I'll write more about this in the future. Below is my taxonomy for approaches to development. Each includes an example of an effective practitioner who takes (primarily) that approach. There are plenty of hybrids, so I'll list some of my favorite examples of those.
All the names are a little mocking and irreverent because I think setting a tone of being both unserious and critical is important. Too many people are critical (which is important), but dead serious and rigidly ideological, when talking about different approaches to doing a project.
1. The Beggar (Lobbyist)
The beggar lobbies governments for money and legislation. For example, the Live8 concerts, organized by Bob Geldof, lobbied the G8 countries to commit to doubling funding for foreign aid. The NGO ONE in the United States, and its celebrity spokesman Bono, lobby for legislation on debt relief (Jubilee Act), cutting farm subsidies (FRESH amendment), trade reform (GROWTH Act), and providing funding for the treatment of AIDS (PEPFAR).
Examples: Bono and Bob Geldof, ONE Campaign
The appeal of the beggar is plain enough: governments have a lot of money and can use it to solve social problems. We spend a lot of time campaigning for our political parties in the US because we believe their approach to health care or education will improve our systems here. Since many problems in the developing world are likewise problems of education and health care, doesn't the same approach makes sense?
The main criticism of the beggar is that he or she usually doesn't understand the complexity of the issues. Lobbying for bad policy can hurt on a massive scale the same way lobbying for good policy can help on on a huge scale. Also, many intellectuals in the countries receiving the aid the beggar lobbies for think that the aid is paternalistic and encouraging laziness and outright corruption in the receiving country.
2. The Policy Entrepreneur (Academic)
The policy entrepreneur is usually a professor or other academic working for a think tank. They argue for policy reforms based on their research. Esther Duflo, co-founder of the Poverty Action Lab at MIT, is a prime example of an effective policy entrepreneur. Her and her colleague's research has shown which interventions in education, water infrastructure, health and microfinance have the biggest impact. Based on that evidence they have worked to reform policy in both the developed world (foreign aid policy) and the developing world (domestic policy).
Examples: Esther Duflo and co., Santiago Levy and Jose Gomez de Leon, Michael Clemens
The appeal of the policy entrepreneur is straight forward: policy decisions have a much bigger impact than small projects, so making good policy decisions should do more good than doing good small projects. The problem is this can work in reverse. Some policy entrepreneurs turn out to be wrong about issues in the long run and thus each runs the risk of making policy worse, not better. Also, many policy entrepreneurs never have much impact on policy.
Hybrid: Jeff Sachs is both a grade A beggar and policy entrepeneur
3. The Mad Scientist (Inventor)
The mad scientist is focused on technology. There are a lot of mad scientists at engineering colleges such as MIT and in universities with Engineers without Borders chapters. The mad scientist thinks primarily on a small scale, hoping to invent neat new technologies that solve basic problems at low cost. Many of these technologies are directed at income generation, but some are also useful for improving health (e.g. delivering vaccines more effectively).
Examples: Amy Smith
The biggest problem for the mad scientist is that their technologies rarely reach the field after endless prototyping. Economists also often question the utility of this approach by noting that all the technology needed for development already exists and arguing that the problem is how the resources are utilized and distributed.
4. The Dentist (Behavior Change)
The dentist focuses on behavior change. In many cases people in the developing world have poor health or education outcomes because they don't make much effort in school or practice basic sanitation practices. The work of the dentist is difficult--like pulling teeth--hence the name. Particular examples of dentistry are total community-led sanitation, which encourages villagers in rural Asia, to take responsibility for their community's sanitation; hand-washing programs world-wide which encourage people to wash their hands; similar problems encourage the use of condoms and boiling water before drinking it.
Examples: TCLS, Public-Private Partnership for Handwashing with Soap
The main complaints about dentistry are that the dentists are trying to tell people what to do with their lives and that their projects tend to be very slow moving, with only incremental successes. The later tends to be valid while the former is not necessarily a fair representation of dentistry, see TCLS.
Hybrid: Paul Polack of IDE is a Dentist mixed with a Mad Scientist. His organization develops technologies for use by rural farmers, but spends at least as much time convincing farmers to take a risk and buy them.
