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Week of July 19, 2019

1. The Great Convergence: I want to tell you about a young man in his early 20s. I'll call him M. He has a high school diploma, but it's from a school system where students don't tend to learn very much in the upper grades. M has a semi-skilled job, but it's tenuous and the hours are pretty unpredictable. Public transport in his neighborhood is poor, so he borrowed some money to get a "minimum viable vehicle" in order to get the job. His connection to the formal banking system is negligible. His biggest goal is to save up some money for a better apartment--where he lives now is as safe and reliable as his vehicle, which is to say, not very. He's been saving up for that for awhile, but he keeps his savings with his grandmother. The combination of ups and downs and needs from his extended family has kept that savings from growing much, if at all.
Based on that description, there is no way to tell if M is Manuel from Puebla, Melokuhle from Cape Town, Mohammed from Dhaka, Mentari from Jakarta or Michael from Baltimore. There has been tremendous progress in reducing poverty(and yes in financial inclusion) in most of the world over the last few decades. Meanwhile, in the US, there has been tremendous growth in inequality. More than that, the US economy and the labor market in particular has become much more like that in developing countries. The result is a great convergence: For the bottom 40% of the income distribution in the US, the economic reality they live in is more like that of Mexico, South Africa or Indonesia than the economic reality for the upper part of the income distribution.

2. The State of the US and the World: From a financial inclusion standpoint, there are fewer and fewer meaningful differences in the challenges faced by middle income countries and the US, at least if we care about that bottom 40% of the income distribution. Below is a chart I quickly made based on the latest Findex data, which helpfully breaks out the US lower 40%, comparing it to middle income countries.

Global Financial Inclusion.png

Just taking it at face value, you can see that the differences on a variety of financial inclusion metrics aren't that big. Take a close look particularly at the "No source of emergency funds" metric. Yes, the US has more people with no source of emergency funds than middle income countries on average. The one metric that stands out is the use of formal credit, but that difference is almost certainly due to credit cards. As digital credit grows rapidly in the countries where mobile money systems are functional, expect that gap to close dramatically.
The financial inclusion challenge for many middle income countries is rapidly shifting from one of expanding access to formal services broadly to issues of consumer protection for the masses, ensuring that services offered are appropriate and safe, and of reaching the last mile. Sound familiar?

3. The Corrupted Economy: But there's another part of this story that is less about financial inclusion or exclusion defined narrowly, and more about how the economy functions and what that means for growth, development, opportunity, mobility and even social cohesion.
When we think about the challenges of growth and development in middle income countries the conversation is often about institutions, about access to good jobs, about quality of education, about opportunity and economic mobility for the average citizen. The general understanding is that in these countries there is one set of rules and opportunities for those who are already wealthy, those connected to power (economic and political), and everyone else. Getting a place at a university, getting a government job, getting a formal job at an international, making a powerful friend are like winning lottery tickets that can transport someone from one class to another--but they are allocated like winning lottery tickets. Getting one is a factor of luck and divine intervention. For most everyone not already part of the elite, there is little prospect of upward mobility absent a lottery ticket. Even if you follow the rules, there's little reason to believe the institutions or the powerful are going to follow the rules.
Just as the description of M above applies equally well people in middle income countries and the US, this description of the how the economy and opportunity function are clearly true of the United States. Access to opportunity and mobility is a factor of where you live, and what color you are. Access to justice is a factor of how much money you have and what color you are. Access to a quality education is a factor of how much money you have, which determines whether you get to live in a school district where students learn or one where they don't (and don't you dare break the rules to get access to a good school).
What if you try to follow the rules? Well, you end up with predatory financial products that strip your family of wealth. Or you find out that all the years of hard work were for naught because you trusted institutions to do the right thing. Or you find out that the education you paid for isn't really worth anything and doesn't get you a job with a path to opportunity, just enriches those who deceived you.
Meanwhile, there is a different set of rules for the upper part of the income distribution. Consider just the first two stories of one particular day of Matt Levine's newsletter. First, if you are a very wealthy energy trader and you make a financial mistake, don't worry. There's a system so that you don't bear any consequences. And if you're a wealthy investment banker, don't worry about actually needing to compete for lucrative contracts--the whole system is arranged so that everyone gets a piece of the largess.
But the stories about how corrupt--corrupt in the sense of not being governed by a set of fair and equitable rules--the American economy has become abound. All you have to do is look around.
Say you're a CEO and are getting divorced. That's bound to be terrible for your net worth right? Nope. The company will fix it for you. Or say you're charged with the sad but sacred duty of ensuring that the corporate bankruptcy process is fair to the claimants. It's very important that you don't manipulate that process for your own gain right? Nope, you can do that and without consequence. Or say the Federal government has a program to make sure that lower income people can file their taxes for free, and even goes so far as to simplify the process for a lot of people. That will be good for you right? Nope. A mammoth company will manipulate the whole process to make sure you never end up at the free filing site, and then will use its data to figure out how to force the most people into using a paid version of their software so the whole thing ends up costing you more money. Meanwhile, even pop culture is organized around an elaborate set of corrupt relationships that allow the few to profit wildly.
Even philanthropy is not immune--the fastest growing part of the industry is a way for donor's to take all the benefits of donations immediately while not actually giving any money away, and enriching large asset management companies.

4. American Unexceptionalism: By the way, those concentration camps are still open. Which is another way of pointing out that the great convergence has happened in many different domains. The US economy and it's political system operate far more like our mental models of developing countries.
I'm going to close this edition of the faiV with a link to something that I think everyone concerned about the state of the United States and of the world, and how to respond should read and consider. Last year, Will Wilkinson of the Niskanen Center has pulled together a wide range of research that provides a compelling explanation of how we've come to this moment politically in the US and in many other wealthy and less wealthy nations. It doesn't address what I'm calling the corrupted economy in the US, but if it's right, it should affect how we think about possible paths to fixing things.

5. That's All Folks: Wasn't that enough?

This  Pearls Before Swine  comic comes closest to summing it all up. I'm glad I wrote this in the middle of summer and that many of you will be able to go out in the sunshine, and then get back to work making the world a better place.  Source .

This Pearls Before Swine comic comes closest to summing it all up. I'm glad I wrote this in the middle of summer and that many of you will be able to go out in the sunshine, and then get back to work making the world a better place. Source.

Week of July 12, 2019

The Research Production Process Edition

1. Research, Evidence, Policy and Politicians: We talk a lot around here about evidence-based policy and often about the political economy of adopting evidence-based policies. In the last faiV I featured some of the first evidence that elected officials (in this case 2000+ Brazilian mayors) are interested in evidence and will adopt policies when they are shown evidence that they work.
Far be it from me to let such encouraging news linger too long. Here's a new study on American legislators (oddly also 2000+ of them) that finds that 89% of them were uninterested in learning more about their constituents opinions even after extensive encouragement, and of those that did access the information, the legislators didn't update their beliefs about constituent opinions. Here's the NY Times Op-Ed by the study authors.
But wait, there's more! In another newly published study using Twitter data on American congresspeople, Barera et al. find that politicians follow rather than lead interest in public issues. But also that politicians are more responsive to their supporters than to general interest. Which perhaps goes some way to explaining the seeming contradictions between these two studies: American legislators are not interested in accurate data on all of their constituents' opinions, but will follow the opinions of their most vocal supporters.

2. Research Reliability: Two studies of the same population finding at least nominally opposing things published in the same week is kind of unusual, shining a brighter light on the question of research reliability than there normally is. But there have been plenty of other recent instances of the reliability of research being called into question for lots of different reasons:
* The difference between self-reported income and administrative data: the widely known finding that Americans living in extreme poverty (below $2 a day) was based on self-reported income. Re-running that analysis with administrative data that presumably does a better job of capturing access to benefits and other sources of income and wealth finds that only .11 percent of the population actually has incomes this low, and most are childless adults. Here's a Vox write-up of the findings and issues.
* A "pop" book on marriage from an academic claimed that most married women were secretly desperately unhappy. But that's because he misunderstood the survey data, believing that the code "spouse not present" meant that the husband was not in the room when the question was answered, when it really means that the spouse has moved out. Again, Vox does some good work explicating the specifics and the context: most books aren't meaningfully peer reviewed.
* But you probably should be very skeptical of any research on happiness regardless of whether it's peer reviewed because "the necessary conditions for...identification..are unlikely to ever be satisfied."
* And you should be skeptical of many papers studying the persistence of economic phenomena over time, and spatial regressions in general because of the possibility of inflated significance that is really just noise.
* You should also perhaps be skeptical of any claims based on Big 5 personality traits outside of WEIRD countries because the results are not stable across time or interviewers.
* And there are still a lot of issues with the applications of statistical techniques across the social sciences, including, for instance, the misapplication and misinterpretation of RDD designs, or conditioning on post-treatment variables (that's a paper from last year that finds 40% of experiments published in top 6 Political Science journals show evidence of doing so), or using estimated effect sizes to do ex post power calculations.
* Or this Twitter thread about a series of papers published in top medical journals that defies description, other than you really have to read it.
It's enough to make you despair.

3. The Research Production Process and Reliability: There's another aspect of research reliability in economics that doesn't get enough attention I think--how the research and publication process is set up in ways likely to create inadvertent errors. Now what follows is all speculation, but it is speculation informed by experience.
The bar for empirical research keeps going up--and that's a good thing--requiring more sophisticated experiments/analyses, with more data, bigger samples/datasets etc. But data is hard to deal with. It's messy and noisy and all sorts of other things that require a lot of time and attention that grows if not exponentially at least more than linearly as the amount and complexity of data increases. The research production process and the expectations of productivity from researchers hasn't changed though--you don't really get any more credit for a paper with a sample of 10 thousand than you do for a sample of 1000. So most of these more sophisticated projects with longer time frames and more data involve more and more collaborators and especially more and more of changing cast of RAs working on the data. And that's a recipe for inadvertent errors.
That is how I've been thinking about this recent "re-analysis" by Bedecarrats et al. of the Crepon et al. study of microcredit impact in Morocco (one of the famed 6 RCTs on microcredit impact) which incredibly ambitiously recreates the entire analysis from scratch, including rewriting all of the code into R. Bedecarrats et al. find plenty of errors in the analysis and code and question the reliability of the entire effort. I think they overstate the case, as it's not at all clear that the errors they uncover would yield a different conclusion than the original paper, but the variety of small mistakes is noteworthy.
Crepon et al. have now responded, acknowledging some errors, pushing back on others, finding some errors in the Bedecarrats et al. analysis etc. They also reiterate that the errors that are there are not sufficient to change the conclusions of the original paper.
If you follow microcredit research it's definitely worth looking at both the re-analysis and the response. But, clearly I think the more important thing is recognizing that these kinds of errors are likely common, are incredibly hard to notice, and are most likely going to become more common unless the research production process changes in some meaningful ways.
In that regard there is some good news and bad news. On the good news side, as Crepon et al. highlight in their response, J-PAL has recently launched a service for researchers where graduate students will attempt to replicate code and analysis, looking for errors. The French government has recently launched a new agency to certify the replicability of research that uses confidential administrative data, which until now hasn't been possible at all.
The bad news is that more and more data is going to become confidential as data tools allow exposing the identity of individuals involved in research. Which is going to make it even more difficult to find errors and mistakes in research.

4. Research Ethics: The reliability of research is an important question, but it's a second order one. The first order question is, "Should this research be done." There's been a lot of discussion of that question this week, as a new paper based on an experiment encouraging participation in protests in Hong Kong was released. Follow this thread for some reactions, this thread from Sheena Greitens for others (and check out her paper with co-authors on "Research in Authoritarian and Repressive Contexts"), and this thread that has some particular development econ perspectives. Spurred by the controversy, Andrajit Dube started a thread which raises the ethical questions up a level from this particular paper. And if you do a little searching there is a lot more out there.

5. Mortality: OK, we'll head in a different direction in closing. Here's an essay from Arthur Brooks that is hard but worthwhile reading: Your Professional Decline is Coming Much Sooner than You Think.

L-IFT , a diaries research firm, is a proud sponsor of the faiV. See our video on  diaries research with 800 women microentrepreneurs in Myanmar .

L-IFT, a diaries research firm, is a proud sponsor of the faiV. See our video on diaries research with 800 women microentrepreneurs in Myanmar.

This came across my Twitter feed yesterday and I thought it would be a nice diversion from all of the more serious topics above. It's a murmuration of starlings in Costa Brava, photographed by  Daniel Biber .  Source .

This came across my Twitter feed yesterday and I thought it would be a nice diversion from all of the more serious topics above. It's a murmuration of starlings in Costa Brava, photographed by Daniel Biber. Source.

Week of June 21, 2019

The Concentration Camp Edition

1. Concentration Camps: The United States is operating concentration camps again, and one soon will be at the site of one of the Japanese-American camps operated in the 1940s. The conditions are inhumane and unconscionable, both for children and for adults,and getting worse. People are dying. Babies are being denied medical care. Last week, I joked about a scream of helpless rage about financial literacy programs. This week, I'm not joking, and I don't know what else to do, except to do my best to not look away.

2. Philanthropy and Social Investment (and Microfinance): What would it look like if US philanthropy en masse decided the reappearance of concentration camps in the United States was a crisis that deserved all hands and funds on deck? I don't know, but I don't think historians would view that decision unkindly.
There is something going on in American philanthropy--for the first time since 1986, charitable giving did not track GDP, falling 1.7% last year. More specifically, giving by individuals fell 3.4% and for the first time (since the data has been tracked) made up less than 70% of total contributions. Here's the researchers' analysis of the new data. And here's Ben Soskis' Twitter thread on the important questions the decline in giving raises about giving culture and inequality. Several years ago I speculated about whether Giving Tuesday's hidden theory of change was to shore up American giving culture, and that question has new relevance.
On the social investment front, there's a new book out that I can recommend, A Research Agenda for Financial Inclusion and Microfinance. If you're wondering about the connection to social investment, Jonathan and I have the opening chapter, "The Challenge of Social Investment Through the Lens of Microfinance." Keeping on that theme, Beisland, Ndaki and Mersland have a new paper on agency costs for non-profit and for-profit microfinance firms, finding that CEO power determines whether residual losses are higher or lower in non-profit firms. Governance matters in social investment!
If you're one of those CEOs (or just any aspiring social entrepreneur), you may be interested in Alex Counts', founder of the Grameen Foundation, new book, Changing the World Without Losing Your Mind. Here's an interview with Alex about the book and the evolution of microfinance (which I'm including even though he says a couple of nice things about me).

3. Digital Finance, Part I: Libra: The news of digital finance this week was dominated by the announcement of Libra, Facebook's proposed...well, depending on what you read, either Facebook's "me too" derivative payments service masquerading as crypto, or Facebook's attempt to take over the world and replace all governments. Here's Vox's explainer.
My favorite immediate response was from Erik Hinton, which I have to quote in full: "God, grant me the confidence of Facebook, a company that has managed to lose most of the data that it's either stolen or extorted and has repeatedly been caught lying or miscounting its own analytics, deciding to create a global financial system."
As that response hints, there are a lot of questions. Here's a start at some of them and some answers about who is participating and why. Here are Tyler Cowen's questions about how exactly Libra will work as a currency without an underpinning banking and regulatory system. Here's a view that Facebook's main target in the near-term is remittances, but that it really does have ambitions to replace national currencies. One of the things I find most interesting about the whole thing is that this is a like Facebook building a giant sign to the world's governments saying: "Come seize all our data and regulate us heavily!" (and governments are indeed reading the sign!) I would guess that there will be approximately .1 seconds between the first cross-border transfer and an accusation of money laundering or terrorist financing. I was having a conversation this week about the main reason Amazon hasn't started consumer lending: it would never do something to invite regulator access to its data.
Here's a piece on the good and bad of Libra which I highlight because it's an odd mix of complete ignorance about how money works and evolved (did you know that before bitcoin there had never been money that wasn't controlled by a government?), with some actual engagement on the dangers of private digital monetary systems.

4. Evidence-Based Policy (and Information Interventions and FinLit Redux): I never intended for the faiV to become a regular discussion of financial literacy and information interventions, but here we are. In one of the most amazing tests I've seen of whether evidence can affect policy, Jonas Hjort, Diana Moreira, Gautam Rao and Juan Francisco Santini work with 2000+ Brazilian mayors and find that they are a) willing to pay to learn the results of impact evaluations, and b) change their beliefs, and c) are willing to implement new policies. The only thing missing is a test of whether they would be willing to shut down an existing program (say, financial literacy in schools). Score another one for David Evans' point from last week that information interventions do sometimes change behavior.
And here's a test of a financial literacy program in Colombia that delivered content through tablets to women recipients of a CCT program, with some social interactions built in. Attanasio, et. al. find that the program boosts not only knowledge but actual practices, with poorer, less educated and more rural women benefiting more. But still not impact on access to and use of formal services.

5. Financial Exclusion: This is so great it deserves its own item: a "visual essay" from the American Historical Review on how access to capital in 1800's New Orleans required getting yellow fever--and surviving. And how that channel led to many new migrants attempting to catch yellow fever as quickly as possible, despite the 50% chance it would kill them. Of course, that only applied to whites. While survival was a symbol of fitness for whites, blacks' relatively higher rates of survival was evidence that they were destined to be slave laborers in the fields.

