scroll

  top
  back

Week of February 11, 2019

The Writing on the Wall Edition

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

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

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

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

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

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

Week of February 4, 2019

The Global Con Edition

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

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

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

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

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

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

Week of January 28, 2019

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

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

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

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

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

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

Week of January 21, 2019

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

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

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

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

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

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

Week of January 7, 2019

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

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

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

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

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

Week of December 17, 2018

1. Economics? What Is It Good For?: It's hard to spend any time paying attention to methodological and disciplinary debates without thinking of the Planck/Samuelson dictum about science advancing via funerals. Here, I'm thinking of attitudes toward the value of field experiments specifically and the "credibility revolution" generally. Christopher Ruhm recently gave a speech, in paper form here, about the "credibly-answered unimportant questions" vs "plausibly-but-uncertainly-answered important questions" debate. I found it helpful because it makes the hollowness of this concern more evident than usual, but you'll have to wait on the book chapter I'm procrastinating on to read why. Noah Smith has a more charitable take on Ruhm's speech, with the added important note that one of the big problems of the field is that outsiders don't understand the difference at all
On the credibility side of things, there are issues beyond just the identification strategy. Here's an interview with Ted Miguel on transparency and reproducibility, a neglected part of the credibility revolution as far as I'm concerned. David Roodman has resurfaced with two new papers doing the hard work of reproducing results. He looks at Bleakley's study of the effects of hookworm elimination in the US and of malaria control in the Americas, questioning the result of the first, but largely upholding the result of the second. 
But there's yet another dimension of credibility that I feel like is even more neglected, hearkening back to Paul Romer's mathiness paper: the comprehensibility of methods and tools. Here's a recent example: Declare Design has a lengthy discussion of whether and when to cluster standard errors, inspired by questions posed by David McKenzie and Chris Blattman. It's great. But is anyone else concerned about how few people actually understand the statistical methods we rely on? And that problem is going to get worse, as more and more machine learning and AI techniques come to the fore, techniques that perhaps even fewer understand. And the people that do understand them often don't understand causal inference or the philosophical issues around such basic concepts as fairness
I guess, therefore, in fairness I should point out that apparently economics is good for sports, specifically the NFL (at last), and it is good for showing that the Planck/Samuelson dictum is true.

2. A Clash of Civilizations: Part of the curious thing about the way the RCT debates in economics evolved is the frequent citing of the use of RCTs in medicine as justification for their use in economics. It's curious because seemingly the understanding of causal inference methods in medicine isn't great. Here's a piece from JAMA (trigger warning: it calls RCTs the gold standard) on why you shouldn't take people out of your treatment group and put them into your control group because the treatment didn't work for them. It's not quite that bad, but still. Here's a thread from Amitabh Chandra on that paper and the general lack of causal inference understanding in medicine.
And here is a fascinating piece of work about how causal claims in health research get steadily ratcheted up. The authors looked at the 50 most shared journal articles about the health effects of exposure to something, finding "that only 6% of studies exhibited strong causal inference, but that 20% of academic authors in this sample used language strongly implying causality." And then the general news media further ratcheted up the causal claims.
I include that as important background to the clash of civilizations that happened recently when Jennifer Doleac, Anita Mukherjee and Molly Schnell wrote about the causal effects of harm reduction strategies related to opioid addiction, reviewing the literature and especially their paper on the impact of naloxone distribution. They find that naloxone access reduces short-term mortality but increases long-term mortality. That doesn't sit well with a wide variety of people outside economics. This is one of the tamer reactions from outside economics (trigger warning: it also refers to RCTs as the gold standard), tamer in the sense that it actually attempts to grapple a bit with the issues. But it ultimately settles on a version of the trope that "we already know the answer, so your causal inference sucks" and "Here's a study of a different intervention that works, so your causal inference sucks." You have to admire (well, you don't, but I do) Doleac for continuing to wade into controversial topics where there are people with very strong priors such as whether bail-setting algorithms might in fact be fairer than judges.
Public Health and Medicine aren't the only areas where economics clashes with other disciplines. Perhaps that has something to do with how insular economics publishing is. Tying all this together, here's a thread from Jake Vigdor about economic publishing insularity (See Graphic of the Week below) linking to this very cool set of visualizations about cross-disciplinary references in academic journals. Suffice it to say Econ is not doing well at being noticed outside of Econ journals. Perhaps the Doleac et al paper may make a dent in the public health journals.
 
3. Impact, Scale, Policy, Oh My: One of the critiques of the experimental approach is that it necessarily must focus on relatively short-term effects, when from a policy perspective we should care much more about long-term outcomes. Here's a new paper from Bouguen, Huang, Kremer and Miguel on the possibility of long-term follow-up of RCTs finding that many do lend themselves to possible long-term follow-up, and offer advice on how to make more studies amenable.
Another critique is the necessarily small scale of RCTs and that the results tell us little about would happen if the intervention was scaled up (and the historical record has lots of examples of interventions where the effects faded out when scaled up). Now, the "necessarily" part has been pretty conclusively debunked, it is absolutely true that most experiments are small scale (cf. that same link). Yale has a new program specifically to study issues of scaling up: the Research Initiative on Innovation and Scale, or Y-RISE. They recently held their first conference on external validity, with lots of tweets. Here's a Vox summary of a conversation with faculty director Mushfiq Mobarak. This is obviously written for a general audience, but I have to point out that everything in this discussion can be found in critiques of RCTs by people like Lant Pritchett written years ago. I expect this to feature in an updated version of Lant's presentation, "The RCT Debate is Over. I won."
Now the thing that is obscured in Lant's framing is that the main argument for "I won" is that the randomistas are doing nearly everything that he advocated. Studying how to effectively scale-up is an example. Another LantRant is how impact evaluations are often essentially adversarial and outside the chain of policy-making. That's something the randomistas are doing something about as well. Here's a new J-PAL report on their partnerships with Latin American governments to both conduct and use impact evaluations as part of policy-making.

4. My Wish List: Seema Jayachandran is taking a term as an associate editor at the Journal of Economic Perspectives, and is wondering what topics in development you would like to see covered in JEP. Here's my wish list: 
1) An update on microcredit impact since the Banerjee Karlan Zinman 2015, with a focus on heterogeneity, intrahousehold decisions, general equilibrium, labor and other market effects and mediators. (Yes, that's exactly the topic of the first faiVLive. If you haven't seen it, you should click here. Especially if you're Seema or any of the other JEP editors).
2) A synthesis of the low-income household savings literature, including studies in high-income countries, from the last decade.
3) David McKenzie writing a review of his dozen(s) of papers on micro- and small firms, training, formalization, etc.
4) A paper that revisits behavioral econ/finance ideas, in the wake of much of the social psychology underpinnings getting shaky, (e.g. every sort of reminder you can imagine fails to have an effect on medication adherence).
5) Someone reflecting on the curious case of the "no short-term effect but big long-term effect" (e.g. deworming, MtO, now HeadStart), and the "big short-term but no long-term effect" (e.g. Blattman, Fiala) phenomena
What's on your wish list?
Perhaps, though, your wish list turns more toward who should win the next few Nobel prizes. If so, you can submit an essay to Econ Journal Watch.

