Wetrock Farm in Durham

A friend of ours is developing an area that will be called "Wetrock Farm."  It sound pretty interesting.

Durham is actually a very nice place, becoming more so recently.  I think the change dated to Angus and Ms. Angus staying here, nearly 10 years ago now.  That had to be it...  Hipsters attract hipsters, it's a law of nature.

MicroWork Development

From the HBR....

What’s the best way to help the world’s poor? The answer may not be giving them more aid. What people need to break the cycle of poverty is work. A small but growing industry known as “impact sourcing” is addressing that need head-on by hiring people at the bottom of the pyramid to perform digital tasks such as transcribing audio files and editing product databases. Essentially, it’s business process outsourcing aimed at boosting economic development.

Impact sourcing is not unlike microfinancing: It aspires to create meaningful work for and put money in the pockets of the people who need it most. And because it connects new workers—often those who’ve been marginalized, such as Muslim women in Calcutta—to the global supply chain and addresses real needs of first-world companies, it could quickly reach a large scale. In a study commissioned by the Rockefeller Foundation last year, Monitor Group estimated that the market for impact sourcing was $4.5 billion in 2010 and would rise to $20 billion by 2015. It also predicted that employment in the industry would grow from 144,000 to 780,000 over the same period.

Nod to Kevin Lewis

Baffle them with bulls**t

Oh my.  Jeff Sachs has a piece in The Lancet, extolling the accomplishments of his Millenium Village Project, that is, shall we say, weak.

Let's concentrate on child mortality, described in the Lancet piece as the "primary study outcome".

Sachs et. al. claim that, "Mortality rates in children younger than 5 years of age decreased by 22% in Millennium Village sites relative to baseline (absolute decrease 25 deaths per 1000 livebirths, p=0·015) and 32% relative to matched comparison sites (30 deaths per 1000 livebirths, p=0·033)."

They present this evidence in a table (page 7 of the article, the last row of the results there) comparing the change from year zero to year 3 in the MVs and in the comparison villages.

So far, so good, right? Well, what if I told you that, in the words of Sachs et. al., "Local comparison village sites were introduced in the third study year to enhance the plausibility that recorded changes were the result of intervention exposure."

In other words, the comparison villages were added ex-post! So how then can they report the change in child mortality in the comparison villages over a time period that started before they started to study those villages?

"Year-0 value is based on recall items in the year 3 survey (eg, women’s reproductive histories)."

YIKES!!

So in year three, they asked women how many children they had under 5 that died in year zero and compared that to the actual numbers they measured in year 3, while the MV change was computed from measurements (not surveys) in both years.

Why does this matter? Well according to the table in the Sachs et. al. article, child mortality is RISING in the comparison villages. This "result" is driving the whole claim quoted above. In the MV case, child mortality falls from 113 to 88.7 over the time period, while in the comparison villages the rate rises from 90 to 96!

So if that comparison is no good what can we use? Well, the total percentage decline in child mortality in the MVs was around 22% which is pretty much right in line with the overall figures the World Bank is reporting for many Sub-Saharan African countries!

I am by far not the first one to point this out. Here's an article from Nature, quoting Michael Clemens than makes many of the same points.. Here's the Roving Bandit pointing out other statistical silliness in the Lancet paper. Here's more from Aid Thoughts about the overall decline of child mortality in Africa.

I really don't understand why a well published PhD economist would bend good practice to this extent, no matter how noble his ultimate goals.

Transmissions from the satellite heart

The World Bank estimates that remittances to developing countries in 2011 exceeded $370 billion. Here's some context, from the "Migration & Development Brief":

It's interesting to see just how thoroughly remittances dominate ODA (official development assistance) as a source of funds in developing countries.  The chart also shows the explosion of FDI in the developing world over the last 10 years (interrupted by the financial crisis but recovering quickly).

Hat tip to the Roving Bandit!

A travesty of justice

Politics and RCTs

Justin Sandefur and longtime KPC friend Mwangi Kimenyi along with Tessa Bold, Germano Mwabu & Alice Ng’ang’a  have written a remarkable paper about the non-uniform results of an educational intervention in Kenya. The paper is well-deserving of discussion, but so is the story of its evolution.

