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Viewing all FaiV posts with topic: Regulation  

Week of October 11, 2019

The Regressive Edition

1. Microfinance: October 2nd was the 10th anniversary of what I consider to be an underappreciated but critical moment in the history of the microfinance movement--David Roodman's piece on how Kiva actually worked. David had already been working on a book about microfinance that was going to be very influential--his open book blog as a whole is a remarkable contribution to the public good, one I wish many more people had decided to replicate--but the Kiva post (based on it being one of the most read blog posts in CGD history according to Justin Sandefur) brought a huge amount of attention to questions about how not only Kiva, but microfinance as a whole, actually worked. I re-read it this week and it's as good as I remember it and definitely makes me pine for the brief glorious time where the development blogosphere was a thing.
There's another important anniversary this week for global microfinance though with a less arbitrarily neat number--Muhammad Yunus's Peace Prize was 13 years ago. Today many were surprised that Greta Thunberg didn't win. The explanation seeming to be both timing and the fact that there is not a direct link between climate change and conflict. There may be a narrowing of the scope of the Peace Prize given that there is certainly no connection between microcredit and reduced conflict. In case you didn't know the winner was Abiy Ahmed, the Ethiopian Prime Minister, who has done some pretty impressive things directly related to peace, like ending the conflict between Eritrea and Ethiopia and freeing thousands of political prisoners. For what it's worth the Economics Nobel announcement is Monday so expect to see more about that in next week's faiV. Some favorites with particular applicability to the faiV include some combination of Donald Rubin, Josh Angrist, John List and Guido Imbens for kicking off "the credibility revolution" and Michael Kremer, Abhijit Bannerjee, Esther Duflo and/or John List for kicking off the experimental revolution. Of course, I'm hoping for the latter because it would likely give a pretty significant boost to my book sales.
But back to microfinance. Banerjee, Emily Breza, Townsend and Vera-Cossio have a new paper (presented at NEUDC) that uses the Townsend Thai village data and the expansion of a credit program to further bolster what should be the clear consensus on the effect of microcredit: on average not much, but very high returns for some. In this case, they find that there are very large gains for high productivity households who get access to credit (1.5 baht increase in profits for every 1 baht increase in credit) and even higher for those outside agriculture. This is broadly similar to earlier work, now in an NBER paper form, by Banerjee, Breza, Duflo and Cynthia Kinnan on Indian microfinance. Keep in mind, as we continue to see these results, that there is another side of the coin: is there a business model that can reach the high productivity borrowers more exclusively?

2. Inequality: If you think about within-country inequality, you think about taxes. Since the United States has had a huge explosion of income and wealth inequality in the last few decades, and there is a presidential election (hopefully) just over a year away there is a lot of discussion about the US tax system and how it has contributed to the growth of inequality and how it might be used to reduce it. This week there has been a lot of focus particularly on whether the US tax system is progressive or regressive, which seems intuitively like it should be a pretty straightforward question to answer. But the US tax system is so complicated, including not only collecting but distributing cash, it's a controversial question. Emmanuel Saez and Gabriel Zucman make the case that since the 1950s the US tax system has shifted dramatically toward being regressive. Here's David Leonhardt's shorter version of their argument with cool animated graphics. But not everyone agrees and those differences can't be traced just to ideology. Here's a thread from Jason Furman, former chair of the Council of Economic Advisors under Obama debating Zucman on methodology and interpretation. Here's David Splinter with a more in-depth analysis illustrating why Saez and Zucman get such different numbers than the traditional approaches to analyzing progressivity.
Meanwhile, there is an entirely different question about whether taxes can be used to effectively address inequality (Saez and Zucman's book is all about how the wealthy evade taxes). There's a new NBER paper on the response of rich taxpayers to an increase in the California tax rate. It finds that just under 1% of those subject to the higher taxes moved out of state, and those who stayed found ways to avoid the tax, so that total income from the tax was about half of what it would have been otherwise. Here's Lyman Stone's Twitter summary.
It's not clear how to think about that 50% cut in additional revenue: on the one hand, there is a big increase in tax collection, on the other hand you have to expect that over time people are going to get even better at evading the tax. Here's Lily Batchelder and David Kamin with a comprehensive review of wealth taxation in implementation with hope that wealth taxes can work.

3. Evidence-Based Policy: Let's talk about the inverse relationship between farm plot size and productivity in developing countries. That's admittedly a strange place to start a discussion about evidence-based policy, but I view it in the same bucket as whether the US has a progressive or regressive tax system. These are questions that seem easy to answer--and very important to answer for policy purposes--but are remarkably complicated to actually answer.
For background, what is known as the IFSP hypothesis started way back with Amartya Sen making the observation (well before the credibility revolution) in the early 1960s about Indian agriculture. Lots of papers over the years have tried to chase this observation down and document it in India and around the developing world. Here's a helpful summary that you really should read even if this is not even close to your area of interest. That was written in 2018, and still there are papers coming fast and furious that related to this basic question. Here's Gollin and Udry looking at measurement error as a big factor in measures of farm productivity, explaining about 90% of the differences between farms (e.g. they aren't really differences). And from NEUDC here's Kibrom Abay, Leah Bevis and Christopher Barrett with a different take on measurement error, where it comes from and how it affects the related policy questions (which are big! Like how much should you redistribute land!). And here's Milu Muyanga and TS Jayne using data from Kenya to document that there at least the U-shaped relationship holds no matter how you measure productivity.
So what is the evidence-based policymaker to think when such basic inputs to policymaking as progressivity of the tax system and whether there is a IFSP are subjects of debate for decades? If you are waiting for "settled science," well the economics publishing industry isn't going to help much. Here's new data from the Journal of Political Economy which, in the fine print, says that the average time from submission to publication--EXCLUDING AUTHOR REVISIONS--is more than 450 days.

4. SMEs and Human Capital: A couple quick hits on two favorite topics of mine these days--especially as they come together. Girum Abebe, Fafchamps, Koelle and Quinn had a paper at NEUDC about how to get management experience to young people in Ethiopia. The paper is, unfortunately from my perspective, most framed around the methods and the algorithms to use to produce the best results, rather than what I find most interesting: is it possible to match young managers with more experienced managers in order to spread the human capital of management? They find that matching high-ability trainees with high-management score firms yields meaningful increases in self-employment (in other words that these trainees go on to start and manage their own firms). What I really want to know though is how much better everyone got at managing and what the effect within firms of better management was.
There's a new paper that starts to answer this question with larger firms in Mozambique--by offering finance training to managers of "medium and large enterprises." Claudia Custodio, Diogo Mendes and Daniel Metzger find that a short executive education style course for these managers has meaningful effects on working capital management and small but still there effects on long-term investment. Perhaps there is hope for the management trap!

