Tag Archives: aid

Bonds

There has been a lot of chatter in the last few weeks about social development bonds. Basically, they are financial investments that are spent on social-welfare development which pay-out at a fixed point only if there is good evidence that the social-welfare efforts were successful, and not at all if not.  They are currently being pioneered in England by the group Social Finance.

There are two queries that I have about these bonds.  First is that since they are linked to a cost-benefit measurement before paying out they are really a cross between a bond  and a share.  The bond holder will be expected to take great interest in the service delivery etc to ensure a return, but that is hardly current bond holder practice. Second, can the impact of an intervention be determined reliably and even if it could be how would we determine what is a ‘successful’ project?  There is more mileage in the ‘share’ analogy here since there will be a price-over-earnings consideration that is not normally considered by bond holders.

Which brings me to the question of risk.  If these complex bonds, which have share-like dependency on performance, are to be commercially traded, who is going to take on the additional risk?  To make the bond attractive the interest rate will have to be high, and that additional risk will be paid for by the government when it pays out.  The externalities are positive (successful project) but the whole thing rests on the idea that the benefit from private sector involvement is greater than the additional cost to the government in borrowing.  I am not so sure that this argument is sound.

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Accountabiltiy

Interesting debate here at LSHTM last night: “Does development assistance help or hinder?” with Rifat Atun, Imperial College London,  Andy Haines, LSHTM and Nuria Molina, Save the Children.

Everyone agreed that there was a need for greater accountability in the aid industry.  Which led to the inevitable calls for more governing bodies, and impartial seers.

But what, then, of the idea that poverty is a lack of choice?  All of this planning is just another imposition on poorer (less powerful) people.  The aid industry has huge power – through NGOs or governments – and is not inclined to give it away to the people.  A selfish bureaucracy reigns.

Would it be so terrible to side-step the bureaucrats and give the money directly to the people who need it?  Not top down, literally a monthly or yearly living allowance in their pockets.  Without all that schmoozing to do and wasting time fighting at summits, aid agencies could focus on attracting people’s custom by offering the best services.  Investors might invest in promising start-ups who could show innovation in the field of helping people.  The people who are supposed to be gratefully receiving the benevolence of the aid industry would have, for the first time, a position of power and a position to choose.  The aid agencies would answer to them.

Radical? Right wing? Not really.  This is about shifting power from the richest to the poorest people in the world.  While we’re falling over ourselves to please donors, do we ever stop to think about how we’re pleasing the people we claim to want to help?

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Opportunity Child

Happy helping people is not enough when the factors that determine resource allocation are improper.

The the previous posts we have seen that resource allocation is based on a number of things – proximity, emotions, timing – but that efforts to define and measure actual outcomes are lacking.  The result is that resources are likely misdirected such that sizable opportunity costs can be measured in actual children killed (not saved) because of the action of badly determined criteria.

Let me explain.  An NGO is spending $100m on children in a crisis in Africa.  We don’t know exactly what effect this will have (because it is not measured) but the NGO hopes to save $4m children.  That’s $25 per child, which sounds pretty good.  But is it?  First of all, $25 might not be all that cheap, despite huge healthcare costs in the West it might be possible to help a child for much less in a different context and for a different ailment.  Second, we haven’t really defined ‘life saved’ (see previous post), although we could just do that.  Let’s say it is that the child lives beyond childhood and reaches 16.  That doesn’t solve the problem since, third, we haven’t measured what actually happens and the ‘confidence interval’ on our 4m saved estimate is very wide, wide enough that resource allocation goes from cheap and effective to extremely expensive, even wasteful.  So a number of things have to come together for the $100m for 4m claim to hold up and without it there is a good chance that our $100m is not helping as many children reach 16 as it would do if it were spent elsewhere.  What seems like a rational basis for action – maximum number of children reaching 16 per dollar spent – is not the basis at all.

As a result, children needlessly fail to reach 16 – are saved – when we have the funds to help them.

