1. Jobs: I've written a good bit here on the "Great Convergence" from the perspective of financial inclusion--that the US and middle-income countries have more in common in that domain than they have ever had--but another version of the "Great Convergence" is the common focus on jobs in countries across the per-capita income spectrum.
It's useful to put the current convergence in historical perspective--the recognition that creating jobs was critical and that "national champion" industrial development was not creating them played a large role in the development of the microfinance movement. The failure of microcredit to produce much beyond self-employment alternatives to casual labor has brought job creation, and especially job creation through SMEs, back to the top of the agenda of international development. At the same time, the failure of richer economies to produce very many "quality" jobs in the 10 years since the Great Recession (and arguably since the 1970s) or for the foreseeable future has put the question of jobs at the top of the list of concerns for policymakers in those countries.
Paddy Carter, the director of research for CDC (UK, not US), and Petr Sedlacek have a new report on how DFIs and social investors should think about job creation that lays out some of the issues (e.g. boosting productivity can both create and destroy jobs) quite nicely. MIT's "Work of the Future Task Force" also has a new report, this more from the perspective of policymakers in wealthier countries, with a call to focus on job quality more than job quantity. Stephen Greenhouse has a new book on dignity at work, which of course has a lot to do with job quality. Here's a talk he gave recently at Aspen's Economic Opportunities Program.
Seema Jayachandran has a new working paper on a specific part of the jobs conversation: how social norms limit women's labor market participation and what might be done about that. For me it also opens the question about microcredit-driven self-employment being a higher "dignity" job for women in many contexts than the jobs that are available to them otherwise. More on that in a moment.
2. Household Finance: I don't have a lot of links here, just some thoughts from conversations in the last few days. But to kick things off, Felix Salmon had a nice gibe at financial literacy this week that had my confirmation bias going. But in hindsight, I actually disagree: teaching financial literacy actually doesn't seem to be that hard based on the many papers that show that running a class leads to passing a financial literacy test. The hard part is making higher financial literacy pay off in terms of changed behavior. But there I agree with Felix's basic point: higher financial literacy doesn't lead to improved decision making for the poor or the wealthy. The wealthy just have more structure and protection (both formal in terms of regulation and practices at private firms who know better than to routinely screw profitable customers, and informal in terms of slack and cushion) from bad choices. On the flip side, Joshua Goodman has a new paper in the Journal of Labor Economics that finds that more compulsory high school math leads African-American students to complete more math coursework and to higher paying jobs (there's a nice little estimate that the return to additional math courses makes up half of the gains from an additional year of school).
Part one of "more on that in a moment" is that Seema with a rockstar list of development economists (Erica Field, Rohini Pande, Natalia Rigol, Simone Schaner and Charity Troyer Moore) has another new paper on whether access to, deposits into and training on using a personal bank account affects women's labor supply and gender norms. They find that it does increase women's labor supply and shifts norms to be more accepting of women working. Here's the indispensible Lyman Stone with a somewhat skeptical take on the interpretation of the data.
Finally, in a conversation with Northern Trust this week about their financial coaching work (see a recent summary here) a really fascinating insight came up: people in the coaching programs seem to have much more success when "saving" is framed as "debt reduction" than when it's framed as "saving." These sort of things always grab my attention because Jonathan's paper Borrowing to Save was a seminal piece for my interest and thinking in financial inclusion. But it also got me thinking: what would happen if retirement savings programs were framed as debt + loss aversion? Specifically, if when you started a job, the employer said: "I'm loaning you $10K, deposited into an IRA and you owe me $x monthly, until you pay it off--and if you don't I take it back." Obviously you couldn't run an experiment like that in the US because of regulations, but is there somewhere you could? Maybe someone has already done it? Let me know if you have any thoughts.
Viewing all posts with tag: Money Management
Week of March 1, 2019
1. Economics: The dismal science doesn't often generate positive reviews from outside the discipline, so when it does happen it's worth noting. Julia Rohrer, who in addition to having one of the best titled blogs I've ever seen, is a psychology graduate student who procrastinated on her dissertation by attending a summer program in economics. Here is her list of things she appreciated in economics as a positive contrast to her experience in psychology.
