Psychology and Economics

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"

Does deworming really work?

The latest Cochrane Collaboration review of the evidence on the impact of deworming on various outcomes has come out decidedly less than optimistic.

Here's a summary by the very smart Alexander Berger from Givewell, some discussion on the Public Library of Science blog including comment from one of the Cochrane authors and Alan Fenwick from SCI, and finally a rebuttal to the review's findings on schooling from IPA, JPAL, CEGA, Deworm the World, and the authors of the original Busia experiment on deworming.

I haven't spent enough time looking at the details to come to a strong opinion here, but one point made on the IPA blog seems evidently correct - random assignment should be enough to ensure pre-treatment balance between treatment and control. That is the whole point of random assignment. And  following the recent debacle of the medical journal the Lancet being forced to retract the key finding of a social-science-y study after some actual social scientists pointed out a mathematical error, combined with my disciplinary and professional loyalties, I'm inclined to go with the social scientists rather than the doctors on this one.


Update: Thoughts from David McKenzie

Doing governance is hard #163826353

First the good news: a new evaluation report from a community driven reconstruction programme in Eastern Congo (HT: Sarah Bailey) shows yet again that it is possible to evaluate messy hard-to-measure governance interventions using rigorous quantitative methods. IPA and JPAL have an evaluation of a similar programme in Sierra Leone.

Now the bad news: this kind of design only works with interventions at the local level because you need a large sample size of units - in this case villages. National-level interventions give you a sample size of one, not very conducive for quantitative analysis.

And the worse news: these local level governance interventions don't seem to work. Both this Congo study and the Sierra Leone study find no improvement in local governance.

Now for some better news: we actually already know what a lot of the national-level governance interventions that need to be done are. They are boring. Things like audits of government accounts. South Sudan has finally just published the audit of the 2007 accounts, to apparent astonishment and outrage by parliamentarians. It's pretty grim reading. Though I'm not sure how anyone is actually honestly surprised. Still, it's probably not totally outlandish to think that audits done a bit quicker than 5 years after the fact might improve budget governance.

And now for the worst news of all: much of this easy, boring, national-level governance stuff is around accountability - which means the national leadership intentionally putting in place limits on its own power. Binding its own hands. You have to be an incredibly enlightened leader to purposely reduce your own power. The whole point of the politics game is increasing your own power. Which means that you need people to demand accountability and force leaders into action. And despite all the talk about governance from the international community, we aren't really interested or able to be the ones doing the demanding.

How to find an NGO to support

It is likely that bigger and more well-established agencies will be better able to answer these questions than smaller ones, though these do not have to be international agencies. This is an important observation as it suggests that bigger, more experienced, and more independent organizations with a greater range and depth of skills and deeper knowledge of the countries in which they are working are more likely to make wiser choices about how to deploy their funds than are smaller and newer agencies, which are often run and staffed by people with little development and country experience. It should be added that there are not only many competent nationally based poverty-focused organizations but that many of these have a better understanding of poverty and especially how it might be eradicated faster than do some international agencies. Also, it must not be thought that it is only the bigger agencies that do good development work: many smaller, especially locally based, agencies perform very valuable work. Additionally, a number of smaller agencies set up by people now living in the industrialized world but based on a deep understanding of the local communities in need—such as Send a Cow—continue to have a significant impact. The challenge is finding out about them.

Thoughts from Roger C. Riddell, a Non-Executive Director at Oxford Policy Management, writing in a special issue of  "Ethics and International Affairs" (HT: themonkeycage)

Whither participation?

Esther Duflo's recent Tanner Lecture (download it here, really, go and read it now) offers a provocative attack on the dogma of community participation in NGO development projects. The lecture builds on ideas expressed here and here and drawing from the recent behavioural economics literature on limited attention. Sometimes a bit of paternalism is good for us. Good defaults are good. You don't need to worry about most services in England because everything just works.

I asked people in Masisi a few weeks ago whether they had been consulted enough by the big international NGO running the programme in their town. Some were happy, but some were a little nonplussed - "it's their [BINGO] programme - let them decide how to do it". One guy who had not been selected for assistance (through a very participatory community ranking exercise) suggested that if big international NGO wasn't going to pick him, then maybe they should be doing the work of selection and not asking him to spend half a day doing it (note this is in no way a criticism of BINGO, they exemplars of best practice. It is a tentative criticism of that best practice, which is widely supported). 

Many social programs insist on beneficiary participation in management, claiming that it is valuable and instrumental for program success. 

