Week of June 14, 2019

The Colorblind Edition

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

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

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

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

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

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

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

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

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