Week of June 14, 2019

The Colorblind Edition

1. FinLit Redux: A few weeks ago I had an op-ed in the Washington Post bemoaning the ongoing emphasis on financial literacy training. David Evans had an issue with one particular sentence in that op-ed, not about financial literacy, but about the effectiveness of information interventions. Here's his list of 10 studies where providing information (alone) changes behavior. And I suppose my inclusion of this is another piece of evidence supporting his point? On the other hand, here's a long, rambling essay from the president of the (US) National Foundation for Financial Education which is one of the finest examples I've ever seen of not just moving the goalposts but denying they even exist. He's got all the greatest hits: don't evaluate based on current practice because we're changing; don't evaluate based on average practice, because of course there are bad programs; don't evaluate based on standard measures because programs vary; don't pay attention to negative stories because they are "old and tired"; and even, "hey look over there!" Is there an emoji for scream of helpless rage?
The reason I find such defenses so enraging is because the huge amount of resources being poured into financial literacy could be put to so much better use that actually are likely to help people. Here's a piece looking at one of the specific trade-offs: financial literacy distracts from the very real need to protect consumers from bad actors. That's not just theoretical. The (US) CFPB is actually shifting from consumer protection to education. Where's that scream of helpless rage emoji again?

2. Household Finance and Regulation: Thinking about consumer protection and the role and value of financial literacy requires thinking about household finance. Fred Wherry, Kristin Seefeldt and Anthony Alvarez have a short essay on how to think about these issues, with several sentences I wish I had written, including, "Stop treating the borrowers as if they are ignorant or irresponsible. And start treating the lenders as if they are inefficient (and sometimes malicious) providers of needed financial services."
There is a tension there, however, that I think too often gets short shrift. Consumer protection regulation necessarily involves removing some choices, and therefore some agency, from consumers. I hope to write more about this, but here is Anne Fleming, (author of City of Debtors which I've been citing frequently) writing about the trade-offs in the caps on interest rates proposed by some prominent Democrats. Making those trade-offs also requires regulators to decide what consumers really want. And that's not always so clear--for instance, here's a look at how "social meaning of money" sociological frameworks do a better job of predicting behavior in retirement accounts than behavioral or rational actor models. And of course the needs and desires of consumers vary so you're not just trading-off between choice and protection but between the needs and desires of different consumers. Yes, this is a bit of a stretch, but here's an article about how women are carving out their own niche in a bit of the household finance world that has been dominated by white men.
Now I recognize that all of this so far is about things going on in the US. But as I frequently argue, the US has a lot more relevance to global conversations than is generally recognized. For instance, here's a story about Facebook turning into a platform for the kind of informal insurance networks we talk about so often in developing countries.
  
3. Digital Finance: That's a reasonable segue into digital finance, especially since the piece quotes Mark Zuckerberg's ambition to make money as easy to send as a picture (which, y'know, isn't actually very ambitious given that a billion+ people can already do that). But in Hong Kong a lot of them are choosing these days not to do it. Well, at least not to use digital tools to make purchases. Why? Because they are worried that the government will use the data trail to identify who is participating in protests. It's a well-founded worry not just in Hong Kong but around the world, and one that digital finance advocates should be taking much more seriously. And no, cryptocurrency is not in any way a solution for this.
Aside from the arguments I've frequently featured on that issue, here's an op-ed andTwitter thread from Rebecca Spang nominally about Italian proposals for a currency alternative to the Euro but really about alternative currencies and good and bad money, and the effects on the poor. Another thing all of us, not just digital finance advocates, could do more of is relearn the lessons of the past--none of the problems of finance are new! 
That doesn't mean that I don't think there is value and promise in digital finance. I do! Here's a story about Nubank, Latin America's largest fintech, now expanding from Brazil to Mexico, offering digital bank accounts and credit cards. Yet more proof (like the report a few weeks ago that Bangladesh has more mobile money accounts than Kenya) that digital finance has taken hold globally. But more relevant to most readers, here's a new report from the European Microfinance Platform on the promise of digital pathways for boosting financial inclusion based on the experiences of practitioners using digital tools. And here's a review of some hearty debates from the launch event for the report. So I do believe in the potential of digital finance, I just take issue when it seems that people believe the problems of finance magically dissolve in the face of bits and bytes. 

4. Our Algorithmic Overlords: Speaking of problems that don't dissolve in the face of bits and bytes, how about the exploitation of children? YouTube is an app for that.
Meanwhile, Europe's data protection policies that were intended to help protect consumers seem to have further entrenched the power of BigTech.
Other problems that don't go away in the face of technology are the need for people to earn a living wage, and for businesses to have a business model that allows them to cover their costs. Uber is caught between those two problems and it increasingly appears that there isn't a way to navigate between the two. I'm increasingly convinced that the idea of negligible marginal costs in the digital realm is simply not true in most instances and that has huge implications for how we think about digital finance. Again, a topic I hope to return to.
In the meantime, here's a long essay from Vi Hart on how she has changed her mind about AI, UBI and the value of data. It's worth a close read. 

5. Global Development: I wasn't planning this but the transitions are really working today--since this is mostly going to be about cash transfers. In all of the stories about UBI and cash transfers, it had slipped my notice that Stockton, CA is running a test of a basic income guarantee. Stockton is one of those places that has a lot in common with many developing and middle-income countries, and very little in common with Silicon Valley, so the experiment is worth following.
In other transfer news, there's a new paper on a Targeting the Ultra-Poor experiment in Afghanistan which shows large effects. Of course, if I'm reading the charts right, the transfer was 5x ex-ante consumption so there darn well better have been large effects. Markus Goldstein has a nice write-up of the paper at Development Impact.
The big question about TUP, in my mind, is not about the near term impact of large transfers, but about the possibility of fade-out of effects, a la Blattman, Fiala and Martinez. Since TUP programs are very expensive, gains have to be sustained for quite a long time for them to be cost-effective. Imran Rasul notes that 4-year follow-up of one of the original TUP programs in Bangladesh showed sustained gains, and there is an 11-year follow-up forthcoming (though I'll admit I'm confused since the 4-year follow up was in 2016). But you should also read these results alongside this"different take on TUP programs" by Naila Kabeer (summary and further thoughtsfrom Berk Ozler) who does a qualitative study of two TUP programs.
Finally, late last week, Evidence Action announced that No Lean Season, a program to encourage seasonal migration in Bangladesh, based on a well-known impact evaluation finding large gains in income, was being shut down. There were two main issues: the discovery that the local implementer bribed local officials to get a license for the program, possibly with the knowledge of local Evidence Action staff, and that the program was not generating results at scale. Note that I have lots of ties here: I'm chairman of GiveWell who had recommended No Lean Season (here's their write-up), and I advised (pro-bono) Evidence Action on its communications.
 

L-IFT , a diaries research firm, is a proud sponsor of the faiV. See our video on  diaries research with 800 women microentrepreneurs in Myanmar .

L-IFT, a diaries research firm, is a proud sponsor of the faiV. See our video on diaries research with 800 women microentrepreneurs in Myanmar.

This is right up there with the most self-indulgent graphics I've ever included. I'm colorblind. Hence, I find most color-based charts enormously frustrating. So, a tear came to my (color-blind) eye when I came across this page for color patterns for use in R that are actually interpretable by the 10% of the male population that is like me. I promise that if you use this and then send me your chart/paper/whatever it will go in the faiV.  Source .

This is right up there with the most self-indulgent graphics I've ever included. I'm colorblind. Hence, I find most color-based charts enormously frustrating. So, a tear came to my (color-blind) eye when I came across this page for color patterns for use in R that are actually interpretable by the 10% of the male population that is like me. I promise that if you use this and then send me your chart/paper/whatever it will go in the faiV. Source.

Week of May 24, 2019

1. India: This year I resolved to make sure I was paying more attention to events in countries with large populations that aren't the United States, and not just treating them like an instance of a broader class. Given the elections in India, and the somewhat surprising strength of the BJP's performance, this seems like an opportune moment. Here's a Vox explainer on the elections for those of you who, like me, may have been only vaguely aware of the elections as a referendum on Modi vs. (Rahul) Gandhi. Here's an interesting essay on the most important feature of Indian politics not being the rivalry between parties but the generally uncontested move toward closing off civil liberties and a more authoritarian state. Here's 12 reasons why the BJP won, with perhaps the most interesting point being the BJP's efficiency at actually delivering welfare programs rather than just vague promises about future welfare programs. For those of you following along in the US or Australia, or any other country where right-wing populism has experienced a rebirth, there are clear parallels throughout. Here's Shamika Ravi on policy priorities for the new government (written before the election).
There is more than the election going on. So here's a couple of things that may be more of traditional interest to faiV readers. Demonetization was three years ago. And everything is back to where it was--maybe this should make programs with "null effects" feel better. And here's a fascinating study of the social lives of married women in Uttarakhand, with a particular emphasis on how "empowerment shocks" spread through social networks and decay over time. 

2. Causality and Publishing Redux: A few things popped up related to last week's focus on causality. One point I touched on was spillovers and general equilibrium effects. Here's a note from Paddy Carter of CDC on the tension for DFIs attempting to invest in ways that are "transformative" (read, lots of spillover effects) and measuring their causal impact. I also noted JDE now accepting papers based on per-analysis plans. Pre-registration isn't going so well in psychology where a new study looked at 27 preregistered plans and the ultimate papers and found all of them deviated from the plan, and only one of those noted the change. Brian Nosek's money quote: "preregistration is a skill and not a bureaucratic process." Which could serve as a theme of Berk Ozler's discussion of using pre-registration to boost the credibility of results, not just for an experiment. Very useful for those interested in developing the pre-registration skill.
This may be stretching it a bit, but Raj Chetty's incipient attempt to replace Ec10 at Harvard got a lot of attention this week. There's a lot to recommend his approach, but there are plenty of people who are concerned about the apparent glossing over of causality. I'm honestly worried that some of these things may cause Angus Deaton and other critics of causal claims from RCTs to go into apoplectic fits. Just when you thought some of the messages might be getting through, along comes a new toy. So I should probably not mention that there's an update to the oldDonohue and Levitt paper on abortion and crime that claims it has better evidencewithout dealing with any of the problems in the underlying model.
  
3. Micro-Digital Finance: Microfinance can be pretty confusing when you get beyond the simple statements and start to worry about how it actually all works, and how it's changing, and what we do and don't know. Hudon, Labie and Szafarz have a nice little primer on those issues with a microfinance alphabet. I wish I had thought of doing this.
I complained last week about "mobile money" not including payment cards, which dominate the United States. But a telecom-driven mobile money product is now available in the US. Well sort of. Not sure what to make of this yet. 
Caribou Digital and Mastercard Foundation have a new study of Kenyan microentrepreneurs "platform practices." I also don't know what to make of this, but that's probably because I haven't read it yet, but I figured many of you would be interested. 
Among other things it's hard to know what to make of, there's Earnin, a sort-of payday lender, health care cost negotiator, fintech something. It's confusing. And New York State regulators are confused too, which is probably not a good sign for Earnin. But that's nothing new--I have to point again to City of Debtors, a book that documents New York city and state regulators confusion over how to regulate small dollar lending for more than a century. 

4. US Inequality: The history of exploitative finance in New York continues to write new chapters, which unfortunately often seem to be just remixes of the old chapters. For instance, the oft-heard story of New York taxi drivers being driven to despair by the entry of Uber and Lyft, misses a big part of the story: those drivers are often operating in deep, deep predatory debt that was going to drown them whether ride-sharing came along or not. For those of you who have followed the supposed stories of microfinance driving Indian farmers to suicide, this should all sound familiar. 
One of the reasons that those loans were unsustainable is the skyrocketing cost of housing in US cities. And that's driving people out of cities, particularly the people with just enough to be able to move away. Why? It's the zoning stupid. Well it's more than that--it's economic rationality. The higher wages for unskilled workers in cities in the US have totally disappeared along with the rise in housing costs.
Overall, though the financial situation of Americans is getting better along with the job market. The new Survey of Household Economic Decisionmaking is out, and the oft-(mis)-quoted statistic about how many Americans would pay for a $400 unexpected expense with cash or a cash-equivalent is at an all time high (for the survey, which is only 6 years old). Still that's only 60%.
And so, many people feel insecure. Here's Jacob Hacker's essay on why, building on his classic book, The Great Risk Shift. Another reason is the continued increase in student debt (I'll tackle the Morehouse/Johnson/Philanthropic angle another week). Helaine Olen has a great policy prescription on that front: make student loans dischargeable in bankruptcy again (MSLDBA?). Though the mobility effects of college degrees may be substantially overstated, which makes the student debt problem even worse. And finally, what should be another reason, even if it isn't, is the many ways that the economy is corrupted by things like this

5. Three Day Weekends: Go enjoy yourself away from a screen, wherever you are.

L-IFT , a diaries research firm, is a proud sponsor of the faiV. See our video on  diaries research with 800 women microentrepreneurs in Myanmar .

L-IFT, a diaries research firm, is a proud sponsor of the faiV. See our video on diaries research with 800 women microentrepreneurs in Myanmar.

From  Alfred Twu , an illustration of "It's the Zoning Stupid" and a nice application for discussing tax incidence theory.  Source .

From Alfred Twu, an illustration of "It's the Zoning Stupid" and a nice application for discussing tax incidence theory. Source.

Week of May 17, 2019

1. Causality: In this great book I know, Jonathan Morduch describes an obsession over causality as "the marker of the tribe" of economists. Most people outside the field, then, might be surprised to find out how unsettled the science of causality is and how much, after all these years, the practice of academic economics is 80% arguing about causal inference. Well, at least in the circles of applied micro that I run in. Recently Emi Nakamura, an "empirical macroeconomist", won the Clark Medal("American economist under the age of 40 who is judged to have made the most significant contribution to economic thought and knowledge") for her work mapping macro theory to macro reality. One of her more well-known papers is a discussion of the gap between theory and evidence in macro; it has a jaw-dropping section on the best existing "evidence" on the effects of monetary policy. So much for an obsession over causal identification. 
Now before getting too holier-than-thou over what is considered evidence in macroeconomics, it's worth pointing out that the experimental micro-crowd is just getting around to measuring general equilibrium effects, the defining feature of macro debates. I've linked multiple times to recent work on GE effects of microcredit (and related programs) on labor markets (See here for links and lots of discussion on that). While I was writing about that the other day, it occurred to me to wonder, given what we know about peer effects in education, whether anyone had looked at whether spillovers/GE effects were responsible for the rapid fade-out of early childhood education interventions. Less than 24 hours later, this new paper from List, Momeni and Zenou showed up in my Twitter feed, finding large spillover effects from an early childhood intervention (1.2 SD! on non-cognitive skills, which are increasingly found to be the more important feature of such programs), which lead to substantial underestimation of program impact. On a related note, here's a short video of Paul Niehaus talking about the value of experiments at scale, including better measurement of GE effects.
Still, there are lots of appealing things about using experiments to establish causality, even if it is somewhat akin to looking for the keys under the streetlights. For instance street lights cause a 36% reduction in nighttime outdoor crime in New York City housing developments. Unfortunately, people really don't like the idea of being experimented on, or even the idea of other people being part of an experiment even when the treatment arms are "unobjectionable." (MR summary here). I'm not really sure how to think about that. 
If you want to dig deep into causality discussions, Cyrus Samii's syllabus for hisQuant II class this spring is here. Lots (and lots) of interesting and useful links there. If you're more of the video type, Nick Huntington-Klein has a new series of videos on causal inference, including one on causal diagrams and using Daggity to draw them. If you are among the obsessed and want to be even more so, Macartan Humphreys is looking for a post-doc to work with him on causal inference at WZB Berlin.

2. Academic Publishing: To understand the RCT movement you have to know something about one of the world's least efficient markets: economics journals (Yes, I'm sure someone has a paper/post explaining how the market is actually efficient after all). Seema Jayachandran tweeted this week about stats from her first year as co-editor at AEA: Applied: "4% were R&R, 36% were reject w/ reports, 60% were desk rejects." All of her R&Rs were eventually accepted and average and median time to decision was less than 2 months.
Data on the acceptance rates at all the AEA journals shows that Seema is doing an exceptional job. AEJ: Micro received 415 papers over a 12 month period, made decisions on only 55% of them, which were all rejections. Yes, zero of those 415 papers were accepted. The overall data led to this thread from Jake Vigdor with the provocative question: "If a journal...never accepts a manuscript, does it exist?" Or how about this paper from Clemens, Montenegro and Pritchett that was finally published in REStat after a decade in R&R? For the record, I have a paper with Michael that we got back for R&R after 4 years that I'm supposed to be revising but I'm writing the faiV instead. While I'm grinding an axe, let me also boost this question from Justin Sandefur on why citations still exist and haven't been replaced by hyperlinks. I wonder if an estimation of the dead weight loss from searching for, formatting and copyediting citation details could get published in an economics journal?
One of the reasons for the dismal acceptance rates in journals is the same as the dismal acceptance rates at top ranked universities. Reputation matters a lot. Tatyana Deryugina has a (revised) proposal on a different way of ranking journals that could lead to a more efficient publishing market. It's a start.
And to close out with some positive news: JDE is now prospectively accepting papers based on pre-analysis plans, without requiring the authors to commit to publishing there. It's almost as if the editors aren't maximizing their oligopolistic power. I hope they don't have their economist credentials revoked.
  
