1. Altruism is a prevalent motivating factor behind parent-child and other nonmarket-market interactions, including those undertaken by the World Bank(WB) and IMF. Like parents/guardians, the WB/IMF gives their clients both money and advice. Like children, their clients mostly take the money and ignore the advice. Should parents/guardians (the WB/IMF) give more or less money and less or different advice in order to get their children (clients) to improve their economic situation? Two papers highlight different approaches to answering this question. On, a not particularly rigorous speech/paper by Joe Stiglitz (jstiglitz@worldbank.org) called the "Wider paper," was presented as the Annual Wider Lecture on January 7, 1998. Though ancient history, the paper, entitled "More Instruments and Broader Goals" is influential within the WB and relevant because it forms a basis for the currently fashionable criticism of the IMF's high interest rate, tight monetary/fiscal policy stance. The Wider paper is typical of most WB/IMF economic papers (e.g. the Dollar/Pritchett and Paul Collins papers) in that it focuses on increasing the breadth and intensity of policy advice, without considering how the continual provision of large amounts of aid by the WB/IMF affects the reception of this advice and/or the outcome of stabilization/development efforts. Instead, the Wider paper pretty much asserts that maintaining/increasing aid-flows while improving the policy milieu will increase the financial solvency and development of client countries. The other paper, by Ralph Chami (relchami@nd.edu) and Connel Fullenkamp, presented at the 1999 AEA meetings and entitled "Should Gift Giving Be Subsidized?" has a very different approach. It considers how varying the amount and the targeting of altruistic transfers in a constant-policy milieu can affect development, at least as this applies to employment (work effort) and welfare .The Wider paper mostly tells practitioners to "do more and do better" while the Chami/Fullenkamp paper suggests how changing the size of altruistic (WB/IMF) money flows can increase economic welfare. It is likely that the Chami/Fullenkamp paper is much more relevant to development.

2. The Wider paper supplements its "do better" platitudes with a fascinating section entitled, "The Process of Financial Reform,"which likens financial systems to the "brains" of countries' economies. These brains are supposed to perform functions relating to improving the allocation of credit, reducing risk and perfecting the flow of economic information, thus stimulating growth. The paper says, "Left to themselves financial systems will not do a very good job of performing these functions." This is clearly a parent talking. It sweeps aside any hope, suggested in the endogenous growth/learning literature, that financial systems can develop and/or reform by themselves. The paper eschews any consideration of the impact of large (WB/IMF) financial flows on financial systems. It would be irrelevant to a banker's viewpoint that quick disbursement of a huge WB financial sector reform loan was ruinous to Kenya's financial sector.

3. The Chami/Fullenkamp paper is primarily concerned with the market reaction to altruistically (non-commercially) motivated money flows. It assumes that the "brains"of economies are its markets, which are capable of developing/reforming themselves unless they are overwhelmed by uninsurable external shocks such as sudden changes in policies or financial inflows/outflows. This paper argues (roughly) that gift giving represents a form of non-market income insurance the impact of which, particularly with respect to labor supply and productivity, must be considered in government policies. Gift giving (insurance) which stimulates productive work effort (e.g., lump-sum gifts targeted to provide unmet basic needs and training) should be subsidized. This would stimulate investment and employment. However, all gifts are subject to moral hazard and those which cause income dependency and reduced work effort (e.g., a lot of social funds) should be taxed in order to reduce or eliminate them. Otherwise, investment and employment can fall as a result of the gifts. It is both the analytical approach and the focus on employment which make the Chami/Fullenkamp more relevant to development than the Stiglitz paper.