Samaritan's Dilemma

1230 Words3 Pages

The Samaritan’s dilemma occurs when giving charitable donations removes the incentive for the receiver to improve their own situation. When aid is given, the receiver initially has two options: they can use the aid to improve their situation, or they can trust that they will receive aid again and do nothing productive with the aid they receive. Good Samaritans evidently give charitable donations in hopes of the former, however we will see that this scenario does not necessarily play out in their favour (Coate 1995). The Samaritan’s dilemma often presents itself in the area of foreign aid, and there are certain measures the government can take to eliminate the uncertainty it causes. In this essay I will first discuss the significance of the …show more content…

First we return to Coate’s optimal transfer policy involving in-kind transfers of insurance. By definition, in-kind transfers from the government are goods and services given to the poor instead of money. This system removes the possibility that the poor will abuse the charity by using it irresponsibly. Thus, this is a very effective method of eliminating the uncertainty burden on the giver. If a charitable government gives a suffering country a donation in the form of a good or service instead of a monetary transfer, the country will be forced to use the charity for its intended purpose. Another solution proposed by Coate is for the government to simply require that the country take insurance measures if it wants to receive continuing donations in the future. Presumably the recipient country would present some sort of proof of insurance and the charitable government would continue to provide donations. Coate takes this method a step further and states that the charitable government can also subsidize insurance by offering monetary transfers conditional on the country taking insurance, such as natural disaster insurance. However, the in-kind transfers remain the failsafe measure since with insurance requisite for donation policy or subsidized insurance policy the country could take the insurance but that would not necessarily stop it from using the rest of the charitable money for other less productive projects (Coate 1995). The fundamental problem with the first two measures is that there is no approach the charitable government can take to punish the recipient government without hurting the poor in the recipient country. Even if there is a contract between the giver and the receiver stating that the quality of life of the poor must increase by a certain amount in a set time, there is nothing the giver can do if the contract is broken. If the giver ceases donations,

Open Document