Week of October 11, 2019

The Regressive Edition

1. Microfinance: October 2nd was the 10th anniversary of what I consider to be an underappreciated but critical moment in the history of the microfinance movement--David Roodman's piece on how Kiva actually worked. David had already been working on a book about microfinance that was going to be very influential--his open book blog as a whole is a remarkable contribution to the public good, one I wish many more people had decided to replicate--but the Kiva post (based on it being one of the most read blog posts in CGD history according to Justin Sandefur) brought a huge amount of attention to questions about how not only Kiva, but microfinance as a whole, actually worked. I re-read it this week and it's as good as I remember it and definitely makes me pine for the brief glorious time where the development blogosphere was a thing.
There's another important anniversary this week for global microfinance though with a less arbitrarily neat number--Muhammad Yunus's Peace Prize was 13 years ago. Today many were surprised that Greta Thunberg didn't win. The explanation seeming to be both timing and the fact that there is not a direct link between climate change and conflict. There may be a narrowing of the scope of the Peace Prize given that there is certainly no connection between microcredit and reduced conflict. In case you didn't know the winner was Abiy Ahmed, the Ethiopian Prime Minister, who has done some pretty impressive things directly related to peace, like ending the conflict between Eritrea and Ethiopia and freeing thousands of political prisoners. For what it's worth the Economics Nobel announcement is Monday so expect to see more about that in next week's faiV. Some favorites with particular applicability to the faiV include some combination of Donald Rubin, Josh Angrist, John List and Guido Imbens for kicking off "the credibility revolution" and Michael Kremer, Abhijit Bannerjee, Esther Duflo and/or John List for kicking off the experimental revolution. Of course, I'm hoping for the latter because it would likely give a pretty significant boost to my book sales.
But back to microfinance. Banerjee, Emily Breza, Townsend and Vera-Cossio have a new paper (presented at NEUDC) that uses the Townsend Thai village data and the expansion of a credit program to further bolster what should be the clear consensus on the effect of microcredit: on average not much, but very high returns for some. In this case, they find that there are very large gains for high productivity households who get access to credit (1.5 baht increase in profits for every 1 baht increase in credit) and even higher for those outside agriculture. This is broadly similar to earlier work, now in an NBER paper form, by Banerjee, Breza, Duflo and Cynthia Kinnan on Indian microfinance. Keep in mind, as we continue to see these results, that there is another side of the coin: is there a business model that can reach the high productivity borrowers more exclusively?

2. Inequality: If you think about within-country inequality, you think about taxes. Since the United States has had a huge explosion of income and wealth inequality in the last few decades, and there is a presidential election (hopefully) just over a year away there is a lot of discussion about the US tax system and how it has contributed to the growth of inequality and how it might be used to reduce it. This week there has been a lot of focus particularly on whether the US tax system is progressive or regressive, which seems intuitively like it should be a pretty straightforward question to answer. But the US tax system is so complicated, including not only collecting but distributing cash, it's a controversial question. Emmanuel Saez and Gabriel Zucman make the case that since the 1950s the US tax system has shifted dramatically toward being regressive. Here's David Leonhardt's shorter version of their argument with cool animated graphics. But not everyone agrees and those differences can't be traced just to ideology. Here's a thread from Jason Furman, former chair of the Council of Economic Advisors under Obama debating Zucman on methodology and interpretation. Here's David Splinter with a more in-depth analysis illustrating why Saez and Zucman get such different numbers than the traditional approaches to analyzing progressivity.
Meanwhile, there is an entirely different question about whether taxes can be used to effectively address inequality (Saez and Zucman's book is all about how the wealthy evade taxes). There's a new NBER paper on the response of rich taxpayers to an increase in the California tax rate. It finds that just under 1% of those subject to the higher taxes moved out of state, and those who stayed found ways to avoid the tax, so that total income from the tax was about half of what it would have been otherwise. Here's Lyman Stone's Twitter summary.
It's not clear how to think about that 50% cut in additional revenue: on the one hand, there is a big increase in tax collection, on the other hand you have to expect that over time people are going to get even better at evading the tax. Here's Lily Batchelder and David Kamin with a comprehensive review of wealth taxation in implementation with hope that wealth taxes can work.

3. Evidence-Based Policy: Let's talk about the inverse relationship between farm plot size and productivity in developing countries. That's admittedly a strange place to start a discussion about evidence-based policy, but I view it in the same bucket as whether the US has a progressive or regressive tax system. These are questions that seem easy to answer--and very important to answer for policy purposes--but are remarkably complicated to actually answer.
For background, what is known as the IFSP hypothesis started way back with Amartya Sen making the observation (well before the credibility revolution) in the early 1960s about Indian agriculture. Lots of papers over the years have tried to chase this observation down and document it in India and around the developing world. Here's a helpful summary that you really should read even if this is not even close to your area of interest. That was written in 2018, and still there are papers coming fast and furious that related to this basic question. Here's Gollin and Udry looking at measurement error as a big factor in measures of farm productivity, explaining about 90% of the differences between farms (e.g. they aren't really differences). And from NEUDC here's Kibrom Abay, Leah Bevis and Christopher Barrett with a different take on measurement error, where it comes from and how it affects the related policy questions (which are big! Like how much should you redistribute land!). And here's Milu Muyanga and TS Jayne using data from Kenya to document that there at least the U-shaped relationship holds no matter how you measure productivity.
So what is the evidence-based policymaker to think when such basic inputs to policymaking as progressivity of the tax system and whether there is a IFSP are subjects of debate for decades? If you are waiting for "settled science," well the economics publishing industry isn't going to help much. Here's new data from the Journal of Political Economy which, in the fine print, says that the average time from submission to publication--EXCLUDING AUTHOR REVISIONS--is more than 450 days.

4. SMEs and Human Capital: A couple quick hits on two favorite topics of mine these days--especially as they come together. Girum Abebe, Fafchamps, Koelle and Quinn had a paper at NEUDC about how to get management experience to young people in Ethiopia. The paper is, unfortunately from my perspective, most framed around the methods and the algorithms to use to produce the best results, rather than what I find most interesting: is it possible to match young managers with more experienced managers in order to spread the human capital of management? They find that matching high-ability trainees with high-management score firms yields meaningful increases in self-employment (in other words that these trainees go on to start and manage their own firms). What I really want to know though is how much better everyone got at managing and what the effect within firms of better management was.
There's a new paper that starts to answer this question with larger firms in Mozambique--by offering finance training to managers of "medium and large enterprises." Claudia Custodio, Diogo Mendes and Daniel Metzger find that a short executive education style course for these managers has meaningful effects on working capital management and small but still there effects on long-term investment. Perhaps there is hope for the management trap!

