Less Wrong is a community blog devoted to refining the art of human rationality. Please visit our About page for more information.

"Can't Say No" Spending

18 Post author: Eliezer_Yudkowsky 18 October 2007 02:08AM

The remarkable observation that medical spending has zero net marginal effect is shocking, but not completely unprecedented.

According to Spiegel in "Too Much of a Good Thing: Choking on Aid Money in Africa", the Washington Center for Global Development calculated that it would require $3,521 of marginal development aid invested, per person, in order to increase per capita yearly income by $3.65 (one penny per day).

The Kenyan economist James Shikwati is even more pessimistic in "For God's Sake, Please Stop the Aid!":  The net effect of Western aid to Africa is actively destructive (even when it isn't stolen to prop up corrupt regimes), a chaotic flux of money and goods that destroys local industry.

What does aid to Africa have in common with healthcare spending? Besides, of course, that it's heartbreaking to just say no -

Comments (33)

Sort By: Old
Comment author: Robin_Hanson2 18 October 2007 02:32:48AM 11 points [-]

It is heartbreaking to just say no - that seems a sufficient explanation. When we want to believe so strongly that we can't even stand to consider that it might not work, well that will create terrible incentives for people to actually make it work. So let's turn it around - what else can't we stand to say no to? How about parenting - we can't stand to not help our kids. Judith Harris says we have little effect on them, at least on how they act with others. And we can't stand to not send everyone who wants to college - that may not help much either.

Comment author: bw2 18 October 2007 03:00:50AM 2 points [-]

I am not convinced. I write a column for a newspaper on political and economic matters, have tried making the case against development aid a few times and it elicits a strange kind of anger. I would think that a strong desire to help would be receptive to looking at the best way to do so. If a desire to help is all it is. Part of it is that people simply do not believe that it will not help, they think evidence to the contrary is false and manipulated for selfish purposes...

Comment author: Rolf_Nelson2 18 October 2007 04:09:29AM 10 points [-]

"it's heartbreaking to just say no"

Sounds like a false dilemma; I would argue that, even if you accepted James Shikwati's analysis (which I don't), the first reaction should be to see whether it's possible to enact more effective methods of assistance, rather than immediately give up.

"What does aid to Africa have in common with healthcare spending?"

I assume "they're both politicized topics that smart people seem to disagree about" is not the answer you're looking for.

Comment author: jeff_gray2 18 October 2007 04:12:03AM 6 points [-]

1. Development aid for Africa may be ineffective, but relatively small marginal spending on medical care in Africa could have large returns on mortality, life expectancy, preventing diseases like malaria, etc etc etc. Of course, if present infrastructure/political systems cannot handle the increased populations such medical care would allow...

2. Is it really that hard to say 'no' after TRILLIONS ($,$$$,$$$,$$$,$$$) have been given away? This magnitude must signal we all really care about those poor savages! Western governments transfering their own people's money to other governments so we can all pat ourselves on the back about how much 'we' are doing? Confirmation bias really is a bitch.

"Western aid to Africa is actively destructive...stolen to prop up corrupt regimes...destroys local industry"

Aid is (largely) about exercising and maintaining power, or shall we suppose our leaders don't know its deleterious effects for Africa? Health care spending is simililarly about power. Whoever pays has the ultimate power (take heed, single payer advocates). Sadly as bw notes, we self-deceive & manipulate the evidence whenever it doesn't fit our beliefs. It is a terrible irony that we subconsciouly impute our own selfish motives upon any resented facts

Comment author: bw2 18 October 2007 04:19:04AM 1 point [-]

People are not really able to see their actions as part of reality rather than some immaterial force or holy ghost that changes reality from the outside. But can you blame them? You need a mirror for that sort of trick. So they will simply deny that reality with their actions included may be very different, that if health care is free people will seek it even when it is not needed. The problem here is thinking people will act as if you have not acted.

Comment author: Raw_Power 18 September 2011 09:45:13PM *  4 points [-]

if health care is free people will seek it even when it is not needed

You have paid for your private insurance. Do you go to the doctor as much as you possibly could? When you are healthy, you have better things to do with your life, than travel the city from one appointment to the other.

