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.
Week of November 13, 2017
1. Our Algorithmic Overlords: I saw someone joke on Twitter recently that the best way to do a literature review was to complain on Twitter that "no one is studying..." and just use the incensed replies that come pouring in. It's an interesting form of trolling. This week Cathy O'Neil, author of Weapons of Math Destruction and perhaps better known as mathbabe.org, had an Op-Ed in the New York Times saying, "Academics aren't paying attention to our algorithmic overlords." Of course, I agree with the need to pay attention--hence this regularly featured topic--but it's a curious framing that academics aren't paying attention. In fact, all of the examples she gives of areas where academics need to be paying attention to algorithms and their effects are areas of intense academic work. Say the use of sentencing algorithms. Or teacher assessments. Or dynamic scheduling.
And it's not just the specific instances. There's also work on the big picture of the use of algorithms and big data in policy making. Or simply understanding how companies will approach gathering and using data and algorithms (How could I not link to a paper so excellently titled as "Seeing Like a Market"?). Or how about a whole academic center "examining the social implications of artificial intelligence"? The conspiracy theorist in me couldn't help noting that the center, at NYU, was officially announced the day after O'Neil's op-ed which proposes an academic center, though they have a 2nd annual report on the use of AI and 10 recommendations to guide research and accountability.
I can hardly be opposed to academic research centers, but it seems to me that what's missing is not academics paying attention or research centers devoted to the topic, but a Consumer Algorithm Protection Board. Yes, this is a pipe dream given the dire outlook for the Consumer Financial Protection Board, but it is a pipe dream I'm particularly fond of. Anyone want to help me make the case for it?
2. Household Finance: Before the algorithmic overlords item gets ridiculously long, let's move on to something that could fit either under algorithms, protection boards, or household finance. Entrepreneurial Finance Lab, which uses psychometrics to assess creditworthiness, has a piece on the FICO blog about how their testing for personality traits like impulsiveness and delayed gratification predicts default rates. It's such a good example of why I've been a fan of EFL while being queasy at the same time, it almost felt like I was being trolled. On the positive side it's an operationally relevant way of assessing borrowers who otherwise would be shut out of access to credit. On the queasy side, there's apparently huge variation in different cultures (while the metric remains predictive), and real questions about the immutability of the features they are testing--which cuts both ways. If they're mutable there's a question about what we are measuring; if they're immutable, what do we do about people who lost the "present bias" lottery? It's a good thing to protect people from themselves by not offering them credit they are likely to default on, but it still leaves me queasy nonetheless.
In terms of others being trolled, here's a piece about Refinery29's ongoing series where women share a week-long financial diary, and then readers rip apart their life choices. I'm not entirely sure whether it's the ones sharing or the ones critiquing that are the trolls, perhaps both.
And since we're on the topic of diaries and I've already gone fishing for help on one research interest of mine, here's another: I read this week that more than 100,000 puertoriquenos have migrated to Central Florida since this fall's hurricanes. Wouldn't it be great to do financial diaries of those households? It's a really unique opportunity, wouldn't be very expensive to do, and it breaks my heart to see it go to waste. If you think so too, call me.
Week of November 6, 2017
1. Appropriate Frictions and End-User Behavior: A key theme of the EPIC conversations on debt from my perspective was the importance of differential frictions in access to various kinds of debt. One example: it's much more time consuming to open a home equity line of credit than a credit card account. There are reasons for that of course: we want people to be careful about borrowing against their home, because we fear the consequences for people if they default. But the cost of unsecured credit is so much higher, and various forms of debt are so interlinked, that households can end up in worse straits precisely because we tried to protect them. The true conundrum of appropriate frictions is that the process of determining the best form of credit for a household is in itself a friction that drives consumers toward those willing to provide credit without a care for its impact on the household--a somewhat obtuse but accurate way of describing predatory lenders.
