Week of September 17, 2018

1. MicroDigitalFinance: A few weeks ago I wrote that small-dollar short-term loans have always been the bane of the banking industry. We're getting a new test of that. US Bank is launching an alternative to payday loans: loans are between $100 and $1000 and repaid over three months. Interest rates are well below payday lending rates, but still around 70% APR--interestingly on US Bank's page about the loan they very clearly say: "Simple Loan is a a high-cost loan and other options may be available." All of that is good news. But the loans are only available to people with a credit rating (even if it's bad), who have had bank accounts with US Bank for 6 months and direct deposit for 3 months. It will be fascinating to watch take-up, repayment rates, and outcomes--those are where banks have always struggled in this market. Here's Pew's Nick Bourke's take on the US Bank move and the potential for others, with some more regulatory action, to follow suit.
I occasionally remark on insurance being the most amazing invention of all time. It's astounding that it works at all, even in the most developed, trusting and well-regulated markets (see this attempt by one of the US's oldest life insurance providers to collapse the market); it's not surprising that it's a struggle to make it work elsewhere, in the places where households face more risk and would most benefit from access to insurance. So I'm always interested in new work on insurance innovation. Here's a new paper on a lab-in-the-field insurance experiment in Burkina Faso. The basic insight is that many potential purchasers struggle with the certain cost of an insurance premium versus the uncertain payoff. It turns out that framing the premium around an uncertain rebate if there is no payout--which makes both premium and benefit uncertain--increases take-up, especially among those that value certainty most. Yes, you probably need to read that sentence again (and then click on the link to see that even that obtuse sentence is marginally clearer than the abstract). If we want to delve into the details of insurance contract construction, there's also a new paper that delves into how liquidity constraints--a huge factor that hasn't generally gotten enough attention--affect the perceived value of insurance contracts, and how to adjust the contracts accordingly.
And finally, William Faulkner's dictum that "The past is never dead. It's not even past." applies to fintech. A new paper finds that common law countries in sub-Saharan Africa have greater penetration of Internet, telecom and electricity infrastructure, and thus much greater adoption of mobile money and FinTech. That's consistent with history of banking literature that finds common law countries do better on financial system development, financial inclusion and SME lending. 
For the record, I've clarified in my own mind the difference between the MicroDigitalFinance and Household Finance categories. The former provides perspective on providers, the latter on consumers. I reserve the right to break that typology as necessary or when it suits me.  

2. Household Finance: I suppose another way to distinguish between the two categories is that MicroDigitalFinance features bad news only most of the time, while Household Finance is just all bad news. At least that's the way it feels when I come across depressing studies like this: Extending the term of auto loans (e.g. from 60 months to 72 months as has become increasingly common during this low-quality credit boom) leads to consumers taking loans at a) higher interest rates, and b) paying more for the vehicle. Liquidity constraints mean consumers pay much more attention to the monthly payment and get screwed.
It's not just auto loans where liquidity constraints lead to people making sub-optimal choices (yes, I'm thinking a lot about managing liquidity lately). For instance, when people move from traditional health insurance to high-deductible plans they suddenly reduce spending on health care--but not in the ways you want. People don't learn to price shop, even after two years, and they don't reduce spending only on optional or low-value services. And here's the JP Morgan Chase Institute study that shows how much liquidity constraints or their removal affect health care spending using a different approach.
Now if you are a loyal faiV reader, I know you're not thinking, "We need financial literacy training!" But just in case, here's some more bad news: "peer-to-peer communication transmits financial decision-making skills most effectively when peers are equally uninformed, rather than when an informed decision maker teaches an uninformed peer." Or this: "provision of effective financial education to one member of a pair...does not lead to additional improvements in the quality of the untreated partner's decisions." 
If you're thinking, "That hasn't ruined my Friday yet, Tim, give me more," don't worry. How about "Twenty-four million homeowners think it's acceptable to tap into home equity to cover everyday payments." Granted, that's from one of those ridiculous surveys that should be taken with several kilos of salt, but still. 

3. Our Algorithmic Overlords: Here's a quick story about an egregiously bad algorithm the State of Idaho was using to determine how much assistance Medicaid recipients should receive. You can probably already guess--bad data, bad software, bad implementation. But it took a lot of work, and a lawsuit, to figure that out. 
Stories like that emphasize that before handing over decisions to our algorithmic overlords we should want those algorithms to be understandable and fair. Here's a new paper from Jon Kleinberg and Sendhil Mullainathan developing a model that shows you have to pick between simple and equitable. You can't have both.
And here's the "Anatomy of an AI System" that in some ways is a visual proof of the Kleinberg and Mullainathan paper. It's also one of the coolest visualizations I've seen in a while--both in scope and because it isn't reductionist about AI. It takes into account all of the surrounding processes as well. You won't regret clicking on this, unless you have something else really important to do.

4. Global Development: So many things to include this week. Let's start with the biggest: Asher, Novosad and Rafkin have assembled an incredible dataset on incomes in India that allows them to measure intergenerational mobility in a country of more than a billion people, down to the level of 5600 rural districts and 2300 cities and towns. One key finding: increasing mobility among scheduled castes is offset by decreasing mobility among Muslims.
At a necessarily smaller scale, but still big in terms of scope and time, Casey, Glennerster, Miguel and Voors have a long-term follow up on the results of a large scale experiment on Community Driven Development in Sierra Leone, finding that CDD doesn't break down traditional autocratic governance mechanisms enough to allow full exploitation of human capital, which as I understand it was part of the motivation for CDD, and there are easier and cheaper ways to to do so. Of note, they also look at the "prior beliefs of experts on likely impacts"--which, given the "Everything Is Obvious" responses research like this often generates, is pretty cool. Here's Rachel's Twitter thread summary.
Another of the arguments I've heard both for and against CDD-style programs is side-stepping difficult targeting questions--just let the community decide who needs help. Rema Hanna and Ben Olken have a new paper on targeting, specifically on the relative welfare gains of universal basic income versus means-testing. They find means-testing wins using data from Indonesia and Peru, despite some issues; and they discuss adding community-targeting to means-testing.
Meanwhile, here's a piece by Josh Blumenstock that tries to deflate some of the excitement around using high-tech means of targeting, like satellite maps, social networks and call records. In summary, data without theory is useless, and so is data + theory without anthro/soc (or at least anthro/soc informed economics).

5. Methods and Evidence-Based Policy : That's a good lead-in to methods. Let's start with some quick hits. Brian Wansink, whose scandals I've covered in this item in the past, has resigned from Cornell. Noah Smith has a column on the replication crisis in Economics though it's about a very different kind of replication crisis than the one Wansink faced. Now that I type that, it occurs to me that it was in fact easy to replicate Wansink--just making up numbers that matched his would apparently be both a literal and conceptual replication. And here's a new paper on improving diff-in-diff methods to account for effects changing over time.
The idea of evidence-based policy sort of requires that there is evidence of something working. But y'know, nothing does. Encouraging women to get mammograms? Those most likely to respond are those least likely to need one, and because of false positives, the net welfare effect is negative. The health effect of better trade and transport links in the United States in the early 19th century? So negative that it made it people shorter (I mean, as a whole, not specific people). What else? Oh, those gains we all know of like improved water and sanitation, and food safety standards during the early 20th effect on total or infant mortality. That last one reminds me of an old LantRant about assessing whether development interventions matter based on whether they were important in the history (or present) of developed countries. Shall we scratch food safety and urban sanitation off that list? 
I suppose we can hope that these results won't replicate, like the examples that Noah Smith cites. But on the other hand, it's already too late. Once a result is published, no one (or at least no doctors) changes their mind, or changes their behavior.
Wow, this has been bleak. So here's one hopeful note on something that did work. Women's suffrage caused large gains (via demand for more spending on education) in educational attainment of poorer/disadvantaged children, and long-term earnings gains. So go out this weekend and help a woman register to vote (and then go back and make sure she has everything she needs to follow through and vote on election day).

 I would have had the Anatomy of an AI visualization here, but it's way too big, and  Justin Sandefur   created this really great example of how simple choices in the visual  representation of data can radically change the way we interpret it. The  two charts are of the same data, on the left from the World Bank and on  the right from The Economist. Via  Justin Sandefur .

I would have had the Anatomy of an AI visualization here, but it's way too big, and Justin Sandefur created this really great example of how simple choices in the visual representation of data can radically change the way we interpret it. The two charts are of the same data, on the left from the World Bank and on the right from The Economist. Via Justin Sandefur.

Week of September 10, 2018

The ThreeV Edition

Editor's Note: I found it very hard to even start writing this week's faiV because there's so much stuff. Yesterday alone I feel like I saw enough things to do two entire editions of the faiV, and it was the 2nd day of the week like that. I don't want to degenerate into list of "here are some more interesting links that I didn't have time for" so I'm just going to start writing and see where I get.--Tim Ogden

1. US Inequality: I talk a lot about congruence between the US and developing countries, but usually in the context of sharing lessons in the financial inclusion domain. But there are other domains where there is a lot more commonality. For instance radically corrupt policing. While this paper has been circulating for awhile, it's worth revisiting over and over again, and it's acceptance for publication is a convenient excuse. US cities and towns, when faced with budget deficits, ramp up arrests and fines of and property seizures from black and brown citizens but not white ones. Here's the easy to share Twitter thread version so you can send it to your not so economics-paper-inclined friends. To be clear, it's only second-order racism. The reason seems to be it's much easier to get away with stealing from people of color because of systemic racism.
Systemic racism like the premium that blacks pay for apartments, a premium that rises with the fraction white a neighborhood is. Lucky that the place you live has little effect on the quality of your education or your future job market opportunities. Oh, wait
The US is still deeply segregated (cool visualization klaxon) and there has been virtually no progress on that front in decades. Part of the reason is exclusionary zoning which puts a floor on home prices well above the reach of black and brown households. Apparently though, the Department of Housing and Urban Development is planning on tying future grants to cities to cutting zoning restrictions on multi-family dwellings. That would be a rare bright light in the current administration's deregulation push.
2. Cash: I haven't done anything on cash transfers, universal, conditional or otherwise in quite a while. This week we got a flood. I'm going to try to cover the landscape first, before some summary thoughts. Blattman, Fiala and Martinez have an update on their cash grants to youth clubs in Uganda paper--the one that found large gains after four years. After nine years, the controls have caught up. Chris used the analogy of "a tightly coiled spring" as an explanation for why the gains in the first four years were so surprisingly large--and that analogy may still hold. No matter how high the spring jumps, it eventually returns to baseline. Here's Chris's Twitter thread on how his thinking has changed. Here's a Vox article by Dylan Matthews. At this point, if you pay any attention at all, you should expect Berk Ozler to have some thoughts. He does.
Meanwhile, IPA pulled off the greatest unintentional (I'm told by reliable sources--hi Jeff!) mass market advertisement for the release of a development economics working paper in history when the NYTimes Fixes column ran a long-delayed piece by Marc Gunther on using cash as a benchmark for development programs on Tuesday. The paper was being released Thursday. That paper, a comparison of a Catholic Relief Services program to a cost-equivalent cash grant, and a much larger cash grant, by McIntosh and Zeitlin is here. The IPA brief is here. The Vox article is here. And Berk's thoughts (about the Vox coverage really) are here. And Tavneet Suri's. But I'll give Craig and Andrew the last word--here's their post on Development Impact on how they think about the study and the issues.
Before moving on to some thoughts of my own, here's a video clip of Felix Salmon highjacking an appearance on a Fox News show to advocate Universal Basic Income.
There's so much here to talk about--9 year follow-ups in Northern Uganda! A highly regarded charity willing to compare itself to cash! A cost-to-donor comparison between two programs! Nothing works over the long term!--but in the interest of this actually getting out today, I'm going to limit myself to only talking about one aspect of the benchmarking issues.
Marc Gunther, in his NYT piece, does a pretty great job of highlighting the difference in measuring "money that gets to the poor" from traditional charity overhead discussions, where the dividing line between program and overhead costs is utterly arbitrary and no one ever talks about how much of program costs are reaching recipients. One of the most fascinating things to watch as cash benchmarking makes waves is how it affects the overhead debate and how charities market themselves. Particularly because while there is by no means a consensus on cash, the general direction of this work is toward minimal programs (see an example in Berk's tweets). The overwhelming majority of the discussion on why considering overhead costs is wrong is that those costs are necessary to run programs well. It's not clear how to adjust that argument when the counterfactual is, "what if you didn't really run a program?" Of course, a huge chunk of those costs, whether they are classified as program costs or overhead costs are imposed by the donors (be they individuals or official aid agencies), and that's another variable in how these discussions will change.
3. Social Investing and Philanthropy: But they may not change much, because branding is everything in charity. Regardless of demographic characteristics, 50% of people in a survey asked what charity they would support if they could support only one, picked one of the largest charities.
On the other hand, giving by small and medium donors--the kind presumably most likely to go with the branding flow and pick a charity by branding--is declining. I'll quickly note that this article claims that overall giving is way up, in inflation adjusted dollars. I haven't had time to dig into that, but when I've done similar calculations before, I've found that giving has been flat for the last 20 years or so.
You may have heard that Jeff Bezos announced that he'll be giving $2 billion to organizations fighting homelessness (perhaps he should consider cash [I was going to link to a study about emergency cash grants to people that helped prevent eviction but I can't find it]? or perhaps not.) and apparently starting the world's largest Montessori franchise to serve low-income kids. There are plenty of takes out there. Here's Rob Reich interrogating. Here's Ben Soskis on how the plan doesn't fit any of the current stereotypes of ultra-wealthy/tech philanthropy.

4. and 5. The First Ever Split faiV?: Apparently I only got to 3.

