Categories:
Behavioral Economics
Income Distribution
Bill Easterly and Laura Freschi point to a study showing that foreign aid increases happiness–for the donor countries. For the recipients, not so much.
I have not read the study, but I doubt that I would find the research methods persuasive. Still, the conclusion is perfectly Hansonian. If the goal of foreign aid is to “show that you care,” it stands to reason that it would have no net benefit on recipients while increasing the happiness of donors.
And there is no reason to assume that the result does not extend to many domestic redistribution programs.
READER COMMENTS
David
Dec 4 2009 at 2:48pm
This of course extends to domestic programs. Perhaps it only became clear to me when reading Dan Klein’s “people’s romance” papers. Previously, I had thought that it was reasonable to criticize domestic spending on its failure to deliver the intended results. Now, I realize that the effort itself is what resonates so deeply with the would-be reformers. For example, I used to think that Social Security was immoral because in practice the elderly are the wealthiest age cohorts- why should we take money from workers to give it to comfortable seniors? It’s really inverse income redistribution, and it can’t be defended on the basis of preventing starvation and deprivation. On the first page of Will Wilkinson’s 2005 Cato paper, however, he catalogues a number of defenses of social security that have nothing to do with protecting the elderly from the ravages of aging, the most telling being that Social security means that “we’re all in this together.”
Charlie Quidnunc
Dec 4 2009 at 3:54pm
A good discussion on the dead weight loss from Christmas gift giving was on this week’s Planet Money. See http://www.npr.org/rss/podcast.php?id=510289 for the show called “#122 Planet Money: The Most Wasteful Time Of Year
Wednesday, November 25, 2009 3:26 PM”
From the description:
“Economist Joel Waldfogel says giving gifts people don’t want isn’t just bad for the recipients, it’s bad for the economy. According to his research, billions of dollars are wasted each year because of holiday shopping. A professor at Wharton, he has spent years surveying his students about how much items they received as gifts cost and how much they would pay for the same items. Based on those surveys, Waldfogel says the spending others do for us produces about 20 percent less satisfaction than the spending we do for ourselves.
Despite the title of his book, Scroogenomics: Why You Shouldn’t Buy Presents For The Holidays, Waldfogel says he doesn’t want to end giving gift, in fact he enjoys it. He says he just wants us to think harder about who we are buying for and maybe choose a gift card over that reindeer sweater.”
Perhaps if we gave Zimbabwe charity gift cards, we’d all be better off.
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