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Viewing all FaiV posts with topic: Microfinance  

Week of May 24, 2019

1. India: This year I resolved to make sure I was paying more attention to events in countries with large populations that aren't the United States, and not just treating them like an instance of a broader class. Given the elections in India, and the somewhat surprising strength of the BJP's performance, this seems like an opportune moment. Here's a Vox explainer on the elections for those of you who, like me, may have been only vaguely aware of the elections as a referendum on Modi vs. (Rahul) Gandhi. Here's an interesting essay on the most important feature of Indian politics not being the rivalry between parties but the generally uncontested move toward closing off civil liberties and a more authoritarian state. Here's 12 reasons why the BJP won, with perhaps the most interesting point being the BJP's efficiency at actually delivering welfare programs rather than just vague promises about future welfare programs. For those of you following along in the US or Australia, or any other country where right-wing populism has experienced a rebirth, there are clear parallels throughout. Here's Shamika Ravi on policy priorities for the new government (written before the election).
There is more than the election going on. So here's a couple of things that may be more of traditional interest to faiV readers. Demonetization was three years ago. And everything is back to where it was--maybe this should make programs with "null effects" feel better. And here's a fascinating study of the social lives of married women in Uttarakhand, with a particular emphasis on how "empowerment shocks" spread through social networks and decay over time. 

2. Causality and Publishing Redux: A few things popped up related to last week's focus on causality. One point I touched on was spillovers and general equilibrium effects. Here's a note from Paddy Carter of CDC on the tension for DFIs attempting to invest in ways that are "transformative" (read, lots of spillover effects) and measuring their causal impact. I also noted JDE now accepting papers based on per-analysis plans. Pre-registration isn't going so well in psychology where a new study looked at 27 preregistered plans and the ultimate papers and found all of them deviated from the plan, and only one of those noted the change. Brian Nosek's money quote: "preregistration is a skill and not a bureaucratic process." Which could serve as a theme of Berk Ozler's discussion of using pre-registration to boost the credibility of results, not just for an experiment. Very useful for those interested in developing the pre-registration skill.
This may be stretching it a bit, but Raj Chetty's incipient attempt to replace Ec10 at Harvard got a lot of attention this week. There's a lot to recommend his approach, but there are plenty of people who are concerned about the apparent glossing over of causality. I'm honestly worried that some of these things may cause Angus Deaton and other critics of causal claims from RCTs to go into apoplectic fits. Just when you thought some of the messages might be getting through, along comes a new toy. So I should probably not mention that there's an update to the oldDonohue and Levitt paper on abortion and crime that claims it has better evidencewithout dealing with any of the problems in the underlying model.
  
3. Micro-Digital Finance: Microfinance can be pretty confusing when you get beyond the simple statements and start to worry about how it actually all works, and how it's changing, and what we do and don't know. Hudon, Labie and Szafarz have a nice little primer on those issues with a microfinance alphabet. I wish I had thought of doing this.
I complained last week about "mobile money" not including payment cards, which dominate the United States. But a telecom-driven mobile money product is now available in the US. Well sort of. Not sure what to make of this yet. 
Caribou Digital and Mastercard Foundation have a new study of Kenyan microentrepreneurs "platform practices." I also don't know what to make of this, but that's probably because I haven't read it yet, but I figured many of you would be interested. 
Among other things it's hard to know what to make of, there's Earnin, a sort-of payday lender, health care cost negotiator, fintech something. It's confusing. And New York State regulators are confused too, which is probably not a good sign for Earnin. But that's nothing new--I have to point again to City of Debtors, a book that documents New York city and state regulators confusion over how to regulate small dollar lending for more than a century. 

4. US Inequality: The history of exploitative finance in New York continues to write new chapters, which unfortunately often seem to be just remixes of the old chapters. For instance, the oft-heard story of New York taxi drivers being driven to despair by the entry of Uber and Lyft, misses a big part of the story: those drivers are often operating in deep, deep predatory debt that was going to drown them whether ride-sharing came along or not. For those of you who have followed the supposed stories of microfinance driving Indian farmers to suicide, this should all sound familiar. 
One of the reasons that those loans were unsustainable is the skyrocketing cost of housing in US cities. And that's driving people out of cities, particularly the people with just enough to be able to move away. Why? It's the zoning stupid. Well it's more than that--it's economic rationality. The higher wages for unskilled workers in cities in the US have totally disappeared along with the rise in housing costs.
Overall, though the financial situation of Americans is getting better along with the job market. The new Survey of Household Economic Decisionmaking is out, and the oft-(mis)-quoted statistic about how many Americans would pay for a $400 unexpected expense with cash or a cash-equivalent is at an all time high (for the survey, which is only 6 years old). Still that's only 60%.
And so, many people feel insecure. Here's Jacob Hacker's essay on why, building on his classic book, The Great Risk Shift. Another reason is the continued increase in student debt (I'll tackle the Morehouse/Johnson/Philanthropic angle another week). Helaine Olen has a great policy prescription on that front: make student loans dischargeable in bankruptcy again (MSLDBA?). Though the mobility effects of college degrees may be substantially overstated, which makes the student debt problem even worse. And finally, what should be another reason, even if it isn't, is the many ways that the economy is corrupted by things like this

5. Three Day Weekends: Go enjoy yourself away from a screen, wherever you are.

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.

From  Alfred Twu , an illustration of "It's the Zoning Stupid" and a nice application for discussing tax incidence theory.  Source .

From Alfred Twu, an illustration of "It's the Zoning Stupid" and a nice application for discussing tax incidence theory. 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 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 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 February 4, 2019

The Global Con Edition

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

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

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

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

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

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

Week of January 28, 2019

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

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

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

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

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

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

Week of January 21, 2019

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

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

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

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

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

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

Week of November 12, 2018

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

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

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

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

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

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

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

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!!!).

First Week of May, 2018

For the First Time in Forever

Editor's Note: I apologize if the phrasing on the first item triggers PTSD symptoms in parents of children under 10. In other news, the paywall revolution seems to be gaining steam. I may need to start a Patreon for the faiV to afford subscriptions, but for now I'm just mourning my two favorite columnists, Justin Fox and Matt Levine, disappearing behind Bloomberg's odd paywall. --Tim Ogden

1. Microfinance, Part I (Uses of Credit): For the first time in forever, it seems there's enough new and interesting stuff on microfinance to support not only one, but a couple multiple-link items. Let's start with a useful piece that summarizes findings from several studies that have loomed large in our understanding (or questions about) of how microenterprises use credit, and apparent differences between male-owned and female-owned enterprises. I do find the framing a bit odd, as I don't know anyone who interpreted the results as "women aren't as good at running microenterprises as men" rather than, "women tend to be constrained to operating microenterprises in less profitable industries." When the newer results from Bernhardt, Field, Pande and Rigol emerged, I think the standard take was, "Households optimally allocate credit to their highest-return enterprise." So I think the intriguing thing here is not "women vs men entrepreneurs" but "maybe the industries women are concentrated in aren't less profitable after all." And that makes me think back to a paper from AEA (there's no version online that I can find, but this seems to be a significantly revised version using the same data) finding that female tailors in Ghana earn less than male tailors because they are constrained to making womens' clothes, a sector where there is more competition and lower prices.
Another use of credit for poor households is not to invest in a microenterprise but to smooth consumption when income is seasonal (or volatile for other reasons). Here's a new paper from Fink, Jack, and Masiye examining that dynamic in rural Zambia. Providing credit during the lean season affects the labor market, allowing liquidity-constrained farmers to avoid wage labor for their comparatively less-constrained neighbors, and pushes up wages. The intriguing thing here is another piece of evidence on the general equilibrium effects of microcredit via commodity (in this case, labor) markets.


2. Microfinance, Part II (Everything Else): Well, not everything else, see item 4. Access to credit and other financial services is a tricky thing--and it's not just the financial system that affects it, the justice system, criminal and civil, matters a lot too. Here's a new paper on alternative credit scoring using digital footprints--I haven't read it yet but am generally very skeptical of things like this. Grassroots Capital and CGAP are hosting a webinar on May 15th under the heading "Microfinance: Revolution or Footnote?" based on a conference last year (full disclosure, I was a participant). Of course, now I would want it to be called "Revolution, Footnote, or General Equilibrium Effects Eat Us All in the Long Run?" And applications are open for the 2018 European Microfinance Awards (until May 23) with the theme "Inclusive Finance through Technology." Whoever said the faiV didn't have news you could use? 

3. Methods/Statistics/Etc: Here's even more service journalism: A tool that will convert charts into data points automatically. I actually expect this to be the most clicked link in the history of the faiV. RAs, the robots are coming for your jobs sooner than you think.
Does everyone who cares about statistics read Andrew Gelman's blog regularly? Just in case, there were several posts recently that drew my attention. One is a fairly-standard-but-always-useful post about a specific example of dubious practices, on early childhood education (which morphs into some commentary on how the field of economics deals with these issues with a bonus appearance from Guido Imbens in the comments); another is a pointer to a new paper that tries to avoid some of the more dubious practices on a topic of a lot of interest and a lot of noise--the relationship of macro-growth and child development. But the most interesting is a post about how economists tend to see the world, specifically explaining why apparent bad behavior is good, and apparent good behavior is bad. Behavior in the economics profession is the best segue I can find into this short (audio) interview with Claudia Goldin.
But back to the use and misuse of metrics and statistics. If you don't click on anything else under this item, I do think you should look at these last two links. First, a thread about how most of the world thinks about statistics--as a tool for arriving at the answer you're looking for. And a column from Justin Fox on how pro- and anti-metrics authors end up in basically the same place--measurement is hard, and is only useful if you put the effort into doing it right.