5. More from NEUDC: From guest faiVer Jonathan Morduch who actually made it to NEUDC:
Most people know the NEUDC conference by its acronym. Every year, it’s the biggest global gathering of researchers on development economics, drawing participants from around the world. But it started in 1967 as the Northeast Universities Development Consortium and has stuck to the northeast USA. This year, though, the NEUDC landed in Chicago with a successful event at Northwestern. You wouldn’t have been alone if the 4 parallel sessions (most with 4 papers each), had left you longing for a nap. It turns out that naps are powerful. In an NEUDC paper based on a field experiment in Chennai, urban poor individuals averaged 5.6 hours of sleep a night. For those who could get an afternoon nap, the researchers saw “improved cognition, psychological well-being, and productivity. Naps also reduced inattention to incentives and increased patience, as measured by a real-effort task and financial savings.” The big, lurking question is whether behavioral biases are often a function of sleeplessness?
A different NEUDC paper finds that microcredit flexibility may be over-rated. An RCT introduced flexibility into microcredit contracts in Bangladesh. The setting is one with highly seasonal income, and the flexible contract allowed borrowers to pay less during the lean season. I was surprised (and the authors were too) that the intervention made little difference to financial and economic outcomes.
Before I rethink all the lessons on volatility from financial diaries, here’s a different finding that steadiness can in fact be very helpful. The big news in cash transfers from the summer was that Mexico’s long-celebrated conditional cash transfer (CCT) program was shutting down. It was the CCT program that launched dozens of other CCTs -- and also gave early credibility to RCTs (and RCTs of CCTs). Prospera’s demise came despite the NEUDC paper showing that Prospera recipients were much better protected against anticipated income shocks than otherwise similar households. However, households receiving transfers were still sensitive to unanticipated shocks, in line with the Permanent Income Hypothesis.

1950 tax.png
The "money" charts on how the total tax rate has changed in the US since the 1950s that I mentioned in the first item. Source:  NYT

The "money" charts on how the total tax rate has changed in the US since the 1950s that I mentioned in the first item. Source: NYT

Week of September 27, 2019

1. Jobs: I've written a good bit here on the "Great Convergence" from the perspective of financial inclusion--that the US and middle-income countries have more in common in that domain than they have ever had--but another version of the "Great Convergence" is the common focus on jobs in countries across the per-capita income spectrum.
It's useful to put the current convergence in historical perspective--the recognition that creating jobs was critical and that "national champion" industrial development was not creating them played a large role in the development of the microfinance movement. The failure of microcredit to produce much beyond self-employment alternatives to casual labor has brought job creation, and especially job creation through SMEs, back to the top of the agenda of international development. At the same time, the failure of richer economies to produce very many "quality" jobs in the 10 years since the Great Recession (and arguably since the 1970s) or for the foreseeable future has put the question of jobs at the top of the list of concerns for policymakers in those countries.
Paddy Carter, the director of research for CDC (UK, not US), and Petr Sedlacek have a new report on how DFIs and social investors should think about job creation that lays out some of the issues (e.g. boosting productivity can both create and destroy jobs) quite nicely. MIT's "Work of the Future Task Force" also has a new report, this more from the perspective of policymakers in wealthier countries, with a call to focus on job quality more than job quantity. Stephen Greenhouse has a new book on dignity at work, which of course has a lot to do with job quality. Here's a talk he gave recently at Aspen's Economic Opportunities Program.
Seema Jayachandran has a new working paper on a specific part of the jobs conversation: how social norms limit women's labor market participation and what might be done about that. For me it also opens the question about microcredit-driven self-employment being a higher "dignity" job for women in many contexts than the jobs that are available to them otherwise. More on that in a moment.

2. Household Finance: I don't have a lot of links here, just some thoughts from conversations in the last few days. But to kick things off, Felix Salmon had a nice gibe at financial literacy this week that had my confirmation bias going. But in hindsight, I actually disagree: teaching financial literacy actually doesn't seem to be that hard based on the many papers that show that running a class leads to passing a financial literacy test. The hard part is making higher financial literacy pay off in terms of changed behavior. But there I agree with Felix's basic point: higher financial literacy doesn't lead to improved decision making for the poor or the wealthy. The wealthy just have more structure and protection (both formal in terms of regulation and practices at private firms who know better than to routinely screw profitable customers, and informal in terms of slack and cushion) from bad choices. On the flip side, Joshua Goodman has a new paper in the Journal of Labor Economics that finds that more compulsory high school math leads African-American students to complete more math coursework and to higher paying jobs (there's a nice little estimate that the return to additional math courses makes up half of the gains from an additional year of school).
Part one of "more on that in a moment" is that Seema with a rockstar list of development economists (Erica Field, Rohini Pande, Natalia Rigol, Simone Schaner and Charity Troyer Moore) has another new paper on whether access to, deposits into and training on using a personal bank account affects women's labor supply and gender norms. They find that it does increase women's labor supply and shifts norms to be more accepting of women working. Here's the indispensible Lyman Stone with a somewhat skeptical take on the interpretation of the data.
Finally, in a conversation with Northern Trust this week about their financial coaching work (see a recent summary here) a really fascinating insight came up: people in the coaching programs seem to have much more success when "saving" is framed as "debt reduction" than when it's framed as "saving." These sort of things always grab my attention because Jonathan's paper Borrowing to Save was a seminal piece for my interest and thinking in financial inclusion. But it also got me thinking: what would happen if retirement savings programs were framed as debt + loss aversion? Specifically, if when you started a job, the employer said: "I'm loaning you $10K, deposited into an IRA and you owe me $x monthly, until you pay it off--and if you don't I take it back." Obviously you couldn't run an experiment like that in the US because of regulations, but is there somewhere you could? Maybe someone has already done it? Let me know if you have any thoughts.

3. Digital Finance: I linked this a few weeks ago, but I keep coming back to it, so I'm going to link it again: CGAP's data set on how Kenyans use m-Pesa. MicroSave also has some new data on Kenya, built in partnership with the Smart Campaign and the SPTF, specifically on the prevalence and use of digital credit, which "highlights some positive signs and some persistent problems." Honestly I see a lot more of the persistent problems than of the positive signs.
That's reflected in a new post from David Porteous at Next Billion about the nearly completed FIBR project (no the acronym doesn't make any sense to me either) which looks at digitization and financial inclusion. Among the persistent problems: for most of the world digital finance isn't different from mobile money (in other words there isn't deeper engagement with formal finance by individuals or much progress on digitization of business finance), and new players with unclear (or non-existent) commitment to social goals are dominant. Let me expand quickly on one point that David frames positively which I am much more cautious of: the extension of digital credit to small business by large organizations with access to their data. Here's the home page of the Responsible Business Lending Coalition which exists because of all the ways that increased access to data and digitization is facilitating predatory small business lending in the US.
Speaking of new players, Juvo has "announced" "Financial Identity as a Service", complete with ridiculous acronym FiDaas). I'm not sure if there is a there there, but you can also guess my priors about this based on the above two paragraphs. And here's a WSJ piece on Google Pay's success in India, which came very much as a surprise to me. It turns out part of the reason is Google launched the service in India in advance of regulations that slowing competitors down.

