At the Mercatus Center over the past decade or more we have engaged in various research initiatives. One of the first was our Global Prosperity Initiative. This project was an outgrowth of my involvement through Mancur Olson's research center in the late 1990s with a USAID project on incorporating institutional analysis into development policy. After Mancur's premature death in 1998, the project continued at IRIS but eventually a segment of the project was transferred to GMU/Mercatus in cooperation with IRIS at U of Maryland and I was the PI. We mainly engaged in theoretical research on the role of institutions, but also field assessment of investor roadmaps in transitioning and developing economies -- mainly red-tape analysis.
Clearly the "big push" influenced development projects were not as successful as hoped, and so a more microeconomic and entrepreneurial project was to be examined. Development we argued was basically about individuals being able and wiling to "bet on ideas" in the marketplace, and to find the financing to bring those bets to life. The institutional analysis of development suggested that impediments to this "betting on ideas" needed to be reduced. So an examination of the costs of doing business was the first step, and the second step was to reduce those costs. But such changes often were undermined by reluctant political interests. So wasted money on "big push" type projects might have been slowed, but wasted money on "institutional transformation" increased.
Peter Leeson and Chris Coyne saw this up close and personal during their field work in Romania, and they wrote an excellent though too often neglected book, Media, Development and Institutional Change that explains the reform dilemma in detail. As economist who had studied Gordon Tullock's transitional gains trap, we were well aware of the costs of defeating entrenched special interests. Working through government agencies, even if in the right direction, had costs associated with it that often times swamped the benefits of the feasible change.
Aiding the world's poor effectively through government sponsored programs -- whether interventionist or free market -- faces multiple problems in terms of incentives and knowledge. Chris Coyne has documented the crashing of good intentions against the hard rock of incentives and knowledge problems across a variety of circumstances and proposals to provide humanitarian assistance in his aptly titled Doing Bad By Doing Good. So it was with great interest that I followed Alex Tabarrok's link today to GiveDirectly.
Such a simple basic idea has the possibility of radically changing the entire way development assistance is thought of -- and along with Michael Clemens's ideas on emigration, has the potential to radically change development policy and the fate of billions of desperate souls. After so much disappointment in the effort to tackle the problem of poverty in the world, perhaps we are rediscovering what has always worked -- trade, migration, and direct cash transfers.