5. More from NEUDC: From guest faiVer Jonathan Morduch who actually made it to NEUDC:
Most people know the NEUDC conference by its acronym. Every year, it’s the biggest global gathering of researchers on development economics, drawing participants from around the world. But it started in 1967 as the Northeast Universities Development Consortium and has stuck to the northeast USA. This year, though, the NEUDC landed in Chicago with a successful event at Northwestern. You wouldn’t have been alone if the 4 parallel sessions (most with 4 papers each), had left you longing for a nap. It turns out that naps are powerful. In an NEUDC paper based on a field experiment in Chennai, urban poor individuals averaged 5.6 hours of sleep a night. For those who could get an afternoon nap, the researchers saw “improved cognition, psychological well-being, and productivity. Naps also reduced inattention to incentives and increased patience, as measured by a real-effort task and financial savings.” The big, lurking question is whether behavioral biases are often a function of sleeplessness?
A different NEUDC paper finds that microcredit flexibility may be over-rated. An RCT introduced flexibility into microcredit contracts in Bangladesh. The setting is one with highly seasonal income, and the flexible contract allowed borrowers to pay less during the lean season. I was surprised (and the authors were too) that the intervention made little difference to financial and economic outcomes.
Before I rethink all the lessons on volatility from financial diaries, here’s a different finding that steadiness can in fact be very helpful. The big news in cash transfers from the summer was that Mexico’s long-celebrated conditional cash transfer (CCT) program was shutting down. It was the CCT program that launched dozens of other CCTs -- and also gave early credibility to RCTs (and RCTs of CCTs). Prospera’s demise came despite the NEUDC paper showing that Prospera recipients were much better protected against anticipated income shocks than otherwise similar households. However, households receiving transfers were still sensitive to unanticipated shocks, in line with the Permanent Income Hypothesis.

1950 tax.png
The "money" charts on how the total tax rate has changed in the US since the 1950s that I mentioned in the first item. Source:  NYT

The "money" charts on how the total tax rate has changed in the US since the 1950s that I mentioned in the first item. Source: NYT

Week of June 14, 2019

The Colorblind Edition

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

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

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

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

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

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

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

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

Week of April 16, 2018

Wash, Rinse, Repeat Edition

Editor's Note: Of late, I've been thinking a lot about comments Tyler Cowen made to me in our interview for Experimental Conversations: "..what we're lacking are incentives...to do what I would call synthesis...it's a very intangible skill and it's hard to tell how good someone is at it." There are people doing synthesis (as you'll see in the links), and I like to flatter myself that I'm one of them, but there aren't enough and it is really hard to tell when you're getting it right.--Tim Ogden

1.  Read, Synthesize, Repeat: Two weeks ago I featured a bunch of links about new and new-ish research about cash transfers, including a synthesis by Berk Ozler which particularly draws attention to the growing evidence of negative spillovers from cash transfers. This week Justin Sandefur wrote up his own synthesis, which disagrees with Berk in important ways, and followed up with a Twitter thread summary, which includes the amazing line: "unless cash recipients literally spent the money on gasoline to set fire to their neighbors farms..." Which of course led to a response from Berk and then lots of further replies--much of which center on how to think about the scope of negative spillovers and what to do with data that doesn't seem to be entirely trustworthy. That's the job of synthesis! But there's a long way to go before there's any consensus on the right synthesis.
The site Straight Talk on Evidence has been working on, if not synthesis, at least part of the work of synthesis, sorting through lots of research on US policy interventions and whether it holds up. A few weeks ago they started a series of blog posts on what the path forward should be "when most rigorous program evaluations find disappointing effects." Here's part two with their proposed steps (I try to avoid using the word "solution" even when it's just quoting others). And here's Chris Blattman's Twitter thread response to their proposed steps.
I may have already linked this but in case I didn't, it's relevance to this conversation in particular compels me to include it: The Political Economy of RCTs. Equally I have to include this short article titled "Evidence-Based Claims About Evidence" which challenges the conventional wisdom on how long it takes for evidence to influence physician behavior.
And yes the connection is tenuous, but here's Ideas42 first ever Impact Report on their first 10 years of work. I think there remains a lot of work to be done on synthesizing behavioral science and other approaches and the real world. 


2. Banking: When I first started working with Jonathan at FAI, one of the first things was helping get the book Banking the World out the door--based on work by Jonathan and others estimating that "half the world is unbanked." The World Bank's Findex database has just been updated with 2017 data, with a new report and complete data, and it now seems that the proper statement is "a third of the world is unbanked." Of course, that begs the question of what we mean by unbanked or financial inclusion, and how to think about people who have access to formal accounts but choose not to use them--often because those formal accounts aren't as useful as the alternatives (or in some cases are actively harmful). Obviously, the Findex has a lot to explore and I'm sure I'll be sharing more in the coming weeks as people try to synthesize the findings. 
But coming back to that point about how to think about financial inclusion and exclusion, here's the text of a speech from N.S. Vishwanathan, Deputy Governor of the Reserve Bank of India, about evolving regulation of Indian banks and stressed assets, which closes with an all-too-familiar warning: "There appears to be taking hold a herd movement among bankers to grow retail credit and the personal loan segment. This is not a risk-free segment and banks should not see it as the grand panacea for their problem riddled corporate loan book."
Meanwhile, the US Consumer Financial Protection Bureau under Mick Mulvaney has drastically cut back it's enforcement actions, apparently to zero. The latest is dropping charges and sanctions against an abusive payday lender and scaling back regulations of high-cost consumer lending. Perhaps Mick should place a call to India.