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Can’t give, won’t give

In the last few years a lot of effort has gone into evaluating the effectiveness of charities. The organization Giving What We Can emphasis that cost-effectiveness in charities is essential:

…even restricted to the field of health programs in developing countries, research shows that some are up to 10,000 times as effective as others.

The site divides charity giving into categories, such as health, education and empowerment.  Within the health section,  the site gives a nice breakdown of disease priorities according to the effectiveness of their treatment (largely based on the DCP2 from the Disease Control Priorities Project), where effectiveness is measured in disability adjusted life years per dollar spent.  All well and good.  However an interesting thing happens when you click on the Emergency Aid section:

It is a very difficult intervention type to assess, because it is so wide-ranging, there is little quantitative data, and because each emergency is unique. At this point in time, we have no information on the cost-effectiveness of different types of emergency aid, but we hope to rectify this in the future.

For a more detailed analysis of an intervention-type, see our pages on health.

For all their work, this charity cannot find any data to estimate the effectiveness of emergency relief.

There is no basis on which to separate emergency and health programs.  Both are concerned with saving lives, they have the same outcome of interest.  Emergency conditions appear differently to us, the giver, but to the patient who is dying the conditions don’t seem that different.  Yes, we see/hear/feel more about emergencies than ‘normal’ health problems and emergencies have a sort of ‘Biblical’ significance, but from the point of view of a child dying of malaria, or the mother of a malnourished baby, I don’t imagine there is a distinction.

What this site and others show, in high contrast, is the peculiar position of humanitarian aid in our thinking.

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Tyranny of the local-present

We live under an irrational tyranny that the people in the present are more important than people in the future.

This is probably obvious: certainly, we spend much more treating diseases than it would cost to prevent the diseases in the future.  Also, we experience this phenomenon in other areas of our lives; being unable to delay ‘gratification’ and going for early gains.  But is it acceptable when delivering aid?

Tyranny is a strong word, but I think that it’s apt.  People in the present are the only ones with a voice and a claim for resources, resources that are finite.  From health to the environment we are selling those yet to exist short.  Granted, people in the future don’t exist now just as people in the past don’t exist now.  The difference is that our decisions now will affect people in the future.  And they don’t have a say in our decisions, they live under our tyranny.

Delaying gratification is often cited as a mark of maturity and rationality.  The idea of credit and investment is central to this.  We would save more lives, in the long run, if we invested in future generations with the money that we spend on the present.

There is another tyranny plays out as an irresponsible bias: the tyranny of location.  This has two features: tyranny of things that happen close to us (local) and tyranny of things that happen more often in one place (locality).

The first is well known and complicated by the fact that people close to us are also like us.  The second, the tyranny of things happening in the same place, is different.  We pay much more attention to tragedy when it is localized than when it is spread out.  Bono tells us that 30,000 children have died in the last 3 months in Somalia because of the Famine.  When he tells us this he does so as if this is some dirty secret that no-one wants to talk about.  But we are talking about it.  We’re not talking about the estimated 3,000 children that die each day from malaria, for example.  That happens in their own homes and is difficult to capture within one shot.  The numbers are not the issue, it is the concentration of misery which is attracting celebrity attention.

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Saving lives

What does it mean to save a life?  Or at least, what do we mean by it?

The first thing we need to do is stop and think a bit about causation.  Causation, notorious in philosopher’s circles, is not normally the best way to make a clear definition.  But here we are talking about a psychological interpretation of cause, as in how do we cause this or cause that, and so it is sufficient to suggest a loose picture of causation that we can accept.  A very popular interpretation is, ‘if I had not done this, then that would not have happened.’  Now, beset with problems, I believe this is roughly how we each think about when we have caused and outcome, more especially when we have not caused it.

Next we need to be explicit about what we mean by ‘a life’.  This is tricky because we probably don’t mean a couple of hours but we also don’t mean living until 74.  There is some middle ground and I think that it is defined by our action: ‘life’ is what you get when the immediate risk to your life is removed by someone who has saved it.  For example, if a nurse delivers nutrients to a child who would have died of starvation then that is a ‘life saved’ and we don’t wonder how much longer that child does actually live.  You have ‘saved a life’ when in the counter factual case the person would have died but instead the person does not die from the cause of death you intervened on.