Long time readers of the faiV may remember that my son Nathanael has a rare disease, the most notable symptom of which is loss of vision. He crossed the threshold of legal blindness this year. Nathanael and I raise funds for research--there's more known than ever before about this syndrome, but we're still a long way from treatments, much less cures--by riding 36 miles from our home to the Philadelphia Museum of Art, and running up the famous Rocky steps. We call it the Rocky Ride. If you'd like to contribute, in lieu of a subscription fee for the faiV, we would deeply appreciate it. And for any readers in the New York to DC corridor who would like to ride along, join us!

Week of September 3, 2018

Editor's Note: In case you needed a break from using game theory and textual analysis to guess at the author of the anonymous NYT Op-Ed or debate whether it represents a coup, here's the faiV. If you like the faiV, by the way, please do share it and encourage others to subscribe.--An Anonymous Senior Official at the Financial Access Initiative

1. Social Investing: Calling out the bland and meaningless rhetoric in social and impact investing almost seems unsporting--it's just too easy but it's Friday after a long week so I'm going to do it anway. Take this piece from John Elkington, who coined the term "triple bottom line," (Please), saying it's time to "rethink" or "recall" or "give up on" it (all his phrases). Why? Because the term has been misunderstood and misappropriated for uses well short of what he intended. Instead he thinks we need "a triple helix for value creation, a genetic code for tomorrow’s capitalism." But apparently not a clear definition or a recognition of trade-offs under scarcity.
Then there's this piece from the Wall Street Journal on the meaninglessness of words like "ethical", "impact" and "sustainable" in the mutual fund world. It's a treasure for the sheer density of laugh out loud snippets. For instance, Deutsche Bank switched out the word "dynamic" in the title of a family of funds and replaced it with "sustainable." Vanguard's bar for a company being "socially responsible" is literally not enslaving people or manufacturing weapons banned by international treaty. But my favorite is probably this quote about buyers of "ESG" funds: "We do hear from investors that have bought funds that they never realized did something." (Protip for non-WSJ subscribers who may not otherwise take the trouble to read this gem, search the title in an incognito window, click on the result link and close the invitation to subscribe and you'll be able to read it.) 

2. Household Finance, Part I, Theory: Not realizing that funds did something is a good transition to Matt Levine's musings about the relationship between financial services providers and customers (scroll down to "How much should an FX trade cost?"). Matt is writing specifically about investment and corporate banking but the theory fully applies. In short, 'smart' large customers treat banks like commodity providers and ruthlessly push margins toward zero. Banks have to go along because these are large customers and economies of scale matter in financial services. So the banks make up those margins by charging 'loyal' customers much more than 'smart' customers. Which is, shall we say, not what 'loyal' customers think the banks should be doing and they rightly get very angry when they find out. So loyal customers should be more like smart customers and treat banks like commodity providers. The application of faiV interest is the Catch-22 for lower-income households: they only very rarely have the time and choice to treat financial services like a commodity, so they are almost inevitably left subsidizing wealthier customers. And even banks with good intentions struggle to do otherwise, because if you don't have the large customers, you can't drive costs down through scale.
In other theory news, one of the common motivating theories on helping low-income households is helping them plan. Planning is hard when facing scarcity. There's been encouraging evidence of the value of specific planning for getting people to follow through on their intentions. Here's a new paper testing the value of planning for one of the only two intention-action gaps that can rival the intention-action gap on savings: exercise (the other being dieting). It finds that careful detailed planning of an exercise routine has a precisely zero effect on follow-through.
Finally, here's a piece that at face value seems to be talking about the empirical transition away from cash (in the US). But look closely and it's really musing on the theory about the costs of cashlessness for lower-income households, something that deserves a lot more attention, on theory and empirics, than we seem to be getting right now. And it features Lisa Servon and Bill Maurer so you should definitely click.      

3. Household Finance, Part II, Practicum: I don't remember how I stumbled across this paper about how US households respond to high upfront medical costs. It's not new, but it was new to me, though I suppose you can also say it's very old to anyone who has paid attention to healthcare consumption in low-income countries. The authors find a large decrease in spending, but no evidence that households are price shopping or making any differentiation between high-value and low-value services. Something to think about--how much of what we call "shocks" for low-income households are actually "spikes" that they didn't have the tools and bandwidth to manage (liquidity) for?
A great tool for managing liquidity is a bank account--something a lot of people still don't have. Leora Klapper has a piece trying to draw people's attention back to the core value of bank accounts, something that feels like it's fallen somewhat out of favor.
You can't get any more practical on Household Finance than reading Stuart Rutherford. Here's a new piece he has based on the Hrishipara Diaries on how the poor borrow. Some of the numbers are staggering, especially for those of us old enough to remember the idea that poor households had no access to credit: Over the course of 8 months, 43 households took out 201 discrete loans, making an average of 75 loan repayments each. The value of their repayments was equal to 83% of their income. Clearly a huge part of what they are doing is managing liquidity in the absence of bank accounts.
There's some justified criticism of the practices of MFIs in Stuart's piece--pushing unwanted loans, overlending, etc.--but one thing the microfinance industry has not done much of, despite the various crises caused by such behavior at scale, is lose depositors money. Not so in the equivalent of an MFI crisis in China. Over the last few years $200 billion of cash from small investors has flowed into P2P lenders. There have been stories here and there about the negative consequences for borrowers from those lenders. But now the small investors are feeling the pain--a huge number of the P2P firms have shut down in the face of tighter controls, and the investors have no recourse (unless you count being shipped to a detention center for protesting the lack of government action to protect the small investors). Of particular note is the explanation of why so many small investors put money into these P2P schemes--banks offered no alternatives for investment other than negative real interest rate savings accounts; and the government has no regime for investor protections. I expect we'll see more stories like this, though obviously at much smaller scale, coming from other countries with a growing middle class--something perhaps consumer protection advocates should be keeping their eye on.

4. Methods and Evidence-Based Policy : There are other ways to be a smart consumer of social science research than faithfully reading the faiV. Eva Vivalt has some tips on that at HBR. It's good stuff though I'm a bit skeptical how much the audience at HBR is interested in accurate research claims. In any case it's a bold move from HBR to provide a guide to why you shouldn't believe the majority of management literature.
For an audience that has far more professional interest in arguing about accurate research claims (not how carefully I phrased that) David McKenzie, Lant Pritchett, Chris Blattman and Karthik Muralidharan (where are the women?) debate whether experimental studies have displaced descriptive studies in economics journals on the Development Impact blog.
Here's a really interesting new paper from Guiteras, Levinsohn and Mobarak on an experiment with subsidies for latrine construction--appearing here because the most interesting thing about it is the work to establish policy relevant answers by combining a structural model with experimental data: to maximize your budget, who should you give subsidies to, and is it better to give a small subsidy to a lot of people or a large subsidy to a few people.
And if I'm not linking to a new paper from Athey and Imbens on (diff-in-diff) methods, or an (88 page!) interview with Chuck Manski then what am I even doing with this category?

5. US Inequality: Lest you think that regulatory malfeasance is an emerging financial system issue, and China is just catching up, here's a few stories about Mick Mulvaney's willfull decision to encourage the destruction of the financial lives of the better part of a generation. The CFPB's student loan ombudsman's resignation letter. And why it matters so much. And a story about the consequences.
Here's some new work on the experience of low-income parents and children in dealing with the welfare system and social workers. And here's a very thoughtful piece on the inversion of American poverty from something hidden to something under constant surveillance, complete with lots of user fees for being poor. Call it the anti-welfare system.

  Two Twitter-savvy academics ( @shrewshrew  and  @sbarolo ) have created a handy guide to the men who reply to women calling out systemic discrimination and harassment in the sciences. To see the detailed explanations of the nine types, follow  #9replyguys .   

Two Twitter-savvy academics (@shrewshrew and @sbarolo) have created a handy guide to the men who reply to women calling out systemic discrimination and harassment in the sciences. To see the detailed explanations of the nine types, follow #9replyguys.   

Week of August 27, 2018

Editor's Note: I'm still playing catch-up this week, and perhaps you are too. It's the "end of summer" in the Northern Hemisphere after all, that week we all get to, in a panic, confront all those things we had put off to the Fall AND all those things we thought we would get done during the "less busy" summer. Catching up notwithstanding, this is a somewhat truncated edition of the faiV, as I head into a weekend of labor related to the above.--Tim Ogden

1. Small Dollar Financial Services: I've been doing a lot of reading the last few weeks about the history of consumer banking (Hi Julia!), and by history I mean going back to the Middle Ages and before. From that reading, it's clear that small dollar lending has always been the bane of the banking system--and there is nothing new under the sun (thanks, David Roodman!). Which certainly colors my view when I see stories about overhauling the overdraft system in the US. Not that I don't think there is room for significant improvement. Overdraft is perhaps the worst possible way to manage small dollar lending--by pretending it's something else while still charging exorbitant fees that would make many microfinance institutions blush. There are plenty of ideas, like this story on a non-profit payday alternative lender which charges roughly half the fees of its competitors. The intent of the story seems to be offering this as a real alternative, but the details keep getting in the way. The nonprofit really is nonprofit in the literal sense of the word, not even being able to pay its CEO a $60,000 per year salary regularly, and facing "four near-death experiences" in 9 years--that sounds about par for the course in small dollar lending from the historical record.    

2. Algorithmic Overlords: Yuval Noah Hariri has a new piece in the Atlantic, the title of which is just candy-coated confirmation bias for me, so how could I resist putting it in the faiV: "Why Technology Favors Tyranny". I'm feeling validated that I started reading Asimov's I, Robot to my kids this week. But back to Hariri, two thoughts: a) borrowing a category from Tyler Cowen, this is a very interesting sentence: "At least in chess, creativity is already considered to be the trademark of computers rather than humans!", and b) the picture Hariri paints bears a remarkable resemblance to the Allende plan in Chile specifically, and to almost every example in Seeing Like A State, it's just that the technology is finally catching up to the political ideology. The big question, of course, is whether the technology will yield any better results.
One more item I couldn't resist is this piece about blockchain and supposed complacency toward technological innovation in development. The most important thing to know is that the two examples given of the benefits of a decentralized ledger (e.g. blockchain) are two of the most centralized and highly policed ledgers in existence: SWIFT and Visa payment networks. It continues with a few potshots at small dollar fintech lenders and then some ersatz blockchain evangelism about power to the people. Let's hope the author reads many of the pieces linked above, but especially Hariri's. And just because, here's a story about the very first blockchain hiding in an ad in the New York Times in 1995.

3. Methods and Evidence: You've likely seen the uproar over ridiculous nutrition studies (on alcohol and dairy--clearly the message is to only drink dairy-based cocktails this weekend) this week. I saw someone on Twitter commenting on how the credibility revolution seems to have passed right by nutritional epidemiology, probably because it would mean that no studies ever got published.
Part of the credibility revolution is the emphasis on open data and replication. Here's a report on the latest large scale replication effort (of 21 social science studies published in Nature and Science). Thirteen of the 21 were generally replicated, but the effect size was roughly half of that originally reported. Of course, this raises the question of what "successful replication" means again. Here's a Twitter thread from Stuart Buck of the Laura and John Arnold Foundation on the difficult distinction between failed replication being a part of the scientific learning process and a failed replication as part of identifying shady research and publishing practices.  
Here's a troubling story about unreliable administrative data. The US Department of Education asked school districts to start reporting "school-related shooting" incidents. There were 240 reported. But follow-up reporting was only able to verify 11 of those incidents and 161 were explicitly denied. Don't let the emotional subject of school shootings distract entirely from the reminder that there are always problems with data gathered like this, no matter what the subject. And pause for a moment to remember that it is data like this that Hariri fears will be used to automate administrative regimes.
The point of these studies, whether ridiculous nutritional ones, or administrative-data based ones, is most often to influence behavior and policy. Here's Jean Dreze on the challenge of evidence-based policy, and the need for economists "to be cautious and modest when it comes to giving policy advice, let alone getting actively involved in 'policy design.'"

4. Global Poverty: On the topic of evidence-informed policy choices, one of the most hotly debated questions in the field right now is what is happening with global poverty. At face value it seems like this is just a question of going to look at the data. But as with so many other areas, different people see very different things in the data (even if it is accurate). It all depends on how you measure poverty and whether you care more about absolute or relative numbers. There was a glimmer of detente in this debate this week as Jason Hickel and Charles Kenny published "12 Things We Can Agree On About Global Poverty." But that only lasted a day before Martin Ravallion chimed in with this Twitter thread, which begins, "it seems they only agree on the obvious, and ignore some less obvious things that really matter."
If you're looking for another way into these debates and the various issues that arrive, here's a Washington Post story about Nigeria displacing India as home to the largest number of people in absolute poverty. Maybe

5. Social Investment and Philanthropy: I highlighted a couple reviews of Anand Giridharadas' new book Winners Take All  last week. Here's another, from Ben Soskis, which I include because it's the best one yet. The theme of Giridharadas' book (and Rob Reich's new book as well) is being skeptical of the power of large-scale philanthropy or social investment. Here's a thread from Chris Cardona, of the Ford Foundation, on the multitudes contained in the word philanthropy, which is certainly important to take into account when considering the critiques. But the question of who is a philanthropist, who is abusing their power, and the trade-offs of institutionalization of philanthropy are always messy. Here's a story about a viral GoFundMe campaign to help a homeless man in Philly who gave his last $20 to rescue a stranded motorist. If you have Calvinist sympathies like me, you'll probably guess what happened next. Finally, here's Ed Dolan of the Niskanen Center on whether we need the charitable deduction.

