The power law and why Aid is SNAFU

According to Ben Ramalingam’s new book, Aid on the Edge of Chaos, emergent characteristics of complex systems (a category that covers most targets of international development aid) often follow a power law in which most results are clustered together but which are offset by a long tail, e.g. lots of mostly poor people and a few incredibly, stinking rich folk. This tail is fatter, and contains much more extreme elements than you would expect from a Normal distribution, so that ignoring it as a few outliers can be incredibly dangerous. Conversely, such as in the case of earthquakes, the tail commands all the attention over swiftly forgotten smaller events. Maybe the same could be said of success rates in Aid projects? Boosters focus on the Green Revolution and the eradication of small-pox ‘fat tail’, sceptics obsess about the vast majority of Aid projects and spending which appears to achieve very little. Both are right, and both are wrong, and both could probably do with reading Ramalingam’s book.

I hope the title does not put people off the book. It suggests to me an anarchic office environment with harassed over-worked managers, when in fact the chaos that results from too many aid projects is rather more slow moving, if no less SNAFU. Ramalingam does have a good justification for his choice of title, but you will have to get to the final few paragraphs to understand it.

The book comes in three parts, and is a mixed read. The first part is a well-written indictment of the many failures and hubris of the international aid system. It treads familiar ground for anyone who has read Ferguson, Easterly and others. I have yet to tire of reading such critiques partly, perhaps, because they fit well with my prior beliefs, but also because such tales of failure are often instructive, useful to remind oneself what not to do!

Some of the targets may be easy, but all the more deserving of criticism. Occasionally it over-reaches, e.g. in condemning the reliance of orthodox economics on the idealised Homo economicus without acknowledging the many useful findings it has produced. Perhaps better editing would have helped, since such lapses are an easy mistake to make when a polemicist’s blood is up, but they do not detract significantly from the argument.

The second part introduces the reader to the power law and other elements of complexity science, and struggles manfully against the reader’s presumed lack of familiarity with this difficult subject. Part of the problem it faces, I think, is that complexity science is as yet a very young discipline. Theory and understanding are still very much in development, hence appropriate analogies and clear explanations are not well established. This presents a barrier to comprehension of a school of thought that is conceptually difficult to grasp.

Given this challenge it is ironic that the book suffers from too much space given over to this part, presumably in some attempt to keep the book balanced between the three parts. Such space has to be used up somehow: Ramalingam has chosen to do so through regular diversions into the history of complexity science. It is laudable that Ramalingam wants to tip his hat to the giants in his field, but such diversions are not fully contextualised (since this is not a history of the development of complexity sciences) and thus not especially illuminating. They are also somewhat repetitive, and distracting from the main argument.

One criticism of the use of complexity theory in development is that it is good for telling us after the fact what went wrong, hence the long list of shame in part one. But it often seems less good at telling us what we should do instead. This is slightly unfair because for the biggest aid agencies with millions of dollars to spend, investing $50,000 (say) in a complexity assessment could save a lot of money from being wasted on a doomed project. (If only aid agency incentives worked that way …) Ramalingam makes this point, but then in part three goes further with a series of examples of where complexity thinking has been used positively to underpin some highly successful development programmes.

How you respond to these examples may depend upon your background. I loved the on-the-ground examples such as the Subak system for irrigation management in Bali, the ecosystem-based approach to tackling endemic malaria in parts of Kenya, and using positive deviance to find ways to reduce child malnutrition in Vietnam, but others left me wondering “So what?” Conversely the talk of chaotic patterns in epidemiology may leave anyone with a decent grounding in ecological population dynamics thinking “Well, duh!” Some of these examples could thus perhaps have done with a better connection back to the critiques of part one to highlight why the use of complexity science is important.

Pressures of time meant that I took much longer to finish reading the book than ideal, and it maybe that a more focused reading would have been easier on the brain, but by the end I found the book frustrating. The overall aims and structure of the book are clear, but in the detail Ramalingam often appears to lose sight of where he is going with too many digressions in what may be an attempt to humanise an extremely abstruse subject. Ultimately I think the book needed more on aid and aid projects, and how they can be improved by the introduction of complexity science, and less on complexity science itself and its practitioners.

