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Thursday, March 1, 2012

We Want to do Nothing You Say?

Recently New York University economist and FEE summer seminar faculty, Claudia Williamson, gave a talk to the George Mason University Economics Society, cosponsored with the Future Freedom Foundation, on “The Trouble with Aid.” Williamson’s answer was simple, “We give it.” Of course she went on to give a lengthy and empirically supported explanation for why foreign aid fails and should not be given. Still, in the Q&A the question naturally came up: “What should we do then?”

To most this question is reasonable, but it really shouldn’t be. Williamson’s talk centered on a means-end framework, which showed that foreign aid not only has not achieved its stated ends but may also have actually caused more harm than good. We can also see empirically that countries which have institutions that promote market interactions tend to be much wealthier than less market-oriented countries. (Thus breaking the so-called vicious circle of poverty is a matter of getting the institutions right.) Sadly, however, this is all too often interpreted as, “So we should do nothing?” Or to put it as Leonard E. Read’s put in Cliches of Socialism #31, “If the government doesn’t relieve distress, who will?  ”The market solution is not a do-nothing approach. It replaces a failed centrally planned approach (governments giving aid to developing countries) with a decentralized array of plans of many individuals. Rather than doing the same thing over and over again and expecting a different result (Einstein’s definition of insanity, by the way), we need to abandon the idea that aid is the only solution. By eliminating aid and allowing any individual to attempt to help in his or her own way, we allow entrepreneurial individuals the chance to create real change. As Read put it, “There is no way to determine in advance who that pioneer might be?” But by allowing for more plans rather than the narrow, let-government-do-it approach, we increase the likelihood of success. This is what economist William Easterly refers to as seekers versus planners. The planners big push for aid projects has failed for well over 50 years. Maybe it is time we eliminated aid and allowed the seekers the chance to provide the relief we are all searching for.

  • Nicholas Snow is a Visiting Assistant Professor at Kenyon College in the Department of Economics, and previously a Senior Lecturer at The Ohio State University Economics Department. His research focuses on the political economy of prohibition.