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Week of June 19, 2017

Not Invisible Edition

1. Indebtedness: A few weeks ago I mentioned the wave of agricultural loan waivers in a variety of Indian states, a pattern that has been repeated over decades (and not just in India; and perhaps I should say repeated over millennia) with all sorts of moral hazard implications for lenders and borrowers (here's Xavi Gine explaining the impact of the 2008 agricultural debt relief program). Shamika Ravi looks at data from the current round of farmer distress examining how poverty, indebtedness and political power interact since straightforward explanations don't hold up to scrutiny. 

2. Our Algorithmic Overlords (and some Data Viz): Sometimes it's helpful to take a step back and see where artificial intelligence is still struggling. Reassuringly while AI can negotiate it still produces aphorisms like: Death when it comes will have no sheep. But maybe that's a negotiating tactic? Meanwhile, apparently machine learning still struggles to tell the difference between labradoodles and fried chicken (I suppose that would be more frightening than funny to chickens and labradoodles).

And while not about algorithms, here's another one of those cool illustrations of how data visualization influences how we interpret data that are so popular.


3. American Inequality: One of the clear themes of recent research on poverty and inequality in the United States is the rise of month-to-month and year-to-year volatility of incomes, while real wages have stagnated. The safety net in the US, such as it is, is especially unable to deal with income volatility. Here's the story of a family in Texas with volatile income who has adopted a number of medically fragile children: because of the way the state administers Medicaid the family has to re-certify eligibility almost every month. While this is somewhat unusual, the language of the Senate Republicans healthcare/Medicaid legislation would enable states to require all recipients to re-certify eligibility monthly.

Meanwhile here's Cengiz, Dube, Lindner and Zipperer with a new look at the perpetual question of what raising minimum wages does to jobs, finding little evidence for job losses or labor substitution. And here's a piece from HBR on the household effects of unstable work.

4. Entrepreneurship: The nature of modern American inequality makes me think that American policy analysts need to spend more time looking at middle income countries like Mexico and Brazil than at Germany or Denmark. There's less business competition, less mobility and more wealth and income inequality--that all seems descriptive of a developing economy not a developed one. A big factor is the emerging American "missing middle" of firms. Historically there have been more new employer firms starting and growing than there are today, and those firms accounted for a great deal of new, stable, middle income and mobility producing jobs. Here's a piece looking at the shift in American entrepreneurship toward the kind of rent-seeking businesses that have long been faulted for slow development in middle income countries.


5. Data, Knowledge and Wisdom: This week (I think) the Kenyan government launched a new effort to help borrowers make better decisions about credit by making it more clear what the relative costs of various sources of credit are. Definitely an effort to keep an eye on. Here's an experiment comparing data-based credit scores versus loan officers' judgment finding credit scores reject slightly more applicants but provides a net benefit to the bank through lower costs of lending. And here's a study of Ethiopian job fairs finding large gaps in knowledge among job seekers and hiring firms about wages, job requirements and quality of candidates. Meanwhile in the US a youth summer employment program does well at placing kids in jobs, but little for long-term outcomes.

A photo of a protestor against current proposed legislation to radically cut Medicaid, the US government program to provide healthcare services for the poor and disabled, being arrested. This is what I meant by "Not Invisible." May class action still get the goods.

A photo of a protestor against current proposed legislation to radically cut Medicaid, the US government program to provide healthcare services for the poor and disabled, being arrested. This is what I meant by "Not Invisible." May class action still get the goods.

Week of June 12, 2017

1. St. Monday, American Inequality and Class Struggle: One of my favorite things about writing the faiV is when I get the chance to point readers to something they would likely never come across otherwise. So how about a blog post from a woodworking tool vendor about 19th century labor practices, craft unions and the gig economy? Once you read that, you'll want to remind yourself about this piece from Sendhil Mullainathan about employment as a commitment device (paper here), and this paper from Dupas, Robinson and Saavedra on Kenyan bike taxi drivers' version of St. Monday.

Back to modern America, here's Matt Bruenig on class struggle and wealth inequality through the lens of American Airlines, Thomas Picketty and Suresh Naidu. I feel a particular affinity for this item this week having watched American Airlines employees for a solid 12 hours try to do their jobs while simultaneously giving up the pretense that they have any idea what is going on. 


2. Our Algorithmic Overlords: Facebook is investing a lot in machine learning and artificial intelligence. Sometimes that work isn't about getting you to spend more time on Facebook...or is it? With researchers at Georgia Tech, Facebook has been working on teaching machines to negotiate by "watching" human negotiations. One of the first things the machines learned was to "deceive." I use quotes here because while it's the word the researchers use, I'm not sure you can use the word deceive in this context. And that's not the only part of the description that seems overly anthropomorphic.

Meanwhile, Lant Pritchett has a new post at CGD that ties together Silicon Valley, robots, labor unions, migration and development. And probably some other things as well. If I read Lant correctly, he would approve of Facebook's negotiating 'bots since negotiation is a scarce and expensive resource (though outsourcing negotiation is filled with principal-agent problems). I guess that means a world where robots are negotiating labor contracts for low- and mid-skill workers would be a better one than the one we're currently in? 

3. Statistics, Research Quality and External Validity: Here's another piece from Lant on external validity and multi-dimensional considerations when trying to systematize education evidence. A simpler way to put it: He's got some intriguing 3-dimensional charts that allow for thinking a bit more carefully about likely outcomes of interventions, given multiple factors influence how much a child learns in school. It closely parallels some early conversations I've had for my next book with Susan Athey and Guido Imbens, so I'm paying close attention. And if you can't get enough Lant, you could always check out my current book. Yes, both of those sentences are shameless plugs.

4. Household Finance: If you read the faiV regularly you know I think about household finance a lot and how little we really know about household finance decisions. Viviana Zelizer is a sociologist who opened a lot of vistas on household finance--particularly on the importance of understanding that money has meaning. Money isn't just a store of value, it's a store of values. Here's Zelizer on new research into how households use money (which may mention a recent project I've been a part of) from the LA Review of Books. Here's a very different, but complementary, view on issues of household finance and values: how much should someone save for retirement. I usually hate pieces like this, but this one does a great job of showing how each of the standard pieces of advice could be wrong. And here's another form of values impinging on household finance: The "marriageable male" effect is breaking down.


5. Digital Finance: Ignacio Mas can't be digitized. At least not yet (I'm sure Facebook is working on it). And that's a problem that ultimately comes back to financial regulations, scale and the reasons that the poor are often shut out of quality financial services. Serving poor customers is expensive relative to the profits that can be generated, unless you can scale, which means standardization, which often equates to poor service because poor customers are not uniform.

And for something completely different, but definitely relevant to digital financial services and regulation, here's a story about pressures on Uber to allow repressive governments access to their data in return for access to markets. Hmmm...I wonder what other data repressive governments might want to have access to?

 

Billy Bragg and the Blokes performing St. Monday. Have a good weekend.

Week of June 5, 2017

It's Not What You Know... Edition

1. Social Enterprise: A few weeks ago I noted that Etsy was under pressure from an activist investor for behaving like a B Corp (which it is (was?)). I missed the notice that the investor won: Etsy layed off 80 employees and fired the CEO/Chairman. Here's a piece reflecting on the Etsy saga that is emblematic of much of what I think is wrong in social enterprise rhetoric. The argument that social enterprises have to be ruthless competitors may sound good (to some) but it ignores the exact issue that is at the heart of social enterprises: how do you manage the trade-offs. It's worthless--less than worthless, I should probably say "actively harmful"--to pretend there are no trade-offs or to imply that there is value in advice like "be ruthlessly competitive except for in these parts of your business model." It's why efforts like B Corporations that don't have any governance teeth are a distraction, and why even efforts like For Benefit Corporations that do have governance teeth are fraught.

In other social enterprise-ish news, I can't resist a story about a star rapper, off-grid solar power in Senegal and Chinese investors. You can't either can you? On a more practical level here's Devanshi Vaid on the lack of information flow on social enterprise in India.

And here's Felix Salmon with some remarkably clear reframing of an important wing of social investment: if a foundation endowment can't get high investment returns in the near term, don't cut back on grantmaking, accelerate it!


2. Our Algorithmic Overlords: The Atlantic has a long piece on how cryptocurrencies like Bitcoin, purportedly designed to limit centralized authority, actually can become tools of authoritarianism. You don't have to go all the way to cryptocurrencies though, as I try to frequently point out. Digital currency of any sort can easily become weaponized by authority, even authority that isn't fully authoritarian.

I wasn't sure whether to include this in "Social Enterprise" or "Our Algorithmic Overlords" because it's a bit of both, through an extraordinary lens: Venezuela's bonds. As Matt Levine relates, Goldman Sachs (sort-of) bought some bonds from Venezuela (sort-of) that (sort-of) prop up an authoritarian government apparently bent on starving people. But no one is really responsible for this decision because of the way governance of the investment funds is set-up and which all point back to an index by which fund manager performance is measured. (I know, this is confusing and complicated, but it's worth it). In this case everyone is pointing to some arbitrary set of decisions as responsible for their behavior and denying any responsibility for moral judgment. If we struggle with these issues already, how much worse are they going to get with the arbitrary set of decisions are made by an algorithm that we don't really understand?

But people are more worried about algorithms driving their cars, than about algorithms ruling their moral decisions.

3. Statistics, Research Quality and External Validity: Admittedly this is just going to be a hodge-podge of stuff loosely connected.
There's apparently some new work suggesting wide-spread errors or research misconduct in medical RCTs. I haven't had time to look at this much, so here's Andrew Gelman's thoughts which will be much better than anything I would have come up with.
Stuart Buck this week asked whether we're nearing the point of more papers about the 1970s pre-K experiments in the US than there were kids in the experiments. It got me thinking about external validity. Here's an honest question: to a first approximation, do you think there's more in common between, say, microenterprises in Zambia and the Philippines in 2017 or between Chapel Hill, NC in 1972 and Detroit in 2017?
Here's David Evans working through a framework for external validity judgments proposed by Mary Ann Bates and Rachel Glennerster. I'd have to say at this point that I'd lean toward applying lessons from Zambia to the Philippines more than from Chapel Hill to Detroit.

4. American Inequality: The major focus on inequality in America has been on income and wealth but it's not just the money, it's the instability. A substantial part of inequality of income, wealth and stability seemingly can be traced back to exclusionary zoning, which limits lower-income people from getting access to jobs and pushes up both the income and wealth of the already wealthy. Hsieh and Moretti estimate that exclusionary zoning has also "lowered aggregate US growth by more than 50% from 1964 to 2009."