The paper studies an intervention that adds "contract teachers" to schools. Contract teachers are meant to be teachers outside of the main educational bureaucracy who in some way have close ties and more accountability to the local community than the "regular" teachers. In the study, some of the intervention was run by the government, and some was run by an NGO (Worldvision). Test scores in math and reading went up by 0.2 standard deviations compared to the control schools when the intervention was run by the NGO and this increase was statistically significant. However, the intervention had no effect on test scores when it was administered by the government.

This result alone points out the difficulties involved in scaling up education intervention that have been tested by RCTs run by NGOs. Size means government and government might not work.

But people, there is so much more to the story!

The concept of contract teachers initially involved remedial teaching. Banerjee, Cole, Duflo and Linden (QJE 2007) study an NGO-run program in India where the contract teachers tutored remedial students (which raised test scores 0.28 standard deviations). Duflo, Duplass, & Kremer study a contract teacher RCT in Kenya that included the concept of "tracking" where contract teachers were added to a specific class. In some cases the class was randomly split into two groups; in others it was split into low and high scorers on an initial test. This split into more homogeneous classes produced the biggest positive results in the trial.

In an email exchange, Justin told me that while Duflo encouraged him to include a tracking component in his study, she said that it was very unpopular and hard to administer. It is also hard to imagine a government run program that would allow such a component. Think about the USA. What would parents do if they found that classes were being segregated by test scores and their kid was in the "dumb" group?

Because they were explicitly interested in the idea of scaling up a program that could be run by the government, Sandefur et. al. did not include any idea of tracking in their study. In other words, they judged a key element of the success of contract teachers in previous RCTs to be politically unviable ex-ante.

But there's more!

The Sandefur study was part of a pilot program in Kenya. However, things didn't go according to plan:

the Ministry opted to scale-up the contract teacher program before the pilot was completed. Thus the randomized pilot program analyzed here was launched in June 2010, and in October 2010 the Ministry hired 18,000 contract teachers nationwide, nearly equivalent to one per school. These 18,000 teachers were initially hired on two-year, non-renewable contracts, at salary levels of roughly $135 per month, somewhat higher than the highest tier for the pilot phase. In 2011 the Ministry succumbed to political pressure and agreed to allow the contract teachers to unionize and subsequently to hire all 18,000 contract teachers into the civil service at the end of their contracts.

In other words, 18,000 supposed "intervention" teachers became "control" teachers! In plainer terms, they switched from being part of the solution to being part of the problem. Although maybe not, because as Sandefur et. al showed, the government administered contract teachers had no positive impact on outcomes.

In sum, the Sandefur et. al paper shows that while small scale contract teacher RCTs produced modest but positive results, it is not likely those results will survive scaling and government administration.

So what to do? Well Justin & Mwangi along with Tessa Bold and Germano Mwabu have another paper that points to what I believe is the solution at least in the short and medium term. They show that in Kenya, being in a private school raises test scores by one full standard deviation relative to public schools, other relevant factors held constant (this is not an RCT but rather uses "observational" data).

So on the one hand we have these interventions in public schools that raise outcomes by a couple tenths of a standard deviation when implemented on a small scale by NGOs and that may will have no effect when scaled up and implemented by governments.

On the other hand we have an institution (private schools) that raises test scores dramatically more by effectively solving the teacher accountability problems that seem to be behind the outcome problems in public schools in Kenya and other developing countries.

Let me channel Milton Friedman and James Tooley and suggest expanded private schooling with a public voucher program as potentially the greatest pay-off educational intervention available in such situations.

The economics of labor and capital

Recently, the Economist argued that China's astoundingly high investment rate makes some sense because China is a capital scarce country with a very low level of capital per worker compared to the US.

This may well be true. It is certainly the case that it makes sense that China's investment rate is higher than that of a very capital abundant country like the US.

However, the article concludes with some amazing errors, both factual and economic:

the evidence suggests that China has not seriously overinvested. That does not mean rebalancing is unnecessary. Under China’s capital-heavy model of growth, owners of capital have been getting much richer than workers. The main reason for shifting from capital-intensive production to the more labour-intensive, consumer-friendly sort is not to sustain economic growth, but to reduce inequality. Workers could then enjoy more of the rewards of China’s past investment.

