Foreign Policy Explained, Ep. 8: Do Foreign Policy benefits outweigh the cost?

Release Date
September 1, 2016

Topic

Liberty Politics & Policy Role of Government
Description

Does foreign intervention do more harm than good?
It’s hard to look at suffering in developing nations and stomach much of the poverty that exists in the world. Naturally, we all want to help, but to help requires a knowledge that people in a given community have gained over time. Based on experiences, habits and customs passed down through generations, specific to local cultures and environments. Sufficient local knowledge is necessary to make good policy decisions. Otherwise, how can we know the incentives local people face? And how they will react to the changes the new policy presents them with? Professor Abby Hall Blanco of University of Tampa explains.

Foreign Policy (playlist): In this series, we discuss the many ways that government policies abroad tend to come back home and negatively affect American citizens. 
World Poverty: Can We End Poverty Overnight? (video): Could a global redistribution of wealth really help the world’s poorest people? 

Many foreign policy decision are made with good intentions, but they fail to accomplish their objectives, why? Because policy makers are often unable to predict the way real people will behave in the face of their policies. This is where economics can offer important insights that other disciplines overlook.
In this video, we’ll learn how two crucial economic concepts, incentives and constraints, impact foreign policy decisions. Economists think about incentives as the cost or benefits of a particular decision. People usually choose to do activities when the benefits exceed the costs. But costs and benefits don’t just mean we look at money, benefits include things like having fun or bringing joy to someone you love.
And cost includes things like your time and energy. Incentives aren’t just valuable to help explain your own actions and those of the people around you. They also operate on people in power, like politicians, bureaucrats, and military leaders. No matter who you are, it’s natural to react to the incentives you face personally.
To see how this might add to bad foreign policy outcomes, let’s consider a hypothetical example. Congressman Morris represents a district where the largest employer is a company that manufactures tanks for the military. Business hasn’t been so good lately, so the company has been laying people off. Morris talks to constituents every day who are struggling and genuinely feels for them.
Further, he knows that getting them jobs will help him get reelected. So he promises to do everything he can to help the company. Morris works for lobbyists from the company as well as his colleagues in Congress to ensure that the military will buy more tanks from his district.
In doing this, Morris isn’t considering whether these tanks are actually what the military needs for their current campaigns. Or whether the money would be more useful elsewhere. The incentives for Morris are not to weigh what would be best for the nation as a whole. He’s incentivized to help his district and so he does.
He might even wind up voting in favor of a military invasion because of these incentives. After all an invasion could require more tanks and thus more work for his constituents. The second economic idea to consider is that of constraints. One of the biggest constraints facing policy makers is what’s called the knowledge problem.
It’s incredibly hard, if not impossible, for an outsider to have all the local knowledge necessary to make the right decision for a foreign country. Local knowledge is the knowledge that people in a given community have gained over time. Based on experiences, habits and customs passed down through generations.
It is specific to local culture and environments. Sufficient local knowledge is necessary to make good policy decisions. Otherwise, how can we know the incentives local people face? And how they will react to the changes the new policy presents them with? How can we or policymakers know what locals really need and value?
Say you’re a bureaucrat trying to send food to a country experiencing a famine. If you’re going to be successful at helping those who are starving, you need lots of knowledge of time and place. Exactly who will receive the shipment of that food? Do they have the equipment and infrastructure necessary to distribute it?
Are they corrupt? Will they favor some ethnic groups over others? Can the food be kept from spoiling? How will flooding the local markets with free food impact individual farmers and merchants there? If you lack sufficient local knowledge where you’re intervening, you can create worse problems than the ones you set out to solve.
This is why well-intentioned experts from afar very often fail. Achieving foreign policy goals means taking into account thousands of factors that impact millions of people. It requires policies that align the incentives of most local people to act in a way that will support your objectives. It’s a lot to ask of government agencies and a good reason to be skeptical of government intervention.