4. Household Finance: Maybe the grab-bag is the right frame for this week's edition of the faiV. I'm including this item just so I could add this link to a look at how terribly non-poor people manage their money. One of the themes I've been increasingly talking about since the US Financial Diaries is how much even small amounts of slack obscure the sub-optimal decisions of the upper 60% of the income distribution. The analogy I make is to lean manufacturing: for the poorest people, we have drained all the slack out of the system so that when any mistake is made the consequences are large and obvious--that's the point of lean! But of course, unlike Toyota which spends massively to train workers on how to deal with mistakes, we give no useful training to these people to cope with their lack of slack, instead just blathering on to them with useless financial literacy training. Meanwhile, those with some slack are the American car companies of the 1970s, oblivious to their poor management of money. This week is when people who filed their US taxes right before the deadline will receive any refunds they were due; my strong prior is that there will be much more money wasted--even as a percentage--in the next 30 days than when the comparatively lower income families received their refunds back in February.
While we're at it, would you consider $200,000 of debt and a payment plan with the IRS for back taxes an example of "bad" financial decisions? What if the person in question was running for governor?

5. Cash Transfers: To round things out, Finland is giving up on it's "not-universal basic income" experiment since voters don't like it and they sort of already have an actual "universal basic welfare" system. There's another "not-universal basic income/cash transfer" experiment starting in the US. And here's Martin Ravallion on the pros and cons of guaranteed employment versus guaranteed income. (Channeling my inner Lant Pritchett: It's about state capacity!).   

Part of the US inequality story that doesn't get quite as much attention, via the  NY Times Upshot .

Part of the US inequality story that doesn't get quite as much attention, via the NY Times Upshot.

Week of April 2, 2018

April Showers on Parade Edition

Editor's Note: Joan Robinson once said, "The purpose of studying economics is not to acquire ready-made answers to economic questions, but to learn how to avoid being deceived by economists." I often feel like the more modern description would be, the purpose of studying economics is not to acquire ready-made answers, but to learn how to rain on as many parades as possible. Or maybe that's just my natural disposition. Anyway, the recurring theme this week is the reining in of optimistic expectations.  --Tim Ogden

1. Global Development: To start us off, how about some rain on the "rising Kenyan middle class" parade? The core point--that gains from rising incomes that don't translate into durable assets can rapidly be erased, a perspective that should sound familiar to anyone with a passing knowledge of anti-poverty policy in the US. 
But the real parade in global development in recent years has been on the value of delivering cash to poor households. This is a train that's been picking up steam for a long while. I would date the current push back to the first studies of Progresa/Opportunidades, the Mexican conditional cash transfer program. Momentum has steadily built around both the positive impact of cash transfers--that recipients don't waste the money, that they use the money productively--and dropping conditions. That momentum was built on many studies, but probably the two most well known in international circles are Blattman, Fiala and Martinez on cash transfers in Uganda, and Haushofer and Shapiro/GiveDirectly in Kenya. Both showed significant gains by recipients of unconditional cash.
Both of those papers were about relatively short-term effects. Both studies included longer-term follow-ups. And you know what's coming: the large positive effects seem to have disappeared in the medium term. Berk Ozler of the World Bank is currently playing the role of Deng (it's the closest I could get geographically) with two lengthy blog posts. The first, keying off comments from Chris Blattman in the recent Conversations with Tyler, but really delving into the recently released update to the Haushofer and Shapiro/GiveDirectly update is the important one for non-specialists. The second is very useful for understanding the specific details of interpretation. The posts also kicked off a number of useful Twitter conversations (here, here, here, here and here, though that's just a sample; just scroll through Chris's and Berk's timelines for more). Berk's first post also takes on the role that academics have played in stoking that momentum and is worth a close read.
I think it's also important to think through what is happening with cash transfers in light of not only other studies of cash (like this one finding positive effects on the personality of Cherokee Native American kids whose families receive cash that was just officially published) but also other interventions. Deworming is one example--one big source of the controversy over the effects of deworming is that there isn't a medium-term biological effect to explain the long-term economic effects. The Moving to Opportunity study is another--no short-term or medium-term gains, only long-term ones. And I have to note that the Native American paper is a frustrating example of Berk's critique of the role academics can play in raising expectations too high--the paper's title and abstract simply reference a large positive effect of cash transfers with no indication of when (now? 10 years ago? 30 years ago?), where or who the participants are, or even the size or mechanism of the transfers.


2. Social Investment and Philanthropy: In one of those Twitter conversations sparked by Berk's posts, Chris gave Berk the endearing nickname "naysaying grumpy pants" (it's a compliment, honest!). This week I had my own "grumpy pants" moment tied to the release of Henry Timms' just published book New Power. Henry is the main force behind Giving Tuesday--and apparently I am the designated Scrooge on that topic, going back to a few posts I wrote for Stanford Social Innovation Review years ago. In the Chronicle of Philanthropy's long profile of Henry and the new book, I get to say things like, "I can't imagine a more useless number than the amount of money given on Giving Tuesday." Without context, that may sound like hard-hearted parade-raining. And I suppose I am parade-raining on the way that Giving Tuesday is mostly being talked about--as a wildly successful movement based on the amount of money given tied to Giving Tuesday campaigns. But what we really should care about is whether Giving Tuesday is leading to people becoming more generous, not whether their donations happen in response to a specific campaign. I'll write some more about Henry's book and New Power in the coming weeks.
In other social investment parade raining, I've been known to get riled about about the social investment rhetoric about "no trade-offs" and "double bottom lines." Here's a new paper from Karlan, Osman and Zinman that explores the trade-offs of a double bottom line in detail. It finds negative consequences for both social and financial performance. Now that's some first-class parade-raining.

3. Methods: I suppose you could call this recent work on whether regression discontinuity designs are reliable--and finds that they are--to be raining on the parades of other methdological approaches. But for good measure, here's Andrew Gelman, well-known parade-raining statistician, with some notably restrained and subtle raining on everyone's parade in response to the RDD paper. My summary: lots of methods are reliable if you do them right, but you're probably not doing them right.
But tying back to the first item and Berk's discussion of the role of academics in miss-setting expectations, here are two useful pieces from outside economics that are worth thinking about if we think of methods as not just the way a study is done or the analysis conducted but the way the results are communicated (and obviously I think that's the right way to think about methods). First, how the continuing enthusiasm for vitamins came to be. Second, Slate Star Codex takes on adult neurogenesis in humans which is particularly fascinating because it's an example of how commonly held beliefs were overturned by new research, and then more new research overturned the new beliefs. Seems particularly relevant to the conversations about cash transfers, no?

4. Microfinance and Digital Finance: Here are two related pieces raining on crypto-parades, which admittedly isn't that hard these days. But neither is about the crazy part of the crypto world. They are raining on some of the fundamental ideas that are used to justify the ultimate value of crytocurrencies. First, here's a story about Ripple and it's struggles with banks who like the idea of a simplified payments infrastructure but don't see any need for a cryptocurrency to be part of that. Second, here's a story about how crypto trades are actually happening--with a trusted intermediary using Skype, because you know having a trusted intermediary is a useful thing in markets.
In other non-parade-raining news, Walmart is getting into the global remittances game, by partnering with MoneyGram(!?!). I suppose that will rain on lots of other global remittance providers parade. And here's a story about why, after all this time, remittances are still so costly and none of the efforts to bring down the cost have worked. Of course, that was before Walmart got involved.
Finally, it's not often I get to feature some US-based microfinance stuff. Here's a new paper from Aspen FIELD on pricing in US microfinance and why it makes sense for lenders to raise interest rates (Note: I played an role advisory role developing the paper). I think a lot of people in international microfinance will sympathize.

5. US Poverty and Inequality: The role of health care costs in driving bankruptcies got a lot of attention a few years ago and was a big part of the push for the ACA. Since the ACA passage though, there hasn't been a meaningful change in bankruptcy rates even though there was a big increase in the number of people insured. Now there's a reassessment of the data on bankruptcy and health care costs that radically revises down the number of bankruptcies that can be attributed to health care costs directly resulting in papers in the New England Journal of Medicine and in AER. Here's a summary of the work, but the very short version is the culprit is loss of income from poor health more than the costs of health care.
And because it's spring temporarily this afternoon, I feel compelled to leave on some good news--or at least my version of good news. The Gap engaged in a rigorous randomized study (!) to determine if their scheduling practices--which as in most US retail leads to erratic and volatile schedules for retail workers--were helpful to the bottom line. The answer is no. Volatile schedules are bad for workers and bad for business (summary; full report). Hey, did I just suggest there was no trade-off to treating workers better?