3. Digital Finance/Bangladesh: When the subject turns to mobile money, the country under discussion is still almost always Kenya even 12 years after the founding of m-Pesa. I have a particular axe to grind about counting use of mobile money without including payment cards, but there is now another reason to look beyond Kenya. There are now more people in Bangladesh with mobile money accounts than in Kenya. Of course, that's a function of population--penetration in Kenya is 73% (axe grinding: 70% of Americans have a credit card; this discussion does not include China), while it's just over 20% in Bangladesh. But we should expect adoption to accelerate in Bangladesh, and Kenya to be left well in the dust in terms of accounts.
Also, helpfully, there is an increasing amount of research on digital finance in Bangladesh. I'm a big fan of this particular paper. Here's a review of the state of digital microfinance in Bangladesh. And here's a report on the "opportunities, challenges and way forward" for the digital transformation of MFIs in Bangladesh. The latter builds off an earlier report on "retail micro-merchants" in Bangladesh that I've been meaning to link to but hadn't gotten around to. 
But that's also a platform to explain why I hadn't gotten to it: I hate the framing of "retail micro-merchants." That framing allows for comparing the "retail micro-merchant" sector to the garment industry in Bangladesh, which is honestly ridiculous. The better framing--and I am consciously trying to make this a term of art--is subsistence retail. We shouldn't be thinking of this group of people as an industry sector and looking for opportunities for growth for the same reasons that no one talks about boosting the "subsistence agriculture sector." The goal shouldn't be to boost it, but to get rid of it. To get as many people as possible out of subsistence retail as quickly as possible. These aren't frustrated entrepreneurs looking for tools to improve their business, they are frustrated employees. Now I'm not saying I think helping subsistence retailers is a bad idea. We should be looking for ways to boost their productivity, but mainly so they can invest in things that get them out of the sector and into jobs.  

4. Jobs: Which is a useful segway into the next item. An open question in my mind is whether we should consider the online-platform sector part of subsistence retail. I'm leaning toward yes. Here's a look back on what has happened to the "servant economy" companies in the 10 years since Uber's founding created a stampede of companies looking to exploit the slack of frustrated employees.
Here's Daron Acemoglu with a short essay on where good jobs come from, and specifically the insane bias in the last 20 years to investing in technology to replace low-wage workers rather than boosting productivity. Here's a new paper from David Kunst on the fall-out of that weird bias, documenting evidence of premature de-industrialization, and which jobs are being lost. Of note, there is an interesting interaction here with formality that may affect how we think about the barriers to formalization.
Getting people into good jobs is certainly a challenge the world over. Here's a new paper on an apprenticeship program in Ghana from Morgan Hardy, Isaac Mbiti, Jamie McCasland and Isabelle Salcher. The results are a bit complicated. In the short-run at least average income falls as youth shift from casual labor into self-employment. But the kids who trained with more experienced and more ex-ante profitable trainers actually do better. The paper's conclusion is that result can be improved by recruiting better trainers. I always have a problem with conclusions like that, because that option is probably not in the choice set. While spillover effects of early childhood education are probably masking some of the gains (see above), it's also likely that the decreased quality of teachers once you move from pilot programs to scale is a factor. I certainly don't know of any programs where the average quality of the staff increased as the program grew. 
Take for instance this program from the US which promised to teach coal miners to code and get them good jobs in the tech sector. I'm always amazed that people's initial reactions to programs like this isn't, "I have a better idea--let's teach them to be NBA players, they make even more money than coders!" It's about as plausible a theory of change (a classic study from the 1970s established that the productivity difference between "good" and "bad" programmers was at least 10x). Predictably, the program turns out to have been mostly a scam to enrich the founders. 

5. Our Algorithmic Overlords: In case you haven't seen it, Chris Hughes, a co-founder of Facebook, thinks it's time to break up the company. But there's a question about how much Facebook will continue to matter in a lot of the world, asChina perfects the tools of online surveillance and monitoring (I'm beginning to wonder if traveling to China ever again is going to be a good idea for me). Certainly an increasing amount of the hardware and software being used outside of the developed world is being created in China, and with TikTok even in the developed world. I specifically have to give a shout out to the subtle reference to James Scott and Seeing Like a State in that essay to explain the burgeoning black market in old Nokia feature phones.
The view of big tech coming out of China is an interesting lens to look at thediffering perspectives on big tech among right-wing populists in the US and Europe. In the US, where conservative viewpoints are traditionally stronger, big tech is viewed as an enemy of conservatism. In Europe, where the left has long had a stronger grip on more of the institutions of power, big tech is seen as an ally. And after you've thought about that for awhile, think about the new ways that tech in general provides tools of social control--say like deleting references to the ACA from US federal government websites. Why does that ring a bell? Oh yeah, because Intuit does roughly the same thing to con people into paying for their tax prep software

L-IFT , a diaries research firm, is a proud sponsor of the faiV. See our video on  diaries research with 800 women microentrepreneurs in Myanmar .

L-IFT, a diaries research firm, is a proud sponsor of the faiV. See our video on diaries research with 800 women microentrepreneurs in Myanmar.

A proposal from  Josh Zumbrun  on what the default style for all economic data charts should be, to emphasize measurement error and uncertainty. I kind of like it.  Source .

A proposal from Josh Zumbrun on what the default style for all economic data charts should be, to emphasize measurement error and uncertainty. I kind of like it. Source.


 

Week of May 10, 2019

Editor's Note: Today's faiV is guest edited by Dave Evans, formerly of the World Bank and now a Senior Fellow at CGD. Asking him to guest edit has everything to do with his Twitter-famous comprehensive summaries of research conferences, his attention to communicating research, and his voracious reading, and nothing to do with his review of Experimental Conversations or his famous siblings (I apologize for the exceedingly inside joke).--Tim Ogden

Guest Editor's Note: I wanted to call this the Schooled, Safe, Energized and Well-Read Edition, but Tim apparently insists on cryptic references. I really enjoyed guest-editing the faiV and can heartily recommend letting Tim know you would be interested in guest-editing sometime.*--Dave Evans 


1. Happy Teacher Appreciation Week: This week, people around the United States give gifts to show appreciation for teachers. One gift that teachers really like is a decent salary. Way back in the late 1970s, U.S. teachers were paid about 5 percent less than other workers with comparable education and skills. But hey, what’s 5 percent? Did you become a teacher to get rich? Hopefully not, since the U.S. teacher penalty is now nearly 20 percent. (Incidentally, evidence from teachers in Rwanda and health workers in Zambia suggests that recruiting career-focused or salary-focused providers delivers at least as good outcomes hiring people with a focus on pro-social motivation. So even if you did go into it to “get rich,” students and patients will be okay.) In Latin America, teachers faced a gap but it was narrowing in the early 2000s. In Africa, primary teachers face a pay gap but not secondary teachers. In the U.S., teachers have been striking at high levels in the last year, in part over salary, and I recently wrote a piece on what the U.S. can learn from international research on raising teacher salaries. In most cases, raising salaries doesn’t increase effort of teachers currently on the job, but it does matter for attracting and retaining good teachers. (Salary increases can also be a good opportunity to introduce other reforms.) De Ree and others make the argument that because the returns to salary increases take place relatively far in the future, it’s unlikely to be a cost effective education investment relative to immediate quality improvements. That said, the high-income countries with the best education results are those that pay their teachers well.  

2. First, Do No Harm (in schools): The primary objective of a formal education is arguably to learn things. At least, that’s what the World Bank argues; I realize the statement is not without controversy. But the first priority – if we can separate that from the primary objective – may be to keep children safe. Salisbury has a recent essay on the dual dangers of risky school buildings and violence perpetrated by school workers in low- and middle-income environments. This has been in the news recently with the collapse of a nursery and primary school n Lagos, Nigeria, and the revelation that a staff member at a charity running schools to help vulnerable girls in Liberia was in fact raping girls [Or, you know, the US's refusal to do anything to protect children from being murdered in their schools, so that children have to sacrifice their lives to save their peers--TO]. But it’s not just the news. A recent survey of children in Liberian primary schools shows that one in four children admit to having had sex with a teacher (and more with any member of staff), and in Kerala, India, more than one in five adolescents reported sexual abuse in the last year. Three-quarters reported physical abuse. I’m reminded of this horrifying line inJennifer Makumbi’s masterful novel Kintu, when a primary school girl in Uganda is raped by her math teacher: She “bowed in gratitude, forgetting that teachers were not shepherds, that even if they were, once in a while shepherds had been known to eat the lambs in their care.” It’s hard to imagine children learning and thriving in school under threat of violence.
  
3. Get the Lights On: By the latest estimates, more than half of people in Sub-Saharan Africa don’t have access to electricity. Last week, Arlet, Ereshchenko, & Rocha highlighted that this is not a village problem: one quarter of the unelectrified are in urban areas. Part of the problem is the irregularity of the available power: regular power outages – common in many countries – deter households from connecting to the power grid. Another factor is how complicated it is to connect to the grid, which is unsurprising: If we want people to do things that they probably want to do anyway (like connecting to the grid), then make it easy for them. Yesterday the World Bank launched a big report on energy in Africa, which showed that in some places, people don’t get electricity even if they live within access to an electrical grid. Connection costs are high and – in addition to the consistency problem above – “electricity connection via conventional AC (alternating current) supply requires minimum building standards that many existing houses do not meet.” 

4. In the long run, we’re all dead. But our kids aren’t!: A central paper in modern development economics is Esther Duflo’s study showing that school construction in Indonesia led to more schooling and higher wages. A new study by Akresh, Halim, and Kleemans [] shows that the increased schooling reduced fertility for women. It also increased secondary and tertiary education for the next generation, especially for girls. The biggest impacts were on increased mothers’ education leading to education gains among their daughters. This is consistent with recent work that I’ve done with Fei Yuan showing that some of the programs that deliver big gains in girls’ education are – like the school construction program in Indonesia – not targeted to girls. (There’s still certainly room for girl-targeted programs that satisfy girl-specific constraints, but some constraints to access and learning that girls face are not gender-specific and so can be met with general programs.)   

5. Ethnography, aka Reading: This week I finished reading or listening to my 49th book of 2019, Huda Fahmy’s aptly named Yes, I’m Hot in This: The Hilarious Truth about Life in a Hijab. Fahmy is from Michigan (USA), but twenty of the other books I’ve read this year have been by authors from twenty different African countries. Two were memoirs of children surviving terrible events or achieving great things or both. Clemantine Wamariya fled Rwanda at the age of six, during the genocide, and traversed several African countries, both in and out of refugee camps, before landing in the USA. If you want to feel the impact of conflict on children’s lives, read her book (written with Liz Weil). Over in Malawi, William Kamkwamba developed a vision of wind-powered energy as a child and essentially taught himself to build a windmill, which led to other opportunities. His memoir – written with Bryan Mealer – includes lots of insights into the rural public education system in Malawi at the time.
Fiction also offers a useful lens. African fiction, just like fiction from everywhere else, is not ethnography: It’s art. But just as an ethnography is the compilation of many interviews and other data sources, I think of fiction as a little interview with the author. She may not have a representative view of her nation, but if you piece together enough American or Nigerian or Botswanan fiction, you learn something about the society (and you also enjoy the art in the process). I recently read a collection of short stories by South Sudanese writers – you know, a literary focus group – that took me into a wide range of environments in the world’s youngest country.

* Dave Evans denies he wrote this sentence.

Along the lines of learning from fiction, occasionally a bit of comedy speaks deep truth. Such is the case with this faux ad for Romano Tours, which – as you plan your summer trips – reminds you of exactly what vacations can and cannot accomplish and is reminiscent of Tara Parker-Pope’s coverage of research showing that  when you get back from vacation, pretty quickly you’re back to being the same person you were before . Surprise!

Along the lines of learning from fiction, occasionally a bit of comedy speaks deep truth. Such is the case with this faux ad for Romano Tours, which – as you plan your summer trips – reminds you of exactly what vacations can and cannot accomplish and is reminiscent of Tara Parker-Pope’s coverage of research showing that when you get back from vacation, pretty quickly you’re back to being the same person you were before. Surprise!



Week of May 2, 2019

The Workers of the World Unite Edition

1. Microfinance/Household Finance: I mentioned the Hrishipara Financial Diaries last week--it's a project Stuart Rutherford has been running in central Bangladesh for four years now. That's a truly unique data set of high frequency data on the financial lives of households. I also mentioned that Stuart is now funding the continuation of the diaries out of his own pocket. Don't make me beg for someone to step in with more funding so this dataset gets even more valuable. It's incredibly cheap by the way---hmm, maybe the first faiV GoFundMe? See, don't make me resort to such things!
Continuing in the wave of revisiting ideas about microfinance and it's impact, Bruce Wydick has "3 reasons the impact of microcredit might be bigger than we thought." Of course, the "we" in that sentence matters a lot. Mushfiq Mubarak and Vikas Dimble have a short review of microfinance research with handy links to the research we talk about most these days: evidence for ways that microfinance could innovate to increase impact. Of course, I have to return to the binding constraint on microfinance innovation: funding appropriate for investment in innovation

2. Replication: I know what you're thinking: "Hey, I haven't heard about Worm Wars in a long time. What happened?" And so, let me bring you a new paper from Owen Ozier that reviews the history of the Worm Wars in an effort to understand the state of reproducibility in Economics and related topics. Here is Owen's Twitter thread with some "wild things" he learned working on the paper. And here's Annette Brown's replies (onetwothree) pointing out some longstanding errors in the literature on replication in economics--one lesson is that if you don't read the variable definitions you're likely to draw the wrong conclusions and others won't be able to replicate your work.
Here is an interesting argument that theory constrains degrees of researcher freedom more than experiment--that in fact one of the sources of the replication crisis is a lack of theoretical frameworks around empirical research. Oh, and that empirical work needs more formal mathematical models. In case you haven't figured it out yet, this is coming from the perspective of "behavioral sciences" which apparently does not include economics, where alot of recent argument has been about the need for experiments to constrain degrees of freedom and that "mathiness" is a problem. And here's Dorothy Bishop on "reining in the four horsemen of irreproducibility".
Inherent variability is not one of those four horsemen, but it is a plausible source of irreproducibility that has nothing to do with bad practices or researcher misbehavior. If reactions to stimuli vary a lot based on minor contextual factors (which is in fact one of the findings of behavioral sciences, albeit one that is itself subject to lots of questions about replication), then you should expect that the exact same experiment conducted at a different time and place with different subjects will yield different results. Whether that's the case is the subject of this debate between Simmons/Simonsohn, McShane/Bockenholt/Hansen (not that one), and Judd and Kenney (also not that one), all hosted by Andrew Gelman. It's worth the time to read through.
  
3. Research and Communications: Taking that conversation as a leaping off point, here's a new paper on demand effects in survey experiments. On the one hand, it may come as a relief to know that the paper doesn't find much evidence of experimenter demand effects. On the other hand, a lot of economics lab experiments are built on the idea that the experimenter can induce people to behave in certain ways with incentives--and when those incentives don't work, it's evidence of some other important factor operating. But, "Even financial incentives to respond in line with researcher expectations fail to consistently induce demand effects." I feel like this paper could not have been published in an economics journal, because the theory constraints (I'm particularly proud of this callback).
In other backed-up research methods links, I've carried around an open tab for this very useful post from Berk Ozler on alternatives to recruiting a control group for more than a month. As usual Berk lays out the issues and questions, and there's bonus follow-up via Susan Athey, linking to some other recent papers on related issues that I've also been carrying around in open tabs, so I'm feeling good about slaying all those giants at once.
The questions Berk is asking and the responses from Susan stirred something deep in my memory bank and led me back to this 2014(!) post from David McKenzie onwhether the impact evaluation production function is best understood via O-Ring Theory or Knowledge Hierarchy theory. And it seems to me increasingly like the answer is O-Ring.
Finally, there is another part of the production function: communicating the results of the work. That is a place where it seems the dominant model is Knowledge Hierarchy--leave the communications side to the comms experts. (OK, now I have to pause for moment and figure out if that explains the faiV or the faiV is contradictory evidence...). Here is David Evans making an argument that becoming a better communicator should be high on the list of priorities for economists. And here's a paper that finds that high quality communication is contagious, so there are positive externalities if you follow David's advice.
I'm going to confidently predict though, that this last link on communications is going to get the most clicks this week: Bullshitters: Who Are They and What Do We Know About Their Lives? 