  Returning to the topic of methods and evidence-based policy, two images popped up in my Twitter thread this week that I couldn't get out of my head. One is a snippet from a peer reviewer of the social science replication paper highlight above, explaining why it was not published in Nature or Science even though it was replications of papers from those journals. And second is a picture taken from a talk John List was giving this week about his career. You have to ask, does science advance via replication or via funerals? Via  Brian Nosek  and  Ben Grodeck  respectively.

Returning to the topic of methods and evidence-based policy, two images popped up in my Twitter thread this week that I couldn't get out of my head. One is a snippet from a peer reviewer of the social science replication paper highlight above, explaining why it was not published in Nature or Science even though it was replications of papers from those journals. And second is a picture taken from a talk John List was giving this week about his career. You have to ask, does science advance via replication or via funerals? Via Brian Nosek and Ben Grodeck respectively.

Week of August 20, 2018

Editor's Note: I'm back on faiV duty. Many thanks to Alexander Berger, Jeffrey Bloem, John Thompson, and Rebecca Rouse for filling in. If you would be interested in being a guest editor of the faiV at some point, feel free to reach out.
This week, I'm casting my eye back over the many things I've been reading over the last few months. Don't worry, I'm not going to try to cover all of those in one faiV, though there will be, perhaps a bit less commentary than usual.--Tim Ogden

1. Financial Inclusion and Digital Finance: The last time I was writing the faiV, various takes on the Global Findex data were being featured prominently. So it only seems fitting to come back to that as I return. Greta Bull of CGAP has a two-part blog, part I and part II, reacting to Beth Rhyne's and Sonja Kelly's take (may I take a moment to smile at the inclusion that sentence reveals?) on the Hype vs. Reality of inclusion. Bull argues that the Findex data shows greater progress on inclusion than Rhyne and Kelly see. For what it's worth I lean to toward Bull in this debate. It would be surprising, given the incredibly rapid progress in access, if the access-use gap wasn't growing, especially in countries with relatively low levels or recent gains in access as network effects won't kick in for awhile.  
There is another concern beyond the use/access gap--does use of the available accounts make people better off. Here's a new paper from Kast and Pomeranz showing that providing free savings accounts in Chile led to lower debt burdens (and some additional evidence on rotten kin). On the other hand here's an open letter from Anup Signh to Kenyan Central Bank governor Patrick Njoroge making the case for urgent regulatory action on digital credit to protect borrowers. On the third hand (hat tip to Brad DeLong) mobile money seems to have saved lives (note no counterfactuals there, but it seems plausible) during Ebola outbreaks in Liberia and Sierra Leone during Ebola outbreaks by ensuring that response workers got paid.  
Of course, benefit depends not just on use, but on who is using the services. Microsave found that 80% of the "addressable LMI market" in India was not being served by fintechs, and, with CIIE's Bharat Inclusion Initiative, has launched a "Financial Inclusion Lab" to help Indian fintech's address that market.   

2. Our Algorithmic Overlords: If you've gotten out of the habit of reading the faiV, what better way to grab your attention back than sexbots! Here's Marina Adshade, an economist at UBC, with a thoroughly economic argument about how sexbots could make marriage better (by changing how it works and what it does). And here's Gabriel Rossman, a sociologist at UCLA, making the counterargument. Apparently he reads Justin Fox.
On a much more prosaic, and more urgent, front, there have been a raft of stories on the increasingly alarming situation in Northwest China where the tech-driven panopticon seems to be racing ahead in the service of persecution of Muslims and ethnic minorities. Here is the NYTimes "inside China's Dystopian Dreams". Here's Reuters on the "surveillance state spread[ing] quietly." MIT Technology Review asks, "who needs democracy when you have data?" And here's Foreign Affairs on the "coming competition between digital authoritarianism and liberal democracy." If I have a bone to pick it's the lack of attention to the possibility of "authoritarian democracy" that comes along with a surveillance state and AI overlords.

3. Global Development: If sexbots don't get your attention, what about hyperselectivity of migrants? I think, quite a while ago, I linked to Hicks, et al. on the systematic differences between those who migrate from rural to urban Kenya, and those who stay on the farm, finding that urban productivity is a factor of the traits of the workers who migrate. But if not, now they are in VoxDev with a great summary of the work. It's particularly interesting to read in conjunction with this new paper on the hyper-selectivity of migrants to the US--the fact that migrants to the US are both more likely to have a college degree than their compatriots, and than the US native-born population. That hyper-selectivity plays a role in second generation outcomes, but has mixed results for economic mobility of Asian, African and Latino migrants.
What to do for those who don't migrate? I really like this new paper from Beaman et al. on using Network Theory-Based targeting to determine how to deliver agricultural training. Why? Well, because I find technology adoption a particularly interesting set of questions, but mostly because they "identify methods to realize these gains at low cost to policymakers."

4. Philanthropy: There's an old saw that two data points are anecdotes, but three are a trend. It's mostly applied to journalism, but I originally heard it at my first job doing market research on the IT industry. Regardless of it's source, it definitely indicates there is a trend to looking much harder and more skeptically extreme wealth-driven philanthropy (or social investment, or impact investment, etc.). Anand Giridharadas expands a talk he gave at Aspen into a full length book called Winners Take All: The Elite Charade of Changing the World. Rob Reich, a political scientist at Stanford (who I have the temerity to call friend), has Just Giving: Why Philanthropy is Failing Democracy and How It Can Do Better, and David Callahan, founder of Inside Philanthropy, has The Givers: Wealth, Power, and Philanthropy in a New Gilded Age. None of them sound much like Philanthrocapitalism or Giving. I'm excited by all three, and I think you should buy and read them, but let's be realistic. You're much more likely to read this review of the three from Elizabeth Kolbert. The most interesting review--from a meta-perspective--though is this review in SSIR ofWinners Take All from Mark Kramer, clearly one of the targets of Giridharadas's book. Well done SSIR. 

5. US Inequality: Continuing on that theme, it's not just the billionaire philanthropists who are undermining American society and democracy, according to Matthew Stewart. If you're a US-based reader of this newsletter you are likely part of the problem. If you prefer the academic version of an argument like this, here's a new paper from Schneider, Hastings and LaBriola on income inequality and the growing, and amplifying, gap in parental investments in children. They also read Justin Fox (and enough with the cryptic link, that's a piece about sociologists engaging with the public more like economists, including making their papers open access.) Or if you prefer the academic version in summary form, here's Schneider's tweet thread. And since it's back-to-school time, here's the most depressing back-to-school news I can imagine: School districts in my area are hiring private detectives to follow kids and make sure they aren't crossing district lines in order to go to a good school. No arguing with Stewart's thesis allowed while this is how wealthy school districts are spending their money.

 It's not just the US that has concerns about the influence of extreme wealth and inequality. Here's a 3 minute book preview of James Crabtree's book,  The Billionaire Raj .

It's not just the US that has concerns about the influence of extreme wealth and inequality. Here's a 3 minute book preview of James Crabtree's book, The Billionaire Raj.

Week of August 6, 2018

Editor's Note: Two more weeks off before I resume faiV duties. This week's guest editor is Alexander Berger, managing director of the Open Philanthropy Project, which "identifies outstanding giving opportunities, makes grants, follows the results, and publishes our findings." And he's a long-time reader and evangelist for the faiV, so you know he's a great guy.-Tim Ogden

1. Universal Basic Income (unpopular locale edition): In 2010, to replace massive energy and food subsidies, the Iranian government apparently implemented a cash transfer program that began covering over 95% of the population (75 million people) before targeting seems to have lowered coverage to less than 35 million. The story in two sentences: “In 2011, the first full year of the program, transfers amounted to 6.5% of the GDP and about 29% of the median household income. After three years of inflation, the amount transferred per person is down to less than 3% of GDP per capita.” New research finds minimal effects on labor supply or hours worked, though the short time horizon for the large transfers makes it hard to generalize. I suspect that the short time horizon is only part of the reason this policy hasn’t gotten more attention.    

2. Our AI Overlords: Another AI benchmark falls. In a much-publicized practice event Sunday, an AI system developed by OpenAI beat a team of former pros at a mutliplayer video game called Dota (they had a livestream and posted a video that is totally inscrutable to me). This was expected given the rapidly-growing computation devoted to experiments like this, though it looks like the training required by this model (190 “petaflop/s-days,” whatever those are) was less than would be expected from extrapolating past large experiments. (The costs for those experiments are also growing by an order of magnitude every year and a half, which seems… unsustainable.) Apparently OpenAI are planning a Dota match against current pros later this month, so expect to hear more about this.

3. Cryptocurrency (or Weird Household Finance): Apparently “proxies for investor attention strongly forecast cryptocurrency returns,” which seems… a little obvious? And Matt Levine discovers a subculture of people who intentionally participate in pump and dump schemes in marginal cryptocurrencies as a form of gambling, which raises the question - what do the other people investing in marginal cryptocurrencies think they are doing?

4. Unexpected Results, Incarceration Edition: In Colombia, having their parents incarcerated *increases* educational attainment in kids. In Ohio, having a parent or sibling incarcerated reduces high school graduation rates, along with the probability of both childhood and adult incarceration. In Norway, being sent to prison reduces the probability that a younger brother will be charged with a crime by 32 percentage points. Basically none of these findings are what you’d expect just based on observational data. As usual it’s hard to say what these findings add up to, but there are enough papers using this approach now that it might be time to start asking what we can learn from the whole lot. A question for my colleague David Roodman.

5. Public and Private Markets: On the private market side, Matt Levine had fun this week with Elon Musk’s proposal (threat? joke?) to take Tesla private, perhaps vindicating his view that private markets are the new public markets. On the public market side, this blog post by Jesse Livermore changed how I thought about the equity premium, arguing that it had been formerly justified by the riskiness of individual stocks and the difficulty of indexing and that the low cost and rising share of passive indexing today can help explain (and rationalize) rising valuations and lower expected returns going forward.

  In another instance of news from places we usually don't pay attention to, Greece is going through something that, in today's style, should probably be called The Meg Depression. Via  Adam Tooze . Source: IMF, and  this blog post .

In another instance of news from places we usually don't pay attention to, Greece is going through something that, in today's style, should probably be called The Meg Depression. Via Adam Tooze. Source: IMF, and this blog post.

The First Week of August, 2018

US Policy Edition

Editor's Note: The faiV hiatus continues. This week's edition is edited by John Thompson, Chief Program Officer at the Center for Financial Services Innovation. Next week, we'll have one more guest editor before I climb back in the saddle.--Tim Ogden

1. FinTech Charters: Just as the industry takes off for summer vacation, the US Treasury Department released its long-awaited fintech report and the OCC issued a call for fintech charter submissions. I’ve spent the past week sorting through scores of analyses and reactions. Here's American Banker on takeaways from the Treasury report and from the OCC's announcement. What does this mean for all things financial inclusion and innovation? Well, it certainly opens the door for many providers to expand their reach and their potential impact. It will likely be an expensive and involved path, but one that could ultimately give some fintechs much needed lift. However, this is still early in the game. I would expect to see lawsuits and challenges from incumbents now that the charter program is official.     

2. Financial Stress and the Lunar Cycle: For many consumers, the end of the month represents constant instability as accounts are reduced to zero and bills become due.  While income volatility is the umbrella issue, the specific actions that trigger this instability on a cyclical basis live both in our minds and in the products we use.  One of our Entreprenuers-in-Residence, Corey Stone, tackles some big thinking on the topic in his series End of the Month. Drop in regularly to learn more about how human behavior can lead to suboptimal decision making, why long accepted product standards lead to this paucity of funds at the end of the month, and other insights into our monthly budgeting woes.

3. The Gig Economy: The difference between 4% and 40% is pretty significant. And the fact that the US Government doesn’t know how big the gig economy is, in short, a problem. To be fair, it’s not all the government’s fault. The variance in numbers can be attributed to a wide range of perceptions about what constitutes gig employment: full-time, part-time, etc. But no matter what the measurement, the impact is real. Gig employees enjoy the benefits of self-determination, but can often miss out on many of the benefits of traditional employment like insurance, savings vehicles, and more. The result can be regular cash flow gaps and challenging financial tradeoffs. To better design products and create guardrails, it’s imperative that we all find a better – more credible – way to measure this new workforce reality.

4. Fintech Flyovers: Who knew that Dwolla was launching a Midwestern Movement way back in 2010 when it opened its doors in Des Moines. Since then, the Midwest has caught more than its fair share of attention for entrepreneurs, incubators and investors. Drawn by a low cost of living and a relaxed measure of success, companies can stretch a dollar further and pursue a longer term growth plan. Of course, it has its challenges with recruitment – but quality of life seems to be winning out. I can personally attest to the lure as CFSI is headquartered in Chicago and I am a fintech founder from and long-time resident Kansas City. This Midwestern potential will only gain steam with the new OCC fintech charter. Mary Wisniewski tracks this and much more in her most recent piece from American Banker.

5. What We're Slacking About at CFSI: Spies: they are just like us. Who knew that financial health is an issue for international agents? Summer means vacation time, but are you among the millions of US workers who feel like a week isn’t enough to truly dial down the stress of the workplace? Try scheduling vacation bookends. Wearables have made a huge impact on measuring physical health (and giving us all an excuse to get up and walk around throughout the day without looking thoroughly out of place). We’re carefully watching the launch of the “Fitbit for Financial Health” to track similar outcomes.

Week of July 23, 2018

The In Bloem Edition

Editor's Note: My writing hiatus from the faiV continues. This week Jeff Bloem, a PhD student in the Applied Economics Department at the University of Minnesota, and faithful reader of the faiV, takes over. You can follow Jeff on Twitter and, yes, via his own blog. Be sure to check out his review of what sounds like a fascinating, must-read book.--Tim Ogden

1. Food Fights and Methods: First, over on the Economics That Really Matters blog, Paul Christian and Chris Barrett summarize their paper on US food aid and conflict. They call into question the results of an influential paper finding a causal link between US food aid and conflict. The authors follow up with a methodological note on the use of instrumental variables with panel data.
Next, the most recent issue of the American Journal of Agricultural Economics (AJAE) has a nice article, comment, and response. In the article Ore Koren finds that it is food abundance, rather than food scarcity, that causes conflict across Africa. Marshall Burke writes in a comment that the effect sizes are implausibly large and are at odds with previous research. Koren responds to these comments by offering three explanations for the "implausibly" large effect sizes.     