Week of March 19, 2018

The Wheel of Morality Edition

Editor's Note: The reference this week is to the classic bit on the cartoon Animaniacs. The connection is in the first item.--Tim Ogden

1. Household Finance, Debt Specifically: This week I had the chance to talk about the moral dimensions of debt with Fred Wherry, as part of Aspen EPIC's focus on consumer debt in the US (and there are more conversations about debt before and after in that video). One of the things that doesn't get mentioned in the video is that the ancestor of mine who was rescued from debtor's prison later became the official Collector for Jersey City. It's a topic that fascinates me because attitudes toward debt vary so widely across time, culture, context and individual. It often seems like perspectives on debt are pulled from the Wheel of Morality. Just the selective use of the words "credit" and "debt" could be fodder for 100,000 words or more, much less the tension between the lack of access to credit coinciding with troubling debt burdens in many contexts.
To get up to speed on the current situation with consumer debt in the United States, you couldn't ask for a better overview than Aspen EPIC's just published primer. Well, you could ask for one, but given the gaps in the underlying data, you wouldn't get it. And to push some more moral buttons, here's a profile of one of the most influential figures in consumer debt today: Dave Ramsey. If you don't know who that is, you really do need to read the profile.


2. Microfinance and Digital Finance: I suppose I'm sending a message by increasingly conflating these two categories. This piece from NextBillion on the need for Indian MFIs to digitize at least gives me an excuse this week. But while I figure out what message I'm sending (or at least intending to send), here are a couple of recent pieces about digital accounts helping people save more. First, a paper from the job market that I missed about M-Pesa boosting savings among those whose alternatives were most costly. And a new paper about an experiment with female entrepreneurs in Tanzania finding digital savings accounts boosted savings rates. My priors aren't shifted much by these, but they are shifted some.  
To maintain some strategic ambiguity, here's a new paper that fights the digital invasion--there's nothing less digital than grain storage. Providing farmers with a way to communally store grain at harvest has high take-up and as a result were able to sell grain later at a higher price. An intervention to allow individual cash savings for inputs was less successful, though possibly because there wasn't much margin to improve on.

3. Methods and Economics: It took a lot of willpower (though apparently not ego-depleting) not to put this item first, but I worry that my excitement over things like this is not normative for the faiV readership. But for those of you in this niche, here's a new comment from Guido Imbens on the Cartwright and Deaton critique of RCTs (and if you prefer a simpler version, here's my interview of Deaton for Experimental Conversations which gives an overview of most of the issues). To give you a flavor of Imbens perspective: "Nothwithstanding the limitations of experimentation in answering some questions, and the difficulties in implementation, these developments have greatly improved the credibility of empirical work in economics compared to the standards prior to the mid-eighties, and I view this as a major achievement by these researchers."
Imbens places RCTs within "the credibility revolution" in empirical economics (which of course is the crux of the debate--how much do RCTs improve credibility?). The credibility revolution, in turn, has played a big role in the growth of empirical economics compared to theory and econometrics. Here's Sylvain Chabe-Ferret with an overview of "the empirical revolution in Economics", some thoughts on the path forward and a treasure trove of links. I have to note here, for those not so enmeshed in the details, that while Deaton is a critic of RCTs, he is a part of the credibility/empirical revolutions through his careful and detailed work with surveys.
Finally, here's something form the Royal Economic Society with the headline "Tweeting Economists Are Less Effective Communicators Than Scientists". I haven't read it yet but how could I not link it when it has such an exquisite combination of direct and implied slights on economists?

4. US Inequality, Immobility and Instability: I'm assuming that any of you with an interest have already seen the new results on mobility and the central problem of immobility for African-American men from Chetty, et. al. so well illustrated by the NYT's piece. Hidden in Chetty's shadow are a couple of other pieces on this topic that deserve attention. Inspired by Chetty et al's earlier work on variation in mobility geographically, here's Davis and Mazumder on racial differences within geographies, finding that low mobility in the Southeast is driven by whites; African-Americans in the Southeast have higher mobility than those in the Northeast and Midwest. And here's Guyot, Reeves and Winship with a different approach to the question of African-American male immobility and marriage rates, which confirms the latest Chetty et. al. results.
Our work in the US Financial Diaries ties helps shine a light on short-term instability as a factor in immobility. There are a couple new pieces in that domain. Alieza Durana looks at instability in the suburbs and how it contributes to general feelings of insecurity. And Molly Kinder and Kristin Sharp look at the prospects for improving stability by changing the workforce (or at least how and what people are trained to do.)
Finally, the St. Louis Fed Center for Household Financial Stability (tm) has an upcoming symposium on whether college is still worth it, given the disparate returns to education. My synthesis of some of the recent work: college is most expensive for people with the lowest rates of return to enrollment. That'll have an impact on mobility, for sure.

5. Our Algorithmic Overlords: Last week I talked about how AI seems to be just as interested in gaming manager's incentive schemes as humans. Here's a piece about computers liking spurious correlations just as much as human story-telling brains, it's just that they are much faster at finding the spurious correlations.
I could hardly avoid a mention of the current kerfuffle over the Facebook/Cambridge Analytica revelations. Asif Audowla sent me this link which helps tell the story if you've been buried under a rock. I use the word kerfuffle purposely: I'm still really unsure what to think about all of this, with the pieces I see about fake news proliferating without the need for psychographic targeting, about how hard it is to influence people, and about partisan bias in the reaction to the story. So, I leave this one to you dear readers to tell me what to think. To help you along in that process, here's a piece from New Inquiry that's quite on topic: Privacy for Whom? 

Following on those studies of US mobility, this chart depicts the mobility, or lack thereof, of the white and African-American men and women. It's worth thinking hard about the similarities and differences here. To help you do that,  check out this thread from Arindrajit Dube  which puts the chart below in context. 

Following on those studies of US mobility, this chart depicts the mobility, or lack thereof, of the white and African-American men and women. It's worth thinking hard about the similarities and differences here. To help you do that, check out this thread from Arindrajit Dube which puts the chart below in context. 

Week of March 12, 2018

Editor's Note: I keep telling myself that I'm going to start fighting back against the tyranny of the new, but it never seems to happen. But this week I'm taking a small step by pulling stuff I've been accumulating for the last month that hasn't made it into the faiV. Plus some new stuff of course. Get ready for a link heavy faiV. And in case any of you are wondering what I look like, I'll be interviewing Fred Wherry about the sociology of debt in the United States on Tuesday, the 20th. Register to watch the live stream here.--Tim Ogden

1. Microfinance and Digital Finance: Apparently the "farmer suicide over indebtedness" hype train is kicking up again in India. That's not to imply that farmer suicides are not a serious issue. But Shamika Ravi delves into the data and points out that indebtedness doesn't seem to be the driver of suicides and so attacking lenders or forgiving debts isn't going to fix the problem. Certainly poverty and indebtedness add huge cognitive burdens to people that affect their perceptions and decisions in negative ways, including despair. Here's a new video about poverty's mental tax--there's nothing new here, but a useful and simple explanation of the concepts.
Last year (or the year before) I noted Google's decision to play a role in safeguarding people in desperate straits from negative financial decisions: the company banned ads from online payday lenders, in effect becoming a de facto financial regulator. This week, Google announced another regulatory action. Beginning in June it will ban ads for initial coin offerings (if you don't know what those are, congratulate yourself). While I'm all for the decision, it's strange for Google to conclude that these ads are so dangerous to the public that they should be banned, but not for three more months. Cryptocurrency fraudsters, get a move on! Meanwhile, the need for Google and Apple (and presumably Facebook, Amazon, Alibaba and every other tech platform) to step up their financial regulation game is becoming clearer. In an obviously self-promotional, but still concerning survey web security firm Avast found that 58% of users thought a real banking app was fraudulent, while 36% thought a fraudulent app was real. I don't really buy the numbers, but my takeaway is: people have no idea how to identify digital financial fraud. I wish that seemed more concerning to people in the digital finance world.


2. Our Algorithmic Overlords: I've had a couple of conversations with folks after my review of Automating Inequality, and had the chance to chat quickly with Virginia Eubanks after seeing her speak at the Aspen Summit on Inequality and Opportunity. My views have shifted a bit: in her talk Eubanks emphasized the importance of keeping the focus on who is making decisions, and that the danger that automation can make it much harder to see who (as opposed to how) has discretion and authority. A big part of my concern about the book was that it put too much emphasis on the technology and not the people behind it. Perhaps I was reading my own concerns into the text. I also had a Twitter chat with Lucy Bernholz who should be on your list of people to follow about it. She made a point that has stuck with me: automation, at least as it's being implemented, prioritizes efficiency over rights and care, and that's particularly wrong when it comes to public services.
I closed the review by saying that "the problem is the people"; elsewhere I've joked that "AI is people!" Well at least I thought I was joking. But then I saw this new paper about computational evolution--an application of AI that seeks to have the machine experiment with different solutions to a problem and evolve. And it turns out that while AI may not be people, it behaves just like people do. The paper is full of anecdotes of machines learning to win by gaming the system (and being lazy): for instance, by overloading opponents' memory and making them crash, or deleting the answer key to a test in order to get a perfect score. I think the latter was the plot of 17 teen movie comedies in the '80s. Reading the paper is rewarding but if you just want some anecdotes to impress your friends at the bar tonight, here's a twitter thread summary. It's funny, but honestly I found it far scarier than that video of the robot opening a door from last month. Apparently our hope against the robots is not the rules that we can write, because they will be really good at gaming them, but that the machines are just as lazy as we are.
To round out today's scare links, here's a news item about a cyberattack against a chemical plant apparently attempting to cause an explosion; and here's a useful essay on our privacy dystopia.

