Week of October 16, 2017

1. The Search for Truth: The New York Times Magazine has a long piece about Amy Cuddy, the social psychologist of "power posing" fame, and the messy process by which her research has been popularized and then discredited. The piece suggests that Cuddy (though it by no means holds her out as blameless) has been uniquely and personally targeted as the face of unreplicable and bad social science in an era of changing research practices and expectations, perhaps because she is a woman. More broadly it ponders whether the process and social conventions of communication around challenging social science research may do more harm than good. It points specifically to Uri Simonsohn, Joseph Simmons and Andrew Gelman and their roles in both calling out bad social science and in specifically highlighting Cuddy's power posing paper as an example.
It's well worth the long read, careful consideration but also some critical evaluation. The piece comes at a very interesting time, with the Weinstein saga, #MeToo, and more specifically the push back about Econ Job Market Rumors and bad behavior in economics. It's important to read the piece in the context of such things as EJMR and this anecdote from Rohini Pande (in an interview with David McKenzie this week) relating how a "senior male World Bank economist wrote to our senior male colleagues at MIT and Yale asking that they review our work and correct our mistakes" in one of her early papers (with Esther Duflo; see question 4 in the link, but read the whole thing, it's very good on a lot of topics).
But on reflection, I don't think the idea that Cuddy was uniquely targeted or treated more harshly than others holds water. It only appears so to a New York Times reporter because Cuddy's works is the kind that gets broad attention. Remember when Ben Goldacre kicked off "Worm Wars" with an amazingly condescending piece asking people not to point and laugh at Miguel and Kremer for the supposed "errors" in their Worms paper because they shared their data? Or the language and dudgeon around Reinhart and Rogoff's Excel error? Or the intemperate words flowing around the failure to replicate John Bargh's priming work? From another field, here's some pointed language challenging a recent result on gene editing alleging some pretty basic errors. 
Of course, the commonality of bad behavior in academic circles doesn't excuse it. But that cuts both ways. Cuddy has also been using this faulty logic in her own defense. As far as I can tell, her main defense has always been "everyone was engaging in bad research practices, so it's not my fault", and that's definitely the implication that the NYT article gives. I don't see much distance between that and people excusing sexual harassment because they were "raised in the '60s and '70s."
Could the practice of social science be better? There's no question, but it's also not clear exactly how, other than the obvious avoidance of misogyny, ad hominem and personal attacks. But that line is difficult to see sometimes because the nature of social science research requires a great deal of personal investment. It's hard not to feel attacked when one's research, quite literally one's life's work, is criticized.
To me, the most thought-provoking part of the NYT piece is when Simmons, reviewing an email he sent to Cuddy about follow-up work on whether the power posing research was reliable, says "that email was too polite" given how serious he thought the problems were. And there is a lot of bad science that needs to be called out. This week, there's yet another update to the Brian Wansink saga--several papers flat out misrepresent who the study participants were (e.g. a paper claiming participants were 8-11 when they were 4-5). Not calling bad science out, I think, is a real contributor to real world problems, like Chief Justice John Roberts being able to call good political science research "sociological gobbledygook."
Here's a Chris Blattman thread on his reactions. Here's Andrew Gelman's response to the NYT piece and for the sake of this topic it is one of the few posts anywhere on the internet where you should read the comments. Someone in one of the Twitter threads wondered about the responsibility of Gelman and other bloggers like Tyler Cowen to police their comments. I'm sympathetic to this idea, but I'm old enough to remember policing comments on my own blog. It's an incredibly time-consuming and soul sucking affair with lots of trade-offs. The "business model" of blogging just doesn't allow it. In fact, in some ways it was the business model required to police commentary, also known as paid journalism, that led to blogging: the gatekeepers of commentary shut out too many voices who should be heard. Science, and the pursuit of truth, is hard. 

2. Our Algorithmic Overlords: This isn't as much of a pivot as it might seem. Here's a fairly intemperate piece critiquing the "digital humanities." There's a good bit of whining but it's worth reading because much of the critique applies to the big data and machine learning movement in economics. And the critique is more palatable because it's not directly about those fields, and so no one, in those fields at least, will feel personally attacked. The bottom line is the same as above: even with shiny new tools, big data and algorithms the pursuit of truth is hard.
Now here's a pivot. The New Yorker has a long story (this is apparently the long reads week) about the evolving nature of factory jobs and "robot overlords." I couldn't help thinking about the distinction made in that piece about "premium mediocre" a few weeks ago: employment is bifurcating into jobs where you tell the robot what to do, or jobs where the robot tells you what to do. Still, the most compelling piece about the changing nature of jobs and employment this week isn't about robot overlords, it's this story of a worker in a ball bearing plant in Indiana losing her job. Highly, highly recommended.
Back to our algorithmic overlords. Here's some more in-depth reporting on the creation of a complete surveillance state, including AI, in China's Xinjiang province. They're not just monitoring phone and digital money use, as I noted a few weeks ago. There are now facial recognition cameras at gas pumps.
And finally, here's a chance to change your priors. Remember those papers that said that note-taking on laptops leads to less learning and poor student performance? Here's a paper that rigorously randomizes note-taking technology and finds that there isn't a difference between taking notes by hand and on a laptop, suggesting the earlier findings were primarily selection effects. And we're back to the theme of science being hard.  

3. Household Finance: OK, let's take a break from the long reads, but stay with the "quality of research" matters sub-theme. I continue to think financial literacy is the bellwether for whether "evidence-based" policy is making an impact. And apparently it's not. Betsy DeVos, the US Secretary of Education, officially announced this week that financial literacy taught in schools is number 4 of 11 priorities for the department. If only we didn't have good evidence that teaching math has an impact on financial outcomes, but financial literacy doesn't. Or how about some new work from Xavi Gine and colleagues that presenting key facts about financial products helps consumers make better choices than financial literacy does?
Here's some worthwhile reading for how households are dealing with their finances, that should sour anyone on the current financial literacy curricula. Check out these two reviews (one and two) of financial services providers in Google Maps. Remember how distributing food stamps twice a month cuts down on shoplifting in grocery stores? Less spiky delivery of benefits also changes how people spend the money they receive in a positive way. Unlikely that financial literacy in the classroom would have changed this person's perspective on money. Check out some insights from EARN on their users financial challenges and saving behavior.
Of course the most important read on household finance is The Financial Diaries. Here's a new review from Beth Rhyne of that book and Lisa Servon's Unbanking of America.

4. Digital Finance: Now let's tie these last two themes together. China is not only building a panopticon in Xinjiang, it's also ramping up it's efforts to track deadbeat borrowers with a national database and public shaming. I'm sure that's going to go well.
In other credit access news, I've long been a champion of Entrepreneurial Finance Lab, which uses psychometrics to assess credit-worthiness of small business owners, allowing more of them to get access to credit. At the same time, I've long been very wary of Lenddo, which uses alternative data, like social media connections, to assess credit-worthiness of individual borrowers. I've called it, I believe, "a tax on poor people's family ties." I've been able to avoid the cognitive dissonance of these two perspectives until this week. Lenddo and EFL announced that they are merging. Now I really don't know how to feel.
Finally, here's a story about the Gates Foundation funding fintech infrastructure software for interoperability of mobile money platforms? The one thing that's clear here is that the reporter doesn't understand the topic.

5. Global Development: To close us out, and hopefully make you feel slightly better about the state of research, here's a model of reasoned argument and debate on an important topic: will Africa experience a manufacturing boom, as wages creep up in former low-wage countries like Vietnam and Bangladesh. CGD has a paper that says no, because labor costs in many African countries are actually relatively high. That led to a lively debate which CGD has helpfully collated here. And here's a helpful overview of living standards in African cities and rural areas, that has some relevance.

I mentioned that I thought this week would be really off-topic. That's because there were a number of really terrific reads this week that are not within the traditional domain of the faiV. But you should read each of these. First, a review of new research that shows bacteria communicating with each other via electrical signals.

I mentioned that I thought this week would be really off-topic. That's because there were a number of really terrific reads this week that are not within the traditional domain of the faiV. But you should read each of these.
First, a review of new research that shows bacteria communicating with each other via electrical signals.

A bonkers story about how the mattress industry works. Never believe anything you read on the internet.

A bonkers story about how the mattress industry works. Never believe anything you read on the internet.

A long read about a Jewish refugee settlement in the Dominican Republic, one of the only places that was willing to welcome Jews fleeing Nazi Germany. It didn't go particularly well.

A long read about a Jewish refugee settlement in the Dominican Republic, one of the only places that was willing to welcome Jews fleeing Nazi Germany. It didn't go particularly well.