On the other hand (hah!), economists typically have a lot to say about what is wrong with economics--certainly I encounter more "friendly-fire" in the econ literature than when I dip my toes in other disciplines (though this is perhaps my favorite example of the intra-disciplinary critique). There's an ongoing discussion about the future of economics going on in the Boston Review--I don't know if that counts as friendly-fire in terms of the outlet, but the participants are economists--starting with an essay by Naidu, Rodrik and Zucman, Economics after Neoliberalism. Then there are responses from Marshall Steinbaum, who notes that "every new generation proclaims itself to have discovered empirical verification for the first time," and from Alice Evans who focuses on the nexus of economics and political power in the form of unions.
But, because it's me writing this, I have to close on a new paper in JDE, that finds that communal land tenure explains half of the cross-country agricultural productivity gap. And here's a piece about how small teams of researchers are more innovative than large teams. generate much more innovation than big teams Neo-liberalism won't go down without a fight!
2. Migration: I haven't touched on migration for a while so it felt serendipitous that Michael Clemens and Satish Chand put out an update to their paper first released in 2008(!) on the effects of migration on human capital development in Fiji. The basic story is that in the late 80's formal discrimination against Indian-Fijians increased sharply, causing the community to both increase emigration and investment in human capital to aid emigration prospects. The net effect, rather than the dreaded "brain drain," was to increase the stock of human capital in Fiji. grapes
Cross-border migration is really the only option in Fiji, but in many countries, like Indonesia, there are lots of internal migration options. Since there is typically a large gap in productivity within countries as well as between countries, internal migrationhas always been a part of the development story. Bryan and Morten have a new article in VoxDev about this process in Indonesia, looking at the productivity gains possible from removing barriers to internal migration.
Since we started off talking about Economics, here's a post from David McKenzie considering the effects of migration on economists--or more specifically, how to think about job market papers about a candidate's country-of-origin. True to his style, David goes deep, including a model, and a survey. The post was inspired by a tweet from Pablo Albarcar who later noted it was mostly a joke about "brain drain" worries.
It is surprising to me how tenacious the brain drain idea is. When I have conversations about it, I try to cite the literature like Clemens and Chand, but I rarely find that makes a dent. People can always find an objection. So I've taken to just asking people how they feel about the "destruction" of Brazilian soccer/football culture and skill due to the mass emigration of the most skilled players. Typically, that leads to several moments of silent blinking. If you're interested here's a paper about "Rodar" the circular human capital investment, migration and development among Brazilian footballers.
3. US Poverty and Inequality: I typically try to avoid the grab-bag approach to items of interest but I'll confess this one is a bit of a grab bag with a variety of connecting threads. We'll start by connecting to a piece I included last week about tax refunds and saving. If you haven't read that, you should. I noted I was grateful for the piece because it meant I could skip the annual ritual of linking to a piece I wrote for SSIR several years ago about rethinking tax refunds. But I should have known that the zombie idea of tax refunds being bad personal finance wouldn't die so easily. Here's Neil Irwin from the NYT on how people being angry about lower refunds shows that "humans are not always rational." I'm struck by the irony that the continuing common use of "rational" in economics requires zero-cost attention, while a foundational truth of the discipline is "nothing is zero-cost." There is nothing irrational about paying a very small fee (in foregone interest) for the valuable service of helping you to save when other services are ineffective. That's especially true if you include, as you should, the cost of the tax advisors and financial advisors required to accurately calculate the proper amount of withholding and to choose the right investment/savings account in which to store those savings. So I guess that connects to the thread about economics maybe not being post-neoliberalism quite yet. And here's a column from the Washington Post's personal finance columnist withpush back on the "refunds are bad" idea from readers who explain their rational choices in their own words.
The First Week of August, 2018
1. FinTech Charters: Just as the industry takes off for summer vacation, the US Treasury Department released its long-awaited fintech report and the OCC issued a call for fintech charter submissions. I’ve spent the past week sorting through scores of analyses and reactions. Here's American Banker on takeaways from the Treasury report and from the OCC's announcement. What does this mean for all things financial inclusion and innovation? Well, it certainly opens the door for many providers to expand their reach and their potential impact. It will likely be an expensive and involved path, but one that could ultimately give some fintechs much needed lift. However, this is still early in the game. I would expect to see lawsuits and challenges from incumbents now that the charter program is official.
2. Financial Stress and the Lunar Cycle: For many consumers, the end of the month represents constant instability as accounts are reduced to zero and bills become due. While income volatility is the umbrella issue, the specific actions that trigger this instability on a cyclical basis live both in our minds and in the products we use. One of our Entreprenuers-in-Residence, Corey Stone, tackles some big thinking on the topic in his series End of the Month. Drop in regularly to learn more about how human behavior can lead to suboptimal decision making, why long accepted product standards lead to this paucity of funds at the end of the month, and other insights into our monthly budgeting woes.
