Debate in Stockholm: Sachs and Easterly appear together for first time ever

The Revolt of the Pitied

Magatte Wade, Senegalese-American entrepreneur,  in the Guardian:

a young woman asked, "For the Americans on the panel, how do you deal with being a person of privilege while working in global development?" My eyes lit up with fury as she directed her question specifically at the white Americans on the panel. I let them answer, then smiled and added with a wink: "I am an American, you know, and also a person of privilege." She instantly understood what I meant.

Her question assumed that those of us in developing nations are to be pitied. I know as a Senegalese that her attitude is precisely what disgusts us about many who work at NGOs.

For many of those who "care" about Africans, we are objects through which they express their own "caring".

I replied to the young woman, "If you see us as human beings, there is nothing to deal with. We like to eat good food, we love to talk and laugh with our family and friends. We wonder about the world, and why so often bad is rewarded rather than good."

Drone Terror: Maybe Defense and Development are not complementary after all

I feel duty-bound to write this one. Hilary Clinton said a while ago that Defense and Development were complements.

Not so much. A new report from Stanford and NYU (see excellent summary in the Guardian) found that US drone strikes (greatly increased under this administration) in Pakistan were killing and terrorizing civilians, while very few killed their terrorist targets.

It would be hard for Development to benefit from "drones hovering 24 hours a day over communities in northwest Pakistan, striking homes, vehicles, and public spaces without warning."

The report alleges that drones strike areas multiple times, killing rescuers of victims of the first strike.

Next challenge in US: getting people to care about this.

Ahmadinejad excited to learn at UN Forum that "Rule of Law" can be meaningless buzzword

Africa House opening event

Join DRI's partner organization, Africa House, this Thursday, September 27th at 3:30pm for a discussion of youth unemployment and the 2012 African Economic Outlook with Mthuli Ncube,Vice President and Chief Economist of the African Development Bank. The talk will be followed by a wine and cheese reception at 5pm to welcome back to campus NYU students, Africa campus groups and friends of Africa House. The location is 14 A Washington Mews. RSVP to rsvp.africahouse@nyu.edu.

Does Aid Promote Autocracy?

This is NOT the Nobel Symposium panel with Jeff Sachs and others, for which the video isn't available yet. It IS a 3-minute clip of a talk Bill gave at the Swedish think tank Timbro while he was in Stockholm. [vimeo https://vimeo.com/78370826]

Possibly of interest

UPDATE 9/5 4:00 PM: We will post the video from the panel in this space as soon as IIES provides it. UPDATE 9/5 7:40 AM: Panel with Paul Collier, Esther Duflo, Bill Easterly, Dani Rodrik and Jeff Sachs is livestreaming now at this link.

Will appear in public with Jeff Sachs for the first time ever tomorrow at this event.

Gone fishing

Now going off line for the great annual August unplugging...

The Revolt against TED

Evgeny Morozov in the New Republic on TED conferences:

Today TED is ...a place where ideas, regardless of their quality, go to seek celebrity, to live in the form of videos, tweets, and now e-books. In the world of TED—or, to use their argot, in the TED “ecosystem”—books become talks, ... projects become talks, talks become books—and so it goes ad infinitum ... until any shade of depth or nuance disappears into the virtual void....how “ideas worth spreading” become “ideas no footnotes can support.”

Why is he so upset? Christopher Shea at WSJ Ideas Market summarizes and shares Morozov's revulsion at the "distinctively TED-style attitude toward politics in which institutions and democratic debate are derided and technology is looked to as a deus ex machina that will solve such once-intractable problems as poverty and illiteracy."

Morozov's critique comes in the middle of a review of a self-parodying manifesto from TED Books Hybrid Reality: Thriving in the Emerging Human-Technology Civilization, By Parag Khanna and Ayesha Khanna. He continues:

That they can spit out the following passage without running any risk of being disinvited from respectable dinner parties and television shows is a sign of how well our debate about technology—a seemingly neutral and nonpolitical issue—conceals deeply political (and, in this case, outright authoritarian) tendencies:

(Quote from the Khannas' book:) " ...nonfunctional democracies ...are prime candidates to be superseded by better-designed technocracies—likely delivering more benefits to their citizens.... To the extent that China provides guidance for governance that Western democracies don’t, it is in having “technocrats with term limits.”

