Roving Bandit

Face it, economist, you are a nerd

2012-02-23T21:39:00.001Z

Face it economists: you do math, stats, and coding for a living. It's too late; you are a nerd. You are not a backslapping deal-making executive or a trash-talking caffeine-guzzling Goldman Sachs trader. You are a scientist of some sort, or at least you should be. Embrace it! Watch Fringe. Grow your hair out. Learn to juggle.

Noahpinion (new to me, but apparently blogging since 2005, respect for that!)

When the counterfactual really matters

2012-02-22T11:46:00.000Z

Jonathan Portes, the Director of Britain's National Institute of Economic and Social Research has a great post up discussing the slightly controversial mandatory work experience placements in supermarkets for unemployed youngsters. Whether the scheme constitutes slave labour or not, it would be interesting to think for a second about its effectiveness.

The Minister in charge of the scheme has proudly trumpeted:

The fact is that 13 weeks after starting their placements, around 50 per cent of those taking part have either taken up permanent posts or have stopped claiming benefits.

Mr. Portes, formally a Chief Economist at the same government department, considers the counterfactual: claimants of job-seekers allowance (JSA) who do not participate in a work experience placement:

Off-flows from JSA remain high - almost 60% of claimants leave within three months

So you have a 60% chance of leaving benefits in 3 months unless you take part in this scheme, after which you only have a 50% chance. Awk-ward. Of course:

Now this is not definitive - without a proper control group and a counterfactual, we do not know what would have happened to the participants without the programme. Maybe I am wrong, and in fact those who go on the programme have very poor characteristics, and would have done even worse without it. Without proper evaluation, we just don't know. But certainly the evidence and analysis so far published by DWP does not make a good case.

Bottom line #1: if you're interested in smart and well-presented UK economic policy analysis you should really be reading Jonathan Portes.

Bottom line #2: There is probably a very good business case to be made for sending Mr. Iain Duncan Smith on the J-PAL Exec Ed course on evaluating social programs. Training budgets must be tight with all the cuts going on and that though, so - genuine offer - if you're interested Mr. Smith I'll pay your tuition fees out of my own pocket :)

The economics of the UK housing benefit cap

2012-02-18T14:38:00.000Z

I'm as liberal as they come. Economically and socially. I believe in markets, but I also believe that we need massive redistribution to ensure effective safety nets and fair life chances for all children. But sometimes, the Guardian, you just take bleeding heart liberalism to whole new levels.

Yesterday you invited us to feel sympathy for Amira and her four children, who are losing their publicly-funded £812 a week flat near Edgware Road because of the new cap on housing benefits. Eight hundred and twelve pounds a week.

Median earnings in the UK are around £500 a week. Yes, we need a safety net. But should we really be paying 160% of average earnings in housing benefit alone for people out of work so that they can live in very desirable postcodes in central London?

£812 a week is £42,224 a year. Considerably more than what most working people earn. Paid by the state in rent.

Homelessness is scary. Moving kids to new schools can be disruptive. These adjustments needs to be handled delicately. But if we drop the status quo bias for one second, paying £812 a week in housing benefits for one household (PLUS other benefits) is insane.

(The win-win solution here, by the way, is remove planning restrictions, ignore the nimbys, let the private sector build the extra houses that it would if it could, and watch rents fall).

The evolving art of political economy analysis

2012-02-17T08:30:00.000Z

This is a guest-post by Richard Williams, summarising his new OPM Development Futures paper, co-authored with James Copestake of the University of Bath

Over the last 15 years, development actors have increasingly recognised the political and messy nature of reform. Prescribing best practice solutions has often failed given the differing perspectives, capacity and motivations of stakeholders on each side of the aid relationship. Political economy analysis (PEA) has emerged in response to help practitioners close this gap and understand the reform environment in which they are acting. This has led to more realism in the aid industry with more open discussions of power, political culture, ethnic divisions, corruption, sources of opposition and indifference, and so on.

However, PEA as it stands risks becoming another routine element in aid programming, rather than a transforming, innovative influence on how development practice works. For example, the common tool guiding aid programmes – the logical framework – is no doubt enhanced by the use of PEA, for example by ensuring resources are more aligned to local structures, but the fundamental premise of how we act stays the same: goals are set, a logical sequence of actions predicted and all things messy or unknown are relegated to a heading under ‘risks’.

