Michael Clemens had a post last month that is damning to a recent UNDP paper by Nanak Kakwani and Hyun H. Son titled “How costly is it to achieve the MDG of halving poverty between 1990 and 2015?”:

In the thicket of equations, you’ll find two assumptions for which there is zero evidence: All aid becomes investment, and all investment becomes income. No serious economist believes that—not even close—which makes this exercise totally irrelevant to aid policy.

In a five minute skim of the paper, I found passages that support that interpretation:

“Given this assumption, it is obvious that the growth rate of per capita GDP will be equal to the growth rate of capital per person. ”

“The investment gap can be filled by numerous alternative sources such as Official Development Assistance (ODA), private capital inflows, and borrowing.”

“Table 6 presents the average per capita investment-saving gap in 2002 US dollars. The estimates in Table 6 can be, in fact, interpreted as the amount of per person foreign aid required to meet the MDG.”

I’m surprised that we’ve returned to discussing the “investment gap,” which received such brutal treatment from William Easterly in The Elusive Quest for Growth that I took it to be dead. I haven’t followed UNDP/MDG estimates and projections in the past. Is this quality of work typical for them or an exception?