5. The Santa Claus (Charity)
The Santa Claus has the most basic approach: hand out gifts. This approach is almost too simple to comment on, so I'll just throw in that it's my favorite. The Measles Initiative, which vaccinated millions of kids against measles (and other diseases); Partners in Health, which provides free medical care; and Nothing But Nets, which hands out bed-nets, are three of my favorite development projects.
Examples: Paul Farmer
The Santa Claus, while often the most effective development practitioner, and in rare cases the most celebrated (Paul Farmer), is far and away the most criticized. The Santa Claus is accused to eliminating intrinsic motivation, creating learned helplessness and a culture of dependency, and in general being ineffective as resources are (according to one theory) better allocated using the price system. For people who see development as capacity-building the Santa Claus is repulsive for ideological reasons, whereas pragmatists focused on improving health and quality of life, tend to appreciate some aspects of the Santa Claus approach.
Hybrid: Nearly every development practitioner plays the Santa Claus from time to time, often without noticing it.
6. The Petty Bourgeois (Small Business)
The petty bourgeois are businesspeople who espouse the virtues of microfinance and other private sector (but small scale) interventions. They tend to like projects that start restaurants, small service businesses or cottage industry manufacturing.
Examples: Jacqueline Novogratz, Iqbal Quadir
The main criticisms leveled at the petty bourgeois is that they aim too low. If you help someone making $500 a year to make $550 how much good does that do? What does that person spend the money on? Booze, parties or education? Economists have pointed out that because the poor tend to have little human capital and can only acquire small amounts of physical capital with small loans, they will never be able to earn large profits. Economists have also noted that many people who extend microcredit to the poor have enabled the poor to get deep into debt without necessarily raising their income, which might be a bad thing.
Sunday, September 12, 2010
Opportunity Costs
I've reluctant to write this because I think the way of thinking I'm going to argue for here is depressing. It will make you think that you're having less impact on people's lives--which gets distorted into feeling that you are less important. That is most people's visceral reaction. But the upside is that when you use this method to count costs and benefits you (should) be able to better limit costs and create benefits.
Let me start with a story. Angela held a fundraiser at her high school. She and her friends sold 500 cookies for $1 each after school and then sent the money to an NGO that used it to buy 50 children anti-malaria bed nets. Bill wanted to do more. Fundraisers at his school were never going to generate more than a few hundred dollars. But he noticed that there was a competition for high school students to propose a way to "Do Good" and the winner would get $5,000. Bill wrote a proposal to use the $5,000 to buy 300 nets and use the rest to pay to fly to Ghana and distribute them. He won the grant in a close vote over a proposal to spend the money deworming children in Ghana.
Who did more good?
Bill got 300 people nets. Angela only got 50 people nets. Isn't it obvious? No.
If it seems like the statement about the number of nets is the end of the story then you've fallen for one of the most pervasive problems in debate. That statement just listed the benefits--and completely ignored the costs.
And in this case that makes all the difference. The real cost of something is the value of what would have happened otherwise. If Angela didn't organize the bake sale she might have spent the extra time playing volleyball. She also might have prevented the Girl Scouts from selling cookies that today. Compared with the value of saving a (many?) lives, those costs are negligible so maybe it's safe to ignore them.
Bill, though, caused the proposal for deworming not to get funded. The deworming plan was probably of comparable value (perhaps more, perhaps less) meaning that while Bill "saved" perhaps 2 lives he also caused 2 lives not to be saved. The benefit was 2 lives, the cost was 2 lives, and the net benefit (benefit - cost) was nothing. Bill's plan may have done nothing make the world a better place, while Angela's almost certainly did.
Angela, by construction, did more good.
That story is just meant to be an example. Of course it's fictional. And of course the assumptions matter. But it's illustrative. Whenever you apply for a grant you're causing someone else not to get it. The net benefit is only the good from your proposal minus the good of the one that would have been funded. If you open a Fair Trade store right next to another store, and you decrease the business of your neighbor by $5,000 a month while only doing $7,000 yourself, then you've only netted $2,000 in Fair Trade sales for the world. (Of course the distribution of the money could be important too--maybe your suppliers are more desperate and benefit more.)
Too much of the time we don't think at the margin.