2. Randomistas are our new Algorithmic Overlords: At the development economics section of the NBER Summer Institute, Esther Duflo delivered a lecture entitled, "Machinistas meet Randomistas: Some useful ML tools for RCT researchers". Slides from the lecture are available here, and Dina Pomeranz was live Tweeting the lecture. The paper it was based on is here. On the surface it may seem like machine learning and RCTs are interested in different parts of empirical research--the former focused on prediction and the latter focused on causal identification. Duflo highlights a couple areas where using machine learning when analyzing an RCT can be beneficial.

3. Informal Insurance: In a recent article on VoxDev, Kaivan Munshi and Mark Rosenzweig summarize some of the insights from their 2016 paper on the impact of rural informal insurance networks on rural-urban migration in India. The authors first point out that the rural-urban migration rate is relatively low in India compared to other similar countries. The explanation for this is the presence of well-functioning rural informal insurance markets. In order for these informal markets to function well, however, mechanisms must exist to prevent households from reneging on their obligations to their network. A key way this plays out is in restrictions on mobility. This raises a question: What would happen if formal insurance were introduced? Munshi and Rosenzweig run policy simulations and find formal insurance arrangements may increase rural-urban migration. Relatedly, in a new AJAE paper, Kazushi Takahashi, Chris Barrett, and Munenobu Ikegami study how the introduction of formal index insurance affects informal risk-sharing arrangements in rural Ethiopia. They find little evidence of a crowding out of informal insurance from formal insurance products.

4. The Power of Hope: This has already been shared quite a bit, but if you haven't read Seema Jayachandran's summary in the New York Times of the literature on hope and aspirations… you should. The article briefly discusses three recent studies. First, a study in Kampala, Uganda examined the effects of students watching the movie "Queen of Katwe" on educational performance. Second, a study in Oaxaca, Mexico showed an inspirational documentary to women eligible for small business loans. Finally, a study in Kolkata, India designed a psychological training program for sex workers. In each of these studies, these treatments lead to measurable changes in internal characteristics--for example: self-esteem, aspirations, self-efficacy, optimism--and also concrete changes in educational attainment, enterprise revenues and profits, and personal savings.

5. Sanitation: NPR's Planet Money podcast has a nice story about work in Dakar, Senegal helping improve the market for septic tank cleaning. The podcast frames the work as breaking up a "poop cartel." This is a catchy way frame the story, but the truth is urban sanitation is a very important issue in many developing countries. In many places with rapid urbanization and sprawling city footprints, organizing and funding the provision of environmentally-friendly sanitation services is a vexing challenge. This work offers some important insight in how cities might boost sustainable improvements of their sanitation services. More information about this research is available here.


  From VoxEu, some data on something we all knew, but perhaps not this specifically and depressingly. Via  VoxEU .

From VoxEu, some data on something we all knew, but perhaps not this specifically and depressingly. Via VoxEU.

Week of July 16, 2018

A Very Rouse-ing Edition

Editor's Note: As mentioned in the last faiV, I'm taking some time away from weekly newsletter writing to work on some other writing projects. This week's edition is guest-edited by Rebecca Rouse, director of IPA's Financial Inclusion Program, which partners with researchers, FSPs and governments to design and test financial products and consumer protection policies.--Tim Ogden

1. Women's Empowerment: Our friends at JPAL released their long-anticipated Practical Guide to Measuring Women’s and Girls’ Empowerment in Impact Evaluations. It comes with a set of questionnaires and examples of non-survey tools that can be more effective at capturing the useful and reliable data. This new study from the U.S. Census Bureau is timely, showing that when a woman earns more than her husband they both tend to exaggerate the husband’s earnings and diminish the wife’s on their Census responses. Gender norms still shape survey responses, no matter where you are. Seems like a good time to revisit IPA’s discussions on mixed methods approaches to women’s empowerment measurement with Nicola Jones and with Sarah Baird from last year. Finally, the US House passed the Women’s Entrepreneurship and Economic Empowerment Act of 2018 this week. The bill seeks to improve USAID’s work on women’s access to finance, and is notable first because of its attention to some (not all) non-financial gender-norms constraints that impact women’s prosperity, and also because it calls for improvements to outcome measurement methods.  

2. Migration: The first ever Global Compact for Migration was approved by all 193 member states of the UN last week except for the United States (Hungary is now saying it won’t sign the final document), and one of its 23 high-level objectives is to “promote faster, safer and cheaper transfer of remittances and foster financial inclusion of migrants.” A lot of the language in here sounds like the same old story on remittances, and I am skeptical of the laser-sharp focus on reducing prices (it calls to eliminate remittance corridors with costs higher than 5% by 2030), promoting financial education, and investing in consumer product comparison tools that aren’t based on evidence. Dean Yang’s 2016 study on financial education for Filipino migrants failed to find any positive impact on financial product take-up or usage, for example.

3. Remittances: What about looking to the behavioral econ world to enhance the positive effects of remittances? Behavioral nudges that can leverage digital finance look promising – Harvard Business Review had a nice piece last month on Blumenstock, Callen, and Ghani’s test of mobile money defaults to save in Afghanistan. This experiment is exciting because it shows that, with the right tools, successful interventions from the developed world, like Thaler and Benartzi’s Save More Tomorrow, can achieve similar results in other contexts.  Linking remittance transfers to digital finance in the receiving country can create additional opportunities to enhance impact beyond savings, for example using data for credit scoring. Here’s an op-ed from Rafe Mazer and FSD Africa on the opportunities and risks surrounding data sharing models in emerging markets.

4. Nudges: Abraham, Filiz-Ozbay, Ozbay, and Turner have a new working paper on the impact of income-based student loan repayment plans on employment decisions in the United States. They find that limiting the repayment plan options that borrowers are offered can lead them to pursue riskier careers and thereby raise their expected incomes in the long run. By only offering income-based repayment plans, which protects them from defaults by linking payment amounts to earned income, students were unburdened from fears of regret and of making the wrong choice. And lastly, Bernheim and Taubinsky summarize the use of behavioral economics in public policy, including an entire section on policies that target personal saving. 

5. Mobile Money: Finally, from Kenya, some experimental evidence on the impact of mobile money on school enrollment in a new working paper by Billy Jack and James Habyarimana at Georgetown. Parents who received a mobile money savings wallet via M-PESA, regardless of whether it incorporated a commitment mechanism or not, increased savings by three to four times, and were 5-6 percentage points more likely to enroll their children in high school. It’s interesting that the commitment savings option wasn’t more or less impactful than just the offer of any mobile wallet, and you can read a new interview with the authors discussing the results on the IPA blog. 

Thanks for the chance to take over the faiV this week! - Rebecca

  From a new report by the Urban Institute: “By 2020, the federal government is projected to spend more on interest payments on the debt than on children." Source:  Urban Institute

From a new report by the Urban Institute: “By 2020, the federal government is projected to spend more on interest payments on the debt than on children." Source: Urban Institute

Week of June 18, 2018

The Do U Care Edition

1. Migration: If you don't get the "edition" reference, I think I envy you. But I care, and in the absence of other specific ways to oppose cruelty and barbarism, I'll spend some time here sharing some useful information about migration. Such as the fact that the US has become a "low-migration" country. I think this is as significant a change to the nature of the country as the closing of the frontier, especially since so many people don't seem to realize how much migration, whether within the US or to the US from other countries, has dropped.
On to that other crucial fact about migration: it's very very good for the people migrating and doesn't harm the people who are already there. Here's the newly officially published in AER paper by Clemens, Lewis and Postel studying the effect of the end of the Bracero program which led to 1/2 a million Mexican workers leaving the country, without any detectable benefits for native workers (employers simply invested in labor-replacing technology it appears). Here's a new NBER paper on the forced migration of Poles after World War II finding that migrants invested more in human capital for three generations. That's consistent with other work that shows long-term positive, sustained effects for people who move, even those who don't have full choice. Here's a story about how migrants fleeing the US to Canada are finding employment and thriving.
If you're interested in the big picture on global migration, the 2018 OECD International Migration Outlook is out.

2. Banking: I talk a lot about the overlaps between US and global financial inclusion issues--from household finance to consumer protection to business models to regulation. So I think both of these next two items are relevant well-beyond the countries they are focused on.
First, here's New America with a new report on how local and community banks systematically charge people-of-color more for their accounts (here's the OpEd version), which doesn't exactly encourage these historically excluded populations to join the banking mainstream. Oh, and the consumer protection regulatory system is being undermined in more ways than you might realize. Not only is there direct deregulation, but recently the Supreme Court ruled that the way the SEC carries out many of its "trials" for investment fraud are unconstitutional--and the CFPB is too. Here's Arjan Schutte writing about being fired from the CFPB's consumer advisory board which, y'know, at least he's not being unconstitutional now.
On the other hand, in India, the RBI is working to turn urban cooperative banks into "small finance banks." This piece explains a bit about the history of Indian urban cooperative banks and the regulatory issues involved--it's not all good. It's worth reading for anyone thinking about productive ways forward for more inclusive banking systems.

3. Digital Finance: In most of the countries where digital financial services have made inroads among poor households, agents are playing a big role. But those agents are often basically the same folks we see running microenterprises that we can't figure out how to improve. And that probably means that their growth is being limited by the quality of services offered and decisions made by those agents. Here's a paper from Acimovic, Parker, Drake and Balasubramanian who attempt to help mobile money agents in Tanzania (way to go including the country in the paper title guys!) improve their business practices. Specifically not be plagued so much by "stock-outs" that mean they can't serve customers either trying to deposit or withdraw cash ("stock" can be either mobile money or cash depending on the transaction). They find what I would term the "heavy paternalism" approach works best--showing up in person to train and then giving specific direction via text each day. It reminds me a lot of the "mind the change" paper of a few years ago, and the Kenyan enterpreneur mentor paper from last year. Overall it seems that an important dimension for improving microenterprise profitability is inventory management.
Another big piece of the digital financial services equation is designing services that are helpful to the customers you are trying to serve and that they actually want. That's a new report from ProsperityNow focused on low-income US consumers, but you already know that I think such things are globally relevant.

4. Methods etc.: Here's an idea for experiment design: don't substantially and repeatedly mislead people for decades about your experimental design. Forget everything you think you know about the Stanford Prison Experiment, a staple in pop culture and social psychology, because almost everything published about it is an inaccurate representation of what actually happened. Given the horrors happening around us, it's hard to get too riled up about this but it really is stunning reading as a famous researcher repeatedly denies specific accusations until evidence from the archives of the experiment force him to acknowledge what really happened. 
On a more positive note, here's a clever little interactive game to explain concepts of "network science" or more simply, how social connections influence perceptions and behavior, or more complicatedly, how to think in a bit more structured way about spillovers from treatments that have an informational component. 
And here's David Evans sharing a provocative statement from Karthik Muralidharan at the RISE Conference--paraphrased, when working on a large scale experiments run by governments you might be better off not doing a baseline survey--and various reactions, which lead to a very good discussion. 

5. Consumer Behavior/Social Enterprise: So this one makes most sense in light of what is coming after, but bear with me. What happens when you get parents involved in improving teaching practices in Ghanaian preschools? Bad, bad stuff. Well at least counterproductive stuff.
So keep that in mind as we move finally to an interesting experiment on how much influence customers can have on corporate behavior (via Ray Fisman). A key part of the social enterprise movement is the idea that just behavior will resonate with customers and lead to, if not higher sales, than at least loyal customers. But it turns out customers have a hard time remembering who the good and bad actors are when it comes time to make purchases. So while there may be some loyal customers out there, it's going to be hard to get the mass consumer to get on board with shifting corporate behavior via their spending. Which ultimately is a pretty good argument for Just Capital's approach of building an index that socially-conscious consumers of stocks at least can get what they want without having to remember any of the details. 

  I'm always a sucker for Twitter threads with interesting data, and twists and turns. This one is about the  curious case of rising opioid deaths in the US in states that did or did not expand Medicaid . 

