11 May 2011 § 3 Comments
Something that has long struck me about modern discourses on international development is the idea that poverty is somehow shocking, an aberrance in our age of wealth. It’s not! Plenty of people in the world live in the way that humans have lived for most of history. If anything, it is the wealth of the developed West that is profoundly and ahistorically abnormal.
Worldmapper has some good maps of population and wealth through history that offer a bit of perspective on this topic. Data for year 1 CE was taken from Angus Maddison’s historical estimates of the world economy. Check out these maps of estimated population and wealth at this time:
Population, 1 CE (source)
Wealth, 1 CE (source)
You’ll note that the maps are virtually identical, reflecting the facts that per capita GDP (imputed to modern territories, as these states obviously didn’t exist in 1 CE) varied extremely little around the world. Maddison has estimated it at an average of $445 annually per person.
Now check out population and wealth in 2000:
Population, 2000 CE (source)
Wealth, 2002 CE (source)
Hello disparities! Latin America is the only region where wealth appears to have grown roughly commensurately with population. The US, Europe and Japan, of course, are looking a bit bloated, whilst most of sub-Saharan Africa appears to be doing worse (relative to the rest of the world) than it was 2000 years ago. Average global per capita GDP in 2000 was about $5200, meaning that even the massive population growth of the last two millennia has not prevented the world’s citizens from growing (on average) more than ten times as rich as they were in 1 CE.
It should go without saying that the conclusions one can actually draw from a set of maps drawn with imputed data is limited. However, I still find it useful to have a reminder that we shouldn’t assume the normalcy or inevitability of the world as we see it today.
2 May 2011 § 7 Comments
I’ve just started More Than Good Intentions, the new book on impact assessment in international development by Dean Karlan & Jacob Appel,* and was struck by a figure given in their introduction: US$2.3 trillion has been spent on development aid over the past 50 years. (They don’t specify how this figure was constructed, or whether it’s in nominal or constant dollars. However, Easterly cites the same figure elsewhere, so I’m going to run with it for the moment.) K&A mention this in the context of arguments about development effectiveness, with the usual gloss – the question of how that much money could have failed to spark development. Reading this now, however, I’d sooner ask the opposite question of why anyone might assume that such a trivial sum could suffice to materially transform large swathes of the world.
Think about it: US GDP in 2009 was $14 trillion in nominal terms. In a single year, the wealthiest country in the world produces up to 6 times the value of all the money spent on aid over the last 50 years. To put it in per capita terms, US per capita GDP in the same year was $45,989 in nominal dollars. Let’s assume that the $2.3 trillion in aid was spent equally over those 50 years, for approximately $46 billion in aid per year. Let’s assume as well that this aid went exclusively to the bottom billion during each of those years. That leaves us with about $46 per person per year over 50 years – about a month and a half of subsistence at an average of $1 a day.**
This is a highly stylized and inevitably inaccurate description of how aid funding is spent, but I found it useful to put these numbers into context. Why should we expect that a sum like $46 per person per year, no matter how effectively spent, might successfully pull nations out of poverty? Why should we expect this paltry ammunition to succeed against the array of historically and politically contingent reasons why countries find themselves unable to grow or to equitably distribute the benefits of growth?
Of course, this isn’t actually an argument against aid, or improving aid effectiveness. The fact that it isn’t sufficient to raise all impoverished people out of poverty doesn’t mean that the limited but real benefits that it can provide – like improving access to healthcare or education – are suddenly worthless. And certainly almost everyone in the development community sees aid as necessary yet insufficient for development. However, to echo Fukuyama’s critique of the lack of historical context in recent political science work (which you can read in my notes [PDF] from his recent talk at SAIS), I find it a bit troubling that we as development practitioners are still quite so focused on the causal link between aid and development, sometimes at the expense of broader thought about how countries develop and why. As a commentator at the Fukuyama talk said, much development work feels like it’s “trying to do history in a hurry” – and with insufficient tools at that. Alongside rigorous evaluation of the type K&A advocate, I’d love to see a stronger understanding of historical contingency & context in discourse on development.
* I worked on one of Dean’s projects with IPA, and he generously sent me a galley of the book for free.
** For the sticklers on research methods, yes, I know that nominal & real dollar amounts aren’t directly comparable; that aid hasn’t gone to a tidy billion people per year for exactly 50 years; that $1/day is actually a complex estimate of poverty [PDF]; and that living on $1/day doesn’t actually mean you get a dollar per day. It’s a thought experiment, yo.
