The Market for Aid 2.0: Collaborative markets

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A couple of years ago, former PSD blogger Tim Harford and co-author Michael Klein argued for more market-like mechanisms in the aid industry in The Market for Aid. A new working paper by Owen Barder (Beyond Planning: Markets & Networks for Better Aid) picks up where Tim and Michael left off. Owen argues that aid agencies are stuck between a rock (donor countries) and a hard place (recipients and recipient country governments), in which the interests of donors and recipients don't fully align. Better planning alone won't make this problem go away. 

Owen offers up an alternative, something he calls a collaborative market. The concept draws on some of the ideas in The Market for Aid, but goes a step further:

A considered combination of market mechanisms, networked collaboration, and collective regulation would be more likely to lead to significant improvements [in the aid system]. A “collaborative market” for aid might include unbundling funding from aid management to create more explicit markets; better information gathered from the intended beneficiaries of aid; decentralized decision-making; a sharp increase in transparency and accountability of donor agencies; the publication of more information about results; pricing externalities; and new regulatory arrangements to make markets work.

How do we get from here to there? You'll have to read the paper for that. But I was excited to see some of the specific mechanisms that Owen discussed at the end of the paper, e.g. mechanisms for beneficiaries to provide feedback in addition to top-down evaluations, on-line collaborative platforms for sharing information between aid agencies, social networks, prediction markets, explicit contracts for the delivery of aid, and many other ideas.

The financial crisis put a lot of pressure on aid agencies to focus on the short-term. Now that the crisis has receded somewhat, perhaps there will be room for Owen's ideas to get a fair hearing.

Update: Tim Harford adds his own two cents on the issue in the Financial Times. In short, he wants to make my life harder. Thanks, Tim!   


Ryan Hahn

Operations Officer

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