Morozov keeps piling on to the end:

That solving any of their favorite global problems would require political solutions—if only to ensure that nobody’s rights and interests are violated or overlooked in the process— is not something that the TED elite, with its aversion to conventional instruments of power and its inebriated can-do attitude, likes to hear. ....TED’s techno-humanitarians—{are nother} brigade of what the Nigerian-American writer Teju Cole has dubbed “The White Savior Industrial Complex."

Can't wait to hear Morozov's TED talk...

Rigorous ex-post evaluation finds no evidence that Olympics produces Olympic medals

Using data conveniently available from the Peruvian, Ecuadorean, Bolivian, and Chilean Olympic trials, the study compared athletes who just made the Olympic team with those who just fell short. This rigorous regression discontinuity design allowed the study to identify the effect of Olympic participation on Olympic medals. The study found on average zero effect of Olympic participation on Olympic medals. This study found no evidence that the Olympics produces Olympic medals.

It is hoped that national sports federations will follow more evidence-based policies in the future regarding the Olympics.

Lessons from The Development Olympics

UPDATE noon 8/11/12: A devastating rebuttal to this post notes that if you limit the medal count to gold and change the indicator to the Human Development Index, there is no correlation. I have no idea what the point of this is. Researchers devote vast effort to the central question in economic development: "what determines Olympic medals?" The answer is income per capita and population, or in other words total GDP. The following table shows this story fits pretty well.

However, the outliers are interesting.

The big underachievers are (in order of underachievement) India, Mexico, Indonesia, Turkey, Saudi Arabia.

The big overachievers are Belarus, Ukraine, Kazakhstan,  Romania, Iran, , and Jamaica.

The lessons seem to be:

(1) World Bank national development strategies in key emerging markets have failed miserably in the Olympics sector.

(2) a history of Communism may not have been so awesome for development and liberty, but it's still amazing for Olympic medals.

(3) Islamist ideology is a mixed medal producer (Saudi Arabia no, Iran yes).

(4) if nothing else works, just run really fast.

US election depends on whether voters believe output has a unit root

This is not my area, but there has been a long debate since forever on whether real GDP is "trend stationary" or "has a unit root." The Economist magazine discusses how this debate has unexpectedly erupted in the US Presidential campaign.

In the unlikely event you don't know what a unit root is, here's the Cliff Notes version:

Output is trend stationary if a downward movement is temporary, because it will be reversed until output again catches up to the previous trend.

Output has a unit root if a downward movement is permanent, and sets the "new normal" from which output starts growing again.

(This question also matters in developing countries of course, and it may even differ by level of development.)

Why does this matter in the US election?

If an incumbent inherits a large downward movement, then has an anemic recovery, is his performance below normal expectations? If he was stuck with a permanent downward movement, his "unit root" performance does not look so bad compared to the "trend stationarity" expectation that output should have regained the trend by now.

On culture: maybe more research is needed

Inspired by this NYT story on beach behavior in Qingdao, China  to say I'm glad that economists are starting to work on social norms, culture, and development. It's moved way beyond the primitive circular reasoning whereby any poor people were assumed to have a "bad" culture. Culture is partly an endogenous choice; for example, parents decide how much effort to exert to pass their culture on to their children. For a good intro, check out the work of my NYU colleague Alberto Bisin.

PS the relevant cultural norms relevant in the picture are apparently how much female beauty involves pale skin, and on how much extreme measures are acceptable to achieve that.

Dissidents and Philanthropists

VALUABLE UPDATE! 12:22 PM 8/2/2012 GiveWell gives its side of the conversation (see end of this post) Had a conversation with Holden Karnofsky and Stephanie Wykstra of the philanthrophy firm GiveWell, along with an anonymous philanthropy adviser.   I enjoyed the spirited give and take.  At the end, had the feeling "well, nice chat, but I failed to be convincing." Stephanie took notes of my side of the conversation; here's the full transcript on our site. Wish I had taken notes on their side! Below are some extracts from my side:

... the “what works in aid” debate is phrasing the question wrong. You really want to know what works for whom, which will then lead to the question at the heart of economics and politics: who gets to decide what happens? This isn’t answered by randomized controlled trials (RCTs) that show that an intervention improves some quantitative measure of well-being. Markets and democracy are better feedback mechanisms than RCTs, and they provide resolution on “who gets to decide?” Seeing what people buy and asking them what they want gives better indicators of what works for them than quantitative indicators...