Where to begin?

First, as the graph in the article showed, relative to rich countries China is NOT engaged in "capital- intensive production" because they have very little capital per worker. I thought that was the whole point of the first part of the article.  They are decidedly engaged as a simple matter of fact in labor intensive production compared to countries like the US.

Second, if China stops accumulating capital, the owners of capital will continue to make a lot of money and worker salaries will continue to lag. Owners of capital are getting rich because its relative scarcity makes its rental rate high. If capital is paid its marginal product and marginal product diminishes, capital owners make a greater return when the capital stock is relatively small.

In order to raise worker salaries, workers need to become more productive. Part of this can come from workers' own investments in human capital, but a big part comes from the amount of capital per worker in the economy.

If China wants to reduce inequality between the earnings of capital owners and laborers, then they decidedly should NOT "re-balance" away from investment. Of course they should try and make sure that the investments undertaken actually raise worker productivity and are not state led vanity projects or boondoggles.

The greater amount of capital per worker, the higher is worker productivity, the higher will be wages and the lower will be the return to capital. That is the way to diminish the gap.

Raising China's capital per worker is crucial to raising the living standards of Chinese workers.

Bhagwati dishes:

Dr. B. is not a fan of the Obama administration's pick of Jim Kim for World Bank President.

He's also not a fan of an exclusively micro approach to development:

But perhaps the most compelling factor in Obama’s choice seems to have been a fundamental misunderstanding of what “development” requires. Micro-level policies such as health care, which the Obama administration seems to believe is what “development” policy ought to be, can only go so far. But macro-level policies, such as liberalization of trade and investment, privatization, and so forth, are powerful engines of poverty reduction; indeed, they are among the key components of the reforms that countries like India and China embraced in the mid-1980’s and early 1990’s. Such reforms turned these countries from stagnation to stellar growth. 


The anti-reform lobbies reacted by arguing that poverty and inequality had worsened. But new empirical studies show otherwise: growing economies benefit the poor not because wealth “trickles down,” but because growth “pulls up” those at the bottom. In fact, it is the rapid acceleration of economic growth in the major emerging countries that has reduced poverty, not only directly, through jobs and higher incomes, but also by generating the revenues governments need to undertake the public-health, education, and other programs that sustain poverty reduction – and growth – in the long term. India followed this path...


The problem with Kim, and presumably with the Obama administration’s development experts, is that they do not understand that successful development requires big-payoff pro-reform, pro-growth policies, not just small-payoff micro-level policies. Bangladesh has gone down that road, substituting such policies for macro-level reforms, and is developing at a far slower pace than India, where macro-level reforms came first.

I have to say that while I don't think it really matters who becomes president of the WB, I am quite sympathetic to Bhagwati's point of view about what really matters for development.

Sustainable development?

The indefatigable Michael Clemens reports that a new Millennium Village project in Ghana plans to spend a minimum of $12,000 per household lifted out of poverty in the project. This is something north of 30 times higher than average annual household income in the region where the project is going.

I have no doubt that many of these households will be "lifted out of poverty" during the years when these expenditures are made.

But, I don't think it can be called development.

Clemens proposes an interesting cost -benefit hurdle for the MVP by noting that if the money was placed in a trust that earned 5%, each household would receive $600 / year FOREVER (which would be triple the average annual household income in the region). He asks if the MVP method of spending the money will permanently triple the average incomes of these households.

UPDATE: THE FIRST SENTENCE OF THIS POST WAS REVISED TO BE ACCURATE. SORRY FOR THE MISTAKE!!

Sentences

Pithiest sentence I read this week:

"They import nothing into their overseas dominions except damaged officials and they export nothing from them except the same officials, worse damaged"

~ Albert Guerard, describing France's adventures in colonialism as quoted by John Gimlette in his amazing book, "Wild Coast".

To me, the best books both inform and entertain. Wild Coast knocks it out of the park in both dimensions.

Scariest sentence I read this week:


"The world needs more effective global economic governance more than ever."

~ Owen Barder on why the WB presidency matters.

Obviously I disagree. I don't think we need ANY "global economic governance".

