Reply Paid Arbitrage

What charities say on their reply-paid envelopes:

Your stamp on this envelope adds to your gift!

What charities should say on their reply-paid envelopes:

You could put a stamp on this envelope to save us money, but why not donate an extra 45 cents and let us pay the postage, since our charitable institution reply-paid rates are much lower than what you'd pay?

That way our charity gets more money, the post office gets less money, you get a bigger tax deduction, and the government gets less money to start foreign wars and hire meddling bureaucrats to make your life hard!

I guess the people that think hard about  how to arbitrage the government don't tend to end up in the charity fundraising business.

Postal reply arbitrage does have a somewhat checkered past, but I think it's now time to rehabilitate its reputation.

The Real Value of the Peace Corps

I always find the Peace Corps to be an interesting idea. Started by JFK, the idea was that young Americans could go overseas and volunteer in poor countries to help in various development projects, and receive some small payment from the US government.

A number of my good friends did the program, and found it enormously beneficial (OKH did , for sure, and I hope he doesn’t take too much exception to this post). They made a lot of friends, got to see fascinating countries overseas, help out somewhat in these places, and meet the locals.

Don’t get me wrong, these are all great things. But the marginal value of the Peace Corps over, say, studying abroad, or just going backpacking for two years, is harder to tell. Along the aforementioned dimensions, the benefits seem similar, even if the Peace Corps has different advantages.

But the Peace Corps does have one particular benefit that I don’t think staying in a youth hostel can provide.

Based on my rough understanding, the Peace Corps tends to attract smart, idealistic young college graduates eager to do good in the world. This is an entirely admirable thing – a lot of them have come from liberal arts backgrounds that emphasise the injustice in the third world, and they’re eager to do their small part to rectify this.

You’ll note from my previous post that I think, sadly, that this is a Sysephean task that’s likely to result in disappointment and wasted effort.

On the other hand, convincing the average Peace Corps volunteer of this fact seems likely to be an almost equally thankless task. Do you think that after 4 years of relentless lefty agitprop from college professors the average peace corps volunteer is likely to be reasoned out of their convictions, either by my poor scribblings or those of others more eloquent than I? Hardly.

Some lessons just need to be learned firsthand. You can witness personally the sheer level of corruption and inefficiency that characterizes the governments of these benighted places. In some places, you’ll also see the hostility towards capitalism and tribalist attitudes towards wealth (“If my cousin runs a successful business, I deserve a share in the profits despite having contributed nothing”) that help to mire the place even further in permanent poverty. You can also see the general inefficiency of western charity and aid projects, whose implementation is sadly often little better than local governments, despite the loftiest of sentiments and goals.

I don’t want to come across as a total cynic here – many of the people you’ll meet are also lovely, and they have a cheerfulness and joy in their lives that the west sometimes lacks. Read some of Theodore Dalrymple's writings (who is surely no bleeding heart) comparing poor people in the third world with poor people in Britain’s public housing projects, and you realize that you’d much rather be surrounded by the former than the latter. In my own meager travels, I had more friendly strangers introduce themselves to me in India than I ever have in Australia. Some were trying to rip me off. Others just wanted to talk. Human nature is a complicated thing.

But my guess is that either way, two years in the third world is sufficient to convince most Peace Corps volunteers that their efforts to fix the world’s problems are destined to be largely fruitless.

This is useful, because such people tend to be smart and motivated folks, and they’ll do a lot more good for the world by working a regular job in America. Once you’re realized that you can’t change the world, it’s okay to go to law school.

Winston Churchill once remarked that any man who was under 30 and was not a liberal had no heart, while any man who was over 30 and was not a conservative had no brains.

The Peace Corps probably speeds this process up by about 5 years, and with a higher rate of success than the ‘they’ll just figure it out eventually’ school of thought.

And that is immensely valuable, even though it’s a heck of a long way from the intended aim of the whole thing.

Why Foreign Aid Fails

I think at this stage in history, there’s not really much question that foreign aid has been a colossal failure. Shovelling money and goods from first world taxpayers to third world tyrants has definitively failed to improve the standard of living in third world countries. By some measures, it’s made the problem worse – foreign aid is easy to seize, and selectively distributing it to one’s political allies is a great way to shore up political loyalty for corrupt kleptocrats.

The question is, how surprised should we be that didn’t the experiment work? 

My answer is ‘not very’. And here’s why.

The reality is that the principle of foreign aid has embedded in it an important assumption about development. This assumption is so insidious that I doubt that most of the proponents of aid even realize that it’s the basis on which their whole program is built.

The assumption being made sounds almost comically simple, and it is this: poor countries are poor because they don’t have enough stuff. Hence if we give them the stuff, they’ll stop being poor.

Sounds almost too obvious to state, right?

The ‘stuff’ takes on a variety of different forms – food aid, infrastructure spending, bed nets to combat malaria, vaccines, laptops for children, cash transfers, etc.

And that’s exactly what we’ve provided. So why hasn’t this worked?

Because there’s an alternative possibility. It may be that the lack of stuff is not the problem, but is just the symptom of the problem. The real wealth of society is its ability to produce stuff. Rich countries are defined by their ability to produce all of their own bed nets, etc. And when you take the stuff away from a wealthy country, it gets replenished. Haiti, Biloxi and Fukushima all got destroyed by natural disasters. But local production was vastly different a few years later in each place. I’m sure if you switched the populations (moved the Japanese tsunami survivors to Haiti just after the hurricane, for instance) and repeated the experiment, the outcome would take longer, but the end result would be similar. The Singaporeans took 50 years to turn the whole country from a swamp into a first world nation.

