More on Budget Support, Cash-on-delivery, and Cash Transfers

Ranil makes some valid criticisms of my (over?) enthusiasm for new and shiny forms of aid.

Notably, that COD does not dispense with conditionality, just shifts it from process to results. I would still argue that this form of aid is potentially more respectful than process conditionality. It is more transparent and more upfront about the conditionality. There is even an explicit contract involved, rather than arbitrary judgement calls on eligibility (Malawi?).

Furthermore, the taxpayer audience point is a really important one here - COD wins hands down. Budget support will never be able to satisfy rich country taxpayers that there is no waste or corruption going on. Many people think that their own government wastes much of their money, never mind a foreign government with no accountability to them.

Nonetheless, this is an unproven technology, which clearly shouldn't just replace all traditional aid. But I do see it as an evolution.

I am more optimistic about cash transfers. Basically, I just don't see how there is any scope for mis-spending money which goes directly to someone who earns less than $1.50 a day. As long as we are confident that they do indeed get the money, I don't even see the need for an impact assessment. They just get the money that they were desperately short of.

Giving money to the poorest could tautologically eradicate income poverty. And if it is technically feasible and affordable, which it kind of is, I basically think we should just do it already, regardless of concerns about long-term constraints to national economic development, or access to education, health, security, and other public goods. I'm still not sure if Charles Kenny meant his $100 billion as a serious proposal, but why the hell not? It's really just peanuts in the grand scheme of things.

And I don't think we should be afraid of permanent handouts. We don't talk about exit strategies to redistribution within the UK. In Owen's words;

the richest people in the world have a duty to support the poorest people in the world – whether they are in the same country or not – as a matter of social justice rather than charity. This is a principle that we accept within our own countries – few of us think that we should aim to exit altogether from national insurance, state pensions or unemployment benefits in our own countries. The same principle should apply globally: there will always be people who are relatively rich and people who are relatively poor, and we should be aiming to evolve institutions which are effective at transferring income from the best off to the wost off around the world. And we will be doing that for the foreseeable future.

It sounds radical, but its really just some pretty old school liberal philosophy. Free markets are fine as long as everyone gets a fair shot, and you don't get a fair shot when you are born into extreme poverty. So as a matter of ethics there should be transfers from the richest to the poorest, for them to provide enough for their children to eat. No child should go hungry just because their parents don't earn enough.

And the evidence? How about Brazil lifting 20 million people out of poverty in just six years through Bolsa Familia? Has there ever been a better anti-poverty program?

Does it Matter if Budget Support Goes Extinct?

Simon Maxwell is worried about budget support going extinct.

Budget support should not be allowed to fall off the agenda. Developing country finance ministers would miss it ... So would development practitioners ... Budget support ... delivers at scale, empowers developing country Governments, reduces transactions costs, and increases accountability.

All of which is true. But also makes the most sense when you are comparing it with "old" aid. Aid projects designed to replace government functions. Budget support is an improvement on these parallel systems, and a better form of government-to-government aid, in large part because it is built on respect for the recipients.

But is the best possible form of aid? I think that two new forms of aid can do better.

Cash-on-delivery is a close relative of budget support, but it does even more for empowerment and respect, as it manages to do away with all the process conditionality required for budget support, by paying only for results. No need to worry about PFM systems. Either the government delivers for its people, or it doesn't, no need for us tell them how to do it.

Cash transfers to individuals goes one step further from respect and empowerment for developing country governments, to respect and empowerment for poor individuals. It seem so obvious, when our goal is to make poor people less poor, to just give them the cash, especially when it is feasible at low overheads (see GiveDirectly) and globally affordable (see Charles Kenny).

Kenny estimates that $100 billion a year in cash transfers to individuals could eradicate extreme poverty.

There are about 1 billion people living in the rich world. So for just one hundred dollars a year each we could eradicate extreme poverty.

Cash-on-delivery and cash transfers also counter the #1 complaint from taxpayers about aid - that it is wasted.

The only trouble with cash-on-delivery and cash transfers? They get rid of the need for development experts.....

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Update: Response from Ranil at Aidthoughts here

Three Free Books (and the economics of publishing)

All self-recommending; 

Lant Pritchett, The Rebirth of Education: From Universal Schooling to Universal Learning
Ernest Bazanye, The Ballad of Black Bosco
Julian Gough, Jude in London

What particularly caught my interest is Julian Gough's trust-based online publishing model. You get the book for free, and he asks for a tip once you've read it, if you enjoyed it. Now before you all say "that's what Radiohead did with In Rainbows," NO IT IS NOT. Radiohead asked for payment up front. Gough wants it after. That means all the risk is on him, not you. How on earth are you supposed to know how much you think the thing is worth before you've listened to it / read it?

