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Viewing all FaiV posts with topic: Behavioral Economics  

Week of June 14, 2019

The Colorblind Edition

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

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

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

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

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

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

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

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

Week of May 2, 2019

The Workers of the World Unite Edition

1. Microfinance/Household Finance: I mentioned the Hrishipara Financial Diaries last week--it's a project Stuart Rutherford has been running in central Bangladesh for four years now. That's a truly unique data set of high frequency data on the financial lives of households. I also mentioned that Stuart is now funding the continuation of the diaries out of his own pocket. Don't make me beg for someone to step in with more funding so this dataset gets even more valuable. It's incredibly cheap by the way---hmm, maybe the first faiV GoFundMe? See, don't make me resort to such things!
Continuing in the wave of revisiting ideas about microfinance and it's impact, Bruce Wydick has "3 reasons the impact of microcredit might be bigger than we thought." Of course, the "we" in that sentence matters a lot. Mushfiq Mubarak and Vikas Dimble have a short review of microfinance research with handy links to the research we talk about most these days: evidence for ways that microfinance could innovate to increase impact. Of course, I have to return to the binding constraint on microfinance innovation: funding appropriate for investment in innovation

2. Replication: I know what you're thinking: "Hey, I haven't heard about Worm Wars in a long time. What happened?" And so, let me bring you a new paper from Owen Ozier that reviews the history of the Worm Wars in an effort to understand the state of reproducibility in Economics and related topics. Here is Owen's Twitter thread with some "wild things" he learned working on the paper. And here's Annette Brown's replies (onetwothree) pointing out some longstanding errors in the literature on replication in economics--one lesson is that if you don't read the variable definitions you're likely to draw the wrong conclusions and others won't be able to replicate your work.
Here is an interesting argument that theory constrains degrees of researcher freedom more than experiment--that in fact one of the sources of the replication crisis is a lack of theoretical frameworks around empirical research. Oh, and that empirical work needs more formal mathematical models. In case you haven't figured it out yet, this is coming from the perspective of "behavioral sciences" which apparently does not include economics, where alot of recent argument has been about the need for experiments to constrain degrees of freedom and that "mathiness" is a problem. And here's Dorothy Bishop on "reining in the four horsemen of irreproducibility".
Inherent variability is not one of those four horsemen, but it is a plausible source of irreproducibility that has nothing to do with bad practices or researcher misbehavior. If reactions to stimuli vary a lot based on minor contextual factors (which is in fact one of the findings of behavioral sciences, albeit one that is itself subject to lots of questions about replication), then you should expect that the exact same experiment conducted at a different time and place with different subjects will yield different results. Whether that's the case is the subject of this debate between Simmons/Simonsohn, McShane/Bockenholt/Hansen (not that one), and Judd and Kenney (also not that one), all hosted by Andrew Gelman. It's worth the time to read through.
  
3. Research and Communications: Taking that conversation as a leaping off point, here's a new paper on demand effects in survey experiments. On the one hand, it may come as a relief to know that the paper doesn't find much evidence of experimenter demand effects. On the other hand, a lot of economics lab experiments are built on the idea that the experimenter can induce people to behave in certain ways with incentives--and when those incentives don't work, it's evidence of some other important factor operating. But, "Even financial incentives to respond in line with researcher expectations fail to consistently induce demand effects." I feel like this paper could not have been published in an economics journal, because the theory constraints (I'm particularly proud of this callback).
In other backed-up research methods links, I've carried around an open tab for this very useful post from Berk Ozler on alternatives to recruiting a control group for more than a month. As usual Berk lays out the issues and questions, and there's bonus follow-up via Susan Athey, linking to some other recent papers on related issues that I've also been carrying around in open tabs, so I'm feeling good about slaying all those giants at once.
The questions Berk is asking and the responses from Susan stirred something deep in my memory bank and led me back to this 2014(!) post from David McKenzie onwhether the impact evaluation production function is best understood via O-Ring Theory or Knowledge Hierarchy theory. And it seems to me increasingly like the answer is O-Ring.
Finally, there is another part of the production function: communicating the results of the work. That is a place where it seems the dominant model is Knowledge Hierarchy--leave the communications side to the comms experts. (OK, now I have to pause for moment and figure out if that explains the faiV or the faiV is contradictory evidence...). Here is David Evans making an argument that becoming a better communicator should be high on the list of priorities for economists. And here's a paper that finds that high quality communication is contagious, so there are positive externalities if you follow David's advice.
I'm going to confidently predict though, that this last link on communications is going to get the most clicks this week: Bullshitters: Who Are They and What Do We Know About Their Lives? 

4. US Inequality: Here's another topic I've been neglecting of late. And there is some good news: wage growth is finally picking up for the bottom half of the distribution. And minimum wages may be the highest they have ever been.
On the other hand neither of those two trends are going to make a meaningful impact in the racial wealth gap. Here's an essay on that topic which I broadly agree with but have some quibbles. Particularly the statement that "there is no buying your way out of racism." On the individual level that is obviously true, and the systematic worse outcomes for people of color no matter what their wealth is powerful evidence of it, even if you aren't persuaded by the numerous stories. On the other hand, from a historical perspective, it seems to me that the only two things that have worked in dissolving societal racism are a) integration during war, and b) economic growth/power. But I'm very interested in research on this question if you know of it. On that point, here's a discussion of the findings in the most recent GSS of significant positive shifts in racial attitudes.
One of the main policies that "works" to fight poverty in the US is the Earned Income Tax Credit. I have a separate issue with how we talk about the EITC "lifting people out of poverty," when it is delivered in a lump sum and most of the recipients live below the poverty line for 11/12ths of their year. It's almost as if people in the US have no sense of seasonal poverty. But that aside, the widely held idea is that part of the anti-poverty impact of the EITC is encouraging people to enter the labor force. Here's a thread on some emerging research that questions that widely held view.
As the Trump Administration tries to have courts cancel the ACA, here's a reminder that the health insurance plans low-income people have access to through work are much worse than the plans they have access to via the ACA marketplaces. And Texas appears poised to waste an enormous amount of time and money limiting what foods SNAP participants can buy.  

5. Philanthropy: It's late in the day so I'm going to wind things up here quickly. The Notre Dame donations have kicked up the flames of a newly revived debate about the role of philanthropy, especially large scale philanthropy, in democratic societies. Here's some historical perspective on what that debate used to look like, and it involved riots.
Here's Rob Reich, political scientist, on the corruption of college admissions philanthropy and the idea of auctioning admittance to elite schools. And a conversation about the ethics of big donations to arts and culture, and the Sacklers. Here's an interview with Melinda Gates. Here's a perspective on what is next for the Hewlett Foundation, one of the larger US foundations giving to global causes and an incubator of sorts for a lot of the "better philanthropy" and evidence-based policy efforts, as Ruth Levine steps down.

Breaking my own recent rule, here's a fun thing that actually relates to faiV themes. If you can guess which coffee maker I have in one of my offices, you win a free annual subscription to the faiV.

Breaking my own recent rule, here's a fun thing that actually relates to faiV themes. If you can guess which coffee maker I have in one of my offices, you win a free annual subscription to the faiV.