5. To Take Your Mind Off Things: And finally, here are a few odds and ends that have nothing to do with the faiV's usual topics to use for some R&R over the holidays. How about What termites can teach us? Or What if the placebo effect isn't a trick? (OK, that one isn't so far off normal faiV topics). How the Math Men Overthrew the Mad Men? Now I'm realizing that perhaps my interests aren't as varied as I like to think.
Well, this is truly a breakaway. Here's a book that you should buy and read over teh holidays, and it's not a big commitment because it's a set of essays, so you won't add to your guilt pile. Impossible Owls by Brian Phillips.

Here's  a portion of one of those visualizations of Econ journals links, or  lack thereof, to other disciplines. This is only part of of only one of  the visualizations but you can see the self-referential nature of  citations. Source:  I'm not really sure what to call it .

Here's a portion of one of those visualizations of Econ journals links, or lack thereof, to other disciplines. This is only part of of only one of the visualizations but you can see the self-referential nature of citations. Source: I'm not really sure what to call it.

Week of December 10, 2018

1. Targeting: I intended for the faiVLive conversation to spend more time on targeting than we did--it's a sort of rushed conversation at the end. Targeting is something that I've been thinking about a lot, but I'm not sure what I think yet. So forgive me for just ruminating on a few things here.
The whole concept of microcredit is based on targeting--every lender has to target not only those interested in taking a loan but those interested in repaying a loan. Hand-in-hand with targeting repayers was targeting borrowers who were "entrepreneurs," people who would start a business, since the belief was a new microenterprise was the only plausible way for these very poor households to repay. But since the rhetoric emphasized that the poor were natural entrepreneurs, targeting repayers substituted 1:1 for targeting entrepreneurs. Given the findings of microcredit impact studies--namely that while average impact is minimal, there are people who see large gains--the focus on targeting has returned. See for instance, asking middle men who the best farmers are, or surveying other microenterprises.
But if your aim is reducing poverty, then you have to care about more than just finding the borrowers who will repay and have the highest returns on capital--you have to care about equity as well and the effect on, or exclusion of, the poorest or least able to generate high returns. Earlier this year I linked to a paper by Hanna and Olken on the equity effects of targeted transfers vs. UBI. Here's an interview with the two that summarizes their findings: for most poor countries, targeted transfers far outperform a UBI in terms of total welfare. And by the way, here's new Banerjee et al paper from Indonesia showing limited distortions from proxy-means tests.
Of course, in targeting microcredit we are doing the opposite essentially: looking for a proxy-means test to exclude the least-able to generate high returns. What effects might that have? If we boost market efficiency, it could be good for most everyone. That's not just theoretical--here's an empirical finding from Jensen and Miller on improving market efficiency in Kerala boat-building finding higher aggregate quality, lower production costs and lower quality-adjusted prices. But maybe not. That paper above on using middle-men to target finds that traditional allocation of loans does better for the poorest. And as we discussed on the faiVLive conversation, there can be systematic differences in market structure that limits who can generate high returns (in this case, among women seamstresses in Ghana). It's why I worry about what exactly is being measured in targeting algorithms like EFL/Lenddo.
The possible gains and losses have to be measured against the cost of targeting. The cost of microcredit as it exists, without targeting, is pretty low. The median subsidy per loan is about $25, not much for spreading access to the liquidity management features of microcredit well beyond those with high returns to capital. And then there is reason to think about the effect of greater targeting on the microfinance business model. Here is one of the few economics papers to make me actually angry, suggesting that microcredit contracts were purposefully designed to limit the growth of borrower's businesses. While I wholly reject that claim, the underlying idea is worth considering: microcredit's low relative costs are based on a mass-lending business model and MFIs have largely failed to find a way to compete higher up the banking value chain. Altering that business model could have unintended consequences. That's not just based on that paper. As I mentioned last week, City of Debtors, a book about small sum lending in New York City during the 20th century confirms the business model problem is real and pervasive.
So I don't really know what I think. I'll keep thinking about it, but as always I appreciate your thoughts if you're willing to share them.
    
2. US Inequality: I haven't covered US Inequality for several weeks, and so things have been building up. And there's been a whole lot of new stuff in the last few weeks. Let's start with the state of median US income over the last 30 years. The widely held current view is that incomes for all but the top quintile or decile have been stagnant. But that's heavily dependent on all the adjustments that need to be made for taxes, transfers, inflation and innovation. Stephen Rose at the Urban Institute summarizes the past and new work trying to measure changes in median income, and then writes in more detail about the methodological issues. One thing that had particularly slipped by me: Picketty, Saez and Zucman have a newish paper updating the famous results that showed stagnation and find median incomes have increased about 30% over the last 30 years. That shifts the proportion of gains by the top decile from around 90% to around 50% (I'm intentionally rounding these numbers because they are so sensitive to methodological choices, that I think we're all better off not reporting precise numbers because of the illusion of certainty that goes along with them). Perhaps one of the reasons that these new findings didn't seem to get as much attention as the idea of stagnation for the middle class, is that the new paper also finds that stagnation is true for the bottom 50% of the income distribution.
This week the US Census also released it's "Small Area Income and Poverty Estimates" for 2017, with county-level data on incomes and poverty rates. They find that over the last 10 years, median incomes in 80% of US counties were unchanged, with 11% of counties seeing an increase and 8% seeing a decrease. When you look at the maps, it's apparent that a majority of the counties seeing an increase are related to the fracking boom (and thus mostly in places with very few people). On the poverty front, there's a whole lot of stagnation too, with almost 90% of counties seeing no change, but 8% seeing an increase and only 3% seeing a decrease. Not an encouraging picture.
Whenever you talk about incomes and poverty, it's worthwhile to think about the definition of poverty. Here's Noah Smith on updating the definition of poverty to include volatility (though he shockingly fails to mention the US Financial Diaries). And here's Angus Deaton on "How  America poverty became fake news"--with some more methodological detail and the horrid engagement of the present administration with international attempts to measure poverty.
There's plenty new on the policy front as well. Here's a new paper estimating the total budget effect of the EITC--finding that the program self-finances 87% of its cost by reducing use of other transfer programs and increasing taxes collected. And here's The Hamilton Project on the work histories of people receiving SNAP and Medicaid benefits, finding that the majority are working, but irregularly and a substantial portion would "fail to consistently meet a 20 hour per week-threshold" because their hours worked vary so much from week-to-week.

3. US Inequality, Part II: I told you things were building up. Here are a few more things that are a bit less connected, to each other at least. People born in the late 1920s have had consistently higher mortality rates beginning at age 55, "rendered vulnerable by being born during and just after the Great Depression."
The Federal government took over the public housing system in Wellston, MO, near St. Louis, 20 years ago because of chronic mismanagement. It didn't get any better and now it's being shut down. That means 20% of the town's population is going to receive vouchers to leave the town and find housing elsewhere. Here's a thread from Jenny Schuetz of Brookings on the issues. She's a lot more concerned about moving people than I am.
Finally, some new data on women's earnings. You probably saw the study that measures the wage gap not based on hourly earnings, but on what people earn cumulatively over 15 years, finding that women earn about 50% of what men do because of lower rates of participation (hey Stephen Rose is a co-author on this one too). It's an interesting way to look at the issue, but I haven't figured out how to think about it yet. But that finding very interestingly dovetails with new work on the effect of attending an elite college. The traditional finding is that on average, the selectivity (I'm purposely avoiding using the world "quality") of the college someone attends doesn't matter. But for women it does matter--it substantially increases wages through the labor participation rate. But it also decreases the chances of marriage.

