Monday, January 17, 2011

Perverse Incentives

Take some time to think about this sentence from The Economist:

Since a botched Christmas bombing of an American passenger jet in 2009 by a jihadist trained in Yemen and a foiled plot to plant explosives in a cargo aircraft there last October, the United States has increased military aid [to Yemen] from $70m in 2009 to a planned $250m this year.

Imagine that you are a politician or military officer in a country like Yemen.  Given this news, are you more or less likely to put effort into preventing jihadists in your country from launching attacks on the USA?

If you were especially corrupt, you might make deals with the terrorists, promising to leave them alone if they also leave your civilians alone and only focus attacks in the direction of rich countries with large military aid budgets.  After they launch attacks, you collect the money, stuff a large percentage of it in a Swiss bank, and pretend to fight the terrorists:

American aid is not always used for its intended purpose. In 2009 a Pentagon-trained counter-terrorism unit was diverted to Yemen's north to fight Houthi rebels who are not generally jihadists. Recently it was reported that boats donated by America to Yemen's coastguard were being rented out for commerce.

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