This Development Futures paper charts a new course for PEA to have a more radical impact on development practice. It argues that if we are serious about embracing the political and complex nature of development then we need different ways of acting to confront such complexity. This includes acknowledging our own limited knowledge (an action rarely applauded), the need to collaborate with others to build new knowledge and increased flexibility to react to such analysis as well as other unexpected events. PEA therefore should strive to be more than a technocratic means to understand the commitment and capacity of others but an opportunity for internal learning and adjustment.

To this end, the paper sets out a framework for combining PEAs focus on the macro-politics of recipient country interests with the micro-politics of stakeholder relations, including more self-reflection on the part of donors and consultants. This paves the way for thinking of development practice as iterative cycles of experimentation, discovery, learning and interaction. Whilst this perhaps sounds ambitious, particularly given the current emphasis on visible results and value for money, we argue that these iterative cycles of engagement are already happening. By making them more explicit we can become more effective.

(these views don't necessarily represent the views of OPM or the University of Bath, etc etc.....)

Why has poverty fallen in Rwanda?

2012-02-16T15:33:00.000Z

Following the presentation of the headline 12% point reduction in poverty over the last 5 years in Rwanda, the full reports are now available from the National Institute of Statistics (here and here).

One contributory factor will be the reduction in average household size over the period (implying reduced consumption needs); this is consistent with the declining fertility rate reported in the DHS surveys.

Based on the income data, the survey results show an important increase in the contribution of wage income and also an increase in income from transfers; the share of agricultural income falls modestly though remains the majority source of income.

Analysis of the survey data confirms the importance of wage activity by identifying that there has been substantial creation of jobs, predominantly in non-farm activities, over the past five years. Which areas these jobs are in, still needs to be investigated in subsequent work.

A second factor identified from the survey data is increased agricultural production. Looking at aggregate production data confirms significantly higher production levels in 2010/11 than 2005/06, most strikingly in the Northern Province followed by the Western Province (the key producing regions), and this is despite the fact that average land size cultivated per household has fallen over the period. This pattern of increased production is consistent with production data from MINAGRI. At the same time, there was a substantial increase in the use of chemical fertilisers in agriculture over this period.

A third factor has been increased commercialisation of agriculture. In 2005/06, households sold around 18% of their output on average but by 2010/11 the average proportion of output sold had risen to 25%. There was increased demand for agricultural production from Rwanda over this period from neighbouring countries and in part in response to food crises elsewhere. A fourth factor is the increasing importance of transfers over the period, both private and public. While these do not just benefit the poor, they have contributed to poverty reduction over the period.

From The Evolution of Poverty In Rwanda From 2000 T0 2011: Results From The Household Surveys (EICV)

And for more detail, see The Third Integrated Household Living Conditions Survey (EICV3): Main Indicators Report

Economical Writing

2012-02-15T21:42:00.000Z

The main cause of bad writing in economics is that economists don't read good writing. If economists would read Jane Austen or George Orwell, or even Adam Smith or Thomas Schelling, in bulk, daily, habitually, they would improve.

Deirdre McCloskey (HT: Abhijeet Singh)

Ending world hunger

2012-02-15T20:14:00.000Z

Duncan Green is right on point in the Guardian:

Some 850 million people (one in eight of the world's population) go to bed hungry every night. Many of them are children, for whom early hunger leaves a lifelong legacy of cognitive and physical impairment. The human and economic waste is horrifying ...

Damaged bodies and brains are a moral scandal and a tragic waste of economic potential. That hunger exists at all shows the urgency of redistributing income and assets to achieve a fairer world. Providing the additional calories needed by the 13% of the world's population facing hunger would require just 1% of the current global food supply. That that redistribution has not already taken place is truly something to be ashamed of.

The good news is that there's no need to just sit around railing against the system - YOU can make a real difference right now - there is data, there is evidence, there are really good reliable opportunities for you to totally change someone's life. Or rather, lots of people's lives. And for a sneaky selfish bonus, giving money away makes you happier. Go to Givewell, check out the analysis, and make a donation.

A consultant's love life

2012-02-14T16:54:00.000Z

An oldie but a goodie, if you haven't seen this yet, I think it is probably better than most of the other economist-chart valentine's jokes doing the rounds.

Romance: A BCG Analysis

HT: Steve

UNDP is hiring an international fitness instructor for its Juba staff

2012-02-13T21:02:00.000Z

Update: Samer Abu Hawilih states in the comments that this is "not funded by UNDP or donor funds. This is a staff-led initiative, through the Staff Association and Wellbeing Office." Thanks for the clarification Samer.

international personnel are placed in non-family posts in South Sudan under hardship conditions, displacing them from their culture and normal support networks.