This is one of the lessons from microcredit. Demand for microcredit in most contexts is actually quite low, and rarely did microcredit have much of an impact on local moneylenders. The reason of course being that taking a microloan usually involves a lot of friction, while borrowing from a moneylender is low friction. Those operating in the US will immediately see the exact overlap with payday/auto-title lending vs. working with a community development credit union.
But it's not just a question of the behavior of consumers. Front-line staff also play a role; they are an under-recognized form of end-user that has to be taken into account. Here's some new work by Beisland, D'Espallier and Mersland on "personal mission drift" among credit officers of Ecuadorian MFIs. Now don't look away because this is about microcredit or Ecuador--it's directly applicable to any kind of financial service offered to any kind of customer anywhere. Beisland et al. find that as credit officers gain experience they tend to serve fewer "vulnerable" clients (e.g. smaller loans, young borrowers, disabled borrowers). Why? Because it takes too much time--there are those frictions again. Figuring out how to offer quality products, especially credit, with appropriate frictions for both the borrowers and the credit officer, is a conundrum everywhere.
For further evidence of this, check out the similarities between this piece from Bindu Ananth about conversations with newly banked customers in Indian cities, and this report on "Generational Money Chatter" in the US from Hope Schau and Ignacio Luri (especially from GenXers and Millennials). The common theme I perceive: lots of questions and uncertainties about products and providers, little faith in the "systems," and confusion about where to turn for trustworthy advice.
2. Frictions, Temptation and Digital Finance: Those of you working in the digital finance world may already be thinking about how digital tools can lower frictions--after all, not only can FinTech tools more quickly and easily gather data from consumers, but they often cut the front-line staff right out of the equation! Take that, friction!
Oh but friction can be useful. This is one of those areas where I'm constantly baffled at the disconnect between the developed and developing worlds. In the developed world, it's generally understood that the goal of payment and digital finance innovation is usually to remove friction specifically for the purpose of getting people to spend more money, more often. Amazon didn't develop and patent one-click ordering out of concern for saving people time (Interesting side note, Amazon's patent on one-click expired last month--exogenous variation klaxon!). The sales pitch that credit card issuers make to merchants has always been that credit cards induce people to spend more.
Here's one of my favorite new pieces of research in a long time: a study of how people in debt management plans handled spending temptation (if that description is too dry to get you to click, try this one: "Target is the Devil!"). The sub-text, and sometimes text, is how hard retailers and some credit providers work to break down the frictions that prevent people from spending.
What's the connection to digital finance, particularly in developing countries. I'll enter there through this piece from Graham Wright based on a debate at the recent MasterCard Foundation Symposium on Financial Inclusion. Graham was asked to make the argument against the hope for digital finance serving poor customers. His list of five reasons why digital finance is "largely irrelevant" in the typical rural village is worth reading at face value. But it's also worth thinking about in terms of how much of digital finance is aimed at removing frictions, how it's failed to remove some of those frictions for poorer customers and what can (or will) happen to poor households when appropriate frictions are removed.
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.
Week of October 23, 2017
1. The Search for Truth, Part II: Last week's opening theme was about how hard social science is. I often find there's an unspoken wistfulness in social science research for the clear questions and clear answers of the "hard sciences."
But cheer up! It's just as bad on the other side of the fence. When you're frustrated that there doesn't seem to be a biological mechanism that explains the long-term positive outcomes of deworming, remember that we have no idea--literally, no idea--what causes "side stitch," that shooting pain we've all had in our abdomen during exercise. And when you're down in the dumps that so many development interventions don't seem to show much effect, remember that the universe shouldn't exist, and we don't know why it didn't explode nanoseconds after coming into being.
On the other hand, Ioannidis, Stanley and Doucouliagos' paper on how vastly underpowered most economics papers are has finally been published (it's been circulating for awhile). If that's not enough to send you back into despair, the fact that economists need to be reminded of basic good practice in presenting their ideas--per this slide deck from Rachael Meager--might do the trick. Don't get me wrong, it's good advice. But I was reminded of the time I attended a conference for PR "professionals" where the advice included such gems as, "Make sure the reporter you're pitching actually covers the topic" and "Read the last few articles the reporter wrote." Last year I was joking with Jessica Goldberg about starting a side-business editing the introductions and slide decks of job market papers. Perhaps I shouldn't have been joking.