Perhaps, for rich parents who have the luxury of being able to spend time worrying about their children’s educations, participating in the Village Education Committee and being given a voice to obtain more resources for their schools is indeed empowering. Poor parents may care just as much about education, but may have no energy left to figure out exactly how to work the system or to figure out what they might be able to accomplish when they are given vaguely defined powers ... perhaps, finding ways to make schools actually work without the community having to worry about it at all would be even more empowering.

Back in England, I can't imagine anything worse than having to meet all of my neighbours after work to figure out how we are going to run the rubbish collection or fix the potholes in the road. That stuff just gets done. Services get delivered without me having to think about it at all. All I need is a mechanism to complain if things don't work, but don't ask me to help you plan how to fix it. 

There is a great quote from the earlier paper "Mandated Empowerment" (HT: @thrh)

Both examples raise concerns about committing ourselves entirely to antipoverty strategies that rely on the poor doing a lot of the work.

When you put it like that, it sounds pretty sensible. The implication of which is not I think "don't consult people," quite the opposite - provide an open platform for suggestions, comments, and complaints. Just consider how much work you are asking from your "beneficiaries."

Your thoughts?

Social safety net bleg

A friend writes;

Do you know any good, short reads on “social safety nets”?

The context for this is that the South Sudan oil shut-down made all the donors panic and want to divert lots of development programming back to humanitarian programming. All of the advice to the government in response has been to continue to focus on building government systems so that they are stronger and more funds can flow through them when the oil is turned back on.

I think there can and should be a stronger response on the humanitarian side as well, that is institutionalised. Every year, there are going to be parts of South Sudan that are food insecure, even if just due to bad rains or floods. So we need a sustainable system that can address these needs, and to ensure households don’t become chronically food insecure, not the current system of panicked international fund-raising and dumping tonnes of food aid on the problem every year.

So do you know a good, short briefing paper that summarises country experiences and evidence on these sorts of programmes?

I second all of that. So - any suggestions?

Targeting the Hard-Core Poor

As briefly flagged in the IPA Annual Report, there are some exciting positive results coming out of the BRAC graduation model. IPA is coordinating evaluations all over the world, and some of the first results are coming out of the Bandhan implementation in India, the evaluation led by Abhijit Banerjee, Esther Duflo, Raghabendra Chattopadhyay, and Jeremy Shapiro (paper here).
As The Economist reports;

Well after the financial help and hand-holding had stopped, the families of those who had been randomly chosen for the Bandhan programme were eating 15% more, earning 20% more each month and skipping fewer meals than people in a comparison group. They were also saving a lot. The effects were so large and persistent that they could not be attributed to the direct effects of the grants.

What worries me is how scalable this programme is. That word "hand-holding" worries me. How many developing country governments have the resources and management capacity to arrange for a detailed skilled-labour-intensive personalised package of intensive support for every poor person? How many developed country governments have the capacity for that?

It worries me especially when there are so many easily scalable cost effective programmes out there that are not being funded. Why not focus first on the simple things that we know to work, like universal child grants or universal school meals, that can easily have a big impact on millions?

Research Links

1. Why regular church-goers are happier (they make new friends)

2. Four politically easy ways to improve the development impact of UK immigration policy

3. Cash transfers and politics: "anti-poverty programs might have nefarious long-term consequences by preventing replacements of local incumbents"

4. Micro evidence on the impact of the Rwandan civil war on economic performance

5. Can Minimum Wages Cause a Big Push? Evidence from Indonesia

6. Implications of Ghana's graduation to middle income status

South Sudan: Failed or fragile?

This is a guest post by Aggrey Tisa Sabuni, Economic Advisor to the President, Republic of South Sudan. 

Foreign Policy magazine recently ranked South Sudan the fourth most "failed state" in the world in its 2012 Failed States Index, which ranks countries according to a list of 12 "state vulnerability" indicators. There are numerous concerns with this index; however, I would like focus my attention on the term "failed state". To fail implies you cannot learn, improve and eventually succeed. Although I do not dispute that South Sudan is fragile, I take issue with the idea that we will never prosper as a nation. Instead of labelling South Sudan as a lost cause, we should be working to identify the roots of our fragility so that we are able to turn around our fortunes. In this regard, I wonder if the readers of this post and the public at large truly understand what "fragility" actually means?

The term "fragile state" conjures up a number of different images, but ultimately it means a country is susceptible to a crisis, whether it is a natural disaster, an economic catastrophe or a security threat that cannot be easily dealt with. Fragility tends to be caused by the absence of a strong and effective government apparatus capable of dealing with crises as they develop, exacerbated by a lack of relative social harmony across different societal groups. Symptoms of fragility include regular outbreaks of internal insecurity, a weak justice system that fails to resolve disputes as they arise, a shortage of qualified and skilled personnel to staff key government institutions, and a lack of basic services to meet needs of the population.