All of which is a pity because the ideas contained within the book are incredibly important. Indeed, despite those flaws, I have little hesitation in recommending it to anyone working in development or in developing countries. Unfortunately I suspect the very deliberate (and quite correct) decision not to offer any panaceas will limit the book’s impact on how most aid agencies operate. The world will be poorer as a result.

Aid as democracy enabler?

Whilst on the subject of disagreeing with Angus Deaton*, I re-read Chris Blattman’s commentary recently. Blattman made an interesting point about aid supporting the emergence of democracy in post-conflict situations such as Uganda and Liberia where Blattman has worked. The basic sense of his argument, that aid money helped those countries get back on their feet having chosen a proto-democratic path, seems clear enough. Clearly the link is not automatic: recent events in South Sudan show that just having lots of aid money around does not ensure a steady upward path, but I am more than happy to buy the basic idea, that, other things being equal, aid would help and potentially help quite a lot with the transition.

This line of reasoning can easily be extended. Just as the presence, even if largely wasted, of a big aid programme can provide cover for small local NGOs to do good things (I’ve seen cases of this), so maybe the promise of aid money can provide some cover to would be democratizers. I.e. at the margin, the presence of Western donors with deep pockets might plausibly increase the attractiveness of democracy to poor country elites (obviously the same cannot be said of the Chinese). Probably impossible to prove, but it is one of those enticing thoughts that you can see politicians grabbing on to.**

On the negative side of the ledger, the incentive value of lots of aid money would be paradoxically lower when accompanied by strong anti-corruption measures. But on the positive side such an incentive could be seen as the first step on a whole ladder of rising levels of cash support for good behaviour such as I’ve mused about before. It’s never going to happen, of course, and even in the case of democracy, I am sure all parties would deny the cash offer was anything as grubby as a bribe. But if Deaton is concerned with the theoretical undermining of the social contract caused by aid, then this is a nice theoretical riposte.

Next week, back to the messy real world in which bribes are paid all the time, even if they’re not called bribes …

* On the subject of international development aid. He can keep his intellectual authority status on other bits of development economics.

** I guess the Neo-Cons under Bush did exactly that!

Messy reality beats philosophy

Catching up on my listening as well as my reading included enjoying the Xmas time edition of Development Drums that was an interview with Angus Deaton in the wake of his recent book the Great Escape that, amongst other things, severely criticises international development aid. I would recommend a listen to the whole thing*, but here is a grossly simplified summary of the key exchanges (which start from about 40mins in):-

Deaton: Aid should be spent for the benefit of poor people, but not in poor countries, as, in the long run at least, aid spent there will always undermine the social contract (we elect you and pay our taxes, we expect half-decent leadership in return).

Barder: What about Anti-RetroViral drugs (ARVs) used to fight AIDS? Surely that is a massive improvement to millions of poor peoples’ wellbeing that was achieved through aid?

Deaton: Well, yes, so I would allow that kind of an exception, but I would announce that this programme of support will expire in ten years time,  allowing time for the people to force their government into funding it instead.

Oh dear! Two very obvious problems with this solution:

1. It won’t work. Aid dependency is far too entrenched. The donors would be blamed not the local political leaders. That might fit with Deaton’s philosophical argument, but isn’t much use in the real world.
2. Why 10 years? Why not add on another 10 and make it 20 years? I’ve got a few more exceptions I can think of … Where, in other words, do you draw the line when back on the slippery slope? You will always find someone with a well marshalled argument to draw the line that little bit lower.

Surprisingly Barder never explicitly tests Deaton on those two points, but he does tie him in a few knots with other thoughtful probing, before Deaton remembers that a big part of the ARVs success story was achieved by lobbying (especially by the Clinton Foundation and their army of bright, young things) in rich countries to get Big Pharma to reduce their prices, i.e. it satisfies his requirement about where aid money should be spent. That wouldn’t, however, entirely get him off the hook, as I suspect many of those reduced cost ARVs are still being paid for with donor money.

