The Global Con Edition
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 Buchanan, Anand 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).