And here's a review of The Financial Diaries--or alternatively, an essay on how to measure poverty--in the New York Review of Books.


5. It's Not What You Know...: Two weeks ago I made a big deal about the technology of management and how underrated it is within policy and economics. Here's a paper about spreading management technology among Indian tech start-ups, finding that peer networks work to change behavior. The authors seem to attribute this to knowledge diffusion--but based on other research I'm skeptical this is a "knowledge" story rather than a "behavior change" story.

It's not just a management knowledge story. In the energy space, product knowledge, even gained via product demonstrations from peers who are using and very satisfied with the product, fails to induce demand for solar home systems in India in another new paper. And Alcott and Greenstone show that information failures don't play a role in energy efficiency program results in the United States. I'm reminded of this earlier work by Meredith, Robinson, Walker and Wydick on health good purchasing that pretty conclusively demonstrates that the barrier to purchase isn't knowledge, it's not having the money that matters.

When will "high level machine intelligence" arrive? Is a 25% chance in the next 25 years scary or reassuring? Source

When will "high level machine intelligence" arrive? Is a 25% chance in the next 25 years scary or reassuring? Source

Week of May 29, 2017

Editor's Note: I've been traveling all week and so asked Caitlin Sanford (@caitlinsanford) and Maria May (@mariamayhem523) to fill in as "guest editors" for the faiV this week (thankfully they said "yes"). Caitlin is a User Experience Researcher at Internet.org, Facebook's efforts to connect new users to the internet in emerging markets. Maria recently began to focus on organizational learning at BRAC in Bangladesh, after spending several great years in its financial inclusion and social innovation programs. You can find her on the internet or tweeting occasionally from. I bet you can guess who their views and recommendations belong to (hint: it's not me, FAI or their respective employers)


1. Income Instability and the Cost of Living: Those who have studied financial management among low-income people know that instability and unpredictability of income are a main source of difficulty. The U.S. Financial Diaries project and book bring this challenge to life. This week Jonathan Morduch is quoted in the New York Times examining how the norm of a steady paycheck has been replaced by turbulence, affecting pretty much everyone who makes under $105,000 per year. [I didn't tell them they had to include this, promise!--Tim]

Speaking of $105,000 being a new marker for financial challenges, according to the U.S. Department of Housing and Urban Development’s new income limits, in parts of the high cost Bay Area, a family of four earning $105,350 is considered low income. On the other extreme, in the recent CGAP national survey of smallholders in Bangladesh, 75% of households reported that an annual income of $1,524 would cover their household needs.

2. A Raise or More Frequent Paychecks?: Here’s an interesting fact: More than one in four millennials prefer real-time pay to a raise.  A report by the Aspen Institute’s Expanding Prosperity Impact Collaborative (EPIC), employers and governments are exploring new options for workers to collect their pay more frequently and when they need it. The jury is still out on the effects for managing household finances. We suspect this might be be helpful for short-term volatility management, but may result in difficulty with long-term savings and may diminish the commitment element that some people prefer in being able to keep money at a distance under some circumstances. Let’s hope Uber and Lyft are learning from all the data they have!

3. Global Tech Trends: TechCrunch summarized the 2017 Internet Trends report this week, and there are lots of great insights here. With over 700 million mobile internet users, the volume of mobile pay in China doubled last year to reach $5 trillion. There are 3.4 billion internet users in the world, up 10% since last year.  As consumers increasing look online for shopping and retailers offer customer service through “chat”, we are curious what these trends will mean for call centers, a big industry for several developing countries, like the Philippines. There are also increasing apps developed in emerging markets, such as Kampala’s fast-growing Safeboda which allows riders the convenience of the common motorcycle taxi with the promise of a trained and safe driver.

Meanwhile, on-demand car and bike services are exploding in China and throughout Southeast Asia. Bike-for-rent services experienced a 100% month on month growth, reaching 20 million users in 2016 (a scale which could mean meaningful reductions in CO2 emissions. Helpful given recent developments in US politics!).


4. Digital Identity: Digital identities are a new area where financial services providers are investing heavily; seeing this as an opportunity to leverage their extensive client data and experience in “know-your customer” analytics. Canada and the UK have already launched initiatives to start setting up digital identity platforms.

Globally, remote KYC and account opening can save customers who do have identification documents a lot of headache by using technology to make the process faster and to have better organization of records. But what happens to the 1.5 billion plus people globally who do not have an official national ID? Perhaps we work to get them one. Reportedly demonitization in India led to a 60% increase in enrollment in Aadhaar, the Indian government’s biometric national ID program.

As this data becomes more central in everyday purchases, we wonder whether these efforts will be net inclusive or exclusive--will it mean that those with limited financial access or bad credit now struggle to access basic services like gas and electricity?  We have to keep in mind that there are always “losers” in these moments of transition. With the recent scrutiny and Supreme Court ruling on the identification requirements to vote in North Carolina and other states, we should keep an eye on the various opportunities for mis-use and exclusion (financial or otherwise) of digitization.


5. Our Recommendations for the Weekend: There’s so much interesting stuff out there, it was a struggle to limit ourselves to five topics. So we’re taking the liberty to list a few materials that are similar in the fact that they are thoughtful and awesome!

Week of May 22, 2017

1. The Value of Management: If you pay any attention to the development economics world, you were probably already aware that there was unrest at the World Bank since Paul Romer became Chief Economist. Yesterday that unrest came out into full public view with stories about Romer being relieved of management responsibilities for the Development Economics Group. The news stories make everyone look bad, and don't reflect my experience with the parties involved (which is admittedly quite limited). But rather than adjudicate any of the issues, I'm going to pivot to my ongoing amazement that economists of all people seem to have so little appreciation of the value of management and specifically specialization in management. It's a learned skill! The idea that someone should be managing a department of more than 600 people because they happen to be a leading economist is bonkers.

Just look at what a little bit of management training for school principals can do for schools and test scores. Or what professional management training can do for quality of care in hospitals. That's right, management can save lives! Here's hoping that skilled management will advance the very legitimate goals of clear and useful communication in Bank reports. I can't be the only one glancing through the stories about the gender studies hoax paper and thinking it wouldn't be that hard to do the same thing for a World Bank research report.

In closing, I'm not good enough of a person to avoid noting that "and" is 16% of the World Bank's actual name and linking to Ryan Briggs' Drunk World Bank twitter account.


2. Immigration: If you weren't distracted by counting the number of "and"s in your latest piece of writing, you may have seen another controversy bubbling up in social media: Michael Clemens and Jennifer Hunt have a new paper suggesting that Borjas' finding of losses for low-wage workers from the Mariel boatlift are actually a result of a change in the composition of wage survey samples. Borjas responded first by accusing Clemens and Hunt of being tools of Silicon Valley open border enthusiasts--and essentially saying that no grant-supported research can be trusted--and only later with an attempt to defend his results with data. That attempt looks plausible until you realize that he ends up charting the outcomes for less than 20 people. David Roodman--whose earlier work on this specific issue Borjas also managed to slander by calling it "fake news"--weighs in with some typically substantive and clear points (maybe he could do some coaching for World Bank writers?). The major one from my perspective being: Borjas already had to pick through data to find a narrow slice of the population that might have been negatively affected by sudden mass immigration, and can only defend that result with a sample better suited to a local news broadcast than serious economic inquiry.

If this kind of thing fascinates you, rather than tires you, Borjas has an additional reply that is more substantive and ultimately arrives at a useful point. But the process to get there remains bizarre.

In other immigration news, here's a look at the effect of differing state approaches to immigration law enforcement, and here's an animation of Mushfiq Mobarrak making the case for the gains from migration.

3. The Precariat: The precariat is term for people in developed countries who are increasingly having to deal with volatility and instability with less protection. While I've obviously been more focused on issues related to volatility in the US because of the US Financial Diaries, the precariat is by no means confined to the United States. Here are some musings about the precariat in the UK and the implications there. Here's a piece about TD Bank/Ipsos finding substantial income volatility in Canada (which I have to note, makes no mention of the fact that they are replicating the work of USFD, Pew and/or JP Morgan Chase Institute).

Here's Carol Graham of Brookings on how the confluence of low-income and precarity lead the way to hopelessness. Here's Annie Lowery in the Atlantic examining Maine's safety net "reforms" which essentially specifically deny access to the safety net for the precariat and the poorest (making it more likely the former become the latter). Here's some wishful thinking that the Trump budget, which seeks to replicate Maine's "success" in cutting access to aid, will spur a conversation about what the safety net should look like in the age of the precariat. And of course I have to mention "The Power of Predictable Paychecks."

4. African Agriculture: You could say that there are few programs out there aimed at improving agriculture in Africa. If you were to ask the average faiV reader about issues to overcome, I think we would all rattle off a fairly similar list: lack of access to inputs, poor access to markets, limited availability of affordable credit, etc. How many of those are actually problems? Via Tavneet Suri, who is now on Twitter, here's a (wait for it) World Bank report on myths and facts about agriculture in Africa based on synthesizing a lot of recent research. As Eva Vivalt notes, it's important to think through your priors before considering new evidence (well not quite, but close enough for me) so make sure you think about your beliefs before reading.


5. Auto Audio: Since it's a holiday weekend in the US, I'm guessing that a number of readers could use something to listen to while sitting in traffic trying to get out of town. And even if you're not, here are some things worth listening to:
1) Tyler Cowen's "Conversations with Tyler" with Raj Chetty
2) Planet Money episode talking to Robert Gordon about The Rise and Fall of American Growth
3) The entire Revolutions podcast which features many fascinating hours about the American, English, French and Haitian revolutions...but let me especially recommend Series 5 on the Bolivar-led revolution in northern South America. Despite being raised in Colombia I learned for the first time the vital role Haiti played and that my great-great-great-great--more greats--grandfather funded an invasion of Venezuela in the early 1800s.

 

Week of May 15, 2017

Editor's Note: I really do wonder how many people are trying to measure the negative productivity shock to the American, and possibly global, economy. I mean, there those ridiculous annual stories about how the NCAA basketball tournament costs billions in lost productivity, so someone has to be doing this right?

1. Data (and Our Algorithmic Overlords): Many of you probably saw the Economist piece on data becoming the world's most valuable resource. It does a darn good job at producing conflicting reactions for me: Yes, we should be paying more attention to the accumulation and use of data among private companies! But governments aren't to be be trusted with this kind of data any more than private companies! And you're spending way too much time in Silicon Valley--we're a long long way from data being more valuable than physical resources for most of the people in the world!