All of which is a bit of a shame, because apart from that Deaton makes a number of very good points, and much of his criticism of international aid is valid and insightful. But, as many academics are wont to do, by keeping his argument (in this case) strongly rooted in philosophical (some might say ideological) foundations, he fails to grapple with the messy politics and complexity of the real world. Also ironic, as, according to Owen Barder, Deaton is known for careful treatment of data.

* And British listeners can enjoy a nice little audio pun at the end!

Wherefore art thou Aid?

Nancy Birdsall and William Savedoff have an excellent piece over at CGD about one of the hidden pitfalls that lie in wait putting into practice a Cash on Delivery aid programme. In it they describe how targets, often a good thing for benchmarking performance, can fatally undermine implementation of COD. The problem boils down to this: if the donor government expects to disburse $2m through a COD programme and the recipient government expects to receive $2m through said programme, then it can be very difficult to deviate from that even though in practice one would expect variance either positive or negative, with negative deviation being the trickier but more likely scenario.

One can understand the recipient government’s situation; they would surely always want to get the full $2m even when, according to the agreed formula, their performance only merits $600k. But, what I find particularly disappointing is the tendency for the donor to want to disburse the cash any way. There are explanations of a sort: the donor has budgeted that amount, so returning it to their home treasury can mean reduced budgets in future, and maybe the desk officer find themselves in a tricky situation in their relationship with the beneficiary government, which is most easily resolved by giving in, and handing over the full amount. But none of these are very satisfactory. Pressure to disburse can be resisted with a little bit of backbone, and donor governments seem able to cope with varying budgets for things like unemployment benefit, so surely ought to be able to cope with aid budgets that fluctuate?

In my opinion the real issue, and one which fatally undermines so much of official development aid, is that the whole international aid system is constructed around the needs of the donors, not the recipients. Hence the desire to push out the $2m regardless. If we can agree that COD aid is at least an idea good enough to be worth trying, why are we trying to shoe-horn it into a rigid budgeting framework that will not support it?

The problem is that it is the act of giving which has come to be celebrated, not the outcomes of that giving. Politicians get the media coverage they crave when they announce the donation, not when (if?!?) the programme delivers on its promises. Why else the ridiculous focus on aid budgets reaching 0.7% of GDP?

If we wanted to design a system to actually deliver useful benefits to poor people world wide, rather than to reward donors, we would never come up with the system we have now. Cash on Delivery seems like an eminently sensible step in the right direction, but I fear that the required wholesale reform of the aid system is unlikely to occur before market forces and economic conversion over time remove it much of its original raison d’être, as has happened recently with the cessation of British government aid to India.

But in the meantime, if the mainstream media, in developing as well as developed countries, could learn a little self-restraint, and refuse to report any announcements of aid, just maybe we might start to have a chance …

The future of Big Aid

A friend and colleague has challenged me to respond to this post on IIED’s blog that reported on a debate asking whether “development aid has a future”?

Much as I might be up for a bit of blogosphere wonk-warring, I find it hard to disagree with the main points made in the post. In fact, if I wanted to be facetious for a moment, I might suggest that maybe the panellists had been reading this blog:

• Alex Scrivener is dead right when decrying the pointlessness of the focus on countries giving 0.7% of GDP … which is not so very far away from my views on whether we need more aid.
• David Satterthwaite’s point on Aid’s lack of accountability to beneficiaries is a familiar refrain, e.g. see here.
• Thirdly, Andrew Simm’s query as to how Aid can help in climate-constrained world has echoes of my recent musings that in future Aid may turn into guilt-inspired climate reparations.

Of course that would be facetious since none of those posts of mine were particularly original thinking, and you will find many similar thoughts expressed by others both in and outside the blogosphere. And, yes, many of us find it hard to contemplate throwing the (development) baby out with the (aid) bathwater, because most of us are swimming in that same bath water!