2. The Mess that is US Higher Education (or Labor Markets are Broken All Over): Studying labor market inefficiencies is a common topic in development economics (yes, this is clickbait for David McKenzie). But as in so many domains, the problems we study in developing economies also exist in developed ones, just wearing a Halloween mask. Here's a new study on "credentialism" in the US labor market, the demand for college degrees for jobs that have no reason to require a college degree (as demonstrated by the fact that the vast majority of people currently in those jobs don't have one). That's bad for employers who pay some of the cost of the self-imposed mismatch in the labor market, but it's much, much worse for potential employees who are shut out of well-paying, stable jobs for no good reason. Unless, of course, they spend large amounts of money to get a credential. The large, and growing, lifetime earnings gap between those with a credential and those without has justified the incredible growth in student debt to finance these credentials. But if the credential is just an artifact of herd behavior among employers...
And why are those credentials so expensive? One reason is that the universities providing those credentials are spending, and borrowing, huge amounts themselves in order to attract the students who have to get the credential to apply for a job. So the students borrow, and borrow some more. And then they get shut out of programs for loan forgiveness that they are should be eligible for, because the system is a mess. But don't worry, if their debt gets too out of hand, they can discharge those loans in bankruptcy. Oh wait, we changed the bankruptcy law so they can't ever discharge those loans. Don't forget too that large numbers of the people we've pushed into needing a credential are entering universities, taking loans, but never getting the credential (e.g. 70% of single mothers who enroll).
And the advanced degree market may be worse. A few weeks ago I featured some work on English football academies juxtaposed with a paper about the Clark Medal. Perhaps my comparison was too oblique--so here's a piece from Nature making the connection explicit. The chances that a Ph.D. student will land a permanent academic job in the US or UK is well under 10%. The reason it's plausible to offer job market paper editorial consulting is that the premium for a well-written paper is so large. And it's large because there is massive over-supply.
For those newly minted Ph.D.'s taking adjunct teaching jobs just so they can stay marginally attached to academia and perhaps make enough to supplement their food stamps, I have bad news. Current students (bachelor's and master's students that is) teach just as well as adjuncts, suggesting that "student instructors can serve as an effective tool for universities to reduce their costs." Oh right, I was trying to avoid a novella.
Week of October 16, 2017
1. The Search for Truth: The New York Times Magazine has a long piece about Amy Cuddy, the social psychologist of "power posing" fame, and the messy process by which her research has been popularized and then discredited. The piece suggests that Cuddy (though it by no means holds her out as blameless) has been uniquely and personally targeted as the face of unreplicable and bad social science in an era of changing research practices and expectations, perhaps because she is a woman. More broadly it ponders whether the process and social conventions of communication around challenging social science research may do more harm than good. It points specifically to Uri Simonsohn, Joseph Simmons and Andrew Gelman and their roles in both calling out bad social science and in specifically highlighting Cuddy's power posing paper as an example.
It's well worth the long read, careful consideration but also some critical evaluation. The piece comes at a very interesting time, with the Weinstein saga, #MeToo, and more specifically the push back about Econ Job Market Rumors and bad behavior in economics. It's important to read the piece in the context of such things as EJMR and this anecdote from Rohini Pande (in an interview with David McKenzie this week) relating how a "senior male World Bank economist wrote to our senior male colleagues at MIT and Yale asking that they review our work and correct our mistakes" in one of her early papers (with Esther Duflo; see question 4 in the link, but read the whole thing, it's very good on a lot of topics).
But on reflection, I don't think the idea that Cuddy was uniquely targeted or treated more harshly than others holds water. It only appears so to a New York Times reporter because Cuddy's works is the kind that gets broad attention. Remember when Ben Goldacre kicked off "Worm Wars" with an amazingly condescending piece asking people not to point and laugh at Miguel and Kremer for the supposed "errors" in their Worms paper because they shared their data? Or the language and dudgeon around Reinhart and Rogoff's Excel error? Or the intemperate words flowing around the failure to replicate John Bargh's priming work? From another field, here's some pointed language challenging a recent result on gene editing alleging some pretty basic errors.