So I'm going to use it mostly as a foil to introduce two pieces that you should read that you probably don't think are relevant to the faiV. First, here's a piece by Ted Knutson, a protagonist in the development and use of "advanced statistics" in football/soccer, about why he developed and continues to use a terrible visualization of data to evaluate player performance. Second, here's a piece about how adapting behavior based on data in baseball has helped some players but hurt others so that there is zero net gain. The point here being, understanding data is hard enough. Using data is even harder. Figuring out how to help people change based on data--without just turning everything over to our algorithmic overlords--is the toughest of all. And if you don't believe, that let me remind of you of one of my all-time favorite papers about seaweed farmers. Take that, "vast empirical literature"!


2. Theories of Change (and Demonetization): In my book of interviews of development economists on RCTs etc. the throughline is theory of change. How do ideas get translated into policy and into making the world a better place? I argue that a lot of debate about methodology is really debate about theory of change, particularly around the role of experts and the value of small vs. large changes. This Planet Money episode about the Indian demonetization has the most jaw-dropping "theory of change" story I think have ever encountered. The short version is an engineer developed--through divine inspiration--a model of the Indian economy, complete with cheesy illustrations, and just kept talking about it until a powerful politician took notice and decided to introduce one of the biggest economic shocks in modern history. If you know someone graduating from high school or college, perhaps you should make them listen to the episode rather than buying them a copy of Oh, The Places You'll Go. (Oh, and that feeling when you visit the Smithsonian with your kid and get to talk about how even our heroes fail us.)

3. Digital Finance: Over at CGAP, IPA has a post about fees for 21 mobile money services in seven different countries, with an eye to how the highest fees are paid on the smallest transactions, presumably serving as an effective tax on the poorest customers. This of course is the same issue we've been talking about in microfinance for decades: small transactions don't cost less to process than large ones and so small transactions are more expensive. While it's less of an issue in things like digital services than in-person services it doesn't entirely go away and so providers have to make decisions about whether they are going to over-charge their relatively wealthier clients to subsidize their poorer ones, or tax their poorer ones for their inability to transact in larger amounts. The problem with the former is that there is almost certainly going to be a competitor who is willing to take those wealthier clients by not asking them to subsidize costs for smaller transactions.

This also raises one of my long-term fascinations: people tend to react strongly to poor customers being charged more for financial services but not for telephone services--even when it's the same company doing it! The same poor customers who are paying more for mobile money transfers are almost certainly paying more for cellphone minutes by buying them in small increments, but I don't ever see that being charted.

4. Financial Advice: Speaking of fees for financial services, one of the things that chaos in Washington has swallowed is debate about how American investors should be charged for financial advice. There's long been concern that conflicts-of-interest lead financial advisers to push their clients into high-cost investments from which the adviser gets a commission. The Obama administration proposed changes to the rules governing financial adviser compensation and fiduciary duty that are now on hold. In the meantime, a WSJ reporter tried to figure out how much she was paying in fees on her investments. It was difficult, even though she worked with a flat-fee adviser, not one paid on commission. The answer in the end was 1.4%--Noah Smith illustrates how expensive that seemingly small number is (it's hard to interpret data!).

Matt Levine, meanwhile, illustrates how the story complicates efforts to reform financial advice and fees (scroll down to "Fiduciaries"): "If the fiduciary rule pushes investors from high-cost mutual funds recommended by commission-based advisers to medium-cost mutual funds recommended by expensive fee-based advisers -- and if investors' all-in costs aren't any lower -- then what have we gained?" Or as I would put it, financial decisions are complicated and getting good advice is going to be expensive especially for customers of modest means. Seems like households in the US, Kenya and India (for instance) may have more in common than often thought.


5. American Inequality: The new report on the Survey of Household Economics and Decision Making (SHED) is out from the Federal Reserve Board. I am, unsurprisingly, drawn immediately to the data on income and expense volatility--the survey asks more detailed questions in this area, due in part to the findings of the US Financial Diaries--on pages 23-25. Roughly a third of households report monthly income changes, with 43 percent saying the volatility comes from an irregular work schedule. Unsurprisingly, volatility is more common among blacks and Hispanics.

Speaking of the US Financial Diaries, here's my new favorite review of The Financial Diaries. And here are Jonathan and Rachel on Marketplace. And here's some counterprogramming on the state of the job market.

From the new SHED report, the reasons people say their income varies from month-to-month. Source: Federal Reserve Board

From the new SHED report, the reasons people say their income varies from month-to-month. Source: Federal Reserve Board

Week of May 8, 2017

Unintended Consequences Edition

1. American Inequality: The exceptionalism of the United States in promoting home ownership as the signifier of middle class status and/or upward mobility, and a generally accepted keystone of building wealth has persisted despite the Great Recession/housing crisis. But that doesn't mean that things haven't changed--the availability of housing that costs less than 30% of a household's income has dramatically decreased. Matt Desmond, author of Evicted, writes in the New York Times magazine that the American emphasis on home ownership has become one of the primary engines of inequality. Non-profits--or at least how we measure and fund them--are another (unintended) engine of inequality. In New York state, non-profits pay wages just above retail and food service (and 80 percent of these workers are women, and 50 percent people of color).

2. Our Algorithmic Overlords: The goal of machine-learning and using algorithms to analyze data is to yield better decisions, at least better than human beings would make given biases and the challenges of causal inference. A(nother) new book looking into the way this works is Everybody Lies. I haven't read it yet, but I'm looking forward to it. In the meantime, there's an excerpt in the Science of Us, taking a look at one of those areas that humans always struggle to make good decisions: who is credit-worthy. The substitution of bias against minorities (or at least people different from the loan officer) and the poor for careful judgment is well documented and wide-spread. Netzer, Lemaire and Herzenstein turn the machine loose on data from Prosper, an online platform for peer-to-peer lending, and find that the words that borrowers use are predictive of repayment behavior. You should read the whole excerpt because it does focus on the unintended consequences of using machine learning and big data. I, of course, immediately wonder how quickly borrowers and lenders will adapt to the findings.

Meanwhile, here's a Quora forum with Jennifer Doleac on the American criminal justice system, which dwells a lot on how machine learning is affecting decisions in another area humans have a lot of trouble with: who's guilty and who is a threat for recidivism. And of course, on the unintended consequences of our efforts to punish people. And here's a speculation that Donald Trump is a dynamic neural network/machine-learning algorithm with narrow goals. Here's an alternate version of the same argument, which in addition to being even more frightening, provides additional insight into the potential unintended consequences of data analysis without theory (of Mind).

3. Digital Finance: The item on Prosper and algorithms determining credit-worthiness based on language used by borrowers is about digital finance of course. But in the domain of more traditional ways of thinking about digital finance, here's a story about M-Pawa in Tanzania, interesting for it's integration of savings, lending and education. The bottom line: more savings, larger loans, better repayment. In other news, M-Pesa is supporting proposed regulations for cross-platform transfers in Kenya. And MicroSave has some ideas on how to enable digital finance among the illiterate, since traditional approaches to inclusion through digital have the unintended consequence of excluding the illiterate.

More specifically on the "unintended consequences" theme, though having relatively little to do with digital finance, here's some new research on how global de-risking in banking has cut the number of correspondent banking relationships (what makes cross-border payments even somewhat efficient) have declined by 25% since 2009, pushing whole regions out of the regulated banking sector.

4. Finance Frames: I couldn't come up with a pithy and clear intro to this item, so we're stuck with 'finance frames.' The point is that how we think about finance--the mental frames and analogies we use--have an often unintended impact on what happens in the real world. Here's a Twitter exchange that started from a discussion about how investment advice is provided to retail investors in the US (are financial advisors like store clerks?) but quickly moved on to something more globally relevant: how much financial advice is or should be like medical care. The exchange is a bit difficult to follow, but it's worth it.

I struggle with the appeal to the medical care analogy for a number of reasons, not least of which is that the comparison to health tends to idealize the provision of medical care. In fact, medical care the world over is delivered poorly, with bad or conflicting incentives, rife with misinformation and poor decisions. It's why when someone asked "do you really want a doctor that can't afford a Ferrari?" my answer is "Hell, yes." If the medical field is what finance is aspiring to, or taking it's lead from...


5. Charity and Philanthropy: Many years ago, one of the first things that got me some attention writing about charity and philanthropy was an on-going critique of "embedded giving", the jargony term for purchases that include a donation to charity. I even created a scoring mechanism for judging the campaigns! How naive I was back in my youth. A new paper from Gneezy, Gneezy, Jung and Nelson yet again proves why such schemes are suspect: they can drive up profits for businesses while driving down the amount donated. In this case people paid significantly more for products with a charitable donation but did not distinguish between 1% or 99% of the proceeds going to charity. If you were as cynical as I am, you would dispute that this is an unintended consequence. 

And here's Larry Kramer, president of the Hewlett Foundation on the unintended consequences of philanthropy's fad toward "big bets."

Economist William Baumol died last week. He did a lot of work on entrepreneurship but is probably best known for what he called "cost disease" which explains why the costs of goods and services can rise quickly in sectors with little productivity gains when there are large productivity gains in other sectors. One way of thinking about this is that we're spending too much time automating the wrong jobs (and relates back to "hell, yes" above. Source: Vox

Economist William Baumol died last week. He did a lot of work on entrepreneurship but is probably best known for what he called "cost disease" which explains why the costs of goods and services can rise quickly in sectors with little productivity gains when there are large productivity gains in other sectors. One way of thinking about this is that we're spending too much time automating the wrong jobs (and relates back to "hell, yes" above. Source: Vox

Week of May 1, 2017

1. Households Matter!:  If you've followed research on microfinance at all, you've probably come across work by de Mel, McKenzie and Woodruff about giving cash grants to microenterprises (in Sri Lanka and Ghana), finding that the returns to investment in women's firms is much lower (and close to 0) than in men's enterprises. It's a bit of puzzle for several reasons (e.g. why do women borrow if their returns are so low, and why don't men borrow more if their returns are so high?) and there have been various explanations tried out (you can see one of mine in this paper). Bernhardt, Field, Pande and Rigol (paper here, overview from Markus Goldstein here) have a new one that seems pretty compelling based on reanalyzing data from several experiments, including the cash grant experiments. It's an explanation that points back to Gary Becker and Robert Townsend ideas (household's maximizing returns across the household assuming money is fully fungible) about how households work, and away from Viviana Zelizer's (money is often not, in fact, fungible and different income streams in the household are treated differently) or in some ways against Yunus's idea of focusing on women. Bernhardt et al. see that in general when it appears that when women's enterprises show little or no return to capital it's often because the household has another microenterprise that the capital is invested in instead--and those enterprises (where data is available) show gains from the capital injection into the household. When women own the only microenterprise in the household, they see returns (and are often in similar industries) as men. 