Week of October 9, 2017

The Weah-dition

Editor's Note: This is one of those weeks that you get to learn a little more about me. The "Weah-dition" is a way of bringing together the sound that I, and many other of that rare species of die-hard American men's national soccer team fans, made as the US men were eliminated from the World Cup; the fact that famous footballer George Weah is leading the Liberian presidential elections; and to tie into one of our common themes on migration and labor mobility, that George Weah's son, Timothy, is currently in India starring for the US U-17 men's national team (while under contract for Paris St. Germain). You'll see these themes return in the items below.

1. Evidence-Based Policy: Yesterday I was at a workshop hosted at Yale SOM and funded by the Hewlett Foundation on how to better connect evidence to policy. The workshop was part of a bigger project and a series of reports are coming that I will share when they are available. There was a lot of good discussion, but I thought I would share two thoughts that I find to be missing appropriate weight in evidence-based policy discussions. First, there is often discussion of a mismatch in the time horizons of researchers, implementers and policy makers. While this is no doubt true, the mismatch between those groups is trivial in comparison to the mismatch all those groups have with the amount of time it takes for change that people can feel to occur. Deworming's important effects--on earnings, not school attendance--are only felt decades after treatment. Moving to Opportunity similarly has a decade-scale effect. Few if any of the researchers, implementers or policymakers are still going to be around when the world really is undeniably different because of them.
Which brings me to the second point. The enterprise of evidence-based policy is grounded in marginal improvements across large groups of people--and that's a good thing! I'm a big believer in the value of marginal improvements (QED). But people have a really, really hard time noticing or caring about marginal improvements. Human beings prefer stories about big changes for a few people with unclear causality a lot more than they do about marginal gains with sound causal inference. I'm more and more convinced (because of evidence!) that hope is a key ingredient for even marginal impact, but hope comes from Queen of Katwe, not from 1/10 a standard deviation improvement in average test scores. So the unanswered question for me in this conversation is, "How do we manage the tension between the policies that are good for people and the policies that people want?"
In other evidence-based policy news, here's a rumination on the difficulty of applying research to practice in democratization (specifically Myanmar). And here's Andrew Gelman on not waiting for peer review, particularly in Economics, to start putting evidence into practice.

2. Evidence-Based Operations: OK, so there's one more thought: the gap between policy and research, and operations. But rather than a long discussion on that topic, here's a very good new piece on the operational choices of front-line social workers and the gap between policy (whether evidence-based or not) and practice. The challenge in the spotlight is not the Marxist-style view of workers dissociated from their work by rules but workers dissociated because of having too many morally-fraught choices. More light-heartedly, here's a piece that illustrates how hard it is to go from evidence to operational choices, as reflected through the failure of the US men's soccer team (I told you it would return). There is growing attention to front-line staff and the "product" as actually experienced by the beneficiary in impact evaluations, but much more is needed as far as I'm concerned. 

3. Our Algorithmic Overlords: Speaking of operations, one of the areas where more attention is needed is the way that operations are being instantiated into algorithms that are opaque or entirely invisible. Ruben Mancha and Haslina Ali argue that that the unexamined algorithm is not worth using. Of course, they are arguing from ethics, not from business profits, where it's abundantly clear that unexamined algorithms are worth using.
Here's a piece about technology-related predictions from Gartner, a tech industry research and advisory company. Skip the first three to see some striking predictions about AI-generated false information, such as that people in "mature economies will consume more false information than true information." There's a threat to advancing evidence-based policy that definitely wasn't on the agenda yesterday. I started my career at Gartner way back in 1995 and I remember one of the first things we were given to read was an an article in Scientific American about the coming age of fake photography and video. Apparently that future has finally arrived. 

4. American (and other) Inequality: I've been meaning for awhile to mention Richard Reeves' newish book, Dream Hoarders (the thesis is that the upper middle class is passively and actively working to close the door to upward mobility for those below them). I'm finally getting around to it via a few recent pieces. First here's a look at the persistence of the American upper middle class, specifically how white it remains. And here's a piece about the perhaps surprising upward mobility in rural counties. Back to Dream Hoarders specifically, here's a review from Noah Smith that dwells on the "don't focus on how the pie is split, grow the pie" critique. I find I'm much more persuaded that the best way to grow the pie in America today is to change the way it's split.
Meanwhile, here's Eduardo Porter on the growing gap between big cities and small cities.
And moving beyond the US, but definitely applicable, here's the IMF(!) on using fiscal policy for redistribution and reducing inequality.

5. Migration: In an attempt to wrap everything up, here's a piece about Syrian refugees in Turkey, which paints a remarkably positive picture of business creation, job creation and economic growth. The Turkish economy and Turkish workers seem to be seeing substantial gains both in the short- and long-term from the presence of Syrian refugees. In fact, you could argue that changing the way the pie is split between the Syrians and Turks in terms of access to safety (and access to safety, by the way, is one of the things that the upper middle class in America is hoarding) is growing the pie for everyone. It's also similar to the benefits that George Weah's ability to flee violence in Liberia is benefiting America's soccer team and PSG over the long-term. Of course, most of the polity in both cases is focused on the short-term costs rather than the longer-term average marginal gains. 

Urban - racial wealth.png
Returning to the theme of inequality, the Urban Institute has updated it's 9 charts about wealth inequality in America.

Returning to the theme of inequality, the Urban Institute has updated it's 9 charts about wealth inequality in America.

Week of October 2, 2017

Editor's Note: I briefly had ambitions of making this week's faiV a real departure in terms of content and sources. But there's just too much good stuff in the faiV wheelhouse, so instead of "Now for Something Completely Different," we have some "Some Completely Different Things." I would still advise you to beware of Hell's Grannies, know what I mean? Still, I'm going to try to make this faiV different by being uncharacteristically laconic (except for the first item).

1. Abusive Practices: This is the part of the faiV that is different. But, perhaps contrary to the evidence, I have to hang onto the belief that making abusive practices in many domains more visible will in fact play a role in changing those practices. So first up is a piece about abuse of the elderly in Nevada where for years shady operators, aided and abetted by courts, legislators, medical professionals and other nominally civil servants have cooperated to revoke the rights and steal the assets of vulnerable people. That may seem an abstruse topic, but I think it has lots of parallels in many domains. Often, abuse of the vulnerable is tied to weak institutions or institutions that have no duty to those abused. Here we have strong institutions in many cases explicitly designed and supposedly devoted to protecting the vulnerable, which were turned against the people they were supposed to protect and which made challenging what was going on virtually impossible. As an aside, I have to commend Beth Rhyne of CFI who began talking years ago about the challenges that an aging global population would bring to financial inclusion and protection efforts.
At the other end of the age spectrum, here's a piece about the "1% winners/99% losers" labor market of young football/soccer players in England. It's a form of vocational school that consistently lies to 10 year-olds and their families and then dumps the vast majority of them at age 16.
Stretching even further afield, I'm hoping that many folks will find the time to read, or at least scan, the NY Times article on Harvey Weinstein, the movie mogul, and his decades of sexual harrassment and abuse and cover-ups. I'm particularly struck, if not surprised, because Weinstein moved in supposedly progressive circles. His behavior was apparently an open secret but did not dissuade many from working with him and for him and apparently participating in the glossing over of the abusive practices that let him continue. This piece about the lack of criticism coming from Hollywood is particularly pointed.
And now to connect this back to something more faiV-like: I hope the Weinstein saga provides further momentum behind efforts to reform practices and behavior in the social sciences, particularly when it comes to the academic job market. There is a rapidly growing effort particularly in Economics (with offshoots as far as I can tell in Political Science and Sociology) to make job market information more transparent, but more importantly move it away from sites like EconJobRumors which facilitate abusive behavior. Check out the hashtag #EJMinfo for more. This is a rare obvious opportunity to choose between the type of behavior that enabled Weinstein, and the type of behavior that will make such abusive practices and behavior impossible.

2. Economic History, History of Economics, and Evidence: Pseuderasmus, the pseudonym for an economic historian whose real name I don't know, has a long (long, long) post about the productivity gap that opened between India and Japan in the first 30 years of the 1900s. It's filled with fascinating historical details, so even a skim of it will be rewarding. The short version is that the power of unions in Japan was restrained by demographics, culture and the government which allowed manufacturers there to innovate far more quickly and increase productivity. This in turn left Japanese workers eventually far better off than Indian workers where labor unions exerted more power.
Beatrice Cherrier and Andrej Svorencik have a new paper examining the history and evolution of the Clark Medal and it's winners. Again there are plenty of interesting details to reward even a skim. I took particular note of the concentration of winners--eight universities account for all winners in terms of where their degree was earned, and 10 for all winners in terms of employment when they won. So economists are apparently uniquely good at identifying talent early, right? Right?
Finally, this week I stumbled on a newish site, Straight Talk on Evidence, that reviews not the evidence for various programs and policies (for instance as the Cochrane Collaboration, AidGrade or 3ie does), but the claims made by studies that are part of the evidence base. It's a project of the Laura and John Arnold Foundation. Here is their review of an evaluation of CCTs in the United States and of a Heckman paper on the long-run health impact of early childhood education.