3. Philanthropy: Discussions of philanthropy would be improved if there was more synthesis of public choice economics--too often I see writing about philanthropic actors that seems to start with either an assumption of saintly altruism or evil capitalist intent in disguise. A reasonable example of something better is this new report on "what goes wrong in impact-focused projects" and finds roughly half of the "roadblocks" are funder-created obstacles. 
Another example is an important set of stories about the Silicon Valley Community Foundation, which has become one of the largest foundations in the world, that illustrate that the world of philanthropy is even messier than most human endeavors where altruism, good intentions, power and self-interest collide. Marc Gunther, writing in the Chronicle of Philanthropy, details many accusations of abusive behavior by SVCF's leading fundraiser, who has resigned in the few days since the article was published. There was a lot of work to get the story published, as Marc details here on his own blog, but like so many other "revelations" in this season, the accusations were well-known and apparently ignored by a great many people, including allegedly by the president of SVCF, Emmett Carson. SVCF is no stranger to controversy. Though I've linked these before, as a refresher here's Marc's earlier reporting on SVCFs' role, or lack thereof, in Silicon Valley itself and an excellent piece by Phil Buchanan of CEP on how to think about community foundations' role in the complicated world of philanthropy. And here's Rob Reich (the Stanford political scientist, not the Berkeley Economist) on interrogating the power of large philanthropy.  

4. Our Algorithmic Overlords: I'm not sure if this long essay on what Artificial Intelligence means and doesn't mean and the challenges the use of the term creates qualifies as synthesis, but it is worthwhile reading.
Oh, and Palantir knows a lot more about you than Facebook, in fact, everything about you.
If you're looking for some hope, here's Allison Fine and Beth Kanter on "Leveraging the Power of Bots for Civil Society."

5. Jobs: Leveraging the power of bots, for good or ill is one of the big questions about the future of jobs. The Hechinger Report is running a series on the challenge to education systems of educating students when there is so much uncertainty about what skills those students will need. The Hechinger Report is US-based, but the problem is the same globally. Here's the World Bank on how automation is changing the jobs and development outlook for lower-income countries. I'm linking there because while Arvind Subramanian has a piece in the FT on this very topic today, in my experience very few people (including me) have access to the FT.     
And I've been meaning to link this piece from Tyler Cowen on reining in occupational licensing for a long time and keep forgetting. To fully bring things around full circle, I will say that I don't think Tyler does enough synthesis of the findings that occupational licensing can be good for excluded communities who are denied opportunities in many fields.

Book Review Special Edition: Automating Inequality

1. Algorithmic Overlords (+ Banking + Digital Finance + Global Development) book review: I'd like to call myself prescient for bringing Amar Bhide into last week's faiV headlined by questions about the value of banks. Little did I know that he would have a piece in National Affairs on the value of banks, Why We Need Traditional Banking. The reason to read the (long) piece is his perspective on the important role that efforts to reduce discrimination through standardization and anonymity played in the move to securitization. Bhide names securitization as the culprit for a number of deleterious effects on the banking system and economy overall (with specific negative consequences for small business lending). 
The other reason to read the piece is it is a surprisingly great complement to reading Automating Inequality, the new book from Virginia Eubanks. To cut to the chase, it's an important book that you should read if you care at all about the delivery of social services, domestically or internationally. But I think the book plays up the technology angle well beyond it's relevance, to the detriment of very important points.
The subtitle of the book is "how high-tech tools profile, police and punish the poor" but the root of almost all of the examples Eubanks gives are a) simply a continuation of policies in place for the delivery of social services dating back to, well, the advent of civilization(?), and b) driven by the behaviors of the humans in the systems, not the machines. In a chapter about Indiana's attempt to automate much of its human services system, there is a particularly striking moment where a woman who has been denied services because of a technical problems with an automated document system receives a phone call from a staffer who tries very hard to convince her to drop her appeal. She doesn't, and wins her appeal in part because technology allowed her to have irrefutable proof that she had provided the documents she needed to. It's apparent throughout the story that the real problem isn't the (broken) automation, but the attitudes and political goals of human beings.
The reason why I know point a) above, though, is Eubanks does such an excellent job of placing the current state in historical context. The crucial issue is how our service delivery systems "profile, police and punish" the poor. It's not clear at all how much the "high tech tools" are really making things worse. This is where Bhide's discussion is useful: a major driver toward such "automated" behaviors as using credit scores in lending was to do an end-run around the discrimination that was rampant among loan officers (and continues to this day, and not just in the US). While Eubanks does raise the question of the source of discrimination, in a chapter about Allegheny County, PA, she doesn't make a compelling case that algorithms will be worse than humans. In the discussion on this point she even subtly undermines her argument by judging the algorithm by extrapolating false report rates from a study conducted in Toronto. This is the beauty and disaster of human brains: we extrapolate all the time, and are by nature very poor judges of whether those extrapolations are valid. In Allegheny County, according to Eubanks telling, concern that case workers were biased in the removal of African-American kids from their homes was part of the motivation for adopting automation. They are not, it turns out. But there is discrimination. The source is again human beings, in this case the ones reporting incidents to social services. The high-tech is again largely irrelevant.
I am particularly sensitive to these issues because I wrote a book in part about the Toyota "sudden acceleration" scare a few years ago. The basics are that the events described by people who claim "sudden acceleration" are mechanically impossible. But because there was a computer chip involved, many many people were simply unwilling to consider that the problem was the human being, not the computer. There's more than a whiff of this unjustified preference for human decision-making over computers in both Bhide's piece and Eubanks book. For instance, one of the reasons Eubanks gives for concern about automation algorithms is that they are "hard to understand." But algorithms are nothing new in the delivery of social services. Eubanks uses a paper-based algorithm in Allegheny County to try to judge risk herself--it's a very complicated and imprecise algorithm that relies on a completely unknowable human process, that necessarily varies between caseworkers and even day-to-day or hour-to-hour, to weight various factors. Every year I have to deal with social services agencies in Pennsylvania to qualify for benefits for my visually impaired son. I suspect that everyone who has done so here or any where else will attest to the fact that there clearly is some arcane process happening in the background. When that process is not documented, for instance in software code, it will necessarily be harder to understand.
To draw in other examples from recent faiV coverage, consider two papers I've linked about microfinance loan officer behavior. Here, Marup Hossain finds loan officers incorporating information into their lending decisions that they are not supposed to. Here, Roy Mersland and colleagues find loan officers adjusting their internal algorithm over time. In both cases, the loan officers are, according to some criteria, making better decisions. But they are also excluding the poorest, even profiling, policing and punishing them, in ways that are very difficult to see. While I have expressed concern recently about LenddoEFL's "automated" approach to determining creditworthiness, at least if you crack open their data and code you can see how they are making decisions.
None of which is to say that I don't have deep concerns about automation and our algorithmic overlords. And those concerns are in many ways reinforced and amplified by Eubanks book. While she is focused on the potential costs to the poor of automation, I see two areas that are not getting enough scrutiny.
First, last week I had the chance to see one of Lant Pritchett's famous rants about the RCT movement. During the talk he characterized RCTs as "weapons against the weak." The weak aren't the ultimate recipients of services but the service delivery agencies who are not politically powerful enough to avoid scrutiny of an impact evaluation. There's a lot I don't agree with Lant on, but one area where I do heartily agree is his emphasis on building the capability of service delivery. The use of algorithms, whether paper-based or automated, can also be weapons against the weak. Here, I look to a book by Barry Schwarz, a psychologist at Swarthmore perhaps most well-known for The Paradox of Choice. But he has another excellent book, Practical Wisdom, about the erosion of opportunities for human beings to exercise judgment and develop wisdom. His book makes it clear that it is not only the poor who are increasingly policed and punished. Mandatory sentencing guidelines and mandated reporter statutes are efforts to police and punish judges and social service personnel. The big question we have to keep in view is whether automation is making outcomes better or worse. The reasoning behind much of the removal of judgment that Schwartz notes is benign: people make bad judgments; people wrongfully discriminate. When that happens there is real harm and it is not obviously bad to try to put systems in place to reduce unwitting errors and active malice. It is possible to use automation to build capability (see the history of civilization), but it is far from automatic. As I read through Eubanks book, it was clear that the automated systems were being deployed in ways that seemed likely to diminish, not build, the capability of social service agencies. Rather than pushing back against automation, the focus has to stay on how to use automation to improve outcomes and building capability.
Second, Eubanks makes the excellent point that while poor families and wealthier families often need to access similar services, say addiction treatment, the poor access them through public systems that gather and increasingly use data about them in myriad ways. One's addiction treatment records can become part of criminal justice, social service eligibility, and child custody proceedings. Middle class families who access services through private providers don't have to hand over their data to the government. This is all true. But it neglects that people of all income levels are handing over huge amounts of data to private providers who increasingly stitch all of that data together with far less scrutiny than public agencies are potentially subject to. Is that really better? Would the poor be better off if their data was in the hands of private companies? It's an open question whether the average poor person or the average wealthy person in America has surrendered more personal data--I lean toward the latter simply because the wealthier you are the more likely you are to be using digital tools and services that gather (and aggregate and sell) a data trail. The key determinant of what happens next isn't, in my mind, whether the data is held by government or a private company, but who has the power to fight nefarious uses of that data. Yes, the poor are often going to have worse outcomes in these situations but it's not because of the digital poorhouse, it's because of the lack of power to fight back. But they are not powerless--Eubanks stories tend to have examples of political power reigning in the systems. As private digital surveillance expands though, the percentage of the population who can't fight back is going to grow.
So back to the bottom line. You should read Automating Inequality. You will almost certainly learn a lot about the history of poverty policy in the US and what is currently happening in service delivery in the US. You will also see lots to be concerned about in the integration of technology and social services. But hopefully you'll also see that the problem is the people.

