The slides and references associated with a talk I’m scheduled to give about this subject can be downloaded here. Note if you download the slides prior to 5 June, they may change if I tinker with them.
May 25, 2015
July 7, 2014
Martha Nussbaum has an excellent piece in the Boston Review explaining why Narendra Modi ought do more than focus on GDP growth as he seeks to emulate the Gujarat miracle for India as a whole.
Economic development is important, but it isn’t everything when it comes to human welfare:
Now let us return to Narendra Modi’s Gujarat. Measured by the growth paradigm, its achievements are strong indeed. The growth rate of per capita SDP (State Domestic Prodct) between 2000 and 2011 averages 8.2 percent, higher than any other State excepting Uttarakhand (10.0). Other high performers, close behind Gujarat, are Tamil Nadu (7.5), Kerala (7.0), and Maharashtra (7.5)…If, however, we begin to examine distribution, things immediately look very different. Gujarat’s rate of rural poverty is 26.7 percent, of urban poverty 17.9 percent; the combined poverty rate is 23.0 percent. Of the high economic performers, Maharashtra does worse, but Uttarakhand, Tamil Nadu, and Kerala do much better, with combined rates of poverty of 18 percent, 17.1 percent and 12.0 percent respectively.2 Moreover, the following States, not such stellar economic performers, have lower combined rates of poverty than Gujarat: Andhra Pradesh, Haryana, Himachal Pradesh, Jammu and Kashmir, and Punjab…Let’s now look more closely. Gujarat has life expectancy at birth of 64.9 years for males, 69.0 years for females. The figures for Tamil Nadu are 70.9 (female) and 67.1 (male), for Kerala 76.9 (female) and 71.5 (male).3 Lest we ascribe these differences to climate or genes, quite a few other States also outperform Gujarat: these include Maharashtra, Haryana, Punjab, Karnataka, and West Bengal. In infant mortality and maternal mortality, Gujarat also lags well behind the two southern States and quite a few others. In maternal mortality, indeed, Gujarat has the high rate of 148 deaths per 100,000 live births, as compared with just 81 for Kerala and 97 for Tamil Nadu.4 So: comparable growth achievements, utterly disparate health outcomes.
Nussbaum lists similar discrepancies in gender and education.
As it critiques GDP as a measure of welfare, the piece makes the case for Amartya Sen’s capabilities approach to development — the belief that the end goal of development should be to maximise human functioning in a range of aspects of the human condition. Nussbaum lists these as: life, bodily health, bodily integrity, ‘senses, imagination and thought’, emotions, practical reasons, affiliation.
I’m not convinced. Or to be more exact: I am convinced that measuring the state of our lives across a range of indices will provide a better approximation/measure of welfare than measuring GDP alone. But I’m not convinced that maximising human capabilities is a better end goal than the one which supposedly underpins most economic thought: human happiness.
One problem with the capabilities approach is the same trouble all non-utilitiarian philosophies face. What if it turned out that maximising capabilities (or at least certain ones) made us less happy as a whole? Would you really want us to be talented but miserable? Not me, I’d settle for mediocre bliss for our species any day. You can argue that maximising capabilities won’t make us less happy. I’d agree with you. Hence my support of measuring welfare across a range of human indices. But it seems to me that if that’s your way out, you’re tacitly agreeing happiness, not capabilities, is the ultimate end goal.
The other problem with the capabilities approach, is a problem confronting all Aristotelian philosophies — how do you adjudicate trade-offs between the different things you want to maximise (capabilities in this case)? What happens when you need to curtail someone’s affiliation to increase someone else’s bodily health? For a utilitarian this is easy enough (in theory): you act to maximise the greatest good. But this option would not seem to be there for Aristotelians.
June 24, 2014
Over at WhyDev they’ve produced a long, bleak, amusing list of advice for aspiring humanitarian workers.
Pickers of nits (who me?) can find things to complain about (it’s wrong to state categorically that foreign aid doesn’t stimulate growth; if anything, the best available evidence suggests it does) but, overall, the list rings true.
At a more meta-level the list illustrates well one of the grim truths of aid work, that it is a human endeavour, and so is replete with the human failings we see throughout our lives. There is no escaping this. No part of the world of aid work that’s free from it.
If you imagine yourself working for a crusading NGO speaking truth to
DFID/USAID/DFAT/MFAT power, odds are you’ll find yourself working for an entity that receives enough funding from the power itself, or easily scared suburban donors, that truth telling has to be muted. Or, if you end up in a small independently funded cluster of the ideologically pure, you’ll end up doubting, amidst the complexities of development, you actually know what the truth is.
Similarly, if you plan on standing in solidarity with some idealised noble savage against the depredations of the developed world, odds are you’ll find that while those depredations are real, the societies you imagine yourself helping have plenty of their own ambiguity and their own internal abuses of power. And that these are more often the source of suffering than our own crimes. You will also learn similar hard lessons about power and people’s failings if you stride into the world of development keen on promoting participatory approaches.
The dismal science won’t help you either. If, fresh from your economics degree, you imagine all you need is to bring some hard-nosed analysis based on sound theoretical fundamentals into the game, you’ll likely learn the hard way that amidst the messy processes of development tidy theories struggle to give guidance, and simple solutions fail.
Yet, at the same time, if the message you take from all this is that development itself is bad, and if you race to the embrace of chic, post-development philosophising, you’ll find just as much contradiction and confusion. Most importantly, if you are being honest, you will also have to face the uncomfortable truth that — for all it’s flaws and ambiguities, and for all we don’t know about how to bring it about — development actually delivers, both longer and happier lives.
And as for aid work, while it is far from perfect, it’s also far from the worst we can do. The long sad sweep of human history is mostly filled with examples of us actively doing harm to anyone who wasn’t kin or, more recently, compatriot. Set against this, the fact we try to help strangers in far away lands is actually something. Of course it’s still ambiguous, we haven’t actually evolved into a better species in the meantime, but compared to the unambiguous nastiness of much our past, muddled attempts at kindness are still an improvement.