Jim Kim's complicated relationship with economic growth

Bill Easterly's shop at NYU gives some amazing quotes from Jim Yong Kim.

 Here's lo mas contundente:

 Conclusion: Pessimism of the Intellect, Optimism of the Will, By Joyce V. Millen, Alec Irwin, and Jim Yong Kim


 “Through a series of specific cases, we have demonstrated how growth – the market-led economic growth sought by governments, the growth in profits celebrated by businesses, and the growth in power and influence of transnational financial and corporate interests – often comes at the expense of the disenfranchised and vulnerable… As the imperatives of growth at any cost increasingly determine economic and social policy and the behavior of global corporations, more people join the ranks of the poor and greater numbers suffer and die.” (p. 363)

So the presumptive new head of the WB believes that market led economic growth is causing MORE people to become poor and MORE people to die!

 YIKES!!

 So North Korea  >> South Korea?

 Mao  >>  Deng?

Houston, we have a problem.

Twisted steel & Sachs appeal

When someone I follow re-tweeted Jeff Sachs' message to Jim Kim last week, I was impressed and surprised at its gracious tone:

Jim Kim is a superb nominee for WB. I support him 100%. I thank all who supported me and know they'll be very pleased with today's news

So surprised that I went to Sachs' twitter feed to see what was up. And found these gems, all on March 21:

I've been given no consideration, and won't be. The US Government doesn't seem to care about global poverty. 


Did you know that Larry Summers actually knew BEFOREHAND what Shleifer was doing while HIID did not? 


In 1999 Polish President gave me one of nation's highest medals for my historic contribution. 


You should know that in an emergency room there are "short-term disruptions." Don't blame the doc.

Sadly, the feed has gone quiet since he congratulated Kim.

Sunday morning at the woodshed

Wow. Lant Pritchett absolutely eviscerates the Obama administration over their pick for World Bank President.

Here are some of the salty bits:

“It’s an embarrassment to the U.S. You cannot with a straight face say this person is the most qualified to lead the World Bank.”

and:

Adds Pritchett, nominating Kim “is like picking the short stop for the New York Yankees out of the scrub leagues.”

Finally:

“there’s no question that Kim has done terrific things, but I wouldn’t nominate Mother Teresa to head the World Bank if she were still alive.”

I personally think that the World Bank's composite scorecard is way over par (during its existence, on balance, it's done more harm than good) and favor abolition.

But I don't think the main problem has been choice of leadership.

As Mallaby's superb book "The World's Banker" makes clear, WB Presidents cannot make the behemoth bank bureaucracy march to their own tune.

The problem is institutional, the problem is conceptual, the problem is philosophical. The WB is one of the last bastions of central planning, and it functions about as well as other such bastions have functioned.

Look out Hillary, another hat has hit the ring

Apparently top-down development would work just fine if we only had the right leader at the World Bank, and Jeff Sachs has someone in mind.....

Jeff Sachs!

People, did you know that the WB's "central mission is to reduce global poverty and ensure that global development is environmentally sound and socially inclusive."

Shall we take a Python break?

"NOBODY expects the Spanish Inquisition! Our chief weapon is surprise...surprise and fear...fear and surprise.... Our two weapons are fear and surprise...and ruthless efficiency.... Our *three* weapons are fear, surprise, and ruthless efficiency...and an almost fanatical devotion to the Pope.... Our *four*...no... *Amongst* our weapons.... Amongst our weaponry...are such elements as fear, surprise...."

Don't get me wrong, Jeff has a good point that the US has not exactly covered itself in glory with the folks we've put in charge of the World Bank or with our use of the institution to promote cold war goals. But the "all we need are the right people in charge" argument is just so incredibly superficial and lame, whether applied to political systems or vast bureaucracies.

Jeff concludes by offering his vision of where the Bank would go under a Sachs-ocracy:

Its priorities should include agricultural productivity; mobilization of information technologies for sustainable development; deployment of low-carbon energy systems; and quality education for all, with greater reliance on new forms of communication to reach hundreds of millions of under-served students.

Oh, my.

With all due respect, can we not just put Barber Conable's ghost back in charge?