Week of April 26, 2019

The Waste of Time and Money Edition

1. Household Finance: I'm as surprised as anyone that this piece I wrote on the waste of time and money that is mandatory financial literacy classes in the Washington Post seems to be getting as much traction as it is. It's the closest I've ever come to going viral on Twitter (if you want to, here's the tweet just ready and waiting for you to retweet and further drive up those numbers). The comments, by the way, are about what you would expect--and further evidence for Morgan Housel's "you have to live it to believe it" thesis on perspectives of finance. I'm not the only one banging the drum against financial literacy classes: here's Jen Tescher of CFSI imploring banks to stop funding finlit classes and focus on tools that actually help customers. 
One of the likely reasons (but certainly not the only one!) that finlit makes such little difference is the mismatch between what is taught and the actual financial lives of most households. Take for instance figuring out income taxes in the new economy. Most people in the US got a tax cut in 2018 but most of those think their taxes actually went up, because the connection between taxes and paychecks is so damned complicated in the US. And trying to figure it out if you're a contractor rather than an employee...
There is something worse than legislators mandating financial literacy. Intuit engaged in shockingly (even for cynical me) deceptive behavior by tricking people into using their paid product rather than the free product that they were eligible for--even going so far as to make sure that search engines didn't index the web page to use their regulatorily mandated free file service so it was for all intents and purposes invisible. No amount of financial literacy is going to fix that. If you were thinking that this sort of behavior was exactly why the CFPB was created you would be right, but since Mick Mulvaney has destroyed the agency, don't expect any meaningful action against Intuit.
This isn't just a US problem. This sort of thing--hiding the information customers need to make good financial decisions--happens everywhere. Think of the changes in transparency of pricing of M-Pesa. Or this audit study by Xavi Gine and Rafe Mazer finding bank personnel in Ghana, Mexico and Peru don't tell customers about the best account for them (the customers that is). This seems like the right time to bang on one of my pet drums: middle-income countries, look to the US to the see the future of your financial system and tremble.
Looking from the other side, the US has a lot to learn from international contexts about how households manage volatile financial lives. Stuart Rutherford has a fantastic write-up of the 3 years of ups-and-downs and coping strategies of a family in the Hrishapara Financial Diaries. Stop what you're doing and read it. But let me also call-out that Stuart is now funding the Hrishipara diaries out of his own pocket. Any funder who is reading this: send Stuart some money to keep up this remarkable work. Please. 
My friends at the Aspen Institute Financial Security Program have a new report on short-term financial stability and how important it is for any larger goals, based on the work of a number of organizations focused on the issue (NB: I'm a senior fellow of Aspen FSP and was involved in the early discussions that led to this report). Before you international folks keep scrolling...there is a lot of overlap between the insights here and the situation in middle-income and developing countries. And you could easily frame it in the same way that most on the international scene do: the importance of building resilience to shocks.

2. Financial Inclusion: I'm one of the retrogrades who refuses to give up on the term "financial inclusion" (while acknowledging the points made by advocates of "financial security" and "financial health"). Speaking of retrogrades, Matthew Soursourian at CGAP is even more retrograde than I am, making an argument that "access" is important and we shouldn't fetishize "usage." One of the reasons is that usage may be harmful--and Greta Bull argues that we need to talk about that, particularly around credit. Over at Next Billion, Graham Wright of MSC (formerly MicroSave--apparently I'm also retrograde in not changing FAI's name), has some speculation on the next 20 years in financial inclusion (which I take as explicit endorsement for "inclusion" whether Graham meant it or not). One of his key points is on the issue of consumer protection, which in addition to dovetailing with Greta's post, allows me to point out that in every other domain the word "inclusion" means fair and equitable participation and so we should make that part of the defacto definition of financial inclusion. Drawing things fully back to Matthew's post, the one thing I think he misses in the argument for access is network effects. The value of an account has a lot to do with who else has and uses accounts and we should expect usage to trail substantially behind access especially when less than, say, 60% of people have accounts.
Two quick hits on China and financial inclusion: Here's a piece that argues that China's "social credit score" is less coherent and more complex than it is usually portrayed. But then at the Avengers:End Game premiere, one of the trailers was a public shaming of delinquent debtors. I don't know if that's confirmatory or contradictory evidence.
Finally, there is a lot to learn from the history of financial systems and the way they include and exclude. Rebecca Spang reviews a new book (The Promise and Peril of Credit--which would have been a great title for Greta's post--by Francesca Trivellato) about the development of financial instruments in Europe and anti- and philo-semitism and how it shaped economies.
  
3. SMEs: I'll admit this is a bit of a stretch in the initial framing but it's something I've been thinking about a lot and I don't have a better place to put it. So to start, here's Gabriel Rossman live tweeting an overhead conversation in coffee shop where a couple is being recruited into Amway (one of the original multilevel marketing schemes if you're not familiar with Americana). The couple doing the recruiting keep returning to how inspirational the training is and how important it is to commit to the program. Like Gabriel, you're probably cringing and wishing there was a way to warn the "marks." But at the same time, the body of evidence finding that inspiration is effective is growing, and may work better than business training at driving positive outcomes.
Think about this with me a little more. Specifically think about Ubaydullah in Stuart's post mentioned above. Ubaydullah's main occupation is breaking bricks, and when asked what he thinks about while he is doing this, he replies, "mostly nothing." Now think about Blattman, Franklin and Dercon's sweatshops versus microcredit in Ethiopia experiment, recently updated, that finds that after five years all effects fade out--specifically that people leave their factory jobs and close their microenterprises. Or one of Stuart's earlier posts about Hrishipara diaries looking at why so many microenterprises don't grow--people don't want them to. Or this Pearls Before Swine comic this week. Or the findings from lots of studies of forced or semi-forced migration that makes people better off even though they didn't want to move. Or even the Gine, Goldberg and Yang experiment with fingerprinting leading to more investment by borrowers.
I don't have answers here, but I have a lot more questions than I used to about how to think about inspiration and the determinants of micro and SME growth. My current working model though is that people have a type and that type is hard to discover, particularly in developing contexts, and even when you have opportunities to do so, causality is really hard so people can't figure out if they are good at something or not, even when they are doing it, and that inevitably discourages effort...and maybe I should be shifting my priors about Amway.
Here's a semi-related piece on perceptions of risk among potential investors in SMEsand the (non-existent I have to note) "missing middle" and the need for social investors to reduce systemic risk. And here's a review of a book from last year that I missed (Big is Beautiful: Debunking the Myth of Small Business) arguing we should stop paying so much attention to small business. And here's Tyler Cowen's new book, Big Business, arguing roughly the same.

4. Our Algorithmic Overlords: Usually I try to draw in lots of sources in each item, but the New York Times is running a series on the topic beginning with "It's Time to Panic About Privacy." Other pieces cover how the police use Google Maps location data to do post-hoc identification of who was near a crime. How China'smass surveillance and detention of the Uighurs works. And how those surveillance systems that China has developed are being exported around the world to places like Ecuador, which is certainly a different take on One Belt, One Road. But it's not just China of course--the consequences of being caught in a digital dragnet or exposing one's digital data are especially dire for low-income households in the US (who are forced by state surveillance to put their private information on file in less than secure places). Which ties us back nicely to Graham's and Greta's posts and helps me reinforce the point about breaking down the silos of attention between the US and developing countries on these topics. And finally, here's an article at how hard it is to "fix" algorithmic bias from Vox, so I'm not completely unisourced. 

5. African Development: Is Africa industrializing in ways that will make it the next growth story? Here's Noah Smith in thread form and in article form arguing that it is, largely because of Chinese investment both directly in building factories and in infrastructure via the (actual) Belt and Road Initiative. By the way, today there's a big conference in Beijing where China seems to be offering some concessions on debt related to BRI. Here's Dani Rodrik arguing that it's not (in 2017, but he affirms this take). And a dose of realism on how far African countries have to go just to catch Latin America.
There are other parts of development than industrialization, like public health, and there's big news there too. Two different malaria vaccines are being rolled out--the first, which is about 40% effective in earlier trials, will be delivered to 360,000 people in Malawi, Ghana and Kenya. The other, which was 100% effective in a clinical trial, is moving to the first field trial next year on an island in Equatorial Guinea, where 2100 people will receiving the vaccine next year.