3. US Poverty and Inequality: Definitely just trying to catch up here on things that have been building up. Here's a new paper on studying income volatility using PSID data, with a review of prior work and finding that male earnings volatility is up sharply since the Great Recession. There's been a bunch of worthwhile things on US labor force participation in the last few weeks. First here's Abraham and Kearney with "a review of the evidence" on declining participation. Here's a comparison of the UK and US considering why US has fallen behind in participation from Tedeschi. And here's a story from this week about how falling unemployment is affecting hiring and participation.
Returning to the theme of volatility, here's a short video from Mathematica Policy Research on how income volatility affects low-income families. Jonathan is following up on the US Financial Diaries research into income volatility and looking at how it disproportionately affects African-American households, and interacts with the racial wealth gap. But it turns out that even though African-American households are disproportionately income, asset and stability poor, they are even more disproportionately depicted as poor in media

4. Social Investment and Philanthropy: I mentioned above that you should be following Lucy Bernholz. Via Lucy, here's a report on the massive challenge of digital security for civil society organizations. I'll take a moment to editorialize--funders are way way behind in recognizing how big a change digitization is when it comes to their own and nonprofits operations. It's not just security, though that's likely the first place that a crisis will strike. But beyond that, it's crazy that major foundations do not have CIOs on their boards of directors, and that grant applications don't include a technology infrastructure review. The ability to use technology is already a major factor in nonprofits ability to have an impact (either directly by how they deliver services or indirectly in how they can track their activities and improve), while most funders are still viewing IT as an overhead cost to be minimized. That has to change. 
In other worrying trends in philanthropy that aren't getting enough attention--the explosive growth of Donor Advised Funds continues. Recently information about Goldman Sachs' DAF leaked--which is significant because part of the reason DAFs are popular is because they shield information about who donors are. Which makes it particularly interesting that Steve Ballmer and Laurene Powell Jobs, and others among the list of wealthiest people in the world are using Goldman's DAF, because the justification for DAFs is allowing those not wealthy enough to fund their own foundations to gain some of the benefits. Sounds like a gaming of the rules that an AI would be proud of.

5. Methods and Statistics: I feel like I couldn't show my face around here anymore if I didn't link to the world's largest field (literally) experiment. It was in China of course. I feel like this instance satisfies all of the objections raised by Deaton or Pritchett or Rozenzweig, but I'm sure I've missed something. By the way, anybody else have a feeling that relatively soon people are going to be questioning the importance of any study that wasn't done in China or India? 
So you better jump on the chance to read about how to measure time series share of GDP in the United States (and how hard it is to say anything about manufacturing's changing role in the economy). After all it only affects about 350 million people, not enough to really care about. 
Meanwhile, Andrew Gelman of all people makes the case for optimism about statistical inference and replication. I'm not sure of whether to interpret the kerfuffle over Doleac and Mukherjee's paper on moral hazard and naloxone access as bolstering or undermining Gelman's point. I'm going to choose to be optimistic for now though, against my nature.
And finally, here's a visual, interactive "textbook" on probability that has some really cool stuff. But I don't think what it's doing is going to help the problem of people not understanding causal inference.

Figuring out how to do the right thing is hard. This table is from  a Danish government study  of climate change impact of various methods of carrying stuff. Apparently if you properly use, re-use and dispose of a standard plastic bag, it has much less climate impact than reusable cotton bags. If I'm interpreting it correctly, it means that you'd have to use an organic cotton bag something like 20,000 times before net climate impact was the same as the plastic bag's. Of course, that all depends on whether the plastic bag is properly used and disposed of. I bet neither estimate incorporates virtue compensation. 

Figuring out how to do the right thing is hard. This table is from a Danish government study of climate change impact of various methods of carrying stuff. Apparently if you properly use, re-use and dispose of a standard plastic bag, it has much less climate impact than reusable cotton bags. If I'm interpreting it correctly, it means that you'd have to use an organic cotton bag something like 20,000 times before net climate impact was the same as the plastic bag's. Of course, that all depends on whether the plastic bag is properly used and disposed of. I bet neither estimate incorporates virtue compensation. 

Week of February 12, 2018

Editor's Note: I'm obviously not anti-bank (at least I hope that's obvious!), but in the wake of last week's piece on how hard it is to figure out the value of most of what banks do, I've been accumulating a number of pieces on bank behavior that are less than flattering. I've been struggling to come up with any other service that is so vital and that society so commonly holds in contempt. It's a reminder, again, of what an enormous accomplishment it was for microfinance's pioneers to get people to view banks and bankers as heroes. If there are any sociologists in the house who would like to school me on the literature of social perceptions of banking, please do!--Tim Ogden

1. Banking: In case you missed it, here's that link from last week finding that banks would be better off if they did a lot less. Well, a lot less of the complicated financial stuff that most (large) banks spend a lot of time doing. Matt Levine sees a generalized trend in a positive direction--that is that the financial engineering that financial services companies are engaged in is focused much less on engineering complex financial instruments and a lot more on software and technology engineering. Even the cool project names are being reserved for technology projects rather than hard-to-understand derivatives-of-futures-of-insurance-of-bonds-of-weather-derivatives.
That does raise some questions about the evolution of fintech--if the banks themselves are more focused on the technology of service delivery, what does that mean for the technology firms? I do feel a bit of unease that these are the same banks that don't seem to be able to add value to themselves in their core area of expertise (and it's not just the banks, remember that Morningstar's ratings are negative information). How much should we expect from their wading into technology and advice? More on that below, in item 2.
There's another concern with banks moving in this direction. While it's not always the case, the kind of engineering that banks are doing now tend to increase consolidation: returns to scale tend to be bigger and matter more in software, data and high-volume/low-margin activities. And when consolidation happens it tends to be bad for lower-income customers. Here's a recent paper examining the impact of bank consolidation in the US (particularly large banks acquiring small banks): higher minimum account balances and higher fees, particularly in low-income neighborhoods. Those neighborhoods see deposits flow out of bank accounts (justifying closing branches) and later see increases in check-cashing outlets and decreased resilience to financial shocks. But wait there's more: the current version of the Community Reinvestment Act regulations tend to focus on places where banks have a physical presence. So closing branches and delivering more services through technology means, well, that those banks have less worries about complying with CRA. Hey did you know that the Treasury Department is considering making changes to the CRA regulations? I'm guessing the first priority isn't going to be expanding the CRA mandates.
And just to throw in a little non-US spice, here's a story about massive bank fraud at the Punjab National Bank in India.


2. Our Algorithmic Overlords: I've made jabs in the faiV pretty regularly about fintech algorithms ability to make good recommendations, particularly for lower income households. It turns out I'm not alone in distrusting machine-generated recommendations. Human beings tend to believe pretty strongly that humans make better recommendations than machines particularly when it comes to matter of taste. But we're all wrong. Here's a new paper from Kleinberg, Mullainaithan, Shah and Yeomans testing human versus machine recommendations of jokes(!). The machines do much better. Perhaps I should shift my concern away from machine-learning-driven recommendations and spend more time on a different preoccupation: why humans are so bad at making recommendations. There is perhaps another way: making humans and machines both part of the decision-making loop. A great deal of work in machine learning right now is organized around humans "teaching" a machine to make decisions, and then turning the machine loose. An alternative approach is having the "machine-in-the-loop" without ever turning it loose. That is the approach generally being used in such things as bail decisions. The big outstanding question is where we should allow humans (and which humans) to overrule machine recommendations and when we should allow the machines (and which machines) to overrule the humans.
Key to making such decisions is whether the human is able to understand what the machine is doing, and whether humans should trust the machine. Both are dependent on replicability of the AI. You might think sharing data and code in AI research would be standard. But you'd be as wrong as I was about recommendations. There's a budding replication crisis in AI studies because it is so rare for papers to be accompanied by the training data (about 30%) used in machine-learning efforts, much less the source code for their algorithms (only 6%!). Of note if you click on the paper above about recommendations, on page two  there is note that all of the authors' data and code are available for download.

3. Risk: Last week I promised some more thoughts on risk and aspirations. To summarize for those who haven't been following along: there is strong evidence of large returns on investment for poor farmers and even some microenterprises, there are similarly large returns for rural farmers investing in migrating to urban areas, those folks tend to avoid making such investments, and interventions that reduce risk or allow pre-commitment tend to increase such investments. More recently, several other pieces of evidence seem to be falling into place. First, those large returns on investment are not so large once you adjust them for risk (that's from the recent Townsend paper that Jonathan first linked two weeks ago). Second, urban migration might be riskier than we have appreciated. Third, people who migrate may be systematically different and more capable (and thus have less risk) than those who don't. And fourth, as I talked about last week, another way to get people to make more investment is to raise their aspirations or sense of personal efficacy, which could be interpreted as increasing their risk tolerance. 
There are a number of things that strike me given this set of stylized (and not yet fully proven) facts:
1) There are big reasons to be concerned about general equilibrium effects of increasing the risk tolerance of people who are risk averse. It's very plausible that early experiments in this domain would show large gains for participants but those gains would not only fade, but substantially reverse at scale. If this pattern is true, it makes a very, very strong case for investing in insurance that protects people from risk rather than changing their risk tolerance.
2) The pattern of risk-adjusted returns in the Townsend data looks a lot like the entrepreneurial equilibrium in developed countries, as described by Amar Bhide in his book The Origin and Evolution of New Businesses. The short version: established businesses take all of the less risky investments, leaving the truly high risk ones to entrepreneurs. Those entrepreneurs take them not only because they are less risk averse, but because they are the only options available--which is consistent with general findings that successful entrepreneurs are just as risk averse as corporate managers. But we only ever see the risks which pay off, leaving us with a profoundly distorted view of entrepreneurism.
3) A book I spent some time reading while on break was James Scott's Against the Grain. One of the main claims of the book is that, contrary to the traditional narrative, the hunter-gatherer lifestyle is far less risky than the sedentary agricultural lifestyle. He makes a very convincing case using all sorts of evidence, but it raises the big question of why risk-averse agriculturalists haven't continually reverted back to hunter-gatherer lifestyles. I find the arguments there less convincing, but I'm not sure what to think about that or the implications. 