3. The Gig Economy: The difference between 4% and 40% is pretty significant. And the fact that the US Government doesn’t know how big the gig economy is, in short, a problem. To be fair, it’s not all the government’s fault. The variance in numbers can be attributed to a wide range of perceptions about what constitutes gig employment: full-time, part-time, etc. But no matter what the measurement, the impact is real. Gig employees enjoy the benefits of self-determination, but can often miss out on many of the benefits of traditional employment like insurance, savings vehicles, and more. The result can be regular cash flow gaps and challenging financial tradeoffs. To better design products and create guardrails, it’s imperative that we all find a better – more credible – way to measure this new workforce reality.
First Week of May, 2018
1. Microfinance, Part I (Uses of Credit): For the first time in forever, it seems there's enough new and interesting stuff on microfinance to support not only one, but a couple multiple-link items. Let's start with a useful piece that summarizes findings from several studies that have loomed large in our understanding (or questions about) of how microenterprises use credit, and apparent differences between male-owned and female-owned enterprises. I do find the framing a bit odd, as I don't know anyone who interpreted the results as "women aren't as good at running microenterprises as men" rather than, "women tend to be constrained to operating microenterprises in less profitable industries." When the newer results from Bernhardt, Field, Pande and Rigol emerged, I think the standard take was, "Households optimally allocate credit to their highest-return enterprise." So I think the intriguing thing here is not "women vs men entrepreneurs" but "maybe the industries women are concentrated in aren't less profitable after all." And that makes me think back to a paper from AEA (there's no version online that I can find, but this seems to be a significantly revised version using the same data) finding that female tailors in Ghana earn less than male tailors because they are constrained to making womens' clothes, a sector where there is more competition and lower prices.
Another use of credit for poor households is not to invest in a microenterprise but to smooth consumption when income is seasonal (or volatile for other reasons). Here's a new paper from Fink, Jack, and Masiye examining that dynamic in rural Zambia. Providing credit during the lean season affects the labor market, allowing liquidity-constrained farmers to avoid wage labor for their comparatively less-constrained neighbors, and pushes up wages. The intriguing thing here is another piece of evidence on the general equilibrium effects of microcredit via commodity (in this case, labor) markets.
2. Microfinance, Part II (Everything Else): Well, not everything else, see item 4. Access to credit and other financial services is a tricky thing--and it's not just the financial system that affects it, the justice system, criminal and civil, matters a lot too. Here's a new paper on alternative credit scoring using digital footprints--I haven't read it yet but am generally very skeptical of things like this. Grassroots Capital and CGAP are hosting a webinar on May 15th under the heading "Microfinance: Revolution or Footnote?" based on a conference last year (full disclosure, I was a participant). Of course, now I would want it to be called "Revolution, Footnote, or General Equilibrium Effects Eat Us All in the Long Run?" And applications are open for the 2018 European Microfinance Awards (until May 23) with the theme "Inclusive Finance through Technology." Whoever said the faiV didn't have news you could use?
3. Methods/Statistics/Etc: Here's even more service journalism: A tool that will convert charts into data points automatically. I actually expect this to be the most clicked link in the history of the faiV. RAs, the robots are coming for your jobs sooner than you think.
Does everyone who cares about statistics read Andrew Gelman's blog regularly? Just in case, there were several posts recently that drew my attention. One is a fairly-standard-but-always-useful post about a specific example of dubious practices, on early childhood education (which morphs into some commentary on how the field of economics deals with these issues with a bonus appearance from Guido Imbens in the comments); another is a pointer to a new paper that tries to avoid some of the more dubious practices on a topic of a lot of interest and a lot of noise--the relationship of macro-growth and child development. But the most interesting is a post about how economists tend to see the world, specifically explaining why apparent bad behavior is good, and apparent good behavior is bad. Behavior in the economics profession is the best segue I can find into this short (audio) interview with Claudia Goldin.
But back to the use and misuse of metrics and statistics. If you don't click on anything else under this item, I do think you should look at these last two links. First, a thread about how most of the world thinks about statistics--as a tool for arriving at the answer you're looking for. And a column from Justin Fox on how pro- and anti-metrics authors end up in basically the same place--measurement is hard, and is only useful if you put the effort into doing it right.