However, fragility is also an opportunity. It is a chance to start over, to build from the foundation up. What is required, however, is patience. When you are building a house the foundation is the first and most important step. It takes more time to complete than the rest of the house. In South Sudan we are building the foundation.

The year since our independence on the 9th July 2011 has been a turbulent one. The Government and our population have been operating under very challenging circumstances and we are learning how to address these challenges. On January 20th the Government made the decision to shutdown of oil production, in response to repeated provocation from the Government of Sudan and the theft of South Sudan’s oil. As a result, we are facing the prospect of losing 98 per cent of our revenue. We have also seen a resurgence of open hostilities in the border regions, rising domestic prices for basic commodities, insecurity from cattle raiding and limited provision of services.

We did not expect it to be an easy year.

Despite these challenges, we have begun to see the fruits of our labour in other important activities. National and State governments have adopted constitutions and are abiding by them. In Jonglei State, we have witnessed a peace accord that has stabilised relationships between the various groups in that State. These actions have undoubtedly helped improve the level of internal security and has promoted an increasingly strong sense of nationhood amongst the population.

In the area of economic policy, we have implemented significant public financial management reforms, which have led to an increase in non-oil revenue collections of over 250 per cent since July 2011. A new currency was successfully introduced under extremely challenging circumstances, but with minimal disruption to the South Sudanese. All of these successes have been achieved under the framework of the South Sudan Development Plan, our first ever national plan, which outlines how best to use Government and donor funds for the development of the country.

These are not insubstantial achievements. They are a direct reflection of a country determined to ensure that its people benefit from improved security and economic prospects.

Despite these successes, we have continued to receive a significant amount of negative press over our actions, particularly the decision to halt oil production. While there is no doubt that circumstances have slowed down our progress, the fact remains that the complex nature of our negotiations with the Government of Sudan disguises their unwillingness to negotiate and compromise a settlement. Until the political challenges with Sudan are resolved, we will continue to be hampered in our efforts to build a solid foundation for South Sudan. As such, this is the precise moment where we need our friends in the international community to stand up, to acknowledge our successes and failures, and to actively support the efforts of the government in dealing with its challenges.

South Sudan is not a failed state. We are a country rich in potential but hampered by short term fragility. Managing the challenges we face is not a simple task. I strongly believe that South Sudan can utilise its abundant resources for the benefit of the population and the region if an adequate foundation is built. However, this processes requires the patience and sustained support of the international community. We will undoubtedly make mistakes along the way, but with the support of our friends, we will be able build a strong and prosperous nation.

Secretaries without borders

Secretaries without borders is what a colleague joked that the government in Juba needed a few years ago. My friends and colleagues Ben French and Nick Travis have a great post up on the new ODI blog beyondbudgets.org making this point in a bit more detail;

Investment is not just needed in getting the policy ‘right’ but also in making the ‘paper move’. Money needs to be spent on building the capacity of governments to maintain basic administrative and management processes, on training administrators and establishing functional IT systems. No matter how good policies are, without the basics in place - and the people to administer them – implementation will continue to be hindered by chaotic and ineffectual management.

Well worth reading in full. They have also just published a couple of briefing notes on the new government Aid Strategy in South Sudan and the 2009 Donor-Government compact. 

Is a little balance too much to ask?

Perhaps I'm being overly sensitive and demonstrating a heavy bias, but I feel a bit like the mainstream media's coverage of South Sudan's first birthday was a pretty unrelenting torrent of negativity. As ever, John Ashworth puts it well;

I have deliberately refrained from circulating articles about the first anniversary of South Sudan's independence because, quite frankly, I think most of them are rubbish. They buy in to and reinforce the international community's current negativity about South Sudan, a negativity which stems from a lack of understanding of the hopes and aspirations of the people and the actions of their government in the face of intransigence and aggression (military, political and economic) from their northern neighbour.

I would be the first to call for more criticism and scrutiny of the Government of South Sudan, but can't we have just a little balance on their first birthday celebrations? And where has all the criticism been for the past 7 years since the peace agreement?

• Non-oil revenue has increased 250 percent since July 2011 (Aggrey Tisa Sabuni, economic advisor to the President of the Republic of South Sudan). 

• Child and infant mortality are down 20% since the peace agreement (Erin Polich). 

• Frankly, many people are happy to have survived a year without Khartoum invading (Gill Lusk, Africa Confidential)

There has also been almost no reflection on the state of the North, on what specifically the Juba government should be doing better, or on what the international community should be doing better (for instance, have the American or any European governments responded to Salva Kiir's letter requesting assistance in retrieving the stolen funds which are held in American and European banks?).

Social protection works: South Africa edition

UNICEF have just published the impact evaluation of the South Africa Child Support Grant programme (some colleagues of mine did some of the work on the evaluation).

