The Human Element

Because legislation is not driven by the market it lacks information. If the president wants to cut aid to a poor nation he will almost certainly catch bad press, even if the money is destroying the country. A commonly given rationale for cutting foreign aid or restructuring it is that in its present form currupt government officials pilfer much of it... prepetuating the poverty and hence calls for more "aid." Tim Harford gives another reason why we need to rethink our aid strategy in the Undercover Economist. It could have come straight from a Human Factors Engineering journal, though in my opinion it belongs in Engineering Ethics:

Maintence requires two big jobs: keeping the dam in one piece, and clearing the canals of obstructions. This is a lot of work. Farmers won't bother unless they see the benefits, and this potentially leads to a problem. The problem is that while all farmers need the dam to be kept in one piece, farmers near the dam don't much care what happens to the drainage canals farther down the hill. So why should they bother to help with the drainage canals? Fortunately, most farming communities in Nepal have worked out a system of cooperation... the farmers downstream help maintain the dam in exchange for assistance on the canals. So far, so good.

...[However], if a big donor pays for a new dam, everything falls apart. This is not because the dam itself does; quite the reverse. Because the concrete dam needs much less maintenance than the traditional one, the cooperatrion aggreement, which maintained the entire irrigation system, no longer works...

Many modern irrigation systems in Nepal end in failrue because although the technical properties of the system may have been understood and improved, the human properties of the system have not been addressed at all.

Human Factors Engineering, which I am currently studying, is focused on understanding these human properties and adapting the system to accomodate it. Unfortunately, in this and other cases, that analysis either doesn't get done or it is done very poorly. I'm guessing this is because those in charge are more concerned with pointing to a dollar figure ("look how generous we are") than they are with the details. In too many cases these overlooked details, which I will admit would entail non-trivial cost, are what make or break the aid package. So instead of a slightly reduced package that is effective, our less fortunate neighbors get very little benefit (or postive harm) at great cost to us.