What if the things that produce the wealth can’t be easily shipped in? If it’s institutions, it’s hard to transplant those in without a hefty dose of colonialism (although Paul Romer is giving it a red hot go in Honduras, and more power to him). If it’s culture (such as an allegiance to civil society, instead of a tribalist mindset), that’s much harder to fix. If it’s genetics – yikes. Thankfully, cases like Singapore suggest that you can get a hell of a large change in a short period of time without altering the genetic makeup of your country.

People have talked about all these things plenty of times. But what I think isn’t properly appreciated is that the assumption that “more stuff -> development” was entirely unproven when the aid experiment started.

Take all the rich countries in the world today. How many of them were made rich by being given stuff from other countries? The answer is of course ‘none’. Whatever caused their development, it wasn’t because they got huge transfers from the outside world. Even if you doubt this general principle (and you’d be wrong), you’d have to concede that this is surely true for the industrial revolution in England, since there wasn’t anybody richer to give them a handout.

So we know that being given stuff isn’t a necessary condition for development. And now we know that it’s not sufficient either. In this light, the complete failure of the foreign aid experiment shouldn’t come as a surprise at all. We were trying to make poor countries rich using a method that had not been successfully implemented before in human history. Like most experiments tried without a strong reason to presuppose success, the result was failure. Poor countries, it seems, can’t be made rich in any meaningful way just by giving them more stuff.

One of the current poverty ‘silver bullets’ seems to be microfinance. Like bed nets, I presume that it will have some benefit. Like bed nets, I also presume that it will be entirely insufficient to make meaningful changes to poverty levels. We’ll see if I’m right -  I’d be delighted to be proven wrong, but I’m not holding my breath.

The worst assumptions are the ones you don’t even realize you’re making.

Fun run participants - stop being so god damn smug

Suppose I were to present you with the following proposition:

"Next Sunday morning, I'm going to take a dump on your front lawn.  When I'm done, I'm then going to donate $15 to charity. You'll have no say in the matter - this is going to happen regardless of what you want.  When I'm done, I'm going to walk away and feel proud of how I helped out a good cause, and you should be honoured to be part of the charity process - in your case, the cleanup."

How persuaded would you be by this logic? Would the phrase 'not very' about sum it up?

I imagine the modal answer would be something like:

"Look, I'm glad you want to give to charity, but what the hell has that got to do with crapping on my lawn? It seems that taking a dump on someone's property is the actual point of the exercise, and the charity bit is mainly a fig leaf. The whole thing seems bizarre and contrived. Donate to charity if you want to, but leave my lawn out of it."

And that's exactly how I feel about fun runs.

A bunch of yuppie, SWPL women (and their herb boyfriends) decide to go for some charity run or other. The neighbourhood gets shut down. Local residents get the joy of having their house made inaccessible, and their streets closed down.

So if you happen to be (to pick an entirely hypothetical example) dropping someone at the airport as the run is being set up, and you had the misfortune to arrive back while it was in full swing, you might find yourself unable to get back to the street that your house is on. You might also, to extend our hypothetical, be unable to even park anywhere remotely close to your house, due to the bays all being taken by everyone trying to do the same thing, resulting in swarms of angry drivers doing police-enforced U-turns looking for parking and/or an open street. Hypothetically.

So why do these damn things keep happening? Simple - a sizable fraction of the participants find it fun to get to run in a big crowd along the road that's normally reserved for cars. Not all, of course - some are just giddy with the ability to ostentatiously give to charity, and the fun run gives them an excuse to tell their friends about their generosity in a way that writing a cheque doesn't.

But a large percentage just like the idea of doing an organised run along the streets, and don't think or care if they're inconveniencing a lot of people.

You know who else does that? A**holes like Critical Mass. Fun runs are basically just Critical Mass, but with a better PR department. At least the cyclists are honest enough to admit that they're going to piss you off, and don't care. Fun run participants convince themselves that they're actually doing you, and the world, a huge service.

In order to launder the guilt properly, there has to be the maddening two-step of blame-dodging. It's the charity that organises the run. The participants just say 'look, the run was already going ahead! It's not me blocking off your streets, I just happen to like taking part.' The charity either doesn't care (more likely), or explains it as 'look, these charity fun runs raise a lot of money because SWPLs like running on city streets. If we don't do it, someone else will.'

And so they go on.

I know exactly what response this kind of claim produces from the standard whiners - "They're doing so much for charity! Why don't you just put up with a small inconvenience for a good cause?"

This is totally bogus, and just muddies the two parts.

Nothing, nothing, is stopping these people just writing a cheque to whatever charity they're supporting. You think the charity won't take your money unless you've signed up to the fun run? Don't make me laugh. Donating directly would also have the added benefit that a) all the money goes to the cause, instead of most of it subsidising the recreation, and b) then it would have to be all made up of their own money, rather than hassling their friends.

And if they won't write the cheque unless they're allowed to do the fun run, what is that telling you? To me, it sounds exactly like the first hypothetical. I'm going to use this act of charity as moral blackmail in order to do something entirely unrelated that I want to do anyway.

The Talmud has a very different idea of charity:

Charity, ideally, should be given in secret so that the two parties, the giver and the receiver, do not know each other.

By this standard, modern charity can't be accomplished without the donors literally organising their own parade run to celebrate their generosity, and then using most of the proceeds to fund the parade itself.

You'll forgive me for not getting all misty-eyed.