Comment author: Jack 18 September 2011 10:28:42PM 3 points [-]

When you're healthy, sure. That is not the only time you don't need a doctor.

Comment author: jeff_gray2 18 October 2007 04:19:50AM 1 point [-]

*similarly

and Rolf "the first reaction should be to see whether it's possible to enact more effective methods"

Your first reaction is to assume we're following more or less the right course of action? I suppose it would be heartbraking to "give up" if its not working

Comment author: CarlShulman 18 October 2007 05:00:54AM 15 points [-]

Eliezer,

The zero- or negative-effect results for foreign aid focus on measured GDP per capita, and don't take into account increased lifespans, greater populations, and reduced disease burdens. (Adjusting the models for diminishing marginal returns to aid and different classes of aid also leads to better results on income). Some of the most beneficial programs were very cheap and widespread, e.g. the WHO/Gates Foundation effort to encourage worldwide salt iodization. http://www.abc.net.au/catalyst/stories/s1497255.htm http://www.saltinstitute.org/37.html.

Bill Easterly, who makes one of the most famous cases against aid today, uses a figure of $568 billion in aid for Africa through 2006, including huge amounts of World Bank and IMF cash transfers to governments (driven by extremely strong career incentives for the employees to push loans as quickly as possible), items purchased from American suppliers at much greater cost as political pork, etc. Much of this funding does not reflect the political will to spend on foreign aid, but even if we include it all the level of waste is not 99.9%.

From 1950 to 1997 life expectancy increased from 36 to 51, while population increased from 200 million to 622 million. During that period the lives of Africans were extended by hundreds of millions of life-years, at the same time as millions of malaria deaths were averted by chloroquinine and insecticidal sprays and other observable medical treatments were administered. Even if we say that most of the increase was unrelated to aid and mosquito sprays of that increase was surely not due HIV has offset this improvement since 1997, it makes the 99.9% waste figure misleading.

Of course, the money could be spent orders of magnitude more effectively, the biggest advocates of aid present the statistics in highly misleading fashion (e.g. describing the cost of a drug without mentioning huge distribution costs and incomplete compliance) but I think you're overstating the case by citing only these selected studies and GDP benefits. [HT to Toby Ord for the life expectancy data]

Comment author: bw2 18 October 2007 05:22:11AM -2 points [-]

But I suspect that Eliezer and Robin will already have concluded it is an insoluble problem: you cannot act and include your full action in the reality upon which we act.

Comment author: TGGP4 18 October 2007 05:41:29AM 2 points [-]

Bruce Beuno de Mesquita gives an interesting discussion of foreign aid here.

Bryan Caplan scoffs at Charles Kenney's claim that sub-saharan Africa isn't doing so badly here.

Tyler Cowen deals out some revisionist history regarding the Marshall Plan here.

James Watson has blamed the failure of western policies toward africa on a belief in human equality.

I myself have nothing to contribute, but I would curious to know what predictions you all might make about how sub-saharan africa will change over the next decade.

Comment author: bw2 18 October 2007 05:49:30AM -2 points [-]

I find that Watson does not really understand intelligence. If intelligence is an ability to act in the world, if it refer to some external reality, and if this reality is almost infinitely malleable, then intelligence cannot be purely innate or genetic.

Comment author: TGGP4 18 October 2007 08:20:48AM 2 points [-]

Some simple math here shows that one cannot believe in a purely genetic explanation for the gap between Africans & Americans and the gap between black & white americans. I don't think Watson said he believed in a purely genetic explanation though. I would also note that environment is not always all that malleable, Judith Harris (author of "The Nurture Assumption") discusses "non-shared environment" in "No Two Alike", while genes may become more and more malleable with time. Attempts to raise IQ have not been all that successful, with Head Start gains disappearing after a few years, though efforts to introduce iodine into the diets of third worlders may work as they seem to have in the first world.

Comment author: Nick_Chira 18 October 2007 08:26:45AM 4 points [-]

It seems clear that the RAND study shows that there is in fact increased marginal benefit if you're chronically ill and the cost of paying for your health care is significant. The abstract explicitly states that.

