The Best of Aid:Guiding the Movement

Lant PritchettAt

The Best and Worst of Aid: Accountability, Incentives, and Effectiveness

March 5, 2010

Capabilities, Functionings, Utility, Well-being, Happiness, Life Satisfaction(Dimensions and Valuations)

Capabilities, Functionings, Utility, Well-being, Happiness, Life Satisfaction(Dimensions and Valuations)

Human Development

Smallest unit of Analysis: Individual

DevelopmentPolity Economy Administration Social

Smallest unit ofAnalysis: “Nation”Economy, Organization,Society,

H0: T

ightly Causally

Connected

The Challenges of a Movement

• Maintaining the core

• Allowing for transformational excellence

Economics as a Craft

• Robert Solow (roughly): Graduate student papers are the equivalent of child violin recitals, not interesting for what the produce but for what they promise.

• Paul Krugman (roughly): The production of the thousands of boring, unread, uncited, academic papers exists just to give heft to the economist at the policy table. All of academic economics existence can be justified if all it produces is 1 percent of GDP welfare gain from freer trade in the USA (120 billion vs 2.5 billion)

Well-being gains from the 1990s reforms in India exceed the previous 20 years of aid, plausibly by

an order of magnitude Gains from post-reform growth (relative to counter-factual) adjusted to OECD marginal utility in trillions

Marginal utility:

Counter-factual “without reform” growth rate

0% 2%

Constant $2.10 $1.18

1/y $20.63 $11.57

1/y^2 $202.47 $113.49

0

500

1000

1500

2000

2500

3000

3500

4000

4500

1950

1957

1964

1971

1978

1985

1992

1999

2006

GDP per capita (PPP)

Acutal

Zero Growth

1950-1990growth

Cumulative aid, 1970-1990: ~1 trillion

US GDP 12 trillion

Did Aid Contribute to Reform?

• Not directly as conditionality.• But…

– Policy makers with international exposure coming and going from multi-laterals

– Influential studies– Promoting alternative views within India for decades

(one independent view on the economy)– Contributions of specific information– Supporting domestic think tanks– Just being the fat part of the pyramid

Any of a number of reform initiated growth episodes could, by themselves justify decades of the entire endeavor of aid

CountryGrowth Episode

Total gains in trillions

Relative to Counter-

factual growth rate of:

Gains with log

Utility(2 ppa)0 2 ppa

Indonesia1966-

2007 1.22 0.70 5.91

Vietnam1986-

2007 0.21 0.15 1.68

Widjojo, the Indonesianeconomist

Orthodox Principles, Heterodox Implementations

• Successful growth episodes involve the expansion of orthodox principles of generating prosperity (incentives, security of claims, space for innovation and ecological learning)

• But…– Domestically driven and adapted– Often heterodox implementations (marginal,

incremental, adaptive)

The Achievements of the best of aid look the Conditions of the worst

of aidEvery Hollywood movie has the same plot: a sympathetic character overcomes increasingly difficult obstacles to achieve their final objective

William Goldman

The Achievements of the best of aid look the Conditions of the worst

of aidEvery Hollywood movie has the same plot: a sympathetic character overcomes increasingly difficult obstacles to achieve their final objective

William Goldman

The problem wasn’t that Rocky had the same plot as all other Hollywood movies, it was the inauthentic repetition

Isomorphic Mimicry: Which is a bee, which is a fly looking like a bee?

Space fornovelty

(E)Valuation ofnovelty

Legitimation

Leadership

Front-line worker use of capacity

Open

Functionality

Demonstrated Success

Wealth Creation

ConcernedFlexibility

Closed

Agenda promotion

Isomorphicmimicry

Rent Seeking/Distribution

Compliance

Agents(leaders, managers,Front-line workers

Organizations (firms, ministries, NGOs)

System Characteristics

The worst of aid encourages isomorphic mimicry to thrive as a viable organizational strategy

Space fornovelty

(E)Valuation ofnovelty

Legitimation

Leadership

Front-line worker use of capacity

Open

Functionality

Demonstrated Success

Wealth Creation

ConcernedFlexibility

Closed

Agenda promotion

Isomorphicmimicry

Rent Seeking/Distribution

Compliance

Agents(leaders, managers,Front-line workers

Organizations (firms, ministries, NGOs)

System Characteristics

The worst of aid encourages isomorphic mimicry to thrive as a viable organizational strategy

Big Development:Closing Space,

Promoting External Agendas, Rewarding

Inauthentic BAU

Small Development:Against the systemCreates InnovativeSmall Scale Success

Allow

s dysfunctionalP

rograms, policies,

Organizations to thrive

Without system

icC

hanges this remains

Localized and effervescent

Space fornovelty

(E)Valuation ofnovelty

Legitimation

Leadership

Front-line worker use of capacity

Open

Functionality

Demonstrated Success

Wealth Creation

ConcernedFlexibility

Closed

Agenda promotion

Isomorphicmimicry

Rent Seeking/Distribution

Compliance

Agents(leaders, managers,Front-line workers

Organizations (firms, ministries, NGOs)

System Characteristics

Fighting against our baby ontology to focus on properties of complex adaptive systems: allowing success to emerge

Space fornovelty

(E)Valuation ofnovelty

Legitimation

Leadership

Front-line worker use of capacity

Open

Functionality

Demonstrated Success

Wealth Creation

ConcernedFlexibility

Closed

Agenda promotion

Isomorphicmimicry

Rent Seeking/Distribution

Compliance

Agents(leaders, managers,Front-line workers

Organizations (firms, ministries, NGOs)

System Characteristics

Fighting against our baby ontology to focus on properties of complex adaptive systems: allowing success to emerge

Markets succeed by creatingConditions for ecological learning

Through Creative DestructionAnd then Allowing Emergent

Properties of Complex AdaptiveSystems to Emerge

Pull systems this way

Allow

this to em

erge

Best Aid: SSA?

• Program from central to state governments

• Huge support from World Bank, Dfid

• Built schools, hired teachers (mainly)

• Had components for deconcentration and marginal groups and innovation

“state of the art” design

Spent the money, substantially expanding education budgets

Met most physical implementation targets

Enrollments did increase

India on way to meeting MDG for universal primary completion

But….Rocky or Rocky VI?

• Learning levels remain abysmally low, and are not increasing (over five years)

• Entrenched “perfect storm” among teachers (high pay, low performance, disillusioned teachers) persist (PROBE repeat)

• Not a single piece of evidence that SSA caused increased enrollments (in many states total public school enrollment fell).

• Few (any) scaled innovations emerge

Worst of Aid: ASER/EI?

• ASER: nationwide, district representative, testing of simple reading and math competencies using local partners

• EI: Sophisticated testing with techniques for feedback

• Don’t teach a single child

• Not clear what exactly to do in response

• Aren’t rigorous evaluations of “solutions” that could be scaled

ASER/EI as the Best of Aid

• Have, with amazingly few resources, completely changed the discourse about schooling in India

• Are creating pressure for defining success in functional terms where isomorphism doesn’t trump

• Facilitate the emergence of lots of solutions: “vouchers”, low cost franchises, remedial programs, innovations in the public sector (learning for all)

• By demonstrating the failure/slow progress of BAU open up the space for innovation

“We few, we happy few…”

• Core principles (open structured systems pressured on performance)--heterodox implementation that avoid baby ontology to allow solutions to emerge as reification of good struggles

• Free up aid from either complacency or narrow accountability to make more transformational successes possible