For what it’s worth, if you end up working in development, my advice is to abandon all hope of perfection, or of healing the world, but try your best to contribute in some small way to making our planet a kinder, more sustainable place. Do this, and I think you’ve done your bit.
June 11, 2014
A useful corrective from Australia if you happen to labour under that particular delusion.
March 25, 2014
While there is a lot to be said for democracy, generally the consensus is that there has, to date, been little robust evidence to prove it generates – on average – higher levels of economic development. Given the names attached to this new NBER working paper this situation may be about to change…
Democracy Does Cause Growth
Daron Acemoglu, Suresh Naidu, Pascual Restrepo, James A. Robinson
NBER Working Paper No. 20004
Issued in March 2014
NBER Program(s): DEV EFG POL
We provide evidence that democracy has a significant and robust positive effect on GDP. Our empirical strategy relies on a dichotomous measure of democracy coded from several sources to reduce measurement error and controls for country fixed effects and the rich dynamics of GDP, which otherwise confound the effect of democracy on economic growth. Our baseline results use a linear model for GDP dynamics estimated using either a standard within estimator or various different Generalized Method of Moments estimators, and show that democratizations increase GDP per capita by about 20% in the long run. These results are confirmed when we use a semiparametric propensity score matching estimator to control for GDP dynamics. We also obtain similar results using regional waves of democratizations and reversals to instrument for country democracy. Our results suggest that democracy increases future GDP by encouraging investment, increasing schooling, inducing economic reforms, improving public good provision, and reducing social unrest. We find little support for the view that democracy is a constraint on economic growth for less developed economies.
March 4, 2014
Of all the competing explanations to ‘Institutions Rule’, the human capital one always struck me as the most plausible. Or, at least, on the basis of observations of Solomon Islands, I could be very easily convinced that education’s contribution to the world of ideas, and the re-fashioning of ties it also induced, was a deep(er still) determinant of growth. Working in part through its effects on institutions.
However A&R are here with a new NBER working paper, which aspires (on the basis of the abstract only) to lay waste to human capital’s claim to importance…
Institutions, Human Capital and Development
Daron Acemoglu, Francisco A. Gallego, James A. Robinson
NBER Working Paper No. 19933
Issued in February 2014
In this paper we revisit the relationship between institutions, human capital and development. We argue that empirical models that treat institutions and human capital as exogenous are misspecified both because of the usual omitted variable bias problems and because of differential measurement error in these variables, and that this misspecification is at the root of the very large returns of human capital, about 4 to 5 times greater than that implied by micro (Mincerian) estimates, found in some of the previous literature. Using cross-country and cross-regional regressions, we show that when we focus on historically-determined differences in human capital and control for the effect of institutions, the impact of institutions on long-run development is robust, while the estimates of the effect of human capital are much diminished and become consistent with micro estimates. Using historical and cross-country regression evidence, we also show that there is no support for the view that differences in the human capital endowments of early European colonists have been a major factor in the subsequent institutional development of these polities.
February 25, 2014
Over two weeks in 1996 I travelled between extremes of the public transport spectrum. At one end were the buses of Sumbawa in Indonesia – grumpy, diesel-spitting creatures that lurched their way around potholes taking hours to get anywhere. At the other end was the London Underground. Trains were frequent, quick and – despite everyone’s complaints – mostly on time.
Compared to the bus riders of Sumbawa, all but the poorest travellers on the London Underground were also wildly wealthy. And yet they appeared miserable. Commuting in silence. Pale, staring at their shoes. The Sumbawan bus travellers, on the other hand, were full of cheer. The buses rang with talk and laughter.
For a time this contrast led me to question the merits of development. If London was wealthy but glum and Sumbawa poor but happy then — I thought — perhaps we should abandon development and live like Sumbawanese? Such thinking was common currency on the backpackers’ trail. And something similar is also, I discovered when I did a Development Studies degree in 2003, common currency amongst an influential group of intellectuals, the so-called ‘post-development’ thinkers. The first book I was assigned to read for class was The Development Dictionary a post-development tract edited by German academic Wolfgang Sachs, in which a range of well-credentialed researchers excoriated the development enterprise, taking the doubts of backpackers and fortifying them with critical theory…read the rest of this post on Devpolicy.
July 23, 2013
What looks to be a very interesting new NBER paper:
Turning a Shove into a Nudge? A “Labeled Cash Transfer” for Education
Najy Benhassine, Florencia Devoto, Esther Duflo, Pascaline Dupas, Victor Pouliquen
Conditional Cash Transfers (CCTs) have been shown to increase human capital investments, but their standard features make them expensive. We use a large randomized experiment in Morocco to estimate an alternative government-run program, a “labeled cash transfer” (LCT): a small cash transfer made to fathers of school-aged children in poor rural communities, not conditional on school attendance but explicitly labeled as an education support program. We document large gains in school participation. Adding conditionality and targeting mothers make almost no difference. The program increased parents’ belief that education was a worthwhile investment, a likely pathway for the results.
I’m not someone who dismisses the textbook model of humans as rational utility maximisers off hand. Sometimes, we’re close enough for it to be practically useful. And almost always it is a great starting point for thinking. Nevertheless, advances in behavioural economics psychology promise, I think, not only to improve the study of economics and political science, but also to provide all manner of useful insights into aid practice.
July 20, 2013
Setting aside the suffering, and the potential impact on a depressed global economy, the interesting development related question is how will China’s political and social institutions fare through the political stresses caused by a slow down?
Indeed, Rodrik et al’s growth accelerations paper suggested (to me at least) that growth spurts can happen in poorly governed countries but sustained development, which means dealing with the wobbles on the road, is much harder to maintain. What’s more, Rodrik provided pretty convincing evidence in One Economics that democracies weather economic shocks considerably better than autocracies, which doesn’t bode well for slow down in China.