17 April 2011 § 3 Comments
Investment levels seem strongly correlated with natural resources (no surprise there), but don’t appear to have much relation to the ease of doing business in a country. Nigeria, Sudan, Angola, and the Republic of Congo are all major oil exporters, even though of the 46 African countries the World Bank included in its 2011 Doing Business rankings*, they were respectively rated #17, 25, 31 and 40. Chad, at #46, had more investment than Botswana at #3. And Somalia, a failed state that didn’t even make it into the Doing Business rankings, had only a touch less investment than vaunted reformer Rwanda. Fascinating stuff.
*Only the current year’s data are up on the Doing Business site, and some countries have shifted rankings between 2009 (for which we have investment data) and 2011 (the business rankings). For instance, I know that the DRC went from 183 of 183 in the world in Doing Business 2009 to a less whopping 175 of 183 in 2011. That said, with the exception of unusually rapid reformers such as Rwanda, I doubt the investment climate has changed that significantly (with the exception of political unrest) in most countries over the last two years.
4 November 2010 § 4 Comments
I went to see Paul Collier speak at the LSE about his penultimate book…[and] asked him to explain the usefulness of his methodology to his critics (like me) who think his results fall into one of two categories: 1. obvious tautologies or near-tautologies. or 2. those that lend themselves to potentially dangerous extrapolation (or both).
I gave two examples from his lecture that night. Here is one: He said last night that he had found that the statistical relationship between individual leadership characteristics and economic growth didn’t hold when you controlled for the fairness of elections. Moreover, he discovered that individual leadership characteristics effected growth rates only when elections were ‘dirty’ and that individual leadership characteristics did not effect growth rates when elections were ‘clean’. This is a ‘sexy’ finding and sounds interesting. But, you can rephrase this same statement into a simple tautology: leaders are not stronger than institutions (ie. leaders do not have a greater impact than institutions on growth) when institutions are stronger than leaders (ie. when institutions prevent leaders from cheating elections). Vice versa: leaders are stronger than institutions when institutions are not as strong as leaders.
Unfortunately, he completely skirted my broader invitation to explain the usefulness of his methodology. Instead he focused on the one point about leadership and muddled through an answer; he said that he thought it was an interesting finding and that he didn’t know what the data would tell him in advance etc. I wasn’t convinced by [this response]…
[It raises] several interesting questions, in my mind, about Collier’s style and methodology:
1. Would some of Collier’s more unpalatable findings–such as that democracy doesn’t work in poorer countries–be more (or less) widely accepted if numbers were not telling the story?
2. How should the results of randomized testing be used to develop policy interventions? More specifically, would an indication of success through randomized testing in country X imply that such a policy would be useful in country Z?
3. As a public intellectual is it necessary to take extreme, contentious, or overly simplistic views? Should we, therefore, apply a massive public intellectual discount to people like Collier’s statements?
I found the first two questions especially interesting in light of the recent Microfinance Impact & Innovation conference, where a number of the same questions of narrative context and cross-country generalizability were raised. (Tim Ogden has a thorough round-up of blog reactions to the conference here.) Part of the ceteris paribus condition between control & treatment groups in an RCT is inevitably the broader country environment in which the experiment is taking place – and once you start making cross-country observations, well, the ceteris is no longer paribus. Of course, Collier-style observational studies of governance at the national level can only be cross-country, and you can’t ever statistically control for all sources of variation between two countries.
It makes me wonder if there’s a certain level of complexity up to which either randomized or observational studies can in fact be generalized outside of their original contexts. IPA folks talk a lot about the Kenya school deworming study, which showed that giving inexpensive deworming medication to schoolchildren improved educational outcomes, and I think it’s become a popular example in part because it’s so obviously generalizable to non-Kenyan contexts. It’s rooted in biological fact. At a slightly higher level of complexity, Erica Field had a good paper at the MII conference showing that modifying the design of Indian microfinance contracts to allow longer grace periods before repayment increased both profits & defaults among participating clients. Assuming equivalent oversight, there seems little reason to assume that the psychological & financial aspects of a grace period might not produce similar results if implemented in Latin America or Africa. But a country is a unit of observation that’s orders of magnitude larger and more complex than a single borrower, and it’s perhaps unsurprising that the observed nature of governance across countries is too variable, too path-dependent, to allow such cleanly identifiable relationships to exist.
17 January 2010 § Leave a Comment
Dean Karlan & Jonathan Zinman have quantified something most field researchers in the developing world probably sensed already – that respondents are often very sensitive to social perceptions around “undesirable” activities such as borrowing. In South Africa, they found that roughly 47% of known borrowers at a microcredit bank told surveyors they had not borrowed, with women being more likely to lie than men, and especially more likely to lie to male surveyors than female. (The surveyors had no connection with the bank, and thus no independent knowledge of the correct answer for a given respondent.)