4. Evidence/Methods: We often talk around here about the barriers to getting policymakers to take evidence into account in their decision-making. It turns out that a first step toward more evidence-based policy might be teaching statistics students not to be so availability-biased and frequentist.
Before you chuckle to yourself too much about psychology vs. economics, keep reading. Here's a new paper on the multiple testing problem that inevitably results from natural experiments--once one paper identifies the natural experiment there are often many other papers that follow using the same "event" to test other hypotheses. This is certainly not the last word, but it raises big questions. Stuart Buck has some big questions of his own about how to account for multiple hypothesis testing and how we should even think about these problems.
Another domain of economics research that hasn't gotten enough attention is how to do cost-benefit analysis that is meaningful from a policy perspective. Caitlin Tulloch has been all over this issue and she and her collaborators have a new report on best practices for cost-efficiency analysis of basic needs programs.
While it's not the sort of thing I usually include in methods, the AEA's climate survey report is out. And it makes it clear that the harassment of women and minorities in the economics discipline is in fact a method that has shaped and continues to shape the profession and the research.

5. Philanthropy: Speaking of methods that shape development economics--seeking funding from billionaire philanthropists is another core method that shapes the discipline. Here's an interaction I had with Justin Sandefur and others on how the intersection of demands of the profession, the state of evidence-based policymaking and the existence of large-scale philanthropy shapes what the median development economist should focus on. It's in part a preview of my chapter in the upcoming book on RCTs in development economics edited by Isabelle Guerin, Florent Bedecarrats and Francois Roubaud.
Here's Kelsey Piper making the positive case for the role of private mega-philanthropy, through the lens of modern contraception.
And here's a video of two of my favorite thinkers in philanthropy, Rob Reich and Phil Buchanan, fiercely debating each other about the role of private philanthropy in American society, based on their recent books (Rob's Just Giving; Phil's Giving Done Right). My sympathies lie more with Rob, but what I think is really going on in these conversations between Phil and Rob is about differing theories of change. Rob is trying to move the Overton Window on how we talk about philanthropy in order to create space for serious conversations about shifting policy; Phil is worried that Rob will shift the Overton Window too far too fast. But the best part is that I got to add to my idiosyncratic collection of books signed by the intellectual anti-thesis of the author (see also: Angus Deaton signing my copy of Poor Economics).

No particular reason that this came to mind. Source:  Stephan Pastis  And by the way, any parent with kids between 8 and 13, if you haven't stocked your house with the  entire Timmy Failure series by Pastis , you're doing parenting wrong.

No particular reason that this came to mind. Source: Stephan Pastis
And by the way, any parent with kids between 8 and 13, if you haven't stocked your house with the entire Timmy Failure series by Pastis, you're doing parenting wrong.

Week of September 20, 2019

1. Evidence-Based Policy: So this may seem pretty off-topic as a way to start, but here's a story about the very slow moving revolution in soccer/football analytics, told from the perspective of attending a "bootcamp" put on by one the leading firms in the field. Why is it in the faiV? Because I think there is a lot for those of us who think about evidence-based policy to learn from watching how evidence infiltrates other domains. [Side-note: the RCT apologetics that appeal to "the way it's done in medicine" annoy me to no end, because the use of evidence in medicine is terrible.] And I think in many ways the sports world is a useful mirror to the policy world--if only because there are a lot of people who care a lot, have strong opinions but relatively little expertise. Here's a story about that specifically: what it means to be a fan, psychologically, when there is increasing distance between you and the people who are making decisions (or put another way, how does it feel to live in a technocracy?). Which also allows me to slip in Glen Weyl's recent essay, "Why I Am Not a Technocrat."
I don't worry that much about the pros and cons of a technocracy as we are so far away from living in one--many of the people in positions to make decisions are still a long way away from adopting the evidence that is available, even when their job would seem to depend on listening.
Of course there is another factor delaying evidence-based policy in many domains: the poor quality of the evidence. Here's a newly revised paper from Bradley Shapiro, Gunter Hitsch and Anna Tuchman about, of all things, advertising effectiveness (Twitter thread here). I find it interesting because this is a place where you would expect that there is lots of demand for high quality evidence. And yet, with really painstaking work, the authors are able to show that the published literature is quite biased, and therefore wrong. So wrong that the maxim should possibly be not that "half of my advertising budget is wasted, I just don't know which half", but "Three quarters of my budget is wasted...". Waiting for the revolution indeed.
Finally, since I expressed growing skepticism about nudging last week, here's a paper that finds an effect in a place I would not have expected it at all: reminding seniors with reverse mortgages to pay their property taxes.

2. SMEs: Thanks to David McKenzie, I just learned about a relatively new "book" from the World Bank on High Growth Firms: Facts, Fiction and Policy Options for Emerging Economies. It's a terrific effort to pull together a lot of research from different countries and account for how uneven the data is. Two important evidence-based takeaways: past episodes of high growth are not predictive of future ones, and not even that predictive of survival; and, the link between high growth and productivity is really weak. The only quibble I have with it is that it is framed too much for "emerging economies." Everything I see here is relevant to the US and other developed economies as well, where the thinking on SMEs can be just as wrong.
Policy prescriptions in the book include focusing on managerial skill, which I am increasingly convinced is the crux of the matter. Another is to focus on market linkages, particularly export markets. Here's a J-PAL report on helping small-scale Egyptian rugmakers connect to export markets, which boosts their profits and productivity (2017 QJE paper here). For one more aspect of SME development and policy implications, see item 5 below.

3. The Corrupted Economy: For those of you who were a bit tuned out during the summer, "The Corrupted Economy" is my new header for items that reveal the "great convergence" between the economy faced by the bottom 40% of the US income distribution and that faced by people in middle-income countries. I try not to include it every week just to maintain my own mental health.
Here's a new paper that encapsulates a lot of what I think about under this heading: despite supposedly random assignment, in Chicago and New York, bankruptcy lawyers are able to manipulate case assignment to the benefit of their clients (and the detriment of those who file without legal representation). The poor are different from you and me--even the rules to make sure they are treated fairly aren't fair. Or put another way, even the programs designed specifically to help them--like opportunity zones--are quickly turned into programs that benefit the wealthy.
The premise of the corrupted economy is that there are two different economies now in the United States. Here's a new report from Brookings on the two different economies and how quickly they are diverging. We've long known about the divergence between urban and rural economies (another feature in common with middle-income countries)--this analysis shows that this urban/rural divide is increasingly a Republican/Democrat divide. Over the last ten years, median household income in Democratic districts has risen by about 5%, while marginally falling in Republican districts.
Here's a new paper on another phenomena that has been oft-remarked: the school-to-prison pipeline. Using students that are plausibly exogenously moved from a low-suspension school to a high-suspension school, the authors show that being suspended increases the likelihood of future arrest and incarceration.
What can be done about the corrupted economy. Here's a new paper by Lily Batchelder and David Kamin about the real possibilities (technically, not politically) for taxing the rich.