4. Our Algorithmic Overlords: I haven't been neglecting this category as much as US Inequality but I have been curtailing the entries because of time. Which means that there's also plenty built up here too.
I've frequently covered stories about China's surveillance state, especially when it comes to Uyghurs in Xinjiang province where it's increasingly clear that hundreds of thousands of people are being sent to concentration camps. Here's a first person story about how that surveillance state works.
Most of what I feature here is from academics researching the application of AI or machine learning or skeptics. But I occasionally like to cast my eye over what the business world is saying. Here's how AI can make us more human. Though I have to confess, of late, I'm not sure I can fully endorse anything that makes us more human. For the more traditional, at least for the faiV, perspective here's the new AI Now Institute report. They use the phrase very differently than, say, Prosperity Now: the headline is 10 recommendations for immediate and significant regulation of tech companies in general and AI applications in particular.
The other frequent area of coverage in this heading is mocking blockchain. Was there ever a more perfect item than blockchain projects in development have a 0.0% success rate. Here's a post with more details and less snark, but the same scathing conclusions. In an attempt at a veneer of fairness, here's a thread for Vitalik Buterine making a case that as the transaction costs of blockchain entries fall, there are some compelling use cases. Your mileage may vary.

5. Methods and Evidence-Based Policy: A special edition of the faiV focused on these built-up items is coming later this week.

Very  relevant to the inequality conversation, and whether people should  move, here's new data from the US Census on the cratering rates of  Americans moving geographically. This remains to me one of the great  mysteries of the current US economy. Source:  Quartz

Very relevant to the inequality conversation, and whether people should move, here's new data from the US Census on the cratering rates of Americans moving geographically. This remains to me one of the great mysteries of the current US economy. Source: Quartz

Week of December 3, 2018

1. faiVLive Background: The motivation for the faiVLive experiment is discussing what to think about microcredit impact given all the research in recent years. If you can't make it, or if you can, here's your quick cheat sheet to the recent research.
Of course it's starts with the average impact of microcredit being very modest. A Bayesian Hierarchical model look at the data confirms those findings. But there is important heterogeneity hidden within those average effects--"gung-ho" microborrowers do see substantial gains from increased access to credit. It's also true that these are mostly studies of expanding access to formal credit, not introducing it. That's hard to measure, but we can get a cleaner view of the value of credit when it gets taken away from most everyone--and that shows significant benefits, though through a somewhat unexpected channel: casual labor wages. Changes in labor wages can matter a lot for understanding the impact of a program, even entirely masking any benefits of an intervention with evidence that it makes a substantial difference in many contexts. And it's clear that changes in labor supply are quickly passed through into labor rates--in this case, the markets seem to be working fairly well. But it's not just labor markets. When microcredit affects local markets--by increasing or decreasing the supply of tradeable goods--the benefits may be substantial but mostly captured by the people who aren't using microcredit (what economists call general equilibrium effects). Which makes it all the more important to understand local market dynamics, especially when in many cases microenterprises are operating in sectors where supply exceeds demand. That being said, microcredit is a cheap intervention relative to other options. And it's possible we could increase the returns to microcredit for more reluctant microenterprise operators by boosting their aspirations. Or perhaps by doing better targeting of lending. But is it worth targeting? Households do seem to do a pretty good job of allocating access to capital to its most productive use within the household, and the gung-ho entrepreneurs are benefiting even without the expense of targeting.

2. MicroDigitalFinance and Household Finance: I suppose all of the above would qualify here as well, but here's a bunch of different new stuff, starting with the digital side of things. There are two new papers about the effects of SMEs adopting digital payments. In Kenya, an encouragement intervention led to 78% of treated restaurants and 28% of pharmacies adopting Lipa Na m-Pesa, and consequent increases in access to credit. In Mexico, a different kind of encouragement--the government distributed massive numbers of debit cards as part of the Progresa program--led small retailers to adopt POS terminals. That led to wealthier customers shifting some of their purchasing to these smaller retailers, and increased sales and profits for the retailers, but not an increase in employees or wages paid. On a side note, it's curious that the smaller shock of debit card distribution (pushing debit card ownership to 54% of households) had a large effect on retailers but the larger shock of m-Pesa being adopted by practically everyone has not led to more Lipa Na m-Pesa adoption.
A few weeks ago I featured a puzzle in savings from two savings encouragement experiments--the encouragement worked but savings plateau at a level well below what would seem optimal. Isabelle Guerin sent me a couple of papers that I'm still reviewing that might help explain why, but this week I stumbled across another example. The US CFPB, back in the days when it was allowed to do stuff and wasn't a hollow shell of existential dread, ran an experiment using American Express Serve cards and the "Reserve" functionality. They find that encouraging savings works--people boost their savings--but that the savings plateau after the 12 week encouragement and stay at roughly the same level for 16 months. That's consistent with the results from India and Chile but not with a model of accumulating lump sums or precautionary savings. You would expect among this population that they would experience a shock in that 16 month period and draw down the savings. Participants say they reduce payday loan use, but frankly I don't believe any claims about payday behavior that isn't based on administrative data (and it doesn't make sense if balances were stable).   
And finally because I want to encourage this behavior, Maria May sent me an interesting new paper on offering microcredit borrowers flexibility in repayment--customers get two "skip payment" coupons to use during the term of their 12 month loan cycle. Consistent with the much earlier work from Field et al, it yields more investment from borrowers, better outcomes and lower defaults.

3. Evidence-Based Policy: I noted last week that GiveWell, where I have served on the board since it's founding, released it's Top Charity recommendations. One of those is GiveDirectly. GiveWell, as is it's wont, wrote up some details of it's analysis of GiveDirectly, particularly about spillovers from cash transfers. That analysis was significantly informed by a forthcoming paper on general equilibrium effects and spillovers from one of GiveDirectly's programs that GiveWell was given access to even though it is not yet public. Berk Ozler took issue with that. And GiveWell responded. I have nothing whatsoever to do with GiveWell's research process or conclusions, but I was heavily involved advising GiveWell on its response to Berk's questions.
All of that is interesting, but I wanted to quickly draw attention to the Evidence-Based Policy subtext: internal and external validity. As Berk noted there are a number of papers that show negative spillovers from cash transfers in other contexts, and he makes the implicit argument that those papers are more internally valid because of public scrutiny and peer review. But are they externally valid--do their findings apply in other contexts? And more specifically, how should one weight research that has not had it's internal validity "boosted" by public scrutiny but is presumably more internally valid for being a study of the actual program being considered? GiveWell is putting a lot of weight on the non-public study because it has a large sample, is randomized and is pre-registered. Of course, one of the co-authors is a co-founder of GiveDirectly, which obviously presents some conflict-of-interest concerns. But one of the other co-authors might be called a godfather of the research transparency movement (OK, I'm doing it; I'm calling Ted Miguel a godfather of the research transparency movement).
Evidence-based policy is hard.
And that's before we factor in any of the complications of working with government and trying to incorporate community voice and self-determination. Susannah Hares reviews some lessons on "how, why and when to evaluate government-led reforms" through the lens of three impact evaluations of education policy reforms, from Delhi, Madhya Pradesh and Liberia. And since I'm speaking with Karthik Muralidharan later today, here's a throwback to a discussion he kicked off with comments at a recent RISE conference on evaluating policy reforms.  