3. Microfinance: Last week I wrote about the differences between US and global microfinance conversations that I am exposed to. This week there's a story from the Economic Times that illustrates more confluence than divergence, speculating that MFIs in India are struggling for survival, particularly in the face of increased competition from institutions that are banks or are at least more like banks than traditional MFIs. It feels like a Straussian reading is necessary to really understand what point is being made, but I'm not steeped enough in the politics of Indian microfinance to feel confident I'm correctly interpreting the only-semi-hidden advocacy in piece. Surely the writer doesn't actually believe that traditional banks are going to fall over themselves to provide quality services to the poorer sections of Indian society?

4. Our Algorithmic Overlords: How could I not include an item on the "seven deadly sins of predicting the future of AI"? Bonus points for those who can identify my sins in prior editions of the faiV. Super extra bonus points if anyone can identify some of the deadly sins in this video of Susan Athey, Larry Summers, and Austan Goolsbee discussing the impact of AI on policy from the NBER Economics of AI conference.

5. Philanthropy: The Chronicle of Philanthropy has a big new report on "How America Gives," finding that the percentage of Americans itemizing charitable deductions has fallen from 30% to 24% over the last decade. Other studies (using the PSID) have found a similar drop in the number of households reporting that they give to charity. The interpretation given is that growing inequality is the prime culprit: giving to charity is falling in the middle class and becoming the province of the wealthy, to the benefit of larger non-profits (with the skill and brand to recruit wealthy donors) and the detriment of mid-size ones. Perhaps this helps clarify Giving Tuesday's theory of change.

Caitlin Tulloch is frustrated that two different cash efficiency metrics are being used in papers/reports and they mean different things. She drew up this helpful explainer. For my part, I think we should all uniformly adopt the Cost-Transfer Ratio. Souce: Cailtlin Tulloch, used by permission.

Caitlin Tulloch is frustrated that two different cash efficiency metrics are being used in papers/reports and they mean different things. She drew up this helpful explainer. For my part, I think we should all uniformly adopt the Cost-Transfer Ratio. Souce: Cailtlin Tulloch, used by permission.

Week of September 25, 2017

1. Basic Income: I haven't touched on basic income in what seems like months, but that's because there was little to report. This week Planet Money has an episode (adapted from 99% Invisible) on the details of what basic income is and how it might be delivered. And apparently last week, Y Combinator announced some more details of their US Basic Income study. If details matter to you, you'll be pleased to know that the work in Oakland that received a lot of attention last year was a feasibility study and now they are planning an RCT with 3000 individuals in two different states.

2. Methods and More: My next book of interviews is about big data and machine learning (If you have a better name than "Dated Conversations," let me know). Susan Athey is the first person I interviewed for the new book this past spring (I hope to have some excerpts of that interview available soon) in part because of some things Athey had written on how machine learning will change the field of economics. There's a new version of a (preliminary) paper on the topic. It has details.
More specifically on details and methods, here's a new paper on the use of randomization to study network effects, a quite tricky prospect. But when it comes to methods and details mattering, two items this week really hit the nail on the head. First, Buzzfeed of all places has a lengthy piece examining the myriad problems that have emerged as people examine the details of studies published by Brian Wansink's Food and Brand Lab at Cornell. Missing data, mis-described studies, statistical errors, it's stunning. This week also saw publication of what is many ways the exact opposite of what appears to be have happened at the Food and Brand Lab: David Roodman's incredibly detailed review and replication of the research on the relationship between incarceration (or decarceration) and crime rates for the Open Philanthropy Project. The starkest contrast for me isn't actually the attention to detail but the philosophy. The Wansink saga began with a blog post that indicated that the Lab was torturing data until it said what they wanted; the Roodman review and replication was done because they were concerned that their beliefs were wrong.

3. Microfinance, US and Global: My expertise and knowledge is definitely concentrated in global microfinance rather than microfinance in the US, but because of the work on the US Financial Diaries I'm learning a lot more about the US. This week for instance I got to hang around the outskirts of the Opportunity Finance Network meeting. There are no links here but a couple of things have really struck me and so I wanted to note them, and invite you to tell me what you think/have seen, etc.
First, I was really surprised about how open the US microfinance community is about the presence of and need for subsidy. Globally I see an almost totemic adherence to the idea of self-sustainability, even in the presence of compelling evidence of the prevalence of subsidy. I'm sure that's a consequence of how those industries have evolved but I'm curious about any ideas about the details of the US microfinance history that led to this.
Second, two parallel conversations really struck me. One was about "community investment" in order to create "quality jobs." The second was about how to use technology to cut down costs of making loans, costs that are mostly about staffing--or in other words, how to expand microfinance by lowering the need for quality employees in the lenders. I bring this up not to point fingers about hypocrisy, but to raise the inevitable trade-offs for MFIs everywhere about reach and cost. The tension doesn't seem to exactly be on the surface in the US but it is more apparent than in global conversations, where the value of the jobs created by the global microfinance movement seem to be ignored, especially in the rush to digital finance services.
Finally, I was quite surprised at the contrast in attention to borrower outcomes. Again, I'm a novice here, but whereas in international conversations I feel that everyone is talking about "impact" in terms of household incomes and consumption, in the US conversations I've been a part of, the focus seems to be much more operational--in other words, does the business continue to exist, repay and take another loan. That may be a consequence of starting from a more "antibiotic" theory of change and serving existing businesses with documented troubles accessing capital, but again I'm interested in any other perspectives.

4. US Inequality: The release of the Republican "tax plan" this week was the inspiration for the title of this week's edition but since there really is nothing there I'm not going to link to it. My go-to for keeping track of the details and what effect they will have is Lily Batchelder (NYU Law and former tax counsel for the Senate Finance Committee). Just scroll through her Twitter timeline to understand which details matter and how much.
If you are interested in details of Americans' financial situation, there are two notable reports this week. The Consumer Financial Protection Board published the first "Financial Well-Being in America" report. There's lots to digest but a broad summary might be: there are big racial and gender gaps in financial well-being, but also big gaps within groups so that no particular feature is a reliable predictor of well-being. The Fed released the 2016 Survey of Consumer Finances this week as well. Details galore, but here and here are some overviews which boil down to: "the biggest gains continue to flow to the richest Americans." And here is a bizarre misreading of the details from the Washington Post. It's as if no one had ever said "correlation is not causation."
Finally, here is a heartbreaking story about how the poisoning of Flint, MI's water system led to a huge spike in fetal deaths. Of course, the story is by the same person who did the "if you want to be wealthy, buy a house" story.

5. Education: Finally, in detailed reports released this week, the 2018 World Development Report (yes, the same week as the 2016 SCF, the actual year of publication is apparently a detail that doesn't matter) is out with a focus on education, particularly on the need to focus on learning rather than measures of schooling. Make sure to congratulate David Evans. My favorite take on the new WDR is from Justin Sandefur, who in this tweet stream points out that "all sides seem to embrace the learning crisis and still find justification for their previously chosen policies" (with linked examples). You'll have to check the details to see if you agree.

Frederica Frangapane and Alex Piacentini have created a site to visualize the stories of 6 migrants who arrived in Italy from four different countries in 2016, called The Stories Behind a Line.

Frederica Frangapane and Alex Piacentini have created a site to visualize the stories of 6 migrants who arrived in Italy from four different countries in 2016, called The Stories Behind a Line.

Week of September 18, 2017

The New and the Old Edition

Editor's Note: Most of the items this week are in some way new additions to items that have been featured in the faiV the last few months, or at least updates on some long-running themes.

