Alex Singleton is the man who called himself the Globalisation Institute for a while, which he used as a platform to argue against things that would help poor people, like fair trade and aid.
When that folded (presumably on account of talking rubbish) he now seems to write leadrs for the Daily Telegraph.
The always excellent Chris Dillow explains why Alex is talking rubbish again, this time about about domestic economic policy:
Alex Singleton claims that today’s cut in Bank rate will prolong the recession. I think he’s confused.
Chris Blattman asks us to comment on his advice to aspiring graduate student who want to be an impact evaluator:
If your goal is to improve the delivery of aid, and truly advance development, many more skills and knowledge are involved than the randomized evaluation. See here for more. But in short: a well-identified causal impact that arrives two years after the program does not performance management make.
My conclusion is similar, but my perspective is a bit different.
The development business needs much better and more rigorous evaluations. There are a huge number of superficial, poorly designed evaluations whose sole purpose is to tick a box, rather than to find out what works. We would be better off with fewer, but properly designed evaluations.
Like Chris, I think there are ways to do rigorous evaluations other than through randomised trials. But I probably believe more strongly in randomisation as being the most rigorous and effective approach where possible. I think the burden of proof is on those who want to use other methods to show that a randomised trial is impossible, or disproportionately expensive, or unethical, or that their alternative approach is in some way superior. Very often the choice is made out of laziness or ignorance.
But I think there is a big problem in the evaluation industry. Too many evaluations are conducted because they are methodologically interesting – for example, because a researcher has thought of a neat way of randomising, or of demonstrating a new statistical technique. Apparently using well-established and proven techniques of evaluation is too boring: people think they won’t get tenure if they don’t do something new. The result is that evaluations are frequently driven by the interest of the researcher in evaluation techniques, rather than the most important and relevant questions in development policy. We know all kinds of strange things about the use of deworming pills, but we don’t know what the best way is to get girls in school.
And that is why I agree with Chris that you should not specialize in having a PhD in evaluation, and that a broad range of skills is preferable. What we want is people who understand the big picture, and know what are the important questions to ask, and hopefully answer, instead of people who have disappeared up their own navel with an obsession about neat new statistical techniques.
The Economist has a stupid article, Managing the Facebookers which claims that the net generation will suffer int he recession:
Once again, the touchy-feely management fads that always spring up in years of plenty (remember the guff about “the search for meaning” and “the importance of brand me”) are being ditched in favour of more brutal command-and-control methods. Having grown up in good times, Net Geners have laboured under the illusion that the world owed them a living. But hopping between jobs to find one that meets your inner spiritual needs is not so easy when there are no jobs to hop to. And as for that sabbatical: here’s a permanent one, sunshine.
The article is unencumbered by evidence: it reads more like wishful thinking by some curmudgeonly old hack who resents the rise of younger, smarter, better connected and more self-confident rivals.
It is quite plausible that the exact opposite might happen and that the economic upheaval will accelerate trends in the workplace towards the tools and attitudes of the Net Generation. It seems to be the industry dinosaurs that are going bust (think General Motors and Woolworths) not the new economy (Amazon is doing well). At a time of belt-tightening and rapid change, there will be a premium for people who can collaborate effectively, are comfortable working in teams and multi-tasking, and able to adapt rapidly to new ways of working.
Maybe the cosh is actually hovering over the gnarly old bosses who have resisted change for the last decade, not the facebook generation?
There are two new episodes of the Development Drums podcast now online.
Episode 4 with Shanta Devarajan discusses the impact on developing countries of the financial crisis; latest developments in the food crisis; the award of the Mo Ibrahim prize for good governance in Africa. Sheila Page discusses moves towards a Free Trade Area from Cairo to Cape Town.
And there is a special extra edition of Development Drums about currente events in the Eastern Congo. Patrick Smith of Africa Confidential explains the background to the crisis.
You can use this link to subscribe to Development Drums:
If you use iTunes, you can search for Development Drums in the iTunes store (it’s free), or use this link:
Chris Blattman and Bernd Beber are looking at the economics of child soldiering. Why do rebel armies, such as the Lords Resistance Army in Uganda, recruit adolescents? According to Blattman and Beber, because younger children are ineffective soldiers; and adults are too difficult to indoctrinate.
