Wednesday, April 14, 2010

This is why i gave up on development economics

I can't believe they gave this 'intellectual giant' a Nobel, but then again these guys also gave Al Gore and Barack Obama one of these medallions each, so its in keeping with trend.

The best motivation is the profit incentive, if the big banks make money out of these projects its more than likely they'll keep at it and lend more. If this was a charity project, i wouldn't count on it lasting too long. I can understand the counter-intuitiveness of this concept being beyond the lay folk, but apparently its out of bounds for Nobel winners too.

1 comment:

Wafa said...

At the same time you don't want the poor at the mercy of loan sharks & the type of payday loan places that are now ubiquitous in low-income areas in the US. For all my free-market leanings, those businesses are just too much to swallow -- I think the negative externalities are sufficiently high that some regulation is called for.

To my mind an ideal financial institution would combine microsavings, microcredit, & mini-venture capital. Literally a co-op bank or credit union type place, with seed money from development agencies & NGOs. Certainly it should aim to be profitable. But I do balk at 100% APR type interest rates, even if poor people are riskier investments.