The paradoxes of nepotism

It’s not what you know, it’s who you know. It’s the prime minister who uses government funds to send his son to Oxford. It’s the minister who gives key jobs in his ministry to unqualified relatives. It’s the MP who spends his constituency grant on his family. It’s the chief who makes sure the village development fund goes to his clan and not the rest of the community…it’s nepotism, something that impedes good governance in most developing countries. Political economists, aid agency staff and even most residents of developing countries will tell you that the world would be a better place without it. And yet for something that is so unambiguously bad there are strange ambiguities – paradoxes – that run through nepotism.

The first being that while it is bad for society as a whole, and while it is almost universally condemned as morally wrong when people think about its impacts of the efficacy of government, nepotism is born of emotions and instincts that we usually consider good at another level: people’s love and concern for the welfare of their own family and friends. Familial love, it turns out, aggregates upward not to a lovely society but to a corrupt one.

The second paradox of nepotism is that it is born of the world’s oldest social safety net: family and friends. And yet it impedes the proper development of the most effective social safety net our planet has developed to date — the welfare state.

The third paradox of nepotism, in aid work at least, is that we (aid workers) all agree it’s wrong, but most of us still make use of it ourselves. Got a legal problem with a contract which needs fixing quick. Who are you going to call? That unfriendly contracts manager? Or the staff member who you befriended at work drinks the other week? Want a reference for a new job? Are you really going to call your most recent boss? (The one who was cold and clinical.) Or are you going to get in touch with the manager prior to that, who you used to go surfing with? And are you really going to wait in the official queue to get advice on the governance project, when you could just ‘run into’ the governance advisor and have a friendly chat?

[Update: The fourth paradox of nepotism is that if you are a good aid worker you will actually strive hard to increase the short term quantity of something akin to nepotism in the country where you are working. You've got the chequebook and the big white land cruiser, but you actually have surprisingly little power (power to do good at least). So much depends on your local interlocutors and their desire to help. This may come because they support what you are trying to do, but don't count on it. And if they don't, they are armed with all the 'weapons of the weak' they need to turn your log frame into a log jam. And, in a second best world, getting counterparts to like you, and wanting to help you owing to personal affinity, usually helps. I'm no expert but it seems to me that, it is for this very reason that good aid workers get more done because they are likeable, respectful, and don't come across as arrogant.]

[Update two: my wife thinks the fourth paradox comes across as way to harsh on local staff. So, to be clear -- many aid programme staff are incredible people who want to do good and who we can safely assume are even more committed to development than we are (no big pay cheque for them). However, this is not always the case (particularly say if you're working with a government department). And even if local staff do support the cause, it still helps, if they like you and want to help you personally. This nothing particular to developing countries: it is true everywhere on Earth).]

None of this means that we shouldn’t seek to diminish the scourge of nepotism. But we should also accept that it never completely goes away — the various actors in development are far too human for that to ever happen. And we should also be very humble about our ability to tackle nepotism. Capacity building is hardly going to stop someone from wanting to do good for their family.

[note: I'm pretty sure I read that first paradox on someone else's blog recently. If it was yours: sorry, let me know, and I'll link].

links for self

Delong on Sokolof and Engerman et al.

Monbiot on psychology and the left.

Tribal Warfare

Good on Marshal Sahlins for resigning from the NAS in response to it’s military work. On the other hand, from the far distant land of Political-science-phd-studentia, it’s hard not to read the volleys of comments back and forth on the Chagnon saga and be reminded of tribal warfare. Ouch.

Link for self – Stumbling and Mumbling…

…on the occasional benefits of irrationality.

links to self – Rodrik

Dani Rodrik on political economy and on the intersection of economics and the real world.

Link for self – DFID’s engagement with research compared to other UK departments

at Roving Bandit.

Link for Self – the Myth of Wealthy Tax Flight

Link for Self – the Myth of Wealthy Tax Flight

Poverty, minimum wages, efficient markets, and debt

At the New Zealand blog Pundit Tim Watkin makes an impassioned call for a living minimum wage – a wage floor based on estimates of enough to get by. He argues, quite rightly, that in a country as wealthy as New Zealand no one should do a full day’s work and still be living in poverty.

Is this a good idea? The textbook argument against it is that raising the minimum wage would lead to increased unemployment through making low skilled workers too expensive to employ based on what they might contribute to their employer.