4. Our Algorithmic Overlords: Where does the use of algorithms increase fairness and where does it mask, perpetuate and amplify unfair discrimination? Here's a Science Friday story about facial recognition in criminal justice.
What about other kinds of recognition? Perhaps we should be concerned about recognition based on medical imaging since apparently a large number of medical images are pretty easily available on the internet.
But back to the main question: Does AI reduce or increase bias? Of course, it depends on a lot of factors, but one of the largest is how the human beings and AI interact. That stretches from how the data sets that AI engines are trained on are generated (often by human beings with a lot of biases) all the way to the discretion that human beings have in following or rejecting the AI conclusions. Here's a story about how human curation is sneaking back in to fix, replace or simply be an alternative to AI recommendations. More to the point however is this paper thatcompares discrimination in face-to-face lending and via fintech platforms. Borrowers of color pay higher prices in both data sets, but the gap is smaller in the fintech data, and while the fintechs do engage in price discrimination they are much less likely to discriminate by denying loans.

5. Migration: This week I finished up the copy-edits on a paper I co-authored with Michael Clemens on rethinking the research agenda on migration and household finance. Michael and I first submitted the paper a little more than 4 years ago, but I was struck by how many of the research questions we posited back then remain quite relevant. Look for a link soon.
In the meantime, Ryan Edwards has a couple of posts reviewing the literature on "brain drain" (or more properly, the positive spillovers of migration) at the DevPolicyBlog of ANU: Part I and Part II. Samuele Giambre and David McKenzie have a new paper looking at the effects of self-employment, and particularly encouraging self-employment (otherwise known as microcredit) has on cross-border migration, finding a small, negative effect. Corina Mommaerts, Melanie Morton, Mushfiq Mobarak and Costas Meghir look at the effects of rural-to-urban migration on informal insurance in Bangladesh. I think most people's priors would be that migration reduces informal insurance arrangements--but here migration improves informal risk sharing, suggesting that benefits from migration subsidies are 40% higher due to spillovers. And bringing all this together in a Great Convergence kind of way, here's Monica Langella and Alan Manning discussing whether or not people "move to opportunity" in the UK and why regional differences persist even when people do so. In summary, there isn't enough moving far enough by the right people: young people are more likely to move and move farther than older people; poorer people are less likely to move and don't move as far. All-in-all it's highly relevant to thinking about migration and household finance in other developed and in developing countries.

On the Great Convergence and Corrupted Economy topics, here's data from the most recent Bureau of Labor Statistics data on project job growth in the US. As pointed out by  Heather Long , seven of the 10 jobs projected to grow the most in the US in the next 10 years pay less than $34,000 a year, and 6 of them less than $27,000 per year. Source:  BLS  .

On the Great Convergence and Corrupted Economy topics, here's data from the most recent Bureau of Labor Statistics data on project job growth in the US. As pointed out by Heather Long, seven of the 10 jobs projected to grow the most in the US in the next 10 years pay less than $34,000 a year, and 6 of them less than $27,000 per year. Source: BLS .

Week of September 13, 2019

1. Digital Finance: Is a tide turning on digital credit? Old hands in the microfinance world like MicroSave and CGAP have been highlighting concerns about digital credit for the last few years, but the non-specialist community hasn't seemed to notice until recently. In late August Bloomberg had a quick hit piece with an eyebrow-raising headline, "This Nobel-Prize Winning Idea is Instead Piling Debt on Millions," which is likely the way the general public will perceive this despite the protests of insiders that telecoms/fintechs making instant loans at high rates with minimal customer engagement doesn't have much in common with traditional microcredit. A more serious treatment,"Perpetual Debt in the Silicon Savannah" was published in the Boston Review the same week, though it's frustrating in its own ways, notably the lack of engagement with the global/historical context of small dollar lending or with the research from financial diaries.
In both articles there are two additional issues that I wish received more attention. First, the value of liquidity management. The authors of the Boston Review piece, Emma Park and Kevin Donovan (both historian/anthropologists), spend a good deal of time talking about the "zero-balance economy" creating a situation where consumers can be exploited without engaging on the need for services to manage liquidity when you have low and volatile incomes. Second, the kind of default rates being hinted at in these articles raise serious questions about the business models and sustainability of digital lenders. Tala, one of the larger digital credit providers in Kenya (and elsewhere) just raised another $110 million. How much of that money is covering losses? I would love to see some analysis of what sustainable default rates are for digital credit.
Shifting gears a bit, the reason that the Kenya specifically and East Africa more generally remain in the spotlight on digital finance is the ubiquity of access. But ubiquity can't be assumed and in general I would say not enough attention is being paid to what happens when ubiquity fails. Here I don't mean places where everyone knows service is unreliable, but places and times where service is unexpectedly unavailable. Here's a story about the problems that can create in the US with ZipCar customers stranded in the "wilderness" because of a lack of signal leaves them unable to unlock or start the vehicles. More seriously, though, is the concern when access is limited because of political reasons. Here's a story about the rise in government-directed internet shutdowns. Of course there is the big concern of how these shutdowns would affect people who have adopted digital finance and find themselves unable to spend. But I also wonder if Tala investors have priced in the risk to the business model of internet shutdowns.
Internet shutdowns are a blunt tool. We should also be concerned about more fine-grained tools in the hands of governments or private companies. I'm old enough to remember when one of the highlighted "benefits" of digital finance was that it created an audit trail of transactions. Here's a story about how much data about you leaks to unknown parts of the internet when you use the Amazon Prime card and the Apple Card. And finally, here's a new report on cash as a public good from IMTFI, sponsored by the International Currency Association, which I am fascinated to discover exists (though I'm even more fascinated to discover the International Banknote Designers Association, which is one of its members).

2. Our Algorithmic Overlords: There is of course a lot of overlap between concerns about digital finance and privacy and digital everything and privacy. One of the standard mantras of those gathering and selling data is that much of it is anonymized, so we shouldn't be concerned. But, of course, not so much. That's not just a concern in the US, because digital data-gathering is becoming a thing worldwide. Here's a plea to stop "stop surveillance humanitarianism." And here's a story about how a high-tech surveillance approach to improving disaster responseturns out to have not been such a good idea (spoiler: garbage in/garbage out).
One of the major concerns about the use of algorithms in these situations is the garbage in/garbage out problem--combined with the gee-whiz veneer that technology provides obscuring that problem. I'm generally skeptical of that argument as a whole, because my experience is that people are far less likely to trust an algorithm than a human being (In some sense I wrote a whole book about it in a different application: the bogus fears that Toyotas were suddenly accelerating and trying to kill people). But there are other forms that algorithmic discrimination can take. Here's a story about a new US Housing and Urban Development regulation that would exempt landlords from responsibility for the discriminatory results of their screening practices as long as they don't understand the algorithm, which y'know is a given.
Finally, there is a new documentary about the 2016 US election, the Brexit referendum, Facebook/Cambridge Analytica, etc. called The Great Hack. Here's a piece about 7 things the documentary gets wrong which I find pretty convincing.