But I do find it ironic that just when big Aid is enjoying some of the highest levels of political support it has ever received, the entire model is under question perhaps as never before. Many countries classified by the World Bank as low income are expected to follow Ghana and graduate to middle income status in the next decade. Aid is believed to have played only a very small part, if any, in this success, but may well have made many millions of lives better in the mean time.

“What is aid for?” asked Scrivener. Apparently it’s not to help the giver win big commercial contracts. My guess is that most private donations for development are motivated out of compassion and simple altruism, and yet when our governments give money often politicians seek to justify it in terms of self-interest. Are they just responding to a right-wing vocal minority or is this what we expect of our leaders?

In light of the above points I would recast Scrivener’s question into three parts:

• Why do people/institutions/governments give money?
• What can we reasonably expect to achieve with that?
• How will these motivations and ambitions change in a rapidly changing world?

Big, awkward questions all, tailor-made for ducking by politicians. Like all such challenges, I suspect we won’t really get a chance to find out the answers till a big (climate-driven?) crisis comes along and yanks us out of the status quo. So actually it may well be the third question which ends up driving answers to the first two.

Fat cats make good accountants

Amidst all the kerfuffle arising from the  revelations last month about supposed ‘fat cats’ of Aid gobbling up too big a portion of DFID’s budget (and that led to the line by line review of DFID’s budget I blogged about yesterday), I have yet to read any analysis of why this has happened. Those stony hearts on the right want simply to reduce the aid budget, whilst those on the left lament that more money should go to the intended recipient countries.

I’ll give you the answer in one sentence: many would be contractors from developing countries do not generate reports to high enough standards nor keep good enough accounts to keep busy aid bureaucrats confident that money is being well spent. This, of course, is a sweeping generalization, and ignores elements of culture (sharing a common culture can greatly increase ones sense of confidence in a contractor). I have no doubt that many people and organisations in developing countries are capable of this, and the fact that at least one Indian company apparently got a big contract is testament to that. However, in the least developed countries (often the biggest aid recipients) this capacity is likely to be lowest.

The Daily Fail may well rage at these ‘fat cats’ of Aid, but imagine their scorn if they were to read reports written in mangled English by people for whom this is not their first language, and/or who just did not get good enough schooling in writing proper English. (A skill which is quite distinct from analytical thinking and empathy with poor people that are two of the most important abilities in doing practical development work.) And this whole storm in a teacup would quickly be recognised as such if it were instead discovered that significant corruption had occurred in DFID-funded programmes. If there is one person the Daily Fail hates more than a fat cat it is a corrupt foreign official!

If, as seems apparent, the proportion of DFID funds spent on UK-based consultants is going up, then I would suggest one simple reason: DFID’s own budget is rising quickly while staffing levels have been reduced. In such a situation DFID’s remaining staff will naturally look for good ways to get rid of big chunks of money at once. As I have previously noted, I think this is a false economy: at some point larger transaction overheads (as a proportion of funds disbursed) will have to be incurred if you are going to achieve high quality results in countries where government capacity is low.

For this reason, although I disagree with their reasoning (e.g. see Terence Wood’s demolition of Lord Ashcroft’s ill-informed ‘golden taps’ diatribe), I actually agree to some extent with the aid critics. DIFD should drop its misguided focus on the entirely artificial target of spending 0.7% of GDP on international aid and development, and instead simply seek to generate the best development outcomes that it can. If DFID can demonstrate that a budget increase will effectively deliver more good and the British Treasury can afford it, then it should spend more, but if not then it should not spend money just because it has it in the department budget (the standard donor failing). If development aid is a ‘race’ then it is not a sprint to 0.7% of GDP; it is a marathon, and the finish line is elimination of widespread poverty, which despite significant progress in recent years regrettably remains a distant target.

My conclusion from two years ago still stands:

“Few people would disagree that the aid system needs serious reform. Many say we need both more and better aid. I think that’s too much to deal with at one time. First make it better, much better, then add more if the absorptive capacity really is there.”

