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.

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