An optimist might hope (I certainly do) that the Chinese government responds to the pressures generated by economic downturn through democratic opening and redistributive transfers to the poor.
But a pessimist will remind you that there are many, many other potential outcomes.
July 17, 2013
Huh, I missed this when it came out.
The Paradox of Declining Female Happiness
NBER Working Paper No. 14969
Issued in May 2009
By many objective measures the lives of women in the United States have improved over the past 35 years, yet we show that measures of subjective well-being indicate that women’s happiness has declined both absolutely and relative to men. The paradox of women’s declining relative well-being is found across various datasets, measures of subjective well-being, and is pervasive across demographic groups and industrialized countries. Relative declines in female happiness have eroded a gender gap in happiness in which women in the 1970s typically reported higher subjective well-being than did men. These declines have continued and a new gender gap is emerging — one with higher subjective well-being for men.
[gated link sorry]
I haven’t read the paper yet but were I to speculate on causes I would say that societies that place ever increasing pressure on women to look and behave a certain way (simultaneously as sex objects for men; and as virtuous and abstentious) would be a likely cause…
July 4, 2013
By coincidence Horst Bleakly has an interesting new NBER paper looking at the impacts of an 1832 Georgian land lottery that randomly granted tracts of land to men. From the conclusion:
Using wealth measured in the 1850 Census manuscripts, we follow up on a sample of men eligible to win in the 1832 Cherokee Land Lottery. With these data, we can assess the effect of winning that lottery on the distribution of wealth almost two decades after the fact.We show that winners are, on average, richer, but mainly because the middle of the distribution is thinner and the upper tail is fatter. In contrast, the lower tail is largely unaffected. This stands in contrast with a `mechanical’ short-run effect of the lottery, which would tend to compress the distribution of (log) wealth. The results are also inconsistent with the view that the effect of winning would have been greatest on the lower tail because credit constraints had created a wealth-based `poverty trap’. As we see in this episode, it may take more than just wealth to move the lower tail of the long-run wealth distribution “up from poverty.”
July 2, 2013
Meanwhile in the Third World Quarterly…
The fetishism of humanitarian objects and the management of malnutrition in emergencies
Author: Salessi, Sina
Source: Third World Quarterly, Volume 34, Number 5, 1 June 2013 , pp. 929-941(13)
This paper examines two common objects in humanitarian assistance: a therapeutic food called Plumpy’nut, and a tape for measuring malnutrition known as the muac band. It argues that humanitarian relief has become a standardised package reliant on such objects, which receive excessive commitment from aid workers and are ascribed with almost magical powers. Drawing on the Marxist notion of commodity fetishism, the paper proposes a three-part model for examining this phenomenon, in which humanitarian objects are bound up in processes of concealment, transformation and mystification. First, these objects are perceived as rootless, recent discoveries, allowing the complex history and ambivalent results of technology to be concealed. Second, they facilitate a single-minded attention to efficiency and aggregate survival, which transforms the way humanitarian action is understood. Third, these objects are imbued with a mystical and autonomous spirit, redefined as irreplaceable elements of aid. This ‘fetishism of humanitarian objects’, the paper concludes, prevents a more flexible and people-centred approach to relief.
Ok SOIHARTP* but the abstract reminds me: One of the main problems, I think, with so-called critical development theorists is that their fetish for the trivial. Words. Objects. Bits and pieces. It would be wonderful if such things really did provide insights into why the world is such a mess and what we could do about it. But they don’t. Our problems are much more prosaic. Humanitarian relief is (somewhat) ineffective** not because workers involved suffer from commodity fetishes. But rather because:
1. By definition it happens in places which have significant pre-existing issues (war, conflict, remoteness, lawlessness). It ain’t easy to work in these environments.
2. We don’t Actually. Care. That. Much. We care enough to lift a finger to provide threadbare help and keep people alive. And against the the sad history of humanity that’s something, an achievement, an improvement. But we don’t care enough to actually do anything significant like let refugees into our own countries in large numbers. Or to spend 5% of GDP on funding humanitarian work. Limited compassion means limited effort, means limited outcomes. Oh – and by the way – by ‘we’ I mean you and me. Ok so maybe we’re a bit better than average, I vote for the most pro-refugee party in New Zealand for example, but we all possess the trait of not giving a f..k to some extent, so let’s not be too sanctimonious.
3. Power. Not the power of small packets of nutrition. But the power of wealthy and powerful in our own countries and in aid recipient countries to rig the game to their advantage.
I think you can argue perhaps that we don’t face these three truths nearly enough in development. And that maybe we turn to nifty commodities in search of easier solutions. But, if that’s the easiest thing to do and they work, so what? Some people have to get things done. And there is a division of labour. Academics, for example, could be doing more to reveal the challenges of my three points above…
*SOIHARTP — So I haven’t actually read the paper. You can have a refund.
** But actually much more successful than its critics give it credit for.
June 8, 2013
Ever wondered what the solutions are to global poverty and conflict? What we know? The state of the knowledge in development economics? In peace studies?*
This video sums it all up beautifully. H/T Humanosphere.
*I know, I know, a little unfair — knowledge is inching forwards and some great insights exist.
May 9, 2013
At Jacobin Magazine there’s an interesting interview with Marxist academic Vivek Chibber(VC) who’s written a book critiquing sub-altern studies. One little extract I think has a lot of relevance to post-development types, and other cultural essentialists, who are pretty common in development studies in my neck of the woods (JB is Jonah Birch, the interviewer):
JB: A lot of the appeal of postcolonial theory reflects a widespread desire to avoid Eurocentrism and to understand the importance of locally specific cultural categories, forms, identities, and what have you: to understand people as they were, or are, not just as abstractions. But I wonder if there’s also a danger with the way they understand the cultural specificity of non-Western societies, and if that is a form of cultural essentialism.