4. Inequality: OK, late in the day. Time for some rapid fire links. An argument for income redistribution to address growing inequality from an unexpected source: Bain & Company. A new paper looks at whether one of the methods for income redistribution, a Universal Basic Income, discourages work by examining Alaska's citizen oil dividend and finds that it mostly doesn't, though with some effects in tradeable sectors. Overlooked in many discussions of inequality is the largest disparity in college-going: rural kids are the ones most left behind.
And a lengthy piece on the hidden inequality in how people in the US make payments. The rich use credit cards and get lots of rewards (like cash back or airline miles, mostly paid for by merchants, and don't carry balances) and the poor use debit cards or cash and get nothing--making for a very regressive system. Just another way the poor are different than you and me: they pay more.

5. Microfinance Is Just Banking: And to tie the whole thing together, I'm going to close with two pieces about microfinance. First on the motivations and impact of an MFI in Bangladesh dropping its group meetings in favor of mobile money transactions. Second on what's wrong in Sri Lanka's microfinance industry. Is it a Straussian reading if I tell you to read this item like a Straussian? Here let me make the sub-text text: you should read these pieces only after looking at the pieces above what is wrong with banking and be amazed at how quickly microfinance seems to be re-learning all the lessons of modern consumer banking that are evident in developed countries or even in other countries with more mature microfinance.

Mechanical Turk is a common source of 'warm bodies' for social scientists but it's hard to know to just who the workers who participate are, and even how many there really are--and the answers are highly dependent on how you define who is a "regular" participant. It's a complicated question to answer, and the chart below is interesting but wrong,  for interesting reasons . Source:  Panos Ipeirotis .

Mechanical Turk is a common source of 'warm bodies' for social scientists but it's hard to know to just who the workers who participate are, and even how many there really are--and the answers are highly dependent on how you define who is a "regular" participant. It's a complicated question to answer, and the chart below is interesting but wrong, for interesting reasons. Source: Panos Ipeirotis.

The First Week of February 2018: The Morduch Edition

Editor's Note: this week’s faiV is guest-edited by none other than Jonathan Morduch. I'll be back on regular faiV duty next week. --Tim Ogden

Guest Editor Jonathan Morduch's Note:
Thanks, Tim Ogden, for letting me take the wheel for this week’s faiV. Sean Higgins did a great job with last week’s faiV, and I’m feeling a bit of pressure to meet their high standards. Here we go:

1. Development Economics Superstars: You know by now that NYU economist Paul Romer is heading home to downtown NY, leaving his post as the World Bank Chief Economist. It’s good news for the NYU development economics community. Don’t worry about the World Bank, though – if this list of amazing seminar speakers is any indication, the World Bank continues to be a place to find exciting ideas and research. The first speaker was this week: MIT’s Tavneet Suri talking about digital products and economic lives in Africa (video).

2. Dueling Deatons: It would be embarrassing to let on just how much I’ve learned from reading Angus Deaton over the years. But there are different versions of Deaton. One of them is a careful analyst of income and consumption data with a no-BS attitude toward poverty numbers. Another wrote an op-ed in the New York Times last week.
Deaton’s op-ed argued (1) that there’s quite a lot of extreme poverty in the US, not just in poorer countries, and (2) perhaps we should move budget from anti-poverty efforts abroad to those at home. Development economists & allied cosmopolitans rose up. Princeton ethicist Peter Singer argues that argument #2 clearly fails a cost-benefit test: it’s simply much cheaper to address needs abroad. Charles Kenny and Justin Sandefur of the Center for Global Development reject the idea that spending more in Mississippi should mean spending less in India, and they take a good whack at the US poverty data. But if you’re going to read just one rebuttal, make it Ryan Brigg’s essay in Vox. It’s the rebuttal to “provocative Deaton” that “no-BS Deaton” would have written. The main argument is: no, actually, there isn’t much “extreme poverty” in the US once you look at the data more carefully. Deaton’s basic premise thus falls away.
On a somewhat more personal note: in recent years, I’ve spent time down the back roads of Mississippi with people as poor as you’ll find in the state. I’ve come to know the kinds of Mississippi towns that Kathryn Edin and Luke Shaefer describe in their powerful US book, $2 a Day (one of Deaton’s sources). At the same time, I’ve worked in villages in India and Bangladesh where many households are targeted as “ultrapoor”. So I think I have a sense of what Deaton’s getting at in a more visceral way. He’s right about the essential point: It’s hard not to be angry about our complacency about poverty – both abroad and in the US. We should be more aware (and more angry). But Deaton picked the wrong fight (and made it the wrong way) this time. 

3. Risk and Return (Revisited): A big paper published this week. It’s nominally about farmers in Thailand, but it challenges common ways of understanding finance and inequality in general. The study holds important lessons but is fairly technical and not so accessible. The paper is “Risk and Return in Village Economies” by Krislert Samphantharak and Robert Townsend in the American Economic Journal: Microeconomics (ungated).
Why does poverty and slow economic growth persist? A starting point is that banks and other financial institutions often don’t work well in low-income communities. One implication is that small-scale farmers and micro-enterprises can have very high returns to capital -- but (or because) they can’t get hold of enough capital to invest optimally. The entire microfinance sector was founded on that premise, and there’s plenty of (RCT) evidence to back it.
Samphantharak and Townsend use 13 years’ worth of Townsend’s Thai monthly data to dig deeper. The paper gathers many insights, but here are two striking findings: The Thai households indeed have high average returns to capital but they also face much risk. Making things harder, much of that risk affects the entire village or broader economy and cannot be diversified away. As a result, much of the high return to capital is in fact a risk premium and risk-adjusted returns are far, far lower. That means that poorer households may have high returns to capital but they are not necessarily more productive than richer households (counter to the usual microfinance narrative). The action comes from the risk premium.
What is happening (at least in parts of these Thai data) is that poorer farmers are engaged in more risky production modes than richer farmers. Once risk premia are netted out, the picture changes and richer farmers are in fact shown to have higher (risk-adjusted) returns.
A few implications (at least in these data): (1) better-off farmers are both more productive and have more predictable incomes. So inequality in wealth is reinforced by inequality in basic economic security, the kind of argument also at the heart of the US Financial Diaries findings. (2) Poorer farmers face financial constraints, but not of the usual kind addressed by microfinance. The problems largely have to do with coping with risk. That might explain evidence that microfinance isn’t effective in the expected ways. (3) The evidence starkly contrasts with arguments made by people (like me) who argue that rural poverty is bound up with the inability to take on riskier projects.

4. Our Algorithmic Overlords:
 Political scientist Virginia Eubanks has a new book, Automating Inequality, [Tim will have a review in next week's faiV] about poverty in the digital age. Eubanks argues that we’re creating “digital poorhouses” akin to the poorhouses of old. The basic story is that data-driven policy approaches hurt the most disadvantaged – but seem hard to understand and thus hard to criticize. Eubanks, though, says they’re not in fact so complicated. Eubanks is featured in an interesting interview in MIT’s Technology Review. One snippet on politics and activism:I do think it’s really interesting, the way we tend to math-wash these systems, that we have a tendency to think they're more complicated and harder to understand than they actually are. I suspect that there's a little bit of technological hocus-pocus that happens when these systems come online and people often feel like they don't understand them well enough to comment on them. But it’s just not true.” 
Bonus: Just learned the phrase “math-wash”. 

5. Paychecks as Commitment Devices: If you’re like me, you’re probably paid monthly by your employer. A 2016 working paper by Lorenzo Casaburi and Rocco Macchiavello (which I just saw Lorenzo present – I’m very late to the party) argues that – for members of a Kenyan dairy cooperative at least – being paid monthly has an advantage that is easy to take for granted: It helps overcome saving constraints. In effect, the cooperative is saving weekly earnings so the members don’t have to. What’s most striking is that members are willing to pay (by foregoing earnings) for the chance to be paid monthly. The result lines up with other (surprising) evidence that people are willing to pay for saving mechanisms that transform small cash inflows into meaningfully large sums (to take a phrase from Stuart Rutherford).

Week of January 8, 2018

Editor's Note: I took some time off from my time off to attend what is officially the Annual Convention of the Allied Social Sciences Associations, but I prefer to be transparent for people outside the economics profession and just call it the American Economic Association annual meeting. Herewith are some papers I encountered in the three days of the meeting, along with related thoughts and a few other items thrown in for good measure.

