Editor's Note: I have a weird interest in how non-native foods become "staple" foods in other places (e.g. corn in East Africa, chilis in India), but I learned this week that Marco Polo did not bring noodles to Italy from China, and that the story was made up by an American food industry association in an attempt to promote the consumption of pasta in the United States. Now you know.
- Tim Ogden
1. faiVLive: Small Firm Diaries Global Findings, March 27th
It's seems only right that with the faiV getting back on it's feet that it's also time to bring back the faiVLive. On March 27th, I'll be joined by Paddy Carter of BII, Payal Dalal of the Mastercard Center for Inclusive Growth, Muhammad Meki from Oxford, and Hillary Miller-Wise from the Gates Foundation to talk about the global findings from the Small Firm Diaries, but that's just a jumping off point to talk about what we've learned about supporting economic growth and poverty alleviation through credit and other supports for micro and small businesses, and where we go from here in terms of both policy and research.
You can register here.
I'll be presenting four key findings from the Small Firm Diaries (Cheat Sheet: 1. Small firms are meaningfully different from microenterprises; 2. A large group of small firms that we call "Stability Entrepreneurs" that don't fit common archetypes; 3. The need for working capital rather than asset capital; and 4. The nature of "jobs" in small firms). If you want to do a little bit of homework to prepare, you can check out the Small Firm Diaries methodology brief, read this recent piece from Paddy, read these recent papers from Muhammad on loan size and risk-sharing in credit contracts, or this overview piece on how to think about the boundaries of firms from David McKenzie.
If you're new to the faiV or faiVLives, or you've just forgotten because it's been so long, I feel compelled to note that this isn't going to be one of those boring webinars where someone reads slides to you and then a group of panelists give anodyne comments about how "fascinating" the research is. So you should definitely come. Go on, click here to register.
2. Among the Economists
I'm sure that's not the most compelling name for an item for many of you. But for some of you...
There's a new Economist article, as Justin Sanderfur described it, revisiting the RCT wars on issues like ethics, cost, relative value, effectiveness, etc. Rather than going on about it, I'll let Amber Peterman's Twitter thread (re-)cover some of the main points, particularly on why these sorts of articles only seem to be written about RCTs. Or if you'd rather a book length informed discussion on these topics from many points of view, I hear there might be something that could scratch that itch.
If you're interested in a different kind of throw back on the economics profession and where it interacts with popular belief and policy, Steven Levitt is apparently retiring from "academic economics" and was interviewed on the podcast Capitalism and Freedom in the 21st Century on his career. There are some pretty bonkers stories in there about how academic economics works and the persistence of bad behavior.
On the topic of bad behavior among economists and revisiting things from the past, Bloomberg has a feature on the continuing existence of EJMR and it's toxic role (or alternatively, it's reflection of toxic realities) in the profession. Ironically, I learned about this article on Twitter (or is that the opposite of irony?) which I still use because of the lack of adequate alternatives.
3. Consumer Finance
One of the main policy concerns (or at least it should be) in financial inclusion is balancing scale and market power among providers. Scale is necessary for sustainability, particularly for those serving relatively less profitable customers. But scale leads to market power and high prices for consumers (and often an unwillingness to serve those less profitable customers). The US Consumer Financial Protection Board has looked at the US credit card market and 156 issuers, and found that a) the largest 10 issuers dominate the market, and b) charge higher interest rates and fees than the smaller issuers. Interest rates on credit cards matter a lot for consumer finance in the us, as the average household carries more than $5000 in credit card debt (though the distribution is highly skewed).
I have a lot of questions about this though. The largest issues are also the issuers who provide either "white label" cards (e.g. the Gap credit card or the Home Depot credit card), and who offer rewards cards in partnership with airlines or other businesses. Those two types of cards are often held by wealthier customers who use them to earn the rewards but don't carry balances, and in part specifically because of this behavior have higher fees and interest rates. I'd really like to see more detailed analysis of which types of cards carry balances, and what types of cards are carried by different income strata. If you're one of those people who uses points-earning cards but doesn't carry a balance, there's good news for you! There's a new dating app where you can show off your credit score to potential matches.