Let me start with a story. Angela held a fundraiser at her high school. She and her friends sold 500 cookies for $1 each after school and then sent the money to an NGO that used it to buy 50 children anti-malaria bed nets. Bill wanted to do more. Fundraisers at his school were never going to generate more than a few hundred dollars. But he noticed that there was a competition for high school students to propose a way to "Do Good" and the winner would get $5,000. Bill wrote a proposal to use the $5,000 to buy 300 nets and use the rest to pay to fly to Ghana and distribute them. He won the grant in a close vote over a proposal to spend the money deworming children in Ghana.
Who did more good?
Bill got 300 people nets. Angela only got 50 people nets. Isn't it obvious? No.
If it seems like the statement about the number of nets is the end of the story then you've fallen for one of the most pervasive problems in debate. That statement just listed the benefits--and completely ignored the costs.
And in this case that makes all the difference. The real cost of something is the value of what would have happened otherwise. If Angela didn't organize the bake sale she might have spent the extra time playing volleyball. She also might have prevented the Girl Scouts from selling cookies that today. Compared with the value of saving a (many?) lives, those costs are negligible so maybe it's safe to ignore them.
Bill, though, caused the proposal for deworming not to get funded. The deworming plan was probably of comparable value (perhaps more, perhaps less) meaning that while Bill "saved" perhaps 2 lives he also caused 2 lives not to be saved. The benefit was 2 lives, the cost was 2 lives, and the net benefit (benefit - cost) was nothing. Bill's plan may have done nothing make the world a better place, while Angela's almost certainly did.
Angela, by construction, did more good.
That story is just meant to be an example. Of course it's fictional. And of course the assumptions matter. But it's illustrative. Whenever you apply for a grant you're causing someone else not to get it. The net benefit is only the good from your proposal minus the good of the one that would have been funded. If you open a Fair Trade store right next to another store, and you decrease the business of your neighbor by $5,000 a month while only doing $7,000 yourself, then you've only netted $2,000 in Fair Trade sales for the world. (Of course the distribution of the money could be important too--maybe your suppliers are more desperate and benefit more.)
Too much of the time we don't think at the margin.
Friday, September 10, 2010
Do we really believe all people have the same rights?
Jay Mathews posted two good essays from teenage illegal immigrants on why they have a right to federal financial aid money for college.
The first thing that jumps out at me is that the first essay uses "undocumented people" and "Latinos" interchangeably. I'm glad she is Latino or that would be racist. (I also wonder if she thinks illegal immigrants from Haiti deserve the same rights.)
My intuition is that I'd vote to give these kids financial aid. I have serious reservations endorsing financial aid in general and I think there is a small risk Latino students may well be crowding out other students (either for spots in college or for aid money). But on the whole that is probably tax money better spent than the marginal dollar would be, esp. because there might be positive externalities to education.
But what I think is more interesting here is how Patricia structures her argument. The basic idea is that education is a right that Americans have--Americans have a right to a Pell grant if they qualify and to enroll in community college, etc. And since Patricia lives in the United States she deserves a Pell grant and a chance to enroll too. But, interestingly, if Patricia grew up in Mexico, we wouldn't have a problem with the fact that she might not have money to go to high school, much less college. We might not even have a problem if she were malnourished as a kid. Or maybe we'd have a problem, but we wouldn't think it's the U.S. governments' responsibility to pay for it.
Why is that? Why do we implicitly allow where people are born determine what we think they have a right to?
The first thing that jumps out at me is that the first essay uses "undocumented people" and "Latinos" interchangeably. I'm glad she is Latino or that would be racist. (I also wonder if she thinks illegal immigrants from Haiti deserve the same rights.)
My intuition is that I'd vote to give these kids financial aid. I have serious reservations endorsing financial aid in general and I think there is a small risk Latino students may well be crowding out other students (either for spots in college or for aid money). But on the whole that is probably tax money better spent than the marginal dollar would be, esp. because there might be positive externalities to education.
But what I think is more interesting here is how Patricia structures her argument. The basic idea is that education is a right that Americans have--Americans have a right to a Pell grant if they qualify and to enroll in community college, etc. And since Patricia lives in the United States she deserves a Pell grant and a chance to enroll too. But, interestingly, if Patricia grew up in Mexico, we wouldn't have a problem with the fact that she might not have money to go to high school, much less college. We might not even have a problem if she were malnourished as a kid. Or maybe we'd have a problem, but we wouldn't think it's the U.S. governments' responsibility to pay for it.
