The Case for Restrictions on New Charities

"Drawing upon the all-pay auction literature, we propose a model of charity competition in which informed giving alone can account for the significant quality heterogeneity across similar charities. Our analysis identifies a negative effect of competition and a positive effect of informed giving on the equilibrium quality of charity. In particular, we show that as the number of charities grows, so does the percentage of charity scams, approaching one in the limit. In light of this and other results, we discuss the need for regulating nonprofit entry and conduct as well as promoting informed giving."

Information, Competition, and the Quality of Charities, by Silvana Krasteva and Huseyin Yildirimb

The Future of the UN Development System

A new book from the co-Director of the Future of the UN Development System (FUNDS) project (can't believe they didn't call it the "FUN" project). Mark Malloch-Brown (former UN deputy-secretary-general and UNDP administrator) says;

"There is no better compilation of insights about the UN’s lack of cohesion, growing turf battles, declining capacity, clumsy implementation, and cooptation by bilateral and private interests of the family of organizations that calls itself—somewhat awkwardly—the UN development system."

Ouch.

One of the inputs to the book is a global perceptions survey of the UN system, summarised thus:

Four views emerge across the survey: 

• The UN’s development functions are less crucial than such other functions as security, humanitarian action, and setting global norms with teeth. 

• The UN’s development organizations are still mostly relevant, but some are not particularly effective. 

• The World Health Organization (WHO) and UNICEF consistently receive the highest rankings among operational agencies; regional commissions receive the lowest rankings. 

• The UN faces two major institutional challenges: poor internal organization and the predominance of earmarked funding.

What the survey misses, and what is really crucial, is that what we should care about is not just the effectiveness of organisations but the cost-effectiveness, or value for money. Houses in London are "effective" at keeping people dry, but they aren't exactly great value for money from a cost per square metre perspective. 

On giving up development

Nora Schenkel wrote a post mortem last week of her aborted development career 'I Came to Haiti to Do Good….'
I'm sorry we lost you Nora, and I hope that you change your mind. Though long hours hunched over a laptop fiddling with Excel might not always feel like it, working on the most important moral issue of our time, in whatever small way, is really a great privilege.

I sympathise with your guilt living a comfortable life amidst extreme poverty, and your frustration feeling that aid isn't making a positive difference. But your guilt is misplaced, and our frustration with ineffective aid should be a spur to do it better, not to just give up.

Your guilt is misplaced because almost all of us lucky enough to be born in wealthy countries have relatively comfortable lives. Even an average British salary puts you in the top one percent on the global rich list. The fact that in Britain we don't have to brush shoulders every day with extreme poverty does not make it cease to exist, and does not mean that morally we should feel any more or less than guilty than if we were living on the same salary in Haiti. That out of sight is out of mind is not moral reasoning.

Frustration with ineffective aid is exactly what is driving reform in the sector, towards more focus on measurement, results, transparency, and accountability. Yes there is still lots of improvement to be made, especially in difficult places to operate such as Haiti. But there can be no doubt that aid saves lives. And yes, in order for that to happen, some overheads are needed, including occasionally paying the salaries that it costs to hire skilled international staff, and for some of those air-conditioned offices and shiny white cars.

Extreme poverty is ugly. And it can seem uglier when it is contrasted so sharply with rich world largesse. But that contrast didn't cause the poverty, and running away from the problem doesn't make it better. It just means that you aren't forced to think about it every day.

Good luck Nora, I'm sure you'll do good.

This TED talk will probably save someone's life

Aid to Rwanda: "Best value for money in the world"

Tony Blair has an article in Foreign Policy backing aid to Rwanda, and Laura Seay responds here. I'm not going to get into that debate, beyond to say that on balance I think we probably should be restoring aid to Rwanda, but I was intrigued by this quote from TB:

"[Rwanda] is frequently cited for its aid effectiveness by the World Bank and Britain's Bilateral Aid Review acknowledged that aid to Rwanda "offers the best value for taxpayers' money in the world."

How are they measuring that value for money? I took a look at the DFID Bilateral Aid Review technical report. This constructs a Need-Effectiveness Index, which combines measures of poverty and state fragility (need) with a measure of governance (effectiveness). Rwanda comes in the top 25% on this index but not the top 10%. So that can't be the measure of "best value for money."

Maybe "value for money" is just referring to the effectiveness part of the index? This is captured entirely by the World Bank CPIA (Country Policy and Institutional Assessment). So I looked up the index (now renamed to IRAI which contains a nested acronym within an acronym - meta - "IDA Resource Allocation Index" - where IDA = International Development Association, the part of the World Bank which does grants and interest-free loans). The data is available here, and Rwanda scores very highly but not quite "the best" - stable at a score of 3.8 between 2009 and 2011 (where 1 is the lowest and 6 is the highest). The top country in 2011 (the latest publicly available ranking, remembering this is only "developing countries", I'm not going to get into how that is defined) is Georgia on 4.4. The top African country is Cape Verde (4.0) followed by Ghana (3.9).

So there you have it, Rwanda "offers the best value for taxpayers' money in the world" where "best" is defined as "amongst the best but not necessarily actually number 1" and "value for money" is measured exclusively by score on the World Bank Country Policy and Institutional Assessment (which to be fair is probably as reasonable a measure as actually exists).

Aid Effectiveness #Fail

So in 2005 all the big donor countries set themselves a bunch of targets for making their aid more effective. The results are in.

"The results of the 2011 Survey on Monitoring the Paris Declaration are sobering. At the global level, only 1 out of the 13 targets established for 2010 has been met. Nonetheless, it is important to note that considerable progress has been made towards many of the remaining 12 targets."

As Owen Barder says,

"If developing countries had hit as few targets as the donors have met on the Paris Declaration we would have cut off their aid."

And to paraphrase Owen, this is all sadly a bit predictable. The targets are inconsistent with the incentives facing donor agencies. We need new ways of working, including much more transparency and better data (for more - see here).