Week of April 12, 2019

1. Arbitrary and Biased: I feel like "arbitrary and biased" should have been the tagline for the faiV but it'll have to do as just the name this week's edition (I won't make the obvious joke). The reference here specifically is an update to my post at CGAP on impact evaluations and systematic reviews of financial inclusion interventions. Duvendack and Mader, authors of a systematic review of reviews that I've mentioned in the faiV and in that post, responded. And then I responded to them. The short version, if you don't want to click on all those links or do a lot of scrolling, is that we disagree substantially (though in good faith!) and particularly on the issues of arbitrariness and bias. My perspective on these issues have been substantially influenced by Deaton's and Pritchett's critiques of RCTs, which feels a bit ironic. Systematic reviews are useful, but they are no less arbitrary nor less biased than other attempts to synthesize the literature--they're just arbitrary and biased in different ways, albeit generally more transparent ways (though what we know about how disclosure affects people's trust leaves a question about the benefits of that disclosure). 
Reveling in the arbitrarily biased essential nature of the research enterprise, here are a couple of papers that raise different questions about how the literature on microcredit may be biased. Bedecarrats, Guerin, Morvant-Roux and Roubaudreplicate the Al-Amana microcredit impact study and find errors and issues with the data and code--though exactly how much it matters to the big picture conclusion isn't clear. Meanwhile Dahal and Fiala review the microcredit RCTs focusing on whether they have sufficient power to detect likely magnitude of effects (and find that they aren't) and find significant and meaningful effects on profits when the data is pooled. I need to read both these papers more closely, but they are interesting enough that I didn't want to wait before including them in the faiV.

2. Evidence-Based Policy/Methods: Speaking of arbitrarily biased research, the 5% statistical significance threshold is perhaps the most influential arbitrarily biased feature of modern academic research. Some people are trying to change that--well more than 800 who signed onto a letter in Nature protesting the cutoff. Before you come to a conclusion on whether that letter will make a difference, I must note, as many on Twitter did, that it's not a statistically significant portion of scientists who have signed on.
Another arbitrary bias, according to Nick Lea, deputy chief economist at DfID, is the need to run regressions in economics papers. David Evans, now ensconced at CGD, responds with a defense of regressions and some ideas on how development economics can be better.
Here's a reminder that "purely evidence-based policy doesn't exist" though I'm not sure how many people thought it did. And here's a reminder from Straight Talk on Evidence that short-term impact often fades out, something evidence-based policy really needs to take into account.
And finally, here's an interesting piece from mathemetician Aubrey Clayton adjudicating a long-running dispute between Nate Silver and Nassim Taleb over probabilities, finding that Taleb "overplays his hand."
  
3. Household Finance: The mythology of Spanish colonialism in the Americas centered heavily on cities of gold (anybody remember this?). Here's a story about the reverse--Dominicans searching Spain (and Switzerland) for lost troves of gold. It's all a scam of course, of the sort immediately recognizable by anyone who has spent time in Latin America. It's a fascinating read because of how the story delves into the psychology that has led so many Dominicans to believe (and continue to believe) an ancestor secreted billions of dollars of gold in Spanish and Swiss banks that they stood to inherit--to the point that they quit jobs and made all sorts of other bad financial decisions. When there is little hope, believing that slow, steady abstemious frugality will matter may seem as much magical thinking as hidden inheritances. Here's a piece from Morgan Housel on how much our (macro)financial experiences affect our later decision making.
The mismatch between advice, reality and experience means that most financial advice on offer today is useless for people living on low incomes--and the piece doesn't even address the problems of volatility. Here's Helaine Olen taking Suze Orman to task on the magical thinking that buying coffee makes a meaningful difference in household budgets.
Keep that in mind when you read this announcement from Walmart that customers have "moved $2 billion through" their prize-linked savings program. Don't get me wrong--that's great. But do notice that "moved...through" sounds a lot like high-frequency savings and isn't defined, while the claims remain that people are learning saving habits and becoming more financially secure.
On a related note, here's a recent Planet Money story on Purdue University's new income-share college loan program (which grew out of an idea from a Colombian economist and was piloted in Colombia). And here's a story I stumbled across on the lingering death of a much earlier program at Yale that was a miserable failure

4. Our Algorithmic Overlords/Digital Finance: Lucy Bernholz has a problem with "AI for good" and other such constructions. The big issue for civil society is not how to use the technology but to figure out how to manage, counteract, regulate, or build on the technology that is already in use. She suggests this essay on AI and the administrative state, which I haven't read yet, but I always trust Lucy's recommendations so I'm passing it on to you.
I think Lucy and I would have a similar perspective on this article, and I'm going to let you guess what that is via this quotation: "We believe that the lack of access to financial services is fundamentally a technology problem." It's a near perfect illustration of Matt Levine's dictum that the fate of FinTech is to relearn all the lessons of modern finance, painfully and in public. Now I'll take JUMO (the source of that quotation) at face value and believe that they are using AI and machine learning to find ways to include rather than exclude. But here's a different fundamental problem: it's always more profitable to fire bad customers than gain new ones.
Of course there are many more issues when it comes to applying AI and machine learning to financial services. Here Aaron Klein does a terrific job of walking through some of them. They of course don't apply to JUMO, yet, because Aaron is looking at how the application of AI and machine learning interacts with US anti-discrimination law. But it's an illustration of some actual fundamental problems of access to financial services and the potential benefits from much deeper engagement between regulators and practitioners in the US and developing and middle-income countries. 

5. Cash Transfers and UBI: We'll end with some quick hits on some new stuff on cash transfers and UBI. Here's a write-up of a survey of poor Indian households on their preferences when it comes to cash transfers versus spending on public health, roads and jobs: cash transfers come in last, public health comes first. Perhaps one reason why is a trust gap--here's a story from Kenya about the lack of transparency and limited reliability of public nutrition cash transfer programs.
Another way of determining preferences related to cash transfers is the revealed preferences of what people do with the money. That's what Almas, Haushofer and Shapiro do with the GiveDirectly cash transfers to assess whether there is a nutrition poverty trap (there isn't)

From  Natalie Michelle  and  Joshua Tait  a typology of superheroes as neoconservatives. I include this in the hope that someone will produce a version of this for superheroes as neoliberals.  Source  

From Natalie Michelle and Joshua Tait a typology of superheroes as neoconservatives. I include this in the hope that someone will produce a version of this for superheroes as neoliberals. Source 

Week of April 5, 2019

1. Financial Inclusion: It's an "interesting" time in the world of financial inclusion, in the sense of that (apocryphal?) Chinese curse. There are arguments on whether to change the name of the "sector" accurately reflects the goals, the funding environment is uncertain, digital financial services are shifting business models and regulatory frameworks--all also indications that there is important convergence between "developed" and "developing" countries. But most importantly there are questions about whether the results from the work of the last 40 years (a rough approximation of the modern microfinance movement globally, and the asset-building movement in the US) justify further investment. 
You can see the tensions in two recent posts at Next Billion: first, Leora Klapper on the importance of investment in financial inclusion to meet the SDGs; and a fiery response from Phil Mader and Maren Duvendack, authors of the Campbell Collaborative/3ie "systematic review of reviews" that I've likely mentioned a couple of times. But the "interesting" times also explain, at least in part, the raft of other evidence reviews of various sorts that are appearing (IPADvaraUNCDF/BFA,Caribou DigitalCGAP). It's enough to get you to buy into Lant Pritchett's dictum that RCTs are "weapons against the weak."
CGAP asked me to write something about all this--and to do it in under 1000 words. You can guess how well that went, given that the summary for the evidence review I've been working on for CDC is more than 10 pages (you should also read that as an acknowledgement of a specific conflict of interest when it comes to talking about evidence reviews). Anyway, the final result is here. The bottom line is that I'm skeptical of what can be learned from systematic reviews--channeling some other Pritchett-thought on where policy-relevant insights come from.
By the way, if you're skeptical of the point about most interventions struggling to show meaningful impact, here's a new paper making the case that TB public health interventions in the early 20th century had little to do with declining TB-mortality; and here's a paper from the education sector so frustrated that they can't find evidence of impact that they propose doing away with credible large-scale impact evaluations. And here's an open letter to a hypothetical education minister with some useful statistics on how little learning happens in schools in most of the world.
  