This is a big deal and it emphasizes how far we still have to go in understanding household finance. This doesn't say that Zelizer's insights are wrong--they are clearly right in lots of cases--but we don't have a solid grasp on when we should think of households as a single utility-maximizing unit and when we should disaggregate.


2. Pre-K Matters? (and other scale-ups): One of the things that households--or if you read some of the charity marketing that has dominated the last decade or so, only women--invest in is their children's education. Unfortunately, it seems that they often under-invest in education and so a lot of effort is invested in getting children into and keeping them in school. In the United States, the current frontier is about universal Pre-K since most every child is enrolled through the beginning of secondary school. The idea is that children from poorer households start school already well behind their wealthier peers, those gaps persist and if we close them early, well the gaps will stay closed. There are some studies that suggest that's true and Jim Heckman in particular among economists has been a big advocate of significantly increasing investment in early childhood education programs. But there are other studies that suggest it's not. I called the arguments on this "Pre-K" wars in my book because a lot of the argument has been over experimental design and methodological issues in the studies.

Russ Whitehurst at Brookings has a new post on the Pre-K wars that I learned a lot from, including new data from Tennessee that shows the returns from pre-K there were negative and the randomization in the famous Abecedarian study was violated in ways that are impossible to correct for. The bottom line for Whitehurst is that while small-scale, intensive interventions with very high-skill staff can make a big difference, programs at scale don't have any solid evidence they work. Which sounds a lot like some of the things we're seeing from scale up of successful programs in other areas of development.

3. Governance Matters! (even in social enterprises): One of the weird things to emerge in social investment is B Corporations--a not-particularly-binding commitment a firm can make to values other than maximizing profits. That not-particularly-binding part is important because, well, it's not particularly binding while other corporate governance laws and regulations are quite binding. Etsy is learning that as an investor is advocating that the firm be sold, and/or management be replaced, complaining that management is failing in its duties to maximize profits by paying wages that are too high (or put another way, by adhering to the principles of being a B Corp) among other things. Because Etsy is a standard corporation that simply opted in to the voluntary requirements of being B Corp it's quite possible that Etsy's hand could be forced. There is a binding form of corporate governance that would resolve this--becoming a For Benefit corporation as defined by state regulations in about 30 states, but Etsy isn't one of those, yet.

And in other social investment governance news, here's a story about State Street's Fossil Fuel Free ETF held positions in Deepwater Horizon and coal-burning utilities (scroll down to "Who Picks the Index").

4. Regulation Matters! (or how the Indian government keeps undermining MFIs): When you think of India and microfinance, the Andhra Pradesh crisis almost certainly springs to mind. The industry has largely recovered from that regulation-induced shock. But now the industry is confronting a leap in non-performing loans due to regulatory changes that were not directly targeting the industry. Demonetization, by removing most of the paper bills in circulation, kind of had an impact on borrowers ability to repay their loans. And Uttar Pradesh recently announced a $5.6 billion loan forgiveness plan, which unsurprisingly has apparently convinced borrowers in neighboring states to stop repaying their loans to see if they can get the same deal. Andy Mukherjee argues that the net result is going to be the end of specialty microlenders, who will have to be absorbed into larger traditional banks in order to protect themselves from regulatory shocks. I have a theory as to what will happen to the zeal for serving poor customers once microlenders are absorbed.


5. Labor Markets Matter!: You've no doubt heard many times that in the modern era neither businesses nor employees are loyal and everyone will change jobs much more in the past. Justin Fox has heard it too, most recently at a conference on the Digital Future of Work and decided to do some digging. It tuns out that average job tenure in the United States has been rising over the last 20 years (though it's down slightly recently, though still almost a year longer than it was in 1996). Job tenure is especially high for supervisors and for government workers. It seems this is another feature of the much discussed "hollowing-out" of the labor market in the US, and likely a part of the increasing inequality in access to stability.

Statistical inference is hard. All these plots share the same basic data descriptors. Source: Autodesk

Statistical inference is hard. All these plots share the same basic data descriptors. Source: Autodesk

Week of April 24, 2017

1. Sweatshops:  You've probably seen the New York Times piece by Chris Blattman and Stefan Dercon about their experiment with Ethiopian factory employment--finding that while many people wanted the jobs initially, they quickly learned that they didn't want them after all. The jobs are dangerous and unpleasant, and people who didn't get the jobs did just as well if not better via self-employment. Meanwhile, Lee et. al. look at urban-to-rural remittances from Bangladesh factory workers and find large positive effects for the folks back home, while the factory workers were less likely to be poor, but also less healthy. Morduch (one of the et als) also notes the workers felt pressure to work more despite poor conditions in order to send money home. It's an interesting compare/contrast.

I'm of several minds about this. First, the Blattman/Dercon piece notes that much of the problem in the Ethiopian factories is that they were poorly run, not that the owners were deliberately trying to exploit workers. If you're a reader of the faiV you know I'm somewhat obsessed with the "technology of management" and how to spread it (and that there's a good bit of evidence that its a big problem, Google Nick Bloom for more). Second, there's the perennial issue of external validity: what do these experiments tell us about sweatshops more generally in other places and times. Here's an overview by Heath and Mobarak (HT Asif Dowla) on the impact of factory labor on Bangladeshi women; and here are some emerging financial diaries of garment workers in several different countries. Third, factory jobs have almost always been terrible, despite the romanticization of those jobs in developed countries of late--and they still are even in places like the United States. So what to make of the fact that they do seem instrumental in the process of countries and households becoming wealthier? And what of my strong prior that most people in developing countries are "frustrated employees and not frustrated entrepreneurs"?


2. Our Algorithmic Overlords: Continuing last week's theme on Seeing Like A State and algorithms, the Royal Society has a new report suggesting easier access to public data sets so that machine learning can help improve policy. You'll be shocked, shocked, to learn that Google DeepMind, Amazon and Uber leaders were all part of drafting the report. The New Inquiry has used data to create a predictive algorithm and heat map for people and places likely to commit white-collar crime. Here's the methodology behind it, which you should definitely at least glance through to see Figure 4 on page 4. On a related note, here's a story about racial and gender biases being "learned" by machine learning programs.

The white collar crime piece came via Matt Levine, and it's worth scrolling down to his item on Facebook for this gem: "What if human history isn't a video game at all?" Hopefully that will soon be a standard response to FinTech triumphalism: "What if people's financial lives aren't a video game at all?" It all brings to mind this piece from several years ago: The Reductive Seduction of Other People's Problems. You should definitely read it. It's about social entrepreneurs from developed countries traveling to developing countries but it does easily apply to algorithms, fintech and seeing like a state. Hat tip to Lee Crawfurd and Justin Sandefur for reminding me about it.  

3. American Exceptionalism: Chetty et al have a piece in Science on declining income mobility in the US since 1940. Here's Katz and Krueger's take on the policy options available. Matt Yglesias contends that the idea that the economy is becoming more concentrated is a myth. Opportunity however is becoming more concentrated in cities which have a declining share of the population because housing costs (due to limiting the housing supply) are too high. The Hamilton Project has an overview on the increasing gap in what you might call health opportunity as a consequence of decreasing access to economic opportunity.

4. Financial Inclusion: One of the long-standing discussions in microfinance is whether competition via the expansion of microcredit drives down interest rates. Hoffman et. al. see that microcredit via a subsidized self-help group does drive down informal lending rates in rural India. Meanwhile, the penetration of mobile money agents may be much smaller than estimated--the dominant way of counting agents may be doubling the number of actual agents.


5. Spring Cleaning: There was a reason for "spring cleaning" being in the title. Here are some things that I think are definitely worth your time that I've been either holding onto for awhile or don't really have a connection to the usual themes here. Here's the story of the first African American woman to earn an economics PhD (or a PhD at all apparently). Her doctoral thesis was a financial diaries project (there's nothing new under the sun!) of African American migrants to Philadelphia. And here's an essay on what might have been if she had been able to pursue a career in economics (she eventually became the first African American woman admitted to the Pennsylvania bar). Here's the story of 9 different attempts to create Wikipedia that failed before Wikipedia existed. Given all the attention to Wikipedia and the crowdsourcing-mania it inspired, this XKCD comic that's been making the rounds comes to mind. A few weeks ago there were a bunch of tributes to the first woman to run the Boston Marathon, who ran it again (and finished) at age 70. But she wasn't the first woman to run the Boston Marathon.

And this one I confess is pretty personal. At the 20 week ultrasound for our first-born, we were told our son had a birth defect that was "incompatible with life." It was about 2 weeks before further testing revealed he had a different rare disease (he's 11 now). Here's the heartbreaking and uplifting story of a family who heard the same thing--but the initial diagnosis was correct.

You don't have to learn anything in school for it to be good for you. Maybe what the world needs is more bad schools. Source: CGD

You don't have to learn anything in school for it to be good for you. Maybe what the world needs is more bad schools. Source: CGD

Week of April 17, 2017

1. FinTech Like a State:  Aadhaar, the Indian government's unique identifier system, is now ubiquitous with 99% of citizens over 18 having an ID. That makes it a powerful platform for delivering both government programs and digital financial services. But it also raises a lot of concerns about what the government might do--or what others could do if they gain access to or corrupt the system--when it can track and/or regulate citizen behavior at a detailed level. That certainly plays into the longer-term ramifications of Indian demonetization, especially since it appears that it has driven many more people to digital transactions. CGD held an event this week with Annie Lowery interviewing Arvind Subramanian about Aadhaar, demonetization and universal basic income. I haven't gotten all the way through it yet, so I don't know whether my pre-submitted question was asked, "Which governments should be trusted with the power to deny people the ability to transact legally?"

And for some reason I feel like this piece, nominally about why Silicon Valley keeps getting biotechnology wrong, is really about FinTech.


2. Financial Literacy Like A State (University): "Shut Up About Financial Literacy" says Sara Goldrick-Rab contemplating how higher education institutions blame a lack of financial literacy for the problems students have paying for college. Here's Helaine Olen documenting the head of Penn State University's FinLit program saying: "The real problem is not the rising cost of education, it is in the... lack of financial literacy..." Goldrick-Rab cites a new paper from Sandy Darity and Darrick Hamilton (and here's a Chronicle of Higher Education write-up) making the case that the financial literacy movement as a whole tends to blame the victim rather than acknowledging that many of the choices that look like "low financial literacy" are in fact choices born of poverty and the racial wealth gap. That's a key element of Scott's Seeing Like A State: The drive to solve problems at scale often leads to simplified measurement systems that obscure important distinctions, or miss reality altogether, and ultimately reinforce the problems they are meant to address or create worse ones.  