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.

Week of June 26, 2017

Weaponized Data Edition

1. Weaponized Data and American Inequality: Last week I linked to a paper finding minimal effects from minimum wage increases, unaware that a huge explosion of debate on this issue was about to occur. If you follow these things at all, you know that last Friday a paper on Seattle's minimum wage increase was released finding no job losses or cuts in hours. Monday, a different paper finding large losses for households with minimum wage jobs was released. There's a whole lot out there now on the two papers so I'm not going to rehash those arguments (if you need to catch up, try this or this or this or just scroll through Twitter). I want to focus on the backstory of why there were two papers released so close to each other because it's important for the future of research and policy-making. As detailed here, what appears to have happened is researchers at UW shared an early draft of their paper (using tax data that is rarely available in minimum wage studies) with the Seattle mayor's office. The mayor's office didn't like the conclusions so asked a different set of researchers to write their own paper--and release it just before the planned date for release of the UW paper. While I have no special insight into the exact details of what happened, the prospect that the report is accurate disturbs me a great deal. It's a blatant step toward what the author of the Seattle Weekly piece calls "weaponized data." Be afraid for evidence-based policy. Very afraid.   

In other American inequality news on topics that yield strong confirmation bias reactions, Justin Fox reports on new work suggesting that occupational licensing actually crowded-in historically disadvantaged workers--seemingly the transparent rules of licensing reduced formal and informal discrimination that kept these groups underemployed. That's a very plausible story to me, though I generally also buy the anti-licensure arguments.

There's also new work on school vouchers, from Indiana, finding short-term declines in test scores, but later (over four years) gains. It's worth noting how claims for vouchers have down-shifted to "no harm and some students gain." But keeping on the weaponized data theme, the paper is not publicly available and was only obtained by ChalkBeat through public records requests. Apparently the study authors don't think it should be public until it's peer-reviewed, which illustrates the difference in norms in sociology and economics.


2. Our Algorithmic Overlords: Also a few weeks ago I linked to a story about how to tell if borrowers on online lending platforms were going to default, and to the book, Everybody Lies, from which it came. I said I was going to read the book and I started this week--and was immediately dismayed. The opening of the book discusses what search data--particularly searches on pornography websites--can tell us about Americans' hidden desires. You can see a summary in this deeply disappointing Vox piece (isn't Vox supposed to be better at thinking critically about this stuff?). There is no discussion of how such data might be biased or inaccurate, how a site's interface may interact with what people search for, or why we should believe that search data closely corresponds to "real life." In other words, it's an object lesson in the dangers of using data and algorithms without understanding the data or the people, social structures and institutions that generate it. So of course it's a best seller. Suffice it to say that I have radically revised down my faith in any of the book's conclusions.

In other data-generating processes of uncertain usefulness news, Google will stop showing ads inside Gmail based on scans of email content (illustrating the sucker's game that is attention, I had no idea they were still doing this; I hadn't noticed an ad in years). The nominal reason is combating hesitance from corporates to adopt Gmail and Google's suite of web apps. As someone in my Twitter feed noted, the real reason is that Google already gets better information to drive ads to you than your email.

3. Development Economics: David Evans at the World Bank had to teach middle schoolers (6th to 8th grade, also known as Hell on Earth) what development economics is, in 20 minutes. How did he do? I mean, other than not handing out copies of Experimental Conversations.

On a more serious note, here's an interesting new study on the persistence of gains from agricultural extension programs, after those programs end. It's notable both for the cool design, but also for the positive results. I'm always happy to see results that suggest there's hope for getting poor households to adopt productivity-enhancing technology, whether they are farmers or retailers.