VC: Absolutely, that is the danger. And it’s not only a danger; it’s something to which Subaltern Studies and postcolonial theory consistently fall prey. You see it most often in their arguments about social agency and resistance. It’s perfectly fine to say that people draw on local cultures and practices when they resist capitalism, or when they resist various agents of capital. But it’s quite another to say that there are no universal aspirations, or no universal interests, that people might have.
In fact, one of the things I show in my book is that when the Subaltern Studies historians do empirical work on peasant resistance, they show pretty clearly that peasants [in India], when they engage in collective action, are more or less acting on the same aspirations and the same drives as Western peasants were. What separates them from the West are the cultural forms in which these aspirations are expressed, but the aspirations themselves tend to be pretty consistent.
And when you think about it, is it really outlandish to say that Indian peasants are anxious to defend their wellbeing; that they don’t like to be pushed around; that they’d like to be able to meet certain basic nutritional requirements; that when they give up rents to the landlords they try to keep as much as they can for themselves because they don’t like to give up their crops? Throughout the nineteenth and twentieth centuries, this is actually what these peasant struggles have been about.
When Subalternist theorists put up this gigantic wall separating East from West, and when they insist that Western agents are not driven by the same kinds of concerns as Eastern agents, what they’re doing is endorsing the kind of essentialism that colonial authorities used to justify their depredations in the nineteenth century. It’s the same kind of essentialism that American military apologists used when they were bombing Vietnam or when they were going into the Middle East. Nobody on the Left can be at ease with these sorts of arguments.
JB: But couldn’t someone respond by saying that you’re endorsing some form of essentialism by ascribing a common rationality to actors in very different contexts?
VC: Well, it isn’t exactly essentialism, but I am endorsing the view that there are some common interests and needs that people have across cultures. There are some aspects of our human nature that are not culturally constructed: they are shaped by culture, but not created by it. My view is that even though there are enormous cultural differences between people in the East and the West, there’s also a core set of concerns that people have in common, whether they’re born in Egypt, or India, or Manchester, or New York. These aren’t many, but we can enumerate at least two or three of them: there’s a concern for your physical wellbeing; there’s probably a concern for a degree of autonomy and self-determination; there’s a concern for those practices that directly pertain to your welfare. This isn’t much, but you’d be amazed how far it gets you in explaining really important historical transformations.
For two hundred years, anybody who called herself progressive embraced this kind of universalism. It was simply understood that the reason workers or peasants could unite across national boundaries is because they shared certain material interests. This is now being called into question by subaltern studies, and it’s quite remarkable that so many people on the Left have accepted it. It’s even more remarkable that it’s still accepted when over the last fifteen or twenty years we’ve seen global movements across cultures and national boundaries against neoliberalism, against capitalism. Yet in the university, to dare to say that people share common concerns across cultures is somehow seen as being Eurocentric. This shows how far the political and intellectual culture has fallen in the last twenty years.
March 3, 2013
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].
October 28, 2012
“Wealth is not without its advantages and the case to the contrary, although it has often been made, has never proved widely persuasive.” John Kenneth Galbraith
The Conversable Economist has a useful defence of GDP/capita (and its growth) as a measure of the quality of welfare of nations here (HT Edward Carr). Meanwhile, in a very interesting, but ultimately vexing (IMHO) issue of Development Drums, Diane Coyle, starts out in a similar vein offering a robust defence of economic growth.
For what it’s worth:
1. Given diminishing marginal utility of income (and if you’re going to assume just one thing in economics this is it), and given that eventually — even if you allow for technology becoming the generator of a lot more environmental friendliness than it currently produces — our ability to consume must run into some constraints, I think that there is a good case to be made that GDP growth is something that we in the developed world might want to focus less and less on. I also think that we would be wise to view it as an increasingly poor proxy for well-being. This isn’t the same as saying we should ignore it though. Becoming more wealthy may not make us happier, but GDP contraction or stagnation is strongly correlated with rising unemployment and, one imagines rising unhappiness.
2. My guess is that part of the way out of the tangle of GDP growth being coupled with depleted environmental resources and, beyond a point, being coupled less and less with rising happiness, will be for developed countries to keep increasing the productivity/output of every hour worked, but for people in developed countries to work fewer and fewer hours. Tapping the wisdom of a thousand dull clichés I’m guessing that we could be happier with the same amount of money and of consumer goods if we had more time to be free. (For similar thinking see this wonderful essay by John Quiggin and this talk by Robert Skidelsky).
4. All this is true for developed countries. But for the world’s developing countries decent levels of domestically generated well-being require economic growth. Even if they are to become as egalitarian as Sweden, and some, China and India won’t be able to give large shares of their populations the quality of life that you and I enjoy without growing the pie.
There isn’t, I think, any question about this.
Sure you can try and get all post-development if you want and you can argue that the average work-a-day-Johnny in Lower Hutt, or Long Island, or London lacks for a lot in their life. And this may be true. But you’re dreaming if you think first world suburbanites are worse off than their brethren in the suburbs of large third world cities. Or in small villages in the Pacific. Modern lower-middle class life ain’t great. But it is – on average – a lot more likely to lead to happiness than poverty in a developing country. This is what the survey happiness data show. It’s also what the great, too-often thwart, forces of migration that flow (or dream of flowing) across our globalised world show: many, many, many people in developing countries desire to move to wealthy countries. And while the odd well-paid academic might mutter in the other direction, very, very few people in developed countries actually want to move to remote rural poverty or third world slum living.
5. In developing countries there are issues with making sure that growth benefits everyone (and ideally that it’s pro-poor: benefiting the poor the most) which means that distribution does matter in developing countries, but growth matters too, and I would say — typically — it matters more.