The cost of servicing debt matters a lot, and not just because if you can't keep up you might not have a date tonight. Here's a recent paper arguing that debt servicing costs are a big part of how people perceive the state of the economy and inflation, and perhaps explains why Americans have in general been pretty downbeat on the economy even though the US is growing at a far faster rate, with much lower unemployment than other countries.
One reason that the cost of debt service may play an outsize role in consumer perceptions of the economy is that uncertainty about income and expenses has a large impact on mental health. Here's a paper on how commodity price fluctuations have large effects on the mental health of Vietnamese farmers.
And rounding things out, here's an update from FSD-Kenya on the financial journeys of young women and men, showing that particularly among young people--though with important differences between men and women—there is "rapidly escalating uptake of [digital financial services] riding on mobile money rails."
4. Fraud
I told you that fraud was likely to become a regular faiV item. Helping that along, I got an email from Lisa Spantig, who pointed me to some recent papers on the topic, though somewhat undermining my point that this realm was neglected. Francis Annan looks at how much misconduct (which I read here as a synonym for fraud) affects use of mobile money in Ghana, with an intervention that reduces misconduct and leads to increased usage. Burke et al. have a paper that is framed as success in reducing susceptibility to fraud through short educational interventions, but I have a much more skeptical read: the intervention effect persists for 6 months only if the people get reminded after 3 months. That indicates to me not that this works, but that constant intervention to reduce fraud is the only way to have meaningful impact and that is quite difficult given people's willingness to tune out any repeated reminders. Lisa herself (and co-authors) has a paper looking at a similar effort to inform people about SMS-based mobile money scams in Kenya, which finds little concrete effect on people's ability to correctly distinguish scam messages from legitimate ones.
Do you know who else has a hard time distinguishing scams from legitimate offers? If you answered Harvard MBAs, and you know you didn't, you would be right. Here's a long read about a different kind of financial scam, related to fake carbon credits, which reinforces the idea that vulnerability to scams isn't meaningfully reduced even among the most supposedly financially savvy people in the world, it's just a different kind of fraud you're vulnerable too. Since we're on the topic of carbon credits and emissions reductions, and because I don't have a better place to put it, here's Todd Moss on a different kind of, but still harmful, misrepresentation of emissions reductions.
You know who also isn't very good at spotting scams and is vulnerable to financial crimes? Drug dealers. One of the largest online markets for illegal drugs, which claimed to be anonymous (there was a button to "encrypt" messages that didn't actually do anything) has been tracking users and is now threatening to release that data to law enforcement if users don't pay up.
5. Our AI Overlords
Via Matt Levine, I learned first about this story about a rogue chatbot for Air Canada that, as Matt characterizes it, was more human than the human beings in charge of customer service at the airline; and second, about this 2017 essay from Ted Chiang about how our fears of AI are often misplaced--it's corporations as a category who behave in many of the ways we fear an out-of-control AI would.
But if you're interested in learning more about the AI Doomers, here's a New Yorker piece that will provide a lot of details on those people, though not necessarily on the competing arguments. And here's Timothy Lee on ChatGPT vs. Claude for those who do want to keep track of details. One thing I'm thinking about is whether I can use one of the existing AI tools to scrape all the past faiVs, analyze the content, create reading guides from past coverage, and of course, eventually just write the faiV for me.
Graphic of the Day
These charts show revenue for two firms in the Small Firm Diaries. Using a reasonable approach to estimating the trajectory of each of these firms, one is growing and one is declining. Can you tell which one is which? We'll be talking about this more during the faiVLive, so you should register and come so you can find out if you were right.
The faiV is written by Timothy Ogden and produced by the Financial Access Initiative at NYU's Wagner Graduate School of Public Service
Email: fai-wagner@nyu.edu
To read this in your inbox, subscribe to the faiV.