4. Household (and Drug Lord) Finance: Stay with me on this one, we'll get to the drug lords. One of the ongoing things I worry about in household finance is that it involves people and people make bad decisions so predictably. Case in point--a major mistake that people make is chasing investment returns via "hot" stock-pickers. There have been major gains in this area as low-cost index funds have grown enormously. But now comes the Quincy Jones Streaming Music Blah Blah Blah Index fund. Yes, you read that right. It's a new kind of index fund that is an arbitrary set of stocks marketed with the name of someone famous nominally connected to the stocks in the index. Yes, the cynicism of the people creating products like this is annoying and frustrating. But the real problem of household finance is the people that will buy them. The enemy is us. Sigh.

In a variety of forums I've complained about over-zealous regulation of remittance providers under Anti-Money Laundering efforts. There's generally been little evidence that this is a significant danger. But last week 11 people were arrested at Atlanta remittance shops for laundering $40 million of illegal drug proceeds and sending them on to Mexico. Here's the kicker: the people doing the laundering were the Anti-Money Laundering staff at the remittance shops. The problem is the people.

And finally, a quick report on planned up-coming M-Pesa outages, for up to 12 hours. It will be interesting to watch for customer behavior effects.


5. Evidence-Based X: Returning to the opening theme, how should (hopefully not weaponized) data be used for making policy decisions? Andrew Gelman has a short post on "clinical significance" and "statistical significance" that should inspire long thoughts. Here's your clickbait: "Forget the hypotheses and the p-values entirely." I should note that Andrew has a new book that I'm going to get to much sooner now that I know I can just skim Everybody Lies: Teaching Statistics: A Bag of Tricks

A reddit group put together a map about the data in maps, illustrating where data is missing. Source:  @maxcroser  and  reddit

A reddit group put together a map about the data in maps, illustrating where data is missing. Source: @maxcroser and reddit

Week of June 12, 2017

1. St. Monday, American Inequality and Class Struggle: One of my favorite things about writing the faiV is when I get the chance to point readers to something they would likely never come across otherwise. So how about a blog post from a woodworking tool vendor about 19th century labor practices, craft unions and the gig economy? Once you read that, you'll want to remind yourself about this piece from Sendhil Mullainathan about employment as a commitment device (paper here), and this paper from Dupas, Robinson and Saavedra on Kenyan bike taxi drivers' version of St. Monday.

Back to modern America, here's Matt Bruenig on class struggle and wealth inequality through the lens of American Airlines, Thomas Picketty and Suresh Naidu. I feel a particular affinity for this item this week having watched American Airlines employees for a solid 12 hours try to do their jobs while simultaneously giving up the pretense that they have any idea what is going on. 


2. Our Algorithmic Overlords: Facebook is investing a lot in machine learning and artificial intelligence. Sometimes that work isn't about getting you to spend more time on Facebook...or is it? With researchers at Georgia Tech, Facebook has been working on teaching machines to negotiate by "watching" human negotiations. One of the first things the machines learned was to "deceive." I use quotes here because while it's the word the researchers use, I'm not sure you can use the word deceive in this context. And that's not the only part of the description that seems overly anthropomorphic.

Meanwhile, Lant Pritchett has a new post at CGD that ties together Silicon Valley, robots, labor unions, migration and development. And probably some other things as well. If I read Lant correctly, he would approve of Facebook's negotiating 'bots since negotiation is a scarce and expensive resource (though outsourcing negotiation is filled with principal-agent problems). I guess that means a world where robots are negotiating labor contracts for low- and mid-skill workers would be a better one than the one we're currently in? 

3. Statistics, Research Quality and External Validity: Here's another piece from Lant on external validity and multi-dimensional considerations when trying to systematize education evidence. A simpler way to put it: He's got some intriguing 3-dimensional charts that allow for thinking a bit more carefully about likely outcomes of interventions, given multiple factors influence how much a child learns in school. It closely parallels some early conversations I've had for my next book with Susan Athey and Guido Imbens, so I'm paying close attention. And if you can't get enough Lant, you could always check out my current book. Yes, both of those sentences are shameless plugs.

4. Household Finance: If you read the faiV regularly you know I think about household finance a lot and how little we really know about household finance decisions. Viviana Zelizer is a sociologist who opened a lot of vistas on household finance--particularly on the importance of understanding that money has meaning. Money isn't just a store of value, it's a store of values. Here's Zelizer on new research into how households use money (which may mention a recent project I've been a part of) from the LA Review of Books. Here's a very different, but complementary, view on issues of household finance and values: how much should someone save for retirement. I usually hate pieces like this, but this one does a great job of showing how each of the standard pieces of advice could be wrong. And here's another form of values impinging on household finance: The "marriageable male" effect is breaking down.


5. Digital Finance: Ignacio Mas can't be digitized. At least not yet (I'm sure Facebook is working on it). And that's a problem that ultimately comes back to financial regulations, scale and the reasons that the poor are often shut out of quality financial services. Serving poor customers is expensive relative to the profits that can be generated, unless you can scale, which means standardization, which often equates to poor service because poor customers are not uniform.

And for something completely different, but definitely relevant to digital financial services and regulation, here's a story about pressures on Uber to allow repressive governments access to their data in return for access to markets. Hmmm...I wonder what other data repressive governments might want to have access to?

 

Billy Bragg and the Blokes performing St. Monday. Have a good weekend.

Week of May 1, 2017

1. Households Matter!:  If you've followed research on microfinance at all, you've probably come across work by de Mel, McKenzie and Woodruff about giving cash grants to microenterprises (in Sri Lanka and Ghana), finding that the returns to investment in women's firms is much lower (and close to 0) than in men's enterprises. It's a bit of puzzle for several reasons (e.g. why do women borrow if their returns are so low, and why don't men borrow more if their returns are so high?) and there have been various explanations tried out (you can see one of mine in this paper). Bernhardt, Field, Pande and Rigol (paper here, overview from Markus Goldstein here) have a new one that seems pretty compelling based on reanalyzing data from several experiments, including the cash grant experiments. It's an explanation that points back to Gary Becker and Robert Townsend ideas (household's maximizing returns across the household assuming money is fully fungible) about how households work, and away from Viviana Zelizer's (money is often not, in fact, fungible and different income streams in the household are treated differently) or in some ways against Yunus's idea of focusing on women. Bernhardt et al. see that in general when it appears that when women's enterprises show little or no return to capital it's often because the household has another microenterprise that the capital is invested in instead--and those enterprises (where data is available) show gains from the capital injection into the household. When women own the only microenterprise in the household, they see returns (and are often in similar industries) as men. 

