Poverty: Who should do what?

Goncalo brought up this issue recently on his blog:

This is an issue that tugs at people's hearts, in today's world inevitably fills up our TV screens and bears weight in our conscience.

I can't help remember that interesting article a professor of mine wrote explaining all the economic reasons behind not giving money to poor people. At the end of his explanation he says: "I stopped at a traffic light and saw a beggar. I rolled down my window and gave him some change."

It is true that we need "both sides of the coin" as Goncalo calls them. However, economic and social studies have brought light to “who should be doing what”.

In my (perhaps simplistic) view institutions such as the IMF and the World Bank exist to establish policy. Policy exists to create incentives and sometimes even to restrict some types of individual behaviours. In this particular topic they're saying "here's money we’re lending you to build infrastructure and grow". It's not good "policy" for policy to say: "here's some more money (debt relief) so you can avoid paying."

Economics is about incentives.

Individuals and corporations should contribute however they can to the short-term issues such as poverty by giving what they can. That includes giving money and time. This includes you and me.

The institutions mentioned should provide adequate policy to stimulate long-term sustainable growth. Mixing both may be counter-productive and naive.