6. The real issue of economic growth in developing countries is that no one really seems to know how to reliably bring it about (at least in large quantities over long time frames). This is even more the case if you’re talking about pro-poor growth. It is even, even more the case if you’re talking about what external actors (aid agencies, for example) might be able to contribute in this area.
7. And that leads to an important point. While economic growth may be a critical component of the transformation of developing countries into states that afford high levels of well-being to their people, its fostering isn’t the only way we can help. There are examples of developing countries that have milked relatively good health outcomes out of poverty, for example. And there are examples of aid work that hasn’t brought economic transformation but which has helped saved lives.
Achievements of this sort aren’t everything, but they are also good.
In other words: if you live in a developed country, when thinking domestically, challenge growth myopia amongst your own pundits and policy makers, but don’t leap to thinking that growth is bad or can be ignored. And, don’t leap to thinking that the ambiguities of growth in your own country are equally present in the developing world. They’re not. There growth is — unambiguously — a necessary, and necessarily major, component of bringing about the good life.
At the same time, don’t let your thinking stray all the way in the other direction. There is good that can be done in the absence of growth. And when we’re thinking about what we outsiders can do, this may well be where we can most effectively offer assistance.
September 18, 2012
A friend and I were discussing various schools of thought on development, governance and leadership, particularly with respect to Adrian Leftwitch’s work on leadership and also thinking about how people on the ground in the Pacific think about these things. This prompted the table over the fold (freakin ugly because WordPress ain’t being helpful). Different schools of thought and their key features…
[Update – much easier on the eyes, a PDF of the table is here.]
August 29, 2012
Pow! Paul Krugman offers a tidy, qualified, defence of neo-classical economics and rational choice.
August 5, 2012
Is it really rational to use rational choice models to explain political behaviour in Solomon Islands?
I am currently doing two things that would seem to be mutually incompatible: reading, and being convinced by, Daniel Kahneman’s new book, and modelling (in my head at least) Solomon Islands electoral politics using rational choice models of human behaviour.
These two things ought to be mutually incompatible for the simple reason that Kahneman provides powerful evidence that human beings really are not rational utility maximisers much of the time. Which would seem to mean that rational choice models are wrong in their very essence.
So why am I still using them. I think a qualified defence of their use can be made as follows:
1. First, rational choice models are tractable and quite easy to use. What’s more they fit snugly with tools such as game theory that are very valuable aids to thinking about collective action. And at this point in time there aren’t any systematic, readily usable replacements that I am aware of.
2. Obviously, if the models are at total odds with human behaviour, then regardless of point 1, we should still discontinue their use. But this doesn’t seem to be the case. Quite a few social features do seem to approximate those that we would expect from a world of rational agents. Which is likely because we do, at least some of the time, reason our way though problems. And, sometimes, in the case of recurrent decisions, even if we never reason perfectly, trial and error likely gets us to a place where our decisions are much the same as those made by a reasoning machine. More than this though, in much of Kahneman’s book he discusses our non-reasoning side in terms of short-cuts, tricks that our brain uses to make decisions more efficiently than if we had to reason through them. Instincts in other words. Sometimes these tricks get tricked. And we end up with unreasonable outcomes, but much of the time they probably do a reasonable task of making reasonable choices. The short of choices we may well have made anyway, had we bothered reasoning through. And this means that rational choice models may well be accurate a lot of the time.
3. Moreover, by providing clear pictures of expected outcomes, rational choice models also become a very useful tool for highlighting when systematic irrationality is taking place. Spot the deviation and then find a way of explaining it. One good example from Solomons elections is the use of so-called ‘floats’ by the big candidates in Honiara electorates. These are large processions of cars and supporters that the candidates parade around with in the days leading up to the election. Why do they do that? Because they want to make themselves look like likely winners. Voters generally believe (accurately enough) that the candidates with the most money are most likely to win elections in Honiara. Also, everything else being equal, in the strongly clientelistic politics of Solomon Islands, and in an environment where, one way or another, candidates do seem able to find out who voted for them, if you know who’s going to win, it is a good idea to vote for them. If you don’t, they likely won’t help you once in power. So, if you are a candidate it makes sense to look like you are likely to win. Convince people of this and quite a few of them will vote for you for that reason alone. Hence the floats. So far so rational. However, the trouble is, everyone knows that floats are just a way of seeming like you are a likely winner, and not necessarily reliable, so you would expect rational voters not to be swayed by them. And you would expect rational candidates to stop using them once they stopped winning votes. And yet they persist. Why? This would seem to be an interesting puzzle, with an answer probably involving misplaced instincts from voters, who know what the game is all about, but who still can’t help feeling that it’s probably an idea to vote for the candidate with the biggest float. So, even when they are wrong, rational choice models can be useful pointers. One day, when elections are actually being systematically studied by well resourced researchers in Solomons, as opposed to study by one PhD student, these deviations from rationality ought to be a great avenue of inquiry. For now though, I’m sticking to the stuff that does fit rational choice models. Because there seems to be a lot of it.
Of course there are dangers in using rational choice models. One of them being that they are potentially un-falsifiable. Most outcomes can be explained in stories involving reason, even if they are very convoluted and wrong, and this needs to be avoided.
But, if I can do this, and be careful, and not overuse, them my instincts tell me rational choice models still ought to be very useful tools in analysing the data I have.
[Update: Irrationally, I forced myself to finish this post before blog surfing. First thing I did when I finally got there was read this at Roving Bandit:
There are good reasons for keeping prospect theory out of introductory texts. The basic concepts of economics are essential intellectual tools, which are not easy to grasp even with simplified and unrealistic assumptions about the nature of economic agents who interact in markets. Raising questions about these assumptions even as they are introduced would be confusing, and perhaps demoralizing. It is reasonable to put priority on helping students acquire the basic tools of the discipline. Furthermore the failure of rationality that is built into prospect theory is often irrelevant to the predictions of economic theory, which work out with great precision in some situations and provide good approximations in many others.