3. Behavioral Economics: Similar to the expanding skepticism about digital credit, I feel like I'm also seeing some growing skepticism about the efficacy of interventions built on behavioral insights, particularly the broad category of "nudges," (though there is clearly a lot of disagreement about what should be considered a nudge).
For instance, four recent impact evaluations on "behaviorally-informed" interventions in education have come up with not much. few significantly exceeds that of smaller programs. A scale up of a program to encourage completion of financial aid applications, that had been successful at the state-level, found no impact. A program to encourage low- and middle-income students to apply to more colleges found no impact overall (with a very small effect on the quality of schools applied to by African-American and Hispanic students). Nudging college students to study moredoesn't do anything either. But this last one encapsulates the issues for me because it's framed as a success. A program to use behaviorally-informed notices to parents about their kids missing school increased attendance by 40%! Except that amounts to .07 days, or by my rough calculation about 20 minutes.
If you're interested in more specifically finance related nudges, here's an experiment in the Netherlands to encourage more savings with a "social norm nudge." It succeeds in getting people to intend to save more but has a precisely estimated null effect on actual savings.
At a more theoretical level, Dmitry Taubinsky with various co-authors, has two new papers digging a bit deeper on how behavioral insights play out. In the first one they find that people will take up commitment contracts both to exercise more and exercise less! Even worse, educating people about self-control problems reduced demand for commitment contracts. Here's we show that with some uncertainty about the future, demand for commitment contracts is closer to a special case than to a robust implication of models of limited self-control." In the other paper, the authors find that people have "heterogeneous rules-of-thumb" for attention to costs, which complicates a lot of models of limited attention.
And it's not just the empirical research that is getting shakier--some of the key underlying premises of the whole idea that priming and nudging will be effective are also being shaken. Here is a defense of the limited willpower literature from Roy Baumeister, a defense that will shift most readers priors further against that literature being reliable. But more importantly, the neuroscience finding that most undermined classical concepts of free will (brain activity begins before a person makes a conscious decision) has been debunked as an artifact of background mental noise.

4. New Research: I mentioned that there is always a flood of new working papers that appear in late August and early September (and NEUDC is coming fast!). Here are a few that caught my eye. Martin Ravallion has a new paper on measuring global poverty. Closely related is a look at cyclical fluctuations in social indicator measures--some measures of welfare are reflections of global and national business cycles, while others are better measures of long term development. Here's a paper that looks at the longer-term effects of agricultural subsidies in Mozambique, finding thatspillovers account for most of the gains (spillovers are a particular interest of mine lately). An asset transfer program in the Philippines designed to reduce child labor actually increased child labor (as children were pulled out of school to put the asset to use). In Chicago, eviction is a consequence of financial distress not a significant cause of it, i.e. the majority of the negative consequences come before eviction rather than after. And finally, I had been wondering recently about replications of the Drexler, Fischer, Schoar rule-of-thumb experiment, and it turns out there was one recently (hat tip David Mckenzie): Irani Arraiz, Syon Bhanot and Carla Calero tested a similar program in Ecuador and find "significant and meaningful" effects on sales and profits, driven by women. They hypothesize that women have higher cognitive burdens (due to unequal household labor burdens) and therefore are more likely to adopt short-cuts and benefit from them.

5. Other Odds and Ends: Clearly I'm still getting back in the swing of writing the faiV and there are just a whole lot of things out there that I'd love to write about and link to, but it's already 5pm. So some more odds and ends.
The Netflix documentary about a US factory taken over by a Chinese company is getting rave reviews, from the New York Times and Planet Money. There's also a documentary about a factory in India that has been highly recommended but I haven't figure out a way to watch yet. The Economist has a long look at BRAC and it's future. I'm often baffled that BRAC isn't the most famous thing in the modern world. There's a new comprehensive look at "deaths of despair" in the United States that finds they have indeed risen but with a much more complicated story, suggesting that just focusing on opioid epidemic may be more fruitful than attention to "despair." And I'll close out with some confirmation bias--Lauren Willis pushes back on the CFPB's turn to education and calls out financial literacy as a dead end. And so does Caitlin Zaloom specifically on student debt, calling out Steve Mnuchin who is apparently calling for mandatory college financial literacy classes.

Week of August 16, 2019

The Dog Days Edition

1. The Great (Household Finance) Convergence: I've been teasing this for awhile and now it's finally out: my essay for Aspen's Financial Security Program laying out the convergence between the US and developing, especially middle-income, countries especially when it comes to financial inclusion. The essay also highlights areas where mutual learning and collaboration should prove particularly fruitful. While you're there check out the rest of Aspen FSP's work on financial inclusion and keep an eye out for my next essay on "Reinvigorating the Financial Inclusion Agenda" (or, y'know, just wait until it shows up in the faiV; or you could check out this piece I did for CDC (UK) on the value of investing in financial system development).
Now the work for that essay was done a while ago, but the evidence for the convergence thesis (and it's related "corrupted economy" thesis) keeps coming. The past few weeks there were several stories in this vein. For instance, the growing number of American families relying on debt to pay their bills. Sorry, I meant the growing number of Russian families relying on debt to pay their bills. Sorry, I meant the growing number of post-retirement Americans relying on debt to pay their bills and being forced into bankruptcy.

2. Moving to Convergence?/Evidence-Based Policy: Here's a different area of convergence--my interests in the Great Convergence and in evidence-based policy in general and the RCT movement in particular. Part of the argument of the Great Convergence/Corrupted Economy is that the bottom 40% of the American income distribution faces an economy characterized by limited opportunity, with poor jobs, poor education, poor healthcare and housing that closely resembles the economies of middle-income countries. Escaping from these circumstances requires something akin to winning the lottery (Oh, did you hear about Virginia's new program for automatic purchases of lottery tickets? Set it and forget it!). People do win, but it's hard to justify the mental, physical, emotional and economic investment in hard work and building human capital when you are facing a lottery economy (and frequently witness things like this which don't seem to horrify very many people beyond Paddy Carter).
Perhaps you heard about or read the new paper from Chetty et al. on an experiment to revive the Moving to Opportunity program that showed next-generation benefits (but not much in terms of short-term benefits) from moving from poor neighborhoods to wealthier neighborhoods. The results from the experiment were met with a good bit of enthusiasm--here's Nick Kristof, and here's Dylan Matthews.
But the whole thing leaves me pretty uncomfortable for four reasons. One, the whole thing really is a lottery. Jake Vigdor does a good job in this thread of laying out the issues. First, the underlying program is literally a lottery. In fact, all housing assistance in Seattle is the functional equivalent of lottery. So to benefit from the program you would have had to win the lottery of applying for housing assistance at the right time, when there were slots open, and then when the lottery to get one of these vouchers specifically for this type of move.
Second, the program isn't an anti-poverty program as they are traditionally conceived of--it's a test of a program to encourage people who win the double lottery to follow through and actually move to higher-income neighborhood. It turns out that a remarkably small number of people who get housing vouchers like this actually use them--see above on the difficulty of motivating action in a lottery economy. The program works on its own terms--it significantly increases the percentage of people who actually move. But the anti-poverty effects in the theory of change won't be felt until the children of these movers become adults--at least 10 to 15 years from now.
Which raises the third issue. To really consider this an anti-poverty success you have to believe that the things that made the high-income neighborhoods in Seattle good for generational mobility 20 years ago, remain true today, AND that the labor market faced by today's kids will be same in 10 to 15 years further into the future. Those seem to me to be large assumptions.
It's not just that they seem so, the fourth reason is that they are large assumptions. Because the underlying mechanisms that lead to next-generation income mobility haven't been identified in any meaningful way. Other work by Chetty et al has documented the clear existence of high-mobility and low-mobility neighborhoods in the US--that work is a big part of what informs my views on the Great Convergence/Corrupted Economy. But it doesn't make it clear why the good neighborhoods are good, and therefore you have to believe that those factors are invariant over time, which maybe you shouldn't.
Here's the connection to evidence-based policy, and the fourth : this work and the reactions to it seem to me to be a much clearer example of the criticisms of RCTs by folks like Lant Pritchett, Angus Deaton, Glenn Harrison and Martin Ravallion than anything I've seen in the economic development space. You've got black boxes, large unexamined assumptions, a suspension of disbelief due to the methodology, and ultimately the possibility of gains so small (e.g. once you narrow from the winners of the lottery to the people who follow through to the kids who benefit; and all of this is just in one county in the whole country) that you should say, "so what?" instead of cheering.
By the way if you're interested in a different critique of this body of work, and other takes on economic mobility in the US, check out this thread from Scott Winship.
Wrapping up on the evidence-based policy front, it turns out that policy-makers have a lot of behavioral biases.