This is a big deal and it emphasizes how far we still have to go in understanding household finance. This doesn't say that Zelizer's insights are wrong--they are clearly right in lots of cases--but we don't have a solid grasp on when we should think of households as a single utility-maximizing unit and when we should disaggregate.


2. Pre-K Matters? (and other scale-ups): One of the things that households--or if you read some of the charity marketing that has dominated the last decade or so, only women--invest in is their children's education. Unfortunately, it seems that they often under-invest in education and so a lot of effort is invested in getting children into and keeping them in school. In the United States, the current frontier is about universal Pre-K since most every child is enrolled through the beginning of secondary school. The idea is that children from poorer households start school already well behind their wealthier peers, those gaps persist and if we close them early, well the gaps will stay closed. There are some studies that suggest that's true and Jim Heckman in particular among economists has been a big advocate of significantly increasing investment in early childhood education programs. But there are other studies that suggest it's not. I called the arguments on this "Pre-K" wars in my book because a lot of the argument has been over experimental design and methodological issues in the studies.

Russ Whitehurst at Brookings has a new post on the Pre-K wars that I learned a lot from, including new data from Tennessee that shows the returns from pre-K there were negative and the randomization in the famous Abecedarian study was violated in ways that are impossible to correct for. The bottom line for Whitehurst is that while small-scale, intensive interventions with very high-skill staff can make a big difference, programs at scale don't have any solid evidence they work. Which sounds a lot like some of the things we're seeing from scale up of successful programs in other areas of development.

3. Governance Matters! (even in social enterprises): One of the weird things to emerge in social investment is B Corporations--a not-particularly-binding commitment a firm can make to values other than maximizing profits. That not-particularly-binding part is important because, well, it's not particularly binding while other corporate governance laws and regulations are quite binding. Etsy is learning that as an investor is advocating that the firm be sold, and/or management be replaced, complaining that management is failing in its duties to maximize profits by paying wages that are too high (or put another way, by adhering to the principles of being a B Corp) among other things. Because Etsy is a standard corporation that simply opted in to the voluntary requirements of being B Corp it's quite possible that Etsy's hand could be forced. There is a binding form of corporate governance that would resolve this--becoming a For Benefit corporation as defined by state regulations in about 30 states, but Etsy isn't one of those, yet.

And in other social investment governance news, here's a story about State Street's Fossil Fuel Free ETF held positions in Deepwater Horizon and coal-burning utilities (scroll down to "Who Picks the Index").

4. Regulation Matters! (or how the Indian government keeps undermining MFIs): When you think of India and microfinance, the Andhra Pradesh crisis almost certainly springs to mind. The industry has largely recovered from that regulation-induced shock. But now the industry is confronting a leap in non-performing loans due to regulatory changes that were not directly targeting the industry. Demonetization, by removing most of the paper bills in circulation, kind of had an impact on borrowers ability to repay their loans. And Uttar Pradesh recently announced a $5.6 billion loan forgiveness plan, which unsurprisingly has apparently convinced borrowers in neighboring states to stop repaying their loans to see if they can get the same deal. Andy Mukherjee argues that the net result is going to be the end of specialty microlenders, who will have to be absorbed into larger traditional banks in order to protect themselves from regulatory shocks. I have a theory as to what will happen to the zeal for serving poor customers once microlenders are absorbed.


5. Labor Markets Matter!: You've no doubt heard many times that in the modern era neither businesses nor employees are loyal and everyone will change jobs much more in the past. Justin Fox has heard it too, most recently at a conference on the Digital Future of Work and decided to do some digging. It tuns out that average job tenure in the United States has been rising over the last 20 years (though it's down slightly recently, though still almost a year longer than it was in 1996). Job tenure is especially high for supervisors and for government workers. It seems this is another feature of the much discussed "hollowing-out" of the labor market in the US, and likely a part of the increasing inequality in access to stability.

Statistical inference is hard. All these plots share the same basic data descriptors. Source:  Autodesk

Statistical inference is hard. All these plots share the same basic data descriptors. Source: Autodesk

Week of April 17, 2017

1. FinTech Like a State:  Aadhaar, the Indian government's unique identifier system, is now ubiquitous with 99% of citizens over 18 having an ID. That makes it a powerful platform for delivering both government programs and digital financial services. But it also raises a lot of concerns about what the government might do--or what others could do if they gain access to or corrupt the system--when it can track and/or regulate citizen behavior at a detailed level. That certainly plays into the longer-term ramifications of Indian demonetization, especially since it appears that it has driven many more people to digital transactions. CGD held an event this week with Annie Lowery interviewing Arvind Subramanian about Aadhaar, demonetization and universal basic income. I haven't gotten all the way through it yet, so I don't know whether my pre-submitted question was asked, "Which governments should be trusted with the power to deny people the ability to transact legally?"

And for some reason I feel like this piece, nominally about why Silicon Valley keeps getting biotechnology wrong, is really about FinTech.


2. Financial Literacy Like A State (University): "Shut Up About Financial Literacy" says Sara Goldrick-Rab contemplating how higher education institutions blame a lack of financial literacy for the problems students have paying for college. Here's Helaine Olen documenting the head of Penn State University's FinLit program saying: "The real problem is not the rising cost of education, it is in the... lack of financial literacy..." Goldrick-Rab cites a new paper from Sandy Darity and Darrick Hamilton (and here's a Chronicle of Higher Education write-up) making the case that the financial literacy movement as a whole tends to blame the victim rather than acknowledging that many of the choices that look like "low financial literacy" are in fact choices born of poverty and the racial wealth gap. That's a key element of Scott's Seeing Like A State: The drive to solve problems at scale often leads to simplified measurement systems that obscure important distinctions, or miss reality altogether, and ultimately reinforce the problems they are meant to address or create worse ones.  

3. Financial Services Regulation: You pretty much have to do financial services regulation like a state. In the United States one of the main financial regulators is the Office of the Comptroller of the Currency (OCC). This week we learned that the OCC had received more than 700 whistleblower complaints about Wells Fargo's practice of opening accounts without customer knowledge or consent, but did nothing. Well not quite nothing. Matt Levine points to part of the OCC's report where it admits it focused too much on process and not enough on outcomes: "You spend so much time making sure that there are processes to stop bad things that you forget to actually stop the bad things." [You have to scroll past the amazing JuiceTech story] That's certainly another part of seeing like a state. And it's a particular concern when you get isomorphic mimicry, in Lant Pritchett's application, of financial services regulation.
On the bright side, I worry a bit less about the progress of our algorithmic overlords when apparently none of the deep learning programs noticed that videos about Wells Fargo like this or this (and many, many, many others) have been on YouTube since at least 2010. But then there's also this about how United's algorithms led to it's disastrous decision-making.

