The political economy of why flights are so expensive in Africa

Andrea Goldstein of the OECD emails an old but very interesting paper (ungated here) in response to my post on the AfDB blog about African Airlines.

He makes two points and offers two recommendations

First, in the experience of OECD countries, "liberalisation delivers in terms of quantity, quality, and cost of air transport."

Second, what allowed liberalisation to take place was a political dynamic, driven by interest groups (trade associations and organised consumers) pushing for reform.

So what can or should the OECD do to support policy reform?

One, establish an international authority capable of enforcing safety standards (the ICAO is an obvious candidate).

Two, aid could be used to accelerate the restructuring and privatisation of African airlines.

Neither of these address the issue of opening the skies, which is down to African governments, and African consumers and trade groups to lobby for.

Development as... no measurable increase in happiness

Recent Chinese economic growth has led to half a billion people being lifted out of poverty, without doubt just an amazing wonderful story. The poverty rate halved in just over a decade. Human development - measuring not just income but also health and education, has also leapt.



And happiness? Nothing. No change at all. Maybe a bit of a drop. Measured across three different surveys. Chew on that one.

Data from a new CSAE working paper by John Knight and Ramani Gunatilaka. 

Why are there so few blogs by British academic economists?

In the US, to name just a few, you have

Mankiw
Krugman
DeLong
Acemoglu/Robinson
Becker
Thoma
Cowen/Tabarrok
Easterly
Blattman
Rodrik
Landsburg
McKenzie/Ozler et al
Caplan

In the UK I count

Simon Wren-Lewis
Henry Overman
Danny Quah
Matt Collin

Hypotheses:

1. The bandwagon effect - Mankiw and Krugman are really high profile and have been blogging for years - when the leading textbook author and a Nobel prize winner are blogging then its probably ok (although this bandwagon effect could also effect UK academics)

2. Differences in administrative/teaching burdens?

3. A selection effect - in the UK terminal masters programmes are more common, so natural writers quit before then complete a phd and get sucked into academia

4. A simple quantity effect - some fixed % of academics are likely to be interested in blogging, and there are just many more top economists in the US than the UK (about 6 times more according to this list).

What am I missing?

Why voluntourism might even just do some good

When Pippa Biddle wrote last week about "the problem with little white girls," she was adding to a rich vein of development self-flagellation. I just ventured to google "why voluntourism is good," and the top 3 hits were:

"Beware the voluntourists intent on doing good"

"Is voluntourism doing any good? No!"

"Does 'voluntourism' do more harm than good?"

Pippa writes of her own experience as a voluntourist, including the wonderful story of the Tanzanians staying up all night to rebuild the wall that the white American girls messed up, so they wouldn't know what a terrible job they did.

"It would have been more cost effective, stimulative of the local economy, and efficient for the orphanage to take our money and hire locals to do the work, but there we were trying to build straight walls without a level."

But here's the thing - if Pippa had never gone to Tanzania, she would never have sent her money there. We know this. Despite the dizzying scale of global inequality, the vast majority of charitable spending by individuals in rich countries is spent in rich countries, not poor ones. In the UK just 10% goes overseas. 

And for good reasons. Why do we give? Our giving is driven by empathy. And we can't empathise with 6 billion people at the same time. There's just too much suffering to worry about it all - "we would be in a permanent emotional turmoil". And so we use filters, including critically that our familiarity with a person matters, and our similarity and identification matter.

That is why the Kristof uses "bridge characters":

"The problem that I face — my challenge as a writer — in trying to get readers to care about something like Eastern Congo, is that frankly, the moment a reader sees that I’m writing about Central Africa, for an awful lot of them, that’s the moment to turn the page. It’s very hard to get people to care about distant crises like that. 

One way of getting people to read at least a few grafs in is to have some kind of a foreign protagonist, some American who they can identify with as a bridge character. And so if this is a way I can get people to care about foreign countries, to read about them, ideally, to get a little bit more involved, then I plead guilty."

Or think about the story of Solomon Northup in 12 Years a Slave - I feel almost ashamed to admit, but it is clear that it was so harrowing because he is a middle class guy from New York - someone familiar who we can identify with.

