1. FOOD SECURITY
Concepts, Basic Facts,
and Measurement Issues
June 26 to July 7, 2006
Dhaka, Bangladesh

2. Rao 15:
The Scope and Limits of
Targeted Policies
Learning: Trainees will learn to appreciate the basic and
subtle issues that arise in targeting, both normative and
measurement issues that must be faced up to in the
choice between universalism and various degrees of
targeting.

3. Brief Contents
• universalism versus targeting in social welfare approaches
• type I (false negative /exclusion) & type II (false positive
/inclusion) errors
• administrative costs in identifying targeted beneficiaries
• tradeoffs between type I error and administrative costs
versus type II error
• application to food subsidy, food for work and other food
security policies

4. Constraints on Policy
• In standard economic theory, any desired distribution can be
attained in a market economy provided only that “lump-sum
redistributions of initial wealth” can be arranged. Given this
assumption, states do not have to confront any budgetary
constraint or any conflict over alternative instruments of policy. This is
called a 1st best policy context.
• In reality, policymakers lack lump-sum instruments, and so
confront both budget constraints & painful choices among
alternative policies. This is called a 2nd best policy context
• In achieving welfare gains (poverty & FIS alleviation being
prime examples), the most general forms of constrained
policy choice is between pro-growth versus pro-poor growth
strategies and between “universal” versus “targeted” policies.

5. Growth versus Pro-Poor Growth
• The “great tradeoff” thesis is that welfare state policies
necessarily sacrifice growth to get immediate gains in
welfare i.e., sacrifice future gains in welfare that only
growth can bring about for the sake of current gains.
• This ignores much evidence showing that faster economic
growth does not always translate into more equitable
growth e.g., faster growth may improve total food supply
but with unequal entitlements distribution of growth
gains, access to food may increase little or even decline.
• Policies are not always formulated optimally under given
structural economic constraints. Ideological bias and
governance failures often underlie the fitful and fad-ridden
approach to poverty and food insecurity.

6. Universalism VS Targeting
• `Universalism’ in policy means making a publicly provided
benefit available to all sections of society e.g., a universal
policy of subsidized food distribution makes food grains
available at reasonable prices to anyone who wants to avail
of that benefit.
• By contrast, a targeted policy makes the publicly provided
benefit available only to defined segments of society e.g., a
targeted policy of subsidized food makes the food available
only to those identified as being below a poverty line.
• In practice, universalism does not mean everyone will
actually avail of the benefit e.g., self-selection by the poor
(and self-exclusion by the non-poor) in a universal food-
for-work program

7. Universalism and Rights
• The discourse of rights (e.g., human or citizenship rights) is
necessarily universal. A right is intended to be available to
all, without discrimination or `targeting’.
• Thus, the idea of a fundamental right to freedom from
hunger is itself meant to be universal. It does not follow, of
course, that this right necessarily requires direct state
interventions designed to make food available to all. In
some contexts, targeted policies to enhance food
entitlements of the hungry/FIS may suffice.
• But in other contexts, targeted policies may fail to redress
lack of access to food for many. Judging each context to
determine what policies are required to achieve the goals
becomes a crucial element of strategic policy choice.

8. The Scope of Targeting
• We may distinguish between two types of targeting:
• Positive Targeting: aims to support the vulnerable, a group
larger than the actually poor or food-deficient: here, the idea
is to support those who cannot achieve assured access via
the market. No explicit budgetary concern motivates the
targeting. The motive rather is to protect the
unprotected, so the budget is adjusted to achieve the goal.
• Negative Targeting: is determined by a real or self-imposed
budgetary constraint: here, the idea is to avoid subsidies &
admin. expenditure for the benefit of those who are
otherwise food secure while focusing outlays for the benefit
of those who are vulnerable. Implicitly via the choice of
target groups, the goal is adjusted to conform to the budget.

9. The Scope of … (contd.)
• Clearly, the choice between universalism and negative
targeting is a choice of policy goals often disguised by
political rhetoric as merely a choice of policy instruments.
• Equally clearly, positive targeting is compatible with if not
actually identical to universalism. So when we use the term
targeting without qualification, negative targeting is intended.
• With negative targeting, “fiscal prudence“ and "balanced
budget” become the watchwords that constrain policies in
general, food security policies in particular. The motive
here is clearly budgetary in the sense that where the goal of
food security conflicts with the budget, the budget wins.
• With positive targeting (and universalism), any such
conflict is resolved in favor of the goal.

10. Targeted Elements, Groups, Channels
• We have seen various elements in targeting:
Targeted asset distribution e.g., land reform
Public works and Food-for-work (FFW)
Targeted food subsidies e.g. fair price shops
Direct food transfers e.g. relief assistance
• Typical targeted groups might be: subsistence
farmers, small farmers, tenants, urban poor, poor urban
dwellers, rural landless, rural & urban un- and under-
employed
• Specific vulnerable groups, e.g. displaced, disaster-
affected, female headed HH, underweight children, etc.
• Targeted policies raise entitlements via varied channels:
increased AG income, HH food supplies from subsistence
production, cash income, real income due to lower food