I'm always a sucker for Twitter threads with interesting data, and twists and turns. This one is about the curious case of rising opioid deaths in the US in states that did or did not expand Medicaid

Week of June 11, 2018

1. Household Finance: If you'll bear with me I'm going to write about household finance mostly with links to pieces about corporate finance. Corporate finance matters a lot, and it deserves the attention and resources invested in it (Channeling Willie Sutton: why do you write papers about corporate finance? Because that's where the money is). After several hundred years of lots and lots of resources and attention we've pretty much got this thing licked right? Well, maybe not the biggest questions but at least the basic questions like accounting and financial reporting, right? Right?
Here's Warren Buffet complaining about Generally Accepted Accounting (GAAP) rules being applied to his company. And here's an argument from several business school professors that GAAP rules aren't meaningful given changes in the economy--with the enticing tidbit that in many companies having a CPA, in other words having deep familiarity with the rules of corporate finance and accounting, is a disqualification for a senior-level job in the finance department. And here's Buffet again, this time with Jamie Dimon, arguing that quarterly financial reporting is broken.
Lest you think that this is some emerging consensus, here's Felix Salmon arguing they are wrong. Here's Matt Levine arguing they're wrong. And here (via Justin Fox, which we'll return to later) is a whole book about GAAP rules being wrong for entirely different reasons
So all of this is interesting (OK, maybe not) but what does it have to do with household finance? We haven't even begun investing the kind of resources necessary to really understand household finance, but we act like we have all the important questions licked. Or at least that households should be able to, with a little financial literacy training perhaps, be able to get a grasp on their finances and make consistently sound decisions. The fact is, for the most part, we just don't know what we're talking about when we talk about household finance. Or loss aversion

2. Digital Finance: In another brief diversion to start off an item, an astute reader pointed out that the way I had been writing about Findex made it seem like the Findex team did not have it's own report on the findings. They do, so click on it.
One read of the both the Global Findex team's report and the CFI report highlighted last week is that the promise of digital finance is largely unfulfilled. But there's still a lot of excitement over the promise in places like Egypt apparently. I found this piece particularly remarkable because I stumbled on it right after reading through the Findex analyses, and all I could think was "I don't think that data means what you think it means." Oh, and the note that moving to digital finance would allow the government to closely inspect everyone's spending habits, wheeee!
There's a different sort of excitement over digital finance in Uganda apparently where the parliament has approved taxing mobile money and social media(?!?). Apparently there was some concern that such taxes would be regressive, but some MPs objected that people shouldn't be exempted from paying taxes just because they were poor. Clearly those people don't read CGD/Vox.
In other CGD news related to digital finance, here's a piece about using blockchain in development projects--or perhaps more on point, *not* using the blockchain for development projects. There's a terrific decision tree graphic in the piece that is worth the click on its own, even though I disagree substantially with one part of it.

3. Firms, Productivity and Labor: Earlier this week I attended two days of the Innovation Growth Lab conference put on by Nesta. A number of interesting papers and research proposals were presented--the session I found most interesting was on the global productivity slowdown. The conclusion I came away with--though this wasn't what any of the papers were about--is that the big policy problem is insufficient labor mobility. And by that I don't mean geographic mobility (though I do think more of that would be great) but more firm-to-firm labor mobility. 
But while I was sitting in the research meeting discussing a) whether its possible to boost productivity of small firms, and b) whether the adoption of Toyota Way principles could be an effective proxy for increasing experimentation in firms, this new paper from Tanzania popped up in my Twitter feed via David Evans. It's an experiment introducing Toyota-style problem-solving training for small garment firms--three years after training they find significantly higher profits (though no short-run gains). I can't imagine a paper designed to more efficiently challenge my priors--which are/were a) Toyota has developed an incredibly productive system for sustaining and improving performance, b) it is incredibly hard to improve performance of small businesses.
I mentioned returning to Justin Fox's piece earlier--the column is about how firms behave from a theoretical and empirical perspective, especially how well Friedman's perspective is holding up. It's definitely worth one of your precious Bloomberg-pay-wall-exception clicks (though you may want to open it in an incognito tab anyway). The column will make one more appearance before we're through.

4. Our Algorithmic Overlords: In the interests of time I'm going to hit you with several links and very little commentary. The NY Times Magazine has a feature on differing perspectives on the future of AI among the titans of Silicon Valley. I feel like some very close analog of this piece was done last year but I don't have an AI assistant handy to find it for me.
Here are two new NBER papers on the impact of AI and policy: from Jason Furman and Robert Seamans and from Ajay Agrawal, Josh Gans and Avi Goldfarb.
And two stories about surveillance--of crowds looking for violent behavior, and of Chinese school students looking for boredom.

5. Social Investing: Finally, this week a new Exchange Traded Fund focused on "just" corporations launched--it's a collaboration between hedge fund billionaire Paul Tudor Jones II and Goldman Sachs, exactly who you would expect to be arbiters of socially-positive corporate behavior (if only they could have had an actor portraying Milton Friedman at the launch event!). But the methodology for the index is actually quite interesting and the basis for the rankings are remarkably transparent. There are a number of interesting perspectives to read on it. Here's a positive take. A neutral one. And a skeptical one. (And that's why you want to save your Bloomberg clicks)

Here's the last return to that Justin Fox piece because he features one of the greatest faiV-style videos ever: the Stockholm School of Economics choir signing an original composition based on Friedman's view of firm's social responsibilities.

Week of June 4, 2018

1. Financial Inclusion: I have no idea what your priors are about financial inclusion, but I think it still matters a lot and you'll be seeing more about that from me in the faiV and elsewhere in coming months. The best way to update your priors on the state of financial inclusion is the Global Findex of course. I've been including things in drips and drabs, but Sonja Kelly and Beth Rhyne of CFI have now published their reasonably comprehensive look at the data, complete with lots of charts, available for everyone (and Sonja definitely deserves a vacation after all her work on this and the Gallup data).
CFI is certainly onboard with the theme of updating priors. The title of the report is "Financial Inclusion Hype vs. Reality" and the Introduction invites you to "Recalibrate." The big message is that despite growth in account ownership, there's no growth in usage and lots of troubling signs, like falling savings rates. You can feel the exasperation in the report, an exasperation that I generally share, given what seems to be a general fatigue around financial inclusion. These data don't in any way support the idea that it's time to move on from financial inclusion. But I'm less concerned than Sonja and Beth about the growing gap between access and usage. Consumer banking does have network effects--value of usage increases rapidly with the number of other users--but those effects take time. The population being served was never likely to be heavy users, which increases the time before network effects surface and become self-reinforcing. So it makes sense to me that as we get better at access, the gap between access and usage should grow for a while.
One place I'm not updating my priors based on this data is showcased in their Figure 6, illustrating that rapid growth in digital payments is not showing up in borrowing or savings. I've always been puzzled by the idea that making it easier for people to spend was going to boost savings. 
Given that the empirics in Findex aren't very encouraging on progress in financial inclusion, here's a new paper from Besley, Burchardi and Ghatak laying out the benefits of inclusion. The most interesting thing about it is how well it aligns with what we've been seeing on general equilibrium effects of microcredit--it raises wages for the average worker. That's bad for impact evaluations, but good for more people and a powerful reason to continue investing in inclusion.

2. US Inequality: Speaking of average workers, a big reason for this week's theme is the new BLS numbers on contingent work that set the US Economy commentariat aflame yesterday. The big story is that contingent work--which includes freelancers, gig workers, temps, etc.--has not increased since 2005, the last time it was measured (here's a 2 minute overview). That's pretty remarkable since none of the gig platforms we hear so much about today existed back then. But the numbers are hard to interpret. Ben Casselman has a good overview of the issues here, chief among them being that the BLS asks about "primary" job and counts as non-contingent any regular job regardless of how steady the hours are. So the "no growth" data is consistent with findings from the SHED that 30 percent of Americans now rely on contingent work to make ends meet and from JP Morgan Chase Institute that gig work accounts for about 30% of income for those that do participate.
The bottom line: whatever your priors were, you should probably hold them more weakly than before.
But if you were looking forward to actually updating your priors, here's something I found surprising: income inequality in the US stopped growing some time ago (though the conclusions in that piece beg the question, in the logic sense of that term). And here's a paper from late last year that finds that what can be reasonably thought of as "freelance" professionals--doctors, accountants, lawyers--are responsible for most of the growth in income inequality since 2000.

3. Our Digital Overlords: Another inspiration for this week's theme was this piece by David Leonhardt, reviewing Reinventing Capitalism in the Age of Big Data, a new book that considers the benefits of a data-rich markets for consumers, and the danger that data-rich markets lead to monopolies and less employment. But the thing that most caught my eye, in terms of updating priors, is a casual reference to the story of the Kerala fishermen benefiting from cell phones. That's a story that is very much in doubt, but seemingly few people have updated their priors (see also this). As a side note, if anyone knows of more current research on the story or an effort to sort through the claims (beyond what is in the comments on that piece), please let me know. But searching for that link on the Kerala story, I noticed several other stories on the ICTworks site about surprising failures of digital tools to improve market functioning. My eye was specifically drawn to a story I remember blogging about at least a decade ago: sharing market prices with African farmers via text messaging didn't work out nearly as well as it seemed it would.
My bottom line here is influenced by two studies about police bodycams that were released this week, one in Milwaukee and one in Spokane, which seem to have found opposite effects on a major outcome measure (the number of self-initiated stops police make) without having much other effects. That bottom line is I shouldn't make predictions about how technology will change behavior, or even have strong beliefs after reading a paper about such things.

4. Social Enterprise: If you didn't update your priors about double-bottom-lines based on the recently linked paper from Karlan, Osman and Zinman, here's a new paper from Gine, Mansuri and Shrestha that finds that performance pay in a "mission-oriented nonprofit" has complicated effects that certainly make it hard for managers to use that particular incentive. 
This interview from the authors of the new book Unicorns Unite (really that's the title of the book) may change your priors about the value of a book with unicorns in the title, but also about how the world looks from the perspective of a non-profit fundraising or a grant officer evaluating proposals. Even if you don't think that sounds interesting, you should click because it is interesting, especially if you scroll down past the opening questions.

5. Methods, etc.: Updating priors is important, but sometimes they shouldn't be updated because the prior was correct. But those situations are hard to determine because the publication process is biased against confirmations of earlier findings. There's a new journal that aims to change that: The Series of Unsurprising Results in Economics.
For those of you not in the coding side of modern social science research, you may have wondered why everyone was making such a big deal about GitHub's acquisition by Microsoft. Allow me (well Paul Ford actually) to explain.
Moving on to some service journalism here for the economics and econometrics set, here is the first in a series of posts by Sylvain Chabe-Ferrer on hating p-values, and the alternatives. Here is a library of statistical software plug-ins though it doesn't appear to be updated all that often.

   Aaron Klein is hoping that people will update their priors about "cashlessness" in the US , by pointing out that volumes of cash are still rising significantly year over year in the US. Read the replies of the Twitter thread, they are useful for figuring out how to update your priors. Source:  The Federal Reserve , via  Aaron Klein .

Aaron Klein is hoping that people will update their priors about "cashlessness" in the US, by pointing out that volumes of cash are still rising significantly year over year in the US. Read the replies of the Twitter thread, they are useful for figuring out how to update your priors. Source: The Federal Reserve, via Aaron Klein.

First Week of June 2018

1. Microfinance: There are things that make you feel old. Like discovering that KGFS, the Indian "wealth management for the poor" not-a-start-up-anymore is 10 years old. Here's Bindu Ananth's, one of the co-founders, reflections on what they've learned over those 10 years. There's apparently a Field and Pande impact evaluation on its way shortly, which will be must reading. I'm struck by a couple of points in Bindu's post: a) that their take-up rates are so high that they are seeing general equilibrium effects (further cementing for me that GE effects and household risk are the two most important things to be thinking about in microfinance, and financial inclusion more broadly, right now), and b) the attention paid to the behavior and bandwidth of front-line staff (OK, three most important things).
But there are other things to think about too--here's MicroSave's latest Low Income Living newsletter focused on microfinance and WASH.

2. Global Development: For as long as I've been paying attention to Global Development there have been big think pieces and agendas for transforming aid. Right behind me are some of the first books I was handed way back then: Inside Foreign Aid, A Bed for the Night, Lords of Poverty. Here's Jeremy Konyndyk of CGD's review of the reform agenda of the past decades, why they haven't worked, and the pros and cons of what's happening now. Since he's focused on incentives, of course I liked it. Here's Paul Currion's paper on Network Humanitarianism for ODI, which he calls the "other half" of Jeremy's paper.
But that's macro stuff. Micro matters too and any discussion of the macro has to make sense in light of micro-realities. Here's Helen Epstein's review of a new book about Rwanda, titled In Praise of Blood. Marc Gunther recently paid a visit to Rwanda--here's his initial reflections including a discussion with Josh Ruxin, the founder of the Kigali restaurant/hotel Heaven and author of a very different book about Rwanda, from 2013. Realizing that was only 5 years ago makes me feel almost as old as learning KGFS is 10. Marc promises a good bit of reporting on his visit in the weeks to come.
And here's a Nature story on the many trials of unconditional cash transfers that are one of the macro-trends that Konyndyk writes about.

3. Household Finance (and Data Redux): Or perhaps I should have called this item financial inclusion or even financial health. Hot on the heels of Findex, Gallup has a 10 country survey of households, sponsored by MetLife Foundation, called the Global Financial Health Study. It's a really interesting set of data on how households feel about their finances. You can get to the reports and the data via this page in a multi-step process which I'm sure Ideas42 had nothing to do with designing.
Here are Sonja Kelly of CFI and Evelyn Stark of MetLife's take on the results. I'm not a huge fan of the "financial health" terminology--though that's a story for another time--but I am a huge fan of the way Sonja and Evelyn take on the difficulties of all the different phrases we use--financial health, financial inclusion, financial access, etc. All of our terminology fails at some level to capture what we are really after, and so we need a combination of metrics and methodologies to make sure we don't lose our way (such as how the focus on measuring financial inclusion led to paying too much attention to account openings).
I also promised to pass along things that I found around Findex, and here are two that both focus on the problem that Sonja and Evelyn write about: access does not necessarily lead to usage which does not necessarily lead to positive outcomes.

4. Effective Altruism and Some Algorithmic Overlords: The Economist has a piece about effective altruism which is a reasonable introduction to the thinking and the thinkers, if you haven't been following that world. If you have, it's not distinguishable from any of the stories written over the last 5 years or so. If you are more familiar, here's something new: a long profile of the Open Philanthropy Project/Cari Tuna and Dustin Moskovitz and their various entities. Full Disclosure: I'm a long-standing board member of GiveWell which appears in both pieces, along with Cari, and consider a number of the people who appear in the piece personal friends. The profile is by Marc Gunther--same one, also the person who broke the story about misbehavior at the Silicon Valley Community Foundation--and here's his post about the piece.
Marc discusses Open Philanthropy's work on existential threats to humanity, including "evil AI". Which makes for an easy pivot to Open Philanthropy's announcement of their 2018 AI Fellows, "promising machine learning researchers." And here is an NYRB piece on Automating Inequality and another new book, Algorithms of Oppression. I continue to worry that these pieces focus too much attention on the technology and not the non-digital algorithms that influence so much of life. Again, that's probably for another day, but if you want you can get a preview in my review of Automating Inequality.

