Fair point about localized heterogeneity. But simply having different optimal interventions in different places doesn’t itself justify splitting resources across them. That would require either:
Steeply diminishing returns up to the relevant margin for each intervention (making diversification optimal), or
Having more resources than we can deploy in all plausibly effective interventions.
Either claim would be surprising and worth investigating explicitly. I intended this piece as a call for such investigation.
Moreover, if we take your example—productive wealth inequality in the US vs extractive in Uganda—this actually strengthens the case against portfolio diversification. Under this model, returns to investment in Uganda would be systematically captured by extractive institutions. The efficient response might be to focus on systemic changes that reduce extraction (like charter cities or immigration reform) rather than direct aid or cash transfers. This illustrates why we need explicit models of how these systems interact.
Fair point about localized heterogeneity. But simply having different optimal interventions in different places doesn’t itself justify splitting resources across them. That would require either:
Steeply diminishing returns up to the relevant margin for each intervention (making diversification optimal), or
Having more resources than we can deploy in all plausibly effective interventions.
Either claim would be surprising and worth investigating explicitly. I intended this piece as a call for such investigation.
Moreover, if we take your example—productive wealth inequality in the US vs extractive in Uganda—this actually strengthens the case against portfolio diversification. Under this model, returns to investment in Uganda would be systematically captured by extractive institutions. The efficient response might be to focus on systemic changes that reduce extraction (like charter cities or immigration reform) rather than direct aid or cash transfers. This illustrates why we need explicit models of how these systems interact.