2. Global Productivity: Plenty has been written about stagnant wages, slow growth, and rising inequality in developed countries (if you're based in the US, it might not be apparent that this is a global phenomenon, but it is.) But there's another important phenomenon that hasn't penetrated the popular consciousness nearly as much, probably because the impact isn't as immediately apparent: there's a global productivity slowdown. That's a problem because rising incomes come from growth, and growth comes from productivity gains.
Here's a new paper from Gordon and Sayed documenting the trans-Atlantic trend in slowing productivity, and how closely European productivity growth (or lack thereof) has mirrored that of the US, with a time lag. Their thesis is that the slowdown is related to a "retardation in technical change."
That probably sounds odd given that I know about the paper and you are reading about the paper on using technologies that were essentially unfathomable in 1980. But overall economic dynamism, including technical change has actually slowed dramatically since the post-war years. And there's emerging evidence that there is a single cause for all of these issues: the aging of the population
It's a fascinating thesis that makes a lot of intuitive sense, and there is growing evidence for it from lots of different directions. I'm sure there will be lots more papers on this in the years ahead, but in the meantime it suggests a few interesting thoughts: a) China has a big problem coming, and b) future productivity growth is going to come from India, Sub-Saharan Africa and Latin America, and c) we all have legitimate reasons to worry about millennials not having sex.  

3. (Mostly US) Household Finance: I'm going to open with an acknowledgment of severe cognitive dissonance related to item 1 above: my work reviewing evidence on investment in financial inclusion and financial systems, and reviewing others reviews, has changed my perspective on what is learned from such reviews. But one of my long-standing hobby horses is railing against financial literacy because of the lack of evidence that it accomplishes anything and systematic reviews that it accomplishes essentially nothing. So now as I read stories like this about more and more states in the US requiring financial literacy as a condition of high school graduation, not only do I get raging mad, but I also have to battle against my own arguments on how to understand research. To be clear, my perspective hasn't changed--current financial literacy programs are a waste of time and money. But I am more sanguine about investing in figuring out ways to provide meaningful financial literacy. 
Tying everything so far together, here's an article from SSIR on the "cost of financial precarity" which includes reduced worker productivity, suggests why financial literacy training doesn't work (it's about the wrong things) and argues for why investment in "financial well-being" (a phrase that's part of the debate over what to call financial inclusion now) is important. And here's a newish JPMorganChase Institute piece on another part of why financial literacy is about the wrong things: how families manage tax refunds and payments
For those interested in going deeper to understand to understand what is happening in the US families' finances over time, the Federal Reserve Board has created an amazing new dataset: Distributional Financial Accounts. They use a "more comprehensive measure of household wealth" and provide data quarterly to track wealth distribution. By the way, the early findings are quite consistent with the story of aging population driving asset accumulation among older and wealthier parts of the population.
How does wealth concentration happen in the US? It's not just inheritance. Ager, Boustan and Eriksson have a new paper looking at how wealthy slave-owning families quickly recovered their position at the top of the economic ladder after Emancipation, in economic terms a huge negative wealth shock. If you'd like the summary version, here's WaPo coverage of the paper with some interesting details on the work required to find and link 1800's data to track cross-generational outcomes. And before leaving the US, one more thing to tie all this together one more time. Here's a piece that leads with the idea that there are steps that individuals can take to do something about income and wealth inequality, but the ideas really are either the kind of things that are in financial literacy curricula around personal actions that don't lead to meaningful changes in outcomes, or actually systemic changes not individual actions. 
Finally, I'm going to shift gears radically to another part of household finance: intra-household bargaining. Here's a cool new paper that looks at the levels of cooperation, trust, altruism and transactional behavior in polygynous households (of note, 80% of authors are women). 

4. Bank (and other financial services) Behavior: More discouraging to me than any impact evaluation, or systematic review of impact evaluations, finding modest impact are stories about the behavior of banks and financial services firms. Walk with me on the mostly dark side for a while. 
A few weeks ago I covered the scandal in Australian banking after a government commission found widespread predatory behavior by banks. Fifty leading economists in Australia were surveyed about whether something could be done--they unanimously agreed that something could be done, but a substantial minority seem to think major changes are required (e.g. replacing Australian regulators with foreigners!). If Australian regulators are hopelessly compromised, what hope dodeveloping countries like Uganda have of maintaining regulator independence?
Sometimes the regulators do the right thing. Like reporting blatant attempts at bribery by the CEO of an insurance conglomerate looting its assets to fund his other businesses. But much of the bad behavior isn't really under the control of regulators.It's culture, and cultures don't change easily. That's not just a statement about Wells Fargo and unsavory behavior. Here's a new paper about how organizational culture at Indian banks inhibits the adoption of beneficial innovations that reduce the costs of borrowing.
How do the bad actors get away with it. It turns out that consumers enable some of the bad behavior by simply not paying attention. For instance consumers in the UKwon't pay enough attention to savings account disclosures that would allow them to save 123 pounds in the first year. Sigh. 

5. Procrastination: Perhaps the most important thing that I have ever linked to in the faiV: Procrastination isn't about laziness or self-control. And that's why the faiV is so late so often. 

Week of March 22, 2019

1. Social Investment: You've of course seen many stories about the US college admissions bribery scandal. And if you pay any attention to the world of impact investment you likely have seen that Bill McGlashan, the very public face of one of the world's largest impact investment funds, was one of the people arrested for participating in the scheme. Anand Giridharadas, who has become the very public face of criticism of modern philanthropy and social investment, discusses why McGlashan is "the most important fish" in the storyHere's the Twitter thread versionif you prefer that over a 4 minute video.
Trevor Neilson, co-founder of the Global Philanthropy Group, says that McGlashan's behavior should not be seen as a reflection on impact investing as a whole, because...well apparently because he wrote a Medium post saying that it shouldn't. There's really no argument there other than "Our goals are too important to be worried about means!" if you consider that an argument. Here's Jed Emerson, who may have an argument, but I just don't understand what is happening in this piece. Lauren Cochran, managing director of an impact investing firm, actually has a few arguments attempting to make the same point, including that McGlashan himself was a figurehead chosen to attract investors, but who wasn't involved in actual investment decisions.
She has a nice line about Giridharadas: "using one man’s ethical failings to grab the mic is characteristically self-serving, but as usual, he forgot that there might be a baby in the bath water." It's catchy but wrong. Giridharadas whole point is that there may be a baby in the bath water, but the bathwater is toxic and everyone will be better off, even the baby, if you toss the whole thing. Moreover, the fund that Cochran administers uses this language: "dual expectation of best-in-class financial returns and maximum positive social and environmental impact." And that, to me, is a big part of the toxic nature of the current impact investment environment. On reflection, that statement illuminates what is really happening in Neilson's piece--the fear that if the myth of "no tradeoffs" is exposed then the money will dry up.
To be clear, I'm not in Giridhradas' camp but I certainly appreciate how his perspective keeps putting the "no tradeoffs" crowd on the defensive, and illustrates the inconsistency if not hypocrisy hidden there.
Kristin Gillis Moyer of Mulago points to a terrific example of the inherent tension: the new Catalytic Capital Consortium funded by MacArthur, Rockefeller and Omidyar. It aims to invest in businesses with low profit potential and/or high risk. I find it an incredibly refreshing approach--it explicitly acknowledges that the no tradeoff myth is leaving many social enterprises in the lurch. But as Gillis Moyer points out, it's not clear how catalytic it can be since there are unlikely to be that many other investors chomping at the bit to invest in low-profit, risky businesses. I'd like to think the catalytic part will be creating space for more funds and investors to say that they prioritize impact over financial returns, and that's OK. 

