Hello! I’d like to apologise that I’m not well-versed in economics, and I’m not a utilitarian, so I’m not sure I followed this very well, but I’d be interested to know a bit more about what’s being presented in this article.
If I understood it correctly, this argues that different nations yield different ‘utility returns’ (i.e. quantified representations of positive impact?) based on the average income of people in those countries- assuming that the aid projects are targeting people in near identical socioeconomic conditions within those countries. If this is the argument, how could this be evidenced in data? It seems tricky to me to understand whether you are getting greater ‘returns’ from a family who are able to pay off a protection racket and avoid violence for an indeterminate period of time, a single homeless person who can get a bed for a week, or a struggling small ethnic minority businessperson who can afford to pay rent on the next month of their store, across national differences. In short, how do you translate real circumstances into utility?
I know that this might be a big question and I appreciate that it might not be possible to condense down to a comment, but if you’d be willing to explain your perspective on this I would appreciate it a lot.
Another thing I was wondering is if you’d say that ‘returns’ correlate to or are the same thing as ‘effectiveness’?
I don’t have a background in development economics, either, and posted this mostly because I thought people with an interest in that topic might enjoy it.
I do have some thoughts on your question, though. You are correct in pointing out that people’s real circumstances vary widely, and that someone wealthier might get more “returns” on money than someone poorer because of other differences in their lives. (As an extreme example, you could argue that hunter-gatherers living outside of any economic system are some of the poorest people in the world but would have no use for money.)
However, I think the author of this article would argue that these differences tend to be subsumed by the vast numbers of people in the areas being discussed, and that there are good reasons to believe that, in general, the marginal utility of extra money is much higher for people with lower incomes. From the full paper:
To interpret and expand on this (in a way I’m not sure the author would endorse): People around the world spend a lot of their money on the same kinds of things (food, housing, healthcare). These “product categories” all seem to have clear patterns in marginal utility. For example, imagine the difference between a $500 and $1000 apartment in Edinburgh, and then the difference between $1000 and $1500. Or the difference between $1 and $3 vs. $3 and $5 worth of food in a Kinshasa market.
Of course, people don’t always have access to the types of goods they’d need to derive the most benefit from their funds. And sometimes, a relatively small amount of money (for one’s country) could be lifesaving—for example, you sometimes see stories about people dying in the United States because they couldn’t afford an inexpensive medication.
But it’s very difficult to find lifesaving opportunities in richer countries at scale. It’s much more complex to find indebted people who are about to be attacked by mobsters than it is to find children who need vaccinations.
That’s all I have time for in a response now, but I hope it added a bit of useful context. As with many questions relevant to EA, one could write a long book on this topic without running out of new things to say and arguments to make, but I think that most of the details are relatively minor compared to the basic argument that money goes further for the average poorer person than the average richer person.
Hello! I’d like to apologise that I’m not well-versed in economics, and I’m not a utilitarian, so I’m not sure I followed this very well, but I’d be interested to know a bit more about what’s being presented in this article.
If I understood it correctly, this argues that different nations yield different ‘utility returns’ (i.e. quantified representations of positive impact?) based on the average income of people in those countries- assuming that the aid projects are targeting people in near identical socioeconomic conditions within those countries. If this is the argument, how could this be evidenced in data? It seems tricky to me to understand whether you are getting greater ‘returns’ from a family who are able to pay off a protection racket and avoid violence for an indeterminate period of time, a single homeless person who can get a bed for a week, or a struggling small ethnic minority businessperson who can afford to pay rent on the next month of their store, across national differences. In short, how do you translate real circumstances into utility?
I know that this might be a big question and I appreciate that it might not be possible to condense down to a comment, but if you’d be willing to explain your perspective on this I would appreciate it a lot.
Another thing I was wondering is if you’d say that ‘returns’ correlate to or are the same thing as ‘effectiveness’?
Thank you
I don’t have a background in development economics, either, and posted this mostly because I thought people with an interest in that topic might enjoy it.
I do have some thoughts on your question, though. You are correct in pointing out that people’s real circumstances vary widely, and that someone wealthier might get more “returns” on money than someone poorer because of other differences in their lives. (As an extreme example, you could argue that hunter-gatherers living outside of any economic system are some of the poorest people in the world but would have no use for money.)
However, I think the author of this article would argue that these differences tend to be subsumed by the vast numbers of people in the areas being discussed, and that there are good reasons to believe that, in general, the marginal utility of extra money is much higher for people with lower incomes. From the full paper:
To interpret and expand on this (in a way I’m not sure the author would endorse): People around the world spend a lot of their money on the same kinds of things (food, housing, healthcare). These “product categories” all seem to have clear patterns in marginal utility. For example, imagine the difference between a $500 and $1000 apartment in Edinburgh, and then the difference between $1000 and $1500. Or the difference between $1 and $3 vs. $3 and $5 worth of food in a Kinshasa market.
Of course, people don’t always have access to the types of goods they’d need to derive the most benefit from their funds. And sometimes, a relatively small amount of money (for one’s country) could be lifesaving—for example, you sometimes see stories about people dying in the United States because they couldn’t afford an inexpensive medication.
But it’s very difficult to find lifesaving opportunities in richer countries at scale. It’s much more complex to find indebted people who are about to be attacked by mobsters than it is to find children who need vaccinations.
That’s all I have time for in a response now, but I hope it added a bit of useful context. As with many questions relevant to EA, one could write a long book on this topic without running out of new things to say and arguments to make, but I think that most of the details are relatively minor compared to the basic argument that money goes further for the average poorer person than the average richer person.