3. Financial Services Regulation: You pretty much have to do financial services regulation like a state. In the United States one of the main financial regulators is the Office of the Comptroller of the Currency (OCC). This week we learned that the OCC had received more than 700 whistleblower complaints about Wells Fargo's practice of opening accounts without customer knowledge or consent, but did nothing. Well not quite nothing. Matt Levine points to part of the OCC's report where it admits it focused too much on process and not enough on outcomes: "You spend so much time making sure that there are processes to stop bad things that you forget to actually stop the bad things." [You have to scroll past the amazing JuiceTech story] That's certainly another part of seeing like a state. And it's a particular concern when you get isomorphic mimicry, in Lant Pritchett's application, of financial services regulation.
On the bright side, I worry a bit less about the progress of our algorithmic overlords when apparently none of the deep learning programs noticed that videos about Wells Fargo like this or this (and many, many, many others) have been on YouTube since at least 2010. But then there's also this about how United's algorithms led to it's disastrous decision-making.

4. Behavioral Economics: If you squint real hard you can see several connections between item 2 and these papers, but it's probably not worth the effort. Here's a new paper looking at how quickly and how much social nudges wear off, in 38 different experiments. And here's a paper on an experiment in Senegal comparing time discounting in a hypothetical versus real exercise; "Our results show that hypothetical time preferences parameters are poor predictors of actual behavior."


5. Impact Investing Like A State: The most annoying version of impact investing is "negative screening," a choice not to invest in firms one doesn't like. Apparently it has started taking the Portland (OR, US) City Council too long to figure out (i.e. listen to complaints from activist citizens) which firms it doesn't like, so it recently voted to stop investing in corporate debt altogether. The city treasurer estimates the decision will cost the city $3 to $5 million a year via lower returns on its investments. I guess I have to give them credit for making trade-offs? (One of the more amazing parts of this story is that it allegedly costs Portland only $17500 for an "affordable housing unit" but $6000 to build a wheelchair ramp). And connecting to our other theme of nothing new under the sun, here's a blog post about impact investing in Victorian England, complete with "no tradeoffs!" marketing. The investment was in affordable housing and there was quite a robust market until complaints that the housing was still inaccessible to the poorest and profits were too high--and the state imposed even more trade-offs by stiffening building regulations--took the luster off.

A few weeks ago we talked about mortality wars. So I felt I had to include this interactive project from FiveThirtyEight that allows you to view the changing causes of death in every American county for the last 35 years. Source: Five Thirty Eight

A few weeks ago we talked about mortality wars. So I felt I had to include this interactive project from FiveThirtyEight that allows you to view the changing causes of death in every American county for the last 35 years. Source: Five Thirty Eight

Week of April 10, 2017

1. Social Investment Dissent:  Last week I had an item about "social investment wars"--unfortunately Felix Salmon's critical take ("How Not to Invest $1 Billion") on the Ford Foundation's announcement came out just a bit too late to be included. It does pair nicely with a video of Xav Briggs of the Ford Foundation talking about the decision and the future of impact investing.
In the item last week I criticized the sector for not acknowledging trade-offs, principal-agent problems and the like. To be fair, there are people in the sector talking about these issues. Here's a piece from Omidyar Network staff in SSIR about a "returns continuum" rather than "no tradeoffs." Here's a piece from Ceniarth staff concurring. And there are two recent pieces from the CFI blog on responsible exits from social investments: first, pointing out that who a social investor sells to should be part of the impact calculation, and second making an important point about the "missing middle" in social investment (though they don't use that term).

The missing middle they are pointing out is investors who are willing to buy on the secondary market but maintain social goals. This echoes a long-standing problem in foundation philanthropy: most large foundations want to be first movers and believe that there are "followers" who will come after them to support organizations or programs after the initial grants. It seems in both cases, the followers just don't meaningfully exist. 


2. Financial Literacy: April is financial literacy month in the United States at least. I continue to use financial literacy as my barometer for the evidence-based policy movement: if evidence isn't making an impact here, why should we expect to have an influence elsewhere? But on to the links. Here's perhaps the dumbest idea currently circulating--making financial literacy a requirement for high school graduation. Here's Graham Wright de-mythifying financial education in the developing world. And on a brighter note, here is IPA's review of what's been learned from impact evaluations of financial literacy programs around the world (it's not just "they don't work!").   

3. The Technology of Management: Having written a couple of books about Toyota, this is a particular fascination of mine--and of course I therefore think other people should be paying more attention to it. Management matters a lot to firm performance (explaining about 20% of firm-to-firm productivity gaps), which in turn matters a lot to wages and job creation/growth. Here's Nick Bloom in Harvard Business Review on rising firm inequality. Here's Bloom et al. on why the technology of management diverges (or alternatively, doesn't converge as much as expected given the returns).

My particular fascination is how to spread the technology of management to small firms and especially "subsistence retailers." Here's David McKenzie and Olga Puerto on an experiment training small-scale female firm owners (90% have no employees) and finding significant and lasting gains, and importantly, no evidence of negative consequences for untrained competitors. Though recall from this fall a paper on a mentoring program for male entrepreneurs in Kenya that found quick fade-out of gains from mentoring by more successful firm owners. I think there are important things to learn from the literature on subsistence agriculture interventions since this really is a similar problem--how do you get people to adopt productivity-enhancing 'technology' like better practices. In that spirit, here's an evaluation of the phase out of an agricultural extension program in Uganda, finding that demand for improved seeds does not decline, though supply does, and improved cultivation techniques are maintained.

4. Our Algorithmic Overlords: My next book of interviews is on big data and machine learning. I would say I'm paying more attention to articles on these topics but that would be reversing the causality. In Technology Review, Will Knight wonders how important it is that we understand how machine learning algorithms and neural networks work and why they reach the conclusions that they do. Fancy listening to some algorithmically-created singers? Or seeing what happens when a deep-learning algorithm tries to create children's book illustrations? On a more serious note, here's "10 simple rules for responsible big data research" in computational biology.


5. Financial Diaries: The official publication date for The Financial Diaries was this week. You really should buy and read the book, but I'm a realist, so here are some pieces to read if you're not going to do that. From Harvard Business Review, wide-spread financial vulnerability. From Marketwatch, households are saving more than it appears. From PBS Newshour, why families feel so insecure.

The gender imbalances in China and India (and elsewhere where son-preference continues to dominate) are well-known. But the actual situation is not as well understood--because families tend to hide or fail to register daughters until later in life. Source: Nikkei Asian Review

The gender imbalances in China and India (and elsewhere where son-preference continues to dominate) are well-known. But the actual situation is not as well understood--because families tend to hide or fail to register daughters until later in life. Source: Nikkei Asian Review

Week of April 3, 2017

War is Hell Edition

1. Cash vs Chickens Wars:  Within development circles, the most widely read point/counterpoint began with Chris Blattman's piece in Vox, written almost as a letter to Bill Gates. Blattman takes issue with Gates' idea to provide livestock, specifically chickens, to poor households and instead proposes a test of the benefit of just giving cash. To be clear Blattman isn't saying that cash is better, but that we don't know--and we do know that giving chickens is much more expensive (and everyone who's been involved in aid knows at least one story about how "the chickens all died")--so we should run a test and compare. Lant Pritchett responds on CGD's blog, saying in all his years in development, never once has the question of "chickens versus cash" arisen as a pressing question. One reason is that Pritchett believes the goal of development shouldn't be marginal improvements for the poorest but generating the kind of growth that has seen hundreds of millions escape poverty in China, Vietnam, Indonesia and other countries. Of course, Blattman responds and does a good job keeping the focus on what I would call the competing theories of change proposed by Chris and Lant. In fact, I have called it that, and if you're interested in a deeper dive into the issues in this debate, I know a good book you should read (or at least check out Marc Bellemare's and Jeff Bloem's review of it).

2. Mortality Wars: Those in the US policy community, on the other hand, have probably been too occupied following the "mortality wars" to even know there's a battle between cash and chickens happening next door. Here's the quick background: Anne Case and Angus Deaton have a new paper about mortality rates in the US--I would say more about their results but, of course, this wouldn't be a war if there wasn't vehement disagreement over what their results actually are. As with an earlier paper, Jonathan Auerbach and Andrew Gelman take issue particularly around the composition of Case's and Deaton's aggregate results, and provides charts decomposing mortality rates by race, gender and state. There are a lot of other critiques, including about the data visualization in Case's and Deaton's paper, but you can save yourself a lot of time by just reading Noah Smith's excellent post about the data and the debate which brings the attention squarely to where it should be: that mortality rates for white Americans stopped following the trajectory of other developed countries and a massive gap has opened up between the US and others. 
Then there's a secondary discussion of why this is happening and what it all means so here's some supplementary reading on that, courtesy of Jeff Guo at the Washington Post: An interview with Case and Deaton; "if white Americans are in crisis, what have black Americans been living through?"; and it's more than opioids. But if there's one related thing you aren't likely to read, but should, it's this article from Bloomberg on automobile manufacturing in the South.
This also seems like the best place to insert my favorite new aphorism: "Being a statistician means never having to say you are certain." (via Tim Harford)  

3. Social Enterprise and Investment Wars: So now we're progressing to the areas where there isn't so much of a war but there are some differing perspectives worth paying attention to. On the Center for Effective Philanthropy blog, Phil Buchanan has an incisive post decrying the idea of "sector agnosticism" between non-profits, for-profits and social enterprises: the legal form of an institution matters, not just its impact. For-profits have to make trade-offs that non-profits don't. In a similar vein, Miya Tokumitsu writes in the New York Times about accusations that a celebrated "social enterprise", Thinx, was treating employees in some less than socially conscious ways like substandard pay, verbal abuse and sexual harassment. What's notable about the piece is not only lines like, "[funds for social causes] will be taken from the same pool of funds from which her employees are paid," but that the writer is an art historian. The social investment world should be embarrassed that such fundamental concepts as fungibility, trade-offs and principal-agent problems seem to be better understood and articulated by non-profit executives and humanities teachers than by proponents. 
The other major news this week was the Ford Foundation's announcement that it will, over the next decade, move $1 billion from its corpus into "impact investing"--a nebulous term precisely because of the sector's general refusal to acknowledge such things as trade-offs. The funds will be specifically dedicated to affordable housing in the US and expanding access to financial services in developing countries. I have some ideas on how Ford should think about investing those international funds so that they spur innovation rather than the status quo in microfinance.