What is clear, is that it isn’t actually that clear what it really means to ‘save a life’.  But I think that there is a type of apparent clarity that is associated with humanitarian work that is not found in say vaccine delivery.  The psychological effect of delivering aid is to feel like you are saving lives.  There is immediacy and contrast between the results of action and non-action.  If you were not there, if we didn’t send food, then people would die.  Saving lives, therefore, is just a matter of delivering aid. With vaccines you need to appreciate a population level effect.  You might not be saving this child, or the next child, from measles but there is a vague counter factual world where more children die for lack of vaccination.  There is no immediacy and no certainty of the results of your actions.

This psychology is found in all areas of reactionary care. This sense of cause and effect is motivation for working in the humanitarian industry; getting ‘out there’ and saving lives.

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Amoral hazards

In the last post we saw that humanitarian aid agencies are not gathering data on the outcomes of their work (such as years of life saved, average weight increases etc).  Not doing so has some dangerous ramifications, but before looking at these I want to characterize the interplay of motivations that leads to this situation.

Lord Ashdown is clear: donors are as allergic to measuring outcomes as the aid agencies themselves.  In fact, once a contract is determined there is no reason to distinguish between the two tiers; agencies are putting DFID priorities into action.  The distinction between the two tiers should be important when DFID or AusAID or USAID are choosing which agency to fund during a particular crisis.  How do they choose?  They use the process evaluations that the agencies are using to monitor themselves.  For example, who can shift the most food? Who can buy the most tents?

Donors like these types of ‘outcome’ because they are easy to interpret and sell to the public.  They don’t offer budgets for proper monitoring and evaluation and so the agency doesn’t have a choice but to continue with the status quo.  Maybe that’s all, but these agencies have clout (Oxfam, Save the Children) and the British public rarely scrutinize DFID reports to see how that money is being spent.  And yet the agencies don’t say anything, and they don’t put sufficient pressure on DFID to think differently. It is a closed loop: agency and donor benefit when costs are not compared to returns.  The risk of a poor strategy, like wasted food or worse, is borne by the recipients of aid.

This is a moral hazard.  A moral hazard is an economics term for when an agent (person or company etc) behaves differently because they do not bear the consequence of risk taking.

The situation is a bit like the banking crisis.  Aid agencies are ‘too big to fail’, inasmuch as we need them for when the next crisis comes along.  In the banking crisis, it was tax-payers’ money that went via the government to the banks.  With aid agencies, the aid recipients do not themselves contribute money (they’re normally too poor after all) but money is spent on their behalf by governments so that that aid can be given to them (the ‘process’ output often measured).  In both cases there is very little thought to whether or not the bearer of the ultimate risk (tax-payer in the UK, aid recipient in Somalia) is getting a good deal, that couldn’t be better supplied by someone else.  The life-blood of these agencies is recipients in their camps, they need them, but all of the risk is pushed onto the  same recipients.  For example, Oxfam won’t be outcompeted by Save the Children even if Save the Children could actually help 3 times as many people per pound spent in a crisis; we wouldn’t know.  All we know is what they are spending: how many tents? How much food? How many aid workers?  It is the people in Oxfam’s camps (who else!?) will bear the brunt of this inefficiency, alone.

So, no-one in the system need care about the quality/efficiency of services because the risk is passed on to the recipients of aid.  And, like the banks, they probably are too big to fail, indicating the need for tight, independent regulation.  Otherwise there is a run-away feedback of motivation: DFID spend more and the agencies spend more.  Perhaps the ‘good-will’ of the agency members is expected to stop this but, as Lord Ashdown says, the not insubstantial costs of doing so are not covered by DFID grants.  We cannot blame the aid workers themselves because the system has closed in.  However, if they felt the true risk of bad aid delivery then perhaps they’d be complaining with a louder voice.

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