artdiamondblog.com

I'll admit some degree of ignorance concerning Mike Milken beyond what a quick wikipedia glance tells me, but I'm fairly familiar with Yunus (I thought there were interesting ideas in both of his books "Banker to the Poor" and "Creating a World Without Poverty"). The idea of using social pressure to "enforce" a certain behavior (in this case, motivating poor borrowers with no collateral) is one of the great strides in economics. I had the great pleasure to meet and have drinks with economist John List in DC a few years back and I got to pick his brain about similar experiments he was doing with disadvantaged youth in Chicago in an effort to incentivize academic performance as well as disincentivize teen pregnancy. I don't know if he has published his findings yet, but it was fascinating stuff to talk about. But when we talk about anything in finance, even if people are actually being helped, a lot of otherwise well-meaning people balk at the idea that things like "interest" are introduced or the possibility that the money is returned to the lender. I think it creates a bit of cognitive dissonance with them: we don't help people by just handing them something--you help them by empowering and motivating them. But that makes some people extremely uncomfortable and it's too bad because there aren't any shortcuts out of poverty.