Haiti and the problems with foreign aid

There are lots of recent comments chiding me for not recognizing the well-known problems with foreign aid, when it comes to Haiti.  "Why embrace planning?" is one question.  One reader wrote:

I have to say that Tyler disappoints me here; all of the discussion of the effectiveness of aid, and what type of aid works, is thrown out the window as soon as a real crisis hits.

I still believe that foreign aid does not raise economic growth rates, on average.  But aid can alleviate human misery, such as when a visiting doctor gives vaccines or hands out medicine.  (In fact per capita income may fall, as a result, if some "weaklings" are kept alive.) 

I also believe that the U.S. military can make a huge difference in the immediate aftermath of catastrophes.

Imagine U.S. troops liberating Buchenwald.  Would any commentators say the following?  "Don't give him that blanket, sell it to him!"  "Hey buddy, get a job!"  "Moral hazard: they'll just go get captured again."  etc.  I don't think so.

That's one way to look at aid for Haiti, noting that perhaps as many as three million Haitians currently stand at risk.  Just for a start, someone has to rebuild the port and it's going to be a foreign effort, organized by governments.  The market-oriented solution is more immigration, but even that requires a lot of governmental organization and best of all would be if Obama threw his considerable international prestige behind a coordinated effort to take in Haitian refugees.

A related question is how well Haiti can do as an anarchistic society.  Haiti is one right now and arguably many parts of the Haitian countryside have been quasi-anarchistic for a long time, ruled by either custom or gangs.  So this is an option, and indeed it is the default option, but I don't see it as desirable, any more than it helped Somalia (recant, Peter Leeson!).  In essence it would mean rule by gangs, funded by drug-running revenue.

It is striking how much cooperation and heroism we've seen in Haiti.  It's evidence that the Haitian social fabric is a lot stronger than many people thought.  It also suggests that economic growth models with a one-dimensional "trust" variable are not furthering our understanding very much.  I do expect the violence to get worse, as hunger and thirst continue, but so far the Haitian people have a lot to be proud of.

Comments

"If you reward people when they have an earthquake, you will just get more earthquakes!"

Critics in this instance are indeed making a category error.

"Don't give him that blanket, sell it to him!" "Hey buddy, get a job!" "Moral hazard: they'll just go get captured again."

How about this. Take over, govern, tax, profit.

Markets work when left alone. Disasters aren't that.

The problem is that we don't have a better market for relief and are stuck with the stupid stupid stupid option of using the military.

(lend him the blanket)

Haiti: the Libertarian Paradise!

"PAP is a bad place for a city."

And weirdly, there it was...

I feel terrible for Haiti, and I wish them the best, but since when did Marginal Revolution turn into the Haiti Disaster blog? You normally make just a couple posts on one subject before saying you're talking about it too much, but almost every post on this site (certainly of substance) lately is about Haiti. I used to read almost all the posts and comments, now I load the page and close it. Talk about something else.

Tyler wrote:

A related question is how well Haiti can do as an anarchistic society. Haiti is one right now and arguably many parts of the Haitian countryside have been quasi-anarchistic for a long time...

If Haiti is an example of anarchy, what would a country have to be like in order for you to describe it as having a strong state ruled by either socialists or military strongmen propped up by foreign armies?

...ruled by either custom or gangs.

Right, which is why you should be calling for drug legalization as a way to help Haiti. That would be much better than dropping fiat currency on PAP or sending Haitians to Guantanamo Bay. (If those suggestions by you were jokes, my apologies, but I really can't tell which things you are being serious about.)

If aid is all we do, then, yes, you alleviate immediate misery, but you really have done nothing for the long run.

I would simply remove all tariffs on imports from Haiti, permanently, and on an OECD basis. Ultimately, a people either become dependents, or they make their worlds better by their own efforts. Open-ended aid produces the first condition- I would focus more of our efforts on aligning incentives for the second. If Haitians want aid on designing/building the necessary institutions for a working government, then we can talk about it on a item-by-item basis.

I agree with the 'lighten up' sentiment by anon... much more persuasive...

Also, I wonder if this is a little personal for TC because, if I read an earlier post correctly, he had tried to make plans to visit Haiti for the very weekend the earthquake struck... So maybe a bit of 'there but for the grace of god go I..."

The market-oriented solution is more immigration, but even that requires a lot of governmental organization and best of all would be if Obama threw his considerable international prestige behind a coordinated effort to take in Haitian refugees.

Clearly written by someone not living in the real world, but instead inside an economist's version of Sim City.

Do you think anywhere in the world is as liberal as opponents to Obama claim he is?

And where in the world is there a labor shortage?

To my amateur eyes it looks like aid helps when it's given to individuals, and it doesn't help (and may even make things worse) when given to governments. This view is obviously colored by my liberalism, and is open to disproof or substantiation. But that's how it seems to be to me.

Why not emigration? Haitian labor productivity would benefit from an influx of skilled Westeners and east Asians.

Does the rule that the first person to make a Holocaust analogy automatically loses the argument apply when the original poster makes the analogy? What a cheap shot.

