Blogospheric reaction to the Jeffrey Sachs article in Time magazine (UPDATED 3-15-05)

I’ve compiled a little run-down of blogospheric reaction to the Time magazine cover story on Jeffrey Sachs’s plan for ending severe poverty in the world. Unfortunately, it’s pretty meagre. I posted my own reactions to the article here.

Steve Verdon of Dienonychus antirrophus probably had the best reaction in an insightful, rather technical response (what can I say? He’s an insightful, rather technical guy). His initial response is (as is mine) that it’s just throwing money at the problem. But there is some hope for the plan:

What Sach’s is suggesting is that we shouldn’t limit ourselves to the class of functions that is used in the Cobb-Douglas production function (see footnote 1). Instead, Sach’s suggests using a production function where the marginal productivity of capital does not tend towards infinity, but zero as capital tends towards zero. In this case the dynamics are more complex. There is an inflection point in the production function such that the concavity of the production function changes depending on which side of the inflection point you are on. If the economy is to the right of inflection point then the economy will tend towards the steady state and we get the standard result from growth theory. However, if you are on the left of the inflection point then the economy will tend towards zero in terms of capital and growth will fall.

Now if this is all true, then Sach’s solution is indeed the right one. Give these countries enough money so that they can get past the inflection point and put themselves into the phase space where they will have a positive amount of capital and converge on the (non-zero) steady state. Growth will be positive and poverty will be over, at least the extreme poverty we see in third world countries. It is a very nice theoretical package. But it is not without its problems.

You really need to read the whole thing (along with the footnotes for the mathematically inclined) to get hold of what Steve is saying here. My question for Steve on this is don’t the outcomes depend on the shape of the curve and where individual countries fall on that curve?

R Cubed draws attention to this column from Star Parker, “Philanthropy is the best foreign aid”. Ms. Parker notes the striking parallels between Sachs’s plan and Lyndon Johnson’s “War on Poverty” (at least at the rhetorical level):

Here’s President Lyndon Johnson announcing the launch of his “war on poverty” and the Economic Opportunity Act of 1964:

“…(F)or the first time in history, it is possible to conquer poverty…”

“The Act does not merely expand old programs or improve what is already being done. It casts a new course. It strikes at the causes, not just the consequences, of poverty.”

When Johnson launched his “war,” the percentage of the U.S. population in poverty was around 19 percent. By the early 1970s, it dropped to around 12 percent. However, the decline in the national rate of poverty was already headed downward well before 1964. The poverty rate in the late 1950s was 23 percent. U.S. poverty has fluctuated around 12 percent for the last 30 years.

Despite trillions of dollars of expenditures with questionable impact on the incidence of poverty, the greatest costs of Johnson’s programs were the human costs. People were taught to turn to government rather than their families and themselves for the resources to contend with life’s challenges. The psychology of victimization, passivity and dependency is the great legacy of Johnson’s poverty programs.

I find myself in partial agreement with Ms. Parker. On the one hand I don’t really think that philanthropy is the best development aid plan. I think that trade is the best development aid plan. But philanthropy definitely has its place and ignoring the various forms of private philanthropy is (perhaps inadvertently) prejudicial against the United States. Our approach is a mixed approach in which the government, corporations, independent organizations, and individuals all play a role. There’s nothing that beats person-to-person interaction for adroit responses to real world situations in a changing environment. I prefer the emergent phenomena approach of markets and individual initiative. But these things need to be mobilized and that, I believe, is a worthwhile activity of government.

Matthew Yglesias basically concludes that it’s worth a try:

Nevertheless, a proposal that promises to cut extreme poverty to zero and that may, in fact, “merely” reduce it in half is a proposal that’s well-worth supporting on its own terms. I could say something about the perfect being the enemy of the good here. I don’t see any other similarly elaborate proposals on the table, nor would it be easy to generate the political will necessary to implement any plan on this scale, so it seems to me that it would be a good idea for people to put their support behind this idea and do what they can to get it implemented. If something better comes along down the road, then so much the better. Is the Sachs Plan worth doing even if it’s “only” 50 percent right? Sure. If we had a plan on the table to eliminate global poverty for $300 billion a year, that would be worth doing

I actually agree with quite a bit of this. But where I disagree is that I don’t think a plan that doesn’t reduce poverty at all is worth a dime. And I don’t think “a plan” needs to be in place. I think a commitment—at the individual level—needs to be in place.

Brad Plumer thinks the objectives are worth striving for (who doesn’t?) but worries about the administrative details. My worry is that administrative costs will absorb the bulk of the spending.

Secular Blasphemy writes:

And before saying “why should we help people living so far away from us,” remember that 9/11-01 should have taught us many lessons, and one of them is that failed states and human misery anywhere is a threat to life and security everywhere.

Stolen Thunder is skeptical:

TIME magazine tries to justify this worship of unreal fantasy by including a note from Managing Editor Jim Kelly, who says “it is impossible to deny that the needless deaths of so many people every year call for action on a global scale”. Such a claim can only be made by someone who believes at least one of two things:

Such a person must either believe that the United Nations, despite all the evidence, is functionally effective in helping nations grow their economies and welfare or their citizens, or that person must honestly believe that the United States has the right to dictate terms and conditions to every nation on earth, even to the point of controlling their economies and distribution of wealth.

Pundita responds with a fabulous post that has an enormously clever title:We’re so glad you enjoyed the G8 luncheon, India and China! With wine and tip that comes to 5 billion dollars.. This is a good observation: what’s the role of the “New Core” nations? Read the whole post for criticism of Sachs, the IMF, and current international institutions in general. By the way, Pundita’s focus is development policy. I plan on stopping back there frequently.

Undernews is more critical of Sachs’s role in the mismanagment of the transition of the Russian government that Dan Drezner is:

This is the sort of Cambridge machismo that got us into years of trouble in Vietnam. Nothing is more dangerous than a Harvard professor proving his virility in national or international policy.

Got any other good links on this subject? I’ll add ’em on.

UPDATE: Tyler Cowen of Marginal Revolutions is succinct: “My take: No way.“. He goes on to say:

Whatever we are going to spend fighting international poverty, I would spend on freer immigration, keeping in mind that ongoing remittances will kick in over time. We also could send a small military mission to Darfur, and focus our aid on one “doable” country or region. I am a believer in demonstration effects; get it right once, and the world will beat a path to your door.

Unless Mr. Cowen is thinking of (as praktike put it) “…the people sitting on the side of the road selling tissues that they picked out of a trash dump” freer immigration will do nothing for the poorest of the poor. Meanwhile his colleague Alex Tabarrok has a chunk of a review of Sachs’s book from William Easterly.

UPDATE: Submitted to Beltway Traffic Jam.

UPDATE: Our word is our weapon has a critical review of a review (Easterly’s review of Sachs’s book):

So, if Sachs is wrong, will he have fatally undermined faith in aid and in development in general? I tend to think not – by the time we know whether he was right he may have been largely forgotten, and I think it’s unlikely that even if aid does increase significantly it will reach the levels he’s proposing, so there’ll always be a get-out clause. But I’d like at least to try to find out if he’s right, and I fear that attacks like Easterly’s will ensure that we never get even that far.