As an example: recently the World Bank funded a project in Uganda. The project ended up burning down farmers’ homes and crops and driving the farmers off the land. A lot of quantitative indicators like GDP would have shown up as improved as a result of the project, but there were many people whose rights were grossly violated in the process

But researchers don’t want their job to be more difficult than it is. If you ask for not only a RCT but also a guarantee that it’s not concealing unacceptable harm, you’re making it harder, and RCTs are already expensive and hard to begin with. It’s inconvenient for the researchers to acknowledge these problems.

Development happens when people have the opportunity to choose what they want, choose whether or not to give consent for an intervention that affects them, protest if they don’t like what’s being done to them and have a mechanism to exit if they don’t like what’s being done.

Have a system in place to ensure that you’re actually making people better off rather than harming them. Others would be better than I am on how to do this in practice, but just to start the discussion... it could mean offering {beneficiaries} a menu of options that they can choose from, and learning from their responses. More broadly, promoting rights of poor people might have indirect positive consequences that are a lot larger than the benefits of individual interventions.

...a lot of things that people think will benefit poor people (such as improved cookstoves to reduce indoor smoke, deworming drugs, bed nets and water purification tablets) {are things} that poor people are unwilling to buy for even a few pennies. The philanthropy community’s answer to this is “we have to give them away for free because otherwise the take-up rates will drop.” The philosophy behind this is that poor people are irrational. That could be the right answer, but I think that we should do more research on the topic. Another explanation is that the people do know what they’re doing and that they rationally do not want what aid givers are offering. This is a message that people in the aid world are not getting

Funding is biased toward a technocratic approach. Aid agencies do not want to deal with additional complexities like asking the people who they work with for consent or giving them choice. They already have hard jobs. They don’t want to hear about research that makes their job harder.

Dissidents.... say things that people don’t want to hear. Angus Deaton, Lant Pritchett, Ross Levine, and Andrei Shleifer are examples. Dissidents are a positive feature of a system that makes it more robust. A consensus model is prone to groupthink. Even if we dissidents were wrong, it would still be important that people like us challenge the mainstream consensus to make them rethink what they’re doing. Cass Sunstein wrote a book about this (Why Societies Need Dissent.) There are probably many more dissidents that we haven’t heard of. There are a lot of dissident aid workers who can’t speak publically without losing their jobs, and so keep quiet or write anonymous blogs.

UPDATE 12:27PM 8/2/2012: GiveWell has posted its side of the conversation on its blog. Here are some extracts:

• We don’t believe in a “first, do no harm” rule for aid. ... we believe that it isn’t practical to eliminate all risks of doing harm...
• people simply undervalue things like insecticide-treated nets. Brett Keller observes that irrationality about one’s health is common in the developed world. In the developing world, there are substantial additional obstacles to properly valuing medical interventions such as lack of the education and access necessary to even review the evidence.
• We believe that empowering locals to choose their own aid is much harder in practice than it may sound– and that the best way to achieve the underlying goal may well be to deliver proven health interventions. We’ve argued this point previously.
• Bottom line: Prof. Easterly ... see{s} himself as a “dissident”; his role is to challenge the way things are done without recommending a particular course of action. We see ourselves as advisors to donors, helping them to give as well as possible today. So while we share many of Prof. Easterly’s concerns – and would be highly open to new approaches to addressing these concerns – we’re also in the mindset of moving forward based on the best evidence and arguments available at the moment.

Are Glasses the New TOMS Shoes?

By Lauren Bishop There has been a lot written about the TOMS Shoes buy-one-give-one (BOGO) model and its shortcomings, but what about other companies that boast BOGO? Take Warby-Parker, for example, the purveyor of hip eyeglasses that advertises “Buy a Pair, Give a Pair” at the top of their website. Must we now criticize Warby-Parker for their poor aid practices, too?

Despite their tagline, what the company actually does is donate money and glasses to partner organizations like the non-profit VisionSpring, which turns around and sells those glasses to people living on less than $4 dollars a day in Bangladesh, India, El Salvador, and South Africa.