Next week, Sean Higgins of CEGA will be guest editing the faiV--Tim Ogden


1. The Economics Production Function: Over the last few years, papers on microenterprises generally shared a couple of remarkable--given the general narrative--findings: microenterprises (on average) didn't grow no matter what you did to try to boost them, and women-owned microenterprises performed worse than male-owned ones. Those findings led to plenty of yowls from practitioners whose work, livelihoods and in some cases core beliefs were based on the opposite. In many conversations I had, I got the impression that people outside the profession believed that economists would publish these findings and then move on. But that perception really misunderstands the motivations of economists and the way the field works. Economists don't leave puzzles alone once they find them--the field pursues them relentlessly.
The best session I attended this weekend was based on the particular puzzle of why female-owned microenterprises are less profitable. Natalia Rigol presented work following up on an earlier studies that documented the profitability gender gap, finding that the source of the gap is mostly due to lower returns from female-owned enterprises where there was another (male-owned) enterprise in the household. Those male-owned enterprises were in more profitable industries (something documented in the original studies), so the households were making quite rational decisions to allocate additional funds to the more profitable business (and making it look as if the female-owned business had 0 or negative returns). In households where there was only a female-owned business there is no gap in returns to capital. Leonardo Iacovone and David McKenzie presented on efforts in Mexico and Togo, respectively, to provide training to help women entrepreneurs improve their businesses with positive results--in both cases seemingly based on personal initiative training rather than business skills. And Gisella Nagy presented results (unfortunately there's nothing yet to point to on this one) that women tailors in Ghana show lower profitability than male tailors because there are more women tailors which drives down prices they can get in the market. This last finding is particularly important because it suggests that part of the way forward for microcredit aimed at building women's businesses is to do a much better job targeting, or as I've called it elsewhere, abandoning the vaccine (everyone gets one!) model of microcredit for an antibiotic (only people who really need it get one!) model.
And all of that is just a very small sample of work being done on the puzzle of heterogeneity of returns to microenterprises and what can be done about it. I'm now sorely tempted to write an overview on all these studies, but dammit I really want to get to "subsistence retail."


2. Causal Inference is Hard: Those two topics aren't orthogonal to each other of course. One way they are joined together is my common theme about how hard causal inference is for the average person, and in particular for the subsistence (or just above) operator of a microentrprise (whether farming or retail). That's what I kept thinking about when reading this new post from David McKenzie on "Statistical Power and the Funnel of Attribution". David is writing for economists trying to write convincing papers, but this point "Failure to see impacts on your ultimate outcome need not mean the program has no effect, just that the funnel of attribution is long and narrows" is equally important for the people being treated. If the funnel of attribution is long and narrows, then its approaching impossible for the individual (not gifted with a large sample size or a deep understanding of statistics) to figure out which of their actions actually matter.
There is a connection to AEA here. As I was perusing the poster displays (also known as "the saddest place on earth") I kept hearing people arguing with Jacob Cosman, the creator of a poster about how the opening of new restaurants in a neighborhood affects the behavior of existing restaurants. The answer: a very precisely estimated no effect at all. (Here's a link to an old version of the paper with somewhat different results) Economists walking by simply couldn't believe this and were constantly suggesting to the author things he must have done wrong. I was amused. My strong prior is that a person would not open one of these restaurants unless they believed that their restaurant was unique (otherwise, you would believe that your restaurant would quickly fail like the 90+% of other small restaurants and you wouldn't open in the first place). So when another new restaurant arrives, you don't actually see it as a threat that needs a response. You are, after all, different! But even if you did think you needed to respond, how would you possibly know what the right response was? Do prices matter? Menus? Advertising? Item descriptions? Coupons? The funnel of attribution on all of these is so long and imprecise we should assume that individual entrepreneurs have no idea what to do even if they wanted to do something. Which ultimately brings us back to why it's so hard to get microentrepreneurs to change their behavior in a lasting way, and why personal initiative training may work much better than business skills. Personal initiative training teaches you that what you do matters, even if you can't tell, while business skills training teaches you to do something even though you can't tell that it matters.  

3. More from the Saddest Place on Earth: There's more than a whiff of desperation about the poster display area at AEA, where you often find young economists-in-training doing their best impression of a street-corner evangelist/panhandler hybrid. The possibility of being accosted by a well-meaning but overly eager job-seeker seems to keep most attendees away from the area, which is a shame because I always find some quite interesting posters. Two of note this year were about microfinance loan officer behavior. Marup Hossain looked at the behavior of BRAC loan officers after the famous (at least in these parts) TUP experiment and found that they were using TUP participants relative performance in livestock husbandry in that program to determine who to approve for microcredit loans--and that this was a good way of targeting the loans to those most likely to achieve high returns. Sarah Wolfolds had a poster on performance pay in non-profit microfinance institutions in Latin America finding MFIs making smaller loans have smaller pay-for-performance payouts but more targets--I can't find a paper behind it but I always like to highlight work looking at principal-agent issues within MFIs since I don't think that gets nearly enough attention. 
Other "fun" posters amidst the sadness: Declining investment in infrastructure led to rebellions against the Qing dynasty; There's a lot less excess sensitivity to income than most measures suggest; eliminating a small debt account improves cognitive function of the poor more than paying off a larger amount of debt (but not fully paying it off); and digital (non-tangible) innovations tend to contribute more to income inequality than tangible innovations.

4. Our Algorithmic Overlords:  Due to a series of regrettable automotive incidents I missed several of the machine learning/AI/FinTech sessions at AEA on Friday morning that I was really looking forward to. Links to sessions here, here and here. To compensate, here are some completely different algorithmic overlords pieces to contemplate. Wired has a lengthy story about the growth of China's digital panopticon and social ratings. You should click on that and read it before coming back here to click on this link to an excerpt of Virginia Eubanks' forthcoming book Automating Inequality, so that you'll especially feel the bite of discovering how much Americans in poverty already live in an automated panopticon. I've just gotten a review copy of the book, so there will be more on this when I come back from vacation (which will be partially spent reading it). 

5. It's a Small World After All: There's another of my regular themes connecting those last two links: there's not so much difference between here and there. Want another example? At a session at AEA on savings and financial inclusion Simone Schaner presented research on a commitment savings account for serial checking account overdrafters in Ghana (hey, they have them in Ghana too!). The commitment account had shockingly high take-up (over 70% if I remember correctly) and savings in the accounts accumulated at an impressive rate. But decomposing the sample, and looking at savings outside the account, Schaner et. al. find that above median overdrafters drew down there other savings and took on debt, while below-median overdrafters actually built up savings. Oh, and here's Beshears et. al. taking a similar look at the big picture for people defaulted into the commitment savings account we in the US call 401(k)s. Defaulting people in raises the amount they save in the 401(k)substantially. But it also increases the amount of debt those people have 4 years later (though at least it's auto and mortgage loans and not revolving debt). 
There are of course some differences. Compare/Contrast these two pieces on solar home systems in Myanmar and the United States. First, here's a complaint that government subsidies ruined the business of a solar business in Myanmar, and a plea for governments to stop making it so cheap for people to get solar. Next, here's a complaint that government is making it too expensive for people to get solar home systems in the US with a plea for government to start making it cheaper. What brings the world together, apparently, is complaining about government interference in markets. That's something that would be right at home at AEA 2019.

There were a few sessions at AEA that were recorded and "webcast." Here's Alvin Roth's presidential address on  Markets and Marketplaces . Here's David Laibson on  Competition, Equilibrium, Freedom and Paternalism . Here's a session on the  Economics of AI and Robotics . And below there's a panel on Global Inequality and Policy.

There were a few sessions at AEA that were recorded and "webcast." Here's Alvin Roth's presidential address on Markets and Marketplaces. Here's David Laibson on Competition, Equilibrium, Freedom and Paternalism. Here's a session on the Economics of AI and Robotics. And below there's a panel on Global Inequality and Policy.

Week of December 4, 2017

In terms of this week's through-line, I figured I might as well get in on the Star Wars jokes that are going to plague us all, apparently, for the rest of time--Tim Ogden

1. Social Investment: Last week I was at European Microfinance Week. Video of the closing plenary I participated in is here. My contribution was mainly to repeat what seems to me a fairly obvious point but which apparently keeps slipping from view: there are always trade-offs and if social investors don't subsidize quality financial services for poor households, there will be very few quality financial services for poor households.
Paul DiLeo of Grassroots Capital (who moderated the session at eMFP) pointed me to this egregious example of the ongoing attempt to fight basic logic and mathematics from the "no trade-offs" crowd. This sort of thing is particularly baffling to me because of the close connection that impact investing has to investing--a world where everything is about trade-offs: risk vs. return; sector vs. sector; company vs. company; hedge fund manager vs. hedge fund manager. The logic in this particular case, no pun intended, is that a fund to invest in tech start-ups in the US Midwest is an impact investment, even though the founder explicitly says it isn't, because it is "seeking potential return in parts of the economy neglected by biases of mainstream investors." If that's your definition of impact investing you're going to have a tough time keeping the Koch Brothers, Sam Walton and Ray Dalio out of your impact investment Hall of Fame. Sure, part of the argument is that these are investments that could create jobs in areas that haven't had a lot of quality job growth. But by that logic, mining BitCoin is a tremendous impact investment. You see, mining BitCoin and processing transactions is enormously energy intensive. And someone's got to produce that energy, and keep the grid running. Those electrical grid jobs are one of the few high paying, secure mid-skill jobs. Never mind that BitCoin mining is currently increasing its energy use every day by 450 gigawatt-hours, or Haiti's annual electricity consumption. And, y'know, reversing the trend toward more clean energy. Hey anyone remember the good old days of "BitCoin for Africa"?