4. Methods: I suppose that last link might belong more in a methods category, let's go right there. Well, let's go back to those internal validity questions. There's no shortage of discussion on the internet of whether peer review makes a difference or not. But it's much more rare to be told that "robustness checks are a joke." Double faiV points if you guess who wrote that before clicking. Quadruple points if you can guess who it links to. 
On the other hand, sometimes the rigors of peer review, robustness checks and working to have your research finding integrated into policy are just too much. It would all be much easier if your findings were suitably dramatic, surprising and large, even if that's not consistent with the data you've gathered. Here are ten simple rules for faking your research and getting it published (and not retracted).

5. Global Development : Please don't interpret that last link as having anything to do with what is in this item. Esther Duflo famously has noted that an advantage of RCTs is they have the ability to surprise. For my part, I'm frequently surprised by what expermenters manage to convince people to randomize. For instance, how about randomizing the religious content of a poverty intervention delivered by a Christian charity? That happened, in the Philippines, and here's a Freakonomics podcast about it. The results indicate that the evangelical Protestant content does increase effort and earnings. That's consistent with historical work in Germany, and by the way with the wave of work on the role of aspirations and hope. 
Speaking of aspirations and hope, those two characteristics would seem to be disproportionately held by migrants. Here's Michael Clemens and Katelyn Gough on the "best ideas for making migration work.
Finally, I've had a few links on updated work on the impact of the Green Revolution, which remains surprisingly controversial, hanging around waiting for the right faiV to include them, and well, I'm going to include them today. Here's a paper exploiting time variation in the development of high yielding crop varieties and their diffusion that finds that a 10% increase in use of HYVs increases GDP per capita by 15% (within a sample of 84 countries). Alternatively, here's work that finds that HYVs delayed industrialization and urbanization in India, and thereby limited GDP growth. But here's another new paper that finds that while HYV may have kept people in rural areas, it did decrease infant mortality. So if you weren't feeling bad enough about the difficulty of evidence-based policy and evaluating policy reforms as they happen, keep in mind that 30 years later people will still be arguing over whether the reform was good or bad.

Whether you survey husbands or wives about household assets matters, and can have a substantial effect on poverty measures. Via  Development Impact Blog , Source:  Adnan Silverio-Murillo .    

Whether you survey husbands or wives about household assets matters, and can have a substantial effect on poverty measures. Via Development Impact Blog, Source: Adnan Silverio-Murillo.    

Week of November 26, 2018

1. faiVYourJMP: Let's start there with a paper from Ryan Edwards on palm oil plantation expansion in Indonesia. That he finds trade-offs certainly shouldn't be surprising, much less astounding, but it is surprising how well he documents how the growth of export-led agriculture reduces poverty and increases consumption--including the specific channels by which that happens--and the connection to deforestation. Specifically, "each percentage point of poverty reduction corresponds to a 1.5-3 percentage point loss of forest area." Put another way, it's astounding to be able to see the price of poverty reduction outside of a carefully designed cash-based experiment.
And let me give a shout out to the Development Impact Blog team at the World Bank who were the inspiration to do this. Their crop of "Blog your JMP" posts is growing by the day and includes many entries worthy of your attention.
 
2. MicroDigitalFinance: Here's an astounding story about predatory lending and debt collection in New York (and from there, across the US). And I don't care how cynical you are, this is stunning because it's perfectly legal--so legal that there are registered investment companies gathering capital in public markets to do more of it.
That story then led me, via Rebecca Spang, to a book that came out at the beginning of this year that I'm embarrassed that I didn't know about, City of Debtors: A Century of Fringe Finance by Anne Fleming. It tells the story of small dollar credit in New York City and the attempts to regulate it and protect consumers, with lots of unintended consequences along the way. Although I've only begun to read it, what's astounding is how easily, if you changed the names of places and people, you could convince someone this was a book about modern microfinance. There's one chapter that could easily be pasted into Portfolios of the Poor with no one the wiser. Fleming is a law professor, and so she doesn't make the connection to the economics literature, past or present (at least that I've seen so far), which is frustrating but also assuages my guilt at being unaware of the book. Anyway, if you care about financial services for low-income households, regulation and/or consumer protection, you need to pick up this book.
It would be easy to make a snide and cliche comment about those who cannot learn from history, but is too much to ask to learn from present in other places? Here's a story about "neo-banks" in the US attempting to remake the banking industry, while confronting the hard reality that even without a physical presence, the margins on transactional accounts are razor thin. But, like Fleming's book, it's easy to read this as a story about how banks and MFIs are struggling to cope with the threat of digital financial services being provided by telecom firms which are built on a high-volume, low-margin business model.
That is a major theme of the e-MFPs new report on trends in microfinance/financial inclusion, released this week. It's the output of a survey of providers, funders, consultants and researchers on where the industry is headed. I was encouraged to read that other major challenges noted include "client protection, privacy...and preventing an erosion of the social focus of financial inclusion...in the face of new entrants." I'm betting those aren't on the list of very many people in the fintech/neobank space in the US.
Finally here's a story from September that somehow slipped by me: Kiva is working with the government of Sierra Leone to use blockchain to create a national ID/credit bureau. I'm still trying to wrap my head around this one but it definitely seems like the kind of thing that would benefit from and generate lots of opportunities to learn from other places. If any of the faiV readers at Kiva want to share more, please call me.

3. MicroSmallMediumFirms: I'm often frustrated that I don't get to spend more time thinking about firms--those of you who know me know I've been wanting to start a project on "subsistence retail" for years. Hope springs eternal--maybe next year is the year I get to do that.
But in the meantime, here's a job market paper from Gabriel Tourek featured on Development Impact that finds an astounding reaction to a tax cut in Rwanda: the firms pay more even though they owe less. What's going on? The firms don't know their annual revenues so they don't know how much tax they owe, so they anchor on prior year tax payments. And that's even more true of the least able/least profitable, which isn't surprising but is depressing.
Relatedly, here's Chris Woodruff talking for 2 minutes about research on firms at VoxDev, including the difference between studying large firms and small firms.
And, new in AER, here's Jensen and Miller delving into that great puzzle of small firms: why don't they grow? Really, though, given what we know about small firms around the world the astounding thing is that any of them do grow. Anyway, Jensen and Miller use a natural experiment that affects boat builders in Kerala and find that consumers tend to buy local, which limits the ability of productive small firms to grow their market beyond their "neighborhood." When consumers can learn about non-local providers, competition makes things better for everyone (except the low-quality/low-productivity builders).

