Endogeneity & Furiousity
This morning, Tim Harford tweeted me over to this post by Owen Barder, along with the message that it, "should make me furious".
The post complains that, "we (the US) waste our food aid budget". It shows that, in 2010, We sent $5 million in official food aid to Cambodia, but $3.5 million of that was actually paid out to US shippers.
The implication is that we have a fixed food aid budget that is exogenous, and if we could just stop wasting it on shipping (by sourcing the food closer to Cambodia, for example) the aid would be more effective.
Another way to look at the situation though, is to realize that the food aid budget is actually endogenously created in the sausage factory that is Congress.
US shippers and farmers aren't going to lobby for a food aid budget if they don't benefit from it. If shippers and farmers don't lobby and give contributions then the food aid budget will be smaller.
How much smaller? That of course is an empirical question, but given that Cambodians don't vote or lobby (as far as I know at least), zero is not a crazy guess as to the size of the food aid budget without the support of US shippers and farmers.
After all, when you ask the American people where to cut the budget, their first instinctive thought is "foreign aid", which many on them imagine is a large chunk of US expenditures instead of the pittance that it is.
Why does the OECD allow these freight costs to be counted as "aid"? That is a separate question, but in the elaborate kabuki dance of special interest money, it appears to be necessary that money flows not be plainly labeled.
A budget item simply giving money to shippers and farmers is perceived as unlikely to survive, so we call it aid and our pals go along with it. Either because other countries are doing the same thing, or because the OECD knows that calling a spade a spade might end up reducing, rather than increasing the actual amount of aid that is delivered.
We all know that the most effective use of $5 million in aid money is to simply give the money to the people who need the aid. The best our political system can do is, from the $5 million, get $1.5 million in in-kind aid delivered. And then of course the political system of the receiving country takes over, so the amount that actually gets to the intended recipients is going to be a fraction of that measly $1.5 million.
Yet we as a people continue to demand that our political system run more and more of our economy.