Or in Gough's publisher's words:

we're aware of a bigger threat than piracy – oblivion. It is not easy, in this cash- and time-poor age, with free forms of entertainment abounding, to persuade people to spend money on an unknown book. Yes, a great book affords many hours of enjoyment and enrichment; indeed, adorns the shelves and the mind for a lifetime. Thus valued (i.e. using the crude calculus of 'hours of enjoyment and enrichment afforded'), a great book ought to cost far more than, say, a ticket to the cinema or the opera. But it doesn't, and among the reasons for this is the fact that a book – particularly a new, unproven book – comes with a grave risk: that, far from the hoped-for intellectual, moral, emotional and spiritual nourishment, it will bring nothing but asphyxiating boredom and hair-yanking irritation – with the pain only prolonged by that dreadful duty to finish felt by so many readers. And, of course, the worse a book is, the longer it takes to get through. What if you were unlucky enough to pick up an infinitely bad book? It would take all eternity to read it. Films and operas are different: the potential rewards may be less, but so are the risks. They're over in an hour or two, and even if they've bored or annoyed the pants off you, at least they've got you out of the house.

All of which is timely given a recent lecture by author Ewan Morrison lamenting that;

within 25 years the digital revolution will bring about the end of paper books. But more importantly, ebooks and e-publishing will mean the end of "the writer" as a profession. Ebooks, in the future, will be written by first-timers, by teams, by speciality subject enthusiasts and by those who were already established in the era of the paper book. The digital revolution will not emancipate writers or open up a new era of creativity, it will mean that writers offer up their work for next to nothing or for free. Writing, as a profession, will cease to exist.

Now back to those three books. One of these authors is not like the others. He is an academic, with a salary from an institution for teaching, research and writing. His salary, and his ability to write books, does not rely directly upon those books making a profit.

Can we learn from academia and build new institutions to support artists in the new era of free online publishing?

I think that Morrison's diagnosis and analysis of the falling price of online content is correct, but I am far more optimistic that we can create new funding models to support music and literature. I hope I am right.

Ouvrez Les Frontières

"I wrote 'Ouvrez Les Frontières' ("open the borders") to make clear that no matter what is going on in Africa, Africans should have the right to travel just like Europeans or Americans do. It's a question of human rights."  

Tiken Jah Fakoly, who played in Central Park last weekend.

An anthem for the open borders movement? 

Putting my money where my mouth is

I just made a donation to Give Directly. Given how much I have ranted about how great I think cash transfers are, it would be kind of rude not to.

I know it is very undignified and un-British of me to boast, but I believe in the power of social proof, and so I am going to do it anyway on the off chance that just one more person might be guilted into thinking about their own giving.

Besides all of that, I wanted to share this wonderful thank you message:

We will transfer your donation electronically to an impoverished household in Kenya. Your choice will give them choices: to pay school fees, buy food, get medical help, or repair their home, among others. 

Your donation is also a vote for a new vision of philanthropy - a vision that puts recipients in the driver's seat. Help us share that vision with your friends and family. Talk with them about what philanthropy could become and, if they're intrigued, send them our way. We'll be working to create the most efficient, transparent, and respectful way to give.

More on Kids and Happiness

Justin Wolfers on why having children may not make you happy and the shortcomings of happiness-targeting policies:

When I ask other people who would say their kids had made them always happy, they’d say they’d still have kids and the reason is they get meaning from them. Or some deeper sense of something or other. And so it turns out there’s more to life than happiness. That’s actually really important because if you go back and think about these happiness debates, people are saying politicians should target happiness. Well if we really believed that, the first thing we should do is have mass sterilization policies. Now it turns out that that’s an absurd suggestion. And it’s absurd because there’s a whole bunch of other things we also care about. Now what that suggests is not that the happiness project is– is wrong and needs to stop, but it suggests that it needs to expand and start to take account of these other things. These crazy things that make us do things like go out and have kids.

I'd be interested to hear Justin's suggestions for how the UK should build on the new list of happiness questions to be included in national surveys.