4. US Inequality: Here's another topic I've been neglecting of late. And there is some good news: wage growth is finally picking up for the bottom half of the distribution. And minimum wages may be the highest they have ever been.
On the other hand neither of those two trends are going to make a meaningful impact in the racial wealth gap. Here's an essay on that topic which I broadly agree with but have some quibbles. Particularly the statement that "there is no buying your way out of racism." On the individual level that is obviously true, and the systematic worse outcomes for people of color no matter what their wealth is powerful evidence of it, even if you aren't persuaded by the numerous stories. On the other hand, from a historical perspective, it seems to me that the only two things that have worked in dissolving societal racism are a) integration during war, and b) economic growth/power. But I'm very interested in research on this question if you know of it. On that point, here's a discussion of the findings in the most recent GSS of significant positive shifts in racial attitudes.
One of the main policies that "works" to fight poverty in the US is the Earned Income Tax Credit. I have a separate issue with how we talk about the EITC "lifting people out of poverty," when it is delivered in a lump sum and most of the recipients live below the poverty line for 11/12ths of their year. It's almost as if people in the US have no sense of seasonal poverty. But that aside, the widely held idea is that part of the anti-poverty impact of the EITC is encouraging people to enter the labor force. Here's a thread on some emerging research that questions that widely held view.
As the Trump Administration tries to have courts cancel the ACA, here's a reminder that the health insurance plans low-income people have access to through work are much worse than the plans they have access to via the ACA marketplaces. And Texas appears poised to waste an enormous amount of time and money limiting what foods SNAP participants can buy.  

5. Philanthropy: It's late in the day so I'm going to wind things up here quickly. The Notre Dame donations have kicked up the flames of a newly revived debate about the role of philanthropy, especially large scale philanthropy, in democratic societies. Here's some historical perspective on what that debate used to look like, and it involved riots.
Here's Rob Reich, political scientist, on the corruption of college admissions philanthropy and the idea of auctioning admittance to elite schools. And a conversation about the ethics of big donations to arts and culture, and the Sacklers. Here's an interview with Melinda Gates. Here's a perspective on what is next for the Hewlett Foundation, one of the larger US foundations giving to global causes and an incubator of sorts for a lot of the "better philanthropy" and evidence-based policy efforts, as Ruth Levine steps down.

Breaking my own recent rule, here's a fun thing that actually relates to faiV themes. If you can guess which coffee maker I have in one of my offices, you win a free annual subscription to the faiV.

Breaking my own recent rule, here's a fun thing that actually relates to faiV themes. If you can guess which coffee maker I have in one of my offices, you win a free annual subscription to the faiV.


Week of April 26, 2019

The Waste of Time and Money Edition

1. Household Finance: I'm as surprised as anyone that this piece I wrote on the waste of time and money that is mandatory financial literacy classes in the Washington Post seems to be getting as much traction as it is. It's the closest I've ever come to going viral on Twitter (if you want to, here's the tweet just ready and waiting for you to retweet and further drive up those numbers). The comments, by the way, are about what you would expect--and further evidence for Morgan Housel's "you have to live it to believe it" thesis on perspectives of finance. I'm not the only one banging the drum against financial literacy classes: here's Jen Tescher of CFSI imploring banks to stop funding finlit classes and focus on tools that actually help customers. 
One of the likely reasons (but certainly not the only one!) that finlit makes such little difference is the mismatch between what is taught and the actual financial lives of most households. Take for instance figuring out income taxes in the new economy. Most people in the US got a tax cut in 2018 but most of those think their taxes actually went up, because the connection between taxes and paychecks is so damned complicated in the US. And trying to figure it out if you're a contractor rather than an employee...
There is something worse than legislators mandating financial literacy. Intuit engaged in shockingly (even for cynical me) deceptive behavior by tricking people into using their paid product rather than the free product that they were eligible for--even going so far as to make sure that search engines didn't index the web page to use their regulatorily mandated free file service so it was for all intents and purposes invisible. No amount of financial literacy is going to fix that. If you were thinking that this sort of behavior was exactly why the CFPB was created you would be right, but since Mick Mulvaney has destroyed the agency, don't expect any meaningful action against Intuit.
This isn't just a US problem. This sort of thing--hiding the information customers need to make good financial decisions--happens everywhere. Think of the changes in transparency of pricing of M-Pesa. Or this audit study by Xavi Gine and Rafe Mazer finding bank personnel in Ghana, Mexico and Peru don't tell customers about the best account for them (the customers that is). This seems like the right time to bang on one of my pet drums: middle-income countries, look to the US to the see the future of your financial system and tremble.
Looking from the other side, the US has a lot to learn from international contexts about how households manage volatile financial lives. Stuart Rutherford has a fantastic write-up of the 3 years of ups-and-downs and coping strategies of a family in the Hrishapara Financial Diaries. Stop what you're doing and read it. But let me also call-out that Stuart is now funding the Hrishipara diaries out of his own pocket. Any funder who is reading this: send Stuart some money to keep up this remarkable work. Please. 
My friends at the Aspen Institute Financial Security Program have a new report on short-term financial stability and how important it is for any larger goals, based on the work of a number of organizations focused on the issue (NB: I'm a senior fellow of Aspen FSP and was involved in the early discussions that led to this report). Before you international folks keep scrolling...there is a lot of overlap between the insights here and the situation in middle-income and developing countries. And you could easily frame it in the same way that most on the international scene do: the importance of building resilience to shocks.

2. Financial Inclusion: I'm one of the retrogrades who refuses to give up on the term "financial inclusion" (while acknowledging the points made by advocates of "financial security" and "financial health"). Speaking of retrogrades, Matthew Soursourian at CGAP is even more retrograde than I am, making an argument that "access" is important and we shouldn't fetishize "usage." One of the reasons is that usage may be harmful--and Greta Bull argues that we need to talk about that, particularly around credit. Over at Next Billion, Graham Wright of MSC (formerly MicroSave--apparently I'm also retrograde in not changing FAI's name), has some speculation on the next 20 years in financial inclusion (which I take as explicit endorsement for "inclusion" whether Graham meant it or not). One of his key points is on the issue of consumer protection, which in addition to dovetailing with Greta's post, allows me to point out that in every other domain the word "inclusion" means fair and equitable participation and so we should make that part of the defacto definition of financial inclusion. Drawing things fully back to Matthew's post, the one thing I think he misses in the argument for access is network effects. The value of an account has a lot to do with who else has and uses accounts and we should expect usage to trail substantially behind access especially when less than, say, 60% of people have accounts.
Two quick hits on China and financial inclusion: Here's a piece that argues that China's "social credit score" is less coherent and more complex than it is usually portrayed. But then at the Avengers:End Game premiere, one of the trailers was a public shaming of delinquent debtors. I don't know if that's confirmatory or contradictory evidence.
Finally, there is a lot to learn from the history of financial systems and the way they include and exclude. Rebecca Spang reviews a new book (The Promise and Peril of Credit--which would have been a great title for Greta's post--by Francesca Trivellato) about the development of financial instruments in Europe and anti- and philo-semitism and how it shaped economies.
  
3. SMEs: I'll admit this is a bit of a stretch in the initial framing but it's something I've been thinking about a lot and I don't have a better place to put it. So to start, here's Gabriel Rossman live tweeting an overhead conversation in coffee shop where a couple is being recruited into Amway (one of the original multilevel marketing schemes if you're not familiar with Americana). The couple doing the recruiting keep returning to how inspirational the training is and how important it is to commit to the program. Like Gabriel, you're probably cringing and wishing there was a way to warn the "marks." But at the same time, the body of evidence finding that inspiration is effective is growing, and may work better than business training at driving positive outcomes.
Think about this with me a little more. Specifically think about Ubaydullah in Stuart's post mentioned above. Ubaydullah's main occupation is breaking bricks, and when asked what he thinks about while he is doing this, he replies, "mostly nothing." Now think about Blattman, Franklin and Dercon's sweatshops versus microcredit in Ethiopia experiment, recently updated, that finds that after five years all effects fade out--specifically that people leave their factory jobs and close their microenterprises. Or one of Stuart's earlier posts about Hrishipara diaries looking at why so many microenterprises don't grow--people don't want them to. Or this Pearls Before Swine comic this week. Or the findings from lots of studies of forced or semi-forced migration that makes people better off even though they didn't want to move. Or even the Gine, Goldberg and Yang experiment with fingerprinting leading to more investment by borrowers.
I don't have answers here, but I have a lot more questions than I used to about how to think about inspiration and the determinants of micro and SME growth. My current working model though is that people have a type and that type is hard to discover, particularly in developing contexts, and even when you have opportunities to do so, causality is really hard so people can't figure out if they are good at something or not, even when they are doing it, and that inevitably discourages effort...and maybe I should be shifting my priors about Amway.
Here's a semi-related piece on perceptions of risk among potential investors in SMEsand the (non-existent I have to note) "missing middle" and the need for social investors to reduce systemic risk. And here's a review of a book from last year that I missed (Big is Beautiful: Debunking the Myth of Small Business) arguing we should stop paying so much attention to small business. And here's Tyler Cowen's new book, Big Business, arguing roughly the same.

4. Our Algorithmic Overlords: Usually I try to draw in lots of sources in each item, but the New York Times is running a series on the topic beginning with "It's Time to Panic About Privacy." Other pieces cover how the police use Google Maps location data to do post-hoc identification of who was near a crime. How China'smass surveillance and detention of the Uighurs works. And how those surveillance systems that China has developed are being exported around the world to places like Ecuador, which is certainly a different take on One Belt, One Road. But it's not just China of course--the consequences of being caught in a digital dragnet or exposing one's digital data are especially dire for low-income households in the US (who are forced by state surveillance to put their private information on file in less than secure places). Which ties us back nicely to Graham's and Greta's posts and helps me reinforce the point about breaking down the silos of attention between the US and developing countries on these topics. And finally, here's an article at how hard it is to "fix" algorithmic bias from Vox, so I'm not completely unisourced. 

5. African Development: Is Africa industrializing in ways that will make it the next growth story? Here's Noah Smith in thread form and in article form arguing that it is, largely because of Chinese investment both directly in building factories and in infrastructure via the (actual) Belt and Road Initiative. By the way, today there's a big conference in Beijing where China seems to be offering some concessions on debt related to BRI. Here's Dani Rodrik arguing that it's not (in 2017, but he affirms this take). And a dose of realism on how far African countries have to go just to catch Latin America.
There are other parts of development than industrialization, like public health, and there's big news there too. Two different malaria vaccines are being rolled out--the first, which is about 40% effective in earlier trials, will be delivered to 360,000 people in Malawi, Ghana and Kenya. The other, which was 100% effective in a clinical trial, is moving to the first field trial next year on an island in Equatorial Guinea, where 2100 people will receiving the vaccine next year.

Week of April 12, 2019

1. Arbitrary and Biased: I feel like "arbitrary and biased" should have been the tagline for the faiV but it'll have to do as just the name this week's edition (I won't make the obvious joke). The reference here specifically is an update to my post at CGAP on impact evaluations and systematic reviews of financial inclusion interventions. Duvendack and Mader, authors of a systematic review of reviews that I've mentioned in the faiV and in that post, responded. And then I responded to them. The short version, if you don't want to click on all those links or do a lot of scrolling, is that we disagree substantially (though in good faith!) and particularly on the issues of arbitrariness and bias. My perspective on these issues have been substantially influenced by Deaton's and Pritchett's critiques of RCTs, which feels a bit ironic. Systematic reviews are useful, but they are no less arbitrary nor less biased than other attempts to synthesize the literature--they're just arbitrary and biased in different ways, albeit generally more transparent ways (though what we know about how disclosure affects people's trust leaves a question about the benefits of that disclosure). 
Reveling in the arbitrarily biased essential nature of the research enterprise, here are a couple of papers that raise different questions about how the literature on microcredit may be biased. Bedecarrats, Guerin, Morvant-Roux and Roubaudreplicate the Al-Amana microcredit impact study and find errors and issues with the data and code--though exactly how much it matters to the big picture conclusion isn't clear. Meanwhile Dahal and Fiala review the microcredit RCTs focusing on whether they have sufficient power to detect likely magnitude of effects (and find that they aren't) and find significant and meaningful effects on profits when the data is pooled. I need to read both these papers more closely, but they are interesting enough that I didn't want to wait before including them in the faiV.

2. Evidence-Based Policy/Methods: Speaking of arbitrarily biased research, the 5% statistical significance threshold is perhaps the most influential arbitrarily biased feature of modern academic research. Some people are trying to change that--well more than 800 who signed onto a letter in Nature protesting the cutoff. Before you come to a conclusion on whether that letter will make a difference, I must note, as many on Twitter did, that it's not a statistically significant portion of scientists who have signed on.
Another arbitrary bias, according to Nick Lea, deputy chief economist at DfID, is the need to run regressions in economics papers. David Evans, now ensconced at CGD, responds with a defense of regressions and some ideas on how development economics can be better.
Here's a reminder that "purely evidence-based policy doesn't exist" though I'm not sure how many people thought it did. And here's a reminder from Straight Talk on Evidence that short-term impact often fades out, something evidence-based policy really needs to take into account.
And finally, here's an interesting piece from mathemetician Aubrey Clayton adjudicating a long-running dispute between Nate Silver and Nassim Taleb over probabilities, finding that Taleb "overplays his hand."
  
3. Household Finance: The mythology of Spanish colonialism in the Americas centered heavily on cities of gold (anybody remember this?). Here's a story about the reverse--Dominicans searching Spain (and Switzerland) for lost troves of gold. It's all a scam of course, of the sort immediately recognizable by anyone who has spent time in Latin America. It's a fascinating read because of how the story delves into the psychology that has led so many Dominicans to believe (and continue to believe) an ancestor secreted billions of dollars of gold in Spanish and Swiss banks that they stood to inherit--to the point that they quit jobs and made all sorts of other bad financial decisions. When there is little hope, believing that slow, steady abstemious frugality will matter may seem as much magical thinking as hidden inheritances. Here's a piece from Morgan Housel on how much our (macro)financial experiences affect our later decision making.
The mismatch between advice, reality and experience means that most financial advice on offer today is useless for people living on low incomes--and the piece doesn't even address the problems of volatility. Here's Helaine Olen taking Suze Orman to task on the magical thinking that buying coffee makes a meaningful difference in household budgets.
Keep that in mind when you read this announcement from Walmart that customers have "moved $2 billion through" their prize-linked savings program. Don't get me wrong--that's great. But do notice that "moved...through" sounds a lot like high-frequency savings and isn't defined, while the claims remain that people are learning saving habits and becoming more financially secure.
On a related note, here's a recent Planet Money story on Purdue University's new income-share college loan program (which grew out of an idea from a Colombian economist and was piloted in Colombia). And here's a story I stumbled across on the lingering death of a much earlier program at Yale that was a miserable failure

4. Our Algorithmic Overlords/Digital Finance: Lucy Bernholz has a problem with "AI for good" and other such constructions. The big issue for civil society is not how to use the technology but to figure out how to manage, counteract, regulate, or build on the technology that is already in use. She suggests this essay on AI and the administrative state, which I haven't read yet, but I always trust Lucy's recommendations so I'm passing it on to you.
I think Lucy and I would have a similar perspective on this article, and I'm going to let you guess what that is via this quotation: "We believe that the lack of access to financial services is fundamentally a technology problem." It's a near perfect illustration of Matt Levine's dictum that the fate of FinTech is to relearn all the lessons of modern finance, painfully and in public. Now I'll take JUMO (the source of that quotation) at face value and believe that they are using AI and machine learning to find ways to include rather than exclude. But here's a different fundamental problem: it's always more profitable to fire bad customers than gain new ones.
Of course there are many more issues when it comes to applying AI and machine learning to financial services. Here Aaron Klein does a terrific job of walking through some of them. They of course don't apply to JUMO, yet, because Aaron is looking at how the application of AI and machine learning interacts with US anti-discrimination law. But it's an illustration of some actual fundamental problems of access to financial services and the potential benefits from much deeper engagement between regulators and practitioners in the US and developing and middle-income countries. 

5. Cash Transfers and UBI: We'll end with some quick hits on some new stuff on cash transfers and UBI. Here's a write-up of a survey of poor Indian households on their preferences when it comes to cash transfers versus spending on public health, roads and jobs: cash transfers come in last, public health comes first. Perhaps one reason why is a trust gap--here's a story from Kenya about the lack of transparency and limited reliability of public nutrition cash transfer programs.
Another way of determining preferences related to cash transfers is the revealed preferences of what people do with the money. That's what Almas, Haushofer and Shapiro do with the GiveDirectly cash transfers to assess whether there is a nutrition poverty trap (there isn't)

From  Natalie Michelle  and  Joshua Tait  a typology of superheroes as neoconservatives. I include this in the hope that someone will produce a version of this for superheroes as neoliberals.  Source  

From Natalie Michelle and Joshua Tait a typology of superheroes as neoconservatives. I include this in the hope that someone will produce a version of this for superheroes as neoliberals. Source 

Week of April 5, 2019

1. Financial Inclusion: It's an "interesting" time in the world of financial inclusion, in the sense of that (apocryphal?) Chinese curse. There are arguments on whether to change the name of the "sector" accurately reflects the goals, the funding environment is uncertain, digital financial services are shifting business models and regulatory frameworks--all also indications that there is important convergence between "developed" and "developing" countries. But most importantly there are questions about whether the results from the work of the last 40 years (a rough approximation of the modern microfinance movement globally, and the asset-building movement in the US) justify further investment. 
You can see the tensions in two recent posts at Next Billion: first, Leora Klapper on the importance of investment in financial inclusion to meet the SDGs; and a fiery response from Phil Mader and Maren Duvendack, authors of the Campbell Collaborative/3ie "systematic review of reviews" that I've likely mentioned a couple of times. But the "interesting" times also explain, at least in part, the raft of other evidence reviews of various sorts that are appearing (IPADvaraUNCDF/BFA,Caribou DigitalCGAP). It's enough to get you to buy into Lant Pritchett's dictum that RCTs are "weapons against the weak."
CGAP asked me to write something about all this--and to do it in under 1000 words. You can guess how well that went, given that the summary for the evidence review I've been working on for CDC is more than 10 pages (you should also read that as an acknowledgement of a specific conflict of interest when it comes to talking about evidence reviews). Anyway, the final result is here. The bottom line is that I'm skeptical of what can be learned from systematic reviews--channeling some other Pritchett-thought on where policy-relevant insights come from.
By the way, if you're skeptical of the point about most interventions struggling to show meaningful impact, here's a new paper making the case that TB public health interventions in the early 20th century had little to do with declining TB-mortality; and here's a paper from the education sector so frustrated that they can't find evidence of impact that they propose doing away with credible large-scale impact evaluations. And here's an open letter to a hypothetical education minister with some useful statistics on how little learning happens in schools in most of the world.
  