The programme reaches over 10 million children, and pays 280 rand (£22) a month per child to households below a certain income threshold.

This payment improves early child nutrition, schooling, test scores, health, and reduces teenage pregnancy and drug use. For £22 a month. And that is transformative - immediate poverty reduction as well as an investment in economic growth when those children grow up to be smarter and healthier and more productive.

99 problems, but Bashir ain't one

Daniel Kahneman wrote his new book, a popular exposition of the behavioural economics research that won him a Nobel Prize, in part because he thought that popularizing some of the core concepts and allowing them to enter our vocabulary might improve the quality of our thinking and our public debate. Quite sadly I feel much the same about a lot of the basic concepts in economics and statistics that have been around a lot longer than behavioural economics. For instance, the core of impact evaluation; the counterfactual. Imagine what would have happened if the event we are examining had not happened. So let's imagine for a second what would be happening in South Sudan if there had not been independence. Peace and prosperity? New schools, roads, and hospitals? There are a couple of approaches we might use to think about what would have happened. We could look at the history of South Sudan pre-independence. We could look at all of the sterling development initiatives led by indicted war criminal Bashir in the South between 1989 and 2005. All of the schools and hospitals that he built. Or we could look at some of the people still living in the North. Perhaps those who have fled their homes to hide in caves from Bashir's bombers. Or the 100,000 who have fled to the South from Blue Nile. The counterfactual for South Sudan is not flowers and kittens, it is rule by a man wanted for five counts of crimes against humanity; murder, extermination, forcible transfer, torture and rape. Happy Birthday South Sudan. 

Why South Sudan is winning the oil pipeline stand-off with Khartoum

Adam Hyde has a new piece up arguing that it's time for the international community to increase the pressure on South Sudan's leaders to make a deal on oil with Khartoum.

I'm still not convinced that it has to be Juba to blink first. Look at the reaction to austerity; Sudanese students are protesting against the regime in Khartoum. South Sudanese students are collecting money to send to the SPLA. Communities around the South are donating cows to the SPLA.

I want a deal as much as anyone, but I want a deal that is fair, one that is closer to the $1 a barrel it actually costs to run a pipeline than the $36 a barrel that Khartoum wants to charge - half of all revenues.

Congo: Land of rape and rebels

As it turns out, large swathes of Masisi territory in North Kivu actually look a bit like a Microsoft Windows desktop. 

The interesting thing about such potentially dangerous places is that though the news reports can make them sound a bit terrifying, you don't actually really feel threatened in any way about 99% of the time. There is just a vague awareness that things could easily get nasty quite quickly, but the chances of that really happening are probably pretty slim.

This is of course speaking from the relative safety of being white and travelling everywhere with a very professional and security-conscious international NGO. Lots of people we spoke to in the villages complained that (roving!) bandits come and steal everything whenever they get any assistance. We did come across a couple of very friendly men with guns, wearing clearly not official national army fatigues, whilst carrying out interviews in a village. Who very politely asked if we were giving out cash, and if so whether we might prefer to give some to them than be shot. Pretty sure they were joking, at least about the shooting part. Very good natured, and certainly nobody got shot.

Finally, the cheese is great, but I didn't see anyone drinking Um Bongo. Did I miss anything?

New OPM research

1. An evaluation of Oxfam's Emergency Food Security and Livelihoods Urban Programme.

2. How to making agricultural financing work in Rwanda (it's about post-harvest storage & marketing, not inputs)

3. How savings banks can provide better services for the poor

4. Assessing value for money of donor support to the financial sector in Kenya

How aid bloggers should blog

Aaron Ausland is worried that blogging is using up his creativity. He raises some legitimate concerns about time and trade-offs, but with regards to creativity I actually think the complete opposite - that blogging increases my creativity.

On which I quote Felix Salmon's advice to Jonah Lehrer:

Firstly, think of it as reading, rather than writing. Lehrer is a wide-ranging polymath: he is sent, and stumbles across, all manner of interesting things every day. Right now, I suspect, he files those things away somewhere and wonders whether one day he might be able to use them for another Big Idea piece. Make the blog the place where you file them away. Those posts can be much shorter than the things Lehrer’s writing right now: basically, just an excited “hey look at this”, with maybe a short description of why it’s interesting. It’s OK if the meat of what you’re blogging is elsewhere, rather than on your own blog. In fact, that’s kind of the whole point. 

blogging is not at heart about delivering new information, so much as it is about finding and linking and connecting and conversing.

But do just make sure that you add some fucking value.

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Also: for me blogging feels about 90% system 1, so it isn't really competing with real effortful work in terms of mental energy.