All personnel are struggling to cope with the chronic stress of working within a post-conflict environment in which few counseling, social support, and other support and recreational services are available. Of particular concern is the need to help staff deal with traumatic stress, chronic stress, communication and resolution of interpersonal conflicts, multi- and cross-cultural diversity, and alcohol and substance abuse education.

UNDP South Sudan recognizes that counseling services and recreational facilities and activities should be part of the staff wellbeing initiative. Resolving problems, exercise and dealing with personal and work issues is an important part of a staff member’s wellbeing. Therefore, we are seeking to recruit a fitness Instructor to assist in providing exercises as part of the wellbeing of staff in order to ensure work/life balance, which is another important referral service for staff members.

UNDP Jobs (HT: TvV)

I have no words (at least none that it would be prudent to express here).

Compare and contrast with Oxfam deciding not to use its Nairobi swimming pool because of worries about media and public opinion back home in the UK. Spot the difference.

Why don't microenterprises grow?

2012-02-13T18:15:00.001Z

A couple of very interesting ideas from David McKenzie that I hadn't heard before in the second part of his interview with Tim Ogden: (here is part one)

maybe microenteprises are viable because the "reserve wage" of their owners is so low;

If you start trying to value the opportunity cost of that labor and you calculate it at some sort of market wage rate quickly you’ll find that many of these businesses look unprofitable ...

why it is that microfinance can get a woman to run somewhat profitable businesses with chickens and things but they never get those businesses to grow into something greater. And the whole thing is that the women in these Asian countries have no other options. When their time value is 0 they can do this but as soon as they have to hire somebody at market wage it becomes unprofitable to expand.

and measuring microenterprise profit is generally really really hard;

if you look at the Banerjee and Duflo Spandana paper, for instance, there’s a huge amount of noise in their profits data. I did some calculations and I think it came out that they would need 2 million people to find an increase of 10% in profits given the take-up of microfinance and the noise in profit measurements

Finally; I am really looking forward to Tim's new book, Experimental Conversations, based on interviews with a variety of economists conducting field experiments on poverty interventions. One of the best books I ever read on macroeconomics was a book of interviews. There is a tremendous amount that goes unwritten in journal articles. Blogs have increased access to this kind of informal chat, but there is probably still an undersupply of good ideas communicated well. In Tyler Cowen's words;

why do not more economists blog? I believe it is because they can’t, at least not without embarrassing themselves rather quickly, even if they are smart and very good economists. It’s simply a different set of skills.

As Freakonomics demonstrated ably (at least the original book), researcher-journalist collaborations can be a decent way of filling the gap. David McKenzie is one of my favourite economists, doing lots of fascinating research, and he blogs. And yet I hadn't heard either of these two fairly substantial points before.

Urbanization in Africa

2012-02-13T16:59:00.000Z

Sean Fox, a cities expert at the LSE has a great new post up at the Africa@LSE Blog discussing how incorrect analysis has been leading to poor policy for years.

The popular mental model is that there is massive rural-urban migration in search of jobs.

"Since the mid-1970s, African governments have increasingly adopted policies designed to inhibit or discourage people from moving into urban areas. Today, approximately 80% of African countries have policies in place to prevent rural-urban migration. At the same time, international development organisations increasingly withdrew support for urban development initiatives in favour of rural development projects, often justified by the argument (among others) that improving standards of living in rural areas will help to mitigate the growth of urban poverty."

The trouble is, most urban population growth is actually just natural growth. And the rural-urban migration that does exist is driven by a range of factors, not just jobs, such as a "desire to escape age or gender discrimination in their communities, to find a wife or husband, to seek adventure in the “bright lights” of the big city, or to escape rural serfdom."

Which is actually pretty clear when you just look at the data. This is rural and urban population growth in Africa since the 1960s, based on the World Development Indicators (chart stolen from Ian MacAuslan). Cities are growing fast, but so are rural populations.

And the last word from Sean;

"Simply put, the rapid growth of Africa’s urban population is being driven primarily by rapid population growth in urban areas, not rural-urban migration ... For those interested in easing demographic pressure in urban areas, the only humane policy option is to try to reduce population growth by promoting fertility decline through voluntary family planning initiatives. And for those interested in promoting economic development in the region, investment in urban areas should be top of the policy agenda."