4. Behavioral Economics: If you squint real hard you can see several connections between item 2 and these papers, but it's probably not worth the effort. Here's a new paper looking at how quickly and how much social nudges wear off, in 38 different experiments. And here's a paper on an experiment in Senegal comparing time discounting in a hypothetical versus real exercise; "Our results show that hypothetical time preferences parameters are poor predictors of actual behavior."


5. Impact Investing Like A State: The most annoying version of impact investing is "negative screening," a choice not to invest in firms one doesn't like. Apparently it has started taking the Portland (OR, US) City Council too long to figure out (i.e. listen to complaints from activist citizens) which firms it doesn't like, so it recently voted to stop investing in corporate debt altogether. The city treasurer estimates the decision will cost the city $3 to $5 million a year via lower returns on its investments. I guess I have to give them credit for making trade-offs? (One of the more amazing parts of this story is that it allegedly costs Portland only $17500 for an "affordable housing unit" but $6000 to build a wheelchair ramp). And connecting to our other theme of nothing new under the sun, here's a blog post about impact investing in Victorian England, complete with "no tradeoffs!" marketing. The investment was in affordable housing and there was quite a robust market until complaints that the housing was still inaccessible to the poorest and profits were too high--and the state imposed even more trade-offs by stiffening building regulations--took the luster off.

A few weeks ago we talked about mortality wars. So I felt I had to include this interactive project from FiveThirtyEight that allows you to view the changing causes of death in every American county for the last 35 years. Source:  Five Thirty Eight

A few weeks ago we talked about mortality wars. So I felt I had to include this interactive project from FiveThirtyEight that allows you to view the changing causes of death in every American county for the last 35 years. Source: Five Thirty Eight

Week of May 30, 2016

1. Basic Income: Basic income's 15 minutes of fame seem to be stretching on. In the New York Times, Eduardo Porter rains on the parade, at least in the US context. Paul Niehaus is still marching anyway: he hosted a Reddit Ask Me Anything about GiveDirectly's basic income experiment in Kenya. Meanwhile, the MacArthur Foundation announced it's going to give $100 million to a single organization to "solve" a social problem. Poor choice of words aside, I can't think of a better use of that money than expanding basic income experiments into other countries.  

2. Nigerian Entrepreneurs: We all know about a certain kind of Nigerian grassroots entrepreneur. But there are others. PlanetMoney has a podcast about David McKenzie's experiment in giving large cash grants to winners of a business plan competition. David also has a new paper exploring how well participants in the competition (winners and losers) anticipate the effects of winning the cash grant. Most think the impact of the money will be larger than it is, and their estimates don't help predict who will benefit most from receiving the cash.

3. Payday Lending: The US Consumer Finance Protection Board published its long-anticipated proposed regulations for the payday lending industry. Reaction is mixed with some praising the step forward and others suggesting the regulations don't go far enough. It's a tough issue--there are a lot of bad products out there but making credit constraints more binding for the poor isn't great. Here's a reminder about how costly illiquidity is for poor households, even when they don't borrow. CFSI has a look at the demand for small-dollar, short-term credit. And here are the stories of two households from the US Financial Diaries, and how short-term credit can help and hurt.      


4. Work Gap: The theoretical concept of payday lending is that users are borrowing against their next paycheck. Fewer people in the lower-third of the income distribution are getting a paycheck though and those that do are working fewer hours, points out Isabel Sawhill. She and her team model the effects of various proposals and find that few have a material effect, other than full employment. Volatile hours and the lack of paid labor helps explain why behaviorally-informed adjustments to policies like Individual Development Accounts still don't yield any increase in these households ability to save

5. Cashless Societies: What percentage of global consumer transactions are in cash? It's still more than 80 percent. Here's a new framework for assessing which countries would benefit most (at least in economic terms) from moving away from cash and which countries are most ready to make a cashless transition. No word on which countries have the governance to make digital money safe from both criminal and government interference.

Week of September 7, 2015

1. Migration and Finance: We wanted to include a story on how refugees are financing their migration *and managing payments* but we couldn't find any. Do you know of one?  Tweet it to us - @financialaccess.

2. Cash Transfers: Data from The Cash Atlas, an online platform that tracks cash transfers, suggests transfers are a growing (but still small) component of humanitarian interventions but are mostly conditional and/or mixed with in-kind transfers. Center for Global Development

3. US Financial Diaries: "Six months a year the [USFD] households we tracked had income that was either 20 percent above or below their average. So even the concept of average [income] is meaningless.” Next City

4. Investing in SMEs:
David McKenzie shares the results from an evaluation of a Nigerian business plan competition that awarded $50,000 in cash grants--more than half of winners were randomly chosen from semi-finalists. Winners not only had higher profits but were more likely to hire several works and stay in business.  The World Bank

5. Asset Building: A new report reviews the counterproductive nature of many US financial assistance programs - essentially, households have to remain poor to avoid becoming even poorer. American Progress

Week of February 23, 2015

1.  Remittances: A number of large banks are no longer operating in certain countries in the global south in response to growing pressure from regulators to comply with rules on anti-money laundering and financing of terrorism.  But this movement of "de-banking" means less money in the pockets of families who receive remittances as well as more cash traveling through informal channels.  Center for Global Development

2. Behavioral Economics:  From mobile wallets to financial management apps, more entrepreneurs and financial service providers are addressing financial inclusion than ever before. But do they truly understand the needs, habits, and culture of the financially underserved? Tilman Ehrbeck and behavioral economist Dan Ariely discuss the role of behavioral economics in designing effective financial inclusion solutions.  Omidyar Network

3. The World Bank:  In an interview with Jim Yong Kim, Stephen Dubner touches on everything from bringing behavioral economic thinking to the World Bank to Kim's rap performance at a Dartmouth College talent show.  Freakonomics

4. Savings:  A newly published study analyzed personal financial habits of identical and fraternal twins and found the former have very similar savings behaviors - genetic differences explained roughly 33% of the variations in individual savings rates.  Quartz

5. Financial Inclusion: By 2013, 13% of the global population will be over the age of 60.  What does an aging population mean for policy makers promoting financial inclusion? CFI

The chart above (compiled by Chris Said) show the correlation in opinions between every pair of economists based in the IGM Forum, restricting questions to those from 2014. Click here for an interactive version of this matrix.