5. Some Other Stuff: The lack of a thread is really showing through now huh? To hell with it, here's some other interesting stuff that I think you should click on. Planet Money's new episode about game theory and existential risks (see it does sort of tie back). Charles Kenny has a piece about the holes in America's safety net and the damage they do to children, which have a lot to do with non-digital algorithms (see!). Some "innovations" in home financing that seem likely to lead to people answering Gallup Financial Health surveys by saying they are not in control of their finances or future (see!!). And Felix Salmon has a piece about "Fictional Design" that may help you believe that Open Philanthropy's investment in AI scholars is high expected value (see!!!).

Week of May 21, 2018

1. Banking: Coinbase, a cryptocurrency trading platform, is doing something strange: acting a lot like a traditional bank by emphasizing its stability and trustworthiness. As Matt Levine points out (save that link, it's going to come up again later),  this is the central paradox of cryptocurrencies--they supposedly do away with the need for trust, but most everyone needs a trusted intermediary to keep hold of their cryptocurrency and protect them against fraud. Y'know the sort of things that banks or governments do (or enable and enforce with regulation). You've probably heard the mantra that cryptocurrencies aren't that important but blockchain is. The Coinbase approach, which is apparently successful, puts the lie to that notion. Why do you need an expensive and inefficient distributed ledger when you can have a cheap and efficient one provided by a trusted intermediary, like Coinbase? 
Trusted intermediaries are really important and the reason why it's worth caring about financial sector deepening. Rather than being distracted by cryptocurrencies, and their inevitable march toward realizing the need for trusted intermediaries, a more fruitful line of thinking is paying attention to what trusted intermediaries are emerging and how they affect consumers, transactions and the flow of money. This was a big part of the story of MFIs success, and one which I think remains underappreciated. Telecoms providing mobile money platforms is a really interesting case, of course. So are the commerce platforms that are rapidly becoming (or already are) payment platforms: Amazon, Google, Facebook, Tencent and Alibaba. And so stories like this about Amazon and this Planet Money story about Tencent and Alibaba (it's called "A Series of Mysterious Packages," how can you resist?) may not seem like they are about banking, but they are about banking.
Beyond the obvious, the reason that the emergence of non-bank but sort-of-like-a-bank trusted intermediaries is that they change the structure of the market. Here's a new paper from de Quidt, Fetzer and Ghatak on market structure and borrower welfare in microfinance, arguing that competition can yield borrower outcomes that match non-profit lending. I'm not yet convinced. And yet, the NY Times Upshot new "Marx Ratio" determines that banks are socialist collectives (that's the Matt Levine link again, I really really wish I could link to specific parts of his posts).
Speaking of market structure, here's a story about American Samoa creating the first public bank in the United States since the turn of last century. Why? I suppose you could say the lack of competition was hurting borrower welfare.

2. Digital Finance: Here's a paper on how using social pressure to encourage positive health behaviors that every MFI that uses groups in any way should read, whether they are doing anything digital or not. There's a U-shape to the curve: the most influential people in changing behavior are those that are neither too close nor too distant in the social graph.
MicroSave has a new piece that gets helpfully specific on the opportunities for using digital finance to close the inclusion gap in six Asian countries (Bangladesh, China, Malaysia, Myanmar, Nepal and Vietnam). There are also country specific reports for most of the countries. Here's something similar from the IFC on Africa. And here's something similar from IIF with a focus on data rather than delivery.
Here is Felix Salmon's interview of the last remaining founder of Simple, one of the first digital banks in the United States, as he prepares to exit. It's mostly a discussion of why it's so hard to be a good bank, while complying with regulations designed to ensure that banks remain trusted intermediaries. Here's a recent announcement from Simple about their Emergency Savings tool which promises to help people figure out the right amount of emergency savings. I'm really curious about how they are really doing that, but the company hasn't responded to my questions.  

3. Our Algorithmic Overlords: Boy there's a lot of stuff built up here so I'm just going to list it out. Here's Erik Brynjolfsson interviewing Danny Kahnemann about algorithmic decision-making and AI. I bet you can guess whether Kahnemann is more worried about bias among humans or algorithms. Here's an article about Judea Pearl's (an important contributor to the development of AI systems) new book, which criticizes the current state of AI development for reasons that will make economists everywhere stand and cheer: AI systems don't understand cause and effect. Of course, per Kahnemann, that's a criticism that could probably be leveled more devastatingly at humans than at machines. Here's Gary Marcus and Ernest Davis writing about how underwhelmed we should be about Google Duplex and that AI is harder than you think. But again, it's plausible to say that AI is harder than you think because human beings are so bad at thinking.

4. Storytelling: Time for a little--I promise--rant from me. Here's a useful piece from SSIR on how to tell stories about complex issues. It's important to tell stories about complex issues and the piece has some good tips. But it includes this line, "no one has ever taken action because of a great graph or data point" which is so demonstrably false that it makes me want to bang my head against a wall until it's bloody. Millions of people--researchers, economists, analysts, engineers, medical professionals, even manufacturing line workers--are taking action every day based on a graph or data point. The statement--the whole paragraph really which suggests that it's common to talk about complex issues with data rather than stories--illustrates exactly what's wrong with storytelling. Stories help us suspend disbelief and critical thinking, and give rise to all the biases that Kahnemann is worried about.

5. Data: So let's talk about some data, eh? Here's Mary Kay Gugerty and Dean Karlan on collecting and using data rather than stories. The new Survey of Household Economic Decision Making from the Fed is out and is required reading for anyone who cares about the state of household finances in the United States. A "good" news headline that got some attention: 40% of Americans can't cover a $400 emergency expense. If you're wondering why that's good news, in 2013 it was 50%. I really can't imagine it's actually true, but I have to wonder if the widespread media coverage of the finding has led to a lot of financial counselors and households setting $400 as the emergency savings target. If you're interested in the data that Jonathan found most interesting, click here, here, here and here.  
As I mentioned a few weeks ago, the new Global Findex is also out. Here's Kaushik Basu on the value of Findex data. If you see other pieces putting Findex data to good use, be sure to let me know.

  Via  Arianna Legovini , [ready for some  Drunk World Bank -worthy convolutions?] the World Bank's Research Group's DIME group's i2i (which is a trust fund of monies from several European aid agencies) has a report on it's work, "Science for Impact: Better Evidence for Better Decisions." I think the graphic is very cool, and interestingly, aligns quite well with short-term poverty spells in the US. I wonder if anyone will take action based on it? There are lots of stories in the report too, just in case. Source:  World Bank

Via Arianna Legovini, [ready for some Drunk World Bank-worthy convolutions?] the World Bank's Research Group's DIME group's i2i (which is a trust fund of monies from several European aid agencies) has a report on it's work, "Science for Impact: Better Evidence for Better Decisions." I think the graphic is very cool, and interestingly, aligns quite well with short-term poverty spells in the US. I wonder if anyone will take action based on it? There are lots of stories in the report too, just in case. Source: World Bank

Week of May 7, 2018

1. Self-Referential Metadata: Last week's faiV included a link to an app to automatically extract data from charts. I joked it would be the most clicked link in the history of the faiV and it certainly was the most clicked link of the week, more than doubling the clicks on any other link. It was also the most clicked of the last few months. Second place was a review of The Financial Diaries, that unfortunately I suspect many people couldn't read more than the first page of (honestly, it's great, but it's not $45 for 24 hours great. And does anyone ever pay that? Why?).
In other faiV news, Gisella Kagy got in touch to let me know the link to her paper about differential profits by gender for Ghanaian tailors was the right one; and I ran into Leora Klapper who let me know that she forwards the faiV to many colleagues each week. And yes, both of those are really just an excuse to say writing the faiV often feels like shouting into the void. So if you do see stuff you like, or just appreciate the faiV generally, please do get in touch every now and then to let me know. And it's also OK to let me know when I'm getting too niche, too snarky, or you have something you think should be featured in the faiV.

2. US Inequality: It was at the Dignity and Debt Network inaugural meeting that I ran into Leora, and a bunch of other researchers working on household finance, debt and related matters. It was a sociology conference so I had to get used to a format that wasn't paper-centric, but, of course, my bias is to noticing papers. A particularly interesting one was by Barbara Kiviat and Rourke O'Brien finding that low credit scores lower the likelihood of a job offer for a female applicant and lowers the offered salary to black applicants. 
One wonders how such biases play out in the gig economy. Here's a piece on the growing use of 1-day gigs by restaurants and retail. It's practices like that which can make a job guarantee emotionally appealing. Here's Annie Lowrey on the growing momentum behind (very very) vague proposals for a jobs guarantee among Democrat candidates.  

3. Rotten Kin: I'm going to use that as a very tenuous jumping off point to rotten kin as a factor that I don't think gets enough attention in the political economy of job guarantees and universal basic income. At least I hear often about discrimination and racism as explanations for why people would oppose such policies (leaving aside disputes about the basic economics). But I think almost everyone has a cousin or uncle or sibling that they think it would be bad for to get a cash stipend or would abuse a job guarantee in some way. I think that plays a big part in people's skepticism, even if they don't voice it publicly because it's not a nice thing to say about your family.
Anyway, here's Munir Squires writing in VoxDev about "kinship taxes" on Kenyan firm growth finding a fifth of women and a third of men would be willing to pay, and pay a lot, to hide income from their networks. But that's just the tip of the iceberg. Think also of the ways that husbands and wives buy certain goods to protect income from each other. And then think about the rotten kin tax that Indian textile firms are paying based on Bloom, Mahajan McKenzie and Roberts' work--obviously that tax is less than the perceived tax paid if you hire non-relations as managers, but still.

4. Our Algorithmic Overlords: Guys, it's time for some philosophy theory. Stephanie Wykstra (who is one of those people who gives me feedback on the faiV) has a perspective on defining fairness and how we should think about whether algorithms being used in criminal justice are fair. This is something I think about a good bit, as witnessed in my review of Automating Inequality: I perceive a lot of folks giving human beings a really odd "benefit of the doubt" as more fair when compared to an algorithm, but simultaneously decrying systematic and institutional racism and misogyny (which exist! and are very bad! and we should do something about them!) that are the result of those same human beings beings who are supposedly more fair than the algorithm being racist and misogynist. For instance, check out the bureaucratic nightmare of fighting deportation.
This seems quite relevant: When Will Workers Follow an Algorithm? That's a newish paper from Kohei Kawaguchi who runs an experiment with vending machine operators and finds that by-and-large they won't obey the algorithm. Now I wish someone would go back to the seaweed farmers. This is the way future computational social science is going to find me by the way--references to seaweed farmers and isomorphic mimicry.

5. Some Other Stuff: It's late in the day. I want to go outside. But I know you've been eager to know which country is roundest. JP Morgan Chase Institute has a look at the financial impact of Hurricanes Harvey and Irma through the lens of the daily transactions of consumers and businesses in the affected areas. One of the ways we know that families around the world cope with disasters is remittances/informal transfers. Which is why we should be worried if global banks are cutting off correspondent bank relationships and therefore raising the costs of remittances.   


  From Richard Reeves, Katherine Guyot and Eleanor Krause, here's a look at differing definitions of what "middle class" means in the US (at least according to economists and researchers). Source:  Brookings Institute

From Richard Reeves, Katherine Guyot and Eleanor Krause, here's a look at differing definitions of what "middle class" means in the US (at least according to economists and researchers). Source: Brookings Institute

First Week of May, 2018

For the First Time in Forever

Editor's Note: I apologize if the phrasing on the first item triggers PTSD symptoms in parents of children under 10. In other news, the paywall revolution seems to be gaining steam. I may need to start a Patreon for the faiV to afford subscriptions, but for now I'm just mourning my two favorite columnists, Justin Fox and Matt Levine, disappearing behind Bloomberg's odd paywall. --Tim Ogden

1. Microfinance, Part I (Uses of Credit): For the first time in forever, it seems there's enough new and interesting stuff on microfinance to support not only one, but a couple multiple-link items. Let's start with a useful piece that summarizes findings from several studies that have loomed large in our understanding (or questions about) of how microenterprises use credit, and apparent differences between male-owned and female-owned enterprises. I do find the framing a bit odd, as I don't know anyone who interpreted the results as "women aren't as good at running microenterprises as men" rather than, "women tend to be constrained to operating microenterprises in less profitable industries." When the newer results from Bernhardt, Field, Pande and Rigol emerged, I think the standard take was, "Households optimally allocate credit to their highest-return enterprise." So I think the intriguing thing here is not "women vs men entrepreneurs" but "maybe the industries women are concentrated in aren't less profitable after all." And that makes me think back to a paper from AEA (there's no version online that I can find, but this seems to be a significantly revised version using the same data) finding that female tailors in Ghana earn less than male tailors because they are constrained to making womens' clothes, a sector where there is more competition and lower prices.
Another use of credit for poor households is not to invest in a microenterprise but to smooth consumption when income is seasonal (or volatile for other reasons). Here's a new paper from Fink, Jack, and Masiye examining that dynamic in rural Zambia. Providing credit during the lean season affects the labor market, allowing liquidity-constrained farmers to avoid wage labor for their comparatively less-constrained neighbors, and pushes up wages. The intriguing thing here is another piece of evidence on the general equilibrium effects of microcredit via commodity (in this case, labor) markets.

