So many mistakes - Marginal REVOLUTION

Scott Alexander claims “I often disagree with Marginal Revolution, but their post today made me a new level of angry…” The topic is US AID.

I think when Scott is angry (much less “a new level of angry”) he does not think straight. First, someone should tell him that Emergent Ventures overhead is typically two percent, five percent for dealing with screwier banking systems. (That is one reason why I won the recent Time magazine award for innovation in philanthropy.) I am well aware there are various ways of calculating overhead, but there are now more than one thousand Emergent Ventures winners, and all of them can testify to how radically stripped-down the process is.

This sentence is also wildly off:

But it [o3] estimated that if the federal government gives a dollar of research funding to Mercatus, about 40% would go to combined university and Mercatus overhead – higher than the average USAID charity.

For one thing, Scott could have simply asked me how it works. It is also the case that we do not receive or seek federal government research funding, but if we did the overhead going to GMU would be zero (are you listening o3?). Depending on the exact source of the funding, very likely we would make a lot of money on such grants because we would receive significant “overhead” payments for what would not be actual overhead expenses. That is one big problem with the system, I might add. We at Mercatus have made the judgment that we do not wish to become institutionally/financially addicted to such overhead…and I wish more non-profits would do the same.

Scott takes me to be endorsing Rubio’s claim that the third-party NGOs simply pocket the money. In reality my fact check with o3 found (correctly) that the money was “channelled through” the NGOs, not pocketed. Scott lumps my claim together with Rubio’s as if we were saying the same thing. My very next words (“I do understand that not all third party allocations are wasteful…”) show a clear understanding that the money is channeled, not pocketed, and my earlier and longer post on US AID makes that clearer yet at greater length. Scott is simply misrepresenting me here.

There was an earlier time when US AID did much less channeling through American third party NGOs. That was in my view a better regime, though of course Congress wanted to spend more money on Americans, and furthermore parts of the Republican Party, often in the executive branch, viewed the NGO alternative as more flexible and also more market-friendly. That created a small number of triumphs, such as PEPFAR, and a lot of waste, and I am happy to clear away much of that waste. Doing so also will improve aid decision-making in the future. It is right to believe that US AID can operate on another basis, and also right to wish to stop a system that allows spending on ostensible “democracy promotion.” I find it a useful discipline to have an initial approach to the problem that starts with this question “if you can’t find poverty-fighting domestic institutions in a country to fund directly, with sufficient trust, perhaps you should be giving aid elsewhere.” I also find it plausible that doing a lot of initial and pretty radical clearing away of NGO relations is the best way to get there, though I agree that point is debatable.

When I read from the well-informed Charlie Robertson that “My data suggests US AID flows in 2024 were equivalent to: 93% of Somalia’s government revenues, 61% in Sudan, just over 50% in South Sudan and Yemen” I get pretty nervous. Don’t you? I do see this can be argued either way (can we really countenance immediate collapse?), but I am hardly shocked or outraged by the skeptical attitude of the American people here. I say spend the money where it can be put to good use, and also where those uses are politically sustainable. I do understand that this will reallocate aid toward what are on the whole wealthier countries. In those places you still can do a great deal of good for poorer people.

Scott writes: “When Trump and Rubio try to tar them [US AID] as grifters in order to make it slightly easier to redistribute their Congress-earmarked money to kleptocrats and billionaire cronies, this goes beyond normal political lying into the sort of thing that makes you the scum of the earth, the sort of person for whom even an all-merciful God could not restrain Himself from creating Hell.” Is that how the rationalist community should be presenting itself? In a time when innocent Americans are gunned down in the streets for their (ostensible) political views, and political assassination attempts seem to be rising, and there even has been a rationalist murder cult running around, does this show a morally responsible and clear thinking approach to the post that was published?

More generally, I wonder if Scott ever has dealt with US AID or other multilaterals, or the world of NGOs, much of which surrounds Washington DC. I have lived in this milieu for almost forty years, and sometimes worked in it, from various sides including contractor. A lot of people have the common sense to realize that these institutions are pretty wasteful (not closedly tied to measured overhead btw), too oriented toward their own internal audiences, and also that the NGOs (as recipients, not donors) “capture” US AID to some extent. As an additional “am I understanding this issue correctly?” check, has Scott actually spoken to anyone involved in this process on the Trump administration side?

There are a bunch of other things wrong with Scott’s discussion of overhead, but it is not worth going through them all.

I am all for keeping the very good public health programs, and yes I do know they involve NGO partners, and jettisoning a lot of the other accretions. That is the true humanitarian attitude, and it is time to recognize it as such. Better rhetoric, better thinking, and less anger are needed to get us there. It is now time for Scott to return to his usual high standards of argumentation and evidence.