Like so much of what you read in first year economics textbooks, there’s an appealing logic to the argument and you can put it on a chart. It’s also quite possibly wrong.

This post at the WP’s wonkblog lays out a number of reasons why the Econ101 objection may be wrong. (To which I’d add the overarching objection that labour markets almost certainly don’t function under anything near perfect competition (the assumption that the claim that minimum wages must lead to more unemployment hinges on), and also that the minimum wage which anyone can profitably be paid is a moving target which no one, neither worker nor employer perfectly pin to any particular point – something that provides wiggle room enough for a legally mandated floor).

Empirically, it turns out it’s hard to adjudicate between the theoretical arguments about minimum wages and unemployment – research nicely summarised here – but it’s worth noting that our own New Zealand case alone provides plenty of prima facie evidence that having a modest legal minimum wage which gradually increases cannot possibly be a major cause of unemployment. We had a minimum wage through the Labour government years (and I’m guessing it went up) and unemployment as effectively zero (that which we had was mostly short term churn and, for fear of wage-price inflation, the Reserve Bank was actively putting the breaks on our economy via interest rates hikes).

So Watkin’s right then?

As much as I sympathise I’m not a completely signed on supporter of the move to $18 dollars an hour (which is what I think he’s calling for). Why? Because that’s a large enough movement that it really might have significant employment effects (particularly during a time of economic stagnation).

So what about the alternatives then?

One is an earned income tax credit (which we effectively have in NZ in a limited form via Working for Families). As Mark Thorma points out in an economic theory sense this is tidier than raising the minimum wage but practically not so much. (As an aside Ezra Klein notes in the US at present the minimum wage makes much better political sense).

A related partial alternative would install in an income tax free threshold (which IIRC we still don’t have in NZ) so as to at least make sure that those earning too little aren’t then loosing a slice of it to tax. This (assuming I’m right in my recollection of the current state of play) would be an obvious starting point. With the revenue lost being offset by higher taxes on the wealthy.

This is the first thing I’d do. After that then I would raise the minimum wage, but slowly and cautiously, not to $18 in one big hit. I’d also boost Working for Families. (And benefits too, because just as it seems just to me that no working person should live in poverty it seems equally fair that no-one should be in poverty because they are ill.)

And then I’d boost spending on education – particularly for those at the bottom of the heap. Because ultimately the best way to have a country free of income poverty is to have a society were everyone has the skills to earn enough in a market economy to live comfortably. Once again I’d fund this by taxing the wealthy.

I’m in favour of a living wage for all New Zealanders but I don’t think the law’s the only thing we need to get there. Tax and transfer are critical too.

[Important update: Krugman, Konzal, Schmitt, Bernstein- if you've read this far definitely read them too.]

–

A couple of good unrelated links. Noah Smith on Debt and with a good ‘defence‘ of the Efficient Market’s Hypothesis.

A more succinct and eloquent version of the Hitchens/Dawkins/Harris Argument

From a Pacific Island rural development report that I’ve been reading

It was noted that a large number of people in the 3 wards do not belong to either of the above church denominations or the pagan [animist] community. They just live their own lives.

 

Link for Self – Avritzer on Participatory Governance

Link for Self – Avritzer on Participatory Governance

Link for Self – Leonardo Avritzer writing on Participatory Governance at a national level in Brazil.

Link for self — Acemoglu and Robinson on Civil Society and Clientelism

Link for self — Acemoglu and Robinson on Civil Society and Clientelism

Link for self – does the US Social Safety Net Reduce Poverty

Link for self – does the US Social Safety Net Reduce Poverty

The trouble with the MDGs

Ah yes the MDGs, some people hate em, some people like em. I tend to the like side of the divide but even I can’t deny that the Goals have their flaws. Most egregious the fact that they have achieved what you would have thought to be the impossible task of being both over ambitious and under-ambitious at the same time. I explain why in this Dev-Policy blog post along with what could be done to fix the MDGs.

Link for self – government did not cause the GFC

Link for self – government did not cause the GFC

Mike Konzal via Paul Krugman – a useful rejoined to those who claim that state intervention was the culprit.