What I find interesting about this work is that from premises which sound intuitively plausible, Chris and Bernd then arrive at policy conclusions that are initially counterintuitive:
- anti-insurgency measures (eg increasing military spending by the government) may increase child soldiering (because it increases the size of army needed by a rebel commander)
- measures to reduce child labour may increase child soldiering (because it reduces alternative options for children)
- increased educational and economic opportunities for children will only reduce child soldiering if those opportunities increase faster for children than for adults
- a good strategy to reduce child soldiering would include “abduction training” – teaching children how to resist indoctrination and to escape if captured (rather as Japanese children learn to deal with earthquakes)
Chris calls himself a political scientist, rather than an economist. But I think this is exactly the sort of work that economists, at their best, should be doing. This work is a fascinating combination of insights into human motivation and incentives, and the use of quantitative techniques to test whether those ideas correspond to the world we observe.
The third edition of the development podcast, Development Drums, is now online.
This week the guests are:
- Ngaire Woods
Professor of Political Economy at Oxford University, and Director of the Global Economic Governance Programme. - David Roodman
Center for Global Development in Washington DC, and architect of the Commitment to Development Index.
This week the focus is on the impact of the financial crisis on developing countries, and on proposals to reform international institutions.
The podcast is now hosted on a new server. If you have already subscribed, you may need to remove the old subscription and then subscribe again. You can use this link:
If you use iTunes, you can search for Development Drums in the iTunes store, or use this link:
In the meantime, I’ve made some more technical improvements. I have moved the server, to make it easier and faster to download for our listeners in Khartoum and Kinshasa; and though the file size is smaller (15Mb) the sound quality is a little better. I’ve also kept is a bit shorter, to just 45 minutes.
As ever, I’d welcome feedback about this podcast. Do you find it interesting? Do you have suggestions for future topics, or guests? Perhaps you would like to come on yourself?
Ray Fisman writing in Slate asks whether falling commodities prices cause civil wars in commodity-rich countries:
To reduce violence in Colombia and other commodities-rich countries, care has to be taken to recognize how fluctuating prices actually affect the situation on the ground. If lower coffee prices drive poor farmers to desperation, we need to do something to cushion the blow to their incomes. One recent suggestion from University of California, Berkeley, economist Edward Miguel and myself is to shift some amount of international development assistance away from long-term investment and toward short-term emergency aid for countries hard-hit by a collapse in prices of labor-intensive commodities. (Countries would similarly get aid if pummeled by weather shocks like drought.) This aid would kick in as soon as prices headed south, before famine or war broke out. So we’d channel aid to Colombia’s farmers when coffee prices fell (or if the Colombian rain gods failed to nurture their crops). These emergency funds would be scaled back when prices stabilized—as they did in 2001—or the rains returned.
I must say, I’m now a bit confused about whether we think the main problem facing developing countries is rising commodity prices or falling commodity prices. Of course part of the answer is that both rising and falling commodity prices can hit people in poor countries hard (namely different people in different countries), and either way, these are people least able to cushion the effect through savings, insurance, borrowing or changing jobs.
As Fisman and Miguel say in Economic Gangsters, we need a more flexible channel of large scale development assistance which can be deployed quickly to smooth the impact of the financial crisis on developing countries. Preventing the outbreak of conflict or famine will be much cheaper than coping with the consequences, quite aside from the human tragedy that will follow from failure to act quickly.
To the managers of the banks
Every time I have suggested things you might do differently, I have been told that this is impossible as you are under an obligation to pursue the interests of your shareholders.
Now that I am – unexpectedly – one of your shareholders, I expect you’d like to know what I would like you to do. Here are seven new instructions to be getting on with.
1. Short-term profits are not important: what is important is long-term value. I would like you to stop chasing short term arbitrage opportunities and overnight trading and focus on identifying and investing in the best-run, most productive and valuable enterprises. There will be no trading in derivatives or other purely financial products.
2. Cut executive pay immediately. From now on, nobody in the bank will get paid more than four times the salary of the lowest-paid employee. If you want to award yourself a pay rise, you’ll have to increase the salaries at the bottom.
3. All our branches and subsidiaries overseas will pay local taxes, in full. There will be no clever arrangements to transfer profits to tax havens to avoid tax.