Why is that? Why do we implicitly allow where people are born determine what we think they have a right to?
Local Eating
I liked this op-ed in the New York Times on "locovores."
Stephen Landsburg comments on his blog. (I highly recommend both the blog as two of his books: The Big Questions and The Armchair Economist.)
Landsburg's point is very valid and to often ignored. The Soivet Union collapsed because planners can't get enough information to decide who should get what, where and when. Prices, miraculously, do the work of the planner fantastically. They are signals that tell let everyone make individuals choices and when those choices get added up in the market, everyone gets what they want--with a few exceptions.
Exception one is that if people don't make smart choices then they aren't going to get what they want. That sounds stupid to say but its the basis for a ton of experiments in behavioral economics exploring why and when people make bad choices.
Exception two is when the prices don't reflect the real cost of something. For example, the price of gasoline doesn't reflect the cost (externality) of pollution to everyone who likes clean air.
So I disagree with Landsburg that prices are good signals in this case. The price of food doesn't capture the externalities from energy use because there is no carbon tax, so in a way it makes sense to try to "correct" the prices for energy use. That said, my guess is that Landsburg and I would agree locovores (and the op-ed author) don't approach that calculation properly because they don't even attempt to weight the costs of global warming against the happiness from consumption.
Stephen Landsburg comments on his blog. (I highly recommend both the blog as two of his books: The Big Questions and The Armchair Economist.)
Landsburg's point is very valid and to often ignored. The Soivet Union collapsed because planners can't get enough information to decide who should get what, where and when. Prices, miraculously, do the work of the planner fantastically. They are signals that tell let everyone make individuals choices and when those choices get added up in the market, everyone gets what they want--with a few exceptions.
Exception one is that if people don't make smart choices then they aren't going to get what they want. That sounds stupid to say but its the basis for a ton of experiments in behavioral economics exploring why and when people make bad choices.
Exception two is when the prices don't reflect the real cost of something. For example, the price of gasoline doesn't reflect the cost (externality) of pollution to everyone who likes clean air.
So I disagree with Landsburg that prices are good signals in this case. The price of food doesn't capture the externalities from energy use because there is no carbon tax, so in a way it makes sense to try to "correct" the prices for energy use. That said, my guess is that Landsburg and I would agree locovores (and the op-ed author) don't approach that calculation properly because they don't even attempt to weight the costs of global warming against the happiness from consumption.
Thursday, September 9, 2010
Dangers of Obscuring the Point
Sometimes people make arguments in what I call "shotgun" fashion. Instead of listing the key benefits of some policy or project they list all possible benefits in the hope that they'll appeal to a host of different interest and make the project sound like it makes a big difference--by killing two--or five--birds with one stone. I did this when I had to make a presentation about a project I did teaching West Africans to build cheap peanut shellers and I regret it.
I'll use a different example though because it's more illustrative. Take this pitch: "this new energy project lowers costs for individuals, creates jobs, and cuts down on deforestation. Oh, and kids benefit from the fact that the fuel is cleaning burning too!"
When I hear presentations like that is that it makes me wonder if any of those benefits are large. Are they listing many benefits because none of them alone is impressive? And doesn't having a long list obscure the original point of the project?
In the case of the energy project, limiting deforestation probably isn't important in the long run. The impact will be minimal and the environmental consequences are (to my knowledge) paltry compared to the consequences of poverty. The "lower cost" could be (probably is) as little as $10 a year for people, not exactly a kick out of poverty. And it might "create" jobs, but how many? And how many people are displaced in the competing industry? In some ways this is just another argument for trying to be quantitative when talking about benefits and for remembering to be honest about costs.
What I think is particularly interesting in this case is, though, that the added side-benefit, the one that was thrown in at the end, may well be the most important. Indoor air pollution kills millions of kids each year. If they don't die from air pollution they might live to be, say, 50. That's 45 years-of-life added, which we value at $25,000 a piece in the U.S. (roughly). So saving one kid from reducing air pollution is worth (something like) the savings from lowering costs for 11,250 people.
The example that motivated this post was Cash for Clunkers. The program was a total disaster, but many people liked it because of it's laundry list of beneficiaries. It would be progressive (help people driving older cars), environmentally friendly (get dirty cars off the roads), provide a needed stimulus and help the ail car industry. But in reality none of those objectives were achieved efficiently. If we were honest about which were important from the start we could have just designed specific policies for each--at less cost.