• Overall, how satisfied are you with your life nowadays?
• Overall, how happy did you feel yesterday?
• Overall, how anxious did you feel yesterday?
• Overall, to what extent do you feel the things you do in your life are worthwhile?

Important Sentences

Removing barriers to global migration could double world GDP. 

For the elimination of trade policy barriers and capital barriers, the estimated gains amount to less than a few percent of world GDP. For labor mobility barriers, the estimated gains are often in the range of 50–150 percent of world GDP.

Michael Clemens lays out a research agenda for how economists can constructively engage with an incredibly understudied subject.

More on the riots

I am totally biased, but Tony Blair has nailed it and Cameron is totally off the mark.

Cameron is attacking human rights legislation and setting up a national citizens service because of generalized moral decline. Blair points out that this is not a problem of society at large, but a specific excluded class.

The Economist has some smart analysis, but their prescriptions; better vocational education and more youth workers - are pretty superficial.

The only way to get rid of deep divisions is deep integration. That means mixed schools. And here's the thing - the evidence shows that smart kids thrive in any environment, so middle-class parents can relax. 

Do educated leaders matter?

Tim Besley and co-authors have extended the brilliant (if morbid) Jones-Olken paper which estimates the impact of national leaders on economic growth, to consider the impact of education upon leadership performance.

"On average," they write, "the departure of an educated leader" -- a leader with a postgraduate education, like a Ph.D or law degree -- "leads to a 0.713 percentage point reduction in growth. This contrasts with the reduction of just 0.05 percentage points after the death of a leader who does not have a post-graduate qualification." It appears that the more educated leaders were doing something right before they were suddenly removed from office -- and that replacing them with less-educated leaders resulted, on some level, in less effective policy. There's a reverse effect as well: when comparatively less-educated leaders die, their replacements are statistically likely to be more educated, and so growth tends to increase after those transitions.

If you believe these numbers, then that is a large effect, and possibly a boon to brain gain/brain circulation arguments regarding migration given the number of African Presidents with advanced education from Europe and America?

Then again, given the robust correlation between penis length and economic growth, we probably shouldn't be putting too much faith in this kind of cross-country empirical work. 

Google Plus

So what to make of this thing huh?

I am sympathetic to Chris' concerns;

"am I seriously supposed to post separate and new content on yet another platform?"

Whilst Google Plus might be better than either Facebook or Twitter, I think there is probably a risk of technological lock-in and path dependence  (like the qwerty keyboard) due to the network externalities (econo-jargon!). Or in English, whilst you might make the switch, can you really guarantee that all of your Facebook and Twitter friends are going to switch too? And if you aren't sure, then is it worth doing in the first place? Its no fun being the first person at the party.

Ultimately these things aren't really all that predictable. I certainly thought blogging and twitter were stupid when I first heard about them. Twitter took on a life of its own, with much of the functionality being driven by users rather than the creators. When I first started getting Facebook invites they seemed pretty indistinguishable from Bebo and MySpace. Jumo totally flopped, and Google too has had plenty of flops.

But seeing as its Google, its probably worth a low-investment punt. You can follow me here, if only to help keep me ahead of Matt. For more cool development kids see here. 

New Official GDP Figures for South Sudan

Available at the all-new website of the South Sudan National Bureau of Statistics. 

Of note is that Gross National Income is higher in South Sudan than all of its East African neighbours. 

(Thanks LT for the notice). 

There's a world outside of the Ghetto

Why is Britain rioting? Being a lefty-liberal type I predictably turn to inequality as an explanation, but the truth is perhaps a little more prosaic. Riots just happen, and have been happening for a long time. But this doesn't mean that radical efforts should not be made to bring the "underclass" back in to society.

Spoiler alert - what follows is a bunch of links, quotes, amateurish armchair anthropologising, and pop culture, with only a vague semblance of coherence ... but ... I'm struggling to digest this whole thing. 

The economics of riots

The cuts matter. Jacopo Ponticelli and Hans-Joachim Voth conducted a quantitative analysis of social unrest in Europe from 1919 to 2009, and found suggestive evidence that large government spending cuts increase the likelihood of riots. 

Edward Glaeser notes that rioting has actually been a fairly common occurrence in modern democracies, but that actually "across U.S. cities, there has never been much of a link between unrest and either inequality or poverty."

Tyler Cowen has more on the economics here (the comments are also good).

How does all of this apply to London? And where is the sociology of the riots? Durkheim anyone?