2. Our Algorithmic Overlords: Because the faiV was so full I'd been holding on to a few things on this topic, and events have made them all the more relevant. Platforms for open sharing seemed like such a good idea for a long time. But the cost of open sharing is so so much higher than most anticipated. Not only does it enable evil, but attempting to stop evil exacts a huge toll on human beings. This is a story about the Facebook contractors whose job it is to stop the New Zealand murderer's live stream. And a Twitter thread from someone in a similar position at Google. I'm guessing many of those folks are inching toward Calvinism.
Evgeny Morozov has a different take on the costs that open platforms and big tech exact, and why the global white nationalist movement has very different views on that front. It is a helpful reminder of the costs of the old system and the structures that the liberal order created to try to limit those costs, structures that seem to not work so well in this age, and are under attack from many directions. That's in part the theme of a new book reviewed by Noah SmithThe Revolt of the Public by Martin Gurri. I haven't read the book but the review is certainly influencing my thinking on the above.
Oh, and Chinese firms are working on facial recognition of pigs, while US police forces are using bad data to train their facial recognition and other AI systems. Andwhat about "behavioral recognition"? Note that this has quite obvious connections to the use of psychometrics and other "alternative data" for creditworthiness evaluations. 

3. Household Finance: There's a huge amount of new stuff here, so I'm going to be particularly eccentric this week. There's a lot more coming in the following weeks that will be more serious. 
One of the questions that fascinates me these days is what is good financial advice for households that face a lot of income volatility. The foundation of virtually everything in the financial advice world is the lifecycle model--and we know that doesn't apply to a very large proportion of households. That doesn't stop the financial advice industry from thriving--but like so many other things, the internet has disrupted that world a great deal. And that disruption creates perverse incentives. Here's the story of the "Fall of America's Money Answers Man", a once-respectable financial advice columnist who turned into a con artist. 
Advice on how to retire early by spending virtually nothing (while having a high-paying job, natch) has been growth industry. Here's a personal narrative from a Vice columnist who tried to follow the advice and decided the misery wasn't worth it.
Here's a new paper on the possible connection between credit availability and depression (the mental health kind). It finds that increased availability of credit to firms leads to less depression among low-income households. I'll note that this kind of paper is what made the RCT movement so attractive (see below).  

4. Research, Methods, Evidence: I was at a conference in Paris for a new book on RCTs and development economics this week, part of my travels. Drafting my chapter for that book turned out to be much more difficult than I had anticipated--the useful ways of saying something on this topic are much more limited than you might imagine. One thing that became clear to me, probably far later than it should have, is how often argumentation in research methods follows a pattern of: "Individual A made Proposition P at t1. Proposition P is wrong in context X. Therefore Group G is wrong at t2." That's a hard construct to argue with constructively. The other thing that became clear to me was that it would be very useful to have a more structured (in the economic sense) story about the use of RCTs in development economics. I plan on doing that in the next draft of my chapter, but while I was in the midst of pulling a near all-nighter in France to finish my draft before the conference began, Susan Athey produced an inadvertant history of the rise of RCTs in a single tweet: "Just think the most effective way to evangelize a new method is to demonstrate its effectiveness in a first-rate empirical application where the method clearly leads to a better quality and more credible result. Researchers will mimic a fully worked out, successful example."
That tweet was part of a "conversation" with Judea Pearl about Directed Acyclic Graphs, Pearl's preferred method for approaching causality. If you know anything about Pearl, you now why conversation is in quotes--if you don't, the whole thing begins with Pearl wondering why economists don't care about causality, as evidenced by the fact that they don't use his DAGs. If you, like me, don't really understand DAGs, here are a couple of useful tweet threads: one for those who don't mind the use of animated GIFs to provide pointless meta-commentary, andone for those who do. Just to be clear I recommend the second one which is from Scott Cunningham. Scott makes a reasonable case for the utility of DAGs--but Susan's point still stands: when someone/s start publishing papers using DAGs that are higher quality and more convincing than current practice is when their utility will be proven. And then they will quickly become ubiquitous.
Scott also pointed me to a very useful tutorial on another tool making headway in research practice: GitHub. I'm trying to wrap my head around the possibility of using GitHub for the kind of writing I do, which is often very iterative and splinters off into different directions. If anyone has used GitHub, or any other tool, that way let me know.
Here's a thread from Beatrice Cherrier on the historical debates within economics of the role of theory and data. It's worth reading for the reminder of how often the basic issues in these debates repeat. I'll be drawing on it as part of my discussion on the rise of RCTs.
Finally, here's a fun little exercise showing how bad humans are at randomizationeven when we are trying our damnedest to be random. I fully suspect someone is going to respond to this by referencing Fisher vs. Student on the value of randomization. 

5. Management and SMEs: I freely admit that management, particularly in the case of SMEs and development is something of an obsession of mine. Did you remember to click on the review of evidence on management from a few weeks ago? Here's a newish paper that looks at the determinants and consequences of management practices among SMEs in Ethiopia from Abebe and Tekleselassie--of note, Ethiopians working at an Ethiopian research center. They find, consistent with the other literature that good management shows up in productivity, is distinct from human capital, and is a learned skill.
Here is an overview of two recent reports on SME financing in developing countries, that unfortunately uses the "missing middle" concept. I'm quite sympathetic to these efforts, particularly one of the reports segmentation of business types, but I generally think these things are premature. We know very very little about how these small enterprises run on a daily basis, and designing "solutions" for them before we have a better handle on that doesn't seem optimal to me. That being said, it is striking that the conclusions of both reports are essentially exclusively about improving financial systems not about interventions targeted at the firms. That's a welcome change.
In terms of better understanding small firms, there are people working on that. I didn't get to go Oxford CSAE's conference or even pay much attention to it as a consequence of my trip to Paris, but there were a number of papers on the topic that I'll be trying to catch up on in the coming weeks. For instance, an experiment on equity-style investment in microenterprises in Pakistan. Here's one on spillover effects on micro and small enterprises of infrastructure investment. Here's more evidence on heterogeneity of impact of business training and credit on micro- and small enterprises, this time in Ethiopia. The operative differences here being gender, but I think we can safely say at this point that gender, opportunity and aspirations collide (to borrow a Pearl term). And here's more reanalysis of the de Mel et al capital grants research, modeling TFP and learning effects to explain differences in outcomes and capital accumulation. But my favorite example of our collective ignorance is this paper about whether electricity shortages and outages induce firms to innovate more or less. The results aren't particularly convincing to me, but the question is important: on so many dimensions we should be very humble about what the constraints to firms are and what decisions and choices those constraints lead to.
If anyone is interested in funding a very (very) small scale, and possibly idiosyncratic experiment on small firms, technology, productivity and management in order to generate some better hypothesis on these topics, let me know.

Someone recently created a new tool for creating these time-lapse bar charts--that's the only explanation I can find for why they have suddenly been showing up everywhere. Here's one on  global cities' population  that is pretty interesting. And here's  an explanation and one tool for creating them . But in keeping with my effort to keep these a bit lighter, here is one on leading goalscorers by age.

Someone recently created a new tool for creating these time-lapse bar charts--that's the only explanation I can find for why they have suddenly been showing up everywhere. Here's one on global cities' population that is pretty interesting. And here's an explanation and one tool for creating them. But in keeping with my effort to keep these a bit lighter, here is one on leading goalscorers by age.

Week of March 8, 2019

The IWD Edition

1. The OGs: I can't think about who influences me without beginning with Esther DufloErica FieldRohini PandeTavneet Suri (special links to two new papers that would have been in the faiV in a normal week--on the impact of digital credit in Kenya, and UBI in developing countries) and Rachel Glennerster

2. New Views on Microcredit: Because I'm framing this around research that has influenced me and appeared in the faiV, I've organized these into topical buckets that make sense to me. But keep in mind, that may not be the only thing these economists work on.   Cynthia Kinnan and Emily Breza have dug into the Spandana RCT to understand heterogeneity of results, and to used the AP repayment crisis and fallout to understand the general equilibrium effects of microcreditNatalia Rigol with some of the OGs above followed up on the differential returns to capital between men and women from earlier studies finding the differences are largely due to intrahousehold allocation, not gender; she's also looked into how to better target microcredit to high-ability borrowersGisella Kagy and Morgan Hardy uncoverbarriers that women-owned microenterprises faceRachael Meager creatively usesstatistical techniques to better understand heterogeneity in microcredit impact resultsIsabelle Guerin provides insight on why microcredit can go wrong. 
  