2. Microfinance, Part II (Everything Else): Well, not everything else, see item 4. Access to credit and other financial services is a tricky thing--and it's not just the financial system that affects it, the justice system, criminal and civil, matters a lot too. Here's a new paper on alternative credit scoring using digital footprints--I haven't read it yet but am generally very skeptical of things like this. Grassroots Capital and CGAP are hosting a webinar on May 15th under the heading "Microfinance: Revolution or Footnote?" based on a conference last year (full disclosure, I was a participant). Of course, now I would want it to be called "Revolution, Footnote, or General Equilibrium Effects Eat Us All in the Long Run?" And applications are open for the 2018 European Microfinance Awards (until May 23) with the theme "Inclusive Finance through Technology." Whoever said the faiV didn't have news you could use? 

3. Methods/Statistics/Etc: Here's even more service journalism: A tool that will convert charts into data points automatically. I actually expect this to be the most clicked link in the history of the faiV. RAs, the robots are coming for your jobs sooner than you think.
Does everyone who cares about statistics read Andrew Gelman's blog regularly? Just in case, there were several posts recently that drew my attention. One is a fairly-standard-but-always-useful post about a specific example of dubious practices, on early childhood education (which morphs into some commentary on how the field of economics deals with these issues with a bonus appearance from Guido Imbens in the comments); another is a pointer to a new paper that tries to avoid some of the more dubious practices on a topic of a lot of interest and a lot of noise--the relationship of macro-growth and child development. But the most interesting is a post about how economists tend to see the world, specifically explaining why apparent bad behavior is good, and apparent good behavior is bad. Behavior in the economics profession is the best segue I can find into this short (audio) interview with Claudia Goldin.
But back to the use and misuse of metrics and statistics. If you don't click on anything else under this item, I do think you should look at these last two links. First, a thread about how most of the world thinks about statistics--as a tool for arriving at the answer you're looking for. And a column from Justin Fox on how pro- and anti-metrics authors end up in basically the same place--measurement is hard, and is only useful if you put the effort into doing it right.

4. Household Finance: Maybe the grab-bag is the right frame for this week's edition of the faiV. I'm including this item just so I could add this link to a look at how terribly non-poor people manage their money. One of the themes I've been increasingly talking about since the US Financial Diaries is how much even small amounts of slack obscure the sub-optimal decisions of the upper 60% of the income distribution. The analogy I make is to lean manufacturing: for the poorest people, we have drained all the slack out of the system so that when any mistake is made the consequences are large and obvious--that's the point of lean! But of course, unlike Toyota which spends massively to train workers on how to deal with mistakes, we give no useful training to these people to cope with their lack of slack, instead just blathering on to them with useless financial literacy training. Meanwhile, those with some slack are the American car companies of the 1970s, oblivious to their poor management of money. This week is when people who filed their US taxes right before the deadline will receive any refunds they were due; my strong prior is that there will be much more money wasted--even as a percentage--in the next 30 days than when the comparatively lower income families received their refunds back in February.
While we're at it, would you consider $200,000 of debt and a payment plan with the IRS for back taxes an example of "bad" financial decisions? What if the person in question was running for governor?

5. Cash Transfers: To round things out, Finland is giving up on it's "not-universal basic income" experiment since voters don't like it and they sort of already have an actual "universal basic welfare" system. There's another "not-universal basic income/cash transfer" experiment starting in the US. And here's Martin Ravallion on the pros and cons of guaranteed employment versus guaranteed income. (Channeling my inner Lant Pritchett: It's about state capacity!).   

  Part of the US inequality story that doesn't get quite as much attention, via the  NY Times Upshot .

Part of the US inequality story that doesn't get quite as much attention, via the NY Times Upshot.

Week of April 23, 2018

1. Communications: Marc Bellemare has a new post on how to communicate research titled "The Goal of Scientific Communication Is Not to Impress But to Be Understood." To which I say, the goal of human beings is not to be understood but to impress (hence the faiV). But assuming that you aren't as Calvinist as I am, I've been collecting a few things over the last few weeks that broadly fit the theme of better communicating research and ideas. Here's an experiment on disaster relief communications testing negative and positive imagery for their effect on donations and on donors sense of that change was possible. Unfortunately, there are few conclusions to draw; these are hard experiments to run. Here's a piece from ODI on 9 things you are doing, but shouldn't in research communications. I'm guilty of at least five (with mitigating circumstances, e.g. the funders told me I had to).
But let's get specific. Here's something you should definitely not do: produce a set of guidelines for behavior that have no input from the most important people in the equation. You should also not try to write jargony, provocative headlines without really understanding the context, for instance, saying that "40% of Older Americans Will Experience Downward Mobility." Given that the standard models of retirement planning assume that everyone retiring will have a lower income (hello there Lifecycle theory!), and most people aren't close to saving enough for retirement according to those standard models, I'm willing to bet a lot of money that the figure will be a lot higher than 40%. Don't try to find some way to contextualize a massive ritual sacrifice of children. And finally, definitely don't be one of these Manhattanites caught on video expressing revealed preferences for segregation and inequality, but do be like the principal at the end of the video clip and communicate your disgust in no uncertain terms.

2. Global Convergence: But not in a good way. I often think about the divergence in outcomes (or put another way, growing income and wealth inequality, falling mobility) for Americans as a convergence: for the bottom ~40% of the income distribution, the American economy looks a lot more like the economy in, say South Africa or Brazil, than the economy experience by the upper half of the distribution. That clip above is one example of how far out of reach the tools for mobility can be. Justin Fox has a story about fee-based governance in the United States--government agencies funding themselves through fines and fees. Justin makes the connection to the Gilded Age in the US, but it's a mechanism that will be very familiar to people in developing and middle-income countries. For a ray of hope on that front, you can check out Tishuara Jones, Treasurer of St. Louis, who is fighting back against fines and fees as revenue in her city.

3. Household Finance: This week I guest-taught a class at Haverford on US microfinance. In the post-discussion I learned that students prefer off-campus jobs, because Haverford pays student workers only once-a-month, and those who need the paycheck from a job during the semester, need it more frequently. That makes sense. But people on low-incomes also often prefer infrequent payments, so as to get larger lump-sums. Dairy farmers in Kenya do according to this new work from Casaburi and Macchiavello. To the convergence point earlier, this isn't a difference between the US and developing countries. The demand for income spikes among people in the US can be seen in the low take-up rates for monthly EITC payments, and the high take-up of "overwithholding." It's also evident in the fintech Even's pivot away from consumption smoothing. The bottom line is we still have a long way to go to understand optimal income volatility and we should have weak priors about the interest in and benefits of say, on-demand income or a "rainy day EITC."

4. The Ridiculous: Perhaps a new category for the faiV. Presented without further comment: "Soon Blockchain Will Let Armies of Free Agents Run Companies" and the "leading expert" on student loans was just a front for a student loan consolidation company. . Oops.

5. US Poverty and Inequality: When William Julius Wilson writes, it's probably a good idea to read. And here's the best review of The Financial Diaries (and of The Unbanking of America) that I've seen.   

 A very cool video (snippet) of the week, visualizing data on the learning gap. Via  Lee Crawfurd ,  Quartz , and from  Luis Crouch .

A very cool video (snippet) of the week, visualizing data on the learning gap. Via Lee Crawfurd, Quartz, and from Luis Crouch.

Week of April 16, 2018

Wash, Rinse, Repeat Edition

Editor's Note: Of late, I've been thinking a lot about comments Tyler Cowen made to me in our interview for Experimental Conversations: "..what we're lacking are do what I would call's a very intangible skill and it's hard to tell how good someone is at it." There are people doing synthesis (as you'll see in the links), and I like to flatter myself that I'm one of them, but there aren't enough and it is really hard to tell when you're getting it right.--Tim Ogden

1.  Read, Synthesize, Repeat: Two weeks ago I featured a bunch of links about new and new-ish research about cash transfers, including a synthesis by Berk Ozler which particularly draws attention to the growing evidence of negative spillovers from cash transfers. This week Justin Sandefur wrote up his own synthesis, which disagrees with Berk in important ways, and followed up with a Twitter thread summary, which includes the amazing line: "unless cash recipients literally spent the money on gasoline to set fire to their neighbors farms..." Which of course led to a response from Berk and then lots of further replies--much of which center on how to think about the scope of negative spillovers and what to do with data that doesn't seem to be entirely trustworthy. That's the job of synthesis! But there's a long way to go before there's any consensus on the right synthesis.
The site Straight Talk on Evidence has been working on, if not synthesis, at least part of the work of synthesis, sorting through lots of research on US policy interventions and whether it holds up. A few weeks ago they started a series of blog posts on what the path forward should be "when most rigorous program evaluations find disappointing effects." Here's part two with their proposed steps (I try to avoid using the word "solution" even when it's just quoting others). And here's Chris Blattman's Twitter thread response to their proposed steps.
I may have already linked this but in case I didn't, it's relevance to this conversation in particular compels me to include it: The Political Economy of RCTs. Equally I have to include this short article titled "Evidence-Based Claims About Evidence" which challenges the conventional wisdom on how long it takes for evidence to influence physician behavior.
And yes the connection is tenuous, but here's Ideas42 first ever Impact Report on their first 10 years of work. I think there remains a lot of work to be done on synthesizing behavioral science and other approaches and the real world. 

2. Banking: When I first started working with Jonathan at FAI, one of the first things was helping get the book Banking the World out the door--based on work by Jonathan and others estimating that "half the world is unbanked." The World Bank's Findex database has just been updated with 2017 data, with a new report and complete data, and it now seems that the proper statement is "a third of the world is unbanked." Of course, that begs the question of what we mean by unbanked or financial inclusion, and how to think about people who have access to formal accounts but choose not to use them--often because those formal accounts aren't as useful as the alternatives (or in some cases are actively harmful). Obviously, the Findex has a lot to explore and I'm sure I'll be sharing more in the coming weeks as people try to synthesize the findings. 
But coming back to that point about how to think about financial inclusion and exclusion, here's the text of a speech from N.S. Vishwanathan, Deputy Governor of the Reserve Bank of India, about evolving regulation of Indian banks and stressed assets, which closes with an all-too-familiar warning: "There appears to be taking hold a herd movement among bankers to grow retail credit and the personal loan segment. This is not a risk-free segment and banks should not see it as the grand panacea for their problem riddled corporate loan book."
Meanwhile, the US Consumer Financial Protection Bureau under Mick Mulvaney has drastically cut back it's enforcement actions, apparently to zero. The latest is dropping charges and sanctions against an abusive payday lender and scaling back regulations of high-cost consumer lending. Perhaps Mick should place a call to India.

3. Philanthropy: Discussions of philanthropy would be improved if there was more synthesis of public choice economics--too often I see writing about philanthropic actors that seems to start with either an assumption of saintly altruism or evil capitalist intent in disguise. A reasonable example of something better is this new report on "what goes wrong in impact-focused projects" and finds roughly half of the "roadblocks" are funder-created obstacles. 
Another example is an important set of stories about the Silicon Valley Community Foundation, which has become one of the largest foundations in the world, that illustrate that the world of philanthropy is even messier than most human endeavors where altruism, good intentions, power and self-interest collide. Marc Gunther, writing in the Chronicle of Philanthropy, details many accusations of abusive behavior by SVCF's leading fundraiser, who has resigned in the few days since the article was published. There was a lot of work to get the story published, as Marc details here on his own blog, but like so many other "revelations" in this season, the accusations were well-known and apparently ignored by a great many people, including allegedly by the president of SVCF, Emmett Carson. SVCF is no stranger to controversy. Though I've linked these before, as a refresher here's Marc's earlier reporting on SVCFs' role, or lack thereof, in Silicon Valley itself and an excellent piece by Phil Buchanan of CEP on how to think about community foundations' role in the complicated world of philanthropy. And here's Rob Reich (the Stanford political scientist, not the Berkeley Economist) on interrogating the power of large philanthropy.  

4. Our Algorithmic Overlords: I'm not sure if this long essay on what Artificial Intelligence means and doesn't mean and the challenges the use of the term creates qualifies as synthesis, but it is worthwhile reading.
Oh, and Palantir knows a lot more about you than Facebook, in fact, everything about you.
If you're looking for some hope, here's Allison Fine and Beth Kanter on "Leveraging the Power of Bots for Civil Society."

5. Jobs: Leveraging the power of bots, for good or ill is one of the big questions about the future of jobs. The Hechinger Report is running a series on the challenge to education systems of educating students when there is so much uncertainty about what skills those students will need. The Hechinger Report is US-based, but the problem is the same globally. Here's the World Bank on how automation is changing the jobs and development outlook for lower-income countries. I'm linking there because while Arvind Subramanian has a piece in the FT on this very topic today, in my experience very few people (including me) have access to the FT.     
And I've been meaning to link this piece from Tyler Cowen on reining in occupational licensing for a long time and keep forgetting. To fully bring things around full circle, I will say that I don't think Tyler does enough synthesis of the findings that occupational licensing can be good for excluded communities who are denied opportunities in many fields.