1. Microenterprise and Household Finance: I assume that most of you are familiar with David McKenzie's business plan competition in Nigeria (there's even a Planet Money episode about it!) and his cash drop work (I have to use this self-serving link of course). David and co-authors have a new paper in Science (summary/blog version here) testing the effectiveness of business training for microenterprises in Togo and find that a standard business curricula did not do much (in line with lots of other business training studies, though most are plagued by too little power) but a curriculum based on boosting personal initiative did have large effects.
I see this as lining up with a stream of research finding that boosting aspirations or "hope" can have meaningful impact in many different contexts (see for instance, this recent work on effects of watching Queen of Katwe) and through a variety of interventions (any one know of an overview of recent work in this vein?). It also helps explain why there seem to be only small effects of business training on businesses that objectively should have lots of gains from marginal improvements in operations--if you don't believe that running your microenterprise better will matter...
In other microenterprise/microcredit news, I learned this week about a study (new draft coming soon apparently) that tests allocating microcredit based on peer views of microenterprise owner business skills. Those ranked highly do in fact see large returns to a $100 cash drop (8.8 to 13% monthly returns). I heard about the study from this excellent thread from Dina Pomeranz on a talk by Abhijit Banerjee and Esther Duflo on what new they've learned since that "old" book Poor Economics came out.
Finally, here's a new piece from Bindu Ananth that should go on your "must read" list. I couldn't agree with this statement more: "[T]he field of household finance has failed to examine the financial lives of low-income families in sufficient detail." She examines specifically issues with how to think about insurance vs. savings, high frequency saving and borrowing, and financial complexity. I will continue to beat the drum on two points: 1) low-income households are having to make financial decisions that would challenge a finance MBA, with large consequences for sub-optimal choices, and 2) almost all the advice we have on making wise financial choices is built on an assumption that the life-cycle model holds true, and may not in fact be good advice if the life-cycle model doesn't hold.

2. Premium Mediocre and American Inequality: I'll lead this off with a concept that I'm not quite sure what to make of, but does have me thinking: Premium Mediocre. The post goes on way way too long, but it's worth reading at least through the first couple of scrolls for some new ways to think about the old problems of inequality and mobility, or lack thereof, and what it does to household decision making.
This summer I mentioned but failed to link to a study on how delivering food stamps more frequently lowered the rate of shoplifting in grocery stores in Chicago. Here's a new paper that shows a much larger and long-term effect of food stamp receipt. Children whose families received food stamps for more years (due to staggered roll out of the program in the 60s and 70s) were less likely to be convicted of any crime as an adult, with larger effects on violent crime.
The importance of such safety net programs in the United States is growing as we learn more about how household finances are changing. Not only is year-to-year volatility seemingly increasing, and month-to-month volatility seemingly spreading, but lifetime earnings aren't just stagnant--they're falling. Some new work indicates that since the late 1960's American men's expected lifetime earnings began falling each year (into the present). That can make premium mediocre a stretch for each new cohort. It also perhaps helps explain this new and fairly shocking chart, based on Case and Deaton's work discussed extensively in the faiV this spring, that has been circulating on Twitter this week.  

3. RCTs, observations and fieldwork: A new entry into the "value of RCTs" debate from well outside the development economics field: online advertising. Gordon et. al. look at data from 15 Facebook advertising experiments (500 million observations) and find significant differences in results using RCTs vs more post-hoc observational methods. The major conclusion as I see it: you're never going to figure out the unobservables well enough to control for them. In related news, here's a good piece about "researcher degrees of freedom" from the Monkey Cage Blog. And in only sort of related news, here's Tyler Cowen on the manifold harms of Facebook (besides making researchers jealous about the size of their n's)
Closer to home in development economics, here's 6 questions for Chris Udry about fieldwork and learning and teaching economics. I would have asked different questions but then you knew that.

4. Philanthropy and Systemic Change: Last week I linked to a piece about the return of hookworm in impoverished parts of the US. There's another side of that story: the supposed eradication of hookworm in the American South has long been the benchmark example of philanthropic success (and the gains from the eradication campaign are part of the evidence base for deworming today). Ben Soskis takes a look at what the persistence of hookworm, or the lack of persistence of the eradication campaign, says about the limits of public health philanthropy (or any kind of "systemic change" driven by philanthropy).
Here's Felix Salmon reporting from what was apparently definitely not a "premium mediocre" philanthropy conference, where the focus was apparently on "invisible causes and effects." If you have any interest in philanthropic strategy or a bent toward "evidence-based giving" it's worth a read.

5. Household Finance and American Inequality Redux: It's new and old all in the same edition. Here are a couple of things that I wanted to include before they got too out-of-date. First, PWC has a new report on the effects of financial stress on workers. It's almost comically bad, honestly, because they so often seem to miss the story. For instance, while focusing on how self-identified "stressed" workers are likely to withdraw early from their retirement funds (or not have made deposits in the first place), they miss the large percentage of "not stressed" employees who are acting the same way as the stressed ones. When 30% of "not stressed" people already know they are going to need to draw down their retirement savings early, you have a problem with your system.
Finally, here's a proposal to allow people to withdraw up to $500 from their Earned Income Tax Credit early in the year to help cope with financial emergencies. Alex Horowitz sounds the proper notes of skepticism on the Federal Government being able to deliver funds in anything like the amount of time that a financial emergency necessitates. One challenge the piece doesn't discuss is that people generally don't know what size their credit is going to be (or even that they qualify for it at all), a challenge exacerbated by income and other household volatility. That's the subject of a paper USFD co-authored with Urban and the topic of a panel next week at the Tax Policy Center. If you're in DC, come along.

Week of September 11, 2017

1. Digital Finance: There's a regular theme I hit when it comes to digital finance--digital gives much more power to providers, government or private sector, than physical cash does. And that is something we should worry about. So my confirmation bias whet into overdrive when this crossed my feed this week: China is detaining ethnic and religious minorities in Xinjiang Province and one of the criteria for detention is people who "did not use their mobile phone after registering it." Brett Scott objects to cashlessness for both its inherent nature as a tool of surveillance and for more pecuniary reasons: unlike cash, every digital transaction generates fees. Which in turn gives power to the organizations that have a seemingly insatiable appetite for categorizing and controlling people. Hey, ever wonder why Facebook is pushing hard into payments, even into fundraising for non-profits?

Scott uses Sweden's progress toward cashlessness as a foil. Want to guess which other country beyond China and Sweden has made the most progress toward digital-only payments? Somaliland. Huh. Elsewhere, the progress of digital finance seems to have slowed to a crawl: 76% of mobile money accounts are dormant, and the average active user only conducts 2.9 transactions a month. Perhaps that's because of a huge gap in usability that will require a similarly large push in education (according to Sanjay Sinha).

Given the near unrelenting negativity above, I feel like I have to say for the record: I don't oppose digitisation. I oppose not recognizing and planning for the negative consequences of digitisation.

2. Global Finance: Digital finance and mobile money is generally about very local transactions. But another important use is long-distance transactions, particularly remittances. But international transfers of funds require banks to have relationships that cross borders. The technical term is "correspondent banks." What correspondent banks do is vastly simplify and accelerate the flow of funds across borders. So it's a problem that correspondent banking relationships are shutting down as a result of "de-risking," which is banking jargon for "avoiding anything that may draw the attention of regulators who have the somewhat arbitrary ability to impose massive fines." The IFC reports that more than a quarter of banks responding to their survey reported losing correspondent bank relationships with compliance costs the most common reason; and 78% expected compliance costs to increase substantially for 2017.

And now for a bit of levity, if you can call it that. Matt Levine has the incredible story of how the Batista brothers, owners of a large Brazilian meat-packing company, made money shorting the Brazilian Real--they knew recordings of their conversations with President Michel Temer about bribes were going to be released. Is that insider trading?

3. US Poverty and Inequality: This week the US Census Bureau released its report on income and poverty in the United States in 2016. The new was good, at least on a relative basis: incomes are growing across the board and poverty is down. But...the majority of gains are still going to upper income groups, and inequality continues to rise as a result. The bottom half of the distribution is only now getting back to where it was in 1999 or earlier. Here's Sheldon Danziger's take on the data and the policy implications. The Economic Progress Institute has a good overview (with good charts) of the poverty data specifically, which focuses on how safety net programs reduce the number of people below poverty by "tens of millions."

The 8+ million who are above the Supplmental Poverty Measure threshold because of refundable tax credits (e.g. the EITC and the Child Tax Credit) particularly caught my eye because of this profile of a US Financial Diaries household that I just finished. Amy Cox, for the year we followed her, is one of those people. For the year, she is above the SPM because of tax credits. But she receives all of that in one lump sum in February. So for 11 months of the year, she's poor. In 9 months of the year, she's around 75% of the SPM threshold. But officially, she's not poor. Makes me think it's time for a Supplemental Supplemental Poverty Measure that takes into account how many weeks a year someone is below the line.

In other US Financial Diaries news, here's Jonathan Morduch speaking about Steady Jobs without Steady Pay at TEDxWilmington this week (skip ahead to 1:30:00).

