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False Analysis

Reader comment on item: Fund the Palestinians? Bad Idea

Submitted by Basel (United States), Dec 20, 2007 at 13:26

I have just read two articles online written by Steven Stotsky. the first is Will Massive Infusions of Aid Rescue the Palestinian Economy?, and Correlating Palestinian Aid and Homicides 2000-2007 that Mr. Pipes cite. As a professor of economics who teaches econometrics and statistics to my students, I find the amateur numerical analysis in both articles wrong and scientifically baseless. I would like Mr.. Stotsky to answer the following questions:

1. does correlation mean causation in that case? can he prove that?

2. Did he conduct any hypothesis testing before he arrives to the conclusions?

3. What is the theoretical bases for his analysis?

In science there is a correct way and a wrong way to go about testing and analyzing data. What Mr. Stotsky have done is the classic example of everything a scientist should not do. Basically, Mr. Stotsky had an idea and looked for data that seems to give credence to his prejudiced analysis. For example, here is how I can use the same data that Mr. Stotsky presented to discount his argument.

In the first article, I argue that foreign aid was given to help the Palestinian economy during periods of economic decline. that is why one observes foreign aid to be rising when Palestinian GDP is falling.

with regard to the second article ( more aid means more attacks), I can argue again that because of Israeli closure policy and systematic destruction, more aid was following to the Palestinians at at time when hostilities were rising. ...

Sincerely,

Basel Saleh
Asst. Professor of Economics
Radford University

Submitting....

Note: Opinions expressed in comments are those of the authors alone and not necessarily those of Daniel Pipes. Original writing only, please. Comments are screened and in some cases edited before posting. Reasoned disagreement is welcome but not comments that are scurrilous, off-topic, commercial, disparaging religions, or otherwise inappropriate. For complete regulations, see the "Guidelines for Reader Comments".

Daniel Pipes replies:

I asked Steven Stotsky for a reply to this challenge, and he wrote the following:

Professor Saleh:

I will address each of your questions and comment on your alternate hypothesis.

Your first question: Does correlation mean causation in that case? Can he prove that?

My Answer: In my article "Foreign Aid and Palestinian Violence: An Uncomfortable Correlation," I made it clear that correlation did not mean causation. My exact words were:

"These statistics do not mean that foreign aid causes violence; but they do raise questions about the effectiveness of using foreign donations to promote moderation and combat terrorism."

However, it would not have been unreasonable for me to have hypothesized a causal relationship.

Your second question: Did he conduct any hypothesis testing before he arrives to the conclusions?

My Answer: A number of economists have looked at the relationship between aid and GDP and come to the conclusion that aid can be counterproductive because it leads to a lack of effort, overvalued exchange rates, and other social and economic changes that are detrimental to growth. I also cited a study from a peer reviewed economics journal that found a link between increased terrorism and increased aid.

Your third question: What is the theoretical bases for his analysis?

My Answer: My analysis was prompted by the following observations:

  1. It is widely acknowledged that the Palestinian Authority (PA) has misused funds. The diversion of funds to terrorist organizations has been documented. For example, documents captured by the Israeli army during Operation Defensive Shield in 2002 reveal financial links between the Palestinian Authority and terrorist groups.
  2. Prior to the second Intifada, most aid went towards development programs. After September, 2000, most foreign donations were allocated to the PA budget or used for emergency aid. Increased availability of funds to the PA means more opportunity to divert funds to terrorists and militants.
  3. George Abed, the former head of the Palestinian Monetary Authority, and James Prince, consultant to the Palestine Investment Fund, questioned the effectiveness of foreign donations. In an article appearing in the San Francisco Chronicle, Prince was quoted as stating, "many of the donor programs have not only been ineffective, they have harmed the economy." The article also estimates that overseas Palestinians have $60 billion in resources which they are not investing in the West Bank and Gaza. ( "Expert says Palestinians don't need financial aid," SF Chronicle, Sept. 5, 2005)

I will now address your two hypotheses: that increased aid is given during periods of economic decline and that the Israeli closure policy required more aid to be given at a time when hostilities were rising.

Increased aid is given during periods of economic decline. The question, though, is what impact increased aid has. Does it turn around a failing economy or does it reinforce a culture of dependency and stifle self-improvement?

Your hypothesis that rising aid and rising violence is coincidental needs to be subjected to the same rigorous analysis that you require for my correlation. It is important to remember that Israeli security measures, like checkpoints, raids and fences, are a response to Palestinian terrorism.

Budgetary aid was provided to compensate for the shortfall in funds arising out of Israel's decision to hold back tax revenue in response to the PA's failure to take effective action against terrorists. If the aid was effective in stabilizing the situation, then the violence should have declined. But this was not the case. When I compared the aid level and the number of homicides occurring during the following year, the correlation between aid and the number of homicides became even tighter.

There is also a logical explanation for the link between increased aid and violence. If aid had not been increased, there would have been less money available to divert to militants and conceivably more societal pressure to use scarce funds to take care of the most basic needs of the population.

I will close with a final question to consider. If foreign aid was less forthcoming, might the Palestinian public have recognized more quickly the damage being done to their own society as a result of the terror campaign. Did the aid inadvertently serve as a buffer to mask this damage and thus prolong the terror campaign to the detriment of both Israelis and Palestinians?

