Sachs, Easterly and the Banality of the Aid Effectiveness Debate: Time to Move On

Abstract

Abstract: The debate over the effectiveness in foreign aid has existed for decades. Recently it has come to the fore due to the prominence of work and subsequent publicity of Jeffrey Sachs and William Easterly. The debate these two carry out in the public eye is both sensational and polarized. However, an investigation of the academic literature in which Sachs and Easterly’s arguments are rooted reveals just as much polarization. Dozens and dozens of studies produced over the past fifty years have assessed the relationship between foreign aid and growth through econometric analysis of cross-country (or “macro”) data relating the two variables. These studies have consistently turned up inconclusive or contradictory results. At the same time, there is a growing body of research that seeks to determine when and why aid is effective by looking at projects and programs on a case-by-case (or “micro”) level. This paper argues that the debate brought into prominence by Sachs and Easterly, the debate around macro-level data and the question of aid’s effectiveness in general, is both empirically irresolvable and practically irrelevant. Indeed, it is time to move beyond the banality of the aid effectiveness debate.