4. Social Investing: Is there any point to avoiding investments in "sin stocks." At least some people think so, giving the proliferation of mutual funds and other investment vehicles that screen companies based on environmental, social or governance criteria (referred to as a category as ESG). Cliff Asness doesn't think so. The summary version (also see Matt Levine) is that if avoiding "sin stocks" causes those companies cost of capital to rise (which is part of the theory of change of many ESG advocates), well that will just increase the returns of those who are willing to invest in sin. If avoiding those stocks doesn't change the cost of capital, then nothing has been accomplished.

Felix Salmon disagrees. The reason to avoid sin stocks isn't to punish bad companies or raise their cost of capital. It's because "it's the right thing to do," and "divestment is a political gesture" not an economic one. 

5. Education: A few weeks ago I linked to a "Starrant" about Liberia's experimentation with private schools. Last week the preliminary results of the RCT by IPA and CGD that Kevin mentions in his rant were published. There's a little something for everyone here: learning measures were way up, but there was significant heterogeneity among the school operators, and costs were way, way up and those are just the headlines. The biggest question is how to think about the cost-effectiveness, because for instance, this was the first year of the program and it's unclear how much of the increased costs were start-up costs or how scale efficiencies may change the figures.

Caitlin Tulloch has a very relevant tweet thread for education researchers and policymakers/influencers: "We don't lack methodology for costing ed. programs. We lack processes & culture of applying it!" Alejandro Ganimian has a blog post about why
RCTs of education programs that have shown impact haven't led to those programs being scaled up. And here's Attanasio, Cattan and Krutikova in VoxDev (how the hell are they generating so much quality content? Has Tavneet cloned herself in a secret lab at MIT?) on the evidence and the research agenda on early childhood development policies.

Week of September 4, 2017

1. Evidence-Based Policy and Methods: One of the reasons I took a few weeks off was in late August I was part of a panel at Stockholm International Water Week sponsored by on the "evidence base for WASH microfinance." If you've been following the evaluations of microfinance or of WASH you know that evidence base is thin (in more ways than one). Preparing for the panel got me thinking about the strange state of evidence-based interventions. [Warning: I'm going to oversimplify for the next few paragraphs; if you want not oversimplified I recommend the detailed write-ups GiveWell has on both deworming and WASH] Arguably deworming is the sine qua non of evidence-based interventions right now, but the arguably mostly comes not from whether there is some other intervention with a better claim, but that there are large swathes of people who don't believe the evidence for deworming: epidemiologists. Why? Because there isn't a plausible biological mechanism to explain where the gains from deworming come from. There is no consistent detectable effect of deworming on weight or anemia for instance.
In the meantime, there's no question that if you remove bacteria and viruses from water, people won't get sick and will have all sorts of positive short-term health gains. But the most rigorous evaluations of WASH interventions don't find detectable effects on incidence of diarrhea or other health or economic indicators. The most-likely story is that there are so many vectors for infection that people end up consuming contaminated water despite the WASH interventions (and given that doctors in US hospitals still won't wash their hands regularly, that's very plausible). In that way, WASH has a lot in common with microfinance--single point interventions in complex and broken systems are unlikely to produce large long-term effects.
So the state of play is that the intervention with a clear biological mechanism has no effect and the one with no clear biological mechanism has large effects. I hope I'm not the only one who finds that a bit discomfiting.
So what to make of all of this? The point I made at the conference is that building an evidence base isn't just about methodology but about what is being measured. In the WASH + microfinance space, I think the right metrics are about whether well-functioning markets are being created (see my rant about low-quality equilibria, or my "vaccine or antibiotic" theory of change for microfinance piece) where poor households have more actual ability to choose, including the option to not have to think about whether their water is clean.
A second important point is that there is a long way to go figuring out how to measure things we care about. To that point specifically, Rachel Glennerster and Claire Walsh have a post about the difficulty of measuring women's empowerment via surveys and the limitations of how empowerment is currently being measured. They have some useful specific suggestions for improving the current methods. Perhaps there will be some real traction here, as Glennerster was named the new Chief Economist of DfID this week.

Bonus Overflow Links: David McKenzie has a post about re-interviewing participants in unrelated evaluations. Kieran Healy is writing a book about Data Visualization for Social Science and posting most of the content as far as I can tell.

2. US Inequality: So now that I've brought up deworming and WASH, here is a story about the return of hookworm in the deep south of the US. Reading the story, I'm skeptical that hookworm ever really went away, but that these areas were as ignored in the early part of the 20th century as they are now. Dr. Peter Hotez who was a prime mover in getting Neglected Tropical Diseases on the global agenda and laying groundwork for deworming interventions has been leading efforts to document that many of these "diseases of poverty" remain endemic in poor communities in the US and his research here proves the point.
Another important factor in the ongoing story of inequality in the US is labor-force participation which remains at historically low levels despite falling unemployment. The Hamilton Project has a useful overview on Who Is Out of the Labor Force? A key fact to remember: 40% of non-participants are unpaid caregivers. Why is labor force participation falling? Alan Krueger has a new paper that suggests that opiod use is responsible for about 20% of the decline in men's participation. I have to say it's astounding to me that Vioxx was withdrawn from the market but that opiods remain widely available despite the overwhelming evidence of the damage they have done.
Finally, the JPMorgan Chase Institute has a new report on the differential effects of major healthcare expenses on US households. Unsurprisingly older households were more likely to have a major healthcare expense, and those expenses were larger. When younger families had these expenses they tended to make them when their income or liquidity was spiking, indicating that the expenses were hard to manage. Younger and older households turned to revolving credit to help finance these expenses and in some cases saw debt stay at higher levels and even increase a year after the medical payment. In yet more evidence that the US has a lot in common with much less "developed" countries, it reminds me of the story from Scarcity about the fruit vendors who fell back into debt because of health emergencies. Still bummed there's not a paper to link about that.

3. Financial Inclusion and Digital Finance: Now we're going to circle back around to the point about measurement from Item 1. Just like WASH and microfinance, it's been hard to find measurable effects of "access to illumination." That's the take-off point for Julie Zollman to critique the measures that are being used to evaluate the effect of financing asset purchases (like WASH systems or off-grid solar). She makes the excellent point that financial inclusion is rightly conceived as a "means to an end," but that we have to carefully think about what ends count in our calculus. I'd also point out that it has been equally difficult to find gains from IT in developed countries on these same measures, and that it took decades before there was a measurable gain in productivity from the electrification of factories.

Also at CGAP, here's a piece I missed about What Keeps People from Paying with their Phones? based on some work in Ghana. The most interesting part for me was the explication of the low-quality equilibrium that keeps the status quo of agent-intermediated transactions going. One of those factors of course is the user interface and the large number of people who struggle with numeracy and literacy on top of unfamiliarity with technology. Here's a story about the "end of typing" and the development of new user interfaces that do an end-run around literacy. That will require a whole new level of trust in technology though. It's something that's always puzzled me about claims about cryptocurrency being more secure. Supposedly the blockchain prevents counterfeit transactions, but unless you are a top-notch coder and mathematician, you still have to rely on someone to tell you to trust what the software interface is telling you. Matt Levine makes a similar point here (scroll down).

4. Philanthropy, Democracy and Disaster Aid: In a confluence of the interests of the faiV that I didn't see coming, Russ Roberts has a new episode of EconTalk interviewing Stanford political scientist Rob Reich (no not the Berkeley economist) about the undemocratic power of foundations. If there's one thing you listen to this week, it should be this.
One of the long-standing arguments about the value of foundations is that they, through expertise and experience, can do better with their money than the general public does. That argument is most compelling after disasters, when the general public reflexively sends boatloads of money to the Red Cross, or brand-new charities with no experience or mountains of stuff people don't need to charities without the logistics capabilities needed to manage it. Here's Marc Gunther with a useful overview of the situation after Hurricane Harvey. Of course, with Irma destroying Caribbean islands on the way to Miami, it seems like it's going to get worse.

5. Sort of:  I'm going to mix things up with a video and a graphic of the week because let's face it I've already overstayed my welcome, even if it is my birthday.

From VoxDev, which seems to be putting out an enormous amount of content, here is Paul Niehaus and James Ferguson in conversation about the delivery of aid. Source: VoxDev. (The prospect of a substantial expansion of social assistance programmes based on cash transfers is generating great enthusiasm across Africa and beyond.)