4. Philanthropy: This was the week of Giving Tuesday, which has become a global phenomenon. And as with any global phenomenon, there is good and bad. The good wouldn't be that astounding, so let's start at the other end. Here's a fundraising consultancy providing advice on how to use behavioral biases to trick people into giving more. You may not find that terribly surprising, but I found it amazingly cynical. This isn't about a nudge toward a positive outcome, it's guidance on how to mislead people to induce them to overspend their budgets. And if that's not cynical enough to surprise you, here's Lucy Bernholz on the first Giving Tuesday astroturfing she's seen--a charity created by a PR firm to raise money to hire the PR firm.
Giving Tuesday's growth also inspired a lot of debate on Twitter about critiques of the day itself and of philanthropy in general. Here's a thread that includes a collection of links to my longstanding Giving Tuesday skepticism and some thoughts from Ben Soskis, a historian of philanthropy and Asha Curran, one of Giving Tuesday's leaders. That thread bleeds into a couple of other threads. Here's one posted by Rob Reich, whose book Just Giving I highlighted last week, on the need to think critically about philanthropy. That then created this thread including Rob, Phil Buchanan from CEP, Felix Salmon, Asha, Ben and I and connecting back to the earlier conversation. Perhaps the message here is that we should all be astounded that Twitter continues to hold its place in the discussion of ideas.
This week also included the release of GiveWell's Top Charities list--note, that I'm the vice-chairperson of GiveWell's board--which continues to focus on deworming and bednets as the most effective use of marginal giving. There is one change to the list which is surprising, in a surprising way. Last year, Evidence Action's "No Lean Season" program to encourage seasonal migration in Bangladesh was a recommended charity. Results of the on-going RCT of the program showed the scale-up wasn't working, which Evidence Action shared with GiveWell and publicly. Both agreed that it should no longer be a recommended charity until Evidence Action can implement changes and document that the results are closer to what the initial impact evaluation found. Here's GiveWell's post about it, here's Evidence Action's post, and here's Dylan Mathews at Vox on how astounding this is.

5. Our Algorithmic Overlords: It would be tough to find anything surprising about the behavior of tech companies after the revelations highlighted in the last faiV. But you may be surprised which company said this: "We already know and have data on our customers...they trust us...We know what people make...we know where they work...We know if they’re married. We know how long they’ve lived in their house...We’ve never ever been challenged on how we use that." No I'm not going to tell you here, you have to click, but make sure you guess before you do.
In related news, electric vehicles in China made by Tesla, Volkswagen, GM, Ford, BMW, Nissan and more are sending real time data to the government about their usage patterns and precise location.

Ever struggle to understand what is  happening to data with a particular statistical method? Me too. Nick  Huntington-Klein has created a fantastic new resource to help  conceptualize what various statistical methods are doing rather than how  to do them. It's astounding work, and astounding that it didn't already  exist. The world needs more of this. You can see the  full page of animations and explanations here . Source:  Nick Huntington-Klein

Ever struggle to understand what is happening to data with a particular statistical method? Me too. Nick Huntington-Klein has created a fantastic new resource to help conceptualize what various statistical methods are doing rather than how to do them. It's astounding work, and astounding that it didn't already exist. The world needs more of this. You can see the full page of animations and explanations here. Source: Nick Huntington-Klein

Week of November 12, 2018

1. Our Algorithmic Overlords: Since it hasn't featured for a few weeks, I'm going to lead with our old friends this week. If you're in development circles, you know about Aadhaar. And if you're a reader of the faiV you know about China's intrusive citizen monitoring and control (let's dispense with calling it a "social credit score"--this apologia for what's happening is frightening in its own right). But did you know that Venezuela is on the forefront of assigning every citizen an ID and tracking their behavior, including their votes (maybe)? Here's a Twitter thread with some additional details from the reporter of that piece. Guess who's providing the technology? 
The frightening frontier in the US is from private technology companies, well, let's be honest, the frightening frontier is Facebook. Here's a New York Times investigation of the company's conduct that is jaw-dropping, over and over again. Where is Teddy Roosevelt when you need him? For now, we've got Kara Swisher's thoughts on cleaning up the "toxic smoke".
Tying the domestic and global back together, here's Susan Liautaud of CGD on how the perspective on the ethics of automation and AI may look different in developing countries

2. Development Finance and Banking: Sticking with CGD, here's the polymath of development, Charles Kenny, on reforming the World Bank's Private Sector Window to comply with, y'know, the World Bank's guidance on appropriate design for private sector subsidies.
The big question for development finance (and social finance of all sorts) is whether it is crowding-in or crowding-out private sector investment, or neither. Here's Paddy Carter on the "Elusive Quest for Additionality" (have to love a shout-out to old school Bill Easterly) in summary form and in full length paper form (with van de Sijpe and Calel).
Let's say that there is additionality and DFIs are increasing capital flows to developing countries. The next big question is, what impact does that have? Here's Judith Tyson and Thorsten Beck on how those capital flows are affecting domestic financial system development. They conclude that the capital flows are too pro-cyclical and not doing enough to boost domestic capital markets.
There is a specific kind of capital flow that is actively undermining financial development specifically and development in general: regulations on anti-money-laundering and anti-terrorist-financing (regulations are a form of capital right?). Here's a brief from the Humanitarian Policy Group at ODI on how bad it's gotten in humanitarian relief. And just a reminder that this is a pervasive problem. No really,it's a pervasive problem.
Speaking of financial system development, here's an interesting post on what is happening in Ghana's banking sector--well, what's happening is consolidation, the post explains why and what's next. And here's a perspective on the liquidity crunch for Indian NBFCs

3. MicroDigitalFinance: It feels like we might be hitting an inflection point on mobile money services, the point where it's no longer possible to talk about it without prominently noting the negatives. CGAP has a new report on digital credit in Kenya and Tanzania, which leads them to the conclusion that "It's Time to Slow Digital Credit's Growth in East Africa." Late payment and default rates are enough to make any MFI executive faint. One particularly interesting tidbit: loans taken in the morning are much more likely to be repaid than loans taken at night. That's not really surprising but it's amazing to have that level of insight. Of particular concern is that many borrowers don't understand the terms of the loans they are taking. All the progress made on consumer protection for MFIs doesn't matter much if the market shifts to getting credit elsewhere. 
This week Graham Wright of MicroSave gave one of the keynotes at European Microfinance Week on a similar theme. You can see a shortened text version of Graham's talk at Next Billion or video here (though that's a Facebook link so, given the above, I understand if you don't want to click it).
His framing is that digital financial services are an existential threat to microfinance because of the ability of digital service providers to peel off the best customers and leave the hardest to serve to the MFIs. You'll have to work very hard to convince me that is not what is coming, and even harder that that doesn't have lots of negative consequences. It's consistent with what happened with the growth of for-profit MFIs--while the for-profits serve more customers, the non-profits are more likely to serve women, poorer clients, and rural areas. But more importantly, it's also the story of historical development of consumer financial services in high income countries, particularly the United States: pro-poor institutions find innovative ways to expand the market, but struggle because they are serving the most expensive, riskiest clients and eventually other institutions take the most profitable parts of the new markets that have been established. David Roodman's chapter on the lost history of microfinance in Due Diligence is useful on this and I'll have more on this in some of those writing projects I've mentioned.
Graham also mentions the growing possibility of digital financial services creating a new, harder form of exclusion, specifically for rural customers on the wrong side of the digital divide. Elsewhere he's also made the point that digital blacklisting could create rigid barriers to those defaulting on their quick and easy but not well understood digital loans. Again, if you're at all skeptical, take a look at the United States--it's an underappreciated cautionary tale for where many countries are headed. Here's a quick example of hardening digital exclusion in the US
Here's where you'll typically hear the argument about how FinTech can deliver all sorts of useful money management tools to those who need them most. Sure, in theory. Here's a new report from the Global Financial Literacy Excellence Center (and I'm as shocked as you are that I'm linking to something there; that feeling when someone you normally disagree vehemently with writes something that confirms your priors in a different domain) on mobile payments use and financial behaviors in the US. Annamaria Lusardi's summary in the WSJ is here. Mobile payments users are more likely to carry balances on their credit cards and make minimum payments. They're more likely to overdraw their bank accounts and to withdraw from retirement accounts. The same skepticism you should now have for Big Tech needs to be the default setting for FinTech and digital financial services as well. 