Bad news for Malaria…

Roving bandit notes that Rwanda has had significant reductions in Malaria. Intriguingly, this story appears to be true in a range of countries. In Solomons, where state capacity is very weak and which is a very hard place to get large scale aid programmes working, not only are the official stats showing a Malaria decline but when we visited the provinces a frequently recurring comment most everywhere was that “there was hardly any Malaria round here any more.” (Not that I’d usually suggest that my own perceptions were a substitute for good data, but data in Sols are patchy enough that I start taking them more seriously when they point in the same direction as the word on the street).

As far as I know no one has thought to study this in Solomons (why the reduction, why the aid/government programme is working rather than the usual). Were I not up to my eyeballs in election data and trying to finish a PhD this is one of the first things I’d like to investigate. In a place where not much works success is bound to be illuminating.

 

[Update: looks relevant - some old World Bank research on what lead to declining Malaria rates in Solomons in the 1990s here.]

OECD DAC Aid Stats – sigh

Mostly just a note for myself after having being driven closer and closer to Neo-Conservatism thanks to an afternoon slaving away for OECD DAC’s aid data interface.

Note 1: Access CRS here, but note that, while CRS can give you data by donor and by sector this data will not total reconcile with total aid flows from individual countries in any given year. In the NZ case, and other cases if you are lucky, it will approximately reconcile to bilateral ODA by donor.

If you want accurate data for all aid given by a donor to a recipient try this non CRS table. If you want a breakdown of aid by sector by donor try this non-CRS table here.

Other useful stuff – deflators used are here.

And note that for NZ this tied aid table doesn’t reconcile to total aid flows.

LSE Blog on Research and Policy

LSE Blog on Research and Policy

Link to self – research and policy

Link for Self – Minimum Wages

from the Economist’s Free Exchange Blog — here

Link for self: Social Desirability Bias

Development Impact with an excellent post on social desirability bias and survey data in development research.

Making Bureaucracies Work…

One good thing about being a student is that it gives you a — very small — taste of development insignificance. When you work for an aid donor, let’s face it, your chequebook and your government afford you at least a little prominence in developing countries. As a student, if you’re lucky, when you wander into a government department, you might be able to drop the name of a friend of a friend, otherwise you are more or less on your own. You’re a privileged oddity, of course, which means, sadly, that you’ve still got a better chance of being aided than a local (although the flip side is that you likely don’t have any local knowledge of how things really work), but nevertheless — thanks to your lack of import — you still get a somewhat more accurate user’s perspective of how government departments function or don’t.

My student level experiences have been far from universally bad — across a range of government entities some very kind and capable people helped me out (thank you!), but there have also been government departments that I interacted with which were pretty awful.

In one department I was hit up for a bribe. A friend of mine had a similar experience except this time the guy doing the hitting was also drunk (mid-morning). It wasn’t just the outsiders who had problems either, a local friend was enduring endless delays courtesy of the same department.

When I told another expat friend about this he sighed sadly and said something along the lines of “oh man, but they’ve just put a whole heap of aid funded TA and capacity building work into that department.”

No doubt the TA and capacity building was much appreciated but the real problems in that particular department had little to do with staff capacity. And this is where I think a lot of aid work gets bureaucratic strengthening wrong. Too often we misdiagnose the afflictions of government departments. Sometimes it really is staff capacity, but often it’s broken incentives cascading down from the political realm or unhelpful norms. And all the TA and training in the world probably won’t be much use in treating these problems.

I discuss all this in more detail in this new blog post for the Development Policy Centre.

Language Barriers

Yesterday, the sky was perfect, uninterrupted, not a cloud. Just a big thirsty blue, that stretched in an unnerving way between faint horizons. It was the sort of sky you could imagine dying of thirst under. The day baked. Grass and trees wilted. And we drove around Canberra’s empty wide streets running errands.

The super-market was easy. The barber’s more difficult. There I had to talk. But the barber and I lacked enough shared words to converse. We tried, but our sentences fell to the floor like cut hair.

“Summer Nats this week mate.”

“Oh, um, yes, all those noisy cars.”

“…”

“We went home to New Zealand for Christmas.”

“Cold there? You been watchin the cricket?”

“Um no not really, are we playing you guys?”

“You’re bein’ thrashed by the South Africans.”

“Oh.”

The tire place was worse. The guy was friendly, bearded and tattooed. He knew everything there was to know about tires, I knew nothing. We tried. I should have pretended to like the Summer Nats car show.