Back to the point about measurement being difficult, the Easterlin Paradox was a long-standing puzzle in economics--why don't people get happier when they get richer. That disconnection emerged from long-running surveys that included questions about "life satisfaction." It turns out that the questions being used to measure life satisfaction changed over time and so there wasn't a paradox after all. Here's a chart from Our World in Data/Stevenson & Wolfers showing the corrected data from Japan. Source: Our World in Data

Back to the point about measurement being difficult, the Easterlin Paradox was a long-standing puzzle in economics--why don't people get happier when they get richer. That disconnection emerged from long-running surveys that included questions about "life satisfaction." It turns out that the questions being used to measure life satisfaction changed over time and so there wasn't a paradox after all. Here's a chart from Our World in Data/Stevenson & Wolfers showing the corrected data from Japan. Source: Our World in Data

Week of August 7, 2017

Editor's Note: It's the middle of August, so I thought it would be fun to change pace and have a faiV of just visualizations, graphics and videos. Or the most interesting things I saw this week all had visual elements.

The faiV will be off the next 2 weeks. See you in September.

1. The Global Middle Class: By now, Branko Milanovic's elephant chart should be quite familiar. Nancy Birdsall of CGD has a new post about the state of the global middle class that delves into the elephant chart and other data looking at the state of the middle class globally.

2. Global Inequality: Another chart that may be somewhat familiar but certainly should be top of mind these days. Our World in Data looks at inequality, from a lot of perspectives, here before and after taxes and benefits in developed countries.

3. US Inequality (and Debt): Speaking of inequality before and after redistribution, Catherine Rampell at the Washington Post has a couple of interesting recent posts on policy to help (or not) lower-income workers. The first chart here made lots of waves this week in a post by David Leonhardt, and provides the visceral oomph behind the need to reassess policy in the US. Although this data and similar charts have been circulating for quite awhile, it still thankfully grabs attention.

Whether or not the top chart is related to the bottom chart is one of the questions that Aspen's EPIC is taking on this year. Regardless of the direct connection between income inequality and rising debt, the fact that we are back to record levels of credit card debt seems concerning since it's likely not the .001 percent taking on this debt. That being said, rising debt could also be a sign that finally consumer confidence is returning and people feel that their incomes may start rising again.

Our Broken Economy, in One Simple Chart

Our Broken Economy, in One Simple Chart

U.S. Credit-Card Debt Surpasses Record Set at Brink of Crisis

U.S. Credit-Card Debt Surpasses Record Set at Brink of Crisis

4. Statistics GIFS: You can't say I don't know my audience--you guys go crazy for things like this, at least that's what the click data says. The two images at the top are from Rafael Irizarry at Simply Stats, in a post about teaching statistics and how to think about data. Helpfully, the post includes the code to recreate each of the images (and he's got a lot more where these came from).

This week there was also a revival of the Autodesk post about how visualizations can mislead that I featured a while back. It's here again because Jeff Mosenskis of IPA made an underappreciated awesome joke about also being wary of violin plots.


5. Low Quality Equilibria: I couldn't pass this one up when I saw it this week, given my recent rants. Who knew that removing frictions from sharing market information would make it impossible to ever tell if any product was good or not?

Week of August 1, 2017

1. More Ranting (Low-Quality Equilibria and Digital Currency): Following up on my rant last week about the prevalence of low-quality or sub-optimal equilibria because people have such a hard time figuring out what matters, here's another paper that caught my attention because it so thoroughly confirms my priors. The basics: a field experiment provided repair technicians with varying amounts and frequency of feedback. Performance suffered when feedback was weekly versus monthly because the technicians overreacted to each report. In other words, they had a hard time figuring out which details mattered to their own performance. The study could inspire another about "isomorphic mimicry" and the technology of management but I'll save that for another time.

Instead, I'll move on to a different rant about digital finance. In my world, there's only a tenuous connection between the digital finance groups and the cryptocurrency (e.g. BitCoin) groups, but the former certainly should be paying attention to the latter. As Matt Levine put it this week (again, he says this a lot): "The job of the cryptocurrency revolutionaries is to re-learn all of the old lessons of modern finance, one at a time, in public, in embarrassing ways." Right now those old lessons being re-learned seem particularly focused on how hard it is to manage and secure a money supply. I really hope that the digital finance advocates are paying attention to how often various "unhackable" and "secure" cryptocurrencies are being hacked. The spirit of Willie Sutton lives on, and as more "money" is stored in digital form, there will inevitably be more theft. And there's very little reason to believe that average users will employ security practices better than the supposed sophisticated users currently adopting cryptocurrencies. I fear though that the fate of much of digital finance is to "re-learn all of the old lessons of financial services, one at a time, in public, in especially embarrassing ways because they ignored the cryptocurrency movement's repeated mistakes."

2. Global Development (rants): On to more traditional faiV-ing. Kevin Starr has a new rant on the many outside groups making hay over government-funded private schools in Liberia (We need a hashtag to go along with #lantrant, I'm proposing #starrant). Someone once told me there were a lot less education experiments in the US than in other countries because more people were paying close attention and fighting any policy experiments where the outcomes were not already known. That may have been true, but it's certainly not true anymore in Liberia at least. Kevin's plea is to let the Education Minister do his job.

And here's a rant (with a link to another) against the "getting better" narrative that points out how much the world has improved, to the point where it is certainly the best time in history to be alive. I find the argument here pretty annoying, but not annoying enough to rant about myself. Pointing out that fewer children are dying of malnutrition and more people can read (for instance) in no way implies "this is fine."

In fact it's far more common for the "getting better" crowd to argue for more and for taking risks to make more progress, rather than settling for the status quo as Kottke says they are. In that vein, philosopher Peter Singer is probably the best known advocate for doing more, particularly associated with the "drowning child" thought experiment. Except it's not always an experiment. Last week, French philosopher Anne Dufourmantelle died while trying to rescue some actual drowning children. She was particularly known for her work on taking risks.

3. US Inequality: Much of the work on household finance either presumes that households desire to smooth consumption or tries to test how much smoothing they are able to do. Here's a new paper matching up food stamp receipt dates and standardized math test scores (and dates). There's already good data that shows that food stamp recipients aren't fully smoothing food consumption over a month--households often eat less in the last week of a monthly cycle. Here the authors look at how students from these households perform when test dates are toward the end of a benefit cycle and finds there is a material negative impact on performance. There are some other interesting patterns as well. At some point, I'll have a sort-of rant about a related issue: how we should think about whether the EITC lifts people out of poverty or not, given that it does so by delivering a lump sum on one day, but nothing the rest of the year.

Evidence like the food stamp study is used by safety net advocates to argue for more generous benefits, but just as often to say that the reasons people become and/or stay poor is their own choices. One of the frameworks for the latter is known as "the success sequence," originally proposed by Haskins and Sawhill. It lays out a set of choices that make escape from, or protection from poverty much more likely. Matt Bruenig has a new post about the "success sequence" which has been getting more attention of late. While the sequence has lots of advice, Bruenig points out that the only piece that seems to make a material difference is having a full-time job.

Finally, here's a profile of the current life of Rob Cordray, the embattled head of the CFPB

4. Theories, Methods and Models: It's getting late in the day already, so I'm going to pick up the pace a little here. Don't mistake that for disinterest or lack of endorsement. This is all good stuff. You should click on the links.
Michael Kremer and Gautam Rao presented on Behavioral Economics and Development at the NBER Summer Institute. Here are their very useful slides.

Are small studies ever worth it? Some people argue they do much more harm than good. I'm guessing they didn't factor in the damage avoiding small studies would do to the careers of academics-in-training. I'm particularly interested in how this applies in the business context, where unless you are one of the truly massive companies in your space, all the "data analytics" being done are small studies.

On the opposite end of the scale, Karthik Muralidharan and Paul Niehaus have a new version of their paper, "Experimentation at Scale", which points out that development RCTs have typically been "small" (though not in the same sense as the authors above use it), and offers lots of advice for dealing with the challenges of doing very large experiments.

5. Digital Finance: Most of the time when I discuss digital finance in the faiV it's about things like mobile money or digital credit. But there's a much bigger part of digital finance that is about what's happening on the back-end of digital commerce. Here's a profile of Patrick Collison, the founder of Stripe, an increasingly important player in that back-end globally. Stripe handles a lot of digital payments and is increasingly moving to add services to make all the other parts of digital commerce much easier. If you want to extrapolate wildly from Tavneet Suri's and Billy Jack's paper on the effect of M-Pesa on poverty, just imagine the impact of quickly and cheaply enabling developing world entrepreneurs to incorporate, set-up digital storefronts, manage inventory and get access to working capital. You may also recall that Patrick Collison recently interviewed Tyler Cowen and mentioned my book (even if he forgot the name) and so I have a strong positive bias toward anything he does. 

Finally, while Stripe is a big deal in digital finance even though you hardly ever hear about them, if you follow the finance space, you hear about robo-advisors all the time. For example, last week's faiV. But Josh Brown points out that "robo-advisor" already is a meaningless term. If everyone is a robo-advisor then no one is a robo-advisor.