We don't really know why they happened, because nobody was listening to these kids.

Laurie Penny argues that ultimately;

The truth is that very few people know why this is happening. They don’t know, because they were not watching these communities ... Most of the people who will be writing, speaking and pontificating about the disorder this weekend have absolutely no idea what it is like to grow up in a community where there are no jobs, no space to live or move, and the police are on the streets stopping-and-searching you as you come home from school. The people who do will be waking up this week in the sure and certain knowledge that after decades of being ignored and marginalised and harassed by the police, after months of seeing any conceivable hope of a better future confiscated, they are finally on the news. In one NBC report, a young man in Tottenham was asked if rioting really achieved anything:

"Yes," said the young man. "You wouldn't be talking to me now if we didn't riot, would you?"
 "Two months ago we marched to Scotland Yard, more than 2,000 of us, all blacks, and it was peaceful and calm and you know what? Not a word in the press. Last night a bit of rioting and looting and look around you."
 Eavesdropping from among the onlookers, I looked around. A dozen TV crews and newspaper reporters interviewing the young men everywhere ‘’’ 

There are communities all over the country that nobody paid attention to unless there had recently been a riot or a murdered child. Well, they’re paying attention now.

This is true even for me. Being a global development obsessive I am somewhat dismissive of 1^st world poverty. It just doesn’t compare to the chronic malnutrition and excessive mortality facing millions worldwide. But this violence got my attention.

Camila Batmanghelidjh, founder of 2 charities working with thousands of inner-city youths, continues;

Working at street level in London, over a number of years, many of us have been concerned about large groups of young adults creating their own parallel antisocial communities with different rules. The individual is responsible for their own survival because the established community is perceived to provide nothing. Acquisition of goods through violence is justified in neighbourhoods where the notion of dog eat dog pervades and the top dog survives the best.

When politicians decried that these kids are destroying their own communities they were missing the point. These kids are not part of the community.

When attention is paid to this “underclass,” it is mostly in the form of mocking.

From the New York Times review of Owen Jones’ book; “Chavs: The Demonization of the Working Class,”

“Sitting around the table were people from more than one ethnic group. The gender split was 50-50, and not everyone was straight. All would have placed themselves somewhere left of center politically.” Each guest “would have bristled at being labeled a snob.” Disaster arrived, as it always seems to, with the black currant cheesecake. That’s when the talk turned to the economic crisis. One of the party’s hosts joked: “It’s sad that Woolworth’s is closing. Where will all the chavs buy their Christmas presents?” The other guests tittered. Mr. Jones stewed.
 The word chav, if your subscriptions to British periodicals have lapsed, is a noun that essentially means “ugly prole”: loutish, tacky, probably drunken and possibly violent. The stereotypical chav is a hormonal 20-something lad in an Adidas tracksuit, sideways Burberry baseball cap and bling, but women can be chavs, too. Think of Snooki with a cockney accent.
 What angered Mr. Jones about the dinner party comment, he explains, is that the joke could easily have been rephrased thus: “It’s sad that Woolworth’s is closing. Where will the ghastly lower classes buy their Christmas presents?” This got him thinking. “How has hatred of working-class people become so socially acceptable?” he asks.

This social exclusion or broken society or whatever you want to call it has clear economic roots. But it is also seems in part to be a simple breakdown in communication. There is just no social interaction between these kids and the rest of society. There is a lack of empathy on both sides.

You can grasp hints of this from popular culture, when Dizzee Rascal, having made it out himself, calls back to his old peers “There’s a world outside of the Ghetto and I want you to see it,” 

a point supported by Emma Jones, a former teacher and resident of Tottenham, North London

what should be done? Most importantly, there must be an end to ghettoisation of poorer communities and the schools within them. Living only with people who have the same problems as you breeds collective anger and mutual resentment of the better off – just as living only with people who are as well off as you breeds collective underestimation of your own privilege, and mutual negative assumptions of the poor. Truly integrated schools and communities need to be developed so people can begin to understand each other.
 This is of course an enormous and long-term task. But things that can be done immediately include ensuring that children in urban schools attend frequent school trips. Too many young people never leave the square mile around their home, therefore it is no wonder that they grow up without prospects – they have no ability or desire to travel elsewhere for work or study. Teachers might occasionally take a class to Trafalgar Square, and are stunned to have half of their London born and bred pupils say they have never been there before.