Week of December 4, 2017
1. Social Investment: Last week I was at European Microfinance Week. Video of the closing plenary I participated in is here. My contribution was mainly to repeat what seems to me a fairly obvious point but which apparently keeps slipping from view: there are always trade-offs and if social investors don't subsidize quality financial services for poor households, there will be very few quality financial services for poor households.
Paul DiLeo of Grassroots Capital (who moderated the session at eMFP) pointed me to this egregious example of the ongoing attempt to fight basic logic and mathematics from the "no trade-offs" crowd. This sort of thing is particularly baffling to me because of the close connection that impact investing has to investing--a world where everything is about trade-offs: risk vs. return; sector vs. sector; company vs. company; hedge fund manager vs. hedge fund manager. The logic in this particular case, no pun intended, is that a fund to invest in tech start-ups in the US Midwest is an impact investment, even though the founder explicitly says it isn't, because it is "seeking potential return in parts of the economy neglected by biases of mainstream investors." If that's your definition of impact investing you're going to have a tough time keeping the Koch Brothers, Sam Walton and Ray Dalio out of your impact investment Hall of Fame. Sure, part of the argument is that these are investments that could create jobs in areas that haven't had a lot of quality job growth. But by that logic, mining BitCoin is a tremendous impact investment. You see, mining BitCoin and processing transactions is enormously energy intensive. And someone's got to produce that energy, and keep the grid running. Those electrical grid jobs are one of the few high paying, secure mid-skill jobs. Never mind that BitCoin mining is currently increasing its energy use every day by 450 gigawatt-hours, or Haiti's annual electricity consumption. And, y'know, reversing the trend toward more clean energy. Hey anyone remember the good old days of "BitCoin for Africa"?
2. Philanthropy: There are plenty of trade-offs and questions about impact in philanthropy, not just in impact investing, and not just in programs. Here's a piece I wrote with Laura Starita about making the trade-offs of foundations investing in weapons, tobacco and the like more transparent.
I could have put David Roodman's new reassessment of the impact of de(hook)worming in the American South in early 20th century under a lot of headings (for instance, Roodman once again raises the bar on research clarity, transparency and data visualizations; Worm Wars is back!; etc.). The tack I'm going to take, in keeping with the prior item, is the impact of philanthropy. The deworming program was driven by the Rockefeller Sanitary Commission and is frequently cited, not only as evidence for current deworming efforts, but as evidence for the value and impact of large scale philanthropy. Roodman, using much more data than was available when Hoyt Bleakley wrote a paper about it more than 10 years ago, finds that there isn't compelling evidence that the Rockefeller program got the impact it was looking for. Existing (and continuing) trends in schooling and earnings appear unaltered.
Ben Soskis has a good overview of the seminal role hookworm eradication had in the creation of American institutional philanthropy. His post was spurred by an article I linked back in the fall about the return of hookworm in many of the places it was (supposedly?) eradicated from by Rockefeller's philanthropy. We may need to rewrite a lot of philanthropic history to reflect that the widely cited case study in philanthropic impact didn't eradicate hookworm and may not have had much effect. And while we're in the revision process, it may be useful to reassess views on the impact of the Ford Foundation-sponsored Green Revolution: a new paper that argues that there was no measurable impact on national income and the primary effect was keeping people in rural farming communities (as opposed to migrating to urban areas). Given what we now generally know about the value to rural-to-urban migration, that means likely significant negative long-term effects.
If you care about high quality thinking about philanthropy, democracy and charitable giving in general, which I of course think you should, you should also be paying attention to some of Ben Soskis' other current writing. Here he is moderating a written discussion of Americans' giving capacity. And here's a piece about how the Soros conspiracy theories are damaging real debate about the role of large scale philanthropy in democratic societies.
In the spirit of the holidays, I feel like I should wrap up an item on philanthropy with some good news. In the last full edition of the faiV I mentioned the MacArthur Foundation's 100&Change initiative, which is picking one idea to get $100 million to "solve" a problem. For all the problems I have with that, the program is doing something really interesting, thanks to Brad Smith and the Foundation Center. All of the proposals, not just the finalists, are now publicly available for other foundations to review.