Line by Line

Justine Greening the new UK minister for International Development has apparently ordered a “line by line” review of DFID’s programmes. Setting aside snide remarks about that being what an accountant who knows next to nothing about international development would ask, here are some questions she should ask of each line, and a couple she shouldn’t ask.

What to ask

1. Is this programme compatible with your overall strategy? I.e. decide what it is you want to fund and, just as importantly, what you do not. But be careful of ordering a change in strategy just because you’re the new minister. Too much chopping and changing by bilateral donors can be a real problem.
2. Is it achieving good outcomes? Answering this question needs either hard evidence and/or independent evaluations. Note that not all programmes, e.g. those aimed at governance reform, can produce easily measurable outcomes, but it may be too early in their life to evaluate them properly. Do not confuse outcomes with outputs: shiny new classrooms are not evidence of rising educational standards even if the children in the picture are smiling.
3. Is it delivering value for money? An absolutely critical question. Obviously it is difficult to compare outcomes between different sectors: how many vaccines delivered equals one species saved from extinction? But you can ask yourself is the ‘good’ quantified in (2) worth the money spent on it.
4. Are improper people benefiting? This covers two eventualities. The first is whether the recipient government is using the aid programme to support its own naked political goals. The second case concerns ordinary corruption. This is detected by auditors. If you haven’t set up proper audit arrangements or agreed them with the grantee that is your fault.

What not to ask

5. Are the accounting procedures correct? If this programme is about improving accounting procedures or if a programme to improve accounting procedures was recently implemented with this grantee then this is a reasonable question to ask. In all other cases simply refer to question 3: if value for money is being delivered who cares about the accounting procedures?
6. Is anyone else funding it? Have the courage to believe in your convictions. Matching funding is for pussies!

And finally, if Justine Greening wants to make a difference, I suggest that she looks at all the new projects due to be funded and all the projects whose funding periods just came to an end and are now without. Better the devil you know, than the devil you don’t, as they say, and if you want to avoid charges of wasting tax-payers’ money then not cutting funding to proven projects just because they’ve reached the end of the originally planned grant period would be a really good place to start.

What happened to the power in empowerment?

I’ve just been listening to the latest but one Development Drums podcast, in which Andrea Cornwall and Prue Clarke discuss with Owen Barder where now for the gender movement in development. At one point Andrea Cornwall queries what happened to the power empowerment, accurately critiquing much of what goes by the name of empowerment in development as being almost entirely emasculated of any real shifts of actual power.

Professor Cornwall suggests that the bureaucratic nature of Big Aid is the culprit, that bureaucracies have trouble grappling with such issues. It is certainly in the nature of big bureaucracies to hoard power, but I would be inclined to point the finger elsewhere. Towards the end of the podcast, the discussion veers closer to my diagnosis without ever quite coming out and saying it. As for me, j’accuse the locus of international aid that puts it firmly within the diplomatic sphere.

Back when aid began as a quasi expiation of post-colonial guilt, I imagine it made sense to empower the newly independent governing states just launched. Then in the 1970s and 80s when aid focused a lot on capital inputs, new roads, tractors and power stations to go with those shiny new industrial policies the state to state model would have still been the most appropriate. But in the 21st century, when much western aid focuses instead on softer concerns like governance and participation, and service delivery in sectors such as health and education which aim to boost human capacity, such a model seems utterly out-dated.

Alas, most bilateral aid agencies are either part of the donor country’s foreign ministry or clearly subsidiary to said ministry, whilst the multi-lateral agencies are all ultimately controlled by diplomats. Indeed, donor country governments often justify aid budgets to their electorates in terms of self-interest and improving relations with international partners, i.e. that some quid pro quo may at some point be asked for and given. The US appears only to be one of the most brazen in its demand that every donation be prominently stamped as a gift from the American people, with humanitarian philanthropy apparently a poor second in political motivations for international giving amongst most donor governments. When the act of giving – those high profile pledges of funds – gains far more attention than any actual outcomes of giving, is it any wonder that aid agencies struggle to deliver meaningful development?