— Daniel Kahneman “Thinking, Fast and Slow”
June 14, 2012
“The argument which says “Do something. Just do something. Even if it’s not particularly right, at least you’re doing something, which is more than millions of others can say…” is ultimately a bankrupt argument. Twisted as they may have been, Hitler and Pol Pot both honestly believed they were making the world better. They did something. They took the initiative. And we all know the results. So while I absolutely do not compare Heather or Liz or Cara to Hitler and Pol Pot, I do have to point out the obvious: Being deeply convicted that one “means well” and that “every little bit helps” does not mean that one is actually doing good rather than – you know – harm, and it is in no way a good enough basis for mucking about with the lives and livelihoods of other people…”
J. wins my vote for all time best aid blogger. And I have learnt a lot from Carol’s comments (thank you!) but it is simply wrong, even in a very loose conceptual sense, to associate the intentions of Kony2012 or the 1000 shoes guy, or your average Johnny or Jenny do-gooder, with those of Pol Pot and Hitler.
While Pol Pot and Hitler may have had their own perverse visions of a better world in mind (one of village purity and the other of Utopia based on the master race) and while this I guess suggests they thought they were doing good, they harboured no good intentions whatsoever for their victims. Pol Pot wanted to brutally subjugate most of his population and Hitler wanted to exterminate Slavs, Jews, and Roma. These. Weren’t. Good. Intentions. And the roads to hell that Hitler and Pol Pot built weren’t paved with good intentions.
I think there are perfectly reasonable debates to be had about the potential unintended consequences of the operations advocated by the producers of Kony 2012 and whether, possibly, the movie propagated a picture of Africa that is ultimately harmful to the continent (in desperate need of a certain kind of help from a certain kind of saviour)*. But, with respect to the question that motivated my original post — do good intentions often lead to significant harm? — I am still convinced that the answer is no. And I certainly don’t the Hitler and Pol Pot argument works at all here.
*FWIW – I think the films critics might be right on the first of these and are probably wrong on the second – although I could be mistaken.
June 11, 2012
I missed most of Kony 2012. In internetless isolation doing research. But I have a question for everyone in the development blogosphere who became so enraged: how many people have died as a result of Kony 2012? Oh, and another question, how many people are likely to die?
It always struck me that the old saying ‘the road to hell is paved with good intentions’ is utter nonsense. Paved with good intentions? Not often. Most of the time the road to hell is paved with bad intentions. Diabolic ones. That’s what causes catastrophe – nastiness. And just as the road is paved with bad intentions most of the time it is also lined with doing nothing.
It’s not the trivial bits of global assistance that caused the Rwandan genocide. It was the perpetrators of this crime. And it was made worse not by the presence of the UN but rather by the absence of any real international attempts to stop it. Not good intentions: bad plus a willingness to look the other way.
And so Kony 2012. The guys who produced it might be dopey and motivated by a desire for fame (fortunately this is not something that ever motivates bloggers). But have they really caused any harm?
And if not, were we right to focus so much ire in their direction when at the same time, in all manner of different parts of the planet, bad people were busy doing bad shit?
Sure there’s lots of well intended Western development silliness. But, only very rarely does it do any harm. And probably occasionally it does quite a lot of good.
So Kony 2012 didn’t bother me that much. Human history is basically mostly about us trying to kill the ‘other’ or at least ignoring someone else doing the killing. Set against that backdrop I reckon attempts to do good, even daft ones are a step in the right direction.
[Update: See comments. Carol writes: ‘Kony 2012 called for military intervention and support of the Ugandan military (which is also accused of some pretty serious crimes). This kind of action did not end well in 2008, when it led to the retaliatory Christmas massacres.’ Fair point.]
[Update 2: I typed this blog post in a hurry last night while I was, somewhat anxiously, waiting to meet a taxi driver for an interview. I did not devote a lot of thought to it but, I thought, what the heck. Mine is a very small blog and it is a very big internet out there. If I’m wrong I’ll be ignored or corrected. What I didn’t expect was that this morning I would be learning via comments a lot on something I know to little about. This seems unfair. But thank you everyone.
For what it’s worth the Kony2012 defenders are quite convincing at least as of 9am Solomons time.]
An reasonably common suggestion amongst conservative types (including IIRC Niall Ferguson) is that developing countries are so poorly governed the best solution to their problems would be for first world powers to run them again. For a period of decades. Re-colonialism, in other words.
Having spent the last few weeks in a developing country city where it is really hard to get anything done that involves engaging with the formal mechanisms of governance I am sympathetic to this suggestion. I really am.
It is deeply flawed though.
In part for the prosaic reason that no developing country ruling elite would willingly submit to this. But also, more importantly, because the type of colonialism it calls for never existed. Non-exploitative colonialism is a conservative fantasy. Did not happen. And that is important. Not just for being honest about the historical record but also for evaluating whether re-colonisation could help improve people’s lives.
You can argue that this, the new colonialism, would be different from the old. And that it would be humanitarian. But that is unlikely. Unlikely for the same reason that aid is often skewed by developed country interests. The colonised would have no voice in the ultimate decisions made by the colonisers. On the other hand vested interests in the colonising countries would. As they always do. And it’s this imbalance, I think that would rather quickly render the new colonialism almost as exploitative as the old.
And that is why it wouldn’t work.
Update: for example –
One of the interesting sidelights of the charter cities and seasteading debates is how they “out” the lack of any necessary connection between liberalism and democracy. As Mallaby puts it in the FT article about Romer: “In mild professorial language, [Romer] declares that poor countries should hand control of these new cities to foreign governments, which should appoint technocratic viceroys. The better to banish politics, there must be no city elections.”
March 28, 2012
Two things to do with petrol.
1. Kevin Watkins has a great post up at the Guardian on a major, neglected development/health issue: the damage done by traffic.