This just goes to show why economics isn't serious science. All this bluster about theory goes right out the window whenever a crisis hits (see Tyler Cowen regarding the Banking Crisis, TARP, Haiti, etc...). It's like a physicist who abandons the theory of gravity every time he sees someone jump too high...not saying Tyler was always right to stick to his previous ideas, but the complete submission to the status quo whenever an important decision needs to be made sends a signal that you shouldn't take him too seriously in any case.

This just goes to show why economics isn't serious science. All this bluster about theory goes right out the window whenever a crisis hits (see Tyler Cowen regarding the Banking Crisis, TARP, Haiti, etc...). It's like a physicist who abandons the theory of gravity every time he sees someone jump too high

Umm, isn't changing your position in response to events in the world EXACTLY what a "serious science" does? I would expect that if a physicist did in fact see someone jump "too high" in a way that was inconsistent with standard theories of gravity, the physicist would abandon the existing model of gravity. Rightly.

Tyler's unwillingness to stick dogmatically to over-simplified single-equilibrium rational-choice models when faced with complex real-world events is to his credit, not his detriment.

Government = force, Gangs = force, Gangs = Government and so it is a choice between not so bad Gov. (USA Gov.) and worse Gov., the gangs. The question is how to minimize the use of force and that usually means giving a monopoly on violence to a democratically elected gov. The temptation is to overuse Gov. or force. This should be resisted. To fight worse gangs sure use Gov. In the current world to use Gov. to save Haiti sure. Use Gov. to keep people from selling drugs to willing customers Nah. Use Gov. to keep pay for my college ed nah.

@ Andrew Edwards:

You are right of course, if it was the new information that caused updated beliefs. I suspect that is not what is happening here.

What new information have we learned? Did we think earthquakes would never happen, or that people would never again call for the US military to rebuild a country? This is not Bayesian updating; this is reputational risk aversion that leads us to the status quo, and prevents truly helpful economic ideas (Haitan emigration, charter cities) from being implemented.

Tyler, I guess a big question is where do we draw the line in "building institutions" and "nation-building", while I am unsure, it still remains to be seen the amount of time we will need to spend. I would actually argue that the larger tragedy of Haiti is the immense poverty that takes all the problems of a natural disaster and magnifies it tenfold. Thus just leaving Haiti pre-earthquake might not help it all that much if another disaster struck.

The issue of course becomes whether we can or will have the patience not only to rebuild what little Haiti had in the first place but institute some reforms as well. I wish we could also use to time to eliminate corrupt officials and menacing warlords,open the economy and ensure property rights but that of course is much easier said than done. I just have a feeling though there's never really gonna be a good time to pull out, especially when most people who see the nation rebuilt back to "normalcy" are gonna ask, "we really want to leave the country like this?"

Aid, as a long term solution, is something I'd embrace if I wanted to line the pockets of gangster Pierre and his lovely cronies. But I can see how our commitment right now might need to be longer than just lets leave a couple bags of food and get the heck out.

Tyler:

I think you are quite wrong. This post is a very rare misstep on your part. The Buchenwald analogy is inapt to a surprising degree.

An earthquake cannot be prevented, but buildings can be built correctly.

The hazard is that rebuilding Haiti with "free money" will allow Haiti to keep building poor structures. I'm not sure that there is a similar type of hazard in the Buchenwald case.

It is the difference between being mugged (Buchenwald) and suffering from lung cancer. We don't turn cancer patients away from hospitals, but we do try to make sure fewer people smoke.

I don't think there is anything wrong with saying that we'll help Haiti because of this emergency, but insist upon better government structures, building codes, and other things that would have prevented this tragedy. There were two other major earthquakes in nearby places which did not result in the same losses.

A previous commenter in the "graphic images" thread drew a parallel to the Sichuan earthquake. The first, second, third and last reaction to that quake was, "The buildings were unsound." Partially this is because China actually instituted better building codes in 1976, and could point to the fact that fallen buildings were either older, or not built to code.

Another factor is that geologists have been pointing out for some time that this faultline was due for a major quake. I realize that this is a self-fulfilling prophecy -- just like a perennial stock-market bear, they are always guaranteed to be right at some point -- but I'm trying to say that there is an argument to be made that Haiti went into this quake with its eyes open.

I want to stress again that the current international aid efforts in Haiti are justified and warranted. I want to stress again that Haiti should not be punished any more than it has already been.

But I do want to defend the point of view that this tragedy -- unlike "Buchenwald" -- could have been averted or at least minimized through proper administration and planning, and that there is something to be said about strongly encouraging Haiti to build in retrospect the governmental structures and building codes that would have minimized this calamity.

Which, by the way, may also be my way of arguing against the idea of an anarchic society. I'll let experts in the field of anarchy take up that ball.

And, you know, we have some badly-located cities in the U.S. What to do about Los Angeles, Phoenix, and San Francisco?

My heart goes out to the people of Haiti ...but can someone address OUR nations poor and pitiful people, with no shoes or food no medical help.. eg..skid row in LA and other states where children go hungry every day...
I just think help and then help at home...

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