Read the whole thing here.

Evaluating TOMS shoes, child sponsorship, cow donations, and fair trade coffee

2012-02-09T22:38:00.004Z

And the prize for most diverse recent set of popular NGO development program intervention evaluations goes to (drum roll please) **~!Bruce Wydick!~**

James Choi quotes him writing in Christianity Today on Fair Trade Coffee:

Fair-trade coffee isn't a scam, but it is hard to find a development program that has attracted so much attention while having so little real impact. The most recent rigorous academic study, carried out by a group of researchers at the University of California, finds zero average impact on coffee grower incomes over 13 years of participation in a fair-trade coffee network.

So I looked up his page and found this on child sponsorship:

Although international child sponsorship may be the most widespread form of personal contact between households in wealthy countries with the poor in developing countries, to date there are no published studies that have analyzed whether the beneficiaries of these programs have experienced changes in their life outcomes.

We find large and statistically significant impacts of the [compassion international] child sponsorship program on most of our outcome variables.

And then there are rigorous impact evaluations to come on Heifer International and TOMS shoes - exciting stuff!

Governance in Rwanda

2012-02-09T14:36:00.000Z

Some interesting comments about Rwanda on my last post. I'm not going to touch this particular poverty vs human rights debacle with a barge-pole. In any case, I don't buy the argument at all that autocracy is in general in any way good for development (the data just doesn't support it). But I think you can make a reasonable case that you need to look at the change in governance as much as its absolute level in order to understand its impact upon the economy.

This chart shows trends in Rwandan governance, as measured by the Polity IV project. Positive on the scale is democratic and negative is autocratic. Above 6 gets you full democracy status and minus 6 full autocracy. Kagame came to power around 2000 (update: officially 2000, but effectively 1994?).

Poverty down 12% in Rwanda

2012-02-07T15:40:00.000Z

Rwanda launches its new poverty numbers today. Poverty has fallen by almost 12 percentage points in just 5 years. That is pretty incredible. Speaking at the launch, Paul Collier said "The combination of growth, reduction in poverty and more equity has been achieved no where else in Africa."

Here is a comparison with international experience of poverty reduction:

I imagine that some commentators may have something to say about the political implications of all this. Not me. Just congratulations to the approximately 1 half a million Rwandans who have managed to increase their income and work themselves out of poverty. And to the National Institute of Statistics and the Ministry of Finance & Economic Planning of Rwanda for getting these numbers out so quickly after the end of fieldwork. (And... to the team from OPM and Sussex who gave them a hand).

For more, follow @RwandaGov , @MinFinanceRw , #rwanda2020 , and you can find the full launch presentations here.

Is microcredit insane?

2012-02-04T15:59:00.002Z

First off, a lot of microcredit programs operate under the assumption that there are large populations of entrepreneurs in countries with long histories of poverty who just need a tiny push in the form of a microloan to unleash their wealth creating power. A lot of EAWs can say with a straight face that their microloans empower people who may be illiterate, innumerate and own no productive assets to start “microenterprises”.

The problem with this belief is that it’s insane.

http://stuffexpataidworkerslike.com/2012/01/23/132-microcredit/

East African etiquette

2012-02-04T15:59:00.001Z

One of my favourite Juba-things, which is apparently also a Kenya-thing, is hand-shaking. You always shake hands with the people you meet, all the time, every person in the room, no matter how long it takes.

There's also a great rule for when you are eating, or your hands are otherwise dirty - just offer a wrist instead. Simple, and avoids that English awkwardness where you don't know what to do. I'm bringing it back to England. Who's with me?

Ugandan billboard of the day

2012-02-04T15:42:00.003Z

The UN has declared that internet access is a human right. So we’re [MTN] giving you that access for free.

via Brian Swartz

The economics of livelihoods

2012-02-03T11:03:00.002Z

I'm not really sure what "livelihoods" means, except that I know that NGOs talk about it a lot, and that it seems to have something to do with helping poor people to generate more income. In fact NGOs seem to spend a lot of time and money trying to help poor people to improve their livelihoods, or generate more income. Now, how people generate their income sounds a lot like the kind of problem that economics was designed to deal with. In fact, a naive observer might have guessed that the whole point of micro development economics was to apply theory and evidence to the question of how poor people generate their income, and what interventions can do to improve matters. Which might have led you to expect a voluminous literature on the economics of livelihoods.