I'll use a different example though because it's more illustrative. Take this pitch: "this new energy project lowers costs for individuals, creates jobs, and cuts down on deforestation. Oh, and kids benefit from the fact that the fuel is cleaning burning too!"
When I hear presentations like that is that it makes me wonder if any of those benefits are large. Are they listing many benefits because none of them alone is impressive? And doesn't having a long list obscure the original point of the project?
In the case of the energy project, limiting deforestation probably isn't important in the long run. The impact will be minimal and the environmental consequences are (to my knowledge) paltry compared to the consequences of poverty. The "lower cost" could be (probably is) as little as $10 a year for people, not exactly a kick out of poverty. And it might "create" jobs, but how many? And how many people are displaced in the competing industry? In some ways this is just another argument for trying to be quantitative when talking about benefits and for remembering to be honest about costs.
What I think is particularly interesting in this case is, though, that the added side-benefit, the one that was thrown in at the end, may well be the most important. Indoor air pollution kills millions of kids each year. If they don't die from air pollution they might live to be, say, 50. That's 45 years-of-life added, which we value at $25,000 a piece in the U.S. (roughly). So saving one kid from reducing air pollution is worth (something like) the savings from lowering costs for 11,250 people.
The example that motivated this post was Cash for Clunkers. The program was a total disaster, but many people liked it because of it's laundry list of beneficiaries. It would be progressive (help people driving older cars), environmentally friendly (get dirty cars off the roads), provide a needed stimulus and help the ail car industry. But in reality none of those objectives were achieved efficiently. If we were honest about which were important from the start we could have just designed specific policies for each--at less cost.
Post-code lotteries: should you play?
Tim Harford writes two great columns and I can't recommend them enough. I also recommend his book, The Undercover Economist, because (I think) it's one of the best introductions to be big ideas in neoclassical economics.
But in this advice column I think he skips over an important point. Normal lottery tickets are a waste of money because (1) they tend not to make winners happy and (2) you expect to lose money on them. Post-code lotteries are different, though. They work by giving everyone in a given ZIP code a prize (tens of thousands of dollars). This point is important because research suggests not buying a lottery ticket could make you sad becuase you'll feel poor compared to your neighbors if you don't win. Ben Bernanke summarized the research:
But in this advice column I think he skips over an important point. Normal lottery tickets are a waste of money because (1) they tend not to make winners happy and (2) you expect to lose money on them. Post-code lotteries are different, though. They work by giving everyone in a given ZIP code a prize (tens of thousands of dollars). This point is important because research suggests not buying a lottery ticket could make you sad becuase you'll feel poor compared to your neighbors if you don't win. Ben Bernanke summarized the research:
If I live in a country in which most people have only one cow, and I have three cows, then I will have lots of social status and self-esteem and will thus feel happy. But if everyone around me has a luxury car, and I am hung up on status, I won't feel very special unless I have both a luxury car and an SUV. This relative-wealth hypothesis can explain why rich people are happier than poor people in the same country, but also why people in richer countries are not on average much happier than people in poorer countries. It's the big fish in a little pond phenomenon.So you can think of the ticket as insurance again feeling worse if your ZIP code wins. I still don't know if it's worth it, but postal-code lotteries might be a worthwhile form of insurance.
Wednesday, September 8, 2010
Does money suck the fun out of life?
Maybe. The research is discussed on Jonah Leher's highly recommended blog.
Related musing: I suggested to friend that likes to penny pinch that it makes her unhappy. By spending cognitive resources and time trying to spend more effectively she has money on the brain more--which just means more worry and less time for fun things. This research also suggests that it makes it harder for her to savor things because of the priming effects. And what for gain? Having a little extra money to spend on . . . I think living simply can help people enjoy the pleasure of life more, but being thrifty (ironically) makes it more difficult.
Related musing: I suggested to friend that likes to penny pinch that it makes her unhappy. By spending cognitive resources and time trying to spend more effectively she has money on the brain more--which just means more worry and less time for fun things. This research also suggests that it makes it harder for her to savor things because of the priming effects. And what for gain? Having a little extra money to spend on . . . I think living simply can help people enjoy the pleasure of life more, but being thrifty (ironically) makes it more difficult.
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