4. Evidence-Based Policy: Your clicks demanded it, so here's more evidence-based policy links. But first, you have to take a look at this job market paper producing some evidence that's policy relevant. Abhit Bhandari wanted to study how political connections affect economic behavior of firms--so he started a company in Senegal (for real!) and then randomized what his salespeople said to customers, in order to signal (or not signal) political connections. Bhandari has displaced Chris Blattman's randomizing factory job offers and Dina Pomeranz's randomizing tax enforcement in my pantheon of amazing experiments.
OK, back to tips for connecting research to real-world impact. Last week we had eight tips on policy relevance from Oxfam. This week you've got four tips on making evidence synthesis more useful from a variety of folks in the UK government (though I have to say, the UK doesn't seem like the best place to be sourcing evidence-based policy advice at the moment does it?) and the editor-in-chief of Nature. Or perhaps you'd prefer to think about six pathways for evidence to influence policy from J-PAL? To explain how the pathways work they also have 17 case studies that you can delve into

5. Philanthropy: My friend Rob Reich's (not that Rob Reich) new book on the dangers that large-scale philanthropy (alternatively, massive wealth inequality) poses to democracy and what to do about it, Just Giving, is now out. Here's an extended essay drawn from the book. You can hear Rob discuss the book on TinySpark here. 
While thinking about Rob's arguments, I finally read Tyler Cowen's description of Emergent Ventures. It's a very useful pairing; Tyler's description of how some of the pathologies of big philanthropy emerge from "commonsense," unobjectionable choices about how to organize institutional philanthropy and his alternative approach mesh quite well with Rob's vision of a better future for philanthropy. Should I apply for an Emergent Ventures grant to support faiVLive and my (ever forthcoming) next book about big data/machine learning and economics?
Of course, sometimes democratized philanthropy can yield pretty unpleasant outcomes. Remember a few months ago when I linked to a scandal where a couple apparently pocketed $400K from a GoFundMe campaign for a homeless veteran? It turns out that the whole thing was a scam from the beginning, the "homeless vet" had been in on it the whole time, and none of the story was true. 

I feel the need for a little lightness. So here's an amazing image from a Japanese history of the United States for children from 1861. That's John Adams directing the fusillade of the incredibly strong Ben Franklin, who apparently can aim better when he can hold the cannon himself. The other images of the book are equally amazing, so  check them out . Via  Nick Kapur .

I feel the need for a little lightness. So here's an amazing image from a Japanese history of the United States for children from 1861. That's John Adams directing the fusillade of the incredibly strong Ben Franklin, who apparently can aim better when he can hold the cannon himself. The other images of the book are equally amazing, so check them out. Via Nick Kapur.

Week of November 5, 2018

1. Household Finance: One of the trips keeping me busy was to Mexico City for the PRONAFIM conference. Here's a video version of my current thinking on household finance, in Spanish.  
Of course, one of the key questions in household finance is to what extent a household is a household. I've had a hard time not thinking about this recent paper from Afzal et al, which through a series of "lab in the field" experiments, shows there are a lot of schisms in the household. Let me just quote from the abstract: "Subjects are often no better at guessing their spouse's preferences than those of a stranger, and many subjects disregard what they believe or know about others' preferences when assigning them a consumption bundle." Is there some explanation there for the puzzle in the Graphic of the Week (see below?). 
In the household finance realm I often pick on financial literacy--specifically as a bellweather for evidenced-based policy (if money is going into financial literacy, evidence isn't making a dent on policy). Here's some interesting new evidence on financial literacy and why it doesn't seem to work, from Carpena and Zia. They are looking for what parts of financial education might affect behavior, and find attitudes matter more than awareness or numeracy. I feel like that connects to this new paper from Gine and Goldberg documenting endowment effects in account choice in Malawi, and that the endowment effect can be overcome with experience, but maybe not.      

2. Inequality: Teaching a class on wealth inequality and policy makes anything on the topic grab my attention just a bit more. And there is a lot out there. On the downside, there's a lot out there and my attention is drawn to all of it. Here's a handy Twitter thread guide (and in a perhaps easier to follow/read format) to the global inequality literature that I found very helpful. Here's a new paper from Ayyagari, Demirguc-Kunt and Maksimovic calling into question the idea that a group of "star" firms are pulling away from others and boosting inequality. You probably already know about this, but the Chetty team has published their Opportunity Atlas. And here's a recent paper from Card et al. on the role of school quality in transmitting economic inequality in the US during the 20th century (in digest form here). 

3. Our Algorithmic Overlords: Nothing particular profound here but I couldn't resist pairing these two pieces together: a) "China’s brightest children are being recruited to develop AI ‘killer bots’" and b) A list of artificial intelligence programs that do "what their creators specify, not what they mean." I suppose since the actions of the AI programs sound a lot like children trying to annoy their parents, China's approach seems optimal? 

4. Migration: I mentioned too much travel as one of the reasons for the occasional nature of the faiV lately. One of those trips was to Vienna to present at the OSCE's Development and Migration meeting. It was an excuse to go back and re-read a paper I co-wrote with Michael Clemens on "Migration as a Household Finance Strategy." It's good, as you should expect from something that Michael led. I'm linking it here because it lays out a research agenda that's still valid. And so I can also link this video that came out of it. I'm pretty sure it's the video that got me the invitation to Vienna. 
Meanwhile, here's a new paper from Michael debunking brain drain (again; now read that like Eliza Doolittle) and a related article from Harvard Political Review. Or try the even shorter version, a tweet from Michael with this useful fact: "In the 71 countries that grew to middle-income or higher between 1960 and 2013, 67 had a concurrent rise in the emigrant share." 
Here's a recent story from the New York Times about how Uganda is integrating refugees successfully. And here's data on the crossing from Libya to Europe--1 in 5 die or go missing. hel Glennerster examines several cases where evidence led to scaling up n?

5. Evidence-Based Policy: Who isn't interested in making research more useful to policymakers and influencing policy with research? I mean, other than tenure committees. For everyone else, the Evidence in Practice project at Yale SOM has a report on their two years of work on how evidence can be better integrated into policy and practice. Check out particularly, page 32 and the "currency of exchange" for each of the groups involved in evidence-based policy development and implementation. Maybe print it and hang it on your office wall. (Full Disclosure: I participated in one of the Evidence in Practice workshops). The recommendations align pretty well with Oxfam's lessons for influencing policy, summarized in a post by David Evans at the Development Impact Blog. In fact, point 5 could reasonably be a summary of the Evidence in Practice report (I think that's a good thing. That's good right?). But you should still print and hang page 32 because you won't be able to do point 5 without it.    