3. SMEs: A few years ago David McKenzie had a couple of papers on the difficulty of assessing impact of interventions focused on small business: revenue was very noisy, and complicated by difficulty with recall, profits even more so. Anyone who is familiar with those papers will feel a bit of deja vu in this new report from the JP Morgan Chase Institute looking at how volatile cash flows are for US small businesses. It's no surprise, but important to document, that volatility of cash flows and firm survival are inversely correlated. Using high frequency data to better understand the variety of cash flow patterns and the importance of cash flow/liquidity management in relation to access to capital is very useful.
And here's a review of the effectiveness of programs to induce small businesses to formalize in low- and middle-income countries. In a twist on the common finding that effects dissipate at scale, in this case it seems that impact at scale significantly exceeds that of smaller programs.

4. Global Development: There's a lot of big news on the global health front lately. Let's get the bad news out of the way: malaria is back on the rise in Kenya (and based on the reasons, I suspect this is going to be largely true of any other country where malaria is endemic.) On the other hand, researchers seem to have found a treatment regimen that is highly successful for XDR-TB (though frustratingly the article doesn't talk much about the inevitable evolution of resistance to this regimen, into XXDR-TB(?)). And Ebola treatment trials are showing promising results, with one approach appearing to offer major improvement within a day which would be a huge benefit to overcoming trust issues that have plagued the Ebola response.
In keeping with my Great Convergence theme, I'm going to cover two new education papers in the US under the heading of global development because I think they are very relevant. First, here's Elizabeth Setren et. al. reporting the results of an RCT of "flipped classrooms" where instruction happens at home, while class time is spent on the sort of practice that would traditionally be "homework." It turns out that not only does this not have a sustained positive effect on learning, but it widens the achievement gap. From a global perspective this is an important paper for thinking about why "scripted" classrooms seem to work and for caution on technology-based approaches to pedagogy.
Another paper looks at the effects of technical high schools in Connecticut, and using an RD approach finds that male students have large (31%) increases in quarterly income, but no effects on female students. Given that vocational training is a big part of the global development story these days due to concerns about youth unemployment, this again seems quite relevant.

5. Jobs!: I'll close out with some "service journalism." The Gates Foundation has two new jobs in their Financial Services for the Poor team: a program officer focused on Bangladesh and a senior program officer focused on consumer protection (yay!).
While there is no posting/job description yet, I'm going to be hiring a Jill/Jack of all Trades to for FAI with duties including program administration, events management, communications and even the possibility to be included in our primary and secondary research. So feel free to reach out if that seems like something you might be interested in.

The reporter for the piece on retired Americans filing for bankruptcy has some wildly different priors than I do. Via  Financial Times .

The reporter for the piece on retired Americans filing for bankruptcy has some wildly different priors than I do. Via Financial Times.

Week of August 2, 2019

The Attention is a Suckers' Game Edition

Editor's Note: Nothing particularly new to report this week, other than the faiV will be off the next two weeks. Oh and that Imbens paper on potential outcomes vs. DAGs is at least as good as expected, and there's now an NBER version.
--Tim Ogden

1. Financial Systems: I've referenced several times over the last year some work I've been doing for the CDC (the UK DFI, not the one in Atlanta) on investing in financial systems. The first public version of that work, a summary of a much longer paper that I'm still hoping to finish in the next few weeks, is now available. As a summary, it necessarily elides a lot but it does capture what I think are the essential points on the topic right now. The main one I want to highlight here is a somewhat esoteric one: the question in front of us in the sector is not whether or not financial systems matter for the poor, it's whether we know how to intervene in the development of those systems in ways that specifically benefit target populations we care about, in the timeframes and manner in which we can measure. It's an important distinction that I think is missing in too many current conversations about where we are on financial inclusion. Please do read it, and let me now what you think.
In related financial system development and development ideas, Paddy Carter from CDC pointed me to this paper from Paula Bustos, Gabriel Garber and Jacopo Ponticelli on how the financial system in Brazil channeled a productivity shock in agriculture into other sectors (which apparently is on its way to appearing in the QJE) which is exactly what one hopes a financial system accomplishes from a development perspective.
The longer paper for CDC and my research for it emphasizes the history of financial system development. A couple of 2018 books on the topic, specifically on John Lawand Walter Bagehot, are reviewed in the New Yorker by John Lanchester. Rebecca Spang has some thoughts on the continuing focus on the "great man" approach to the history of financial systems and how that misleads. Again, I hope that my work for CDC takes this into account by spotlighting what we know about informal financial systems and how to factor that into thinking about investing in financial system development.
Finally on this topic, two papers that I've had sitting in open tabs for quite some time but have never found a place for in the faiV. First, here's Anginer,Demirgüç-Kunt, and Mare on how institutions affect how much bank capital influences systemic risk (and here's the blog summary). The bottom line is that bank capital matters less when there are well functioning regulatory institutions, but higher capital requirements can substitute for quality institutions in reducing risk. Of course, those higher capital requirements limit the outreach and inclusion of those banks. Trade-offs forever. And here's Ben-David, Palvia and Stulz on how banks in the US react under distress finding that the banks generally reacted prudently rather than gambling in an attempt to revive their sick balance sheets. Which is a further argument for higher capital requirements in weak institutional settings, but creating an alternative system for financial inclusion that isn't bank-based.