2. Over at CGD, in a post posing some questions to the three World Bank presidency contenders, Nancy Birdsall enthuses thus about Ngozi Okonjo-Iweala:
She has practiced good economics in the hard soil of tough politics in Nigeria, fighting high-level corruption at personal risk, recently working to eliminate gasoline subsidies that benefit the car-owning rich while sapping the public budget of resources to serve the poor.
I live and work on the other side of the world so maybe I’m mistaken but, aren’t these the same subsidies whose elimination sparked wide scale rioting and protest across Nigeria?
If so, then the first question I would want to ask for this Ms Okonjo-Iweala would be something like:
Are you committed to economic purism? Or are you willing to accept the political economy and institutional constraints mean that almost all developing countries (not to mention much of the developed world) are examples of ‘second-best’ policy spaces, where sometimes interventions that offend the intuitions of economists are often nevertheless the best we can do?
This would be my burning question because, contra Birdsall, it wasn’t just the rich protesting the end of the subsidies – the poor were up in arms to. This was the case because the subsidy withdrawal impacted on everyone, not just car drivers. Everywhere on Earth we pay the price of transport in our lives, be it through bus fares, or transported goods. Transport costs affect everyone. The poor may not own cars but they are often the least able to afford the price hikes they experience nonetheless.
Which isn’t to say that the subsidy is ideal. There are probably many other interventions through which the same amount of money could better enhance the welfare of the poor (better funding for health clinics; a simply UCT etc.)
However, are any of these alternatives actually on the table in Nigeria? And, even if they are, is the government capable of introducing them, and running them in a way that doesn’t leak like a rusty old petrol can?
I could be wrong of course, it’s not a part of the world I’m familiar with. Maybe the brave Finance Minister talked down the protesters, implemented an excellent cash transfer scheme, and the poor are now much better off. This might have happened but I would be surprised if it has.
I think there’s a lot to be said for the insights that come from analysis inspired by simple economic theory. But it has its limits. And the last time economic purism ran riot in the Bretton Woods institutions it was disastrous for the poor. And I’m not really sure I want a leader of the World Bank who is economically tidy, but also prone to causing the odd riot.
Pragmatism over purity.
That would be a good motto for the World Bank, I think.
February 5, 2012
As I understand the basic theory of voice and exit in groups (and I know that Hirshman’s thought went much further than this) the idea is that if you are unsatisfied with any aspect of the group you are in you can either express your discontent in the hope of changing it (voice) or you can exit it (exit). Between the two options members can prevent the group from treating them poorly.
This make sense, although often enough it seems to me that something which is almost the reverse of this is at play in many entities/organisations. Here the cost of exit for the individual is high enough — loss of friends and family, loss of property or wages, lack of social alternatives — that it stifles voice. Speak out and you risk being kicked out.
Which is why, I think, that all manner of organisations, even those where we ought to be able to exit such as churches, CSOs, and firms, end up being pretty tyrannical.
January 20, 2012
January 9, 2012
My new year’s resolution is to spend more time reading books and less time reading on the internet. Obviously, it would be dangerous to transition directly from screen to paper so, as an intermediate step, I’m reading Poor Economics on my wife’s Kindle.
I’m some way in and one thing that strikes me profoundly is that three very commonly held views about the poor are simply untenable based on the evidence:
1. The first of these is that the poor always make the right choices (or, at least that they’ll do so if they are free to do so). This view underpins the proposed solutions to under-development both of free-market economists and radical leftists, as well as (some of the) arguments used by those promoting participatory development. And yet it’s clearly wrong: poor people in developing countries make mistakes. Of course it doesn’t automatically follow from this that someone else ought to, therefore, be making decisions for them. People abuse this sort of power and experts make mistakes too. But it does suggest that simply giving the poor their say, either through market mechanisms, participatory planning meetings, or anarcho-socialism, isn’t going to solve the problems of under development.
2. On the other hand, the view – held mainly by armchair conservatives – that poor people are poor because of their mistakes, is also utterly wrong. We all make mistakes and if mistakes caused poverty we’d all be poor. What’s more there’s no evidence that the poor make more mistakes.
3. The idea, depressingly common in parts of academia, that people in developing countries are profoundly, culturally different from the rest of us – so different as to justify cultural relativism or anti-development thought – is also utterly wrong. Actually, it turns out that poor people have similar wants and preferences to everyone else. They are just less able to meet them.
I wouldn’t say that Poor Economics is a perfect book but, by reflecting the complicated realities or the lives of poor people, and for showing them to be remarkably similar to the rest of us, it is certainly a very good book.
January 2, 2012
The best case I ever heard for free markets was the one made by Paul Krugman, who paraphrased Churchill to the effect that markets are the worst way of organising economies, except for every other way we’ve ever tried. That sounds about right to me. In many instances as an allocative and organising tool markets are lousy, but nevertheless less lousy than any alternative I can think of. Their outcomes aren’t particularly just. And they are prone to clear and repeated failures. And they don’t guarantee entitlements to their participants that are adequate for survival. But in many – although not all – situations they do a better job than the alternatives in getting people what they need and want.
That’s a reasonable defence of markets I think. Not markets in everything (there are many areas where otherwise organised collective action is better and or necessary) but markets in some things, at least.
A much less convincing defence of free markets is that they lead to faster economic growth. This is plausible but not really true. Growth, in the long run, is driven mostly by technological change. And successful technological change, it turns out, is often much more about states than markets.