Further, it documents whether or not there's increased marginal benefit for free health coverage rather than copay, rather than increased medical spending. They show there's no increased marginal benefit among the affluent and the healthy, which I suppose indicates that reactive treatment works as well as preventative treatment. The study in fact shows that increased spending does help the ill, which can be inferred just by reading the abstract when they say that the free treatment as opposed to copay helps those who are ill and poor. Glancing through the paper backs this up.

The posts seem to understand this, or at least most of them do, as far as I can tell. But the sentence linking to them is at least disingenuous, if not completely in error. I can imagine that to the average person, it seems fairly obvious that more medicine does not help you when you are healthy. Which would explain why this isn't being trumpeted in the news.

I also read the post about the Framington Heart Study with some incredulity. I mean, that's an example of good science right there. Despite their preconceived notions, they found that diet did not impact blood serum cholesterol levels. They saw this, and published it. Then they expressed reservations because given current understanding of biochemistry, that made no sense. As a result, current medical literature acknowledges that and the HDL and LDL levels are emphasized for primary treatment. Which as far as I can tell, studies have repeatedly been able to link to diet. I fail to see the problem and the anti-medicine trial spin given in the post is bizarre as it's a perfect example of good science, good methodology, good data leading to improved medical knowledge and nutritional advice. That's the whole point, is it not?

Comment author: Anders_Sandberg 18 October 2007 09:03:44AM 3 points [-]

"If intelligence is an ability to act in the world, if it refer to some external reality, and if this reality is almost infinitely malleable, then intelligence cannot be purely innate or genetic."

This misses the No Free Lunch theorems, which state that there is no learning system that outperforms any other in general. Yes, full human intelligence, AI superintelligence, earthworms and selecting actions at random are just as good. The trick is "in general", since that covers an infinity of patternless possible worlds. Worlds with (to us) learnable and understandable patterns is a minuscule minority.

Clearly intelligence needs input from an external world. But it has been shaped by millions of years of evolution within a particular kind of world, and there is quite a bit of information in our genes about how to make a brain that can process this kind of world. Beings that are born with perfectly general brains will not learn how to deal with the world until it is too late, compared to beings with more specialised brains. This is actually a source of our biases, since the built in biases that reduce learning time may not be perfectly aligned with the real world or the new world we currently inhabit.

Conversely, it should not be strange that there is variation in the genes that enable our brains to form and that this produces different biases, different levels of adaptivity and different "styles" of brains. Just think of trying to set the optimal learning rate, discount rate and exploration rate of reinforcement agents.

I agree with Watson that it would be very surprising if intelligence-related genes were perfectly equally distributed. At the same time there are a lot of traits that are surprisingly equally distributed. At the same time, the interplay between genetics, environment, schooling, nutrition, rich and complex societies etc. is complex and accounts for a lot. We honestly do not understand it and its limits at present.

Comment author: senderista 18 October 2007 09:21:21AM 0 points [-]

If only some of Bono and Co's moral outrage could be directed against agricultural subsidies in the First World, it might have a chance of actually doing Africa some good.

I'm currently considering donating something like 25% of my income to microcredit charities (still haven't made up my mind which ones). I've tentatively concluded that although microenterprise isn't a substitute for systemic reform in the developing world, it may be the most efficient means for a private individual to alleviate poverty (on a nanoscale of course, I have no illusions about that). But I'm also wondering if I shouldn't reserve some of my giving for direct relief organizations, since starving or sick people aren't in much of a position to help themselves. But I have to wonder how much of this private aid gets sucked down the black hole of corruption and resource substitution. Does anyone here with some knowledge (preferably firsthand) of development economics have an opinion on this dilemma?

Comment author: Toby_Ord2 18 October 2007 11:12:53AM 5 points [-]

Eliezer: I'm afraid you've got this one quite wrong. I can elaborate further in the future, but for now I'll just expand upon what Carl wrote:

Total aid to Sub-Saharan Africa (SSA) from 1950 onwards = $568 billion (according to Easterly)

(I'm just going to look at things up to 1990 as life expectancy data gets skewed by AIDS at that point. Thus $568 billion is a conservative overestimate of money spent until 1990)

Average population in SSA (1950-1990) = 317 million

Life Expectancy in SSA according to World Population Prospects (ie. the UN estimates) = 37.6 in 1950-55 = 49.9 in 1985-90

(the World Bank estimates include a larger life expectancy increase, but I'll use the conservative data)

Gains in Life expectancy (1950-1990): = 12.3 years = 33%

Costs per person in SSA = $1,791

Cost per person in SSA per year = $36

So $36 per person per year has been associated with a 33% life expectancy increase. That is just staggering.