And so I realised later, as Jo and I sat atop mount Ainslee, almost cool in the evening breeze, watching the land grow gold as the sun fell from its empty sky, that somewhere in my life I’d failed to learn an important language. I can speak reasonable Pijin. My Portuguese was passable once. And I had alright traveller’s Spanish. There was even a time when I could at least navigate in Bahasa Indonesian. And yet, despite growing up in the Hutt, I never learnt bloke. I can’t talk rugby, or cars, or common sense. All I can do is stare at my shoes awkwardly, and fudge for a bit until my accent gives me away.

Not that I really mind: I yearn to be a lusophone more than I’ll ever yearn to be a bloke. But there are times, I confess, when I wish I knew what to say when someone says in a confident drawl: “Mate did you hear the Kiwis got bowled out for 44.”

Community Driven Development

Link for self: Development Impact on the massive DRC RCT on community driven development.

The Impact of Trade on Labour Rights

Two very helpful posts from the Monkey Cage – here and here.

Un-anarchist Chris

Chris Blattman wonders why, when he finds both anarchist and libertarian ideas so appealing, he’s still a centrist.

I suspect it has something to do with reality. And him being at least remotely connected to it.

It’s easy to see the appeal of libertarian socialism (anarchism) and right wing libertarianism as *theories*. They have suitably flawed villains (the state: boo hiss) and equally charming heroes: individuals who are either naturally cooperative or rational decision makers. And, as stories that merely require a villain, the state, to be vanquished (or severely diminished) before a better natural order arises they don’t necessitate long tedious discussions about alternate structures.

Right wing libertarianism has an additional appeal if you’re a wealthy adherent: a pleasant little fairy tale which sees the same process through which you become wealthier (lower taxes! less government!) save the world. Splendid.

Better still, they’ve neither anarchism nor libertarianism has been fully put into practice on a large scale anywhere for long periods of time, so their opponents can’t point to dismal failures in arguments.

Like I said, it’s easy to see the appeal, yet  both ideologies face a simple problem: they almost certainly wouldn’t produce welfare enhancing changes in the real world.

In the case of anarchism (no state; consensual collective decision making, no private property) the problem is as such: trade over large geographical areas and specialisation play a massive role in enhancing the quality of life we experience (if you don’t believe me try making a fridge or a radio or antibiotics, or try finding someone in your suburb who can do this). We are all considerably wealthier and better off for being able to focus our labours on specific tasks and trading with others to obtain the other items we need. Why’s this a problem for anarchist? Because trade works better with rules; it requires contracts to be enforced and defaulters punished; and for that you need a state – something that structures and facilitates collective action on a large scale. It’s not just trade either: the transmission of knowledge, the operation of social services, all of these work better across scales larger than could be governed by some sort of consensus based collective. It’s true that states bring with them the inevitability of quite large scale injustices and the potential for tyranny. And it’s also true that not all states afford better lives than those that could be lived in small very egalitarian consensual communities; and that for much of history, including up until the point when early modern anarchists started writing, one could have plausibly make the case that states did more harm than good. But this clearly isn’t true now. We need better states and there are quite possibly lessons from anarchism in how we might best dehierarchialise power but I don’t think it can plausibly be claimed that anarchism as an ideology brings with it much development potential.

Libertarianism – an ideology that espouses a minimal state which enforces property rights and contracts and not much else – has similar fundamental flaws. Flaws that leap out of any first year economics textbook: rational participants, operating with perfect information, in a world free of externalities and coercion, amidst perfect competition, and in possession of sufficient resources to see their revealed preferences equalling their actual preferences might be able to aggregate their choices into socially optimal outcomes, but seeing as none of these conditions exist on Earth, what we’re talking about here is,  as a prescription for how society should be run, mumbo jumbo.

More sophisticated libertarians might argue that while the conditions for their utopia don’t exist, what they have to offer is, owing to collective action being so fraught, better than any other alternative. The trouble is you only have to look to Sweden to see that this is unlikely to be the truth. It turns out that well-functioning states, in practice, do a lot of good, and it is very hard to see how, given the problems of externalities and market failures to name just two, their near elimination would lead to an improvement. It’s true that Sweden isn’t everywhere and in very low capacity states we should be wary of asking the state to do too much. But given that markets are only about as good as the institutions they are amongst we should also be wary of those who claim, hand wave, hand wave, that there’s a market based solution just waiting to solve the problem of X in country Y.