Coming back to the challenge of empowerment, the problem, as I see it, is that as soon as you define aid as a government to government transfer, your capacity to achieve any significant transfers of power are almost negligible. Turkeys do not vote for Christmas, and the prestige of a presidential jet, alas, nearly always appears to be higher priority than the provision of clean drinking water to a developing country’s people.

I suppose there is an argument which says that all the official government aid is a bribe to provide cover to the funding given directly to civil society groups which otherwise are liable to get painted as nefarious agents of foreign powers or other euphemisms of the dictatorati. Working as I do in community conservation, I try to remember – as I lament all the money wasted through largely ineffectual official bilateral and multilateral projects in this sector – that without such colossal greasing of the wheels it is extremely unlikely our small NGO would have ever even got off the ground. But, if that is the case, it would be nice to see rather more honesty about the processes and what they are expected to achieve. Channel money for empowerment and governance initiatives primarily through NGOs and other civil society groups, accept that official state aid will be primarily be spent on salaries and physical assets, and seek to work with that flow rather than against it. Whatever you do, please do not ever pretend that sending some senior officials on the next foreign junket (aka international workshop on governance best practice) is even remotely empowering for anyone who actually needs empowering.

You never know, we might just succeed in empowering the empowerment movement …

Public v private, principles v practice

Over at Duncan Green’s Poverty to Power blog there’s a bit of a ding-dong (parts 1, 2 and 3) between Justin Sandefur and Kevin Watkins over whether donor money for education in developing countries should be invested in state or private schools. Both have data and research findings to support their positions, and both make the point that a bit of both should have a place in any sensible education donor’s portfolio. So far so good, so why the all the fuss and strident opinions? One doesn’t have to be a psychoanalyst to suspect that attitudes to private education in our own countries – a fraught subject if ever there was one – are spilling over into the international development sphere.

If that is the case then I should at least declare my own loyalties; I was lucky enough to go to a private school, and very possibly would not be working in conservation and development today if I had not had that chance. But except for the economists and the religiously inspired, development is a decidedly left-of-centre vocation, and so the balance of commenters and voters in Duncan’s poll appear to be against donor funding for private schools.

My only experience of education systems is as a consumer and employer of other consumers, but you do not need any special insights to agree with the primary assertion made by both that there is a big problem of education quality in many developing countries, and a significant issue of access in at least some countries, e.g Pakistan. The essential quandary is how to practically improve the quality of education without compromising on principles of access and fairness. Private schools by definition cost people money and so are likely to be less accessible to poorer people.

But there are lots of essential public goods for which we are accustomed to paying for. Many, e.g. power, water and telecoms, are tightly regulated as a result, and rightly so. They do not, however, come for free. Yet access to information on market prices via a mobile telephone might potentially be more useful and important to a poor farmer’s children than a questionable education would be. Food is an even more fundamental requirement for life than education, and yet just about everybody has to pay for what they eat.

So just because education is a vitally important public good, I do not buy the argument that it needs to be provided directly by the state. As with, say, generating electricity, you may find that private operators are able to do so both better and more efficiently. On the other hand, given the situation in most countries that the state is the dominant provider of education, and that this generally embodies principles of universal access (at least in theory), I am quite open to the argument that funds for education might best be spent improving that system …

… if such funding can actually lead to significant and cost-effective improvements. Lots of newly-built but empty classrooms (paid for by donors) coupled with miserable educational achievement in rural areas around here even when there are teachers present suggests there can be a flaw in this assumption. So if better results can be achieved by supporting low cost private schools then I am all for them. The same ‘if’, of course, applies, and outside of American tea partiers I imagine there are few people who would support private schooling as a matter of principle; the evidence base if their favour needs to be there. (In the absence of sufficient evidence either way funding some pilot projects would be reasonable.)