11. Information and Identification
• Targeting requires information, identification, channeling and
monitoring to fulfill the targets within the budget. These can
be very costly and must be themselves covered by the budget
• To identify target groups, relevant information must be
available about the wider population, allowing it to be
separated into the target and non-target groups.
Alternatively, their behavioral responses must be known so
programs can be designed to elicit self-targeting (by eligible
beneficiaries) and self-exclusion (of the ineligible groups).
• In turn, administrative arrangements must be made to
channel the benefit (say, subsidized food) to the targeted and
to monitor the inclusion only of the eligible/targeted and the
exclusion of all the ineligible/non-targeted population

12. Type I (exclusion) &
Type II (inclusion) errors
• Identification is said to incur a Type I or inclusion error (also
termed false positive) when ineligible people are included
• Identification incurs a Type II or exclusion error (also termed
false negative) when eligible people are excluded
• Apart from admin/budget costs of identification, inclusion
errors entail financial costs (budgetary/admin resources) of
including the ineligible and exclusion errors entail social
costs (malnutrition/health impacts) of excluding the eligible.
• But these costs are incommensurable. It is meaningless to
compare either the error probabilities or the costs involved
without attaching explicit social weights to them.

13. Considerations in the Choice
• To sum up, then, the choice between universalist
versus targeted policies involves
– Clarity of what the policy goal (benefits) is
– Consideration of various implementation costs
• Budgetary and administrative costs in regard to information
and identification of target groups
• Social weights of Type I and Type II errors of targeting
• Social costs of the errors of targeting
• Budgetary and administrative costs in regard to channeling
and monitoring

14. General Limits to Targeted Food Subsidies
• Food subsidies can only benefit those population groups
who have, although minimal, cash income. Subsistence
farmers, jobless, old and sick
persons, children, refugees, etc.) cannot be reached by
food subsidies. Yet, these groups may be the most
vulnerable to FIS.
• Food subsidies are relatively ineffective in alleviating food
deficiencies resulting from unequal intra-HH distribution.
• Food subsidies are relatively ineffective in alleviating
specific nutritional deficiencies.
In all these cases, direct food transfers appear as
the only feasible alternative of targeted food
interventions.

15. Specific Limits to Targeted Food Subsidies
• Target groups are typically identified by means of HH
income/expen. surveys (also used in identifying the poor).
Targeting errors arise from having a HH classification based
on a survey in one year, and then following it for many
years, the reason being HH income fluctuations.
• The use of a poverty line in identifying the food insecure
creates its own problem since poor ≠ FIS.
• Often, budgetary pressures lead to greater implicit weight for
inclusion rather than exclusion errors. The upshot: a large
part of the nutritionally vulnerable may be excluded.
• Universalism avoids socially costly exclusion errors and can
also serve to stabilize market prices via state procurement
and distribution e.g., through fair price or ration shops.

16. Leakages and Governance
• A standard criticism of universalism is that it leads to
black-marketing of subsidized grains, and leakages in
transfer from procurement to distribution points.
• But universalism also obviates the identification problems
that targeting gives rise to. And targeting by itself does not
avoid the aforementioned leakages.
• Universalism also provides a powerful check on abuses
since it is not only the voiceless poor and FIS who benefit
but also the better-off i.e., it makes for better governance.
• By providing the operational basis for making food a
basic right and the food system a collectively shared
good, universalism can raise the social priority given to
food and foster food sovereignty.

17. Direct Cash Transfers
• Some argue that direct cash transfers are a more efficient
instrument of subsidizing the poor, since non-cash subsidies
for food, fertilizer & fuel involve massive leakages.
• 1st where they have succeeded (e.g., Brazil’s bolsa
familia), direct cash transfers have complemented rather than
supplanted existing schemes of providing welfare services.
• 2nd with cash transfer to be confined to the poor and
FIS, the financial costs of identification and social costs of
exclusion errors will be perpetuated, not eliminated.
• 3rd cash transfers cannot ensure that they will be spent on
socially preferred welfare-enhancing or `merit’ goods e.g., in
patriarchal contexts, the money may well be spent on
individual (male) priorities such as liquor, tobacco, etc.

18. Cash Transfer with Changing Prices
• Under targeted subsidies reliant on identification exercises
for a number of years in common, exclusion errors arise
due to fluctuating incomes over time. Cash transfers
compound this problem in conditions of price instability.
• This is because cash transfers are usually initiated along with
deregulation of market prices (of food, fuel, fertilizer).
When prices rise, the “real” income (or vector of goods)
represented by the cash transfer may be rapidly eroded.
• True, if the relevant prices trend down, the cash transferred
will convey more than the intended "real" transfer. But even
if the probabilities of the price trend are symmetrically
distributed, the poor themselves can be rationally expected
to prefer a real transfer to an equivalent cash transfer since

19. Cash Transfer … (contd.)
• the gain in low-price years cannot compensate for the loss in
high-price years. Put differently, the system of real transfers
(e.g., subsidized food distribution) includes an insurance
value that the cash transfer system lacks.
• Since food-fuel-fertiliz. prices are expected to rise over
time, type I errors will, on average, accumulate over time
and so the insurance value of real transfers will rise over
time. So the growing preference for cash transfer among
economists, donors and lending agencies adds a dynamic
exclusion error to the (static) exclusion error of targeting.
• Arguing for cash transfers is consistent with arguing for
targeting. But in no way does it address the social costs
they impose by replacing real transfers and universalism.