1. Good Economics: I’m pretty jealous of the luck that the editor who signed Esther and Abhijit to write a new book with a big picture view of economics and development and managed to have it scheduled to come out just a few weeks after they won the Nobel has (or alternatively I’m not jealous at all of the eternity of suffering they will have from selling their soul to make this happen). It is pretty remarkable timing regardless of how it came about.
The official release isn't until later this week, but there’s already a good amount of stuff out there, and the book seems likely to generate a lot of conversation. Here’s an excerpt that outlines their perspective on migration (it’s good and there should be more of it). Here’s an excerpt of their perspective on trade (it’s not as good as you’ve heard). Here’s a thread from David McKenzie contrasting the two.
I’m told a review copy is headed my way, and if so I’m sure I’ll have more to say about the book in future weeks.
2. Global Development: It feels like quite some time since I’ve been able to feature some big picture things happening in the development space. So here’s a round-up of some pretty diverse things on that front.
David Malpass has been in charge at the World Bank for long enough to start seeing some changes. Here’s a perspective on how the annual meetings were different this time around. And here’s a piece on how Malpass seems to be trying to shift toward more attention at the individual country level than on global or regional issues. I guess no one will be surprised if the Bank does little on the climate change front while he is in charge.
It’s been well more than a decade of pretty remarkable economic growth on average in sub-Saharan Africa. In some countries that has meant substantial progress on reducing poverty headcounts; in others not so much. Via Ken Opalo here’s a paper that proposes an explanation for the pretty bi-modal distribution of countries that have made progress on poverty and those that haven’t. Spoiler: Acemoglu and Robinson and those who like path dependence stories probably agree.
Bolivia is in crisis right now with real uncertainty about what the next few weeks, much less months, will hold. It would be interesting to see a systematic review of outcomes for countries where there have been coups and ones where there's been "sort of" a coup. But Bolivia is in remarkably better shape than some of the other countries in Latin America that elected populist lefitsts around the same time. Here’s a Twitter conversation between Justin Sandefur, Dany Bahar and Alice Evans (and later Pseudoerasmus weighs in) on the pretty unique set of economic policies and macro-conditions that account for that.
China’s efforts to play a large role in developing countries has been a topic for awhile now. But there’s still a lot of questions about what exactly China’s influence and impact on developing countries will be. Here’s a CGD piece on what the Belt and Road Initiative will look like in 10 years.
Russia is the new scary story in African "investment." A few weeks ago Russia hosted a summit with leaders of African countries. So what does Russian involvement in Africa look like? Here's a claim that Russia is sending mercenaries to Libya with the intention of increasing migrant flows to Europe to destabilize countries there. What are the chances that the Banerjee and Duflo chapter on migration will be wildly influential and cause the Russian strategy to backfire?
On the migration front, here’s Michael Clemens and Jimmy Graham on how demographics are going to change the flows of migrants to the United States from Central America--I don’t think they factor in the possible impact of Russian mercenaries.
3. Digital Finance: Here are some important stories about digital finance that you may not have noticed. If that sounds like a familiar opening, well, yes, OK, I’m going to hammer on this theme for a bit--be prepared it’s likely to be a regular fixture, at least until I feel like it’s gets regular enough attention in conversations about fintech, mobile money and other things digital.
Nikkei--the Japanese financial news organization and owner of the FT--lost $29 million in a phishing scam. UniCredit--the Italian bank--exposed 3 million customer records in a data breach. Web.com, one of the largest domain name registrars in the world, was hacked a few weeks ago and exposed 22 million records. What'sApp was also hacked, apparently by an Israeli firm that proceeded to spy on 1400 people in 20 countries.
Anyone feeling confident that microfinance institutions or even major mobile money providers are really immune to these security breaches that are affecting even highly sophisticated companies spending multi-millions on cybersecurity? If you are, please print out this tweet and tape it to your monitor.
OK, here's something not on the security question: a paper on the economic effects of money based on Spanish history: whether or not shipments of silver made it back to Spain from the New World had a big impact on the literal supply of money. So what does this have to do with digital finance? I think it's a useful explanation for the Jack and Suri finding about the growth effects of mobile money in Kenya.
4. Household Finance and Banking: It's a lucky thing for me that I spend a lot of time trying to convince people that there is more shared between the US and developing countries when it comes to financial inclusion, household finance and consumer banking than there is difference. Because that allows me to wrap a whole lot of disparate things into one category.
Let's start with a post from Corey Stone, the Financial Health Network's entrepreneur-in-residence, on "retronnovation" or using fintech to allow customers to do things that were common in an earlier age before basic checking accounts became pretty close to universal in the US (those with a developing country perspective will recognize almost all of these financial behaviors). A particularly interesting part of Corey's argument is that the failure of banks to deliver these tools is a consequence of the pervasiveness of "free" checking accounts, and that users would be likely be happy to pay fees to get access to them. I'm not sure I agree, but it's worth thinking about, and especially thinking about how user fees might work in a mobile money context in developing countries.
There's another kind of retronnovation happening in the US--turning auto loans into the home loans of 2006. This year 33% of people who traded in a vehicle and took out a loan had negative equity: that is, they owed more money on the prior vehicle than it was worth, and rolled that outstanding debt into a new loan. If you're thinking that's so crazy you must not have understood it, I wish that was it. How did this happen? Who is making these loans? Here's a clue: auto dealers now typically make more money from arranging financing for purchases than they do on the actual vehicle sale. Sounds a lot like the housing crisis doesn't it?
Why is anyone agreeing to take out these loans? It's hard to say since there isn't even a remotely plausible story as there was in the housing crisis that the underlying asset is going to appreciate enough to make up for the negative equity. But there is some explanation of the psychology: the offer of financing substantially increases close rates, especially for lower income customers. It's a different sort of temptation tax on the poor.
If you're also thinking that this is inevitably going to mean a lot of banks getting in trouble sooner rather than later when a very large percentage of these loans go bad, I think you're right. Bad consumer loans are also threatening the banking system in China, with the added fun of bank runs sparked by dubious social media rumors. There is some good news for regulators: banks that are in trouble don't seem to try to save themselves by making even more risky loans.
5. Research and Methods: As noted a few weeks ago, take up of new tools for social science reliability and reproduceabilty has been surprisingly rapid. One of those tools is a pre-analysis plan. There are now enough of them--195 of them by 2016--that pre-analysis plans themselves can be studied (it's turtles all the way down). Here's the paper by George Ofusu and Daniel Posner. Here's the very thorough discussion of the paper by David McKenzie.
There's another new tool that I think is pretty exciting: a platform for predicting the results of social science experiments. There's more about this in a new paper from Stefano DellaVigna, Devin Pope and Eva Vivalt in Science that covers the concept and value of a prediction registry to go along with a pre-analysis registry. And here's a very thorough discussion of the paper at the Behavioral Scientist blog since it won't be accessible to many.
Part of the reason I didn't get this edition of the faiV out on Friday was that I spent the day last Thursday at the NYU Development Research Institute conference on external validity of experiments, and well, my brain still hurts. I'm hoping I can share more about it as video and slides become available. But in the meantime, here's a different video of one of the speakers, Michael Kremer, in conversation with David Evans at CGD.
