You assume that “egotistically motivated people” are rational actors; they are not. Homo economicus is a myth.
I have spent over two decades in the private sector, and I can attest that biases, bad information, warped incentives, and herd mentality run rampant (if you don’t believe me, look at the behavior of the stock market).
You ask: why aren’t banks lending money for people to pay to get themselves dewormed? Possible answers include:
Bankers expect do-gooders to overstate their case (likely true, but probably not more than for businessmen and other borrowers)
Bravado—bankers want to look “hard-nosed” in front of their peers; charities look “weak”
Laziness—ROI for poverty alleviation may be more difficult to estimate (or NGO workers may be worse at presenting a business case)
Fear—if the project fails, it will be harder to explain to the boss than your standard bankruptcy
Status seeking—better to be seen around “captains of industry” than low-status do-gooders (or even lower-status peasants)
Prejudice/bigotry—what if the beneficiaries of deworming are of a different race/religion than the bankers?
if you don’t believe me, look at the behavior of the stock market
that’s a very unpersuasive argument. I hope you at least consistently beat the market if you believe that. or maybe you believe you’re also irrational like the market? in which case, we don’t know if the “poverty market” is really underfunded
Possible answers include
I’m pretty skeptical of any of those reasons, but maybe it only takes one, so mayyybe. But if you believe that, then it seems obviously the best poverty alleviation intervention. Funding the most cost-effective poverty interventions while making higher-than-market returns allowing you to fund even more such interventions, etc., and maybe even inspiring others to copy you until the market inefficiency is fixed. That would seem-to-me like a lot of utilons up-for-grabs.
Beating the market consistently is hard to impossible because the market is unpredictable. But the collective mood swings (animal spirits?) behind its ups and downs are anything but rational.
And yes, there may be arbitrage opportunities in poverty alleviation. Microfinance was an “above market” investment until the market assimilated that loan payment rates were better than the previous consensus estimates.
You assume that “egotistically motivated people” are rational actors; they are not. Homo economicus is a myth.
I have spent over two decades in the private sector, and I can attest that biases, bad information, warped incentives, and herd mentality run rampant (if you don’t believe me, look at the behavior of the stock market).
You ask: why aren’t banks lending money for people to pay to get themselves dewormed? Possible answers include:
Bankers expect do-gooders to overstate their case (likely true, but probably not more than for businessmen and other borrowers)
Bravado—bankers want to look “hard-nosed” in front of their peers; charities look “weak”
Laziness—ROI for poverty alleviation may be more difficult to estimate (or NGO workers may be worse at presenting a business case)
Fear—if the project fails, it will be harder to explain to the boss than your standard bankruptcy
Status seeking—better to be seen around “captains of industry” than low-status do-gooders (or even lower-status peasants)
Prejudice/bigotry—what if the beneficiaries of deworming are of a different race/religion than the bankers?
Ignorant and arbitrary bank goals and policies
that’s a very unpersuasive argument. I hope you at least consistently beat the market if you believe that. or maybe you believe you’re also irrational like the market? in which case, we don’t know if the “poverty market” is really underfunded
I’m pretty skeptical of any of those reasons, but maybe it only takes one, so mayyybe. But if you believe that, then it seems obviously the best poverty alleviation intervention. Funding the most cost-effective poverty interventions while making higher-than-market returns allowing you to fund even more such interventions, etc., and maybe even inspiring others to copy you until the market inefficiency is fixed. That would seem-to-me like a lot of utilons up-for-grabs.
Beating the market consistently is hard to impossible because the market is unpredictable. But the collective mood swings (animal spirits?) behind its ups and downs are anything but rational.
And yes, there may be arbitrage opportunities in poverty alleviation. Microfinance was an “above market” investment until the market assimilated that loan payment rates were better than the previous consensus estimates.