2. The Corrupted Economy: My comments a few weeks ago on the "great convergence" and the "corrupted economy" in the US got more positive feedback than I was expecting. So we may now have a new regular section of the faiV.
Unequal access to a quality education is one of the areas where the US increasingly looks like middle income countries. Here's a minor, but infuriating, version of the corrupted system: wealthy parents giving up their children to "guardians" so those children can in turn apply for financial aid as if they don't have any resources. And here's a less blatantly evil version of a similar corruption: children who receive extra time on tests due to some psychological/medical diagnosis are disproportionately white and wealthy--because those are the parents who can afford the thousands of dollars required to pay a private psychologist to deliver such a diagnosis. And the issue is much broader than that because the article only briefly touches on the systemic impact on families and school districts, one I'm acutely aware of personally. I know the educational outcomes for my son, with a rare disease, are almost certainly going to be much better than many other kids in this country with the same disease, because we can afford to live in a school district that isn't so strapped for cash that they have to cut back on services, and I can be an intimidating presence in meetings with the district when necessary.
Here's a story about how the "adjustment" payments for farmers negatively affected by Trump's trade war are all going to the largest, wealthiest farmers. Here's a story about how minor criminal offenses are turned into profits and debtors prison. And here's a story about the actual labor market conditions faced by the lower half of the income distribution: a few days in the life of a meal-delivery bicyclist in NYC. Marvel at how DoorDash preys on income volatility to take tips away from riders. And how the riders' existence is pushed to margins with minimal and shrinking interaction with the customers, how they acknowledge that they are being used to generate data so they can be replaced by drones, and in the meantime how they are subject to the capricious whims of NYC police who can confiscate their bikes on a pretext at any time. And how the riders are grateful that this is a step above working directly for the restaurants. This is America.
And speaking of the Great Convergence, check out this trailer for a new Indian movie about a heroic effort to help kids break out of their corrupted economy. Then think about the long history of American movies with essentially the same plot:Stand and Deliver, Dangerous Minds, Lean on Me, etc. etc. And they are all essentially a distraction from the systemic issues.

3. FinTech and Social Investment: The systemic issues are something I really struggle with, and it came up this week as I was asked to review some applications for a FinTech incubator. I'm not going to name either the incubator/investor or the applicants, but it was impossible to miss the disjuncture between the systemic issues that were the motivation for the program and the proposed solutions. Those solutions ultimately boil down to a theory of change that rests on individuals being primarily responsible for their financial distress--and therefore apps that get their attention or "gamify" savings are somehow "solving" the problem. Now, I think there are some people that are going to be helped by an app that draws their attention to not missing payments and harming their credit, or who aren't saving not because their wages are volatile and well below what they need to afford housing and healthcare, but because it's not fun enough. But I have a hard time caring much about those people. Especially when the business models of many of the FinTech apps I see seem to be built on gaining trust of users and then profiting from referral fees paid by other financial services. I have to wonder: what kinds of financial services firms are going to be interested in paying for access to these kinds of customers? I doubt it's going to be ones that are offering high-quality, low cost services that are good for people--for no other reason than those products aren't going to be profitable enough to pay referral fees.
Many of these apps also raise an issue I've been concerned about in the application of behavioral science since I wrote a review of Scarcity: if everyone recognizes limited attention and behavioral barriers and tries to address those, where do we end up? I think it's likely that attention-focused interventions are going to be revealed as a sucker's game: you constantly have to do more and spend more to compete with all the other people trying to grab attention. Case-in-point: a large scale intervention to grab students attention and redirect it to studying shows no effect. But if you look back at the article about delivery riders, you'll notice that those apps are doing a great job of using behavioral tricks to take advantage of riders. The takeaway from the "studying" study is that you should shift your priors toward high-touch financial coaching and away from FinTech.
One more quick related rant: the whole process reminds me that there is a long way to go in thinking rigoroulsy about social investment and social capital, and I feel better that this chapter Jonathan and I wrote on that topic is worthwhile. (By the way, I took advantage of a plane ride earlier this week to read through most of the rest of the chapters and the whole book is worthwhile.)

4. SMEs: While filling out my evaluations for the FinTech incubator I couldn't help linking to the now published (and open access for a limited time) paper from David McKenzie on how hard it is to pick winners in business competitions, and that experts and machine learning are both bad at it. Inspired by David's earlier work on management, here's a piece on how management consulting could be the best form of foreign aid (factor into your research theories of change how long it's been since the research cited in that article was done).
And here are two recent articles from Next Billion on SMEs--on the difficulties of scaling up local manufacturing in Uganda, and from TechnoServe on building links between SMEs and foreign firms.

5. Global Development Miscellany: I'll confess this is self-indulgent, but it's on topic: the NYT covers the rising tensions in northern Colombia as Wayuu people cross the border fleeing from Venezuela. The village in the story is a couple of hours from where I grew up and only a few miles from where my mother was born--and for the record the descriptions ring very true to me.
Here's a story that I hope gets attention in proportion to it's past history. Prospera, that staple of CCT discussions, and of evidence-based policy, is being abolished. The story seems to be a political economy one combined with fairly significant mistargeting. I hope to read a lot more about this.
There were concerns that DFID was on the verge of a major demotion under Boris Johnson, but that didn't come to pass, yet. Large concerns remain about the future of the British development agency, though not as large, of course, as concerns about the future of British anything.
And finally, you can consider this a global development story if you squint hard, but it's fascinating never-the-less: there is a form of communicable canine cancer that has spread all over the world, and biologists have mapped that process of globalization with remarkable similarities to economic development.

Historical context really does change perspective, as Matt Yglesias suggests that too many of today's policymakers "spent their formative years in a period of anomalously high interest rates." Though I would argue that the long term perspective also means that short-term rates really are concerningly anomalous. Via  Matt Yglesias .

Historical context really does change perspective, as Matt Yglesias suggests that too many of today's policymakers "spent their formative years in a period of anomalously high interest rates." Though I would argue that the long term perspective also means that short-term rates really are concerningly anomalous. Via Matt Yglesias.

Week of July 26, 2019

1. MicroDigitalFinance: The nominal intention of the faiV is to keep you aware of what's happening in various domains, especially microfinance. But there is a more systematic approach to documenting trends in the industry, e-MFPs survey of people in the industry on what they perceive to be the most important trends and developments. Here's their report from last year's survey. This year's survey is now open--so click here (French; Spanish) and go produce some data on trends in the industry.
There's some new experimental evidence on the impact of mobile money from Christina Weiser, Miriam Bruhn and co-authors, who managed to work with Airtel to randomize the expansion of mobile money agents in Northern Uganda. The findings, to my eye, are broadly similar to Jack and Suri's work in Kenya (keep that in mind, we'll be coming back to it later), though without the direct impact on income poverty.
And here's a report from Karandaaz Pakistan on the regulatory and policy bottlenecks limiting the spread of digital financial services there. The basic issue is a lack of clear policy and regulation, rather than existing policies that prevent action--which raises a question of why the lack of clear policy and regulation was a boon to digital financial services development in so many places, but a hindrance in others.