Of course, the commonality of bad behavior in academic circles doesn't excuse it. But that cuts both ways. Cuddy has also been using this faulty logic in her own defense. As far as I can tell, her main defense has always been "everyone was engaging in bad research practices, so it's not my fault", and that's definitely the implication that the NYT article gives. I don't see much distance between that and people excusing sexual harassment because they were "raised in the '60s and '70s."
Could the practice of social science be better? There's no question, but it's also not clear exactly how, other than the obvious avoidance of misogyny, ad hominem and personal attacks. But that line is difficult to see sometimes because the nature of social science research requires a great deal of personal investment. It's hard not to feel attacked when one's research, quite literally one's life's work, is criticized.
To me, the most thought-provoking part of the NYT piece is when Simmons, reviewing an email he sent to Cuddy about follow-up work on whether the power posing research was reliable, says "that email was too polite" given how serious he thought the problems were. And there is a lot of bad science that needs to be called out. This week, there's yet another update to the Brian Wansink saga--several papers flat out misrepresent who the study participants were (e.g. a paper claiming participants were 8-11 when they were 4-5). Not calling bad science out, I think, is a real contributor to real world problems, like Chief Justice John Roberts being able to call good political science research "sociological gobbledygook."
Here's a Chris Blattman thread on his reactions. Here's Andrew Gelman's response to the NYT piece and for the sake of this topic it is one of the few posts anywhere on the internet where you should read the comments. Someone in one of the Twitter threads wondered about the responsibility of Gelman and other bloggers like Tyler Cowen to police their comments. I'm sympathetic to this idea, but I'm old enough to remember policing comments on my own blog. It's an incredibly time-consuming and soul sucking affair with lots of trade-offs. The "business model" of blogging just doesn't allow it. In fact, in some ways it was the business model required to police commentary, also known as paid journalism, that led to blogging: the gatekeepers of commentary shut out too many voices who should be heard. Science, and the pursuit of truth, is hard.
Week of October 9, 2017
1. Evidence-Based Policy: Yesterday I was at a workshop hosted at Yale SOM and funded by the Hewlett Foundation on how to better connect evidence to policy. The workshop was part of a bigger project and a series of reports are coming that I will share when they are available. There was a lot of good discussion, but I thought I would share two thoughts that I find to be missing appropriate weight in evidence-based policy discussions. First, there is often discussion of a mismatch in the time horizons of researchers, implementers and policy makers. While this is no doubt true, the mismatch between those groups is trivial in comparison to the mismatch all those groups have with the amount of time it takes for change that people can feel to occur. Deworming's important effects--on earnings, not school attendance--are only felt decades after treatment. Moving to Opportunity similarly has a decade-scale effect. Few if any of the researchers, implementers or policymakers are still going to be around when the world really is undeniably different because of them.
Which brings me to the second point. The enterprise of evidence-based policy is grounded in marginal improvements across large groups of people--and that's a good thing! I'm a big believer in the value of marginal improvements (QED). But people have a really, really hard time noticing or caring about marginal improvements. Human beings prefer stories about big changes for a few people with unclear causality a lot more than they do about marginal gains with sound causal inference. I'm more and more convinced (because of evidence!) that hope is a key ingredient for even marginal impact, but hope comes from Queen of Katwe, not from 1/10 a standard deviation improvement in average test scores. So the unanswered question for me in this conversation is, "How do we manage the tension between the policies that are good for people and the policies that people want?"
In other evidence-based policy news, here's a rumination on the difficulty of applying research to practice in democratization (specifically Myanmar). And here's Andrew Gelman on not waiting for peer review, particularly in Economics, to start putting evidence into practice.