VisionSpring does this by training their workers in basic business skills and eye exams, then sending them out into their communities to conduct free vision screenings and sell the glasses donated by Warby Parker. According to VisionSpring, it costs a rural customer between $6 and $11 to visit a doctor, purchase glasses, and pay for transportation, while VisionSpring customers get free exams in their own villages and can buy a pair of glasses for $2 - $4.

Both TOMS Shoes and VisionSpring take on the effects of poverty by distributing goods in low income countries. But VisionSpring also gives people jobs and an opportunity to improve their lot in a way which seeks to address the causes of poverty. As we’ve discussed before, TOMS can actually hurt local businesses that produce or sell shoes by flooding the market with free footwear.

Unlike rampant shoelessness, widespread lack of eye care is actually a major problem in the developing world. A study (pdf) in Sub-Saharan Africa found that over 80 percent of people between the ages of 5 and 93 who need glasses have never had an eye examination. An impact assessment (pdf) conducted by VisionSpring and the University of Michigan found that reading glasses improved wearers’ productivity and income. In general, having glasses allows adults to continue working despite deteriorating sight and helps vision impaired children succeed in school.

Shoes, on the other hand, are available even in the poorest corners of the world. In fact, many TOMS pictures and videos show children removing their own shoes to try on a TOMS pair. Giving away free shoes where footwear is sold locally may or may not improve school attendance, as TOMS claims it does, but it’s certainly not supporting independent business owners.

	TOMS Shoes	Warby-Parker
Step 1
Step 2
Step 3
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VisionSpring works to alleviate poverty by providing necessary employment. TOMS works to alleviate poverty by providing unnecessary shoes.

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Lauren Bishop is Online Projects Assistant at DRI and an NYU MA student in International Relations.

Mr. Sachs loses AIDS debate to Mr. Budget Constraint

The World Bank hosted a debate (click on the above screen shot to get to the link for the whole webcast) on the proposition:

Continued AIDS investments by donors and governments is a sound investment, even in a resource-constrained environment.

Jeffrey Sachs and Michel Sidibé  (head of UNAIDS) argued in favor, and Mead Over and Roger England argued against. There was a show of hands of the audience pro and con before and after. As Mead Over reports, nobody was surprised that a vast majority was pro before the debate; the surprise was that a substantial minority changed their minds to con after the debate.

Mead Over has written a post summarizing the debate, paraphrasing in his words each participant's argument (see the video linked above if you want the exact words of each). Here is Mr. Sachs:

Jeff Sachs: This debate is a sham, because resources are not really scarce. With financial transactions taxes and higher taxes on the rich we would have more than enough money to address all the health problems of the world.

Mead Over and Roger England argued that, in the real world, alas, there really is a budget constraint on health and on everything else.

The cost of pretending this budget constraint does not exist, they argued, is that the lives saved by increasing AIDS spending cause many more lives to be lost when AIDS crowds out more cost-effective health interventions.

Cost-effectiveness calculations of course make the big assumption that both AIDS and alternative  interventions are or would be effectively implemented.  Aid critics like me have of course questioned aid effectiveness, but I and others have also argued that aid's effectiveness is greater in health than in other sectors.

Roger England doubted even the effectiveness rate in AIDS (as paraphrased by Over):

Roger England: The $100 billion that has been spent so far on AIDS has created an “AIDS-industrial complex” and the international AIDS meeting in Washington this week is its trade fair. The money has otherwise accomplished much less than it could have if wisely spent.

Sounds like Mr. Budget Constraint did win the debate.

The AIDS conference political courage meter

The international AIDS conference in Washington has generated a lot of news on how to end the tragic AIDS epidemic. Some approaches to AIDS involve technical fixes (vaccines, treatment drugs, condoms, circumcision) on which it is easy to get political consensus.

Others require real political courage to address, such as behavior change, i.e. reducing the number of multiple sexual partners --"concurrent relationships"-- that spread the epidemic.

The chart below collects all Google News hits on these terms and shows the weight of each of them in news coverage on the AIDS Conference.

Not Knowing as the Place to Start

By John Schellhase Maurice Lim Miller’s innovative idea was that he didn’t know how to end poverty.