Spending time living in or even briefly visiting a developing country can let you skip the bridge characters. You are now familiar with, and can identify with, a handful of the millions of people living in societies with such a profoundly worse set of opportunities to those of us born in rich countries. That matters. There's a sad irony that having made the empathetic leap, so many who work in development then seem to lose their empathy with the uninitiated. Having made a connection with someone living in extreme poverty, we forget how easy it was to not care before we had made that connection. I'd bet that the vast majority of development workers, even the most hardened economists, really got their passion from some form of real human interaction, not abstract analysis, and yet we pour scorn on young kids who venture out trying to have their own interactions and make their own connections, building their own cross-cultural empathy, because voluntourism is tacky. Does it really matter if it is tacky?

In terms of immediate development impact, village voluntourism is probably mostly irrelevant. We could spend time doing careful cost-benefit analysis of the value for money of having American teenagers build brick walls in Tanzania, or we could reflect on the 90% of our collective charitable impulse which goes on other rich people, the 99% of our government spending which goes on other rich people, or our narcissistic trade and immigration policies which help other rich people, and consider instead what it might take to get rich people to actually really give a fuck about global poverty, and that maybe just maybe that might come through actually living and working with people, even if just for a short time. Travel really does broaden the mind (there is even evidence, some of it randomised). If tacky white saviour marketing for a fundamentally useless project is what it takes to grab some attention away from a video of a cat on youtube, maybe that's worth it?

There is a German translation of this article on wegweiser-freiwilligenarbeit.com

More affordable housing for London?

"Affordable housing" is a phrase which needs to go on the banned list. What does it even mean? Something to do with affordability, and something to do with social (subsidised) housing. Mira Bar-Hillel of the Evening Standard notes the wikipedia definition - affordable for someone on median income - coming to a back-of-an-envelope value of around £100,000 (assuming a mortgage of 4 times a £25,000 salary).

She then seems to go off the rails a bit discussing the application of this concept to an actual development - the new central London Mt Pleasant development.

"of the 700-odd flats proposed, fewer than 50 may be for social renting. It also means that, based on current prices in the area, the private flats could easily fetch a total of over £4bn. And be mainly sold to foreign investors.

So based on those numbers (£4bn for 700 flats), each of these flats could sell for more than £5 million each. And the Evening Standard's Property and Planning correspondent thinks Britain should be selling off £5 million pieces of real estate for £100,000? Is it just me or does that sound totally insane to anyone else?

Meanwhile Labour councillors are angry about Royal Mail being "hell-bent on packing in as much private housing as possible" whilst there are "huge housing shortages in London." Does Labour want less homes in London or more homes?

Why does housing policy inspire such epic logic fails from otherwise seemingly intelligent people?

Why fight (relative) poverty?

I was a bit disappointed by Julia Unwin's new short book "Why Fight Poverty?". The subtitle on the US amazon edition is perhaps a better title: "And Why it is So Hard". The most interesting part of the book is about the emotional responses to poverty that make it it hard to get the public to care - shame, fear, disgust, difference, mistrust. She doesn't address why it is so hard to get the public to care about global poverty.

I knew the book would be about UK poverty (Julia Unwin is Chief Exec of the Joseph Rowntree Foundation, which has been working on UK poverty since 1904), but maybe I hoped for a more substantial treatment of the difference between UK and international poverty. Actually to be honest I was probably just annoyed that she dismisses those (like me) who claim that we should think differently about rich world poverty and extreme poverty in poorer countries. This is the sum total of discussion about international poverty in the book:

"[many] argue that while there is real poverty in other countries, any poverty in the UK is less severe, and describing it as such is misleading and untruthful. They are right to some extent ... [but] All poverty is relative and needs to be seen in context. Needs are relative in every society and differ depending on the price of food and other goods, and social norms ... Because UK poverty is relative, it can be easier to ignore or dismiss - but it is real and affects a sizeable portion of our population."

I've written before about why I'm sceptical about the relative importance of relative poverty, but I also worry about too quickly dismissing the experiences of people living in the UK. Jack Monroe has given powerful descriptions of her own experience living with poverty and hunger in the UK.