Regards,

Steven Stotsky

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Reader comments (66) on this item

Title Commenter Date Thread
show me da money hunny [420 words]GabrielleJun 15, 2008 06:51132192
Money can't by me Peace. [94 words]Graham R-BMar 2, 2008 13:02121552
CONDI ONLY IMPLEMENTING ANTI-ISRAEL AGENDA OF STATE DEPT ARABISTS [137 words]G. MarcusDec 30, 2007 07:41117111
This Article Hooked me. [217 words]YnnatchkahDec 30, 2007 02:15117107
Mr. Joel Bainerman's article [536 words]YnnatchkahDec 29, 2007 21:59117100
Abbas showing the real face of Islam too soon [77 words]YnnatchkahDec 28, 2007 01:19117031
Is foreign aid bad for Israel, too? [80 words]
w/response from Daniel Pipes
SusanDec 27, 2007 13:40116986
Foreign Aid Bad For Israel ? [184 words]clarence paul puckettDec 31, 2007 00:31116986
EVEN THE MONEY FROM EU,US,THE WHOLE NON-MUSLIM WORLD WILL DO NOTHING [254 words]TTSDec 27, 2007 01:04116956
Arafat's two-headed snake in action [162 words]DrRJPDec 26, 2007 09:32116932
I expect to see this from the Euros and the Canadians who think that they will be saved but from the US... [152 words]James BurkeDec 23, 2007 13:09116832
End the Jizya [57 words]Peter HerzDec 23, 2007 09:22116826
the title of the article [38 words]snakesavageDec 23, 2007 00:50116823
Now it is all clear [351 words]Yuval Brandstetter MDDec 22, 2007 16:58116815
Disabled Arabs? [72 words]infidelDec 22, 2007 04:36116800
Fund the Palestinians? Bad Idea [50 words]S.C.PandaDec 22, 2007 02:20116795
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Jihad, the pastime of the well-off [97 words]Alan in KansasDec 21, 2007 07:04116740
Corruption [126 words]Edward HalperDec 21, 2007 00:29116723
no end to terror in sight [126 words]Phil GreendDec 20, 2007 23:26116720
Read Steven Stotsky's article, "Will Massive Infusions of Aid Rescue the Palestinian Economy?" [434 words]DrRJPDec 20, 2007 17:37116702
Funding SNAFU [124 words]IKDec 20, 2007 14:17116690
Peres Coming around? [65 words]Archimedes2Dec 20, 2007 13:59116687
Unsupportable Conclusion [310 words]Sheldon TyberDec 20, 2007 13:35116686
The Superposition of Graphs is the most simple X-Ray. [297 words]YnnatchkahDec 20, 2007 13:29116685
False Analysis [259 words]
w/response from Daniel Pipes
BaselDec 20, 2007 13:26116684
Hitting The Nail On The Head [33 words]Seamus MacNemiDec 20, 2007 13:25116683
Bread or Bullets [34 words]SemperfiDec 20, 2007 11:03116678
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Let's Put a Cork in This Money Bottle. [328 words]maura collinsDec 20, 2007 09:09116665
Israel Giving The Arabs The Rope to Hang Them [21 words]Dan FriedmanDec 20, 2007 06:43116657
ABBAS NOT SERIOUS [64 words]Reporting IslaamDec 20, 2007 05:01116649
Funding the palis [795 words]Paul la DemainDec 20, 2007 03:23116646
Hi [226 words]Frank ShipleyDec 20, 2007 03:02116645
Excessive funding is not aid but a bribe [106 words]Nelson D'SilvaDec 20, 2007 00:42116637
The word that is missing from Pipes' sound comments is.... [58 words]Jascha KesslerDec 19, 2007 23:03116625
Fund the Palestinians? Bad Idea.. [588 words]Kim SegarDec 19, 2007 21:07116614
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Millions in Aid Monthly for Murder [75 words]Susan DDec 19, 2007 20:06116605
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Funding the Palestinians [46 words]David GueirosDec 19, 2007 19:30116601
Interesting Statistics [87 words]William H GreeneDec 19, 2007 19:19116600
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Insane [50 words]PeterDec 29, 2007 21:51116552
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What is done with the money - that is what counts [120 words]David W. LincolnDec 19, 2007 17:40116548
Bush and State Dept. and EU Rewarding Evil and Terror [211 words]clarence paul puckettDec 24, 2007 00:41116548
Washing the salt [118 words]David W. LincolnDec 28, 2007 20:15116548
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The correct sequence [183 words]David W. LincolnDec 31, 2007 22:34116548
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its not the part. its the culture [206 words]Yuval Brandstetter MDDec 23, 2007 16:51116547
Voluntary financial aid to killers is evil. Western Governments taking their citizens money by force to aid these killers is evil to the nth! [9 words]Ralph C Whaley MDDec 19, 2007 17:40116546
Insanity [184 words]Mary ConnorDec 19, 2007 23:11116546
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Barghuti+Dahlan+Qurea are already trying to get their hands on this money [28 words]AlanDec 26, 2007 06:22116546
Man's Life is the standard of value for man [138 words]Ralph C Whaley MDDec 27, 2007 22:42116546
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Note: Opinions expressed in comments are those of the authors alone and not necessarily those of Daniel Pipes. Original writing only, please. Comments are screened and in some cases edited before posting. Reasoned disagreement is welcome but not comments that are scurrilous, off-topic, commercial, disparaging religions, or otherwise inappropriate. For complete regulations, see the "Guidelines for Reader Comments".

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