Not particularly new, but new to me: a proportional chart of the use of languages in the world. Source: Search Reddit because I'm worried about filters catching the name of the Reddit forum where this is from.

Not particularly new, but new to me: a proportional chart of the use of languages in the world. Source: Search Reddit because I'm worried about filters catching the name of the Reddit forum where this is from.

Week of July 24, 2017

The ranting edition

1. Low Quality Equilibria: There's an important "new" (e.g. it's been circulating in working paper form for a while, but is now published) paper in QJE about why hobby woodworkers waste so much money...just kidding, it's about why people keep buying cheap Chinese knock-off tech products and IKEA furniture...actually it's about the persistent use of predatory financial products and poor financial decision making...OK, it's really about the bind that the evidence-based policy movement finds itself in. Well, truthfully it's actually about agricultural markets in Uganda and why adoption rates of fertilizer and improved seed are low, but not zero. Really, that's what the paper is about.

But it is also about all of those other things. Here's the basic story:
Fertilizer and improved seeds boost agricultural productivity substantially. But it's hard for farmers to tell whether the fertilizer or seeds they are buying are fake. So there are lots of people willing to sell low quality stuff claiming it's high quality--in Uganda, the fertilizer is regularly diluted (30% of nutrients are missing) and the "improved seed" is fake 50% of the time. Classical economics tells us that markets will drive out the low quality products as people learn who is a reliable seller; or that the market will collapse and no one will be willing to buy the fertilizer or seeds at all. But farming, like almost every other human endeavor depends on lots of factors, not just these inputs. And so it's not only hard for farmers to tell whether they were sold a "lemon" even even after using it. Did their crops underperform because the were sold fake inputs or because the weather was bad, or they used it wrong, or their land was too degraded, or there were too many of a certain kind of pest, or because they were sick during the planting season, etc.? After all, some people buying the fertilizer and seeds did get good stuff and have high yields, so it's even harder to tell where the problem lies. So the market doesn't collapse, and low-quality sellers/products don't get driven out of the market but farmers also--for good reason!--don't invest in the inputs as much as would make sense based on the theoretical productivity boost.

Here's where the rant, and the weird introduction to the item, comes in. This situation is incredibly common: in most of life it's hard to tell whether some input--be it technology, or practice, or advice, or an employee--is high quality before you use it, but also after you use it because of the complex nature of most of life. This basic fact seems to be ignored frequently as researchers, policymakers, and advocates try to explain behavior. In almost all our endeavors we are in a Dunning-Krueger low quality equilibrium. We don't know enough to tell high quality from low quality ex ante, or ex post (yes, I'm a Calvinist). Determining causality is hard--even the most highly trained economists and social scientists get it wrong all the time! What hope does the average human have of looking at a complex system and determining which of the hundreds of factors involved was responsible for what portion of the outcomes? Behavioral economics explanations for sub-optimal choices are tempting because they tend to skirt this core issue. True, cognitive biases and limited attention exacerbate these problems and nudges can yield improvement on the margin, but figuring out what matters is hard (an opportunity to link, yet again, to one of my favorite papers, [Not] Learning by Noticing [the wrong things].

This is why Amazon or any crowdsourced product reviews are worthless. And it's why most people, regardless of their financial literacy, can't consistently tell which financial products are good for them and their situation. And it's why evidence-based policy is such a hard sell--when a policy with strong evidence behind it fails to live up to expectations is that because the advice was bad, the implementation was bad or circumstances changed?

Low quality equilibria are everywhere, defeating them is hard, and that's the sobering challenge we face.

2. Digital Finance: Staying in the ranting realm, here's a piece about digital financial services in China that keeps making my eyebrows try to climb into my hairline. The opening point is spot on--digital finance is paying too much attention to Kenya and not enough to other places, particularly China where adoption and use is much, much higher. But the piece has a not veiled at all assumption that digital financial services are an unalloyed good, and an only thinly veiled praise of authoritarian structures.

China doesn't have the same financial exclusion problems that most other countries have (though of course the very poorest are also pretty permanently and even more completely excluded in a digital environment), where private sector providers ignore or actively discourage lower-income customers. But authoritarian structures--whether they are the government, or monopoly private providers like AliPay and WeChat--will exclude people on other criteria. And that will be very bad for those people. I feel like we need a new version of an old saying: the only thing worse than being excluded by capitalists is being excluded by authoritarian monopolies.

3. Our Algorithmic Overlords: Score one for the human beings, sort of?. Betterment, one of the original "algorithmic" financial advisors announced this week that it's adding (even) more human advisors. Apparently people like asking human beings questions, or at least having someone to talk to. That's a trend that Tyler Cowen sees as the actual outcome of increased use of AI and robots: the jobs that humans will do will all be marketing jobs (and honestly, that's what a financial advisor really is, a marketer).

That doesn't bode well for increasing productivity, or wages. Most marketing is a zero-sum game with a few big winners and mostly losers. Here's Neil Irwin on another way of looking at the productivity slump in developed countries and the low-quality jobs equilibrium we seem to be in. Reminds me of Lant's Rant about labor-saving robots (in Uganda!).

Meanwhile, Mark Zuckerberg and Elon Musk are arguing about AI risks and people are choosing sides.

4. Strugglin' in the USA: Prosperity Now, formerly CFED, has a new scorecard on the state of Americans' finances with the takeaway being, "getting by but not getting ahead, citing USFD research on income volatility as one of the key aspects of American financial lives today. One of the more interesting possibilities for helping people deal with volatility and balance short-term and long-term savings needs is now dead: the Trump Treasury is canceling MyRA. I would rant, but really, who has the energy to rant about the Trump administration right now? Note the article title focuses on retirement but the most interesting part of the MyRA was it's potential use as an emergency savings vehicle.

With the death of a savings vehicle, here's some news on a borrowing vehicle: Noah Smith writes on work suggesting people are much better off (consumption rises in all periods) when payday lending is banned. The implication is that very little payday borrowing is funding actual consumption emergencies and being used for reckless spending instead. If payday were banned, perhaps people would turn to Panhandlr (hattip to @matt_levine for the name). I suppose you could file that under digital finance as well, but that would have required putting two rants into one item.

5. Methods: Marc Bellemare, who is also responsible for pointing me to the Uganda paper in Item 1, has a nice post, building on a Twitter thread from Beatrice Cherrier, about the history of Agricultural Economics as a semi-separate discipline and applied economics. It's definitely worth reading all the way through.

And if applied economics wasn't hard enough for you, here's a proposal to make the cut-off for statistical significance p=.005 (10 times harder than the current standard). That sounds less useful to me than doing away with p-values entirely.

From the DFSLab post described above--obviously not the original source, but I can't figure out where it originally came from. Minor rant: I get very frustrated by category errors in digital finance metrics which exclude card payments from fintech. Cards are fintech! There is nothing special about a phone!

From the DFSLab post described above--obviously not the original source, but I can't figure out where it originally came from. Minor rant: I get very frustrated by category errors in digital finance metrics which exclude card payments from fintech. Cards are fintech! There is nothing special about a phone!

Week of July 17, 2017

Editor's Note: The faiV is brought to you this week by the Aspen Intitute's Financial Security Program EPIC team: Joanna Smith-Ramani, David Mitchell, Katherine McKay, and Katie Bryan. Their views, etc. though YouTube links are probably mine. Check out their work on income volatility and on consumer debt at I'll be back next week. 

1. Weaponized Data and American Inequality (Part 3): We learned a lot in reading the faiV’s summary and corresponding links detailing the minimum wage debate consuming economists across the country. While we haven’t reached our own conclusion about whether a $13 minimum wage in Seattle is or isn’t too high, we are following how some state legislatures across the country are actively rolling back minimum wages established by municipal governments. Example? St. Louis was dealt a big blow and the city has received a lot of press this summer.  

(ICYMI the debate, here and here are the two papers that offer opposing outcomes of Seattle’s minimum wage increase. If you don’t have time to read the papers, here’s a fun breakdown from Vice.)

2. Living for the City: CityLab profiled recent research on the intersection of urban development and economic inequality, making us think back to Stevie Wonder’s “Living for the City.” Still relevant. And beautiful. A new study out of the University of Idaho looks at 639 urban counties in the US and the factors that determined when they felt the effects of the 2006-2010 recession. Rarely do we see the Gini coefficient being used in the context of domestic inequality – but we should use this metric more often. Consequently, we were really excited to see this interactive map of the Gini coefficients of counties across the US.

