Behavioral-Based Theories and the Aid Industry: An Explanation for Unintended, Negative Outcomes

Abstract

In the past decade, the effectiveness and efficiency foreign aid (Aid Industry) has generated considerable debate in both of the academic and popular press. Despite spending billions of dollars in foreign aid well over a billion people remain in extreme poverty. This paper did not intend to question the magnitude of the effort or the motives of donors or aid agencies, but rather why the aid programs have not been more effective.

Certain research in behavioral economics, pathological altruism, and emotional empathy may help provide answers. Common to these theories is the idea that well-intentioned actions or policies may cause unintended, harmful consequences to either the donors or the intended beneficiaries of these actions or policies. This paradoxical result is typically due to the altruist’s inability to properly analyze the situation for a variety of reasons. The Aid Industry may be particularly susceptible to these behavioral biases and thus is likely to suffer to some extent from unintended adverse consequences.

This paper focused on ethical considerations at the microlevel, that is, the paper considered the impact of aid on individual’s economic utility and human dignity as opposed to macromeasures such as gross domestic product. Our purpose was to examine how behavioral theories can improve foreign aid efficiency and effectiveness. Using specific examples and considering ethical arguments based on utility and rights theories, we illustrated how these behavioral theories help explain the Aid Industry’s suboptimal results.

Citation

Coate, C.J., Mahar, J., Mitschow, M.C. and Rodriguez, Z. (2018), "Behavioral-Based Theories and the Aid Industry: An Explanation for Unintended, Negative Outcomes", Schwartz, M., Harris, H. and Comer, D.R. (Ed.) Visual Ethics (Research in Ethical Issues in Organizations, Vol. 19), Emerald Publishing Limited, Leeds, pp. 141-164. https://doi.org/10.1108/S1529-209620180000019009