Even if only a tenth of this increase is due to aid, and there were no morbidity advantages and no economic advantages, it would be a fantastic success compared to spending the money on almost all projects in the developed world.

I think the balance of evidence is actually that aid has done tremendous good in bulk, and certainly that aid by intelligent informed givers at the margin is vastly better again (and there are much better statistics for that one).

It certainly takes more than a single study claiming that aid has no *finincial* benefits to show that aid has been wasted, especially in light of such a strong prima facie case that aid has helped

Comment author: Toby_Ord2 18 October 2007 11:20:52AM 4 points [-]

Jeff Gray:

It is easy to get blinded by large numbers, but *trillions* of dollars over 50 years over billions of people is not very much -- just $20 per person per year or so. It is not surprising that this hasn't industrialised the rest of the world over that period of time. It is an enormous problem and even if tackled very efficiently, it will take trillions more before the gap closes. I strongly suggest using 'dollars per person per year' as the unit to see the relative scales of things.

Comment author: Robin_Hanson2 18 October 2007 11:39:35AM 2 points [-]

Toby, the question is of course what is the evidence that at least "a tenth of this increase is due to aid," since the correlation analyses look bad.

Nica, they did not publish the part of the Framington Heart Study relating diet to heart disease. And in the RAND experiment, the initially poor and sick did not do better on average with free medicine.

Comment author: Recovering_irrationalist 18 October 2007 01:31:14PM 0 points [-]

...it may be the most efficient means for a private individual to alleviate poverty (on a nanoscale of course, I have no illusions about that) But I have to wonder how much of this private aid gets sucked down the black hole of corruption and resource substitution.

I highly recommend the Singularity Institute as an efficient way to boost our chances of alleviating poverty on a macro scale. Every dollar counts.

Comment author: Toby_Ord2 18 October 2007 01:33:16PM 2 points [-]

Robin:

Which correlation studies are you talking about? We would actually need quite some evidence to suggest that aid is net harmful, or very inefficient. I haven't seen anything to suggest this. Even if it has net zero financial effect, that doesn't mean it isn't amazingly efficient at health effects etc. I was very unimpressed with the standard of those Spiegel pieces, especially the interview.

I certainly think we need much more focus on efficiency of aid (as you know I'm spending much of my time starting an organization to see to this) and also more randomized trials to assess the impact of various interventions. However, the strongest negative claim at the moment that we can really make is that it is quite possible aid has had net negative effect, but we would need to look into it much more. Going any further strikes me as overconfident.

Comment author: Robin_Hanson2 18 October 2007 01:42:32PM 1 point [-]

Toby, here is a correlation study.

Comment author: themusicgod1 10 September 2013 10:01:53AM *  0 points [-]

Sadly, your link is broken. Do you have a copy of this one?

edit : nevermind internet archive comes through.

Comment author: steven 18 October 2007 02:00:38PM 0 points [-]

"Even if it has net zero financial effect, that doesn't mean it isn't amazingly efficient at health effects etc."

Rather out of my depth in this discussion, but, wouldn't you expect better health to cause higher incomes?

Comment author: ChrisA 18 October 2007 04:46:53PM 1 point [-]

I suggest the common issue (between health care and foreign aid) is that of agents, who benefit from the current status quo, and provide arguments and generate memes to sustain the status quo. I don't mean to say that the agents are generally doing this wilfully, almost no Doctor believes that "most health care is useless but I will continue the scam to maintain my income/status", just like no aid worker believes what they are doing is useless. But human nature is very good at hiding motives and clothing them in altruistic seeming morality, even to yourself, sort of the reverse of the Smithian invisible hand/selfish baker.

Another way to look at this is incentives: which option has the better pay off (at the margin) for a doctor or aid worker; either convincing people that a given proposed treatment is effective (generating more income for the agent) or the alternative of creating more effective/efficient treatments (generating less income for the agent)?

