Wednesday, August 22, 2012

No good deed goes unpunished

The Bangladesh government is trying to seize control of the Grameen bank.  Vanderbilt alum Mohammed Yunnus won the Nobel Peace Prize (some of us wonder why he didn't win the econ prize) for coming up with what is arguably the most successful way of helping poor people improve their lot, by making small loans to women.

Ironically, the NY Times is pitching this as a war against women, despite the fact that the Bangladesh Prime Minister is female. As an aside, the discrimination that makes this microlending successful would be illegal in the US.

Beyond the damage done to the bank, the bigger issue is the perverse incentives that the government move creates:
...what it tells us is that if you try to make a difference you’ll be kicked and disgraced. I think that sends the worst possible message.

4 comments:

  1. Grameen Bank operates in Bangladesh. Bangladesh separated from Pakistan in 1971.

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    1. thanks, I fixed it, Luke

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  2. I see that the microlending discrimination is successful in this particular scenario, but I would think that in general, microlending discrimination would actually destroy wealth instead of creating it... am I missing something? Are U.S. anti-discrimination laws creating or destroying wealth?

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    1. It could be in that the bank is missing out on wealth creating loans to men. But it is costly to figure out who is likely to repay, and the bank has discovered that its strategy of discriminating is a cheaper substitute for better information.

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