I  was chatting with Lore Vandewalle earlier this week (she's visiting at  NYU-Wagner this fall), talking about savings behavior and that led me to  look back at  an experiment she had run in India with Vincent Somville   where some people were paid cash and others were paid via deposit into a  savings account. While I had read the paper, it didn't really strike me  at the time how similar the results were to another savings  encouragement experiment-- Kast, Meier and Pomeranz in Chile .  So I show them side-by-side here. The interesting thing to me is that  balances for the treatment group rise quickly but plateau at a fairly  low level (e.g. in India it's about a week of food expenditures  according to Lore). It's consistent with using these accounts to manage  liquidity needs (buffering day-to-day or week-to-week volatility) but  not with precautionary or investment savings. But that doesn't explain  why the control groups also plateau, just at a lower level. Is there  another story I'm not thinking of? 

I was chatting with Lore Vandewalle earlier this week (she's visiting at NYU-Wagner this fall), talking about savings behavior and that led me to look back at an experiment she had run in India with Vincent Somville where some people were paid cash and others were paid via deposit into a savings account. While I had read the paper, it didn't really strike me at the time how similar the results were to another savings encouragement experiment--Kast, Meier and Pomeranz in Chile. So I show them side-by-side here. The interesting thing to me is that balances for the treatment group rise quickly but plateau at a fairly low level (e.g. in India it's about a week of food expenditures according to Lore). It's consistent with using these accounts to manage liquidity needs (buffering day-to-day or week-to-week volatility) but not with precautionary or investment savings. But that doesn't explain why the control groups also plateau, just at a lower level. Is there another story I'm not thinking of? 

Week of October 15, 2018

1. China: This is a very meta way of kicking things off, but I do think often of the gaps in knowledge that go along with the language gap between centers of academic inquiry and China (and to a lesser extent, India, Indonesia and Nigeria). It takes a lot of cognitive work to push back against the unconscious equation of value/quality with English-language facility, and that's just for the papers and stories that ever do appear in English (thank goodness for Jing Cai!). Anyway, here's a small attempt to address some of the knowledge gap.
The P2P lending industry in China continues to melt down in very scary ways, and in ways reminiscent of bank runs in the US around railroad bubbles in the late 19th century. The common ingredients--a working class population with enough income to start seriously saving and limited outlets for saving/investing and even more limited consumer protections. It's ugly and getting uglier as the authorities crack down on both the lenders and protestors who have lost their savings.
But that's not the only credit market problem in China. The head of a very large state-backed lender was pushed out of the party for corruption (and he's not the first and likely not the last). Meanwhile, local governments have been creating weird vehicles to borrow via private (or are they public? it's hard to know what's the right phrase to use when it comes to China's hybrid economy) markets. Current estimates suggest there is a $5.8 trillion dollar local government credit problem. Amidst the trade war, the Chinese economy seems to slowing just at the time these credit market problems are coming to light--I don't see anything in these stories about a causal effect--and there are other signs of bad news. If you are a Planet Money listener, you may recall a recent story about a rumored "vast postal conspiracy" that largely checked out. This week the Trump administration announced that it is withdrawing from the Universal Postal Union, a system that was set-up for the US' benefit post-WWII but became a huge boon to small Chinese manufacturers. Planet Money's "The Indicator" also did a series recently on China's social credit scoring system, including talking with someone who has been blacklisted.
Finally, here's a story to lead us into the next item: accusations of racism by Chinese firms are becoming increasingly common in Kenya and other African countries were China has been investing heavily.
 
2. Global Development: The gap (particularly the growth gap) between high-income and low-income countries is what the field is all about, indeed "it's hard to think about anything else." The gap has been stubbornly high and growing since World War II. Dev Patel, Justin Sandefur and Arvind Subramanian have a new post at CGD, reacting to a new paper about the lack of convergence, pointing out that cross-country convergence has been happening   since 1990. The authors of the paper respond on Twitter.
There's a curious connection that back when many of the original ideas of development economics posited that convergence should happen--e.g. poorer countries should grow faster than richer ones--while recognizing that it wasn't happening, one of the prescriptions was a "big push" to help poor countries escape a poverty trap. The idea of the big push eventually went into hibernation, but was revived around the time that the convergence did start happening (though we didn't know it yet). This time the big push was at the village level, not the country level. It didn't work any better there. Last week, the results of "the first independent impact evaluation" of Millenium Villages Project (of a village in Ghana) were released and the bottom-line is scathing. There was no gap-closing here--the only positive effects found, the study notes, could have been accomplished at dramatically lower cost. On a similar note, here's a look at another MVP-project village, Sauri, Kenya, and finding that locals did not believe in the benefits of MVP enough to bid up the prices for land in the village. Which honestly is kind of remarkable given all the money that was showering into the villages. You would think people would want to move there simply to benefit from the opportunities for corruption/patronage.
Finally, here's a really fascinating example of a growing gap--the gap in gender preferences grows with economic development and gender equality. This definitely feels like an "everything is obvious once you know the answer" example.

3. Formality: Another important gap is the lack of formal firms in lower-income countries. Campos, Goldstein and McKenzie have a new experiment from Malawi on inducing firms to formalize. They find high demand for formalization, but not for tax registration (shocked, shocked I say!). The most interesting part is that formalization doesn't seem to help the firms unless there is handholding to introduce them to banks, which does work to get them to open accounts and substantially boosts revenue and profits. But before you get too excited, here's a summary of new work by Gabriel Ulyssea finding that there isn't a gap between formal and informal firms in terms of productivity or welfare. Well, there's a lot more to it than that. Perhaps it's better put as the gap isn't between formal and informal firms but between productive and unproductive firms, and the two categories are not necessarily related.
And on the topic of informality, here's a new "note" from Ng'weno and Porteous about informal firms and "gig work" in Africa. There's a quite large gap between what they write and what I believe, once they get beyond "the informal sector is resilient but unproductive" but perhaps it's especially worth reading because of that.

4. Methods: Yes, this is continuing the theme on gaps. Here it's the gap between data and reality, and what that implies for how much we should believe just about any research. Let's start with a practical example: by comparing surveys (the supposedly reliable ones like the SIPP, ACS and CPS) and administrative records, this new paper finds that 23 to 50% of recipients of food stamps report that they have never received food stamps; and a substantial number of people who don't received them report receiving them. Here's the more general case from a paper by Xianchao Xie and Xiao-Li Meng that showed up in my Twitter feed this week courtesy of Stuart Buck. And via Alexander Berger, here's another paper from Meng showing how quickly the gap of reliability opens when straying away from true random sampling. The abstract closes with this gem: "the more the data, the surer we fool ourselves."