Why Expat Aid Workers like rebel militias

"When colleagues at the “Regional Conference on the Use of RCTs to Define and Shape Sustainable Mainstreaming of Successful Good Practice Related to Local Ownership and Crosscutting Holistic Gender Empowerment for Excluded Adolescent Girls based on Positive Deviance Methodology” think they are being all badass by casually dropping in news about their latest vacation in one dodgy place or another, as someone actually living there, it’s your EAW (expat aid worker) duty to trump them by reminding them that life in Militiaville is no cake walk, thus putting them in their place."

Full post is here. The entire blog is tremendous.

Hashtag of the day

OccupyNigeria

Blogoverse needs Pritchett

Lant Pritchett is guestblogging up a storm about conditional cash transfers.

Check out these two excellent (albeit perhaps slightly contradictory) posts here and here.

Self-recommending.

As in medicine, so in development?

Jonah Lehrer has a great article in Wired documenting the difficulty of truly understanding causal forces.

Here is a representative section:

The story of torcetrapib is a tale of mistaken causation. Pfizer was operating on the assumption that raising levels of HDL cholesterol and lowering LDL would lead to a predictable outcome: Improved cardiovascular health. Less arterial plaque. Cleaner pipes. But that didn’t happen.

Such failures occur all the time in the drug industry.


To recap. HDL is the "good" cholesterol and LDL the "bad". Pfizer found a drug that did what the quote describes, but it turned out to kill subjects in the phase III trial and ended up costing the company billions in market capitalization.

In my opinion, much of macro development advice has worked the same way.

Experts observe that successful countries exhibit qualities A, B & C. Developing countries are advised, subsidized, threatened to emulate the successful countries on these attributes. But the patients do not improve!

Education, Institutions, "getting the prices right", openness to trade, the list goes on of macro advice given and to a surprising extent taken by the developing world, without the implicitly promised results.*

The only real difference in the medical and developmental analogy is that Pfizer lost billions of dollars due to their misreading of cause and effect, while the World Bank just chugs on and on with an ever growing size and budget, producing a new World Development Report every year and acting as if the past had never happened.

That is to say, there is little to no accountability for bad advice or improper diagnoses among the IFIs compared to pharmaceutical companies.



* In our 2007 JDE paper, Robin and I show that school enrollment rates, government spending, openness to trade, political constraints on the chief executive,bureaucratic quality, corruption, and overall law and order are all converging over time.

Malagasy Miracle?

In an article about South African led political negotiations in Madagascar, WSJ reporter Peter Wonacutt says a couple surprising things about Madagascar:

"Rich in vanilla, coffee, cocoa and minerals, Madagascar has long been an economic miracle waiting to materialize."

"the first since a military-led coup in 2009 upended one of Africa's most promising economies."

The article also shows a graph of the country's recent growth rates:



What the article doesn't show or discuss is Madagascar's demographics. Almost half of the population is below age 15. Population growth has averaged between 2.5 and 3 percent. Thus, per-capita GDP is not growing anything like what is shown in the graphic.

Mrs. Angus and I were in Madagascar for 3 weeks in 2008, before the coup. There was really only one good road in the entire country (from the Tana airport to the town to the Andasibe-Mantadia national park). Transportation infrastructure in the South and West was non-existent (We didn't visit the north).

Villages were filled with babies that had just had babies, and the country appeared not to have any old people at all. There was only one airline in the country and flights left whenever all the ticketholders arrived (this could be either substantially early or extremely late). One of the main occupations in rural areas was chopping down trees to make and sell charcoal.

Finally, exporting primary commodities has not proven to be a reliable path to achieving development.

Two caveats. First, I'm not a Madagascar specialist. But given my experiences in that country and knowledge of its demographics, I was stunned by the interpretation of its economy given in the article. Second, Mrs. Angus and I had a tremendous visit to the country. We thoroughly enjoyed it and would recommend such a trip to any semi-adventurous travelers.

Attn: West coast KPC fans

I, Angus will be giving a talk tomorrow at Claremont College.

Title is "Beyond Twin Peaks: Development and Polarization in the World Income Distribution".

The time is 10:30 - 12:00 the place is Kravis 367.

Be sure and say hi if you are a KPC reader.