I’m not a centrist. I’m a left-liberal: I believe that we hairless apes need to be engaging in more collective action to aid the least well off in our societies and to tackle problems such as climate change. And although I’ve got no time for libertarianism I do appreciate that the problems of collective action, information and efficient allocation mean that we do need to leave quite a lot to markets. And likewise, although I’m no big fan of anarchism, given the obscenities of global inequality and the fact that my own proposed solutions are only least worst ones, I am interested in ideas coming from the radical left because I hope somewhere amongst their thinking there’s a blueprint for a better world than any I could dream up. But I’m also very doubtful that our complicated world can be made better by simple solutions or simple ideologies no matter how tidy they might seem on paper.

Have a nice Christmas.

Link for self: Ezra Klien on Gun Violence

Here and here. Also of interest here. And here. And John Quiggin on Australia here.

Occupy

Via Crooked Timber, an excellent essay on Occupy in Wired.

Getting there

Reblogged from Wandering Thoughts:

• 
• 

When I travel the first part of me to arrive is always my imagination. It scouts the route ahead, sketching scenes and picturing people. Empty open spaces make it uneasy. Given a chance it races to fill them.

I had been imagining the Weather Coast for months before we actually got  there. It was at the heart of the civil conflict that submerged the Solomon Islands from 1999 until 2003.

Read more… 1,601 more words

Someone’s Making a Mistake Here

Ed Carr thinks Esther Duflo is mistaken to think that the poor make mistakes, offering as counter evidence work showing male farmers preventing their wives from becoming the primary bread winners. The farmers do this as, were their wives seen to be earning more than them, their (the men’s) status in the community would be challenged and this would likely lead to reduced material welfare. The men’s choices might appear mistaken but once we understand the context they are rational enough.

It’s an interesting example but Carr is the one who is mistaken if he thinks he’s refuting Duflo et al. Mistaken because to Carr’s one example Duflo’s work provides plenty of cases (not chlorinating water for example) where deeper underlying rationality of the sort evident in Carr’s work is very unlikely.

More than that though Carr’s own example has a big ol’ contradiction running through it, which renders it a very poor example for those who might wish to claim we are rational after all.

The problem is as such:

Carr shows that the farmers he researched are choosing something that seems economically irrational (suppressing the earning potential of their wives) but which is actually rational once one considers the incentives they are offered by the informal institutions/norms associated with their communities. Institutions which see farmers loosing status if their wives are earn more than them. Lost of status has a potential land cost and so allowing their wives to earn more makes bad economic sense in the long run. Which is an excellent and interesting insight but one which *does not* afford evidence sufficient for us to conclude that reason has won the day. Does not because the norms themselves (male status being tied to men earning more than women) are profoundly irrational. There’s no good, rational reason, for status to be tied up in him earning more than her, and yet it is.

Sometimes irrational collective outcomes can stem from collective action dilemmas turning individually rational choices into collectively irrational screw ups (i.e. the tragedy of the commons), but it is very hard to see how this could explain the norms driving the actions of Carr’s farmers.

To be clear, Carr’s farmers are hardly unique in this: sexism is quite possibly the most common human cognitive error. And you could find numerous similar examples where I grew up.

And I’m not disputing that their decisions make sense on their own terms. Rather, I’m simply pointing out that the norms (aka informal institutions) shaping their choices themselves appear to be profoundly irrational. Mistaken in other words.

Now that puts things in perspective…

Mother of gods!

Over the last 50 years, developed countries have given as much as $2.3 trillion in foreign aid…$2.3 trillion is a very large sum of money, but again, we need to put it into perspective. A sobering example is that in 2001 the secretary of Defense, Donald Rumsfeld, announced that the Defense Department was so bad at keeping track of its funds that there were $2.3 trillion that it could not account for — an amount equal to the entire international aid spending of the developed countries over fifty years. [Emphasis mine]

Toby Ord puts aid spending in perspective.

What Works in HIV Prevention

What Works in HIV Prevention

3ie have a tidy little summary of what is and isn’t efficacious in terms of reducing HIV infection rates.