Ultimately, in my view, it is better to educate some people well, rather than everyone badly. For all the problems with elites and elitism in developing countries, without an elite you do not have anyone to run your country. (Something, it seems, South Sudan is struggling with.) The principle of universal access only becomes a concern when the thing being accessed is actually worth something, or at least when we are able to fix the problems so that it is worth something. As stated many times before donor funds are sometimes quite good at delivering concrete outputs (more classrooms) but much less frequently successful at delivering less tangible outcomes (better educational achievement).

Is opposition within the development sector to private schooling based upon prejudices founded in developed country politics or actual realities in developing countries? I have no expertise to say one way or the other, but I do find similar biases in tropical conservation, in which many so-called experts insist on the gold standard of protected areas despite plentiful evidence that they often do not work very well on the ground. (This is not the same as saying they do not work at all.) As with education, rich country principles seem to occupy the moral high ground over practical solutions that might actually suit poor countries better. That is a shame for both the people affected and the wildlife that might otherwise be conserved.

Insuring against failure

With Rio+20 about to open I have to give a shout out to the idea of iREDD advanced by Corey Bradshaw et al. They propose to address some of the major challenges of REDD by requiring sellers of REDD credits to purchase insurance (that oh-so-cool i on the front of iREDD). One very good point in its favour is that this should massively increase the buyers’ confidence, although, it should be noted that voluntary carbon market standards such as VCS already require project developers to retain substantial buffers of carbon offsets for just such an eventuality. However, I think financial insurance is a stronger option, since one catastrophe – e.g. a massive forest fire – could wipe out a project’s entire carbon achievements with no recourse. Insurance provided by a highly capitalised third party delivers much better cover for such events.

Thus insurance appears a very good way of dealing with the problem of permanence. It should also be fairly easy; there are pretty good data available on wild fires, whilst forest owners who themselves cleared the forest (or allowed someone else to do so) would be guilty of insurance fraud. (Following the logic of my post yesterday, insurers would probably also have to consider political risk, in which the forest owner suddenly finds they are no longer the forest owner.)

But in tackling the other challenges in REDD in demonstrably delivering real net additional reductions in carbon emissions (see here for my previous observations) iREDD seems mostly just to come down to the idea of insuring against the risk that a proposed action does not result in the desired outcome. Here I see a much greater challenge for insurers. How should they quantify such risks? Every project will be unique in some way or another. I foresee great difficulties in developing standard metrics by which these things can be assessed, and where such guidelines could be determined I fear they would tend to favour cookie-cutter style projects and incentivise against innovation.

On the other hand, if these hurdles could be overcome, this seems to me like an idea that has great potential way beyond the REDD arena. How about if donors required every aid project except for the riskiest (which would therefore obviously stand out) to obtain such insurance? That would force project developers to confront major operational risks in a much more explicit manner than at present. Furthermore it could open up innovative approaches to project funding (donors would expect to get some of their money back when projects fail), and could allow private sector operators taking a greater responsibility for the entire project cycle and assumption of risk. This would be in contrast to the current model for involving the private sector in which big consultancies make fat profits for running flawed projects designed by a donor who should have but didn’t know any better.

Owen Barder recently blogged about attempts to extend the still experimental idea of Social Impact Bonds into the international development space*. These also invite private sector players to assume some of the risk of delivery. Insuring projects against failure could be another option to add into the mix.

In practice I can see that it is going to take quite a while for these various different instruments to be put into practice, during which time we can hope – indeed reasonably expect! – that significant numbers of poor people and poor countries will have developed to the point where they are rather less poor and less in need of development assistance. But that could also work in these ideas’ favour: the least developed countries have the least capacity to engage in these kind of risk-sharing models involving the private sector.

So all in all I think it is great to see innovative thinking around conservation and development finance, and I hope that at least some can come to serious fruition. And I look forward to one day filling out an insurance registration for a project I have helped design!

* The various comments echo my points above about some of the practical challenges that would need to be overcome to introduce these as financial instruments worthy of the name.