This is the eternal question at the heart of field research – what do you do if self-reported data isn’t accurate, but it is all you have? And how does one incentivize truth-telling? An interesting corollary to this experiment would have been to tell a subset of respondents that the surveyors knew they belonged to the bank (without giving the surveyors any other personal information about respondents’ accounts), and measure how the mere mention of the lending institution changed respondents’ rate of truthful reporting. How would this work in situations where there is legitimately no authority with credible information on respondents, like measuring landholding in situations where land tenure is totally informal? Would this be too destructive to surveyor impartiality (and general research ethics) to be an option? The more I delve into these complicated questions of survey design, the more I find them strangely fascinating.
8 January 2010 § 33 Comments
A friend recently asked me for a list of interesting books on development, and I thought I’d share the results here. I read almost randomly in the field when I was still trying to narrow my initial broad interest in development down into something of which a career could be made, and the books below generally struck me as the most interesting, accessible, and generally well-supported introductions to their respective subject areas that I came across. (I haven’t read some of these in years, but in retrospect I think they’d all stand up decently to a reader with greater existing knowledge of development.) In roughly descending order of intellectual impact upon me:
- Development as Freedom, by Amartya Sen, is one of the best books I’ve read on the general concept of “development.” It addresses a number of common critiques, and creates a strong philosophical framework to support the argument that “development” is still necessary.
- Portfolios of the Poor is my favorite book of 2009 – an incredibly thoroughly-researched look into what poor people do with their money and how microfinance plays into this. I don’t remember learning more from a single book, well, probably ever.
- Understanding Poverty is a great introduction to a huge range of issues in development, from food security to education to microfinance. It’s written by a group of leading development economists, often from a behavioral perspective, and the thought contained here is both wide-ranging and rigorous.
- This is a bit quirky compared to the other recommendations, but I very much liked Expectations of Modernity, an ethnography of Zambian copper miners in the ’70s and ’80s. The description probably sounds boring, but it’s actually a great critique of the idea that people from the developing world who act in “Western” styles are blindly mimicking the West, instead of consciously bringing elements of Western culture into their lives in ways that reflect their own social & economic interests. It basically lays out a strong case for relativistic understandings of culture, which I find hugely important for any development worker, without framing it with that potentially off-putting phrase.
- The Bottom Billion has held up better in retrospect than its two better-known contemporaries, The End of Poverty and The White Man’s Burden, at least in my recollection. In a foreshadowing of my current interests, I liked its focus on research methodology in macroeconomics (i.e. where all that data underlying cross-country regressions comes from), and its quantitative look at the connections between war, governance and poverty. (Edit: David Roodman points out his own and Easterly‘s critiques of Collier for data mining in Wars, Guns and Votes, and believes that they’re applicable to The Bottom Billion as well. I’d suggest enjoying the intellectual curiosity of Collier’s research, but taking his statistical results with a grain of salt.)
- I can’t offer too much on the subject of public health, but I did greatly enjoy The Wisdom of Whores, which is an engaging book about health systems responses to HIV from the ’80s onwards, told by an irreverent epidemiologist with whom I would very much like to have a drink one day. It’s also a great critical look at where public health data comes from, how it’s used, and to some degree why governments and international organizations choose the health priorities that they do.
- Making Globalization Work is something I recalled as insightful on the topics of global financial institutions, markets and trade at the time I read it.
- I’ve been trying to find a good overview of the World Bank that I read for a geography class a few years ago, and while I’m not sure that I’ve identified it, The World Bank: From Reconstruction to Development to Equity looks like it covers similar subject matter. I found tracing the Bank’s historical evolution quite interesting, as it also captures the variety of Western thought on “development” that’s occurred over the past 50 years, and explains quite a lot as well about current bilateral and multilateral aid regimes.
Tell me, dear readers, what else would you recommend for the interested lay reader?
22 December 2009 § Leave a Comment
I promised Asif Dowla some time ago that I would blog about some of his work, and after digging myself out from a fair deal of work that accumulated whilst I was focusing on grad school applications, I finally read his interesting 2005 article on how Grameen Bank built social capital among its members. Dowla identifies three components of social capital – trust, norms, and social networks – and what primarily fascinated me from an institutional perspective was how the norms & networks of rural Bangladesh played into Grameen’s search to build vertical trust between bank & clients. Women’s access to finance seems to be a less contentious issue in Bangladeshi microfinance today, given the country’s relatively high penetration of microfinancial services, but at the outset Grameen had to work carefully around purdah norms and women’s correspondingly limited social networks in order to convince potential clients that it was a serious partner. As religious restrictions on gender and public space are less pronounced in most of Africa, I had previously thought of trust-building as more a matter of demonstrating reliability and transparency of services, as Portfolios of the Poor observes. It’s interesting to see the creation of institutional trust explicitly embedded in a local context like this. (On a related note, I was surprised to learn that Bangladesh has more microfinance borrowers than all of Africa and Latin America combined. They’ve come a long way.)