Week of November 6, 2017
1. Appropriate Frictions and End-User Behavior: A key theme of the EPIC conversations on debt from my perspective was the importance of differential frictions in access to various kinds of debt. One example: it's much more time consuming to open a home equity line of credit than a credit card account. There are reasons for that of course: we want people to be careful about borrowing against their home, because we fear the consequences for people if they default. But the cost of unsecured credit is so much higher, and various forms of debt are so interlinked, that households can end up in worse straits precisely because we tried to protect them. The true conundrum of appropriate frictions is that the process of determining the best form of credit for a household is in itself a friction that drives consumers toward those willing to provide credit without a care for its impact on the household--a somewhat obtuse but accurate way of describing predatory lenders.
This is one of the lessons from microcredit. Demand for microcredit in most contexts is actually quite low, and rarely did microcredit have much of an impact on local moneylenders. The reason of course being that taking a microloan usually involves a lot of friction, while borrowing from a moneylender is low friction. Those operating in the US will immediately see the exact overlap with payday/auto-title lending vs. working with a community development credit union.
But it's not just a question of the behavior of consumers. Front-line staff also play a role; they are an under-recognized form of end-user that has to be taken into account. Here's some new work by Beisland, D'Espallier and Mersland on "personal mission drift" among credit officers of Ecuadorian MFIs. Now don't look away because this is about microcredit or Ecuador--it's directly applicable to any kind of financial service offered to any kind of customer anywhere. Beisland et al. find that as credit officers gain experience they tend to serve fewer "vulnerable" clients (e.g. smaller loans, young borrowers, disabled borrowers). Why? Because it takes too much time--there are those frictions again. Figuring out how to offer quality products, especially credit, with appropriate frictions for both the borrowers and the credit officer, is a conundrum everywhere.
For further evidence of this, check out the similarities between this piece from Bindu Ananth about conversations with newly banked customers in Indian cities, and this report on "Generational Money Chatter" in the US from Hope Schau and Ignacio Luri (especially from GenXers and Millennials). The common theme I perceive: lots of questions and uncertainties about products and providers, little faith in the "systems," and confusion about where to turn for trustworthy advice.
2. Frictions, Temptation and Digital Finance: Those of you working in the digital finance world may already be thinking about how digital tools can lower frictions--after all, not only can FinTech tools more quickly and easily gather data from consumers, but they often cut the front-line staff right out of the equation! Take that, friction!
Oh but friction can be useful. This is one of those areas where I'm constantly baffled at the disconnect between the developed and developing worlds. In the developed world, it's generally understood that the goal of payment and digital finance innovation is usually to remove friction specifically for the purpose of getting people to spend more money, more often. Amazon didn't develop and patent one-click ordering out of concern for saving people time (Interesting side note, Amazon's patent on one-click expired last month--exogenous variation klaxon!). The sales pitch that credit card issuers make to merchants has always been that credit cards induce people to spend more.
Here's one of my favorite new pieces of research in a long time: a study of how people in debt management plans handled spending temptation (if that description is too dry to get you to click, try this one: "Target is the Devil!"). The sub-text, and sometimes text, is how hard retailers and some credit providers work to break down the frictions that prevent people from spending.
What's the connection to digital finance, particularly in developing countries. I'll enter there through this piece from Graham Wright based on a debate at the recent MasterCard Foundation Symposium on Financial Inclusion. Graham was asked to make the argument against the hope for digital finance serving poor customers. His list of five reasons why digital finance is "largely irrelevant" in the typical rural village is worth reading at face value. But it's also worth thinking about in terms of how much of digital finance is aimed at removing frictions, how it's failed to remove some of those frictions for poorer customers and what can (or will) happen to poor households when appropriate frictions are removed.
Week of September 18, 2017
1. Microenterprise and Household Finance: I assume that most of you are familiar with David McKenzie's business plan competition in Nigeria (there's even a Planet Money episode about it!) and his cash drop work (I have to use this self-serving link of course). David and co-authors have a new paper in Science (summary/blog version here) testing the effectiveness of business training for microenterprises in Togo and find that a standard business curricula did not do much (in line with lots of other business training studies, though most are plagued by too little power) but a curriculum based on boosting personal initiative did have large effects.
I see this as lining up with a stream of research finding that boosting aspirations or "hope" can have meaningful impact in many different contexts (see for instance, this recent work on effects of watching Queen of Katwe) and through a variety of interventions (any one know of an overview of recent work in this vein?). It also helps explain why there seem to be only small effects of business training on businesses that objectively should have lots of gains from marginal improvements in operations--if you don't believe that running your microenterprise better will matter...