2. Evidence-Based Operations: OK, so there's one more thought: the gap between policy and research, and operations. But rather than a long discussion on that topic, here's a very good new piece on the operational choices of front-line social workers and the gap between policy (whether evidence-based or not) and practice. The challenge in the spotlight is not the Marxist-style view of workers dissociated from their work by rules but workers dissociated because of having too many morally-fraught choices. More light-heartedly, here's a piece that illustrates how hard it is to go from evidence to operational choices, as reflected through the failure of the US men's soccer team (I told you it would return). There is growing attention to front-line staff and the "product" as actually experienced by the beneficiary in impact evaluations, but much more is needed as far as I'm concerned.
3. Our Algorithmic Overlords: Speaking of operations, one of the areas where more attention is needed is the way that operations are being instantiated into algorithms that are opaque or entirely invisible. Ruben Mancha and Haslina Ali argue that that the unexamined algorithm is not worth using. Of course, they are arguing from ethics, not from business profits, where it's abundantly clear that unexamined algorithms are worth using.
Here's a piece about technology-related predictions from Gartner, a tech industry research and advisory company. Skip the first three to see some striking predictions about AI-generated false information, such as that people in "mature economies will consume more false information than true information." There's a threat to advancing evidence-based policy that definitely wasn't on the agenda yesterday. I started my career at Gartner way back in 1995 and I remember one of the first things we were given to read was an an article in Scientific American about the coming age of fake photography and video. Apparently that future has finally arrived.
Week of October 2, 2017
1. Abusive Practices: This is the part of the faiV that is different. But, perhaps contrary to the evidence, I have to hang onto the belief that making abusive practices in many domains more visible will in fact play a role in changing those practices. So first up is a piece about abuse of the elderly in Nevada where for years shady operators, aided and abetted by courts, legislators, medical professionals and other nominally civil servants have cooperated to revoke the rights and steal the assets of vulnerable people. That may seem an abstruse topic, but I think it has lots of parallels in many domains. Often, abuse of the vulnerable is tied to weak institutions or institutions that have no duty to those abused. Here we have strong institutions in many cases explicitly designed and supposedly devoted to protecting the vulnerable, which were turned against the people they were supposed to protect and which made challenging what was going on virtually impossible. As an aside, I have to commend Beth Rhyne of CFI who began talking years ago about the challenges that an aging global population would bring to financial inclusion and protection efforts.
At the other end of the age spectrum, here's a piece about the "1% winners/99% losers" labor market of young football/soccer players in England. It's a form of vocational school that consistently lies to 10 year-olds and their families and then dumps the vast majority of them at age 16.
Stretching even further afield, I'm hoping that many folks will find the time to read, or at least scan, the NY Times article on Harvey Weinstein, the movie mogul, and his decades of sexual harrassment and abuse and cover-ups. I'm particularly struck, if not surprised, because Weinstein moved in supposedly progressive circles. His behavior was apparently an open secret but did not dissuade many from working with him and for him and apparently participating in the glossing over of the abusive practices that let him continue. This piece about the lack of criticism coming from Hollywood is particularly pointed.
And now to connect this back to something more faiV-like: I hope the Weinstein saga provides further momentum behind efforts to reform practices and behavior in the social sciences, particularly when it comes to the academic job market. There is a rapidly growing effort particularly in Economics (with offshoots as far as I can tell in Political Science and Sociology) to make job market information more transparent, but more importantly move it away from sites like EconJobRumors which facilitate abusive behavior. Check out the hashtag #EJMinfo for more. This is a rare obvious opportunity to choose between the type of behavior that enabled Weinstein, and the type of behavior that will make such abusive practices and behavior impossible.
2. Economic History, History of Economics, and Evidence: Pseuderasmus, the pseudonym for an economic historian whose real name I don't know, has a long (long, long) post about the productivity gap that opened between India and Japan in the first 30 years of the 1900s. It's filled with fascinating historical details, so even a skim of it will be rewarding. The short version is that the power of unions in Japan was restrained by demographics, culture and the government which allowed manufacturers there to innovate far more quickly and increase productivity. This in turn left Japanese workers eventually far better off than Indian workers where labor unions exerted more power.