4. Migration Wars: If you've been reading the faiV for any length of time, you know I frequently include papers and related items on the benefits of migration. Like this new paper that looks at historical data and finds that areas with higher historical rates of immigration today have "higher income, less poverty, less unemployment..." and more. Or this piece on "The Case for Immigration" from Matt Yglesias. But there's also this new paper from Hamory Hicks, Kleeman, Li and Miguel that looks at longitidunal data from Indonesia and Kenya rural-to-urban migration and finds that the productivity gains from migration are primarily due to the individuals that migrate. That's a big concern. Right now I'm thinking through my Bayesian updating--in other words, I don't know yet how to think about this, other than possibly ratcheting down my own enthusiasm for migration." Also of note, here is Tyler Cowen on declining rates of migration in the United States


5. Microfinance Wars: Well at least there's something happening in Cambodia, where the government announced a new interest rate cap at 18 percent per year. Dan Rozas writes on how that will shut off access for many in rural Cambodia. I guess the format I've chosen for this week compels me to link to Milford Bateman's response in Next Billion in which he asserts that moneylenders care more about their communities than MFIs (really!) and explains the growth differences between Vietnam and Cambodia are materially a causal effect of lots of microcredit in Cambodia and much less in Vietnam (really! paging Lant Pritchett!).
Over the past month, however, I've been struck repeatedly by the lack of convergence about thinking about microfinance internationally and the credit and savings needs of lower income households in the US. I recently had a conversation with an executive at a US credit union, who said, "I'm so excited we finally have a 501(c)3 set-up so we can get into the payday lending business." Which seems like a very strange thing to say, but only in the United States. In related news, here's a story about SoFi's, short for Social Finance, Inc. (hmmmm....), a fintech heavy lender in the US, default rates rising rapidly. And here's an interesting paper following up on earlier work on a microcredit innovation detailing a potential trade-off (there's that word again!) between efficiency and equity in the operational choices of MFIs

Here's video of Jonathan Morduch and Rachel Schneider discussing their recently released book, The Financial Diaries and the research with David Leonhardt of the New York Times at the Aspen Institute's recent Summit on Opportunity and Inequality.

Here's video of Jonathan Morduch and Rachel Schneider discussing their recently released book, The Financial Diaries and the research with David Leonhardt of the New York Times at the Aspen Institute's recent Summit on Opportunity and Inequality.

Week of February 27, 2017

Money ain't Learnin' and the New Redlining

1. Mobile Money: The GSMA published it's annual mobile money "state of the industry" report, except that this time it's a review of the 2006-2016. Here's a summary (I know which one I would click on). As you'd expect, the GSMA heavily touts some impressive statistics on growth and usage. And I suppose you can't be surprised at the sometimes more than implied leaps from outputs to outcomes. But the more I look at things like this, the more I'm reminded of Lant Pritchett's book The Rebirth of Education: Schooling Ain't Learning and the history of using school enrollment as a very bad proxy for the outcome that everyone actually cares about, learning. Or to use a closer to the finance industry analogy, was there anyone tracking the spread of ATMs and debit cards and getting excited about how much it was going to help the poor?

2. The New Redlining: Fisman, Paravisini, and Vig have a new paper (and a summary) in AER on the effect of loan officer "cultural proximity" with borrowers in India. Loan officers who share religion, ethnicity and other traits with a borrower provide larger loans on better terms, and borrowers have higher repayment rates, meaning the loans are more profitable for the bank. The proposed mechanism is reduced "information frictions" in the lending process. It's a more subtle form of redlining--a systematic way that banks denied credit to minority communities in the United States. Fisman et. al. suggest hiring and promoting minority loan officers as the obvious way to combat the discrimination they document (that's a version of "immigrant" banks that you can still find in places like New York and San Francisco). It's also part of the reason that algorithmic approaches to credit, like this effort to use exam scores as a proxy for student lending in Kenya--remain appealing: you can simply skip past the bias inherent in human-to-human interactions! If only. The long battle against algorithmic redlining is only just beginning and will be much harder to win as long as we succumb to the fiction that algorithms fix bias. I wonder which socioeconomic class the people doing better on exams come from?  

3. Governance and Social Investment: If you pay attention to finance generally and tech in particular, you've surely come across stories about SnapChat's IPO--it's the first time in history that an IPO sold shares with no voting rights. That's right, buying a share of the company entitles you to nothing, not even a symbolic say in how the company is governed (such as at Facebook). Some of called this an absence of governance, but as Matt Levine at Bloomberg (citing John Plender) writes, its actually a shift of governance from shareholders to entrepreneurs (you'll have to scroll down) that is a logical consequence of an environment where capital is plentiful and the specialized labor of entrepreneurs is scarce. Which brings us to social investment. I'd argue that the specialized labor of social entrepreneurs who can build sustainable businesses with high levels of impact is even more scarce. And yet, social investors seem to still be able to, or at least want to, exert outsize control of firms they invest in. The Snap IPO suggests that may change. Why should a social entrepreneur seek social investment when regular old investors seemingly are willing to write blank checks?

4. Investment and Inequality: Most investment isn't social investment or even in tech (though sometimes it seems so). It also turns out that investment in the United States isn't from most people. Well, just barely most people. Only 52% of American adults owned any stocks in 2016, tied for the lowest figure since measurement began in 1998. But most of those people don't own very much stock at all--the top 20% of Americans own 92% of the stock held. In other words, while the stock markets are hitting record highs, that doesn't matter at all for most American households. 


5. Jobs: What does matter for most American households is the quality of jobs available to them. Here's Eduardo Porter on one of the reasons that even the jobs that are available are not nearly as stable, nor do they offer the same benefits, as they did before: outsourcing. No, not to other countries, just to other firms. In many large firms, much of the entry-level jobs are outsourced to specialty firms: receptionists, maintenance, food service and security. These jobs are routinely lower paying and offer fewer benefits than when an employee works directly for a firm--norms of fairness in wages no longer apply.

Bonus Updates: So maybe the next financial crisis isn't auto loans, empty retirement accounts or inflated valuations for tech companies with limited external governance, but pet leases? You have to click on a link that leads to, "Also this cat is ruining my credit score."

An amazing 1953 "explainer" about stock market investing narrated by Edward R. Murrow. The link is to a segment that talks about whether broad ownership of stock is a good or bad thing (see Item 4 above). Hattip to Morgan Housel.

An amazing 1953 "explainer" about stock market investing narrated by Edward R. Murrow. The link is to a segment that talks about whether broad ownership of stock is a good or bad thing (see Item 4 above). Hattip to Morgan Housel.

Week of February 20, 2017

The Impossibility Edition

1. Ken Arrow: Ken Arrow died this week, at age 95. Arrow is the youngest economist to win a Nobel (51), and probably could have won more than once so wide-ranging was his work and influence. He won the Nobel for his work on general equilibrium, but he made foundational contributions to health economics, insurance, risk analysis, and more. Still, he was most famous for his Impossibility Theorem, showing that no majority voting system can be free of arbitrary outcomes. It was also apparently impossible to discuss a subject he wasn't well read in. Here is Tim Harford's short obituary. Here is the Monkey Cage Blog's appreciation ("Arrow proved the existence of a solution to the problem of economics and the non-existence of a solution to the problem of politics."). And here is a three part interview with Arrow from 2009.

2. A Certain Kind of Aid: Speaking of impossible, it's impossible that the combination of subject and price of this new book isn't trolling, isn't it? To be fair, aid does go in cycles, and this was the explicit strategy during colonialism. The item name is a reference to this, if you were wondering. (Hat tip: Justin Sandefur)

3. Pick Your Crisis: Is the next US financial crisis going to come from widespread default on auto loans? Americans now owe $1.16 trillion on car loans, an average of $6000+ per licensed driver. Who is loaning all that money? The car manufacturers; 3/4s of lending to subprime borrowers is underwritten by the manufacturers. Or will the next crisis be the result of the large numbers of Americans who aren't saving for retirement? New data from the US Census Bureau based on tax records finds only 41% of American workers eligible to for a workplace retirement account are using them (another reason why the idea, noted in last week's faiV to make withdrawals from retirement accounts even harder may not help very many people). Or perhaps the next crisis will be based on uncertainty. The Trump administration seems to already be mucking with government statistics. In other words, you should probably lower your expectations of new data insights coming from the Federal government.

4. Household Finance: The Zambia Financial Diaries report is now available. Microfinance Opportunities tracked 355 people for a year in four different parts of Zambia. There are lots of good details here on how households use primarily informal financial services to manage cash flows and smooth consumption. In the US, here's the story of a mother of three in Boston and her weekly financial juggling to make an upwardly-mobile lifestyle on below-local-median-income--it's a mini-financial diary.


5. Mobility and Migration: Here's a piece by Jeff Bloem and Scott Loveridge on the mobility of resettled refugees in the US. Within a year of arrival, more than 10% of the refugees resettled in the US had moved to a different community. The number of refugees in Minnesota doubled because refugees resettled in other states quickly moved again in search of jobs, services and community. They note that there are large differences in the services available state-to-state and that refugees learn this quickly and react to incentives. Which makes it all the more curious that geographic mobility in the United States in general has dropped so much--if refugees can figure out that moving is great path to opportunity in less than 12 months in the United States, why can't everyone else?

David McKenzie presents "The State of Development Journals 2017" detailing the impact, acceptance rate, and time to acceptance at 10 academic journals focused on development topics. The blog post has much more (scary) details, like the average time to acceptance for AER is almost two years. Average! My conclusion: Start citing the Journal of Development Effectiveness at every opportunity everyone! Source: Development Impact Blog/David McKenzie

David McKenzie presents "The State of Development Journals 2017" detailing the impact, acceptance rate, and time to acceptance at 10 academic journals focused on development topics. The blog post has much more (scary) details, like the average time to acceptance for AER is almost two years. Average! My conclusion: Start citing the Journal of Development Effectiveness at every opportunity everyone! Source: Development Impact Blog/David McKenzie

Week of February 13, 2017

1. F*ck Nuance: I know what you're thinking, but that's not what this item is about. It's actually about Kieran Healy's forthcoming paper in Sociological Theory called, well, F*ck Nuance. He argues that the rising demand for "nuance" in sociological theories inhibits clear thinking and useful research. It reminds me of what I've heard a lot of economists say about the demand for complicated formal models in economics papers. It's not what Healy intended, but here's a story about a FinTech start-up ditching FICO scores while offering "the fastest [credit] on the market," which certainly doesn't bother with any nuance like whether the product is good for customers.