3. Savings: I will confess that I have a lot of questions about the savings literature. But that's mainly because  of the work of these economists. Pascaline Dupas, of course. Silvia Prina tests encouraging savings in Nepal, while Lore Vandewalle tries to build savings habits in IndiaJessica Goldberg runs very creative experiments to understand how savings affects decisionsSimone Schaner studies intrahousehold choices around savings.  

4. Related Development Topics: I feel a special burden here to point out the non-comprehensiveness of this item. These are economists whose work comes to mind often as I try to puzzle through evidence. Dina Pomeranz could have been in the savings items above, but she also does lots of interesting things on taxation in developing countriesSeema Jayachandran on cash transfers and changing behavior via payments. Pam Jakiela's work on intrahousehold bargaining and on occupational choicesOriana Bandiera's work on labor markets.  

5. US Household and Micro- Finance: A different kind of caveat here. These are women I work with closely who aren't economists, but whose work is important to understanding household and microfinance in the United States. Joyce Klein is the expert on US microfinance in practice as far as I'm concerned. Ida Rademacher,Joanna Smith-RamaniGenevieve Melford and Katherine McKay are doing great work delving into US household finance, particularly through the Expanding Prosperity Impact Collaborative on topics like income volatility and consumer debt.

From  Tatyana Derugina , via  Annette Brown . Though in my experience the trend line is similar to publishing in every other domain I've been a part of.

From Tatyana Derugina, via Annette Brown. Though in my experience the trend line is similar to publishing in every other domain I've been a part of.

Week of March 1, 2019

The Post-Neoliberal Edition

1. Economics: The dismal science doesn't often generate positive reviews from outside the discipline, so when it does happen it's worth noting. Julia Rohrer, who in addition to having one of the best titled blogs I've ever seen, is a psychology graduate student who procrastinated on her dissertation by attending a summer program in economics. Here is her list of things she appreciated in economics as a positive contrast to her experience in psychology.
On the other hand (hah!), economists typically have a lot to say about what is wrong with economics--certainly I encounter more "friendly-fire" in the econ literature than when I dip my toes in other disciplines (though this is perhaps my favorite example of the intra-disciplinary critique). There's an ongoing discussion about the future of economics going on in the Boston Review--I don't know if that counts as friendly-fire in terms of the outlet, but the participants are economists--starting with an essay by Naidu, Rodrik and Zucman, Economics after Neoliberalism. Then there are responses from Marshall Steinbaum, who notes that "every new generation proclaims itself to have discovered empirical verification for the first time," and from Alice Evans who focuses on the nexus of economics and political power in the form of unions.
But, because it's me writing this, I have to close on a new paper in JDE, that finds that communal land tenure explains half of the cross-country agricultural productivity gap. And here's a piece about how small teams of researchers are more innovative than large teams. generate much more innovation than big teams Neo-liberalism won't go down without a fight!

2. Migration: I haven't touched on migration for a while so it felt serendipitous that Michael Clemens and Satish Chand put out an update to their paper first released in 2008(!) on the effects of migration on human capital development in Fiji. The basic story is that in the late 80's formal discrimination against Indian-Fijians increased sharply, causing the community to both increase emigration and investment in human capital to aid emigration prospects. The net effect, rather than the dreaded "brain drain," was to increase the stock of human capital in Fiji. grapes
Cross-border migration is really the only option in Fiji, but in many countries, like Indonesia, there are lots of internal migration options. Since there is typically a large gap in productivity within countries as well as between countries, internal migrationhas always been a part of the development story. Bryan and Morten have a new article in VoxDev about this process in Indonesia, looking at the productivity gains possible from removing barriers to internal migration.
Since we started off talking about Economics, here's a post from David McKenzie considering the effects of migration on economists--or more specifically, how to think about job market papers about a candidate's country-of-origin. True to his style, David goes deep, including a model, and a survey. The post was inspired by a tweet from Pablo Albarcar who later noted it was mostly a joke about "brain drain" worries.
It is surprising to me how tenacious the brain drain idea is. When I have conversations about it, I try to cite the literature like Clemens and Chand, but I rarely find that makes a dent. People can always find an objection. So I've taken to just asking people how they feel about the "destruction" of Brazilian soccer/football culture and skill due to the mass emigration of the most skilled players. Typically, that leads to several moments of silent blinking. If you're interested here's a paper about "Rodar" the circular human capital investment, migration and development among Brazilian footballers
  
3. US Poverty and Inequality: I typically try to avoid the grab-bag approach to items of interest but I'll confess this one is a bit of a grab bag with a variety of connecting threads. We'll start by connecting to a piece I included last week about tax refunds and saving. If you haven't read that, you should. I noted I was grateful for the piece because it meant I could skip the annual ritual of linking to a piece I wrote for SSIR several years ago about rethinking tax refunds. But I should have known that the zombie idea of tax refunds being bad personal finance wouldn't die so easily. Here's Neil Irwin from the NYT on how people being angry about lower refunds shows that "humans are not always rational." I'm struck by the irony that the continuing common use of "rational" in economics requires zero-cost attention, while a foundational truth of the discipline is "nothing is zero-cost." There is nothing irrational about paying a very small fee (in foregone interest) for the valuable service of helping you to save when other services are ineffective. That's especially true if you include, as you should, the cost of the tax advisors and financial advisors required to accurately calculate the proper amount of withholding and to choose the right investment/savings account in which to store those savings. So I guess that connects to the thread about economics maybe not being post-neoliberalism quite yet. And here's a column from the Washington Post's personal finance columnist withpush back on the "refunds are bad" idea from readers who explain their rational choices in their own words.  
This week a 3 year project by the National Academy of Sciences to provide a "nonpartisan, evidence-based report" on the most effective ways to reduce child poverty in the United States was released. The summary that most everyone is latching on to is that work supports are not going to get the job done. The only way to cut child poverty by at least half is direct cash support to parents. Here's the Vox overview.
If you were thinking about intergenerational poverty, you were probably also thinking about education. The last few years have seen a proliferation of videos of "poor kids" getting into elite schools. Here's a piece about a new book on what happens to the lower-income students once they arrive at elite schools. It's not so joyous--"money remains a requirement for full citizenship in college, despite institutional declarations to the contrary."
Finally, how much do financial incentives and tax rates affect the incentives to innovate and invent? Not much--exposure to innovation matters much more

4. Management: This is a last minute "swap" of an item, since David McKenziemaligned managers in his weekly links tweet this morning. As some of you know, I have a semi-secret identity ghost-writing and editing management books, with several of them specifically about Toyota and lean process and management, so I couldn't let it lie. Of course, David's quip was a joke. The piece he links to is a terrific overview of the research on how management matters, a literature that David is a significant contributor to. It is a topic that I wish the development field paid much much more attention to (I really hope this is the most clicked link of the week), and this overview is a great introduction, both in content and structure/organization. I think I'll make some of my papers look more like this in the future.
And here's a piece about how middle managers deserve more respect. In my read of the literature above, it is middle management that is the actual missing middle in development. 

5. Digital Finance: I relinked the piece on why there's no reason to trust blockchain in the notes above. Here's another reason: "Once Hailed as Unhackable, Blockchains Are Now Getting Hacked." On the other hand, here's, "Bitcoin Has Saved My Family," from a Venezuelan economist.
One of the under-examined topics in the emergence of digital finance is the shift in the organizations and organizational structures that are providing financial services. The institutions and people in telecoms are systematically different than those in finance. That's something that always strikes me as I look at the GSMA's annual report on the state of the mobile money industry. Not because of something in the report specifically, but the fact that the report is from the GSMA.
And finally, a little curiosity that may only interest me. Uganda is opening up the purchase of government debt to individuals using mobile money, on the theory that it will reduce the government's dependence on commercial banks and institutional investors. It's historically sound, but I'm skeptical. For instance, it hasn't worked as well as hoped in Kenya.  