4. No more junk mail trying to persuade people to take out new credit.
5. It is no longer our objective to inflate house prices. An increase in house prices is not an increase in net wealth: it is a transfer from those who do not own houses to those that do. We will try to dampen the housing market, not reinvigorate it.
6. Every bank that is “too big to fail” will be split up into smaller banks. We are going to reverse the cycle of mergers and takeovers that has created these monolithic institutions that have held us all to ransom.
7. There will be no lending for businesses or individuals involved in industries that are harmful to our society and planet. That means no lending to any of the following: the arms trade, advertising and marketing, tobacco, extracting or burning fossil fuels, or the motor industry. Instead, please invest more in clean technologies, technologies appropriate for developing countries, non-profit organisations and community groups.
I know that you have many new shareholders, and it will take time for you to get to know us all. My views won’t necessarily be shared by all your new bosses, but you can be pretty sure that lots of your new bosses think more along these lines than the old lot.
I was a bit hesitant about becoming a bank-owner, but now that it has happened, I think I’m going to enjoy it.
Work hard – but not too hard.
Yours,
Owen
I’ve never liked the name of the FT’s lifestyle section, “How To Spend It“. But with financial markets as they are now, it seems particularly ludicrous. How to spend what, exactly?
Sitting in the airport lounge in Washington DC today, I was a bit surprised to find a “bonus issue” of How To Spend It in today’s paper.
I expect that there are lots of investors whose main concerns today include “whether the perfect sound system exists”, “the demure allure of autumn’s flattering longer skirts” (the Cavalli skirt is a snip at £3000), and “whether corporate gifts can ever truly be objects of desire”.
The BBC sub-editor picked an angle, with the headline Prudence pays off in Ethiopia and the teaser:
With the financial turmoil affecting many of the world’s economies, Elizabeth Blunt in Addis Ababa considers how Ethiopia and other parts of Africa may escape the worst of the credit crisis.
But that headline does not seem to be consistent with the rest of the article which goes more like this:
Over the past few years, Ethiopia has been having something of a boom of its own, and Addis Ababa is littered with building sites.
But a lot of these ambitious construction projects seem to have got stuck halfway. Some may have run out of cement, but others, even more of them, have probably run out of money.
… In all of this, the only money coming in from outside that is a significant flow in most African countries might be remittances from workers overseas.
I think the financial difficulties might hit Ethiopia, and other African countries, pretty hard; especially if remittances dry up, investment (such as it is) falters, and rich countries become more protectionist and less likely to give aid.
Incentives for Global Health have published a new report:”The Health Impact Fund: Making New Medicines Accessible for All”
The Health Impact Fund, our flagship proposal, is a new way of stimulating research and development of life-saving pharmaceuticals. To provide wide access, medicines need to be affordable-but low prices don’t create strong incentives for innovators to invest in research and development. The Health Impact Fund is an optional mechanism that offers pharmaceutical innovators a supplementary reward based on the health impact of their products, if they agree to sell those products at cost. The proposed Fund is to be financed mainly by governments.
I personally find this idea attractive. It shares a lot of characteristics and thinking with the Advance Market Commitment idea that I have worked on in the past. The main difference is that the AMC leaves patents in place; under the IGH they are signed away. If the pharmaceutical industry is willing to participate, this would be very attractive; my guess is that many firms will find this too challenging to their existing business model.
The World Bank published new estimates of the number of people in poverty yesterday. They are very important and they’ve been universally misreported.
The estimates show:
- the developing world is poorer than we thought; there are 1.4 billion people living in poverty (about one quarter of the developing world), not 985 million as we previously thought
- nonetheless, progress in reducing poverty has been about as fast as previously believed – poverty has been declining at the rate of about one percentage point a year, from 52 percent of the developing world’s population in 1981 to 26 percent in 2005. This is a reduction in the number of poor of about 500 million people.
As the full paper explains, the new poverty line is $1.25 a day in 2005 prices, compared to the old poverty line of $1.08 a day in 1993 prices. This is actually a downward revision of the poverty line in real terms: if it had been kept the same in real terms (ie adjusted only for inflation) it would be $1.45 a day in 2005 prices. (There are currently 1.7 billion people living on less than $1.45 a day in 2005 prices, the equivalent today of the old poverty line – which is nearly twice as many as we previously thought lived in poverty.)