2. Global Productivity: Plenty has been written about stagnant wages, slow growth, and rising inequality in developed countries (if you're based in the US, it might not be apparent that this is a global phenomenon, but it is.) But there's another important phenomenon that hasn't penetrated the popular consciousness nearly as much, probably because the impact isn't as immediately apparent: there's a global productivity slowdown. That's a problem because rising incomes come from growth, and growth comes from productivity gains.
Here's a new paper from Gordon and Sayed documenting the trans-Atlantic trend in slowing productivity, and how closely European productivity growth (or lack thereof) has mirrored that of the US, with a time lag. Their thesis is that the slowdown is related to a "retardation in technical change."
That probably sounds odd given that I know about the paper and you are reading about the paper on using technologies that were essentially unfathomable in 1980. But overall economic dynamism, including technical change has actually slowed dramatically since the post-war years. And there's emerging evidence that there is a single cause for all of these issues: the aging of the population
It's a fascinating thesis that makes a lot of intuitive sense, and there is growing evidence for it from lots of different directions. I'm sure there will be lots more papers on this in the years ahead, but in the meantime it suggests a few interesting thoughts: a) China has a big problem coming, and b) future productivity growth is going to come from India, Sub-Saharan Africa and Latin America, and c) we all have legitimate reasons to worry about millennials not having sex.  

3. (Mostly US) Household Finance: I'm going to open with an acknowledgment of severe cognitive dissonance related to item 1 above: my work reviewing evidence on investment in financial inclusion and financial systems, and reviewing others reviews, has changed my perspective on what is learned from such reviews. But one of my long-standing hobby horses is railing against financial literacy because of the lack of evidence that it accomplishes anything and systematic reviews that it accomplishes essentially nothing. So now as I read stories like this about more and more states in the US requiring financial literacy as a condition of high school graduation, not only do I get raging mad, but I also have to battle against my own arguments on how to understand research. To be clear, my perspective hasn't changed--current financial literacy programs are a waste of time and money. But I am more sanguine about investing in figuring out ways to provide meaningful financial literacy. 
Tying everything so far together, here's an article from SSIR on the "cost of financial precarity" which includes reduced worker productivity, suggests why financial literacy training doesn't work (it's about the wrong things) and argues for why investment in "financial well-being" (a phrase that's part of the debate over what to call financial inclusion now) is important. And here's a newish JPMorganChase Institute piece on another part of why financial literacy is about the wrong things: how families manage tax refunds and payments
For those interested in going deeper to understand to understand what is happening in the US families' finances over time, the Federal Reserve Board has created an amazing new dataset: Distributional Financial Accounts. They use a "more comprehensive measure of household wealth" and provide data quarterly to track wealth distribution. By the way, the early findings are quite consistent with the story of aging population driving asset accumulation among older and wealthier parts of the population.
How does wealth concentration happen in the US? It's not just inheritance. Ager, Boustan and Eriksson have a new paper looking at how wealthy slave-owning families quickly recovered their position at the top of the economic ladder after Emancipation, in economic terms a huge negative wealth shock. If you'd like the summary version, here's WaPo coverage of the paper with some interesting details on the work required to find and link 1800's data to track cross-generational outcomes. And before leaving the US, one more thing to tie all this together one more time. Here's a piece that leads with the idea that there are steps that individuals can take to do something about income and wealth inequality, but the ideas really are either the kind of things that are in financial literacy curricula around personal actions that don't lead to meaningful changes in outcomes, or actually systemic changes not individual actions. 
Finally, I'm going to shift gears radically to another part of household finance: intra-household bargaining. Here's a cool new paper that looks at the levels of cooperation, trust, altruism and transactional behavior in polygynous households (of note, 80% of authors are women). 

4. Bank (and other financial services) Behavior: More discouraging to me than any impact evaluation, or systematic review of impact evaluations, finding modest impact are stories about the behavior of banks and financial services firms. Walk with me on the mostly dark side for a while. 
A few weeks ago I covered the scandal in Australian banking after a government commission found widespread predatory behavior by banks. Fifty leading economists in Australia were surveyed about whether something could be done--they unanimously agreed that something could be done, but a substantial minority seem to think major changes are required (e.g. replacing Australian regulators with foreigners!). If Australian regulators are hopelessly compromised, what hope dodeveloping countries like Uganda have of maintaining regulator independence?
Sometimes the regulators do the right thing. Like reporting blatant attempts at bribery by the CEO of an insurance conglomerate looting its assets to fund his other businesses. But much of the bad behavior isn't really under the control of regulators.It's culture, and cultures don't change easily. That's not just a statement about Wells Fargo and unsavory behavior. Here's a new paper about how organizational culture at Indian banks inhibits the adoption of beneficial innovations that reduce the costs of borrowing.
How do the bad actors get away with it. It turns out that consumers enable some of the bad behavior by simply not paying attention. For instance consumers in the UKwon't pay enough attention to savings account disclosures that would allow them to save 123 pounds in the first year. Sigh. 

5. Procrastination: Perhaps the most important thing that I have ever linked to in the faiV: Procrastination isn't about laziness or self-control. And that's why the faiV is so late so often. 

Week of March 22, 2019

1. Social Investment: You've of course seen many stories about the US college admissions bribery scandal. And if you pay any attention to the world of impact investment you likely have seen that Bill McGlashan, the very public face of one of the world's largest impact investment funds, was one of the people arrested for participating in the scheme. Anand Giridharadas, who has become the very public face of criticism of modern philanthropy and social investment, discusses why McGlashan is "the most important fish" in the storyHere's the Twitter thread versionif you prefer that over a 4 minute video.
Trevor Neilson, co-founder of the Global Philanthropy Group, says that McGlashan's behavior should not be seen as a reflection on impact investing as a whole, because...well apparently because he wrote a Medium post saying that it shouldn't. There's really no argument there other than "Our goals are too important to be worried about means!" if you consider that an argument. Here's Jed Emerson, who may have an argument, but I just don't understand what is happening in this piece. Lauren Cochran, managing director of an impact investing firm, actually has a few arguments attempting to make the same point, including that McGlashan himself was a figurehead chosen to attract investors, but who wasn't involved in actual investment decisions.
She has a nice line about Giridharadas: "using one man’s ethical failings to grab the mic is characteristically self-serving, but as usual, he forgot that there might be a baby in the bath water." It's catchy but wrong. Giridharadas whole point is that there may be a baby in the bath water, but the bathwater is toxic and everyone will be better off, even the baby, if you toss the whole thing. Moreover, the fund that Cochran administers uses this language: "dual expectation of best-in-class financial returns and maximum positive social and environmental impact." And that, to me, is a big part of the toxic nature of the current impact investment environment. On reflection, that statement illuminates what is really happening in Neilson's piece--the fear that if the myth of "no tradeoffs" is exposed then the money will dry up.
To be clear, I'm not in Giridhradas' camp but I certainly appreciate how his perspective keeps putting the "no tradeoffs" crowd on the defensive, and illustrates the inconsistency if not hypocrisy hidden there.
Kristin Gillis Moyer of Mulago points to a terrific example of the inherent tension: the new Catalytic Capital Consortium funded by MacArthur, Rockefeller and Omidyar. It aims to invest in businesses with low profit potential and/or high risk. I find it an incredibly refreshing approach--it explicitly acknowledges that the no tradeoff myth is leaving many social enterprises in the lurch. But as Gillis Moyer points out, it's not clear how catalytic it can be since there are unlikely to be that many other investors chomping at the bit to invest in low-profit, risky businesses. I'd like to think the catalytic part will be creating space for more funds and investors to say that they prioritize impact over financial returns, and that's OK. 

2. Our Algorithmic Overlords: Because the faiV was so full I'd been holding on to a few things on this topic, and events have made them all the more relevant. Platforms for open sharing seemed like such a good idea for a long time. But the cost of open sharing is so so much higher than most anticipated. Not only does it enable evil, but attempting to stop evil exacts a huge toll on human beings. This is a story about the Facebook contractors whose job it is to stop the New Zealand murderer's live stream. And a Twitter thread from someone in a similar position at Google. I'm guessing many of those folks are inching toward Calvinism.
Evgeny Morozov has a different take on the costs that open platforms and big tech exact, and why the global white nationalist movement has very different views on that front. It is a helpful reminder of the costs of the old system and the structures that the liberal order created to try to limit those costs, structures that seem to not work so well in this age, and are under attack from many directions. That's in part the theme of a new book reviewed by Noah SmithThe Revolt of the Public by Martin Gurri. I haven't read the book but the review is certainly influencing my thinking on the above.
Oh, and Chinese firms are working on facial recognition of pigs, while US police forces are using bad data to train their facial recognition and other AI systems. Andwhat about "behavioral recognition"? Note that this has quite obvious connections to the use of psychometrics and other "alternative data" for creditworthiness evaluations. 

3. Household Finance: There's a huge amount of new stuff here, so I'm going to be particularly eccentric this week. There's a lot more coming in the following weeks that will be more serious. 
One of the questions that fascinates me these days is what is good financial advice for households that face a lot of income volatility. The foundation of virtually everything in the financial advice world is the lifecycle model--and we know that doesn't apply to a very large proportion of households. That doesn't stop the financial advice industry from thriving--but like so many other things, the internet has disrupted that world a great deal. And that disruption creates perverse incentives. Here's the story of the "Fall of America's Money Answers Man", a once-respectable financial advice columnist who turned into a con artist. 
Advice on how to retire early by spending virtually nothing (while having a high-paying job, natch) has been growth industry. Here's a personal narrative from a Vice columnist who tried to follow the advice and decided the misery wasn't worth it.
Here's a new paper on the possible connection between credit availability and depression (the mental health kind). It finds that increased availability of credit to firms leads to less depression among low-income households. I'll note that this kind of paper is what made the RCT movement so attractive (see below).  

4. Research, Methods, Evidence: I was at a conference in Paris for a new book on RCTs and development economics this week, part of my travels. Drafting my chapter for that book turned out to be much more difficult than I had anticipated--the useful ways of saying something on this topic are much more limited than you might imagine. One thing that became clear to me, probably far later than it should have, is how often argumentation in research methods follows a pattern of: "Individual A made Proposition P at t1. Proposition P is wrong in context X. Therefore Group G is wrong at t2." That's a hard construct to argue with constructively. The other thing that became clear to me was that it would be very useful to have a more structured (in the economic sense) story about the use of RCTs in development economics. I plan on doing that in the next draft of my chapter, but while I was in the midst of pulling a near all-nighter in France to finish my draft before the conference began, Susan Athey produced an inadvertant history of the rise of RCTs in a single tweet: "Just think the most effective way to evangelize a new method is to demonstrate its effectiveness in a first-rate empirical application where the method clearly leads to a better quality and more credible result. Researchers will mimic a fully worked out, successful example."
That tweet was part of a "conversation" with Judea Pearl about Directed Acyclic Graphs, Pearl's preferred method for approaching causality. If you know anything about Pearl, you now why conversation is in quotes--if you don't, the whole thing begins with Pearl wondering why economists don't care about causality, as evidenced by the fact that they don't use his DAGs. If you, like me, don't really understand DAGs, here are a couple of useful tweet threads: one for those who don't mind the use of animated GIFs to provide pointless meta-commentary, andone for those who do. Just to be clear I recommend the second one which is from Scott Cunningham. Scott makes a reasonable case for the utility of DAGs--but Susan's point still stands: when someone/s start publishing papers using DAGs that are higher quality and more convincing than current practice is when their utility will be proven. And then they will quickly become ubiquitous.
Scott also pointed me to a very useful tutorial on another tool making headway in research practice: GitHub. I'm trying to wrap my head around the possibility of using GitHub for the kind of writing I do, which is often very iterative and splinters off into different directions. If anyone has used GitHub, or any other tool, that way let me know.
Here's a thread from Beatrice Cherrier on the historical debates within economics of the role of theory and data. It's worth reading for the reminder of how often the basic issues in these debates repeat. I'll be drawing on it as part of my discussion on the rise of RCTs.
Finally, here's a fun little exercise showing how bad humans are at randomizationeven when we are trying our damnedest to be random. I fully suspect someone is going to respond to this by referencing Fisher vs. Student on the value of randomization. 

5. Management and SMEs: I freely admit that management, particularly in the case of SMEs and development is something of an obsession of mine. Did you remember to click on the review of evidence on management from a few weeks ago? Here's a newish paper that looks at the determinants and consequences of management practices among SMEs in Ethiopia from Abebe and Tekleselassie--of note, Ethiopians working at an Ethiopian research center. They find, consistent with the other literature that good management shows up in productivity, is distinct from human capital, and is a learned skill.
Here is an overview of two recent reports on SME financing in developing countries, that unfortunately uses the "missing middle" concept. I'm quite sympathetic to these efforts, particularly one of the reports segmentation of business types, but I generally think these things are premature. We know very very little about how these small enterprises run on a daily basis, and designing "solutions" for them before we have a better handle on that doesn't seem optimal to me. That being said, it is striking that the conclusions of both reports are essentially exclusively about improving financial systems not about interventions targeted at the firms. That's a welcome change.
In terms of better understanding small firms, there are people working on that. I didn't get to go Oxford CSAE's conference or even pay much attention to it as a consequence of my trip to Paris, but there were a number of papers on the topic that I'll be trying to catch up on in the coming weeks. For instance, an experiment on equity-style investment in microenterprises in Pakistan. Here's one on spillover effects on micro and small enterprises of infrastructure investment. Here's more evidence on heterogeneity of impact of business training and credit on micro- and small enterprises, this time in Ethiopia. The operative differences here being gender, but I think we can safely say at this point that gender, opportunity and aspirations collide (to borrow a Pearl term). And here's more reanalysis of the de Mel et al capital grants research, modeling TFP and learning effects to explain differences in outcomes and capital accumulation. But my favorite example of our collective ignorance is this paper about whether electricity shortages and outages induce firms to innovate more or less. The results aren't particularly convincing to me, but the question is important: on so many dimensions we should be very humble about what the constraints to firms are and what decisions and choices those constraints lead to.
If anyone is interested in funding a very (very) small scale, and possibly idiosyncratic experiment on small firms, technology, productivity and management in order to generate some better hypothesis on these topics, let me know.

Someone recently created a new tool for creating these time-lapse bar charts--that's the only explanation I can find for why they have suddenly been showing up everywhere. Here's one on  global cities' population  that is pretty interesting. And here's  an explanation and one tool for creating them . But in keeping with my effort to keep these a bit lighter, here is one on leading goalscorers by age.

Someone recently created a new tool for creating these time-lapse bar charts--that's the only explanation I can find for why they have suddenly been showing up everywhere. Here's one on global cities' population that is pretty interesting. And here's an explanation and one tool for creating them. But in keeping with my effort to keep these a bit lighter, here is one on leading goalscorers by age.

Week of March 8, 2019

The IWD Edition

1. The OGs: I can't think about who influences me without beginning with Esther DufloErica FieldRohini PandeTavneet Suri (special links to two new papers that would have been in the faiV in a normal week--on the impact of digital credit in Kenya, and UBI in developing countries) and Rachel Glennerster

2. New Views on Microcredit: Because I'm framing this around research that has influenced me and appeared in the faiV, I've organized these into topical buckets that make sense to me. But keep in mind, that may not be the only thing these economists work on.   Cynthia Kinnan and Emily Breza have dug into the Spandana RCT to understand heterogeneity of results, and to used the AP repayment crisis and fallout to understand the general equilibrium effects of microcreditNatalia Rigol with some of the OGs above followed up on the differential returns to capital between men and women from earlier studies finding the differences are largely due to intrahousehold allocation, not gender; she's also looked into how to better target microcredit to high-ability borrowersGisella Kagy and Morgan Hardy uncoverbarriers that women-owned microenterprises faceRachael Meager creatively usesstatistical techniques to better understand heterogeneity in microcredit impact resultsIsabelle Guerin provides insight on why microcredit can go wrong. 
  
3. Savings: I will confess that I have a lot of questions about the savings literature. But that's mainly because  of the work of these economists. Pascaline Dupas, of course. Silvia Prina tests encouraging savings in Nepal, while Lore Vandewalle tries to build savings habits in IndiaJessica Goldberg runs very creative experiments to understand how savings affects decisionsSimone Schaner studies intrahousehold choices around savings.  