The musing on the quality of Brazilian football in the face of mass emigration gives me an excuse to include a video in support of my argument. If you're interested in falling down the rabbit hole a bit, here's  a short documentary on the 1982 Brazil team , which is my Platonic ideal of how the game is supposed to be played. Though that could have something to do with the fact that I was 9 that summer, and it was the first World Cup I watched. I still have a visceral rage reaction any time I see the Azurri take the field.  

The musing on the quality of Brazilian football in the face of mass emigration gives me an excuse to include a video in support of my argument. If you're interested in falling down the rabbit hole a bit, here's a short documentary on the 1982 Brazil team, which is my Platonic ideal of how the game is supposed to be played. Though that could have something to do with the fact that I was 9 that summer, and it was the first World Cup I watched. I still have a visceral rage reaction any time I see the Azurri take the field.  

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 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 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 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 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.

Week of June 18, 2018

The Do U Care Edition

1. Migration: If you don't get the "edition" reference, I think I envy you. But I care, and in the absence of other specific ways to oppose cruelty and barbarism, I'll spend some time here sharing some useful information about migration. Such as the fact that the US has become a "low-migration" country. I think this is as significant a change to the nature of the country as the closing of the frontier, especially since so many people don't seem to realize how much migration, whether within the US or to the US from other countries, has dropped.
On to that other crucial fact about migration: it's very very good for the people migrating and doesn't harm the people who are already there. Here's the newly officially published in AER paper by Clemens, Lewis and Postel studying the effect of the end of the Bracero program which led to 1/2 a million Mexican workers leaving the country, without any detectable benefits for native workers (employers simply invested in labor-replacing technology it appears). Here's a new NBER paper on the forced migration of Poles after World War II finding that migrants invested more in human capital for three generations. That's consistent with other work that shows long-term positive, sustained effects for people who move, even those who don't have full choice. Here's a story about how migrants fleeing the US to Canada are finding employment and thriving.
If you're interested in the big picture on global migration, the 2018 OECD International Migration Outlook is out.


2. Banking: I talk a lot about the overlaps between US and global financial inclusion issues--from household finance to consumer protection to business models to regulation. So I think both of these next two items are relevant well-beyond the countries they are focused on.
First, here's New America with a new report on how local and community banks systematically charge people-of-color more for their accounts (here's the OpEd version), which doesn't exactly encourage these historically excluded populations to join the banking mainstream. Oh, and the consumer protection regulatory system is being undermined in more ways than you might realize. Not only is there direct deregulation, but recently the Supreme Court ruled that the way the SEC carries out many of its "trials" for investment fraud are unconstitutional--and the CFPB is too. Here's Arjan Schutte writing about being fired from the CFPB's consumer advisory board which, y'know, at least he's not being unconstitutional now.
On the other hand, in India, the RBI is working to turn urban cooperative banks into "small finance banks." This piece explains a bit about the history of Indian urban cooperative banks and the regulatory issues involved--it's not all good. It's worth reading for anyone thinking about productive ways forward for more inclusive banking systems.

3. Digital Finance: In most of the countries where digital financial services have made inroads among poor households, agents are playing a big role. But those agents are often basically the same folks we see running microenterprises that we can't figure out how to improve. And that probably means that their growth is being limited by the quality of services offered and decisions made by those agents. Here's a paper from Acimovic, Parker, Drake and Balasubramanian who attempt to help mobile money agents in Tanzania (way to go including the country in the paper title guys!) improve their business practices. Specifically not be plagued so much by "stock-outs" that mean they can't serve customers either trying to deposit or withdraw cash ("stock" can be either mobile money or cash depending on the transaction). They find what I would term the "heavy paternalism" approach works best--showing up in person to train and then giving specific direction via text each day. It reminds me a lot of the "mind the change" paper of a few years ago, and the Kenyan enterpreneur mentor paper from last year. Overall it seems that an important dimension for improving microenterprise profitability is inventory management.
Another big piece of the digital financial services equation is designing services that are helpful to the customers you are trying to serve and that they actually want. That's a new report from ProsperityNow focused on low-income US consumers, but you already know that I think such things are globally relevant.

4. Methods etc.: Here's an idea for experiment design: don't substantially and repeatedly mislead people for decades about your experimental design. Forget everything you think you know about the Stanford Prison Experiment, a staple in pop culture and social psychology, because almost everything published about it is an inaccurate representation of what actually happened. Given the horrors happening around us, it's hard to get too riled up about this but it really is stunning reading as a famous researcher repeatedly denies specific accusations until evidence from the archives of the experiment force him to acknowledge what really happened. 
On a more positive note, here's a clever little interactive game to explain concepts of "network science" or more simply, how social connections influence perceptions and behavior, or more complicatedly, how to think in a bit more structured way about spillovers from treatments that have an informational component. 
And here's David Evans sharing a provocative statement from Karthik Muralidharan at the RISE Conference--paraphrased, when working on a large scale experiments run by governments you might be better off not doing a baseline survey--and various reactions, which lead to a very good discussion. 

5. Consumer Behavior/Social Enterprise: So this one makes most sense in light of what is coming after, but bear with me. What happens when you get parents involved in improving teaching practices in Ghanaian preschools? Bad, bad stuff. Well at least counterproductive stuff.
So keep that in mind as we move finally to an interesting experiment on how much influence customers can have on corporate behavior (via Ray Fisman). A key part of the social enterprise movement is the idea that just behavior will resonate with customers and lead to, if not higher sales, than at least loyal customers. But it turns out customers have a hard time remembering who the good and bad actors are when it comes time to make purchases. So while there may be some loyal customers out there, it's going to be hard to get the mass consumer to get on board with shifting corporate behavior via their spending. Which ultimately is a pretty good argument for Just Capital's approach of building an index that socially-conscious consumers of stocks at least can get what they want without having to remember any of the details. 

I'm always a sucker for Twitter threads with interesting data, and twists and turns. This one is about the  curious case of rising opioid deaths in the US in states that did or did not expand Medicaid . 

I'm always a sucker for Twitter threads with interesting data, and twists and turns. This one is about the curious case of rising opioid deaths in the US in states that did or did not expand Medicaid

Week of June 11, 2018

1. Household Finance: If you'll bear with me I'm going to write about household finance mostly with links to pieces about corporate finance. Corporate finance matters a lot, and it deserves the attention and resources invested in it (Channeling Willie Sutton: why do you write papers about corporate finance? Because that's where the money is). After several hundred years of lots and lots of resources and attention we've pretty much got this thing licked right? Well, maybe not the biggest questions but at least the basic questions like accounting and financial reporting, right? Right?
Here's Warren Buffet complaining about Generally Accepted Accounting (GAAP) rules being applied to his company. And here's an argument from several business school professors that GAAP rules aren't meaningful given changes in the economy--with the enticing tidbit that in many companies having a CPA, in other words having deep familiarity with the rules of corporate finance and accounting, is a disqualification for a senior-level job in the finance department. And here's Buffet again, this time with Jamie Dimon, arguing that quarterly financial reporting is broken.
Lest you think that this is some emerging consensus, here's Felix Salmon arguing they are wrong. Here's Matt Levine arguing they're wrong. And here (via Justin Fox, which we'll return to later) is a whole book about GAAP rules being wrong for entirely different reasons
So all of this is interesting (OK, maybe not) but what does it have to do with household finance? We haven't even begun investing the kind of resources necessary to really understand household finance, but we act like we have all the important questions licked. Or at least that households should be able to, with a little financial literacy training perhaps, be able to get a grasp on their finances and make consistently sound decisions. The fact is, for the most part, we just don't know what we're talking about when we talk about household finance. Or loss aversion


2. Digital Finance: In another brief diversion to start off an item, an astute reader pointed out that the way I had been writing about Findex made it seem like the Findex team did not have it's own report on the findings. They do, so click on it.
One read of the both the Global Findex team's report and the CFI report highlighted last week is that the promise of digital finance is largely unfulfilled. But there's still a lot of excitement over the promise in places like Egypt apparently. I found this piece particularly remarkable because I stumbled on it right after reading through the Findex analyses, and all I could think was "I don't think that data means what you think it means." Oh, and the note that moving to digital finance would allow the government to closely inspect everyone's spending habits, wheeee!
There's a different sort of excitement over digital finance in Uganda apparently where the parliament has approved taxing mobile money and social media(?!?). Apparently there was some concern that such taxes would be regressive, but some MPs objected that people shouldn't be exempted from paying taxes just because they were poor. Clearly those people don't read CGD/Vox.
In other CGD news related to digital finance, here's a piece about using blockchain in development projects--or perhaps more on point, *not* using the blockchain for development projects. There's a terrific decision tree graphic in the piece that is worth the click on its own, even though I disagree substantially with one part of it.

