Thinking Again: To What Extent is Aid Effective?

Favorite quote from the section:

“Poverty leads to an intolerable waste of talent. Poverty is not just a lack of money: 

it is not having the capability to realize one’s full potential as a human being.”

- Amartya Sen, economist-philosopher and Nobel Prize Laureate

Today I read the first section of Chapter 1: "Think Again, Again." Essentially, this title suggests many of us tend to turn away from the feeling that the fight against poverty is too overwhelming. We feel discouraged when being faced with the scale of the global problem: it feels too big, too intractable. What we should do instead of talking about these problems, however, is to 1) get ourselves to identify and understand the problems, and then 2) start thinking of solving these concrete problems one step at a time. Simply spending time feeling overwhelmed with these problems without talking about some accessible solutions is the way to paralysis rather than progress.

Undoubtedly, everyone thinks we should help the poor people when we can. Everyone agrees on this point, but not everyone agrees on how. To what extent is aid effective? There has been an ongoing debate about this question. Jeffrey Sachs, an adviser to the United Nations, believes that foreign aid ($195 billion/year) could potentially eliminate poverty and pull those out of the "poverty trap." On the other hand, many others argue that aid does more bad than good, and the people stuck in poverty should find ways to solve their problems independently. Taking the debate aside, the book tells us that what really matters is where the aid actually goes to, and not where it comes from.

Something interesting I found was a case study on how the poor actually make choices. Sleeping under bed nets reduces the incidence of malaria by half, but the question lies on what types of decisions they would make depending on the price of the net.

1. If they must pay a full price for the bed net, will they prefer to go without?

2. If the bed net is given to them for free/at a subsidized price, will people use them or will they be wasted?

3. After getting the bed net at a subsidized price, will they become more or less willing to pay for the next one if the subsidies are reduced in the future?

   
   

   The best solution is to carry our an experiment. It would have individuals randomly selected to receive different levels of subsidy to purchase bed nets. By comparing the behavior of groups offered a net at different prices, we can answer the questions.

These are my takeaways and thoughts on the section I read today. Stay tuned for tomorrow!