2. Philanthropy: There are plenty of trade-offs and questions about impact in philanthropy, not just in impact investing, and not just in programs. Here's a piece I wrote with Laura Starita about making the trade-offs of foundations investing in weapons, tobacco and the like more transparent.
I could have put David Roodman's new reassessment of the impact of de(hook)worming in the American South in early 20th century under a lot of headings (for instance, Roodman once again raises the bar on research clarity, transparency and data visualizations; Worm Wars is back!; etc.). The tack I'm going to take, in keeping with the prior item, is the impact of philanthropy. The deworming program was driven by the Rockefeller Sanitary Commission and is frequently cited, not only as evidence for current deworming efforts, but as evidence for the value and impact of large scale philanthropy. Roodman, using much more data than was available when Hoyt Bleakley wrote a paper about it more than 10 years ago, finds that there isn't compelling evidence that the Rockefeller program got the impact it was looking for. Existing (and continuing) trends in schooling and earnings appear unaltered. 
Ben Soskis has a good overview of the seminal role hookworm eradication had in the creation of American institutional philanthropy. His post was spurred by an article I linked back in the fall about the return of hookworm in many of the places it was (supposedly?) eradicated from by Rockefeller's philanthropy. We may need to rewrite a lot of philanthropic history to reflect that the widely cited case study in philanthropic impact didn't eradicate hookworm and may not have had much effect. And while we're in the revision process, it may be useful to reassess views on the impact of the Ford Foundation-sponsored Green Revolution: a new paper that argues that there was no measurable impact on national income and the primary effect was keeping people in rural farming communities (as opposed to migrating to urban areas). Given what we now generally know about the value to rural-to-urban migration, that means likely significant negative long-term effects.
If you care about high quality thinking about philanthropy, democracy and charitable giving in general, which I of course think you should, you should also be paying attention to some of Ben Soskis' other current writing. Here he is moderating a written discussion of Americans' giving capacity. And here's a piece about how the Soros conspiracy theories are damaging real debate about the role of large scale philanthropy in democratic societies.
In the spirit of the holidays, I feel like I should wrap up an item on philanthropy with some good news. In the last full edition of the faiV I mentioned the MacArthur Foundation's 100&Change initiative, which is picking one idea to get $100 million to "solve" a problem. For all the problems I have with that, the program is doing something really interesting, thanks to Brad Smith and the Foundation Center. All of the proposals, not just the finalists, are now publicly available for other foundations to review.

3. Frustrated Employees: One of the core conceits of the microfinance movement is the idea that many (most?) poor people are frustrated entrepreneurs, with lots of ideas and opportunities available if only they had access to credit. It's one of the reasons that we didn't get the impact we were looking for from massive expansion of microcredit.
The idea of frustrated entrepreneurs still lives on for a lot of the general public, but I think (hope?) it's been largely abandoned within the core of the industry. But just in case, I thought I would pass along some more evidence that the poor are frustrated employees, not frustrated entrepreneurs. Here's a paper looking at small enterprise owners in Mexico, who shrink their businesses when jobs come to town, in anticipation presumably of giving up the grind of entrepreneurship for the dream of a paycheck. And here's a look at Thai entrepreneurs operating multiple micro-enterprises that concludes that it's not lack of credit that's holding back their businesses, but their own lack of skills.
One of the paradoxes of the microfinance movement was that co-existing with the idea that the poor were frustrated entrepreneurs just waiting to be unleashed was the emphasis on providing a loan with conditions that made entrepreneurial risk-taking difficult if not impossible. Field and Pande showed quite a while ago that if you relaxed the constraints on loan payment, some borrowers would make riskier investments and gain from it. Here's a recent follow-up to that work which adds further evidence--again finding that borrowers with a more flexible contract end up with higher business sales, but also that the contract does a good job of inducing self-selection of borrowers who do have more of the necessary characteristics for entrepreneurial success.
It's not just people in lower income countries that are frustrated employees. Many employees are frustrated employees--frustrated that the jobs they have are terrible. Here's Zeynep Ton on the case for relieving that frustration and creating better jobs.

4. Our Algorithmic Overlords: A couple of quick hits here. First, the Illinois Department of Children and Family Services tried to use big data and algorithms to predict which children were at most risk. They're scrapping the program "because it didn't seem to be predicting much."
And here's Zeynep Tufecki on the dystopia we're building "just to make people click on ads." Definitely not the impact we were looking for.

5. Household Finance: If there's any impact the microfinance movement was not looking for, it was to replicate the troubling situation with debt that we see in many lower income American (and European, though to a lesser extent) households. It's one of the reasons the industry was so fixated on emphasizing that they were making entrepreneurial loans not consumption loans. The Urban Institute has a new interactive map on debt in America, with data down to the county level. There's a lot to explore there--CityLab has a nice summary overview if you just want some takeaways. The Mimosa Index is doing something conceptually similar for microfinance, albeit at a much grosser level due to data constraints. Hey, MicroSave what about doing something like this for digital credit in Kenya?
And to tie everything together, from trade-offs to impact, here's some new work from Emily Gallagher and Jorge Sabat (via Ray Boshara's blog post) on the trade-offs households have to make between savings and debt--finding (in the US) that the short-term sub-optimal choice of saving at low interest rates while carrying high-interest debt pays off in the medium-term. The mechanism is having some liquidity to meet shocks without running up more debt. I have some ideas (and some organizations willing to try them) about how to maintain liquidity while reducing debt, so if you'd be interested in funding a pilot, just let me know. 
Ray's post is motivated by thanking his dad for giving him advice as a teenager to always have some savings on hand, even if it meant ultimately paying more in interest on loans, advice that now has an empirical basis. I can't let that opportunity for one of my standard harangues pass by: the state of personal finance advice is horrific. Here's a piece from the NY Times this week which under the heading of getting "better at money in 2018" advises readers that cutting out small indulgences can add up and that they should spend more on take-out to be happy. Gosh I wonder which of those pieces of advice is more likely to be taken?  

Via Barbara Magnoni of EA Consultants, a little video about international remittances to hopefully brighten your weekend. It's certainly better than a Star Wars joke.

Week of November 27, 2017

Editor's Note: Two weeks ago, I told you that the faiV would be off for two weeks, and that's technically still true, because this isn't the faiV.--Tim Ogden

1-4. An Experimental Podcast: Every month or so someone asks me if I've considered doing the faiV as a podcast. The answer is not really, because the faiV doesn't lend itself to audio at least when I'm not ranting. Also because I rarely listen to podcasts because I don't commute and realistically I'm never going to sit at my desk and listen to audio for 30 minutes or more.

But because of the Thanksgiving holiday and travel this week to European Microfinance Week I wasn't able to the faiV. So I thought it was a good time to experiment with an addendum to the faiV in podcast form. Thankfully Graham Wright of Microsave agreed to experiment with me. So we recorded a conversation about digital finance, its potential and its pitfalls, inspired by Graham's post, "
Can Fintech Really Deliver On Its Promise For Financial Inclusion?"

We discuss whether mission matters, barriers to adoption, the tensions in building agent networks and why everyone who says "X is not a silver bullet" is lying. All in just over 30 minutes. Give it a listen and let me know if you'd like to hear more conversations like it.

 

Table of Contents:
1:45 - Can Digital Finance be Transformational for the Rural Poor?

3:51 - Does it matter that most DFS providers have never had a "pro-poor" mission?

7:54 - Does the US and microfinance experience foretell the future of digital finance?

13:42 - Biggest challenge for DFS: Lack of Education, Lack of Infrastructure or Lack of Consumer Protections?

21:50 - The Tensions of Agent Networks

27:00 - Financial Inclusion and Silver Bullets

31:13 - The Consequences of Removing Frictions

And because I can't stop myself, here are links to some of the things we talk about:

Graham's original post that inspired the conversation
Cathy O'Neil's book Weapons of Math Destruction
Cull, Demiguc_Kunt and Morduch: Microfinance Meets the Market and The Microfinance Business Model
[Note: Jonathan and I had a long email discussion today about whether my description of for-profits serving more poor customers overall, while non-profits are more likely to serve poorer customers and women is true given how the microfinance industry has rapidly evolved and the limitations to data. We didn't resolve the question.]
Mersland et. al. on loan officer "mission drift"
Don't Swipe the Small Stuff
MicroSave work on agents: Solving Agents' Liquidity Problems; Improving Agent Network Performance; Enhancing Agent Networks


5. the faiV Live: And if you really miss the faiV, the closest you'll get this week is the livestream of the closing session from European Microfinance Week where I'll be discussing the future of microfinance with Paul DiLeo, Renee Chao-Beroff and John Alex at 09:30 EST/15:30 CET.

First Week of November, 2017

1. The Future of Microfinance: A few weeks ago I linked to a curious piece about the future of Indian microfinance, that seemed to be praising the swallowing of MFIs by traditional banks and justifying the extinction of MFIs that tried to go it alone. Dan Rozas wrote to point out some of the subtext: The pattern in India is similar to other countries, with the largest MFIs turning into banks. And while there are mergers and acquisitions, it is still largely the same organizations serving poor customers, "only now they're called banks." This week Barbara Magnoni tweeted from the Foromic conference that "microfinance is stale" so I asked her what she thought was next. Her response: "[B]ig MFIs win, digitize processes, poor too expensive to reach. Poor go back to cash/informal markets/ and consumer loans.YAY?:("
Between the two comments, I feel like the future of microfinance is already here, right here in the USA! Per Dan's note, the transition in India and elsewhere sounds a lot like the history of banking in the United States, right up through credit unions. And per Barbara's note, the next step is pulling back from poorer customers because they are more expensive to serve. So you end up with a system where even an institutional form whose original reason for being was to serve the excluded and put "clients at the center" (to borrow a phrase) has, aside from exceptional organizations, left the poorest behind. The global microfinance movement, I think, needs to spend a lot more time looking at the financial services landscape in the United States, because that is where, absent some major investment, are headed: nearly ubiquitous financial services, but very little quality available to lower-income customers, with plenty of predatory or just indifferent-to-the-effects-on-poor-customers actors ready to fill the gaps. I guess you could say that's the negative way of making the "Case for Social Investment in Microcredit".
To keep things from going too dark right off the bat, here's the story of how BRAC's MFIs in Liberia and Sierra Leone managed the Ebola crisis and it's aftermath (blog summary). And a shout-out to the Global Delivery Initiative for writing up stories like this in sufficient detail to be operationally useful. 
OK, that's enough optimism for me. You might be skeptical of my take on where microfinance is headed. So let me present this piece from Matthew Soursourian over at CGAP on what can happen when we push consumers toward digital merchant payments, drawing parallels to the US experience.