5. Our Algorithmic Overlords: That seems a great segue into the gap between the perceptions and realities of artificial intelligence. Just based on the recommendations I see daily from Google Now I've come to the conclusion that either machine learning and AI are way, way behind what I generally think, or Google is running a comically inept system in order to make me think the former. Here's "A Skeptic's Guide to Thinking about AI" based on this week AINow Symposium.
And to close us out, here's "The Automation Charade" which begins by pointing out that most "automation" we currently interact with is just about shifting work onto the (human) customer from the (human) employee, and gets more interesting from there.

Week of September 24, 2018

1. Poverty and Inequality Measurement: How do you measure poverty, and by extension, inequality? Given how common a benchmark poverty is, it's easy to sometimes lose sight of how hard defining and measuring it is.
Martin Ravallion has a new paper on measuring global inequality that takes into account that both absolute and relative poverty (within a country) matter--for many reasons it's better to be poor in a high-income country than a low-income one, which is often missed in global inequality measures. Here's Martin's summary blog post. When you take that into account, global inequality is significantly higher than in other measures, but still falling since 1990. 
The UK has a new poverty measure, created by the Social Metrics Commission (a privately funded initiative, since apparently the UK did away with its official poverty measure?) that tries to adjust for various factors including wealth, disability and housing adequacy among other things. Perhaps most interestingly it tries to measure both current poverty and persistent poverty recognizing that most of the factors that influence poverty measures are volatile. Under their measure they find that about 23% of the population lives in poverty, with half of those, 12.1%, in persistent poverty.
You can think about persistence of poverty in several ways: over the course of a year, over several years, or over many years--otherwise known as mobility. There's been a lot of attention in the US to declining rates of mobility and the ways that the upper classes limit mobility of those below them. That can obscure the fact that there is downward mobility (48% of white upper middle class kids end up moving down the household income ladder, using this tool based on Chetty et al data). I'm not quite sure what to make of this new paper, after all I'm not a frequent reader of Poetics which is apparently a sociology journal, but it raises an interesting point: the culture of the upper middle class that supposedly passes on privilege may be leading to downward mobility as well.   
There's also status associated with class and income. On that dimension, mobility in the US has declined by about a quarter from the 1940s cohort to the 1980s cohort. That's a factor of "the changing distribution of occupational opportunities...not intergenerational persistence" however. But intergenerational persistence may be on the rise because while the wealth of households in the top 10% of the distribution has recovered since the great recession, the wealth of the bottom 90% is still lower, and for the bottom 30% has continued to fall during the recovery.
 
2. Debt: What factors could be contributing to the wealth stagnation and even losses of the bottom 90% in the US? Just going off the top of my head, predatory debt could be a factor. If only we had a better handle on household debt and particularly the most shadowy parts of the high-cost lending world. Or maybe it's the skyrocketing amount of student debt, combined with bait-and-switch loan forgiveness programs that are denying 99% of the applicants. I'll bet the CFPB student loan czar will be all over this scandal. Oh wait, that's right, he resigned after being literally banned from doing his job.

3. Banking, SMEs, US and Global: Given those links, you'd be forgiven for assuming that banks, and the financial system in general, are a big factor in driving inequality and downward mobility. But on a global and historical basis, financial system development lowers inequality (that's the classic paper on the topic, not anything new, but I didn't think I could say that without the citation). One way to measure financial system development is the cost of financial intermediation--more development, more intermediation, lower costs. The spread between interest rates for deposits and loans is a reasonable way to measure the costs of intermediation. Here's a new paper from Calice and Zhou measuring the spread in 160 countries (blog summary). They find, not unexpectedly but usefully nonetheless, that intermediation costs are higher in lower income countries, Latin America and Sub-Saharan Africa. Why? A combination of higher overhead, higher credit risk and higher bank profit margins. They also helpfully provide a guide for policymakers on where action will be most effective in lowering intermediation costs.
One way financial system development lowers inequality is by funneling capital to SMEs and entrepreneurs (along with, of course, to its most productive use, banking theory 101). Here's the OECD's 2018 Scoreboard for doing just that. The overall trend is a bit puzzling--falling rates of new lending, with a shift to longer-term lending and generally declining interest rates (though this is based on 2016 data). One striking data point: the most expensive places for SMEs to borrow are Mexico, Chile and...New Zealand? (What's going on there, Berk and David?)
Perhaps one factor in falling rates of new lending that the OECD report doesn't take into account is the closing of physical bank branches. In general, SMEs may depend more on relationship banking--getting to know the loan officer and developing trust through direct contact--than transaction (arms-length) banking: SMEs and start-ups financial statements are simply not going to look that impressive. That does seem to be the case, and it may particularly be a problem for women and minorities, somewhat counterintuitively. That's the finding from Sweden, in a new paper from Malmstrom and Wincent (blog summary). Without the ability to work with a loan officer, women-owned businesses don't look credit-worthy to the algorithms. Another reason to click on that Blumenstock piece in the Editor's Note.
In the US, one of the tools to drive funding of women- and minority-owned SMEs is the Community Reinvestment Act. But that's up for revision, and the two men overseeing that revision have a long-standing beef with the CRA and the non-profits who support it. Uh oh.

4. Unlearning: Last week I linked to a piece about how difficult it is to get even experts to change their minds with a second research finding, focused on doctors. It was criminally under-clicked so I'm specifically linking it again. But the universe seemed to want to prove the point, and so this week I saw a bunch of tweets about a PNAS piece that shows the famous finding of judges being more lenient on parole after a meal break rather than before doesn't hold up. The order of cases is not random. I was all set to include it, along with a snide comment about people (not) changing their minds and the fact the paper was from all the way back in 2011 and the original finding was still being repeated. Then I noticed that there was a response to the paper from the original authors, showing that their original findings did hold up despite the not completely random ordering. But a bunch of people were retweeting the 2011 critique this week, apparently without knowledge of the response. So now I'm confused about whether this whole sequence supports or contradicts the article about people not updating their beliefs.
So let me try again. Here's "Women in Agriculture: Four Myths" that takes on four widely repeated statements about women's role in agriculture that aren't true. Hopefully there is a chance for us to successfully unlearn something.

5. Philanthropy and Social Investment: I'll admit that it's not really clear that this belongs in this category, but then it's not really clear that it belongs anywhere else either. So without further ado: the disturbing parallels between modern accounting and the business of slavery. That's a story about the new book from Catilin Rosenthal, Accounting for Slavery: Masters and Management. Think of that the next time you hear there are "no tradeoffs" in impact investment. It's a stretch, but still--it will definitely throw the person off when you point out that their statement not only violates basic economic theory but is based on principles developed by slaveholders.
Finally, Brest and Harvey have a new edition of their book Money Well Spent, a guide to strategic philanthropy. Here is their reflection on what has changed in philanthropy since the first edition was published ten years ago. And here are several critical (re)views of the book and the concept of strategic philanthropy from a forum hosted by HistPhil blog.

Week of September 17, 2018

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

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

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

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

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

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

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

Week of September 10, 2018

The ThreeV Edition

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

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

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

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

Week of September 3, 2018

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

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

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


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

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

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

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

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

Week of August 27, 2018

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

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


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

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

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

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

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

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

Week of August 20, 2018

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


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

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

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

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

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

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

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

Week of August 6, 2018

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

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


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

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

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

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

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

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

The First Week of August, 2018

US Policy Edition

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

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


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

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

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

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