Should you always try to pick the best investment in aid?
A recent twitter exchange on how to pick what aid projects to fund prompted me to think about whether or not it really is a good idea to invest all/most aid money in those interventions with the biggest proven return to investment.
Some organizations, such as the Copenhagen Consensus and GiveWell, have invested a lot of effort on reviewing research, expert opinion and feedback to help rate and identify the “best” investments” in development and the “best organizations” to which you might donate your money. Their laudable aim is to encourage a more rational approach to charitable giving and aid allocation in order to get the best results for the limited resources available.
While there are many data uncertainties in this type of calculation (not all types of interventions have been studied, and comparable information is not available on all organizations) this type of effort can be very valuable in terms of provoking discussion around effective approaches and in terms of helping guide individuals and organizations to invest in effective strategies.
So it might seem at first glance that any donor, whether governmental, corporate or individual would be well advised to review the available ratings and to invest most of not all of their money into the top rated activities and organizations. It probably comes as no surprise that I don’t agree! (if I did this would be a much shorter blog post).
While it’s true that the top rated interventions/organizations most likely deserve greater attention and funding than they currently get – there are also some good reasons why this shouldn’t be the only determinant of where the money goes. Here are a few reasons why:
1. Diminishing returns on investment – even though childhood vaccination and micronutrient supplementation might be great investments, there is only so much that can be invested in these before the large parts of the population have already been reached, and the added costs and complications of reaching the unreached mean they are no longer the “best” investments to make, at least in terms of efficiency.
2. Equity/human rights – making allocation decisions purely on the basis of cost efficiency is likely to lead to targeting interventions at the easy to reach, rather than at the most needy. Cost effective maybe – but certainly not fair. In the early days of the MDGs many countries tried to reach the goals by focusing on those parts of the population where it was easier to meet the targets overlooking those who were most marginalized and discriminated against because they were harder to help (the tyranny of averages) – and this is one of the reasons for the current discussions about inequality and equity in the context of the post-2015 goals, and why many organizations are now looking at how to focus more on reducing inequality in their approaches.
3. Some of the most important problems faced in the developing world are not necessarily the most cost-effective to address nor do we always know how to measure them– at least yet. Part of this might be that for some complex problems such as conflict prevention or gender equality we don’t have a simple set of agreed interventions that can be easily replicated. That doesn’t mean we shouldn’t try to work on them. Quite often different “problems” are interrelated and may have shared underlying causes. While individually it might make sense to invest in an individual intervention, the long-term sustainablity of that intervention and “net development gain” for the country in question may well depend on attention to these underlying complex issues. For example proven health interventions are unlikely to be implemented successfully in situations of chronic instability and lack of security, while they are unlikely to be sustainable until efforts are made to address issues such as health system capacity and governance, domestic financing and resource mobilization with a sound public financial system , or attention to public attitudes and behaviour (e.g. you can’t have an effective vaccination programme without public communication and attention to anti-vaccine rumours).
4. Doing what we know and what we care about – Expertise and financial resources for development are not fully fungible. People are more ready to contribute to some countries, interventions or organizations than others and make these decisions based on factor other than cost-effectiveness. People, and organizations are more likely to give to issues they care about (or that resonate politically) and naturally make choices based on their perceived importance of the issue itself not only the proposed interventions,. While micronutrients may be cheaper they may well attach a greater importance to addressing violence, HIV/AIDS or some other topic, because it touches them personally, they feel it is more critical or it easier to engage others about. another important element is expertise – if your country or organization (or you as an individual) know more about agricultural development than health then it makes sense that you will provide assistance in your area of comparative advantage regardless of whether it is the most cost-effective or sought after area of work since you will be able to do more good doing what you know well rather than doing something else you don’t know poorly.
5. Diversifying your portfolio – investors know that even if you have a few solid stocks it’s always good to diversify your portfolio to reduce risks if your pick suddenly does badly (e.g. new research finding your cost-efficiency measures were not so good after all, or that they had unintentional negative consequences). It also makes sense to spend some part of your resources on new innovative “start-up” approaches that are unproven, and which may even fail, in order to find new and better ways to support development. This requires a willingness to take risks on unproven but promising new approaches, and preferably on multiple diverse ones including some long shots – otherwise you might miss out on discovering whole new and potentially more cost-effective approaches.
6. What the beneficiary wants – last but not least: just as donors care about some issues more than others, so do beneficiaries. Developing country governments may disagree on priorities and need to operate within their own domestic political constraints. But also individual beneficiaries might also disagree with you about what is their most pressing need, even when you explain the evidence! Ultimately the aim of development assistance is to help individuals, communities and governments to be able to manage their own development and so they should have the last say on what is done to them, for them.
I’m all in favour of measuring cost effectiveness, continually looking at how to improve it, and using it more in aid allocation decisions, but like any aid intervention – it’s no panacea. Often choices about what to fund are governed by subjective decisions about what is important, and always issues are interrelated and cannot be decided upon in isolation – so while I encourage the technicians to do their work, let’s not be fooled that they will or should be the ones making the decisions about where aid money will go.