4. Related Development Topics: I feel a special burden here to point out the non-comprehensiveness of this item. These are economists whose work comes to mind often as I try to puzzle through evidence. Dina Pomeranz could have been in the savings items above, but she also does lots of interesting things on taxation in developing countriesSeema Jayachandran on cash transfers and changing behavior via payments. Pam Jakiela's work on intrahousehold bargaining and on occupational choicesOriana Bandiera's work on labor markets.  

5. US Household and Micro- Finance: A different kind of caveat here. These are women I work with closely who aren't economists, but whose work is important to understanding household and microfinance in the United States. Joyce Klein is the expert on US microfinance in practice as far as I'm concerned. Ida Rademacher,Joanna Smith-RamaniGenevieve Melford and Katherine McKay are doing great work delving into US household finance, particularly through the Expanding Prosperity Impact Collaborative on topics like income volatility and consumer debt.

From  Tatyana Derugina , via  Annette Brown . Though in my experience the trend line is similar to publishing in every other domain I've been a part of.

From Tatyana Derugina, via Annette Brown. Though in my experience the trend line is similar to publishing in every other domain I've been a part of.

Week of March 1, 2019

The Post-Neoliberal Edition

1. Economics: The dismal science doesn't often generate positive reviews from outside the discipline, so when it does happen it's worth noting. Julia Rohrer, who in addition to having one of the best titled blogs I've ever seen, is a psychology graduate student who procrastinated on her dissertation by attending a summer program in economics. Here is her list of things she appreciated in economics as a positive contrast to her experience in psychology.
On the other hand (hah!), economists typically have a lot to say about what is wrong with economics--certainly I encounter more "friendly-fire" in the econ literature than when I dip my toes in other disciplines (though this is perhaps my favorite example of the intra-disciplinary critique). There's an ongoing discussion about the future of economics going on in the Boston Review--I don't know if that counts as friendly-fire in terms of the outlet, but the participants are economists--starting with an essay by Naidu, Rodrik and Zucman, Economics after Neoliberalism. Then there are responses from Marshall Steinbaum, who notes that "every new generation proclaims itself to have discovered empirical verification for the first time," and from Alice Evans who focuses on the nexus of economics and political power in the form of unions.
But, because it's me writing this, I have to close on a new paper in JDE, that finds that communal land tenure explains half of the cross-country agricultural productivity gap. And here's a piece about how small teams of researchers are more innovative than large teams. generate much more innovation than big teams Neo-liberalism won't go down without a fight!

2. Migration: I haven't touched on migration for a while so it felt serendipitous that Michael Clemens and Satish Chand put out an update to their paper first released in 2008(!) on the effects of migration on human capital development in Fiji. The basic story is that in the late 80's formal discrimination against Indian-Fijians increased sharply, causing the community to both increase emigration and investment in human capital to aid emigration prospects. The net effect, rather than the dreaded "brain drain," was to increase the stock of human capital in Fiji. grapes
Cross-border migration is really the only option in Fiji, but in many countries, like Indonesia, there are lots of internal migration options. Since there is typically a large gap in productivity within countries as well as between countries, internal migrationhas always been a part of the development story. Bryan and Morten have a new article in VoxDev about this process in Indonesia, looking at the productivity gains possible from removing barriers to internal migration.
Since we started off talking about Economics, here's a post from David McKenzie considering the effects of migration on economists--or more specifically, how to think about job market papers about a candidate's country-of-origin. True to his style, David goes deep, including a model, and a survey. The post was inspired by a tweet from Pablo Albarcar who later noted it was mostly a joke about "brain drain" worries.
It is surprising to me how tenacious the brain drain idea is. When I have conversations about it, I try to cite the literature like Clemens and Chand, but I rarely find that makes a dent. People can always find an objection. So I've taken to just asking people how they feel about the "destruction" of Brazilian soccer/football culture and skill due to the mass emigration of the most skilled players. Typically, that leads to several moments of silent blinking. If you're interested here's a paper about "Rodar" the circular human capital investment, migration and development among Brazilian footballers
  
3. US Poverty and Inequality: I typically try to avoid the grab-bag approach to items of interest but I'll confess this one is a bit of a grab bag with a variety of connecting threads. We'll start by connecting to a piece I included last week about tax refunds and saving. If you haven't read that, you should. I noted I was grateful for the piece because it meant I could skip the annual ritual of linking to a piece I wrote for SSIR several years ago about rethinking tax refunds. But I should have known that the zombie idea of tax refunds being bad personal finance wouldn't die so easily. Here's Neil Irwin from the NYT on how people being angry about lower refunds shows that "humans are not always rational." I'm struck by the irony that the continuing common use of "rational" in economics requires zero-cost attention, while a foundational truth of the discipline is "nothing is zero-cost." There is nothing irrational about paying a very small fee (in foregone interest) for the valuable service of helping you to save when other services are ineffective. That's especially true if you include, as you should, the cost of the tax advisors and financial advisors required to accurately calculate the proper amount of withholding and to choose the right investment/savings account in which to store those savings. So I guess that connects to the thread about economics maybe not being post-neoliberalism quite yet. And here's a column from the Washington Post's personal finance columnist withpush back on the "refunds are bad" idea from readers who explain their rational choices in their own words.  
This week a 3 year project by the National Academy of Sciences to provide a "nonpartisan, evidence-based report" on the most effective ways to reduce child poverty in the United States was released. The summary that most everyone is latching on to is that work supports are not going to get the job done. The only way to cut child poverty by at least half is direct cash support to parents. Here's the Vox overview.
If you were thinking about intergenerational poverty, you were probably also thinking about education. The last few years have seen a proliferation of videos of "poor kids" getting into elite schools. Here's a piece about a new book on what happens to the lower-income students once they arrive at elite schools. It's not so joyous--"money remains a requirement for full citizenship in college, despite institutional declarations to the contrary."
Finally, how much do financial incentives and tax rates affect the incentives to innovate and invent? Not much--exposure to innovation matters much more

4. Management: This is a last minute "swap" of an item, since David McKenziemaligned managers in his weekly links tweet this morning. As some of you know, I have a semi-secret identity ghost-writing and editing management books, with several of them specifically about Toyota and lean process and management, so I couldn't let it lie. Of course, David's quip was a joke. The piece he links to is a terrific overview of the research on how management matters, a literature that David is a significant contributor to. It is a topic that I wish the development field paid much much more attention to (I really hope this is the most clicked link of the week), and this overview is a great introduction, both in content and structure/organization. I think I'll make some of my papers look more like this in the future.
And here's a piece about how middle managers deserve more respect. In my read of the literature above, it is middle management that is the actual missing middle in development. 

5. Digital Finance: I relinked the piece on why there's no reason to trust blockchain in the notes above. Here's another reason: "Once Hailed as Unhackable, Blockchains Are Now Getting Hacked." On the other hand, here's, "Bitcoin Has Saved My Family," from a Venezuelan economist.
One of the under-examined topics in the emergence of digital finance is the shift in the organizations and organizational structures that are providing financial services. The institutions and people in telecoms are systematically different than those in finance. That's something that always strikes me as I look at the GSMA's annual report on the state of the mobile money industry. Not because of something in the report specifically, but the fact that the report is from the GSMA.
And finally, a little curiosity that may only interest me. Uganda is opening up the purchase of government debt to individuals using mobile money, on the theory that it will reduce the government's dependence on commercial banks and institutional investors. It's historically sound, but I'm skeptical. For instance, it hasn't worked as well as hoped in Kenya.  

The musing on the quality of Brazilian football in the face of mass emigration gives me an excuse to include a video in support of my argument. If you're interested in falling down the rabbit hole a bit, here's  a short documentary on the 1982 Brazil team , which is my Platonic ideal of how the game is supposed to be played. Though that could have something to do with the fact that I was 9 that summer, and it was the first World Cup I watched. I still have a visceral rage reaction any time I see the Azurri take the field.  

The musing on the quality of Brazilian football in the face of mass emigration gives me an excuse to include a video in support of my argument. If you're interested in falling down the rabbit hole a bit, here's a short documentary on the 1982 Brazil team, which is my Platonic ideal of how the game is supposed to be played. Though that could have something to do with the fact that I was 9 that summer, and it was the first World Cup I watched. I still have a visceral rage reaction any time I see the Azurri take the field.  

Week of February 18, 2019

The Special Service Edition

1. MicroDigitalFinance (and women): Questions about gender and financial inclusion have been a part of the modern microfinance movement since the beginning, when Yunus made those initial loans to women. For a long time, the accepted wisdom was that women were more responsible borrowers, repaid at higher rates, and did better things with their earnings than men. Then came several waves of research that called that into question--finding, for instance, that men had much higher returns to capital; that women didn't spend money that differently (outside of the social norms that constrained both their income-earning and -spending choices).
Recently there has been another swing. For me it started with suggestive evidence from Nathan Fiala's grants vs. loans to men and women in Uganda that women's average low returns were driven by the women who had the hardest time protecting money from male relatives--something that didn't make it into the published paper (so factor that into your Bayesian updating). Then Bernhardt, Field, Pande and Rigol re-analysed data from the original returns to capital work and found that women who operated the sole enterprise in their household had returns as high as men. Then Hardy and Kagy dug into why returns to men and women's tailoring businesses were so different in Ghana.
Now Emma Riley has a new paper going to back to Uganda and using mobile money accounts to give a much more definitive answer to the control of funds issue that Fiala's work hinted at. Working with BRAC (it occurred to me yesterday that I think all the subsidy to global microfinance could be reasonably justified just by BRAC), she provided female business owners with a separate mobile money account to receive their loan proceeds--the theory being, of course, that this would allow them to protect the funds much better. She finds that women who received the money in the private mobile accounts had 15% higher profits and 11% higher business capitalthan controls who received the money in cash. There are number of possible mechanisms, but she finds the best explanation is indeed the ability to protect money from the family. This is a big deal.
And last year when I posted a story about Uganda implementing a social media and mobile money tax, I didn't really take it seriously. It turns out I should have. The tax went into effect and Ugandans have behaved like good homo economicuses: mobile money use and social media use is down. Say, that suddenly sounds like a useful policy intervention. 
Finally, this rang my confirmation bias bell so hard that there's no way I could leave it out or even wait another moment to put it in the faiV. Maybe I'll include it in every edition from here on out. There's No Good Reason to Trust Blockchain Technology.

2. Youth Unemployment: This wasn't supposed to be "the Uganda edition" but in other women in Uganda research news, here's a paper from a star-studded list of researchers starting with Oriana Bandiera (is it just me or has Selim Gulesci had a remarkably productive last 12 months?) forthcoming in AEJ:Applied on a program to empower adolescent Ugandan women with both vocational and sex/relationship education. They find large effects after 4 yours, boosting the number engaged in income-generating activities (all microenterprise) by 50% (5pp) and cutting teen pregnancy and reported unwanted sex by a third. That's impressive. But your homework assignment is to square these results with the five year follow-up results of Blattman and Fiala's grants to Ugandan teenagers (where all the effects fade out after 9 years) and Brudevold-Newman, Honorati, Jakiela and Ozier vocational training program for young Kenyan women where effects of training and grants dissipate after 2 years. Seriously, this is your homework. Email me with your theories. If you can work in Blattman and Dercon's Ethiopia follow-up (which as disappeared from the web, hopefully temporarily), any of the other papers from this session at ASSA2018, or McKenzie's review of vocational training programs, you get extra credit.
  
3. Economic History: I've mentioned a couple of times recently that I've been delving into Economic History to learn a bit more about financial system development and the history of banking and consumer financial services. It's been fascinating so I thought I would share a few links in that vein. There are two books that top the list, both of which I think I've mentioned, but since I now consider these as must-reads for anyone interested in financial services along with Portfolios of the PoorThe Poor and Their MoneyDue Diligence, and, y'know, coughcough cough, I'm going to mention them again. City of Debtors covers the tragically unknown history of microcredit in the United States from the 1890s on. Insider Lending is the story of how banking evolved in New England from the 1800s, specifically how economic and political forces turned something entirely self-serving for existing elites into a vital service for the masses. 
If you're intrigued by what can be learned from economic history but aren't ready to dive into a book, here's a new paper on the development of a French village from 1730 to 1895, an era very similar to conditions in many middle-income countries today. But if you're not ready for even that level of commitment, try this new Twitter account: @EmpireRomanHoly. There's a daily thread on one of the thousands of semi-independent principalities that made up the neither Holy nor Roman nor Empire. Or try this single thread about a forgotten Indian empire (though since I'm Peruvian-by-birth I have to say he gets the comparisons to the glorious Incan Empire all wrong). 

4. Our Algorithmic Overlords: I was going to give the algorithms a rest, but well, it turns out the Overlords never sleep. Well, actually, apparently they were asleep at the switch so to speak. Some Chinese company left their facial recognition database being used to track Muslims in the country exposed online.
And here's Stephanie Wykstra on some university's attempts to teach ethics to the programmers who are going to be building our overlords. I wonder if any of them have a satellite campus in China? 

5. Service Journalism: For those of you unfamiliar with the phrase, service journalism is the term of art for those articles like, "Five Ways to Eat Healthier Today" or "How to Delete Facebook From Your Phone." In my case, I often get questions about some of the tools I use, so herewith is some insight into the faiV (and my other work) behind the scenes. First up is Asana, which I apparently use in a somewhat unusual way. I've never been able to consistently use task/to-do list/project management software, which is the main use case for Asana, consistently. But a few years ago, Asana introduced a "bulletin board" style view which I now use religiously to track papers and sources whenever I'm working on a big project. I've used it for years to keep track of things for the faiV, but since the start of the year I've been experimenting with a new tool for Chrome called Workona(the tag line is "browse like it's your job" which feels a bit on the nose for me). In case it wasn't clear I'm one of those people who has upgraded every one of my machines to 16GB solely to cope with the 100+ tabs I have open on each of 4 computers I use regularly. Workona allows you to group those tabs usefully, share them between machines, suspend tabs your not using, and some other cool things. It's free for now, tough a paid model is coming, but I will be the first in line to pay because I find it so useful.
Another tool I use everyday is Synergy which allows me to park two machines beside each other and use them as one nearly seamless machine. My normal work set-up has 4 screens--two laptops side by side, each connected to a 24-inch external monitor.
Finally, I just stumbled across Perma.CC, which though I haven't used it yet, seems like something I've been looking for for a long time--a way to make sure that links don't rot. Check it out. 

Keeping with the service journalism, this week I learned that pangolins are bi-pedal and I think everyone needs to know that too. You're welcome.  

Keeping with the service journalism, this week I learned that pangolins are bi-pedal and I think everyone needs to know that too. You're welcome.  

Week of February 11, 2019

The Writing on the Wall Edition

1. Our Algorithmic Overlords: I've long argued that teaching kids to code is as much of a waste of time as financial literacy. The simplified version of the argument is that most people are terrible programmers and computers are already better at coding than the average human. As a consequence I emphasize to my own kids and to others who are blinkered enough to ask my advice, that learning how to communicate/write is a much more important tool for the future (yes, yes, cognitive dissonance).
While I still think I'm right about the first part, it turns out I'm wrong about the second part. Yesterday OpenAI "released" work on an AI system that writes shockingly good text. I use scare quotes because, in another sign of things to come, OpenAI has only published a small subset of their work because they believe that the potential malicious use of the technology is great enough to restrict access. There are a bunch of news stories about this. Here's Wired, for instance. But the most interesting one I've come across is The Guardian because they had the algorithm write an article based on their lede.
Let's stick to the disturbing for a bit, because it's that kind of day. The World Food Program has formed a partnership with Palantir to analyse its data on food distributions, apparently with the main motivation being to look for "anomalies" that indicate that aid is being diverted or wasted. The idea of handing over data about some of the world's most vulnerable people to a private company that specializes in surveillance and tracking of people hasn't gone over well with a wide variety of people. As background, here's an article about what Palantir does for their biggest client, the NSA. Sometimes it seems like some people at the UN look at the one world government kooks and think, "What could we do to make their conspiracy theories more plausible?"
On a more theoretical level, Kleinberg, Ludwig, Mullainathan and Sunstein have a new paper on "Discrimination in the Age of Algorithms," arguing that despite fears of algorithmic discrimination, proving discrimination by algorithms is a lot easier than proving discrimination by humans. Of course, that requires putting regulations in place that allow algorithms to be examined. I'm going to flatter myself by pointing out it's similar to an argument I made in my review of Automating Inequality. So I feel validated.
Speaking of transparency, regulation and of algorithmic surveillance, here's David Siegel and Rob Reich arguing that it's not too late for social media to regulate itself, by setting up something like FINRA (Financial Industry Regulatory Authority, which polices securities firms). It's an argument that I would have given short-shrift to, but the FINRA example is credible.
Finally, I'll be dating myself in the Graphic of the Week below, but here's another way to figure out how old I am: when I was an undergrad, most of the "power imbalance" between developing countries and private firms literature was about GM. Here's a new piece from Michael Pisa at CGD on the new power imbalance and it's implications: the relationship between developing countries and tech giants.