2. F*ck Impact: So that's not what Jishnu Das's blog post is actually titled, but it might as well have been. Das (quite ironically, as David McKenzie noted) blogs about how researchers being held accountable for having impact beyond academia, for instance by writing blog posts, is a drag. It's worth reading because there are some valuable nuggets especially about the "poorly specified model" of impact in use and the breakdown of trust between funders and researchers. If you were interested in hearing the thoughts of some development economists who care a lot about having an impact, you could do worse than checking this out. On a different note, the subdued reaction to the post convinces me that the development blogosphere really is dead.   

3. Commitment Savings: In the WSJ, Bernartzi and Beshears argue that evidence from commitment savings evaluations suggest that restrictions around retirement accounts should get even more severe, particularly citing the original Ashraf, Karlan, Yin work in the Philippines. It's true that retirement accounts in the US are very leaky, but the cause isn't just temptation or present bias as Benartzi and Beshears imply. Volatility of incomes and expenses seems to play a large role. Here's a video of Dean Karlan discussing the possibility that less restrictive accounts may work better.

4. Mobility: Kevin Williamson writes in National Review that more should be done to help the poor move to better opportunities. Of course, he's only talking about mobility for the poor within the United States (and he weirdly cites the circa 2000 early evaluations of Moving to Opportunity which were contradicted by later work, but then overturned again by the more recent, more comprehensive work from Chetty et al) and never seems to consider the implications of his argument for trans-national mobility. Here's what I wrote not too long ago about philanthropy stepping in to help the people of Flint, MI move (and here, channeling Hirschman). Speaking of philanthropy, I was disappointed to see that the semifinalists for the MacArthur 100&Change $100 million grants didn't include anyone working on mobility. They're described as "eight bold solutions" but mostly seem to be scaling up ideas with mixed evidence that have been around for a quite a while.


5. Nuance Lives!: At least for Daniel Kahneman, who responds to a blog post analyzing the Replicability Index of the papers on priming cited in Kahneman's Thinking Fast and Slow. Kahneman explains what he missed and how he came to believe too much in the priming results. The nuance comes at the end where Kahneman states that he has not "unbelieved" the individual studies and that he still believes that priming is possible, but has changed his views about the size and robustness of priming effects.

Credit Suisse's 2016 Global Wealth Report provides some perspective on why trans-national mobility is so attractive, and why it's meeting more resistance than in the recent past. Source: Credit Suisse Research Institute

Credit Suisse's 2016 Global Wealth Report provides some perspective on why trans-national mobility is so attractive, and why it's meeting more resistance than in the recent past. Source: Credit Suisse Research Institute

Week of February 6, 2017

1. The World's Largest Financial Inclusion Experiment(s): That's a descriptor that applies to basically any Indian or Chinese national policy, but India is definitely where the interesting financial inclusion experiments via sweeping policy changes action is right now. Whether we'll learn from these experiments remains to be seen. Here's an attempt to learn something from the Indian government's JDY scheme to make bank accounts widely available--finding that usage is growing, and the primary actions are person-to-person transfers (sounds familiar doesn't it?). And here's a story from the FT on how insurance companies are attempting to use the shock of demonetisation and the increasing use of bank accounts (via JDY) to increase penetration of microinsurance.

2. Economists' Social Skills: A big concern in developed economies is the "skill mismatch": the skills that people have today (and by implication that our education system is focused on imparting) are not the skills that will be required for jobs in the near future (if not the present). The two items I see most frequently in such discussions is "coding/programming" and "social skills." I've never understood the former--computers are obviously better at coding than people are already. Social skills though, those do seem important. The surprising thing in this piece on skills and future jobs is the chart about mid-way through which says that economists require strong social skills, even more so than physicians, nurses' aides, and police(!). Perhaps that mismatch between practicing economists and social skills explains why the chart also notes that employment share for economists is stagnant.

3. QTWTAIN: Definitely becoming a regular feature of the faiV. (For those of you with better things to do than spend hours on social media, that's "Questions To Which the Answer is No.") 1) Is dramatic reduction in societal inequality likely without violence? 2) Are smart phones going to be the driver of digital financial inclusion? 3) Does gentrification push out existing homeowners (thought I'm not quite clear on who thought this was true)? 4) Did Donald Trump understand what the job was? ("I am shocked--shocked--to find that gambling is going on in here!")

And the mother of all questions to which the answer is no, "Are the worm wars over?" If you're really looking for something to read, there are a bunch of pieces in that issue of IJE on causal inference in epidemiology. But if you're reading the faiV, I'm guessing you'd be more interested in what these people have to say about causal inference.

4. Expense Volatility: The JP Morgan Chase Institute has a new report based on their work with Chase customer data exploring expense volatility, finding a 29% month-to-month fluctuation in expenses for median-income households, and that households have to build up liquid assets for major medical expenses, but do not recover from that shock within 12 months. Expense volatility is a major theme of the forthcoming book The Financial Diaries. You can pre-order it now.


5. The Last Mile: If you provide information to citizens that lets them better plan around unreliable public services, does it help? Not if the people in charge of providing the information don't actually provide it. The fact that front line staff (public or private) don't do what their managers tell them to do is a too often ignored problem in both program development and program evaluation. It's a recurring theme in Karlan and Appel's book on failure in field experiments. But it remains one of the ways you can challenge the results of many economics papers, and usually you're going to sound smart when the presenter acknowledges that there wasn't a lot of attention paid to that factor.

Bonus Updates: Some more back and forth on whether cashlessness is good for low-income people. A new review of Experimental Conversations. And with immigration so much in the news, this research agenda on migration and remittances came back to mind--still many unanswered questions.

Yesterday I was guest lecturing with Jessica Goldberg, and she mentioned the table below from the AEA's Committee on the Status of Minority Groups in the Economics Profession. I suppose I shouldn't have been surprised, but I was: in 2013-2014, just 13 out of 422 economics Ph.D.'s were awarded to African-Americans.

Yesterday I was guest lecturing with Jessica Goldberg, and she mentioned the table below from the AEA's Committee on the Status of Minority Groups in the Economics Profession. I suppose I shouldn't have been surprised, but I was: in 2013-2014, just 13 out of 422 economics Ph.D.'s were awarded to African-Americans.

Week of January 30, 2017

1. Cashlessness: I continue to be amused that the most commonly written about and discussed issues in the field seem to be "more cash" and "less cash"--and those aren't actually opposing view points. Here's a piece critiquing the "less cash" arguments using the classic Baptists and Bootleggers lens. I remain puzzled that there isn't (even here) more discussion of the increased coercive power cashlessness would provide governments, which is something it appears a lot more people are starting to worry about in other domains. Here's a reading list on one of the arguments for cashlessness that I am least familiar with: how it enables more (and more effective?) monetary policy options. And here's an overview of the possibility of a universal basic (cash) income in India, plausible because of India's progress away from cash, including speculation about Gandhi's attitude about UBI. Meanwhile, Peru is making progress in building the infrastructure for ubiquitous digital payments, but adoption is concentrated among the urban and already banked. To summarize, I fall back to paraphrasing James Scott, "Underbanked is a strategy, not a condition."

2. Digitization: Digitization isn't all about digital payments. A start-up in Chicago is focused on digitizing the process for applying for food stamps. On it's face, it appears to be quite similar to Propel, a somewhat older start-up in New York. I wish much success to both. Interestingly, though, the above discussion of UBI in India contemplates one of the ways to keep program costs under control is to make it time-consuming to certify access so that only the truly needy take the time. It's a reminder, in the spirit of Bootleggers and Baptists, that difficulty in accessing public benefits is often a feature, not a bug.

3. Conspicuous Consumption (Is A Hell of A Drug): Conspicuous consumption is usually thought of as a feature of the spending choices of the wealthier tiers of society. Here's a new paper from Bellet and Sihra examining conspicuous consumption among the poorest in India finding that where inequality is greater, the poorest households substitute toward more visible spending and away from basic necessities like nutritious food. Here's one of the foundational pieces on spending patterns of poor households, The Economic Lives of the Poor, just because if you haven't read it, you should.  

4. QTWTAIN: Perhaps this will become a regular feature of the faiV. (For those of you with better things to do than spend hours on social media, that's "Questions To Which the Answer is No.") Three items this week: "Did a massive reduction in immigrant Mexican laborers in the United States raise wages or employment levels for native-born?", 2) "Does bribery in health care worker hiring necessarily lead to sub-optimal outcomes when access to education is highly unequal?", and 3) "Are public sector workers bystanders in the coalition of forces limiting housing supply?


5. Social Investing: Social investing is hard. That's sub-text of my recent piece on investing in microcredit and NextBillion's recent look at microfinance IPOs. Most often the focus is on balancing financial and social returns. But there's also a challenge in thinking through the various forms of delivering social finance and the implications that come along with them, and the needs of social investors at scale to manage an overall investment portfolio. In a recent piece for Stanford Social Investment Review, Root Capital discusses it's evolving tools for tackling these challenges. If you're interested in these questions, you should check out the Video of the Week, below.

The Centre for European Research in Microfinance at ULB has just launched a MOOC on the commercialization of social enterprise, which draws on the lessons of the microfinance industry. It's free and begins February 27th. Contributors include Paul Collier, Johanna Mair, Dan Rozas and FAI's own Jonathan Morduch. Register here.

Week of January 23, 2017

1. Cash Crisis (India): India's demonetization "adjustment" continues. IMTFI has begun a special series on their blog focused on demonetization; the first post has an overview of the issues with links to work from many researchers from many disciplines, and the promise of more to come. The New York Times takes a look at the knock-on effects three months after the announcement--my only quibble is the headline which implies that demonetization only now "begins to bite." 

2. Cash Crisis (US): It's certainly not sudden demonetization that's the cause of US household's troubles managing cash and cash flows. But there are struggles none-the-less. Diana Elliott of the Urban Institute looks at the budgetary effect on cities of residents who don't have $2000 in liquid savings, finding that 10 large US cities incur (via missed property tax payments, managing evictions, etc.) costs that amount to .3 to 4.6 percent of their annual budgets (the data can be found here). Lisa Servon has a new book, The Unbanking of America, which looks at how much of the traditional financial services industry has turned its back on customers who need help managing their day-to-day cash flow and short-term needs. Here's Lisa discussing her research, which included working at a check casher, a payday lender, and a debt crisis hotline, on Fresh Air, and a review from The Atlantic.