For more on cities, another CityLab piece looks at how housing policies worldwide will only exacerbate urban inequality and housing crises. And this story on how inefficient tax codes, high cost of living, and migration, by both companies and residents, are sending the state of Connecticut spiraling, makes us rethink how we view the fiscal policies of traditionally blue, wealthy states.

3. Income Volatility, Short-Term Savings, Retirement (Oh My): Over the last 18+ months, our team has conducted a deep dive on both the impact income volatility – large fluctuations in week-to-week and month-to-month income – has on US households and potential solutions for mitigating the problem. Our latest briefs look at the role wage insurance could play in helping families cope with job loss or reduced wages and how shortfall savings can serve as a buffer during financial emergencies.

Because we care about both short-term financial stability and long-term security, we also spend our days thinking about comprehensive policy solutions to help expand access to retirement savings opportunities. In our process learning about more about income volatility, we’ve realized it’s particularly hard to save for the long-term when short-term savings are lacking. This new paper looks at the effect income shocks have on retirement savings (the stats aren’t pretty: “96 percent of Americans experience four or more income shocks by the time they reach 70”), and *mark your calendars* later this fall, we’ll be publishing two papers on how volatility affects retirement savings. 

4. China, China, China:
Cash is king. Right? Hard currency has been with us for nearly three thousand years, after all. But maybe not for much longer. As one reporter details, visit urban China and you will likely, “have to deal with being locked out of China’s online payments infrastructure.” Sweden is also rapidly moving to a cashless economy. “Out of Sweden's 1,600 banks, 900 don’t do cash— you can’t deposit it or withdraw it.”

The advantages of going cashless? The claimed benefits tend to be 1) speed - for both consumers and banks, removing cash from transactions is faster 2) curbing illegal activity – Sweden saw a decrease in drug trafficking and illegal employment and 3) financial inclusion – this one needs to be fleshed out more, but we think and are hopeful that going cashless will require more people to open bank accounts, and the benefits of being “banked” are many.  That said, some are concerned that going cashless could undermine other financial inclusion efforts. We may be able to learn from how this plays out in India
, where recent moves toward becoming a cashless economy have disrupted many poor communities. 

5. Consumer Debt: EPIC’s new topic is consumer debt. Debt is back to pre-Recession levels, subprime auto lending is booming, and we have many many questions: how does income volatility impact people’s ability to manage their debt? And, will we pay off our student loans before our children apply to college? Maybe… if you’re one of thousands of distressed borrowers who learned this week that their private student loans may be forgiven. Because the investors who sued them are unable to prove ownership of nearly $5 billion in student loans. It’s like the foreclosure crisis all over again!

U.S. consumers now have a record $12.7 trillion in debt, leaving many wondering whether it’s time for concern. There’s no easy answer. Based on a new paper from UBS, Business Insider reports “The poorest Americans are suddenly worried about repaying their debts.” We don’t know about that “suddenly” part, but you can’t judge a story by its headline, and those making less than $40,000 are increasingly concerned.

Do you know what it means? Source: via The Basis Point via Apparently none of them know what it means either. I feel like it must have something to do with the serial linking but that's probably wrong. I'm more confident it might have something to do with the record-low labor force participation rate, not charted here.

Do you know what it means? Source: via The Basis Point via Apparently none of them know what it means either. I feel like it must have something to do with the serial linking but that's probably wrong. I'm more confident it might have something to do with the record-low labor force participation rate, not charted here.

Week of June 26, 2017

Weaponized Data Edition

1. Weaponized Data and American Inequality: Last week I linked to a paper finding minimal effects from minimum wage increases, unaware that a huge explosion of debate on this issue was about to occur. If you follow these things at all, you know that last Friday a paper on Seattle's minimum wage increase was released finding no job losses or cuts in hours. Monday, a different paper finding large losses for households with minimum wage jobs was released. There's a whole lot out there now on the two papers so I'm not going to rehash those arguments (if you need to catch up, try this or this or this or just scroll through Twitter). I want to focus on the backstory of why there were two papers released so close to each other because it's important for the future of research and policy-making. As detailed here, what appears to have happened is researchers at UW shared an early draft of their paper (using tax data that is rarely available in minimum wage studies) with the Seattle mayor's office. The mayor's office didn't like the conclusions so asked a different set of researchers to write their own paper--and release it just before the planned date for release of the UW paper. While I have no special insight into the exact details of what happened, the prospect that the report is accurate disturbs me a great deal. It's a blatant step toward what the author of the Seattle Weekly piece calls "weaponized data." Be afraid for evidence-based policy. Very afraid.   

In other American inequality news on topics that yield strong confirmation bias reactions, Justin Fox reports on new work suggesting that occupational licensing actually crowded-in historically disadvantaged workers--seemingly the transparent rules of licensing reduced formal and informal discrimination that kept these groups underemployed. That's a very plausible story to me, though I generally also buy the anti-licensure arguments.

There's also new work on school vouchers, from Indiana, finding short-term declines in test scores, but later (over four years) gains. It's worth noting how claims for vouchers have down-shifted to "no harm and some students gain." But keeping on the weaponized data theme, the paper is not publicly available and was only obtained by ChalkBeat through public records requests. Apparently the study authors don't think it should be public until it's peer-reviewed, which illustrates the difference in norms in sociology and economics.

2. Our Algorithmic Overlords: Also a few weeks ago I linked to a story about how to tell if borrowers on online lending platforms were going to default, and to the book, Everybody Lies, from which it came. I said I was going to read the book and I started this week--and was immediately dismayed. The opening of the book discusses what search data--particularly searches on pornography websites--can tell us about Americans' hidden desires. You can see a summary in this deeply disappointing Vox piece (isn't Vox supposed to be better at thinking critically about this stuff?). There is no discussion of how such data might be biased or inaccurate, how a site's interface may interact with what people search for, or why we should believe that search data closely corresponds to "real life." In other words, it's an object lesson in the dangers of using data and algorithms without understanding the data or the people, social structures and institutions that generate it. So of course it's a best seller. Suffice it to say that I have radically revised down my faith in any of the book's conclusions.

In other data-generating processes of uncertain usefulness news, Google will stop showing ads inside Gmail based on scans of email content (illustrating the sucker's game that is attention, I had no idea they were still doing this; I hadn't noticed an ad in years). The nominal reason is combating hesitance from corporates to adopt Gmail and Google's suite of web apps. As someone in my Twitter feed noted, the real reason is that Google already gets better information to drive ads to you than your email.

3. Development Economics: David Evans at the World Bank had to teach middle schoolers (6th to 8th grade, also known as Hell on Earth) what development economics is, in 20 minutes. How did he do? I mean, other than not handing out copies of Experimental Conversations.

On a more serious note, here's an interesting new study on the persistence of gains from agricultural extension programs, after those programs end. It's notable both for the cool design, but also for the positive results. I'm always happy to see results that suggest there's hope for getting poor households to adopt productivity-enhancing technology, whether they are farmers or retailers.

4. Household (and Drug Lord) Finance: Stay with me on this one, we'll get to the drug lords. One of the ongoing things I worry about in household finance is that it involves people and people make bad decisions so predictably. Case in point--a major mistake that people make is chasing investment returns via "hot" stock-pickers. There have been major gains in this area as low-cost index funds have grown enormously. But now comes the Quincy Jones Streaming Music Blah Blah Blah Index fund. Yes, you read that right. It's a new kind of index fund that is an arbitrary set of stocks marketed with the name of someone famous nominally connected to the stocks in the index. Yes, the cynicism of the people creating products like this is annoying and frustrating. But the real problem of household finance is the people that will buy them. The enemy is us. Sigh.

In a variety of forums I've complained about over-zealous regulation of remittance providers under Anti-Money Laundering efforts. There's generally been little evidence that this is a significant danger. But last week 11 people were arrested at Atlanta remittance shops for laundering $40 million of illegal drug proceeds and sending them on to Mexico. Here's the kicker: the people doing the laundering were the Anti-Money Laundering staff at the remittance shops. The problem is the people.

And finally, a quick report on planned up-coming M-Pesa outages, for up to 12 hours. It will be interesting to watch for customer behavior effects.

5. Evidence-Based X: Returning to the opening theme, how should (hopefully not weaponized) data be used for making policy decisions? Andrew Gelman has a short post on "clinical significance" and "statistical significance" that should inspire long thoughts. Here's your clickbait: "Forget the hypotheses and the p-values entirely." I should note that Andrew has a new book that I'm going to get to much sooner now that I know I can just skim Everybody Lies: Teaching Statistics: A Bag of Tricks

A reddit group put together a map about the data in maps, illustrating where data is missing. Source: @maxcroser and reddit

A reddit group put together a map about the data in maps, illustrating where data is missing. Source: @maxcroser and reddit

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, 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