Week of April 9, 2018

Editor's Note: I'm very disappointed that no one commented on my clever pun in last week's editor's note. Given the beautiful weather outside, that's my only explanation for my perhaps snarkier-than-recently tone this week. --Tim Ogden

1. Global Development: Hey, does anybody remember the Millennium Villages Project? It seems an age ago in terms of development fads, now that we're all focused on cash grants and graduation programs, and according to some papers would fall into the "long-run" category. Andrew Gelman has a post about a new retrospective evaluation of the program (that he participated in), including a link to an evaluation of the evaluation. The results are surprisingly good, given what I expect most people's priors were at this point. Though I suppose the TUP evaluations should perhaps have shifted those priors in a positive direction. I guess I'm kind of surprised that the results don't seem to have gotten the attention I would have predicted. Of course, I don't think anyone has argued that the MVP should be a model for other programs since Nina Munk's book, so maybe I shouldn't be so surprised.
Lant Pritchett has a list of six other things in development that people aren't paying (enough) attention to, mostly variations on the continuing large gap between even the lower part of the income distribution in rich countries and the upper part of the distribution in poor countries.
Lant's first point is about the huge gains from moving. Here's a piece from a few weeks ago about the lack of geographic mobility, specifically rural to urban migration, in the United States where the overall tone is exasperation at these benighted people who stay in small towns (and ruin things for everyone else; it's an interview with Robert Wuthnow about his new book). It caught my eye because I can't imagine something like this being written about rural people in developing countries (without touching off a lot of blowback). But perhaps we should see more stuff like this about all forms of poor-to-rich geographic mobility. Speaking of those rural people, here's a new paper from Marc Bellemare about one of the dynamics that may be keeping the poorest people in rural areas (at least in Madagascar)--the intensification of income from agriculture.

2. Jobs: Last week I linked to the recent study of scheduling practices at The Gap that found that encouraging managers to set more stable schedules for retail employees led to higher productivity and sales for the firm. The exact mechanism for increased sales isn't completely clear, but it appears that managers shifted hours to more experienced workers, who unsurprisingly were more productive. While the study is encouraging overall--stable schedules are better for (most) workers and for employers--it also has a dark tinge. To see why, consider this Atlantic article about the future of jobs at Walmart (which, to its great credit, was well ahead of The Gap in experimenting with more stable schedules for its hourly workers, and other efforts to stabilize workers income). The macro trend is toward fewer jobs, at least in terms of how we used to define that term, for less-skilled and less-experienced employees, and declining job quality for those people. That's been happening at many companies (think of outsourcing of janitorial, security and similar jobs) for a long time. It seems an awful lot like what I understand has happened in European labor markets which are more regulated--stable jobs are limited, more workers, particularly the young pushed into contingent labor contracts with limited benefits, stability or security. From a distance this is fascinating: similar outcomes from radically different processes. But from a policy perspective it's frightening. In the economic development world, we've been talking for a long time about how to move more people into formal employment, like in developed economies. Meanwhile the developed economies are making great progress moving people into informal employment, like in developing countries. Maybe I should have called this item Global Undevelopment.
And to play to the academic part of my readership for a moment, here's a piece about how every effort to create better incentives in academic jobs makes things worse. I remain baffled at the general assumption in economics that managers know what they are doing, given the management they experience on a daily basis. While I can't vouch for the management abilities at the Open Philanthropy Project, chances are if you're a reader of the faiV you, or someone you know might be interested in these job openings.

3. MicroDigitalFinance: Is a neologism a step too far? Probably. But check out CFI's fellows program research agenda. There's a whole lot of "microdigital" there. Interestingly, to me at least, is that you could copy and paste these questions into a research agenda for the US financial services marketplace and no one would bat an eye, especially the ones about the changing nature of work.
A brief interruption for a public service announcement: If you're going to be in Uganda, for God's sake, DO NOT LOSE YOUR SIM CARD. Matt Levine has a line about fintech re-learning all the lessons of modern finance, painfully and in public. Seems that could apply equally well to a lot of actors in the financial inclusion space, but relearning the lessons of the need for explicitly pro-poor services, institutions and regulations. Take for instance this post from CGAP about pricing transparency for digital services. Who knew that digital finance providers might not be very upfront about their pricing without regulation?
There is still innovation and research happening in "traditional/nondigital" microfinance, thankfully. Here's a new paper from Burke, Bergquist and Miguel on lending to Kenyan farmers to enable them to buy low and sell high, rather than the inverse which is the status quo ex ante. The most interesting part is not that it does help farmers profitability but that they can track general equilibrium effects on prices of both inputs and outputs--and there are effects. It's another piece of evidence that microcredit can have positive general equilibrium effects that are missed in individual-focused impact evaluations (cf. Breza and Kinnan).

4. Our Algorithmic Overlords: With ongoing questions about how automation, AI, tightening labor markets, and shifting skills will affect employment, I suppose we can take some heart in this "against the run of play" piece claiming that progress in AI research has hit a wall. Maybe we have more time for structural adjustment than we thought. Of course, that may give more time for big tech companies to lobby for privacy laws that look tough but actually enable much of their ongoing gathering and use of data outside public view. And here's Lucy Bernholz on the need for civil society organizations to quickly come to terms with "the burden of data." I guess Lucy would be encouraged about CFI's research agenda, above. And I got through that without mentioning the Zuckerberg hearings. Oops.

5. US Poverty and Inequality: You may have already seen that Matthew Desmond and colleagues have "kicked on" from their work on evictions in Milwaukee and built a database of eviction records that covers a good portion of the US. Here's the NYTimes coverage of evictions in Richmond.
Here's a new report on the racial wealth gap and small business, that while useful continues my frustration at focusing on the idea that starting small businesses will directly address the wealth gap. Business ownership only increases wealth if there are buyers of those businesses at some point in the future. Given the pre-existing wealth gap, and the businesses that minorities are able to start, who is going to put a residual value on those businesses high enough to affect wealth? Perhaps we should consider the lessons of the global microfinance movement in building wealth through small business financing?
In case you were wondering, here's a new paper on immigrants and entrepreneurship in the US. First-generation immigrants create about 25% of the new businesses in the US, but this is as high as 40% in some regions. But, of course, those firms create fewer jobs and those jobs aren't as good as jobs in native-owned firms. In other words, they may be very good for boosting incomes (though in general there is no wage premium for entrepreneurs versus their likely earnings from employment) but likely not for building wealth.

  Kieran Healy has a couple of blog posts in recent weeks looking at various ways to represent time series data,  using birth data in the US  and in other countries. In addition to my general interest in data viz, this caught my eye because, well, did you know how much birth rates varied from month-to-month? After contemplating whether there were some basic biologic facts I was unaware of, and soliciting help from a L&D nurse friend, I discovered that birth seasonality is a thing, is consistent across time, culture and geography, and  there is still lots of debate over what factors account for it . And I also discovered that  I have the most common birthday in the US (at least among people born 20 to 40 years after me) . You can see more of  Kieran's visualizations of the baby boom here , and some  cool animated population pyramids (with discussion and code) here .

Kieran Healy has a couple of blog posts in recent weeks looking at various ways to represent time series data, using birth data in the US and in other countries. In addition to my general interest in data viz, this caught my eye because, well, did you know how much birth rates varied from month-to-month? After contemplating whether there were some basic biologic facts I was unaware of, and soliciting help from a L&D nurse friend, I discovered that birth seasonality is a thing, is consistent across time, culture and geography, and there is still lots of debate over what factors account for it. And I also discovered that I have the most common birthday in the US (at least among people born 20 to 40 years after me).
You can see more of Kieran's visualizations of the baby boom here, and some cool animated population pyramids (with discussion and code) here.

Week of April 2, 2018

April Showers on Parade Edition

Editor's Note: Joan Robinson once said, "The purpose of studying economics is not to acquire ready-made answers to economic questions, but to learn how to avoid being deceived by economists." I often feel like the more modern description would be, the purpose of studying economics is not to acquire ready-made answers, but to learn how to rain on as many parades as possible. Or maybe that's just my natural disposition. Anyway, the recurring theme this week is the reining in of optimistic expectations.  --Tim Ogden

1. Global Development: To start us off, how about some rain on the "rising Kenyan middle class" parade? The core point--that gains from rising incomes that don't translate into durable assets can rapidly be erased, a perspective that should sound familiar to anyone with a passing knowledge of anti-poverty policy in the US. 
But the real parade in global development in recent years has been on the value of delivering cash to poor households. This is a train that's been picking up steam for a long while. I would date the current push back to the first studies of Progresa/Opportunidades, the Mexican conditional cash transfer program. Momentum has steadily built around both the positive impact of cash transfers--that recipients don't waste the money, that they use the money productively--and dropping conditions. That momentum was built on many studies, but probably the two most well known in international circles are Blattman, Fiala and Martinez on cash transfers in Uganda, and Haushofer and Shapiro/GiveDirectly in Kenya. Both showed significant gains by recipients of unconditional cash.
Both of those papers were about relatively short-term effects. Both studies included longer-term follow-ups. And you know what's coming: the large positive effects seem to have disappeared in the medium term. Berk Ozler of the World Bank is currently playing the role of Deng (it's the closest I could get geographically) with two lengthy blog posts. The first, keying off comments from Chris Blattman in the recent Conversations with Tyler, but really delving into the recently released update to the Haushofer and Shapiro/GiveDirectly update is the important one for non-specialists. The second is very useful for understanding the specific details of interpretation. The posts also kicked off a number of useful Twitter conversations (here, here, here, here and here, though that's just a sample; just scroll through Chris's and Berk's timelines for more). Berk's first post also takes on the role that academics have played in stoking that momentum and is worth a close read.
I think it's also important to think through what is happening with cash transfers in light of not only other studies of cash (like this one finding positive effects on the personality of Cherokee Native American kids whose families receive cash that was just officially published) but also other interventions. Deworming is one example--one big source of the controversy over the effects of deworming is that there isn't a medium-term biological effect to explain the long-term economic effects. The Moving to Opportunity study is another--no short-term or medium-term gains, only long-term ones. And I have to note that the Native American paper is a frustrating example of Berk's critique of the role academics can play in raising expectations too high--the paper's title and abstract simply reference a large positive effect of cash transfers with no indication of when (now? 10 years ago? 30 years ago?), where or who the participants are, or even the size or mechanism of the transfers.

2. Social Investment and Philanthropy: In one of those Twitter conversations sparked by Berk's posts, Chris gave Berk the endearing nickname "naysaying grumpy pants" (it's a compliment, honest!). This week I had my own "grumpy pants" moment tied to the release of Henry Timms' just published book New Power. Henry is the main force behind Giving Tuesday--and apparently I am the designated Scrooge on that topic, going back to a few posts I wrote for Stanford Social Innovation Review years ago. In the Chronicle of Philanthropy's long profile of Henry and the new book, I get to say things like, "I can't imagine a more useless number than the amount of money given on Giving Tuesday." Without context, that may sound like hard-hearted parade-raining. And I suppose I am parade-raining on the way that Giving Tuesday is mostly being talked about--as a wildly successful movement based on the amount of money given tied to Giving Tuesday campaigns. But what we really should care about is whether Giving Tuesday is leading to people becoming more generous, not whether their donations happen in response to a specific campaign. I'll write some more about Henry's book and New Power in the coming weeks.
In other social investment parade raining, I've been known to get riled about about the social investment rhetoric about "no trade-offs" and "double bottom lines." Here's a new paper from Karlan, Osman and Zinman that explores the trade-offs of a double bottom line in detail. It finds negative consequences for both social and financial performance. Now that's some first-class parade-raining.

3. Methods: I suppose you could call this recent work on whether regression discontinuity designs are reliable--and finds that they are--to be raining on the parades of other methdological approaches. But for good measure, here's Andrew Gelman, well-known parade-raining statistician, with some notably restrained and subtle raining on everyone's parade in response to the RDD paper. My summary: lots of methods are reliable if you do them right, but you're probably not doing them right.
But tying back to the first item and Berk's discussion of the role of academics in miss-setting expectations, here are two useful pieces from outside economics that are worth thinking about if we think of methods as not just the way a study is done or the analysis conducted but the way the results are communicated (and obviously I think that's the right way to think about methods). First, how the continuing enthusiasm for vitamins came to be. Second, Slate Star Codex takes on adult neurogenesis in humans which is particularly fascinating because it's an example of how commonly held beliefs were overturned by new research, and then more new research overturned the new beliefs. Seems particularly relevant to the conversations about cash transfers, no?

4. Microfinance and Digital Finance: Here are two related pieces raining on crypto-parades, which admittedly isn't that hard these days. But neither is about the crazy part of the crypto world. They are raining on some of the fundamental ideas that are used to justify the ultimate value of crytocurrencies. First, here's a story about Ripple and it's struggles with banks who like the idea of a simplified payments infrastructure but don't see any need for a cryptocurrency to be part of that. Second, here's a story about how crypto trades are actually happening--with a trusted intermediary using Skype, because you know having a trusted intermediary is a useful thing in markets.
In other non-parade-raining news, Walmart is getting into the global remittances game, by partnering with MoneyGram(!?!). I suppose that will rain on lots of other global remittance providers parade. And here's a story about why, after all this time, remittances are still so costly and none of the efforts to bring down the cost have worked. Of course, that was before Walmart got involved.
Finally, it's not often I get to feature some US-based microfinance stuff. Here's a new paper from Aspen FIELD on pricing in US microfinance and why it makes sense for lenders to raise interest rates (Note: I played an role advisory role developing the paper). I think a lot of people in international microfinance will sympathize.

5. US Poverty and Inequality: The role of health care costs in driving bankruptcies got a lot of attention a few years ago and was a big part of the push for the ACA. Since the ACA passage though, there hasn't been a meaningful change in bankruptcy rates even though there was a big increase in the number of people insured. Now there's a reassessment of the data on bankruptcy and health care costs that radically revises down the number of bankruptcies that can be attributed to health care costs directly resulting in papers in the New England Journal of Medicine and in AER. Here's a summary of the work, but the very short version is the culprit is loss of income from poor health more than the costs of health care.
And because it's spring temporarily this afternoon, I feel compelled to leave on some good news--or at least my version of good news. The Gap engaged in a rigorous randomized study (!) to determine if their scheduling practices--which as in most US retail leads to erratic and volatile schedules for retail workers--were helpful to the bottom line. The answer is no. Volatile schedules are bad for workers and bad for business (summary; full report). Hey, did I just suggest there was no trade-off to treating workers better?