Comment author: Dog_of_Justice 18 October 2007 07:54:16PM 0 points [-]

As far as I can tell, Watson is obviously right.

That said, we have every reason to believe that the intelligence gap is solvable. The difference in performance between American blacks and those still in Africa suggests that more than half of the problem is environmental and can be tackled via relatively simple measures like micronutrient supplementation. And by the time we are done implementing that, it's likely that germline engineering and/or "smart pills" will be sophisticated enough to handle any genetic component of the problem that may remain. So there is no technical reason for doom and gloom. And the course of action described here shouldn't even be that expensive.

The problem is political will. The subject of racial differences in intelligence is too politically charged domestically for any US politician to be able to lead such an effort anytime soon. My guess is that China's leaders aren't similarly constrained, but they're just interested in securing natural resources from the continent and don't care for "uplift". So the best hope may be philanthropists like Bill Gates...

Comment author: Multiheaded 13 April 2012 12:58:05PM 0 points [-]

So the best hope may be philanthropists like Bill Gates...

No. I don't believe that private charity alone, however much wealth it might amass, can ever deal with such a vast task. IMO a more realistic best hope would be the benevolent, well-controlled development of and a fair distribution mechanism for all kinds of intelligence-enhancing technologies, from currently existing medicine up to genetic manipulation and more radical transhumanist stuff like cranial augs. Today there would be a heated political debate as to whether those would be best achieved by market- or government-dominated means, but I'm afraid that both would be grossly inadequate for the humanitarian purpose of prioritizing the most disadvantaged first. People of <85 IQ don't tend to have large incomes or political pull and strong communities, so without someone having the will to "uplift" them on a global scale little could probably be acheived. Which, as with the other infamous Gordian knots of today, should make us consider whether trying to ensure a positive Singularity might not be the most effective and ethical course.

Comment author: Eliezer_Yudkowsky 19 October 2007 02:02:51AM 4 points [-]
Comment author: bw2 19 October 2007 02:14:42AM 0 points [-]

Does anyone have an electronic copy of Garrett Hardin, The Cybernetics of Competition?

Comment author: bw2 19 October 2007 02:34:55AM 0 points [-]

What Hardin does there is really unparalleled in terms of thinking about what a scientific public policy would be. And it helps you see how democracy and rights are an impediment to that.

Comment author: Brandon_Reinhart 22 October 2007 02:00:12AM -1 points [-]

With the recent revelation that global remittances to poor countries totals more than three times the size of the total US foreign aid budget, I would argue that we should completely eliminate the foreign aid budget. The public tax burden should be decreased by an equal amount. This might result in more workers with foreign families having a higher income, possibly increasing remittances further. Remittances seem like a more beneficial method of aiding other countries for several reasons. First, the money may be used more efficiently by individual foreign consumers than through large block grants to foreign governments. Second, Americans without foreign family would have higher discretionary income. Third, I believe this is a more moral policy allowing individuals to dispose of their income as they see fit.

This policy should probably be supported by other pro-immigration policies.

Someone has probably developed this into a stronger policy argument, but this is just what occurred to me the other day.

Comment author: Jack 18 September 2011 10:26:35PM 3 points [-]

With the recent revelation that global remittances to poor countries totals more than three times the size of the total US foreign aid budget, I would argue that we should completely eliminate the foreign aid budget. The public tax burden should be decreased by an equal amount. This might result in more workers with foreign families having a higher income, possibly increasing remittances further.

This doesn't follow. The money that would come from cutting foreign aid would be spread across the entire tax bracket with only a small fraction of it ending up in the hands of workers with foreign families. Of course, if aid is damaging to developing economies then it doesn't matter where the money ends up once those programs are eliminated. In any case, the foreign aid budget is tiny and would have a negligible effect on the tax burden.

The pro-immigration angle is where most of the utility in this proposal would come from.

Comment author: Dmytry 16 February 2012 10:48:37AM *  1 point [-]

Well the very cynical way to see the aid, is that we are biologically most inclined to help others in such a way that doesn't threaten our own success. Giving away a spare fish, not teaching how to fish - or when the things get tough they'll fish out the fish that you needed to fish for yourself to survive. The optimal level of help is not the most effective help.