The meaning of the poverty line is often misunderstood. Some people assume that the poverty line measures the number of people who have an income of $1.25 a day; and they reassure themselves by thinking “a dollar will go a long way in some countries”. But the poverty line is measured as $1.25 a day at purchasing power parity – that is, people below this line are able to buy each day what $1.25 would buy them in the United States. This really is an absolute measure of poverty.
Of course, the newspapers got this all wrong:
James Politi in the FT reported
The new figure was estimated after researchers at the bank raised the threshold for extreme poverty from earnings of $1 a day to $1.25.
(Not true; the threshold has been reduced in real terms). The BBC reported
The new estimates suggest that poverty is both more persistent, and has fallen less sharply, than previously thought.
(Not true: it has fallen at the same rate as previously thought; just at a much higher level.)
Finally – a big untold part of this story is the big changes in the purchasing power parity estimates that underpin these poverty figures. These show massive changes in the estimates of GDP at PPP. For example, here in Ethiopia, GDP per capita is now estimated to be $591 per year, compared to $1084 under the previous estimate. India is down 40%, now below Pakistan in income-per-head; and China’s income per head is also 40% lower than the previously estimated.
If you think it is okay to ignore economists because they are so often wrong, you’re looking at the wrong questions. Economists are generally wrong with complicated models but right about concepts. For example, they know that additional domestic drilling won’t make much of a dent in the energy problem. And they know that free trade is generally good for all economies. (You can argue with my examples, but the point is that some things are generally known by economists while not being understood by the general public.)
By analogy, a mechanic knows that changing your oil is good for your engine, but he can’t tell you what problems you will have with your car next year. You shouldn’t ignore the mechanic’s advice on changing oil just because he doesn’t know when your battery will die, or because he didn’t personally perform any scientific studies on oil changes.
Last weekend, we stayed in Gheralta Lodge, about 2 hours drive from Mekele in Tigray, Ethiopia, as our base for seeing some of the countryside and visiting the local rock churches. (See also here and here.)
Gheralta is near Hawzien (or Hawzen), a small market town which is the site of an infamous massacre by the Derg of TPLF rebels.
The Lodge is beautifully designed to fit in with the local countryside and architecture, and to minimize the environmental impact of the accommodation. They grow their own food and bake delicious bread.
More photos here or as a slideshow.
Here it is in Tripadvisor.
If we can’t get an agreement on cutting food tarriffs and limiting market-distorting agricultural subsidies now, while food prices are surging (see graph), then when we will ever?
Clare Lockhart in Prospect Magazine June 2008 issue 147 (pay firewall):
We would like to tell you the story of $150m going up in smoke,” said the young villager. “We heard on the radio that there was going to be a reconstruction programme in our region to help us rebuild our houses after coming back from exile, and we were very pleased.”
This was the summer of 2002. The village was in a remote part of Bamiyan province, in Afghanistan’s central highlands, and several hours’ drive from the provincial capital—utterly cut off from the world. UN agencies and NGOs were rushing to provide “quick impact” projects to help Afghan citizens in the aftermath of war. $150m could have transformed the lives of the inhabitants of villages like this one.
But it was not to be, as the young man explained. “After many months, very little had happened. We may be illiterate, but we are not stupid.
So we went to find out what was going on. And this is what we discovered: the money was received by an agency in Geneva, who took 20 per cent and subcontracted the job to another agency in Washington DC, who also took 20 per cent. Again it was subcontracted and another 20 per cent was taken; and this happened again when the money arrived in Kabul. By this time there was very little money left; but enough for someone to buy wood in western Iran and have it shipped by a shipping cartel owned by a provincial governor at five times the cost of regular transportation. Eventually some wooden beams reached our villages. But the beams were too large and heavy for the mud walls that we can build. So all we could do was chop them up and use them for firewood.”
My current work is about how we can make aid more transparent, so that this kind of thing does not happen.
I was pondering for a presentation on Thursday why it is that inequality between countries has grown so markedly over the last 100 years. There are many reasons why the richer countries have grown, but it is harder to explain why poor countries do not catch up as quickly as they did during the previous 2,000 years.
A candidate explanation of why poor countries catch up more slowly now is that rich countries have taken steps which slow down the transfer of technology. By tightening intellectual property rules and expanding those restrictions to an increasing proportion of economic value, rich countries are, in effect, yanking up the ladder behind them.
