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 Water.org 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


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