2. Digital Finance: That feels like as reasonable a transition as I'm going to get to new data from Pew on the global spread of smartphones. Given limited consumer protections, regulatory and enforcement capability, and "digital literacy" in many developing countries, I will confess this worries me a lot, cf Chris Blattman's thread on "creating a 20th Century...system in an 18th Century state."
Here's a particular instance of that concern, tieing together the last few items: the rapidly growing use of "alternative credit scores" using things like digital footprints and psychometrics. You can make an argument that such things are huge boon to financial inclusion by tackling the thorny problem of asymmetric information. But there are big questions about what such alternative metrics are actually measuring. For instance, as the article above illustrates, the argument is that in lending, character matters and that psychometrics can effectively evaluate character. But it doesn't ask whether character is in-born or shaped by circumstance? No matter which way you answer that question, you're going to have a tough time arguing that discriminating based on character is fair. And that's all before we get to all the other possible dimensions of opaque discrimination.
The growing use of alternative data is starting to get attention from developed world regulatory agencies, but the first frontier of regulation is likely to be from securities regulators. I don't think they are going to be particularly interested in protecting developing world consumers. I guess that idea about self-regulation is starting to look more appealing, particularly if it's trans-national.
Meanwhile, the frontier of digital finance is advancing rapidly, even without alternative data. Safaricom introduced what is here called a "overdraft facility" in January, but I think of it more as a digital credit card. In the first month it was available, $620 million was borrowed. The pricing seems particularly difficult to parse but that may be just the reporting. One of the very first things I wrote for FAI was arguing for development of a micro-line-of-credit. Now that it's here, I confess it makes me very nervous.
 
3. Financial Inclusion: That's not to say that digital tools don't hold lots of promise for financial inclusion, just check the Findex. This week CGAP hosted a webinar with MIX on "What Makes a Fintech Inclusive?" There are some sophisticated answers to that question with some good examples, but I often return to the simplest answer: it cares about poor and marginalized people. And so I especially worry when I see answers to that question that lead with tech.
The financial inclusion field as a whole has been in something of a slow-moving existential crisis for the last few years. The best evidence of that is the number of efforts to define or map the impact of financial services and financial inclusion, several of which I'm a part of. Last week I linked to an IPA-led evidence review on financial inclusion and resilience. The week before that to a Cochrane Collaboration review of reviews of evidence on financial inclusion. This week, the UNCDF and BFA published their take on pathways for financial inclusion to impact the SDGs (full report here). I could say I expect there will be more, but I know there will be more in this vein, if I can finish revisions, etc.

4. US Inequality: It's tax return/refund time in the US. So there's a lot of discussion of the size of tax refunds and how people should withhold less and save more of their refund etc. It's particularly an issue this year because refunds seem to be smaller because of last years tax law changes and perhaps pressure on the Treasury to reduce withholding so more people would see a quick boost in their paycheck. Justin Fox takes a look, using the US Financial Diaries and some related work to show what a dumb policy that was and saving me from reposting my annual tax time lament.
There are a few things here I've been meaning to include for a few weeks but haven't gotten to. Here's a look at how tech is "splitting the workforce in two" which has some big implications for inequality. Here's a look at how stacked against the young the US system has become, which has implications for the persistence of the current very high levels of inequality. And here's one of those very depressing looks at how well-intentioned policies to do something about inequality end up being churned up in the meatgrinder and making things worse, in this case having to do with pushing colleges to admit poorer kids. The latter two are why I have a problem with the proposed incremental approach to Medicaid-for-All by allowing people between 50 and 62 to buy in to the system. I'm usually a great fan of incremental, but that specific proposal seems likely to accelerate the transfers from young-to-old in many ways worse than we can imagine.

5. Evidence-Based Policy: Yes, it's a dark day. So I'm going to revel in it and continue that theme of well-intentioned not working out so well, in this case from the old scale problem. One of the staples of "evidence-based" interventions in the last decade or so has been home visitation for new mothers/infants. An evaluation of a scaled-up version of the program found "no statistically significant effect on the evaluations focal outcomes" and no significant heterogeneity of effects (e.g. no larger or smaller effects for ex-ante determined high-risk or low-risk families). Chile scaled up cognitive behavior therapy in schools to deal with disruptive kids. It made things mostly worse. Pittsburgh scaled up a "restorative justice" program in an attempt to deal with discriminatory discipline practices for disruptive students (African-American kids get suspended from school much more often than white kids). Some people are saying it made things worse, but I look at the results table and see "no effect" given the number of outcomes.
Andrew Gelman features an old Michael Crichton piece on why media depictions of research are so wrong with some actually, it seems to me, good advice on what to do about it. If anyone ends up creating the proposed organization to do rapid response to spurious reporting of research, hire me. I want to do that. I suppose in some small way, that is what the faiV does. So, I guess, sponsor the faiV?
And here's a report from the William Grant Foundation on "Reframing Evidence-Based Policy to Align with the Evidence" which seems a useful thing to do if you've clicked on the three links above.

This isn't new, but it's fun. Merriam Webster has a site where you can put in any year and see words that first appeared in that year. This is a snippet of my birth year. Source:  Merriam Webster Time Traveler

This isn't new, but it's fun. Merriam Webster has a site where you can put in any year and see words that first appeared in that year. This is a snippet of my birth year. Source: Merriam Webster Time Traveler

Week of February 4, 2019

The Global Con Edition

1. MicroDigitalHouseholdFinance: 
I've had to cram what I usually break out into 2 categories into this first item. First, last week I featured a story about Kenyan MFIs being driven "to [an] early grave"and asked if any one had some additional knowledge of that situation. Thanks to David Ferrand (of FSDAfrica) and Alexandra Wall (of CEGA's Digital Credit Observatory), I'm reasonably confident that story is reasonably accurate (I do try to be good Bayesian). Meanwhile, with a broader perspective, Gregor Dorfleitner sent me a link to his recently published research looking at adoption of digital infrastructure by nearly 1000 MFIs globally. It's generally a more hopeful picture of evolution over disintermediation than what is happening in Kenya. 
This week, coincidentally I had two conversations about household finances that revolved around individuals' willingness to hide their income from others in the household and that affects outcomes for good or ill. And then, up pops Fred Wherry and colleagues with a new paper on exactly on the mechanics intrahousehold bargaining around borrowing and lending based on research in California. I'm very impressed they avoided "Neither a borrower nor a lender be..." and I do kind of love "Awkwardness, Obfuscation and Negative Reciprocity." And in other new paper news, the titans of financial choice architecture, have a new paper on how use implicit defaults to spur people to make active choices--which seems a better form of nudging than much of what I see. 

2. Banking (and Money Transfer Operators): I frequently talk about how financial system regulators in the developing world need to look to the US for a peek into their future. This week I learned that Australia is also a useful cautionary tale. Pretty much the entire banking sector in Australia is facing the prospect of criminal prosecutions after a wide ranging royal commission report that details rampant "fee for no service" practices were widespread.
Meanwhile there are some big changes happening in the global money transfer space, related to Chinese operators attempts to expand globally, and the Trump administrations general antipathy to such moves. Last year, Ant Financial tried to buy MoneyGram before regulators put a stop to the transaction. MoneyGram is now essentially moribund, having lost 83% of it's market value since then, and trying to sell itself to anyone who might have some cash. Ant Financial has moved on to a UK company, WorldFirst, which this week announced it was shutting down it's US operation so that American regulators have no say in the deal. Neither of those stories sound like the prospects for cutting the costs of global remittances are improving.
  
3. Global Inequality: Last week I purposely skipped over the ridiculous annual OxFam global wealth inequality brouhaha. Perhaps I should stick to my guns, but given the number of people I saw engaging with this Guardian piece from Jason Hickel, that somehow argues that global poverty hasn't been decreasing, and life was great in the 1820s, well...Here's pushback from Martin Ravallion. Here's Max Roser, who was a particular target in the Hickel op-ed.
Turning to doing something about global inequality rather than fantasies about the pastoral idylls of the 1820s, there's been a remarkable flourishing of pieces about tax avoidance by the wealthy. Here's the op-ed from the NYT that inspired the name of this week's edition on the Trump tax cuts enabling corporate tax dodging. Here's a new paper in the AER finding that globalization since 1994 has led to the labor income tax burden of the middle class rising, while that on the top 1 percent fell. Here's a new brief from Danny Yagan at SIEPR on how high earning wealthy entrepreneurs dodge taxes on labor income of about $1 trillion per year. And using data from Gabriel Zucman, here's a piece from the Washington Post on the new club of wealth inequality, with charter members China, Russia and the US

4. Philanthropy and Social Enterprise: There's a good bit to catch up on here. Back in the fall, I featured several entries in an on-going discussion involving Rob Reich (the political scientist, not the economist), Phil BuchananAnand Ghiridharadasand Ben Soskis on the role of philanthropy in the US (each of those links is to their books/sites). Phil has a newish post trying to take stock of the various critiques and defenses.
Last summer, I took note of Just Capital, a newish organization trying to create an index of socially-responsible firms using criteria less laughable than most of the SRI indexes. Just Capital has partnered with Forbes Magazine to create a list of the US's 100 most "just" companies with the criteria determined by surveying (what I presume is a convenience sample) readers.
On the topic of philanthropy worth critiquing and just companies, the Pennsylvania Attorney General is suing one of the largest non-profits in the state, the University of Pittsburgh Medical Center, for being neither philanthropic nor just. And here's someVox reporting on the equally unphilanthropic and unjust Zuckerberg San Francisco General Hospital, with the added twist of the City of San Francisco playing the "man behind the curtain." The Vox critique has already had an effect; I'll be cheering for the PA Attorney General. As a side note, one of the problems I have with the concept of "financial health" is it makes an analogy to the only industry that is more of a mess of conflicting incentives and hidden bad behavior than the finance services industry.
Dramatically changing the topic, GiveWell has announced some changes to it's research focus, and as a consequence, is hiring. Full disclosure: I'm Vice-Chairman of GiveWell's board. I think it's likely that faiV readers know some people who might be interested in those jobs. So click and check them out.
Finally, this week Guidestar and the Foundation Center announced that they are merging. I'm not sure whether to think of this as evidence of maturing philanthropic infrastructure or further evidence of a market failure in data on philanthropy. Regardless, I have a lot of respect for Jacob Harold and Brad Smith, the respective CEOs of the two organizations for taking a step that many in the non-profit world avoid. 

5. Methods: Behold, the first ever "listicle" in the faiV. What should experimental economists do more of? These 12 things, according to John List. And here's a review of how field experiments have improved our understanding of labor markets (List again). Though I have to ask, is this use of "natural field experiments" standard outside of development economics or is it a Nature thing? One of the things that experimental economists should perhaps hesitate before doing more of are list experiments--that according to a new paper from Pascaline Dupas and co-authors(and do read the comments).

I had decided to make the graphic/video of the week a bit more fun and less on-topic. But then  Kieran Healy created something both fun and on-topic . The best of both worlds. Source:  Kieran Healy . 

I had decided to make the graphic/video of the week a bit more fun and less on-topic. But then Kieran Healy created something both fun and on-topic. The best of both worlds. Source: Kieran Healy

Week of January 28, 2019

1. MicroDigitalFinance: Back before the holidays, I hosted the first faiVLive on how to think about microcredit impact based on recent evidence. If you missed it, you can watch it here (and people are still watching it, I'm happy to say). Here's Bruce Wydick's take on the proceedings if you prefer text to video.
Last week, there was some discussion of evidence gaps, and it's clear that I'm not the only one thinking in this direction. On the heels of that Campbell Collaborative review-of-reviews, IPA has a review of evidence (and gaps) on "Building Resilience through Financial Inclusion" that makes a lot more sense to me.
Okay, now to some less-meta items. Well only a little bit I guess. Remember that Karlan and Zinman paper about high-cost loans in South Africa that found positive effects? It was a lending for resilience story. Now there's a company in California offering high-cost loans to people via their landlords, specifically marketed to help them not miss a rent payment or to pay a security deposit. The article mostly ignores fungibility, presuming that the actual use of the loan proceeds are paying rent rather than covering some other emergency, but that seems unlikely to me. In the US Financial Diaries we saw that housing payments were much more erratic than other types of payments, though the data wasn't clean enough to really draw any firm conclusions. So is this a lending-for-resilience story or a new version of payday lending debt traps?
Speaking of payday lending debt traps, we usually use that phrase metaphorically. But there's a UK payday lender who is apparently eager to make it more literal. Yes, they are advocating for a return to debtors' prisons (darn that asymmetric information and moral hazard!). And even doubling down on the idea.
Finally, here's a story (HT Matthew Soursourian) about Kenyan MFIs being driven "to [an] early grave" as digital financial services allow commercial banks and non-banks to siphon off the customer base. Disintermediation was not exactly the story that early proponents of mobile money were hoping for, but it does fit with the historical record of financial systems development. If you know anything about this, or can vouch for the accuracy of the information in the article, I'd love to hear from you.
  
2. Global Development: I'm going to skip the on-going "shooting fish in a barrel" about OxFam's annual global wealth publicity/outrage stunt since there's nothing at all new there. Better to spend your limited attention on this NYTimes op-ed from Rohini Pande and colleagues on the "new home for extreme poverty."
If you follow these topics at all, you know that new home is middle-income countries like India. The Congress Party's proposal of a not-universal basic income to address the persistence of extreme poverty in the country has been getting a fair amount of attention. Apparently Angus Deaton and Thomas Piketty are advising Congress, though from my experience with politicians "advising" could mean "we read their books." Here's Maitreesh Ghatak's take on what it would take for the policy to work
On the other side of the world, I've watched the evolving situation in Venezuela with a great deal of personal interest. I grew up in Colombia, a few hours from the Venezuelan border, and learned relatively recently that an ancestor of mine funded an invasion of Venezuela in the early 1800s. Particularly my interest has been caught by some economists volunteering to educate politicians and pop culture figures on what is going on, in the hopes of stopping bad takes. Here, by the way, courtesy of Chris Blattman, is a deeper background piece on the Maduro regime than you may find elsewhere. The macroeconomic quirks of access to gold reserves and of sovereign and not-so-sovereign bonds under sanctions have been pretty interesting too. And here's Cindy Huang of CGD on the potential for Colombia accessing concessional funding to help finance programs for Venezuelan refugees.
Finally, I'm happy to claim, without evidence, that my request for Rachel Glennerster to post her Twitter thread on what she's learned in her first year as DfID's chief economist as a blog post so that was easier to share, cite and archive caused this blog post compiling her Twitter thread.

3. Small Business: My fixation with breaking down the silo between financial inclusion in the US and internationally extends beyond household finance. The story of most small business in the US is the same as it is in developing countries--they are not high-growth "gung-ho" entrepreneurs but frustrated employees trying to generate an income in the face of labor market failures of various sorts. So the perennial development topic of how to increase lending to SMEs should be looking to the US, and those in the US should be looking internationally.
For most small and micro-businesses the biggest financial challenge isn't getting credit to invest, but managing cash flow and liquidity. Square, which has historically been focused on enabling retail consumer-to-business payments, recently announced a new product specifically to tackle this problem: a debit card that allows real-time access to balances. To put it in development-speak, Square is offering trade credit to small merchants to cover the trade credit they provide to customers. I'm super-interested in seeing how well it works.
But, yes, small businesses often need credit as well. Lending to them is as difficult, if not more so, than lending to low-income consumers. Here's a story in the FT on how digital platforms have filled, expensively, a gap left by a secular decrease in small business lending from banks. The key point is that technology is offering several new putative solutions to classic lending problems, including direct and immediate access to small businesses' bank accounts. Supposedly this will prevent the lenders from incurring large losses in a downturn, but you have to wonder about the macro effects of immediately cutting off the supply of credit to small businesses at the first sign of a recession.
Finally, as important as finance is for small business, I think the more important missing capital is human capital. Here's a piece from Next Billion advocating for more funding for human capital interventions which reviews some of the relevant literature.

4. New Year, New You: It's still January in faiV-land, so it's not too late to pledge to learn some new things this year. Say, for instance, practical deep learning (the pinnacle of meta--learning about deep learning). That's a new, free, online course from something called Fast AI. Or perhaps, you'd like to get a better grasp on econometrics (who wouldn't?). Marginal Revolution is rolling out a new free class from Josh Angrist. In the spirit of the source, I'll say it's self-recommending. But maybe you'd like go back to fundamentals. In that case, here's a playlist of Tyler Cowen's 9 most important ideas in economics

5. Our Algorithmic Overlords: Whenever you think it can't get any worse, that's a big signal that it's about to get worse. Not on topic, but since the story on the world's worst family was such a popular link, last week, here's something even worse. But back to the topic at hand: Facebook being even worse. In this case, by paying teenagers to let the company digitally stalk them. I'm sure all those parental consent forms were authentic. The Facebook stalking broke Apple's rules, and now Apple is the de facto Facebook regulator. Yay?
Central to these issues is the nature of digital identity and what can be done with it based on the necessarily not complete picture that digital tracking provides. You may be comforted sometimes by the thought that companies like Facebook, Google, Amazon and Apple don't know everything about you. But you should also be scared, because, the limited information is already shaping what you see. Here's a very insightful piece on the limited control you have over your digital identity and how it shapes your world.
And here's a curious effort called Good ID to ensure that digital identities are "good for people as well as for business and government." Which is an idea that I wholly support--even the acknowledgment of the issue is a breath of fresh air. But perhaps they could do a better job of revealing their own identity? This is one of the least informative "who are we"'s I've ever seen. The meta! It burns!