"Poverty isn’t just having no heating, or not quite enough food, or unplugging your fridge and turning your hot water off ... Poverty is the sinking feeling when your small boy finishes his one weetabix and says ‘more mummy, bread and jam please mummy’ as you’re wondering whether to take the TV or the guitar to the pawn shop first, and how to tell him that there is no bread or jam."

And here:

"sitting across the table from your young son enviously staring down his breakfast ... it’s distressing. Depressing. Destabilising. ... Imagine those 77 days of being chased for rent that you can’t pay, ignoring the phone, ignoring the door, drawing the curtains so the bailiffs can’t see that you’re home, cradling your son to your chest and sobbing that this is where it’s all ended up. It feels endless. Hopeless. Cold. Wet."

You should read both in full. It breaks your heart. And yet... thanks to her blog, Oxfam invited Jack to Tanzania, to meet some of the people they work with. Jack concluded;

"Our experiences of hunger and poverty are different, but we need to see the similarities too."

Well yes. But let's think about those differences and similarities, and make that comparison.

Going hungry is much more common in Tanzania than it is in the UK. Maybe that makes it relatively less bad, psychologically less painful? I imagine it might. You might be less likely to imagine hunger as a personal failure in a society where it is more common. And yet... Perhaps it's time to put some numbers on this. 

Let's say that the single mother who Jack met in Tanzania - Irene - earns £200 per year. This is below the poverty line, and 15% less than the average (median) income of around £230 a year.

Let's say that someone like Jack living in poverty in the UK earns £10,000 a year. Below the poverty line, and less than half of average income of £21,000 (these numbers aren't exact, but they are realistic).

So if we agree that "poverty is relative and needs to be seen in context", that "needs are relative", well for her relative income, Jack (48% of average income) is much worse off than Irene (87% of average income). But is Jack really worse off than Irene? The same? Similar? Comparable? Remembering that in absolute terms she earns 50 times more than Irene?

What if we flipped it around. Imagine a very rich society. Perhaps it is Britain in 100 years, after 3% annual growth. Average income is now £400,000. A single mother - Abby - living in poverty, earns "just" £100,000. That is a quarter of average income. Relatively speaking, Abby is now much worse off than Jack. Do you feel sympathy for Abby, on her relative pittance of £100,000? Or does that sound silly? And yet Jack is more similar to Abby (Jack earns 10% of Abby's income) than Irene is to Jack (Irene earns just 2% of Jack's income).

Or to take another example, think about this headline from the Atlantic: "America’s 1% live in relative poverty compared to the .01%". The top 1% in America earn a measly $2 million a year, just a fraction of the $30 million that the top .01% earns. If the top 1% all decided to set up their own new country, Richland, should we suddenly start feeling sympathy for the lowly $2 million a year earners, who are on just a small fraction of the median income, and well below the relative poverty line?

The other thing to consider when what we're really interested in is some concept of wellbeing rather just cash, is what happens when we try and directly measure wellbeing? Gallup surveys have asked individuals around the world to rate their own life satisfaction on a scale of 1 to 10. If relative poverty in the UK was comparable to poverty in developing countries in terms of their lived experience rather than in terms of their income, we might expect to see some similarity in self-reports of life satisfaction. 

Well, the difference in life satisfaction is perhaps unsurprisingly much smaller than the income gap (life satisfaction is measured on a bounded 1-10 scale, but income is measured on a much wider and unbounded scale). But the surveys show that even the poorest people living in developed countries like the UK report higher levels of life satisfaction than everyone in developing countries, almost no matter what they earn. You can just about make out from the chart below; the poorest in Britain (GBR) are more satisfied with their life than the richest in Indonesia (IDN), Nigeria (NGA), India (IND), Pakistan (PAK), and South Africa (ZAF) (for more details see the Brookings briefing, based on a paper by Stevenson and Wolfers).

So. In conclusion, I suppose I remain sceptical about relative poverty.

If you are buying flowers for tomorrow, buy them from Kenya

The Mirror has an exposé looking at the shocking conditions of workers on Kenyan flower farms - some earning just £30 a month. 

