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The Costs of Inaction

Shanta Devarajan's picture

Sudhir Anand and co-authors recently published a fascinating book, The Costs of Inaction, which looks at cost-benefit analysis in a different way. All cost-benefit analysis requires the analyst to specify a counterfactual—how the world would have evolved in the absence of the project of program.  This is critical.  An evaluation in Kenya included increased use of cellphones as an indicator of project success — neglecting the fact that cellphone use in neighboring villages was just as widespread. 

In many cases, the counterfactual could be “doing nothing.”  For a number of important areas such as health and education in Africa, The Costs of Inaction calculates the costs of doing nothing in terms of lives lost or under-educated children.  They then compare these to the net benefits (benefits minus costs) of various programs, such as school feeding in Rwanda or free male circumcision in Angola.  The difference between the net benefits of the program and the costs of doing nothing is what they call “the costs of inaction.”

In the book, the programs that are being evaluated are typically government programs.  Yet, we know that the delivery of health and education services in Africa suffers from multiple government failures.  Teachers in Tanzania are absent 23 percent of the time.  When present, they are in class teaching a quarter of the time.  In Chad, the share of nonwage health spending that reaches the clinic is one percent.  And doctors in Senegal spend a total of 39 minutes a day seeing patients.

If this is the current situation, we should be careful in designing and recommending programs, such as secondary enrolment in Rwanda or clinician-dependent services in Angola, when the state of public services is so poor.  The programs may not have the desired effects.

But here too there is a role for the “costs of inaction.”  The costs of inaction in this case is not the cost of the government’s doing nothing, but of the government and the general public tolerating these pervasive and massive government failures.  These government failures persist because vested interests are able to capture the political system and ensure that politicians maintain the status quo—with poor people the losers.  One way to break out of this low-level equilibrium is to empower poor people with information about these government failures, so they can elect politicians who advocate genuinely pro-poor policies.  What kind of information?  Let’s start with systematic evidence about the state of service delivery—whether poor people are getting what they are due, and if not, why not.  But this is nothing more than the costs of doing nothing about government failures.  In other words, it is the true costs of inaction.

The costs of inaction, therefore, can play a powerful role, not just in guiding public action, but also in mobilizing public support for reforms that will benefit the poor.