2. Digital Security: One of the areas the report on Pakistan highlights is lack of clarity on data privacy and protection, but mostly from the compliance side. One of the things I've been thinking a lot about lately is the other side of digital security and the huge burden we are rapidly putting on individuals and firms to protect themselves from bad actors.
I'll admit this is somewhat driven by personal anecdote--I've spent a good bit of time over the last few weeks helping my in-laws recover after falling for one of the "Microsoft" security alert scams. These are older folks, obviously, but both are highly educated, experienced professional people--and they found it completely plausible that Microsoft had a customer service department that was monitoring their computers and helping protect them. Which is not a crazy thing to think, unless you've spent most of your life living in an era where digital service providers have effectively declaimed all responsibility for the damage using their products could do.
But apply this more broadly to people and institutions. As digital financial services spread, we are asking essentially the entire world to become immediately savvy about what a plausible claim is in the digital world. Google and Firefox and other browser providers who have policies and authorized "stores" for browser extensions actually enforce those policies right? Ha, ha, no, of course not, why would you think that? If you get a call from travel agent to book your accommodation at the conference you have been invited to give a keynote at, that's safe right? I mean, how would some scammer know that you're the keynote speaker and the right dates, etc. No of course that's a scam too.
But individuals aside, institutions should have the expertise to protect themselves. Unless it's say, local governments who keep being compromised by ransomware. Or you know, institutions that don't deal with anything particularly crucial, like say, elections.
But the old adage is that "banks" will be the most attacked targets because that is where the money is. Here's an interview with the former CEO of Thomson Reuters and now founder of a digital security company that touches on some important points, especially for financial services providers that aren't behemoths. Here's a blog post about how you can't "hire enough people to fix your cybersecurity problems." The nominal solution is to hire data scientists, which while great for the job market prospects of future economics PhD cohorts, isn't much of an answer for most organizations. How on earth are microfinance institutions going to be able to secure their digital infrastructure?
The bottom line on all of this for me is simply this: we pushed digital financial services as a way of pushing down transaction costs but it seems increasingly likely that if we add up the costs of keeping up with technology and ensuring digital security, we actually radically increased total cost.

3. Our Algorithmic Overlords: Digital security is even more of a concern because of our algorithmic overlords--I keep picturing the movie Brazil, which a minor change to data triggers an unstoppable set of processes, ruining a man's life. It was conceived in an era where those processes were totalitarian/bureaucratic; it's all the more plausible today when those processes are automatic.
What does the age of algorithmic control mean for how governments make decisions. Here's video of a session on that topic from the Institute for Government's recent conference featuring Sendhil Mullainathan and Rachel Glennerster. Rachel makes the point that decision rules hidden by machine learning and algorithms are a big problem for good governance.
I've argued before that decision rules tend to be much more hidden when the decisions are carried out by people, who actually have motivation to hide their real reasoning. Sendhil (et al.) makes a similar point in the video and in this paper which I've featured in the faiV before but is now published in the Journal of Legal Studies.
Consider a few specific instances. Amazon has secret deals with local police forces to turn them into salespeople for the company's Ring video surveillance doorbells; in return the cops get expedited access to video from the installed Ring devices. This is frighteningly terrible, but the core issue is not the technology, it's the people who made the decision to enter into such partnerships and agreed to keep them secret from the public. Or how about Palantir's secret manual for local police forces to use the company's mass digital surveillance technologies. Again, terrible, but mostly because of the people who can use this data to retroactively come up with justification for the surveillance, and the people who agreed to give the government data to Palantir that enables this type of mass surveillance.
Another factor is how people react to the algorithms: who uses them, and how do they react to the information or decision the algorithm generates? We're getting more research on both of these questions and they tend to point to people problems. Last week I included, though it was somewhat buried, a paper on howKentucky judges react to algorithmic risk scores in determining bail. The short version: the judges follow the algorithm for white defendants but overrule it for black defendants, imposing harsher bail conditions. Here's a new paper from Kate Bundorf, Maria Polyakova and Mig Tai-Seale on using algorithms to help people choose optimal insurance plans. The key headline for me: the people most likely to gain from using the tools were least likely to use them.

4. Subsistence Retail: Although I've done a recent faiV on the "research production" function, there are still lots of parts of the system that I don't understand. For instance, the most recent set of NBER papers featured four papers on agricultural extension services. You may be wondering why that fits into the category of subsistence retail. Here's how: the problems of low agricultural productivity, the problems that ag extension aims to solve, are essentially the same problems of low microenterprise productivity. As urbanization occurs globally, the numbers of people engaged in subsistence retail is increasing and the number engaged in subsistence agriculture is decreasing. If we're going to figure out interventions to help subsistence retailers, the best place to learn is from decades of work on subsistence agriculture. So it's helpful to know about a) spillovers from training delivered via video, b) how well groups of undifferentiated producers can effectively coordinate for improved profits, c) the success of an intensive program that targets multiple constraints at once, and d) how information interacts with social networks. And although it's not about ag extension, here's another relevant paper that explores how much small-scale farmers are simply wrong about their plot sizes and how that can mislead conclusions in other work.
Here's an interesting overview of one of the few programs that I've heard of that are directly targeting subsistence retailers: "The Informal Retailer Platform aims to deliver sustainable, large-scale social and financial impact by building the business capacity and income potential of low-income shopkeepers in the global South via education and access to services."
I mentioned that you should keep the Jack and Suri paper on mobile money in Kenya finding increased economic activity, and a decrease in extreme poverty in mind. This is where it comes up again. There's a new paper from Milford Bateman, Maren Duvendack and Nicholas Loubere critiquing that paper and it's findings. Here's the layman's version. I've had my own problems with the way the Jack and Suri paper was framed, in line with Pritchett's larger point about "kinky" development: there's too much emphasis on moving people from slightly below to slightly above an arbitrary line. But I don't find the new critiques particularly compelling--e.g. whether the majority of the benefits of mPesa flowed to wealthy investors in the form of profits is an interesting point but it doesn't tell us anything about benefits to users. My interpretation of the Jack and Suri result is from the perspective of subsistence retail and consumption smoothing: mobile money provides a big boost to liquidity in poor communities where literal absence of physical currency is a real constraint. That in turn enables people to jump into and out of subsistence retail in a way that helps them smooth income and consumption. That again is consistent with the new paper from Uganda cited above. And it's consistent with mobile money having some positive impact but not a large one on individual households. Here I think we're going to learn a lot from a few papers Emily Breza has in the works that shed light on the decisions that Indian village households make in switching between casual labor and subsistence retail.

5. Methods: Two very important items that I've left for the end, largely because they speak for themselves. First, Guido Imbens has a new paper on the Rubin Causal Model and Directed Acyclic Graphs and their relevance and usefulness in empirical economics. It's one of the few times when I've been actually tempted to use the popcorn-eating animated gif. I'm hoping to spend most of my upcoming flight to the West Coast reading it.
And if you pay attention in this space you know about the controversy over a new paper that appeared to incent young people to participate in protests in Hong Kong. Berk Ozler has a lengthy post on the controversy and a better approach to ethics in experimental economics that is a must read, including the comments where Berk has a long response to some of the critics of the critiques.

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 map of the current location for authors of World Development articles created by editor-in-chief  Arun Agrawal . I find it surprisingly diverse, especially considering this doesn't count where the author is originally from, just where they are currently are. I'm not sure how to think about the difference between those two metrics.  Source .

A map of the current location for authors of World Development articles created by editor-in-chief Arun Agrawal. I find it surprisingly diverse, especially considering this doesn't count where the author is originally from, just where they are currently are. I'm not sure how to think about the difference between those two metrics. Source.

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.