Our Word is Our Weapon

I had no idea that the debate on aid between William Easterly and three discussants I posted on recently subsequently went on and on and on. One of the frustrations of trying to follow academic ‘conversations’ through the established journals is that they tend not to get beyond a first response, partly because of the long time lags involved, so fair play to Cato Unbound for giving these guys space to argue themselves hoarse in just a couple of weeks.

As I said before, I found Steve Radelet’s critique of Easterly’s arguments on aid convincing. By contrast, Easterly replies to him with a pretty shabby display of straw-manism. Radelet responds himself, but I thought I’d go through Easterly’s points one by one.

The most spirited part of the debate is provided by Dr. Radelet. I hardly need to argue with Dr. Radelet, as he spends most of the time arguing with himself. Aid amounts to virtually nothing, yet accomplishes miracles of raising growth and saving lives.

Radelet didn’t say anything about miracles. He said aid boosts growth significantly, but not hugely, and has saved millions of lives through improved health.

Aid is doing just fine, but needs to be drastically reformed anyway.

No. Aid has done surprisngly well, considering donors handle it so badly and much was deliberately wasted. Some fairly straightforward reforms (like these) should make it work even better.

Aid should not go to middle income countries, except he celebrates middle income “aid success stories” like Korea and Botswana.

They only became middle-income countries after years of high aid and high growth.

We should judge on the basis of econometric evidence on average results, except for when he can selectively use data points to support his case.

As well as providing strong statistical evidence, Radelet points out the most notable examples that disprove Easterly’s own sweeping generalisations, so maybe he should try to be a bit more nuanced in his own remarks.

Facts should be used instead of rhetoric, except when he feels the need for ad hominem attacks.

Diddums! Radelet just exposes the sloppiness of Easterly’s argument - hardly an ad hominem assault.

We should suppress the debate on aid for the sake of the cause, except for presenting his side of the debate.

He doesn’t say that.

I should not use unpublished studies, except for Radelet’s own unpublished study.

What unpublished study is that? Radelet’s study is public and well-known.

Scientific methods should be used to judge aid’s effects on growth, except for searching across every possible statistical specification until you get the “right” result (which promptly falls apart when other researchers try to replicate it.)

Researchers have not tried to replicate those results, so they have not ‘fallen apart’. For example, Rajan and Subramanian explicitly say “we have not replicated [Radelet et al’s] results using their specification and covariates”.

Aid does have positive effects on growth, yet aid donors have mysteriously overlooked this positive potential and allowed Africa to stagnate for decades.

It’s not that mysterious when you think about it - donor countries are stingy, and the evidence showing the positive impact of aid has only started to emerge in the last decade or so.

Aid does have positive effects on growth, except in Radelet’s own “diminishing returns” study in which the most aid-intensive countries have a zero or even negative effect of additional aid on growth.

Nonsense, which Easterly repeats in his book, where he claims that the Radelet study finds aid having a negative impact above 8% of GDP. This is appears to be a wilful misinterpretation, and Radelet and his co-authors explain why here:

Are there limits on how much early impact aid typical recipients can absorb? The answer appears to be yes, but the maximum growth rate occurs on average when early impact aid represents 8–9 percent of GDP, more than three times the typical amount. As a rule of thumb, since early impact aid is slightly more than half of total aid on average, this implies that the maximum growth rate occurs when total aid reaches around 16–18 percent of GDP in the typical country. This does not mean that in any particular country, aid flows greater than this amount are necessarily a bad idea. Instead, this represents the typical pattern over the last 30 years—some countries can absorb more, and others less. Moreover, we find that absorptive capacity depends to some extent on the quality of institutions and general health of the population. In countries with stronger institutions and higher life expectancy, the impact of early impact aid is stronger throughout, and more aid can be absorbed before reaching the maximum growth rate.

In summary, not a particularly impressive defence.