Here’s Naomi Oreskes and Eric Conway in Merchants of Doubt:
“[W]e turn to Milton Friedman’s Capitalism and Freedom, where he claimed that “the great advances of civilization, in industry or agriculture, have never come from centralized government.” To historians of technology, this would be laughable had it not been written (five years after Sputnik) by one of the most influential economists of the second half of the twentieth century. The most important technology of the industrial age was the ability to produce parts that were perfectly identical and interchangeable. Blacksmiths and carpenters couldn’t do it; in fact, humans can’t do it routinely in any profession. Only machines can. It was the U.S. Army’s Ordinance Department that developed this ability to have machines make parts for other machines, spending nearly fifty years on this effort – an inconceivable period of research for a private corporation in the nineteenth century. Army Ordnance wanted guns that could be repaired easily on or near a battlefield by switching out the parts. Once the basic technology to do this – machine tools, as we know them today – was invented, it spread rapidly through the American economy…Markets spread the technology of Machine tools throughout the world, but markets did not create it. Centralized government, in the form of the U.S. Army, was the inventor of the modern machine age.
Machine tools are not the exception that proves the rule; there are many other cases of government-financed technology that were commercialized and redounded to the benefit of society. Even while Friedman was writing his soon-to-be-famous book, digital computers were beginning to find uses beyond the U.S government’s weapons systems, for which they were originally developed. Private enterprise transformed that technology into something that could be used and afforded by the masses, but the U.S. government also played a made it possible in the first place. The U.S. government also played a major role in the development of Silicon Valley. In recent years, something we now all depend on – the Internet, originally ARPANET – was developed as a complex collaboration of universities, government agencies, and industry, funded largely by the Department of Defense’s Advanced Research Projects Agency. It was expanded and developed into the Internet by the government support provided by the High Performance Computing and Communication Act of 1991, promoted by then-senator Al Gore.
In other cases, new technologies were invented by individual or corporate entrepreneurs, but it was government action or support that transformed them into commercially viable technologies, airplanes and transistors come to mind…Still other technologies were invented by individuals but were spread through government policy. Electricity was extended beyond the major cities by a federal loan-guarantee program during the Great Depression. The U.S interstate highway system, which arguably created postwar America as we know it, was the brainchild of President Dwight Eisenhower, who recognized the role it could play both in the U.S. economy and in national defense; it became the model for similar highway systems around the globe…The relationship between technology, innovation, and economic and political systems is varied and complex. It cannot be reduced to a simple article of faith about the virtues of a free market.”
December 31, 2011
It’s naughty, I know, but I have a rule of thumb that runs something like this:
The more a solution to the problems of under-development appears simple and elegant on paper, and the more it appeals to the intuitions of orthodox economists, the more likely it is to fail.
Like all rules of thumb it’s sometimes wrong (CCTs for example) but, on the other hand, the 1980s and 1990s and the broad failure of the decades’ free-market reforms, suggests that generally it fits fairly well with the data.
It’s basically this rule of thumb that made me deeply sceptical of Cash on Delivery Aid, at least in the form that it’s been promoted (incentivise countries in the same way that you can incetivise people? – please). It’s also why I haven’t paid much attention to Paul Romer’s idea of charter cities.
But now it looks like a charter city may actually happen, and Duncan Green’s offered a wager that it won’t work.
I’m with Duncan on this. I think failure is very likely. For the following reasons:
1. Because formal rules, which is the only thing the
philosopher kings technocrats in charge of the city would actually control, aren’t the only rules (or perhaps even the most important rules) responsible for making cities work. Informal institutions are critical. And I’m not confident that healthy norms and informal rules will simply arrive in an instamatic migrant city, the way the Charter Cities’ boosters seem to think they will. And if they don’t I suspect the task of governing the city will become difficult, and difficultly bureaucratic pretty quick.
2. Issues of political economy. I would imagine that in the lead up to the creation of the city, there will be a major push by interested businesses to get sweet deals for themselves, with regards to the city, from the Honduran government. And I imagine that the government, being eager for the project to be seen to work, will grant such deals. Which will make the city a less than optimal place for its workers.
3. Of course, if the city is a worker’s hell-hole workers simply won’t move there. So even if they don’t have any political voice in the rules of the city, they still have exit (or never entering in the first place) as a tool to ensure their rights. However, information about the city won’t be perfect and exit is never as easy in practice as it is on paper, particularly for poor migrants. All of which makes me think that worker welfare will be under catered to in the city.
4. No city is an island. Presumably there will be relatively easy migration in and out of the city (otherwise the problems in point 3 would be much worse), which I suspect will lead to rather messy spillover effects. On both sides of the city line. Squatter camps on the outside and crime on the inside, for example.
I could be wrong. And as is usually the case when I’m pessimistic about someone else’s development solutions I hope I’m wrong. But I really doubt charter cities will work.
December 9, 2011
Meanwhile, in the Herald, New Zealand’s paper of record, a columnist returns from a visit to the Northern Hemisphere, sees the cloud trails of planes in the sky, visits Wikipedia, and concludes that conspiracy theories about secretive governments poisoning their people from above and deliberately triggering earthquakes could actually be true.
Her arguments stumble onto the page propelled by sentences like this: “My mind went back to when I first became aware of claims that chemtrails with a purpose were being laid across our skies.”
First up, I have a question for any economist who might be reading this: what kind of market failure has led to this situation (where a newspaper *pays* someone to emit poorly written nonsense)?
OTOH Ms Bridgeman’s writing is a handy reminder of an important development relevant point. I’ve been busy interviewing people about voting here in Solomon Islands. And it would be easy to conclude from the general confusion, the quantity of mis-information and the allegations of conspiracy that are present in quite a few of my interviews, that the problem with politics here stems from very poorly informed voters.
An easy conclusion, but also mistaken, as Ms Bridgeman’s writing very helpfully reminds us: voters (not to mention pundits) back home in New Zealand are often woefully under-informed too, or cling to beliefs that are just plain wrong. And yet democracy works well enough in New Zealand. It’s true that there are also plenty of well-informed voters in New Zealand, but that’s also true of Solomons too. So what ever the causes of political dysfunction may be in Solomon Islands they almost certainly aren’t voter ignorance. If they were, New Zealand would be an aid recipient country too.