3. Policy Influence: Every week I link to new (at least to me) research--but does any of it matter? ODI has a new report on "10 Things to Know About How to Influence Policy with Research." It's also a question I ask everyone in my book on the use of randomized trials in development economics (hint, hint, nudge, nudge). Sometimes it's hard to draw the lines between basic research, research designed to inform or influence policy, and advocacy masquerading as research. Other times not so much. That particular instance from Justin Sandefur and colleagues as they respond to critics about their RCT evaluating Liberia's new charter school policy, and consider whether the research will change anyone's mind

4. QTWTAIN: For those of you with better things to do than spend hours on social media, that's "Questions To Which the Answer is No." In this case, the question seems to be "Is behavioral economics dead?" which I had no idea was even a thing people were asking. In the course of answering "no," Noah Smith provides lots of links to interesting work connecting behavioral findings to macro questions. I think the far greater challenge is the on-going roll back of confidence in behavioral/social psych findings, but I don't think anyone really thinks even that is fatal.


5. Microfinance IPOs: While I've been worrying (and continue to worry) about a move away from social investment in microcredit innovation, it's true that there have been a couple of microfinance IPOs recently. Next Billion has an interview with Dan Rozas and Anna Kanze about the new IPOs in India and what they mean for the industry. Next Billion is also hosting a Twitter chat on Microfinance IPOs on Monday the 30th, at 10:00am (GMT-5) on the topic, using #mfichat if that's your sort of thing.

A Brookings study of the relationship between being a good researcher and being a good teacher at Northwestern University, finds a precise "none." Now we just need to find a way to measure "policy influence" instead of "instructor value added." Source: Brookings

A Brookings study of the relationship between being a good researcher and being a good teacher at Northwestern University, finds a precise "none." Now we just need to find a way to measure "policy influence" instead of "instructor value added."
Source: Brookings

Week of January 16, 2017

Editor's Note: I've been traveling so much at the beginning of the year that I literally forgot that last Friday was Friday. Rather than publish a few days late, I decided to save up for an extra large faiV this Friday, figuring that many of you will appreciate lots of fodder to distract from the events of the day.

1. In Memoriam: In the last edition, I linked to some remembrances of Tony Atkinson. The philosopher Derek Parfit died the same day as Atkinson, and was equally concerned with inequality though in a quite different way. Here's a 2011 profile in the New Yorker by Larissa MacFarquhar that provides a very good overview of Parfit's thinking (by the way, if you haven't read MacFarquhar's Strangers Drowning, it is probably the ne plus ultra of counterprogramming today). Here's Dylan Matthews remembrance and explainer at Vox--with the truly remarkable note that a volume of essays discussing his work On What Matters was published before the book itself came out. Here is a review of Reasons and Persons from 1984 and Parfit's essay "Why Anything? Why This?" both from LRB.


2. Reproduceability, Replication and Meta-Analysis: There are all sorts of arguments about what the defining features of science are, but I think most of them include reproduceability and the ability to make accurate predictions. At the ASSA meetings there were a number of sessions on these issues in economics. Here's a look at published replications in development economics and an overview of the state of replication in the field in general. Here is Eva Vivalt's review of the dispersion of estimates of impact in development impact evaluations (in lieu of the in progress paper she presented on the rate of false positives and false negatives that builds on her earlier work). And here's Rachael Meager's job market paper on using Bayesian Hierarchical Analysis to understand and predict heterogeneity in treatment effects using the microcredit impact literature. And here's Ioannidis et al. on the limited power of most economics papers

3. Household Finance and Cashflow: Expect to hear a lot in this space about cashflow and how it affects households (hey did you know you can pre-order The Financial Diaries, the book about the US Financial Diaries work?). Here's a paper looking at how changing minimum payments affects how much people pay on their credit cards finding a large but not exclusive role for liquidity constraints, estimating that US consumers would save $570 million a year (or credit card companies would lose $570 million a year in earnings) if all companies used the most conservative minimum payment calculation. Here's a look at excessive sensitivity to payday in Iceland--people spend a lot more when they receive paychecks and it's not explained by illiquidity. Here's recent work in Malawi varying timing of paydays (weekly vs. monthly, Friday vs. Saturday) finding that monthly payments helped recipients save more. And here's a video of Meiping Sun discussing the very large effects of the New York City MTA imposing a $1 fee on the purchase of fare cards

4. Cash and Cashlessness: Two big questions remain in cash transfers (whether recipients use them well is settled as far as I'm concerned): when and where do conditions help, and what are the long-term effects of cash. Here's a study from Lesotho on soft conditions--a clear message that the cash should be spent on the "interest and needs of children" yields significant changes in how the funds are spent. Here's work by Baird, et. al. building on their earlier work examining the impact of conditions in cash transfers, finding that the benefits of cash transfers fade out after two years with interesting implications for the role and application of conditions. And while we're talking about cash (albeit in a very different application of the term), here's a Guardian piece on the exclusionary impact of moving away from cash in developed countries. Very soon we're going to have to develop new vocabulary to distinguish between "fully liquid" aid and literal, physical cash.


5. Microfinance Innovation: NextBillion is moving to a new editorial approach by focusing it's coverage on a different topic each month. January is about microfinance and features three pieces by me on innovation in microcredit. The latest is considers the implications of thinking about microcredit as a vaccine or as an antibiotic. All three of the pieces are extensions of my recent paper The Case for Social Investment in Microcredit, which if you haven't read it yet, you should. And sticking at NextBillion (and setting up the next item) here is Graham Wright's take on five ways microfinance needs to innovate in response to digital finance.

6. Tech and FinTech: I confess that this most recent paper on the impact of One Laptop per Child in Peru made me giggle: Getting a laptop makes it less likely that teachers use a more effective approach, less likely that kids do homework, and less likely that they do chores. The effect sizes are huge so I'm skeptical but I don't recall seeing so comprehensive a set of bad news in a long time. The news isn't nearly so bad for FinTech of course, but that doesn't mean that all signs are positive. Here's Graham Wright reflecting on some areas of concern, particularly the troubling statistics on digital credit out of Kenya. Bangladesh is lowering the ceilings on mobile money transactions (both amount and frequency) due to unspecified suggestions of "abuse." And to illustrate the huge gap in thinking about FinTech in the US and in developing contexts here are 10 fairly ridiculous predictions for FinTech in 2017.    

7. Algorithms: Wrapping up on the tech front: In contrast to the late '90s thinking about how the internet was going to a massive boon to consumers, this piece suggests that algorithms could dramatically reduce price competition.

8. Microenterprise: Have I mentioned that my book is out? Yeah, I guess I have. One of the interviewees is David McKenzie--we spend a lot of time talking about his experiments, with de Mel and Woodruff, to understand microenterprises, in particular work in Sri Lanka on whether it's possible to help microenterprises "level-up" or to change their growth trajectory. David's most recent paper on the issue is now out as well, finding that subsidies to employ workers don't have a lasting impact on employment, profitability or sales. The search for ways to help microenterprises continues.

9. Parsimony: Behavioral economics has illustrated the many, many impediments to "rational" and consistent behavior but it some ways those many, many ways inhibit our ability to study and understand specific issues: does each study need to do extensive work to understand each participants risk aversion, hyperbolic preferences, limited attention, etc. etc.? A new paper by Stango, Yoong and Zinman attempts to make such work a bit easier by looking for simpler ways to measure and model behavioral phenomena, with some success and some failure.

10. Deworming: No, there will never be a last word. Owen Ozier has a new paper on long-term effects of deworming that sheds a lot of light on the reasons why long-term effects can be large while short-term effects are small or negligible. And in case you haven't taken the time yet, here's David Roodman's two long posts (one and two) on the deworming literature--a great useful distraction if there ever was one.

Video: Esther Duflo's Ely Lecture on "The Economist as Plumber"

Video: Esther Duflo's Ely Lecture on "The Economist as Plumber"

Week of January 2, 2017

Pre-AEA/ASSA Edition

1. In Memoriam: The new year began with news of the deaths of two important thinkers on development, economist Tony Atkinson and philosopher Derek Parfit. Here's Tony Atkinson's view of his most important work. Here's a celebratory post from the World Bank's Let's Talk Development blog, here's Beatrice Cherrier's overview of his work as the "founder of modern public economics," and here's a Foreign Affairs piece of Tony's from late 2015, as always focused on inequality and what can practically be done about it. I'll save links for Parfit until next week.

2. Microcredit: I have a new post at Next Billion on what I consider to be one of the most important new research papers on microcredit, an examination of the size and prevalence of subsidy by Cull, Demirguc-Kunt and Morduch. It documents that subsidy is widespread but small--in other words, that delivering pro-poor financial services isn't free, but that it is cheap. Over at CGAP, Greta Bull offers her thoughts on the four drivers of change for financial inclusion in 2017. And here are the most influential posts of 2016 at Next Billion.

3. Cash Aid and Basic IncomeI'm trying not to turn the faiV into a cash and basic income newsletter, but it is a topic that is drawing a lot of attention lately. In the UK, one of the tabloids attacked aid for giving cash to poor people (as opposed to giving cash to rich people?). The Atlantic ran a piece about the history of cash aid in philanthropy and how it is changing current practice. Here's a short history of the idea of basic cash income and here's a round up of both history and current things going on. If you're at #ASSA2017, there's a reception Saturday night to learn more about the Y Combinator basic income experiment in Oakland.  

4. Kahneman and Tversky and Lewis: You've probably seen that Michael Lewis has a new book about Kahneman and Tversky. In case you haven't, here's Sunstein and Thaler's review of the book. Here's a piece by Walter Isaacson about Michael Lewis. And here's a piece from Slate about the irony of Kahneman, our teacher about how easy it is to be wrong, and his faith in results that depended on small samples and have ultimately not held up to replication.


5. Savings: On a more prosaic level, how and why people save remains an important question. Here's Guerin, Kumar and Venkatasubramanian on the use of ceremonial expenditures as a means of informal saving at the IMTFI blog. In related news, Bill Maurer of IMTFI has a book coming out this year on the artifacts of money and transactions (via Diane Coyle's round up of the spring catalogs from econ publishers)

Bonus Ad: Today is the official release date of my book Experimental Conversations: Perspectives on Randomized Trials in Development Economics. Check it out at the MIT Press booth at #ASSA2017 or order one from Amazon (though it now says temporarily out of stock. Is that good news or bad news?)

The second post in David Roodman's epic review of the evidence for deworming is now up at GiveWell. The first post looked specifically at some of the worms papers; this post looks at whether results from those papers can be reasonably applied to other contexts. It's a long read but thoroughly worth it. Source: David Roodman/GiveWell

The second post in David Roodman's epic review of the evidence for deworming is now up at GiveWell. The first post looked specifically at some of the worms papers; this post looks at whether results from those papers can be reasonably applied to other contexts. It's a long read but thoroughly worth it. Source: David Roodman/GiveWell