Searching for Social Entrepreneurship in the Middle East

"Fewer than 10 percent of Muslims in the West Bank have checking accounts." That's a pullquote from a new article in the World Policy Journal (pdf) on microfinance and the Muslim world. The article focuses, in part, on the efforts of Reef Finance ("rural" in Arabic), a microfinance organization based in Ramallah, Palestine. There are few good examples of entrepreneurship, let alone social entrepreneurship in the Middle East, so this is a bigger story than it might look at first glance. (The interested reader should also see the profile of Sekem in Innovations).

Check it out. The summary:

These efforts described here are still quite new, but so far, they seem to be working for both financiers and rural Palestinians. So, while the amount of funds being loaned may be relatively small, the goals are anything but. Building a sustainable economic foundation in the rural West Bank is a powerful inducement to keep young men off the streets, and a big step forward in the march to a lasting peace in the Middle East. If international aid efforts are to be focused on this particular goal, a dramatic expansion in shariah-based microfinance is likely to bear enormous dividends, far beyond any immediate economic impact.

Congestion Pricing

Matthew Yglesias offers up another reason to support congestion pricing and sees some form of road pricing as inevitable:

As I said before, someday people are going to look back on the Unpriced Road Era and be baffled. Then someone will point out that for the first several decades of the relevant period, the technology simply didn’t exist to do the tolling in a feasible way. That created an unpriced road status quo, which became extremely psychologically powerful for years after the unpriced road model had become technologically obsolete.

I actually wrote a paper about this topic a couple of years ago and even made up a cute acronym for the legislation that would make such pricing a reality. Our goal was to think of a policy that is not currently in place but would be in 100 years and that a future society would find inconceivable that we didn't have said policy in our dark early days. Apparently the professor only wanted us to write about gay marriage, which she mentioned frequently, because she found my topic very boring and dull. I'm glad Matt doesn't agree.

R&D Funding

From the Science and Engineering Indicators: 2010. This came out back in January but I'm just getting to it. You can find plenty of other coverage elsewhere (start here). What's immediately obvious is that the share of funding for R&D from the government has shrunk from a high of about 65% in the 1960s to about 25% in 2008. The other striking change is the increased share from business. I didn't label three other categories, universities and colleges, nonfederal government, and other nonprofit, which together make up about 6% of funding.

A few clarifying points are in order. First, total expenditures have grown over this entire period and for all groups. It is not the case that private funding is somehow crowding out public funding, even if it looks like this from the graph. The government increased its funding of R&D in almost every year since 1953 (as far back as the data go). But the growth rate from business investment has been higher. Thus, even though R&D funding from business started off with a smaller base ($2.2 versus $2.7 billion), by 1980 private investment passed government and the gap has widened ever since.

Despite the shrinking share of funding, government policy is important, and government politics even more so. So here's a simple reform, to make this post policy relevant. Rather than waiting until the end of the year, as they did in 2009, perhaps Congress could approve an extension to the R&D tax credit in a more timely manner. Uncertainty seems to be the word de jour, but it is applicable. Unfortunately, in the midst of a recession, policy uncertainty shouldn't be what we're talking about all the time. This is a simple legislative act, which would improve planning and reduce uncertainty.

Even better of course would be to just pass a permanent extension of the credit and be done with it. Forget budget dilemma's over how to offset the cost with payfors. Just count higher GDP as the offset and move on.

On a related note, interested readers might want to check out the Economist's recent conference on innovation:

The Economist believes that the world is governed by ideas. Because human progress relies on the advancement of good ideas, we are launching a new series of events that brings together top thinkers from around the world to discuss and debate the most important ideas of our time. By focusing on Innovation, Intelligent infrastructure, and Human Potential, we imagine an ecosystem where good ideas move from concept to implementation, fueled by the power of human ingenuity, and only the best survive. Welcome to the Ideas Economy.

Some good writeups from IBD here and here.

Pulling in Multiple Directions

We've mentioned this before, but government to government aid is about much more than just poverty reduction. The latest example of this is the cybersecurity bill that is winding its way through Congress. From the new new internet:

A broader proposal that is gaining political momentum would create a cyber post at the State Department and establish cybersecurity attachés at U.S. embassies. It would also mandate that the State Department identify countries that are havens for cybercrime and which ones are doing little to combat it. The findings, updated annually, would be used to prioritize foreign-aid programs to combat cybercrime, but countries that fail to make progress fighting cybercrime could also face U.S. penalties. The president would have a variety of options to sanction noncompliant nations—from limiting new foreign aid to restricting financing from the Overseas Private Investment Corp., a U.S. agency that helps U.S. businesses invest overseas.

When we tie foreign aid to specific reforms, we are using a carrot and stick approach. But there are limits to how many reforms we might request. We might give money conditional on fiscal policy reforms, or changes to a country's regulatory structure - and sometimes we lend with no conditions. By tying foreign aid to cybersecurity we are affirming our belief in this important goal, but at the same time tying our hands in other areas. We are, in a very real sense, trading off economic reforms for security. This may be optimal, but we should account for these changes when looking at the effectiveness of foreign aid in alleviating poverty. Simply put, foreign aid isn't, and hasn't been for a very long time, simply about improving living standards. For that, we need entrepreneurs.

A Few Things

I've been negligent in posting but there have been a number of positive developments that are worth celebrating. So the good stuff, in no particular order:

1. Fazle Abed, founder of BRAC, was knighted by the Queen. This was a wonderful honor and it was bestowed on one of the most humble men alive. See the economist for coverage and then check out Sir Fazle Abed's recent article in Innovations, entitled, Beyond Lending: How Microfinance Creates New Forms of Capital to Fight Poverty (pdf). His name should be as well known as Nobel Laureate Muhammad Yunus.
   
2. David Miller has a new blog - don't worry, it's not replacing Campus Entrepreneurship - covering Under Armour and its founder, Kevin Plank. See this post for more details, and here is his new blog, Under Armour Files.
3. Speaking of David, he links to a great article at Techcrunch from Vivek Wadhwa on whether entrepreneurs can be made. See David's writeup for more.
   
4. The latest from Xavier Sala-i-Martin, African Poverty is Falling...Much Faster than You Think! (PDF), and the gated NBER version.