3. Firms, Productivity and Labor: Earlier this week I attended two days of the Innovation Growth Lab conference put on by Nesta. A number of interesting papers and research proposals were presented--the session I found most interesting was on the global productivity slowdown. The conclusion I came away with--though this wasn't what any of the papers were about--is that the big policy problem is insufficient labor mobility. And by that I don't mean geographic mobility (though I do think more of that would be great) but more firm-to-firm labor mobility. 
But while I was sitting in the research meeting discussing a) whether its possible to boost productivity of small firms, and b) whether the adoption of Toyota Way principles could be an effective proxy for increasing experimentation in firms, this new paper from Tanzania popped up in my Twitter feed via David Evans. It's an experiment introducing Toyota-style problem-solving training for small garment firms--three years after training they find significantly higher profits (though no short-run gains). I can't imagine a paper designed to more efficiently challenge my priors--which are/were a) Toyota has developed an incredibly productive system for sustaining and improving performance, b) it is incredibly hard to improve performance of small businesses.
I mentioned returning to Justin Fox's piece earlier--the column is about how firms behave from a theoretical and empirical perspective, especially how well Friedman's perspective is holding up. It's definitely worth one of your precious Bloomberg-pay-wall-exception clicks (though you may want to open it in an incognito tab anyway). The column will make one more appearance before we're through.

4. Our Algorithmic Overlords: In the interests of time I'm going to hit you with several links and very little commentary. The NY Times Magazine has a feature on differing perspectives on the future of AI among the titans of Silicon Valley. I feel like some very close analog of this piece was done last year but I don't have an AI assistant handy to find it for me.
Here are two new NBER papers on the impact of AI and policy: from Jason Furman and Robert Seamans and from Ajay Agrawal, Josh Gans and Avi Goldfarb.
And two stories about surveillance--of crowds looking for violent behavior, and of Chinese school students looking for boredom.

5. Social Investing: Finally, this week a new Exchange Traded Fund focused on "just" corporations launched--it's a collaboration between hedge fund billionaire Paul Tudor Jones II and Goldman Sachs, exactly who you would expect to be arbiters of socially-positive corporate behavior (if only they could have had an actor portraying Milton Friedman at the launch event!). But the methodology for the index is actually quite interesting and the basis for the rankings are remarkably transparent. There are a number of interesting perspectives to read on it. Here's a positive take. A neutral one. And a skeptical one. (And that's why you want to save your Bloomberg clicks)

Here's the last return to that Justin Fox piece because he features one of the greatest faiV-style videos ever: the Stockholm School of Economics choir signing an original composition based on Friedman's view of firm's social responsibilities.

First Week of June 2018

1. Microfinance: There are things that make you feel old. Like discovering that KGFS, the Indian "wealth management for the poor" not-a-start-up-anymore is 10 years old. Here's Bindu Ananth's, one of the co-founders, reflections on what they've learned over those 10 years. There's apparently a Field and Pande impact evaluation on its way shortly, which will be must reading. I'm struck by a couple of points in Bindu's post: a) that their take-up rates are so high that they are seeing general equilibrium effects (further cementing for me that GE effects and household risk are the two most important things to be thinking about in microfinance, and financial inclusion more broadly, right now), and b) the attention paid to the behavior and bandwidth of front-line staff (OK, three most important things).
But there are other things to think about too--here's MicroSave's latest Low Income Living newsletter focused on microfinance and WASH.

2. Global Development: For as long as I've been paying attention to Global Development there have been big think pieces and agendas for transforming aid. Right behind me are some of the first books I was handed way back then: Inside Foreign Aid, A Bed for the Night, Lords of Poverty. Here's Jeremy Konyndyk of CGD's review of the reform agenda of the past decades, why they haven't worked, and the pros and cons of what's happening now. Since he's focused on incentives, of course I liked it. Here's Paul Currion's paper on Network Humanitarianism for ODI, which he calls the "other half" of Jeremy's paper.
But that's macro stuff. Micro matters too and any discussion of the macro has to make sense in light of micro-realities. Here's Helen Epstein's review of a new book about Rwanda, titled In Praise of Blood. Marc Gunther recently paid a visit to Rwanda--here's his initial reflections including a discussion with Josh Ruxin, the founder of the Kigali restaurant/hotel Heaven and author of a very different book about Rwanda, from 2013. Realizing that was only 5 years ago makes me feel almost as old as learning KGFS is 10. Marc promises a good bit of reporting on his visit in the weeks to come.
And here's a Nature story on the many trials of unconditional cash transfers that are one of the macro-trends that Konyndyk writes about.

3. Household Finance (and Data Redux): Or perhaps I should have called this item financial inclusion or even financial health. Hot on the heels of Findex, Gallup has a 10 country survey of households, sponsored by MetLife Foundation, called the Global Financial Health Study. It's a really interesting set of data on how households feel about their finances. You can get to the reports and the data via this page in a multi-step process which I'm sure Ideas42 had nothing to do with designing.
Here are Sonja Kelly of CFI and Evelyn Stark of MetLife's take on the results. I'm not a huge fan of the "financial health" terminology--though that's a story for another time--but I am a huge fan of the way Sonja and Evelyn take on the difficulties of all the different phrases we use--financial health, financial inclusion, financial access, etc. All of our terminology fails at some level to capture what we are really after, and so we need a combination of metrics and methodologies to make sure we don't lose our way (such as how the focus on measuring financial inclusion led to paying too much attention to account openings).
I also promised to pass along things that I found around Findex, and here are two that both focus on the problem that Sonja and Evelyn write about: access does not necessarily lead to usage which does not necessarily lead to positive outcomes.

4. Effective Altruism and Some Algorithmic Overlords: The Economist has a piece about effective altruism which is a reasonable introduction to the thinking and the thinkers, if you haven't been following that world. If you have, it's not distinguishable from any of the stories written over the last 5 years or so. If you are more familiar, here's something new: a long profile of the Open Philanthropy Project/Cari Tuna and Dustin Moskovitz and their various entities. Full Disclosure: I'm a long-standing board member of GiveWell which appears in both pieces, along with Cari, and consider a number of the people who appear in the piece personal friends. The profile is by Marc Gunther--same one, also the person who broke the story about misbehavior at the Silicon Valley Community Foundation--and here's his post about the piece.
Marc discusses Open Philanthropy's work on existential threats to humanity, including "evil AI". Which makes for an easy pivot to Open Philanthropy's announcement of their 2018 AI Fellows, "promising machine learning researchers." And here is an NYRB piece on Automating Inequality and another new book, Algorithms of Oppression. I continue to worry that these pieces focus too much attention on the technology and not the non-digital algorithms that influence so much of life. Again, that's probably for another day, but if you want you can get a preview in my review of Automating Inequality.

5. Some Other Stuff: The lack of a thread is really showing through now huh? To hell with it, here's some other interesting stuff that I think you should click on. Planet Money's new episode about game theory and existential risks (see it does sort of tie back). Charles Kenny has a piece about the holes in America's safety net and the damage they do to children, which have a lot to do with non-digital algorithms (see!). Some "innovations" in home financing that seem likely to lead to people answering Gallup Financial Health surveys by saying they are not in control of their finances or future (see!!). And Felix Salmon has a piece about "Fictional Design" that may help you believe that Open Philanthropy's investment in AI scholars is high expected value (see!!!).