2. The Future of Digital Finance (and of us all): That last piece could just as easily have fit here, so to encourage you to read it, let me just say again: the future of digital finance is already here, and contrary to popular opinion, it's in operation in the United States
Still not buying it? Here's another CGAP piece drawing on the US experience: "How Developing Countries Can Prevent Their Own Equifax Breach." The encouraging thing is that this possibility is being considered; the discouraging thing is that David Medine is probably wrong: developing countries can't prevent their own breaches. At least there is no evidence so far that institutions are learning from examples like this, given how pedestrian the causes of such breaches are.
At a more macro level, Tyler Cowen and Matt Levine (a dreamteam if there ever was one) discuss where technology is taking finance. Pay special attention to the section in the middle where they discuss whether technology ultimately increases or decreases access to credit. While they don't mention it specifically, this is the big question mark about Lenddo and EFL, and their like, that I mentioned: while the algorithms will rescue lots of people who are good credit risks but can't prove it conventionally, they will also likely simultaneously lock bad credit risks out of the system permanently.
Speaking of being locked out, here are Charles Kenny and Cordelia Kenny reporting on a forum at CGD on women being locked out of FinTech companies and how that affects what services are being developed and who is served.

3. The Future of Our Algorithmic Overlords: One domain where the US is not the future is massive state infrastructure for identification and tracking. There the future is India (and China, but today we're talking about India after talking about China for the last several weeks). The best case scenario is that Aadhaar becomes a "societal platform" for delivering services much more efficiently and effectively. And there's evidence that it does. The worst case scenario is that Aadhaar is an insecure store of personal data that the state can nevertheless (or perhaps especially) use as a tool of control and coercion. And there's evidence of that too.

4. The Future of Household Finance: OK, this may be the only single link entry in the faiV in months, but I can't let this opportunity to bang on one of my pet drums pass by. In this edition of Matt Levine's newsletter he talks about evidence on the value of Morningstar's ratings of mutual funds (as usual you have to scroll way down to get to this section). Aside from a useful discussion of confounders in the data, he points out that Morningstar's ratings are worse predictors of future performance than some of the individual data points that make up the rating. In other words, Morningstar's ratings are negative information.
What does this have to do with household finance? Well, we're in a world where we broadly expect households to be able to compare financial services and make good choices about optimal products. But even the experts in stable industries with decades of detailed data produce ratings that are worse than useless. We should expect the future of household finance is lots of services to "help" households make financial decisions using algorithms and data, and that those ratings are going to be wrong.

5. The Future of Small Firms, Authoritarian Countries, and School Children: It wouldn't be the faiV if I didn't stretch the metaphor beyond all recognition at some point. Here's new work from David McKenzie on small firm death in developing countries. Remind me to produce some harangues about subsistence retail in the near future. Here's a newish paper on democratization that suggests that the transition from authoritarianism to democracy is almost always the result of mistakes, rationalized in hindsight. I suppose that's hopeful--we don't need authoritarian leaders to have a change of heart, but can expect that some number of them are just going to screw up and the results will be positive. And finally, the future of schoolchildren who are hungry is pretty easy to predict. So why aren't we doing more to feed them

What good design really means in today's FinTech world. Via  Tobias Van Schneider .

What good design really means in today's FinTech world. Via Tobias Van Schneider.

Week of September 25, 2017

1. Basic Income: I haven't touched on basic income in what seems like months, but that's because there was little to report. This week Planet Money has an episode (adapted from 99% Invisible) on the details of what basic income is and how it might be delivered. And apparently last week, Y Combinator announced some more details of their US Basic Income study. If details matter to you, you'll be pleased to know that the work in Oakland that received a lot of attention last year was a feasibility study and now they are planning an RCT with 3000 individuals in two different states.

2. Methods and More: My next book of interviews is about big data and machine learning (If you have a better name than "Dated Conversations," let me know). Susan Athey is the first person I interviewed for the new book this past spring (I hope to have some excerpts of that interview available soon) in part because of some things Athey had written on how machine learning will change the field of economics. There's a new version of a (preliminary) paper on the topic. It has details.
More specifically on details and methods, here's a new paper on the use of randomization to study network effects, a quite tricky prospect. But when it comes to methods and details mattering, two items this week really hit the nail on the head. First, Buzzfeed of all places has a lengthy piece examining the myriad problems that have emerged as people examine the details of studies published by Brian Wansink's Food and Brand Lab at Cornell. Missing data, mis-described studies, statistical errors, it's stunning. This week also saw publication of what is many ways the exact opposite of what appears to be have happened at the Food and Brand Lab: David Roodman's incredibly detailed review and replication of the research on the relationship between incarceration (or decarceration) and crime rates for the Open Philanthropy Project. The starkest contrast for me isn't actually the attention to detail but the philosophy. The Wansink saga began with a blog post that indicated that the Lab was torturing data until it said what they wanted; the Roodman review and replication was done because they were concerned that their beliefs were wrong.


3. Microfinance, US and Global: My expertise and knowledge is definitely concentrated in global microfinance rather than microfinance in the US, but because of the work on the US Financial Diaries I'm learning a lot more about the US. This week for instance I got to hang around the outskirts of the Opportunity Finance Network meeting. There are no links here but a couple of things have really struck me and so I wanted to note them, and invite you to tell me what you think/have seen, etc.
First, I was really surprised about how open the US microfinance community is about the presence of and need for subsidy. Globally I see an almost totemic adherence to the idea of self-sustainability, even in the presence of compelling evidence of the prevalence of subsidy. I'm sure that's a consequence of how those industries have evolved but I'm curious about any ideas about the details of the US microfinance history that led to this.
Second, two parallel conversations really struck me. One was about "community investment" in order to create "quality jobs." The second was about how to use technology to cut down costs of making loans, costs that are mostly about staffing--or in other words, how to expand microfinance by lowering the need for quality employees in the lenders. I bring this up not to point fingers about hypocrisy, but to raise the inevitable trade-offs for MFIs everywhere about reach and cost. The tension doesn't seem to exactly be on the surface in the US but it is more apparent than in global conversations, where the value of the jobs created by the global microfinance movement seem to be ignored, especially in the rush to digital finance services.
Finally, I was quite surprised at the contrast in attention to borrower outcomes. Again, I'm a novice here, but whereas in international conversations I feel that everyone is talking about "impact" in terms of household incomes and consumption, in the US conversations I've been a part of, the focus seems to be much more operational--in other words, does the business continue to exist, repay and take another loan. That may be a consequence of starting from a more "antibiotic" theory of change and serving existing businesses with documented troubles accessing capital, but again I'm interested in any other perspectives.

4. US Inequality: The release of the Republican "tax plan" this week was the inspiration for the title of this week's edition but since there really is nothing there I'm not going to link to it. My go-to for keeping track of the details and what effect they will have is Lily Batchelder (NYU Law and former tax counsel for the Senate Finance Committee). Just scroll through her Twitter timeline to understand which details matter and how much.
If you are interested in details of Americans' financial situation, there are two notable reports this week. The Consumer Financial Protection Board published the first "Financial Well-Being in America" report. There's lots to digest but a broad summary might be: there are big racial and gender gaps in financial well-being, but also big gaps within groups so that no particular feature is a reliable predictor of well-being. The Fed released the 2016 Survey of Consumer Finances this week as well. Details galore, but here and here are some overviews which boil down to: "the biggest gains continue to flow to the richest Americans." And here is a bizarre misreading of the details from the Washington Post. It's as if no one had ever said "correlation is not causation."
Finally, here is a heartbreaking story about how the poisoning of Flint, MI's water system led to a huge spike in fetal deaths. Of course, the story is by the same person who did the "if you want to be wealthy, buy a house" story.

5. Education: Finally, in detailed reports released this week, the 2018 World Development Report (yes, the same week as the 2016 SCF, the actual year of publication is apparently a detail that doesn't matter) is out with a focus on education, particularly on the need to focus on learning rather than measures of schooling. Make sure to congratulate David Evans. My favorite take on the new WDR is from Justin Sandefur, who in this tweet stream points out that "all sides seem to embrace the learning crisis and still find justification for their previously chosen policies" (with linked examples). You'll have to check the details to see if you agree.

Frederica Frangapane and Alex Piacentini have created a site to visualize the stories of 6 migrants who arrived in Italy from four different countries in 2016, called  The Stories Behind a Line .

Frederica Frangapane and Alex Piacentini have created a site to visualize the stories of 6 migrants who arrived in Italy from four different countries in 2016, called The Stories Behind a Line.