The problem does not just lie at the bottom. Firstly as Peter Oborne comments, there is moral decay at the top of our society as well as the bottom, highlighting the "theft" by MPs through the expenses abuses.

And aside from morality, there is simply little opportunity or incentive for meaningful interaction between individuals from different social strata. David Cameron's 2006 "hug-a-hoodie" speech on social inequality was actually remarkably progressive (you don't hear much of this from him now though). He does attempt to empathise with urban youth. But what is really telling is that he gets his dose of empathy from a movie rather than an actual real personal encounter. He just doesn't know anyone who lives on a council estate. And why should he?

What is to be done?

Ed Miliband, Leader of the Labour Party, says that we need to give people

"a stake in society, and that we are one society and not two parallel worlds," but he doesn't really say how. 

Suggestively, middle class Alex Turner sings; 

“Well over there there's friends of mine, What can I say, I've known 'em for a long long time, And they might overstep the line, But i you just cannot get angry in the same way.” 

How does he know them? Probably from school. 

We can build communities through schools, by making sure that schools are socially mixed rather than divided.

The school that I went to had an intake stretching from inner-city Chapeltown out to wealthy suburban Roundhay. Which meant a real mix. Which meant that middle-class kids rubbed elbows with gangster culture, which I am confident was beneficial all round, if we are to have any hope of understanding each other, and any hope of being any kind of society. 

So how about a radical proposal - less parent choice, and more integration of schools across communities. Even if that interaction stops at 18 when the rich kids go off to university, there is immense value in that cross-cultural interaction. 

(And whilst we're at it how about doing something about funding? Average spend per pupil in English state schools is about £5,500, compared with fees for day pupils at private schools of £10,296. Just sayin.)

New Labour was supposed to be about equality of opportunity. Meritocracy. Whatever happened to that eh?

The State of the Juba Blogosphere

Not really, but I did just come across the rather entertaining Erin In Juba. It has home-made pictures!

Why do economists have kids?

Empirical research tells us that on average having kids does not make people happier. If anything, people who have kids are slightly less happy than people who don't but are similar in other respects. So why do we do it? In particular, why do the economists who are familiar with this research do it?

The recent Freakonomics Radio show the "Economists' Guide to Parenting" posed this question to three economists.

I would like to believe Bruce Sacerdote when he gives the very rational explanation

"I realised - this is the greatest adventure ever... Its so interesting..."

but I think that if I'm honest with myself I probably actually believe Bryan Caplan who says

"I started getting what psychologists call baby fever", 

and Steve Levitt:

"Just because I'm an economist, doesn't mean I cant be fooled by evolution like everyone else."

Bad Teacher

Matt Damon just gave a moving speech to a teacher's rally in DC:

My teachers were EMPOWERED to teach me. Their time wasn’t taken up with a bunch of test prep — this silly drill and kill nonsense that any serious person knows doesn’t promote real learning. No, my teachers were free to approach me and every other kid in that classroom like an individual puzzle. They took so much care in figuring out who we were and how to best make the lessons resonate with each of us. They were empowered to unlock our potential. They were allowed to be teachers.

All of which I have great sympathy for. Like Matt, I was raised by a teacher, and the best ones I had in school made an incredible difference. And I am glad to have attended the local state school. But for every great teacher, there was the bad one who managed to put me off an entire subject.

And then there is the evidence, reported in the Guardian, that:

Black children are being systematically marked down by their teachers who are unconsciously stereotyping them, it has been revealed. 

Academics looked at the marks given to thousands of children at age 11. They compared their results in Sats, nationally set tests marked remotely, with the assessments made by teachers in the classroom and in internal tests. The findings suggest that low expectations are damaging children's prospects.

Clearly the correct balance to be struck between freedom for teachers and external accountability is a tough one. We don't know how to apply the correct incentives. Which is why the answer can only be testing - testing the tests - which brings me to New York Mayor Bloomberg's use of RCTs to test out 2 promising education initiatives in the city - conditional cash transfers and cash incentives for teachers. Both programs cost $50 million each. Neither worked, and so both schemes were promptly scrapped. Bloomberg deserves a medal (the Tim Harford award for experiments in social policy?). He just saved $50 million a year (or $100 million, if both schemes were to be run concurrently), on a program that makes plenty of intuitive sense, but that without proper testing could have gone on for years, with nobody knowing that it wasn't having any effect at all. How many other pieces of the education system are doing nothing?