I see today that James Surowiecki makes a similar point in the May 14 edition of The New Yorker:
The great irony is that the U.S. economy in its early years was built in large part on a lax attitude toward intellectual-property rights and enforcement. As the historian Doron Ben-Atar shows in his book “Trade Secrets,” the Founders believed that a strict attitude toward patents and copyright would limit domestic innovation and make it harder for the U.S. to expand its industrial base. American law did not protect the rights of foreign inventors or writers, and Secretary of the Treasury Alexander Hamilton, in his famous “Report on Manufactures,” of 1791, actively advocated the theft of technology and the luring of skilled workers from foreign countries. Among the beneficiaries of this was the American textile industry, which flourished thanks to pirated technology. Free-trade agreements that export our own restrictive I.P. laws may make the world safe for Pfizer, Microsoft, and Disney, but they don’t deserve the name free trade.
Does this matter? I think it probably does. David Houle wrote last month about the growing economic importance of information in the value of economic production:
In 1975, at the very beginning of the Information Age, 16.8% of the market capitalization of the S&P 500 was from intangible assets. By 1995, that number had grown to 68.4%, and in 2005 it was up to 79.7%, where I imagine it will level off in the years ahead. In the historically short time of thirty years there has been a fundamental shift in the concept of value, not unlike the transition from the land values of the Agricultural Age to the production values of the Industrial Age.
The twentieth century has seen a new enclosure of the commons – robber barons have built fences around the key economic assets of the community, and they have got rich charging people for using them. In the past, when mankind learned how to get more food from the land (e.g. learning about irrigation, crop rotation or seed soaking) these ideas were not protected by patents. When we learned how to improve our health (e.g by improving access to clean water, or using antibiotics) these ideas were not protected by patents. When we learned how to organize factories, or build roads, or design windmills – all these ideas could be transplanted and adapted by poorer countries, so that they too could benefit from them.
Now at the start of the 21st Century, many of the key technologies that drive economic value are locked away by patents and intellectual property rights – agricultural technologies, business software, vaccines to prevent disease. As a result, the poor can no longer simply adopt these techniques and adapt them for themselves.
The cruel irony is that it would do us no harm to allow others to share in the benefits of our innovations. We worry about intellectual property rights because we want to protect our ability to recover the costs of innovation from the rich: the poor (who cannot afford to reward us for our cleverness anyway) are just innocent bystanders.
You must read this article by Naomi Wolf in the Guardian
From Hitler to Pinochet and beyond, history shows there are certain steps that any would-be dictator must take to destroy constitutional freedoms. And, argues Naomi Wolf, George Bush and his administration seem to be taking them all
The Government has consistently refused to set up a statutory inquiry into the way that many thousands of haemophiliacs were put at risk by the supply of contaminated blood products. (The new inquiry by Lord Archer of Sandwell is an independent inquiry, not a government inquiry, and has no powers to subpoena witnesses or evidence.)
But it announced yesterday that there will be an official inquiry into the alleged removal of human tissues from the bodies of former Sellafield employees.
I just don’t understand this obsession with the treatment of dead bodies. Dead bodies don’t have rights. I really don’t care if human organs are taken out of dead bodies. What’s more, if these body parts can be used to identify causes of and cures for disease, then I think we should encourage scientists to use them.
How can we possibly think it is more important to investigate what happened to dead bodies than to find out whether somebody has negligently infected living people?
So asks Simon Maxwell at ODI. His conclusion is that DFID is pretty good.
In our own work on aid architecture, we asked developing country aid practitioners from 27 countries to rank donors and comment on their strengths and weaknesses. DFID outranked other bilateral and multilateral donors. DFID scored especially highly on efficiency, flexibility, speed of disbursement and alignment with country priorities.
The conclusion to draw from this: ‘don’t panic!’.
Thanks Simon. It is good to have support from such a reputable and independent source.
Just one quibble. Simon says:
Some of these contributions have a whiff about them of competition between DFID and the Foreign Office, which is unfortunate.
That would indeed be unfortunate. I don’t know if there is any Whitehall briefing going on; but if it is, then it all seems to be going one way. There is nothing in the papers to suggest DFID briefing negatively about the FCO. And a good thing too. We are above that kind of thing.
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