I've  decided that in general I'm going to try to make the graphic/video of  the week a bit more outside-of-the-box of the rest of the faiV. And this  is perfect for the meta theme.  People on reddit   are   painting   recursive pictures   of people holding their paintings . And there's a  github  for it. Make sure to click on the change layout button.  Source . 

I've decided that in general I'm going to try to make the graphic/video of the week a bit more outside-of-the-box of the rest of the faiV. And this is perfect for the meta theme. People on reddit are painting recursive pictures of people holding their paintings. And there's a github for it. Make sure to click on the change layout button. Source

Week of January 21, 2019

1. MicroDigitalFinance: Many of you will be familiar with the story of microcredit's rise and sort-of fall, and it's current state of--I don't know, existential angst? But if not, the story is ably told in a new Vox piece by Stephanie Wykstra, with some comments from Jonathan and I included. Not too long after that, the Campbell Collaborative and 3ie issued a "systematic review of reviews" of the impact of financial inclusion, led by Maren Duvendack. I have to say it's kind of weird. The one sentence conclusion is "Financial inclusion interventions have very small and inconsistent impacts." Which apart from appending an "s" to the perfectly plural "impact", I don't disagree with. But this format is a review of reviews which imposes some weird constraints. Ultimately only 11 of 32 identified studies were included, and only one of those was from an economics journal, two are earlier Campbell or 3ie publications, two are specifically only about women's empowerment, and three are about strangely specific topics like HIV prevention. So I'm left really uncertain what to think of it.
Of course, the hot topic isn't generic microfinance but digital finance. The Partnership for Finance in a Digital Africa has an updated "evidence gap map" of research on the impact of digital finance featuring 55 studies (which is more than I have had the time to delve into so I can't compare it to the Campbell/3ie inclusion set). There's a summary of the findings at Next Billion.
Finally, here's an interesting story about Econet, the Zimbabwean mobile money provider--interesting in that it is really about the evolution of mobile money providers from following M-Pesa to following Tencent.
  
2. US Inequality: A big part of the story of understanding US inequality specifically, and inequality in developed countries in general, is understanding what has happened to wages of low-skill workers. The NYTimes has a piece on how cities have shifted from being the "land of opportunity" for such workers to a trap, based on work that David Autor presented in his Ely Lecture at the AEAs (by the way, AEA, it's still a good time to rename the Ely Lecture!).
One policy option for addressing stagnant wages for low-skill workers is to raise the minimum wage. Cengiz, Dube, Lindner and Zipperer continue their long-running work on the effects of 138 minimum wage changes between 1979 and 2016. They find increased earnings and essentially no effect on number of low-wage jobs
That's encouraging. Less encouraging is a new paper from Rodrik and di Tella finding that people are really, really happy to support protectionist policies, regardless of their politics, as a policy response to trade shocks.

3. Our Algorithmic Overlords: Speaking of people's attitudes, there's a big new report on Americans' attitudes on artificial intelligence from something called the Future of Humanity Institute, which as a name is somewhat creepy in my opinion. Maybe I've seen/read too much dystopian fiction. Anyway, they find that Facebook is the least trusted institution when it comes to AI development (no surprise) and the US military is tied for most trusted (big surprise, apparently these people haven't seen/read the same dystopian fiction I have). Also of interest, the median respondent thinks there's a 50% chance that robots will be able to fully replace human beings in less than 10 years. And just because, here's a Night Before Christmas style poem about the future of AI.
Meanwhile, MIT Technology Review "analyzed 16,625" AI papers to predict directions of future research. As someone interested in the future of humanity who doesn't trust either Facebook or the US military to develop AI, I'm encouraged to see cyclical patterns of research consistent with over-confidence.
One of the questions about the development of AI and machine-learning is how it will integrate into existing procedures. Flint, MI is a particularly fascinating case study on those challenges--and they are large. In a community with every incentive possible (they are literally being poisoned by their water and have extreme budget constraints) except politics to adopt the most efficient approach, the machine-learning approach was abandoned. I guess that should make me re-think my attitude toward phrases like "The Future of Humanity."

4. Methods and Evidence-Based Policy: Back in the fall I featured a paper about the effect of political connections on business success because I was so impressed by the method: Abhit Bhandari set up an actual company in Senegal and had his salespeople vary their pitches to signal political connections. Turns out Bhandari is not alone. David McKenzie has a new post at Development Impact on the apparently hot new trend in experimental development economics: setting up your own firm so you can run experiments on it. If you thought the barriers to running and publishing an experiment were high before...
Eva Vivalt has a new paper on specification searching and significance inflation in impact evaluations (see, you don't need to add an "s" to impact!). She finds less bias in economics and health papers than what's been found in political science and sociology. She also finds significance inflation in RCTs is lower than other methods and has fallen over time.
Here's an article from Gelman, Goel and Ho on what statistics can't tell us about affirmative action at Harvard. I'm a sucker for experts writing about the limits of their field.
I mentioned new research earlier punching some gaps into existing evidence bases. Here we go. Money priming, like other forms of priming, doesn't actually have a meaningful effect on behavior. The charts in this one are particularly striking. And an at-scale implementation of CBT for disruptive kids in Chilean schools radically backfired.
And because I have no other place better to put it, but wanted to include it, here's Ray Fisman and Michael Luca on how free pens are killing so many people in the US that average lifespans are falling. And on a related note, ugh, ugh, ugh. There are some things that need to be re-named more urgently than the Ely Lecture.

5. Global Development: When you can write about industrial policy and subsistence agriculture in the same item, you have to take advantage. Thanks VoxDev! Dani Rodrick has an overview on the resurgent economics of industrial policy, which is a very helpful refresher if you've looked at David's post on setting up your own firm to run experiments and are thinking it may be time to change your topics of interest. But VoxDev also has a summary of work reviewing what's been learned about improving agricultural extension services from the Agricultural Technology Adoption Initiative. Which is a very helpful overview if you, like me, have long-standing plans to look at what we can learn from research on subsistence farming to design programs for subsistence retail.
But there's still a long way to go, because even after all this time studying small-scale agriculture we still don't know a lot. Like how much of the difference in productivity from farm-to-farm is real or just mismeasurement. That paper should also be of interest to anyone thinking about studying firms, by setting up their own or otherwise, or in industrial policy.

Apropos of nothing, I found this chart, and  the related blog post  looking at data from lots of different drugs, on the frequency of use of marijuana quite interesting.

Apropos of nothing, I found this chart, and the related blog post looking at data from lots of different drugs, on the frequency of use of marijuana quite interesting.

Week of January 7, 2019

1. The History of Banking: For a project I'm working on I've been thinking a lot about financial system development and have gotten a bit obsessed with the history of banking. You might think that with a topic so core to economic thinking there would be some consensus on things like what banks do and how they came to do them. But you would be wrong. I've had great fun reading conflicting accounts of the history of banking in the US and Germany over the last few weeks. At the AEA exhibit floor I stumbled on a new book about the history of banking in France, Dark Matter Credit. The short version is that informal banking was a massive part of the French economy, and worked better in many ways than French banks until World War I, and it took regulation to finally allow formal banks to displace the informal system. I also picked up Lending to the Borrower from Hell and just in the first few pages discovered that Italian "friars, widows and orphans" were buying syndicated loans to Charles the II of Spain in 1595. The bottom line is that informal finance was much more efficient and "thick" than I believed, and formal banking extended much further much earlier than I had known. There's also a new book on banking crises in the US before the Federal Reserve, Fighting Financial Crises, which is equally relevant to thinking about the much-more-grey-than-you-would-think borderland between formal and informal banking.
To tie this all more specifically to the AEA meetings than just what was on display at the book vendors' booths, one of my favorite sessions was Economics with Ancient Data. Though I'll confess I'm not sure whether to be heartened that things we are doing now can have persistent effects for thousands of years, or depressed that our present was determined by choices thousands of years ago.
   
2. MicroDigitalHouseholdFinance: There was of course a number of new(ish) papers on our favorite topics, further condensed here. Here's the session on financial innovation in developing countries and one specifically focused on South Asia. Some of these papers have appeared in recent editions of the faiV already, but I want to call out a couple specifically. Microcredit, I've argued, is in dire need of innovation. So I'm always pleased when I see papers on innovation in the core product terms, like this paper from India on allowing flexible repayment, and while it wasn't at AEA,this one in Bangladesh. In both cases, allowing borrowers to skip payments results in higher repayment rates and better business outcomes. I see these as part of an evolving understanding that microcredit is a liquidity-management product, not an investment product. Credit can also be a risk-management product, as long as you know it's going to be there when you need it. That's the story of this paper on guaranteed loans for borrowers in the event of a flood (in Bangladesh). Another cool innovation in microcredit. Of course, the next question is who is going to insure the MFI so that it has the liquidity to make good on emergency loan promises?
There was a session titled "Shaping Norms" that I almost missed out on because of the somewhat oblique title. There were some very interesting papers here on how household preferences get formed, and how they can be changed, including longer-term data on the experiment in Ethiopia that I think of as launching the "changing aspirations" theme that we see more and more of.
I was amused that there were simultaneous sessions on "Finance and Development" and "Financial Development" but the poor Chinese student beside me was very confused as apparently the translations in the official app did a poor job of differentiating between the two. Both had interesting papers, but I found this on the sale of a credit card portfolio from a department store to a bank (which has access to more credit bureau data) in Chile, and this on bank specialization in export markets particularly interesting.
But moving outside of the AEA realm, my confirmation bias prevents me from not including two other related items on Household Finance. First, Matthew Soursourian of CGAP has some pointed questions about the usefulness of "financial health" as a concept, questions I thoroughly endorse. Second, there is documentary evidence (for instance, here) that I've long been skeptical of the story about mothers in developing countries caring about their children while fathers don't. I find it more than vaguely racist as these stories typically only involve countries where the majority of fathers are black or brown. Anyway, at long last someone, specifically Kathryn Moeller, tried to track down one of the more common statistics on women spending more money on children and found that there is no source, and it was apparently made up as part of a marketing campaign. But that's just the start. Seth Gitter links to three studies that find no difference in investment in children (and I'll add the Spandana impact evaluation to his list) and Martin Ravallion points out that the "70% of world's poor are women" stat seems equally unsourced.
 
3. Entrepreneurship, Reluctant and Otherwise: Overall, the paper that left me thinking the most is a long-term update to the Blattman and Dercon experiment randomizing employment at factories in Ethiopia. If you need a catch-up, the original experiment had three arms: control, a $300 cash grant plus business training and a job in a "sweatshop"-type factory. While there were positive effects for the entrepreneurship group, the jobs didn't improve income and had negative effects on physical health. After five years, all the differences dissipate (hours worked, income, health, occupational choice). Pause to think about that for a moment--after several years of higher incomes from entrepreneurship, the average person in that arm shut down their business. And the control group started microenterprises and got factory jobs (filling the gaps left by the treatment arm participants who dropped out?). It's another piece of a growing puzzle about why microenterprises don't grow, or more specifically why people don't seem to invest in their microenterprises, even when the income is higher than the alternatives. Stuart Rutherford has been thinking about that too, and because it's Stuart, he went out and interviewed participants in the Hrishipara Diaries to try to get some answers.
If you're a regular reader of the faiV, you know that one of my standard soapboxes is the need to pay more attention to the commonalities between the US and developing countries. And this is anther example. At AEA, Fiona Grieg of the JP Morgan Chase Institute presented updated data on participation in the gig economy in the US (not publicly available yet, here's the older version). Of the various forms of gig work, driving is arguably the most similar to the low-skill self-employment options, which I generally term "subsistence retail", available in developing countries (indeed, that's one of the jobs Stuart discusses in his piece). In that sector, specifically, the striking finding is that participation is sporadic, irregular and incomes are falling, in part apparently because of competition but also because participants are spending fewer hours doing it. It's a pattern that looks to me much like the Ethiopia experiment, and Blattman's similar experiment in Uganda which also saw all effects dissipate after nine years. 
Here's a nascent explanatory theory, based on a new NBER paper about demographic change in the US. The authors show that all of the troubling changes in the US economy related to job creation, start-up rates and the labor share of income can be explained by the US's aging population. The basic idea is this: older people start fewer firms, particularly firms that grow and add employees, than young people. With fewer start-ups you get less creative destruction and more mature firms which tend hire fewer new workers and, at least partially as a consequence, have more unequal wages and less wage growth. Now apply those ideas to developing economies which tend to be quite young demographically. There young people are trying a lot of things to figure out what the best option for them is. Because of other market failures, the need for extraordinary entrepreneurial ability to succeed is much higher and therefore much fewer small firms grow to any size. And even survival takes a huge amount of effort, especially since there are so many other low-skill young people trying out the same things at the same time. So people drop out of microenterprises before learning enough to improve them, and then bounce through other options because none of them are particularly good. And that's what we are also now seeing in the US economy, with the gig economy as one example. The jobs just aren't good enough to justify investment. Any thoughts on this very welcome. 

4. Blind Spots and Privilege: The two things that generated the most attention at AEA this year had to do with blind spots. You've likely heard about the investigations into harassment and bullying of women by (former) superstar Roland Fryer. That gave real energy to the sessions on gender discrimination in the profession that were already on the agenda by the time the story broke. Here's video of a session featuring Susan Athey, Marianne Bertrand, Sebnem Kalemli-Ozcan and Janet Yellendiscussing their experiences being economists while female. The sessions and conversations certainly caught the attention of the news media with follow-up stories, from the NYT and NPR. The conversations have brought to light plenty of blind-spots and privilege. For instance, the AEA has not had any way to remove someone from the executive committee. There is now a code of conduct, but no mechanism for enforcing it. And the post-conference conversation on Twitter has been turning to more of the blind-spots, like the persistence of one-on-one job interviews in hotel rooms. It remains to be seen how much of a reckoning there will be. Case in point is the death this week of Harold Demsetz, an economist who, the consensus seems to be, should have won a Nobel (with Armen Alchian). The third comment on Marginal Revolution is a very credible story of years of harassment by Demsetz. But here's a Twitter thread lamenting his passing in which I can't help but notice an imbalance among the commenters who knew him personally.
OK, here's a huge pivot. The other session that inspired the most passionate response, at least as far as I could tell, was about coming changes to how the US Census Bureau anonymizes data. Here's some quick background: the ability to de-anonymize anonymous data is increasingly a concern in many areas of life; and the Census Bureau is moving toward something called "differential privacy" to make it harder to do, with unclear but probably negative effects on the ability of researchers to use Census Bureau data. Whether there are real threats to privacy and how the Census plan is being implemented are apparently deeply controversial. Here's a "live" thread from Gary Kimbrough, with follow-up responses from some of the participants, that reveals some of the tensions and problems. Something that emerges from the thread of particular note is an issue I was not aware of: Raj Chetty has more access to Census data than anyone else, apparently, and that is a source of a lot of tension among researchers. There is real concern that the Census' plan will create a hierarchy of who has access to useful data and put even more power in the hands of privileged researchers--and the extreme hierarchy that already exists in Economics is certainly a part of the culture problem. 

5. Replication and Causal Inference: OK, let's expand our horizons beyond things drawn directly from AEA. David Roodman has a new piece on the lessons from his work attempting to replicate two important public health economics papers over the last few years. Roodman doesn't see a replication crisis in economics similar to that in psychology, because "most...original results can be matched when applying the reported methods to the reported data." He thinks, though, that re-analysis is more important than replication and there economics has a "robustness" crisis.
There is a new study of "push button replication"--the ability to get the same results from the reported data and methods with the resources made available--of impact evaluations from low- and middle-income countries. Brown, Muller and Wood find that only 27 of the 109 studies they find are "push button replicable." Of those that were not, 59 did not provide the necessary data and code (similar to another paper from a few years ago that David cites); 30 of those were published in journals that nominally required the data and code to be posted. Not great, Bob
Finally, a clash of titans in the world of causal inference erupted this week, with Andrew Gelman posting a review of Judea Pearl's newish book, The Book of Why. AsSue Marquez notes, the comments are where it gets really interesting (which also got me to wondering, why are the comments on Gelman's blog must reads and the comments on Tyler Cowen's blog must-not-reads?). Pearl himself responds, (eventually in multiple places in the thread) and if you thought the culture in economics was unique, maybe not so much. Most of what is in the comment thread at Gelman's blog is statisticians. The economists got to discussing it on Twitter. I wish I could provide a useful guide to that, but the conversation got so fractured that even I was stymied trying to follow it. The best I can offer is to start with Marquez's tweet, and then click on various replies to see the conversation branching. It's frustrating but worth it, and if any faiV readers end up making sense of it (nudge, nudge Marc) and summarizing the conversation in a useful way, let me know.

There were a lot of things I considered including this week, but in the end I decided that everyone could use a smile to start the year with. So without further comment, click play.

There were a lot of things I considered including this week, but in the end I decided that everyone could use a smile to start the year with. So without further comment, click play.