Naturally, all of this put me in mind of Tim Harford’s hugely insightful article on the importance of institutional trust for economic growth. Dowla has a good section on how building non-kin-group networks through group lending was an important effect of Grameen’s work in the Bangladeshi context, but he also hints at the limits of building a financial system on personal trust when he observes that joint liability within groups seemed to be enforced more by staff than by other group members. This makes sense on the face of it, when one thinks about the conflicting incentives any group member might have to force another member to cover a missed loan payment. On the one hand, predicating continued access to credit on full and timely group repayment is a powerful incentive to force payment, but on the other hand, clients might want to be given some leeway themselves if they miss a payment in the future – or might not want to act as hostile enforcers towards people they’ll continue to see around the neighborhood. This is mere speculation, of course, but it does point to the advantages of shifting loan enforcement duties from a situation governed by personal trust to one governed by institutional trust. I think it would be a good sign if Grameen’s groups had naturally drifted towards this arrangement.
Finally, my favorite phrase? The poorest of the poor often have “a short radius of trust … because trust [must be] enforceable by the threat of retaliation.”
19 December 2009 § 1 Comment
I have to say that I really enjoy academic literature reviews – so many insights in so little space! An excellent recent find was Stefano DellaVigna’s “Psychology and Economics: Evidence from the Field,” which is more or less a short treatise on how to think about and test hypotheses in behavioral economics. Whilst some of the points covered were essentially quantifications of easily observable phenomena (such as hyperbolic discounting), there were two that struck me in their phrasing and their implications for microfinance:
- Attention is a scarce resource. This makes intuitive sense, but I found it a pithy description of a fact that we too often neglect when trying to communicate with others. Another good insight was that “consumer inattention to non-transparent [costs] is substantial.” This to say that we tend to anchor our purchasing behavior on the costs that are most prominent, or even literally visible to us. For instance, most US shoppers do fully understand that sales & excise taxes will be added on to the final cost of their grocery purchases – but researchers found that listing the (unchanged) tax visibly on an item’s price tag decreased consumer uptake of that item.
- Choice avoidance is real. I’ll just quote: “Marianne Bertrand et al. (forthcoming) examine the impact of a small or large menu set in the context of a field experiment on the mailing of 50,000 loan offers in South Africa. The authors randomize, among other things, the format of the table illustrating the use of the loan. The small-table format lists only one loan size as an example, while the big-table format presents four different loan sizes. The finding is consistent with the choice avoidance results. The take-up in the small-table format is .6 percentage points larger compared to a baseline of 8 percentage points, an effect size equivalent to a reduction of the (monthly) interest rate by 2.3 percentage points.”
Both of these points made me think about striking a balance in microfinance marketing. On the one hand, it’s clearly preferable to phrase information in ways that are transparent (no invisible costs) and understandable to clients (so probably discussing interest as a fee rather than an annualized percentage). On the other hand, however, it’s also important not to overwhelm potential clients with information – especially those for whom microfinance is a first, and likely intimidating, foray into the formal financial system. So the responsible MFI must figure out – what aspects of their products are clients really paying attention to? And how do you tell people about them in a way that’s transparent, but also compelling?
I think there’s an obscure parallel here to David Roodman’s recent post on microfinance as institution building – namely, that doing better sales, marketing, client outreach, whatever you’d like to call it is a step towards building commercially viable financial systems for the average residents of developing countries. A large part of this is that product design is at the heart of marketing, and, as Portfolios of the Poor amply demonstrated, microlending could use a revolution or ten in the design of its products. But I also partly feel like an attention to marketing – to why microfinance clients take or refuse the loans that they do – would indicate that the financial sector is starting to take the poor seriously as financial decision-makers, as valid and valued clients of a non-exclusionary financial system. That’s what I’d really like to see.
13 April 2009 § 2 Comments
Just a quick note on the research on agricultural supply chains that I’m doing right now – I’m finding it fascinating that one can guess at the nutritional status of households based on their income elasticity of food expenditures. Poorer households tend to have an elasticity of demand close to one, suggesting that people who are far from getting their nutritional needs met will spend almost all additional income on food. Wealthier households in developing countries, on the other hand, are more likely to have an elasticity of close to zero, suggesting that people who are well-nourished will spend little additional income on food. Of course, it’s also been found that some wealthier households have an elasticity of caloric intake close to 0.5, hinting that as income goes up, consumption of packaged foods that are more expensive and less healthy may crowd out some cheaper and more nutritious foods. This is so cool – graphical representations of the complex social & economic realities that govern food choices.