A google search for "the economics of livelihoods" gets you 51 results. "The economics of livelihoods approaches" get you zero. Now, I think this is probably just an issue of terminology. Is this an unexploited niche for economists to influence policy just by speaking NGO language?

Economic models are so unrealistic

2012-01-31T22:07:00.000Z

Sometimes listening to criticisms of models feels a bit like this.

South Sudan non sequitur

2012-01-30T11:17:00.002Z

Simon Tisdall writes in the Guardian

disputes over oil revenue-sharing, cross-border conflict, and looming famine. These multiple crises combine to pose a fundamental question: can South Sudan survive as a viable state?

Which in a slightly round-about way is a nice reminder of the tremendous benefits of studying economics. Economics teaches you a handful of incredibly powerful core concepts which, once assimilated, you kind of take for granted, and forget that not everybody intuitively thinks this way. Supply and demand. Incentives. Opportunity cost.

Opportunity cost means asking "compared to what." Can South Sudan survive as a viable state compared to what? A Khartoum-led state whose most significant offerings to the South over the last 50 years have been bombs? In what sense was the Khartoum-led state "viable" in the South over the last 50 years?

It's a bit like sceptically asking a daily victim of domestic violence for 50 years whether they are really being realistic thinking that they can survive as a viable independent household.

Would you rather live in a weak state or a state that is literally trying to kill you?

Hold on to your hats

2012-01-24T21:46:00.003Z

So Juba has decided to stop oil production in South Sudan, in protest of Khartoum theft. Pre-independence, revenues from the South were split 50:50, and Khartoum have basically been trying to continue that by imposing arbitrary fees, asking for up to $30 per barrel (Juba claims that normal prices for pipeline transit fees in other countries are around $1 per barrel).

So now we have a war of attrition. Which side can afford to last out the longest before making a compromise? Who has the largest cash reserves relative to their recurrent spending demands? The numbers are probably not in the public domain, but Khartoum does at least have some other sources of revenue. Revenues in Juba must basically be zero now. But then Juba does probably have a more sympathetic population who seem to be behind the decision, and therefore with perhaps a greater appetite for dramatic spending cuts than citizens in Khartoum. Good luck Juba, and I pray this ends peacefully.

Do chime in if you have any insights.

Update: Alex de Waal notes that if the pipes are shut, it will take 6 months to get oil flowing again. The last chance to come to a deal is apparently Friday when Bashir and Kiir meet in Addis Ababa.

Lenny Henry in Kibera

2012-01-22T17:17:00.001Z

Four British celebrities try living and working in Kibera for a week on the £1-£2 average daily income (hattip: my mum).

The culture that is Britain

2012-01-18T14:38:00.000Z

Or how foreigners view the British:

From a VSO report on "The Live Aid Legacy," via @nathanyaffe

Why do Kenyans save?

2012-01-17T14:48:00.002Z

0.089% of them apparently answered "When I receive money in ransom" to this question, from the 2009 Financial Access survey. Ahem.

Korogocho

2012-01-15T10:28:00.001Z

I've spent most of this week wandering around Korogocho, Nairobi's third or fourth biggest slum (against recent FCO advice against "all but essential travel to low income areas of Nairobi, including all township or slum areas" - worth a few dangerzone street-cred points?).

Korogocho is probably a bit poorer and a bit more dangerous than Kibera so I was advised against taking a camera, but it looks pretty similar to Duncan's photos of Kibera from this week. In fairness, someone did have a phone snatched literally opposite where we were sitting, and there was a stabbing on the same street a few nights ago. A local medical centre reported stabbings as the #1 source of admissions, followed by malaria and typhoid.

I did sneak one photo from the safety of the NGO building we were based in. Remember those "amazing" sunlight powered water-bottle lights innovated for slums in Philippines that were all over the development blogs a few months ago? Rubbish. Everywhere in Korogocho just fits a square of transparent corrugated plastic into the corrugated iron roof. Much better.

Lots of other interesting moments, but for now;

Best t-shirt slogan: “No Handouts, Just Empower me.”

Best blog on the neighbouring Kariobangi light industrial cluster where many Korogocho residents work.

What you can do to help: apparently uneaten plane meals from Kenyan Airways get dumped at the enormous dandora dumpsite adjacent to Korogocho, and end up in the market (including things like quite expensive Out of Africa brand Macadamia nuts). So the moral of the story: next time you fly Kenya airways, don't eat your plane meal and donate it to a poor slum dweller!