Beatrice Cherrier and Andrej Svorencik have a new paper examining the history and evolution of the Clark Medal and it's winners. Again there are plenty of interesting details to reward even a skim. I took particular note of the concentration of winners--eight universities account for all winners in terms of where their degree was earned, and 10 for all winners in terms of employment when they won. So economists are apparently uniquely good at identifying talent early, right? Right?
Finally, this week I stumbled on a newish site, Straight Talk on Evidence, that reviews not the evidence for various programs and policies (for instance as the Cochrane Collaboration, AidGrade or 3ie does), but the claims made by studies that are part of the evidence base. It's a project of the Laura and John Arnold Foundation. Here is their review of an evaluation of CCTs in the United States and of a Heckman paper on the long-run health impact of early childhood education.
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.
Week of September 18, 2017
1. Microenterprise and Household Finance: I assume that most of you are familiar with David McKenzie's business plan competition in Nigeria (there's even a Planet Money episode about it!) and his cash drop work (I have to use this self-serving link of course). David and co-authors have a new paper in Science (summary/blog version here) testing the effectiveness of business training for microenterprises in Togo and find that a standard business curricula did not do much (in line with lots of other business training studies, though most are plagued by too little power) but a curriculum based on boosting personal initiative did have large effects.
I see this as lining up with a stream of research finding that boosting aspirations or "hope" can have meaningful impact in many different contexts (see for instance, this recent work on effects of watching Queen of Katwe) and through a variety of interventions (any one know of an overview of recent work in this vein?). It also helps explain why there seem to be only small effects of business training on businesses that objectively should have lots of gains from marginal improvements in operations--if you don't believe that running your microenterprise better will matter...
In other microenterprise/microcredit news, I learned this week about a study (new draft coming soon apparently) that tests allocating microcredit based on peer views of microenterprise owner business skills. Those ranked highly do in fact see large returns to a $100 cash drop (8.8 to 13% monthly returns). I heard about the study from this excellent thread from Dina Pomeranz on a talk by Abhijit Banerjee and Esther Duflo on what new they've learned since that "old" book Poor Economics came out.
Finally, here's a new piece from Bindu Ananth that should go on your "must read" list. I couldn't agree with this statement more: "[T]he field of household finance has failed to examine the financial lives of low-income families in sufficient detail." She examines specifically issues with how to think about insurance vs. savings, high frequency saving and borrowing, and financial complexity. I will continue to beat the drum on two points: 1) low-income households are having to make financial decisions that would challenge a finance MBA, with large consequences for sub-optimal choices, and 2) almost all the advice we have on making wise financial choices is built on an assumption that the life-cycle model holds true, and may not in fact be good advice if the life-cycle model doesn't hold.
2. Premium Mediocre and American Inequality: I'll lead this off with a concept that I'm not quite sure what to make of, but does have me thinking: Premium Mediocre. The post goes on way way too long, but it's worth reading at least through the first couple of scrolls for some new ways to think about the old problems of inequality and mobility, or lack thereof, and what it does to household decision making.
This summer I mentioned but failed to link to a study on how delivering food stamps more frequently lowered the rate of shoplifting in grocery stores in Chicago. Here's a new paper that shows a much larger and long-term effect of food stamp receipt. Children whose families received food stamps for more years (due to staggered roll out of the program in the 60s and 70s) were less likely to be convicted of any crime as an adult, with larger effects on violent crime.
The importance of such safety net programs in the United States is growing as we learn more about how household finances are changing. Not only is year-to-year volatility seemingly increasing, and month-to-month volatility seemingly spreading, but lifetime earnings aren't just stagnant--they're falling. Some new work indicates that since the late 1960's American men's expected lifetime earnings began falling each year (into the present). That can make premium mediocre a stretch for each new cohort. It also perhaps helps explain this new and fairly shocking chart, based on Case and Deaton's work discussed extensively in the faiV this spring, that has been circulating on Twitter this week.