What they fail to point out is that absolutely the best thing you can do for global welfare is to buy your flowers from Africa rather than Europe. Even if flower-pickers are on a low wage, it's a better wage than their alternative, your spending stimulates the Kenyan economy, and it is even good for the environment (flights from sunny places on the Equator pollute less than all the electric lights you need to grow flowers in cloudy Europe).

Yes be shocked at wage rates in Kenya. But then the best thing you can do to fix that is to do more business with Kenya and spend more money on Kenyan products. Happy Valentine's Day. 

Is it wrong to shop from places that use child labour?

I got told off recently for shopping at H&M because of some sweatshop / child labour scandal (a burden I share with Beyonce who has also been criticised for her H&M links). But is a boycott really the right individual action?

Two new(ish) papers look at the impact of government bans on child labour in India:

One economics paper by Bharadwaj, Lakdawala, and Li (via Berk Ozler) looks at the impact of India’s Child Labour (Prohibition and Regulation) Act of 1986. They find that the ban led to a decrease in child wages and an increase in child labour. This is consistent with the theory that families use child labour to reach subsistence levels - so a ban which leads to a reduction in child wages, will make families make their children work more to earn the same amount and reach that subsistence level.  

Second is a note by my colleagues (Ian MacAuslan, Valentina Barca, Yashodhan Ghorpade and Gitanjali Pande) based on qualitative fieldwork in India (150 interviews and focus groups with both children and adults). Their findings support the results of Bharadwaj et al - parents make rational trade-offs, child labour is driven by household poverty, and outright bans might be counter-productive - better to invest in social protection and improving the quality of schooling.

What does all of this imply for me and my new H&M jumper? I'm not really sure. I asked the question a few years ago in Juba, and further quick googling hasn't got me any closer to an answer. I suppose the theory of change is that individual boycotts could force H&M to improve their procurement and make sure no child labour is involved. But this could either lead to those children leaving the factory and going to school, or perhaps more likely and in line with these two papers, a reduction in the going wage rate for children, and an actual increase in child labour.

Any ideas? References? Once again, I'm left wishing that there existed some rigorous impartial GiveWell-style analysis for consumption decisions so I could outsource some more everyday moral dilemmas and not have to do the thinking myself.

Breaking: The country is going to the dogs

One of many bizarre things about public opinion on immigration in the UK is the divergence in opinion between impacts "on your local area" and impacts on the country at large. People are much more worried about the country than about their local area. 

Sunder Katwala, Director of British Future who commissioned a recent survey showing this fact, said to the Guardian:

"People are obviously very anxious about immigration. But I was struck by how much higher it was as a national rather than a local tension. That to me suggests that managing local tensions is obviously very important, but it is probably not the answer entirely because people have this national-level concern. 

"I think it would be wrong to say that local concerns are real and national concerns are just driven by the media, but I think what is going on there is people asking: does the system work? And I don't think anyone has any confidence as how it is managed as a system. Also there is a concern around national cohesion, identity and ability to cope with the scale of change."

Clearly he's being polite here. How on earth do people know how immigration is affecting the rest of the country except through the media? Are survey respondents travelling up and down the country carrying out their own research each weekend?

A nation is an "imagined community." In your own local area you know people. By contrast: "[A nation] is imagined because the members of even the smallest nation will never know most of their fellow-members, meet them, or even hear of them, yet in the minds of each lives the image of their communion".

So almost by definition it is true that national concerns about immigration are driven by media. 

This phenomenon is not just limited to immigration. A recent Populus survey finds that people systematically think that things are going worse "for the country as a whole" than for "you and your family". Is it even possible for things to be going well for all of us as individuals but badly "for the country as a whole"? What is the country as a whole but the aggregation of all of us individually? 

Maybe just maybe it is in fact our relentless diet of media pessimism that is giving us a distorted view of reality?

Evidence on global education: A lit review in one chart

From Stefan Dercon's presentation at the recent "Town Hall" event on funding opportunities for international education research. He explains further in this blog post. Other presentations from representatives from the World Bank, USAID, and ESRC, are available here. 

The results agenda is yet to take hold in the UK

DFID Annual Budget: £10 billion

Current (domestic) UK Government "Major projects expenditure" with no plans to evaluate impact or value for money: £49 billion (NAO 2013: Evaluation in Government)