He had worked for years for non-profits in San Francisco. One night the mayor called him at home and invited Miller to his office to pitch whichever program he thought would help most. As he prepared for the meeting, Miller grew anxious. Whatever he and others had been doing wasn’t working: “The very first kids I had trained back in the early 80s,” Miller told NPR about his job skills program for at-risk teenagers, “I saw their kids now showing up for programs.”

Miller thought of his mother, a poor immigrant from Mexico who had found her own way out of poverty. He realized he wanted to put poor people in charge of the money usually spent on anti-poverty professionals.

The resulting Family Independence Initiative has no program. Self-organized groups of families set their own agendas, ranging from debt reduction to improved grades for kids to weight loss to home ownership. Families receive a laptop, a $160/month stipend, and additional funding from FII for every success they can demonstrate based on their own targets.

Though still in its early stages, FII’s outcomes look promising. According to reporting by the families themselves with a follow-up audit by FII, in two years the families earned on average 23 percent more, saved 240 percent more, and increased their home ownership by 17 percent.

This apparent success comes from a hands-off approach from FII’s staff. FII did not organize the groups, lead meetings, or give any direction about what to prioritize. Miller believed that outside direction was likely to undermine true innovation. Staff who couldn’t help themselves from offering advice were actually fired.

As Miller has written, “Trusting low-income families with money and connections, thus giving them control and choice in their lives, is what led to their success.”

What would happen if aid agencies and international NGOs extended the same trust to the families they work with in developing nations? Often, the arrogant assumption in development is that the poor can’t be trusted to know what’s best for themselves and their families. The last half-century of failed development projects, however, suggest that it is truly the rich outsiders who don’t know.

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Further reading about FII and their approach: Get Feedback (pdf) The Uphill Battle to Scale an Innovative Antipoverty Approach (pdf)

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John Schellhase is a Program Assistant at DRI and pursuing an MS in Global Affairs at NYU.

Adam Smith Award winner for 2013 announced

Just announced:

The Association of Private Enterprise Education (APEE) is proud to announce that the Adam Smith Award winner for 2013 will be William Easterly of New York University. APEE describes the award as follows:

"The Adam Smith Award is .. is given to recognize an individual who has made a sustained and lasting contribution to the perpetuation of the ideals of a free market economy as first laid out in Adam Smith's Wealth of Nations. The recipient of this award must be an individual who has acquired an international reputation as an eloquent scholar and advocate of free enterprise and the system of entrepreneurship which underlies it..."

Previous award winners include Nobel Prize winners James Buchanan, Vernon Smith, Douglass North, and Elinor Ostrom, and other leading economic thinkers such as Armen Alchian, Robert Barro, Harold Demsetz, Allan Meltzer, and Gordon Tullock...

Easterly's work is not just a critique of efforts at development planning due to perverse incentives, bureaucratic bottlenecks, and errors in economic calculation, but also contains a deep understanding of the role of the entrepreneurial market process in lifting individuals out of poverty and producing a social order of freedom, dignity, peace, and prosperity. Economic development follows from a society of free and responsible individuals; who participate in a market economy based on profit and loss; who participate in a political regime governed by principle, not privilege; and live in a society that exhibits neither discrimination nor dominion...

Easterly will be honored on Sunday, April 14th, 2013 at the opening banquet of the annual meetings of APEE. This years conference will be held at the Sheraton-Maui. Here is the call for papers, please consider submitting a paper and/or a panel for the meetings.

Come fund-raise for us! We promise to make it nearly impossible

Imagine trying to fund a development research institute the Development Research Institute which includes at least some people obviously including the present author who seem to go out of their way to annoy, contradict, and insult every important and unimportant constituency in development. Maybe they'll like self-deprecating humor. Could you possibly raise funds for these people? To keep them in business? Wouldn't that be incredibly fun? Now's your chance to find out. We are recruiting a new Assistant Director of Development for us and our sister organization Africa House (Development means here not what it usually means in our posts, but "raising money.") Please apply, or send us the names of your highly qualified friends who are too shy to apply. The links are all there, but if you want to discuss informally or just offer advice, please email Liuba Grechen at liuba.grechen@stern.nyu.edu.