Week of February 16, 2015

1. Informal Finance: FAI's Executive Director Jonathan Morduch discusses what makes informal finance so popular and how financial institutions can respond. NextBillion

2. Cash Transfers:  Electronic payments are a fast and effective way to administer cash transfer programs. But what about in failed states, where the lack of infrastructure means driving large piles of cash around to beneficiaries? The Guardian

3. Wealth Inequality:  "The fact that 42 percent of African-American Americans between the ages of 25 and 55 had student loan debt in 2013 (compared to 28 percent of whites) reflects a vicious cycle: families’ lower wealth compels students to take on debt, but that debt then hurts their overall wealth well into adulthood."  PBS Newshour

4. Ethics and Investing:  The recent movement for socially-conscious investors to steer clear of "vice stocks" may have backfired - avoidance has depressed their share prices, offering higher returns in the long run for those without ethical concerns. Capital Finance International

5. Labor Standards:  Could MFIs be an effective entry point to improve working conditions for entrepreneurs in the informal economy that operate outside of the purview of labor laws and regulation?  ILO 

Week of February 9, 2015

1. Microfinance: A look at the microfinance industry's rebuilding efforts in a post-Ebola West Africa.  Devex

2. Unbanked:  In what sounds similar to a time-compressed version of this experiment, Accion Venture Lab's Managing Director reports on his experience of being unbanked for a day.  Medium

3. Development Valentines:  Every February, Love is in the air...and on Twitter. Storify

4. Inclusion vs. Laundering: It's not always easy for financial institutions to walk the line between improving financial inclusion and preventing fraud by strengthening Know Your Customer requirements.  How do financial institutions strike the right balance? The Guardian

5. Transparency: A recent RCT in Indonesia shows evidence that simple techniques to increase transparency and community participation in a food subsidy program (providing price information, ID cards, and forming village committees) can increase efficiency and reduce leakage. NBER

Savings groups are a popular and effective way of helping poor households increase their savings. But is there a way to incorporate the mechanisms that make them effective outside of the group in savings products in general? 

Week of February 2, 2015

1.  Mobile Banking:  Rural customers in India rely on local bank agents and business correspondents to open new accounts.  But the requirement (and cost incurred) for holding cash to cover withdrawals during busy periods is not worth the banking agents' while.  Could mobile money pose a solution?  The Economist

2.  Microcredit:  What happens when microcredit clients default? The answer depends mostly on where they live.  Smart Campaign

3.  Regulation and Development:  Hernando de Soto played a  major role in putting property rights on the development agenda. Planet Money profiles him, where his ideas came from, and the impact they've had.  NPR's Planet Money

4.  Bitcoin:  The recent collapse of bitcoin prices and the introduction of third-party agents to process transactions is leaving many in the cryptocurrency community disillusioned.  Is this the beginning of the end for bitcoin?  Financial Times

5.  Debt:  Croatia canceled the debts of over 300,000 of its poorest citizens, allowing them to access their blocked bank accounts.  However, some economists are concerned that if lenders think mass debt relief is a future possibility, they will charge low-income borrowers very high interest rates.  Washington Post

Week of May 19, 2014

1. Remittances:  Why have such rapid increases in remittances not resulted in noticeable improvements in economic growth in the recipient countries?  Michael Clemens and David McKenzie investigate possible answers in a new working paper. The World Bank - Development Impact Blog 

2. Poverty in the US: Over the past 30 years, government spending on the poorest Americans dwindled - those living far below the poverty line now receive less government assistance than they did in 1983 and spending has shifted to the relatively more well-off. Slate

3. Cash Transfers:  After receiving $150, five days of training, and intensive supervision, ultra-poor women in Uganda doubled their business ownership and their incomes, according to a newly published study. Chrisblattman.com

4. Financial Services: "India Post, the world’s largest postal network, may become India’s first 'payment bank,' a new classification of bank which will offer payment, savings and remittance services to customers but not loans." The Wall Street Journal

5. Microfinance Regulation:  The history of regulation and deregulation of the US financial sector could provide useful insights for microfinance in promoting a balance between financial inclusion and stability. European Microfinance Platform

Week of May 12, 2014

1. Bank Transparency: Wal-Mart is known as a low-cost retailer, but customers  of the independent banks inside its outlets are among America's highest payers of bank fees. The 5 banks with the most Wal-Mart branches ranked among the top 10 in fee income as a percentage of deposits in 2013. The Wall Street Journal (paywall)

2. Financial Sector Investment: A new report finds that the financial sector is now the largest beneficiary of World Bank Group investment, receiving $36 billion between July 2009 and June 2013 the IFC. Over the same period the World Bank’s public sector arms committed $22.1 billion to health and $12.4 billion to education. Bretton Woods Project 

3. Credit:  "There are two housing markets in America. It's not one for student debtors and one for non-student-debtors. Rather, it's one market for healthy corporations, who are buying at a historic rate; and one market for families, which is still quite sick." The Atlantic

4. Research Methodology: A newly revised working paper from Hunt Alcott explores the challenges of generalizing data from a single site to a larger context using data from an energy conservation program in the US and analyzing  impact evaluations involving MFIs. The World Bank - Development Impact Blog

5. Regulatory Reform:  Richard J. Parsons, a former Bank of America executive vice president, proposes public policy changes to help give smaller community banks the opportunity to survive independently. American Banker

Week of February 7, 2010

Follow us on Twitter @financialaccess

2/9: The Regulator’s Dilemma: Navigating Competition Policy http://shar.es/mn2lq via#microfinance

2/9: Cell-phone banking offers financial help to Third World - http://bit.ly/5DF7fH#microfinance

2/9: Forbes.com: "How to protect the world's most vulnerable banking clients" http://bit.ly/aMKwNu #microfinance
  
2/8: RT@poverty_action: IPA research that's good for your heart (literally!) http://www.newsweek.com/id/233006

2/8: MICROCAPITAL PAPER WRAP-UP: Behavioral Foundations of Microcredit http://bit.ly/aUu5dB #microfinance

2/8: FAI invites you to an event with Muhammand Yunus at NYU on March 5th. RSVP at http://bit.ly/apyrMl #microfinance