In other microenterprise/microcredit news, I learned this week about a study (new draft coming soon apparently) that tests allocating microcredit based on peer views of microenterprise owner business skills. Those ranked highly do in fact see large returns to a $100 cash drop (8.8 to 13% monthly returns). I heard about the study from this excellent thread from Dina Pomeranz on a talk by Abhijit Banerjee and Esther Duflo on what new they've learned since that "old" book Poor Economics came out.
Finally, here's a new piece from Bindu Ananth that should go on your "must read" list. I couldn't agree with this statement more: "[T]he field of household finance has failed to examine the financial lives of low-income families in sufficient detail." She examines specifically issues with how to think about insurance vs. savings, high frequency saving and borrowing, and financial complexity. I will continue to beat the drum on two points: 1) low-income households are having to make financial decisions that would challenge a finance MBA, with large consequences for sub-optimal choices, and 2) almost all the advice we have on making wise financial choices is built on an assumption that the life-cycle model holds true, and may not in fact be good advice if the life-cycle model doesn't hold.
2. Premium Mediocre and American Inequality: I'll lead this off with a concept that I'm not quite sure what to make of, but does have me thinking: Premium Mediocre. The post goes on way way too long, but it's worth reading at least through the first couple of scrolls for some new ways to think about the old problems of inequality and mobility, or lack thereof, and what it does to household decision making.
This summer I mentioned but failed to link to a study on how delivering food stamps more frequently lowered the rate of shoplifting in grocery stores in Chicago. Here's a new paper that shows a much larger and long-term effect of food stamp receipt. Children whose families received food stamps for more years (due to staggered roll out of the program in the 60s and 70s) were less likely to be convicted of any crime as an adult, with larger effects on violent crime.
The importance of such safety net programs in the United States is growing as we learn more about how household finances are changing. Not only is year-to-year volatility seemingly increasing, and month-to-month volatility seemingly spreading, but lifetime earnings aren't just stagnant--they're falling. Some new work indicates that since the late 1960's American men's expected lifetime earnings began falling each year (into the present). That can make premium mediocre a stretch for each new cohort. It also perhaps helps explain this new and fairly shocking chart, based on Case and Deaton's work discussed extensively in the faiV this spring, that has been circulating on Twitter this week.
Week of August 7, 2017
This week's faiV is a fun change of pace of just visualizations & graphics - click through to see.
1. The Global Middle Class: By now, Branko Milanovic's elephant chart should be quite familiar. Nancy Birdsall of CGD has a new post about the state of the global middle class that delves into the elephant chart and other data looking at the state of the middle class globally.
2. Global Inequality: Another chart that may be somewhat familiar but certainly should be top of mind these days. Our World in Data looks at inequality, from a lot of perspectives, here before and after taxes and benefits in developed countries.
3. US Inequality (and Debt): Speaking of inequality before and after redistribution, Catherine Rampell at the Washington Post has a couple of interesting recent posts on policy to help (or not) lower-income workers. The first chart here made lots of waves this week in a post by David Leonhardt, and provides the visceral oomph behind the need to reassess policy in the US. Although this data and similar charts have been circulating for quite awhile, it still thankfully grabs attention.
Whether or not the top chart is related to the bottom chart is one of the questions that Aspen's EPIC is taking on this year. Regardless of the direct connection between income inequality and rising debt, the fact that we are back to record levels of credit card debt seems concerning since it's likely not the .001 percent taking on this debt. That being said, rising debt could also be a sign that finally consumer confidence is returning and people feel that their incomes may start rising again.
4. Statistics GIFS: You can't say I don't know my audience--you guys go crazy for things like this, at least that's what the click data says. The two images at the top are from Rafael Irizarry at Simply Stats, in a post about teaching statistics and how to think about data. Helpfully, the post includes the code to recreate each of the images (and he's got a lot more where these came from).
This week there was also a revival of the Autodesk post about how visualizations can mislead that I featured a while back. It's here again because Jeff Mosenskis of IPA made an underappreciated awesome joke about also being wary of violin plots.
5. Low Quality Equilibria: I couldn't pass this one up when I saw it this week, given my recent rants. Who knew that removing frictions from sharing market information would make it impossible to ever tell if any product was good or not?
Week of June 12, 2017
1. St. Monday, American Inequality and Class Struggle: One of my favorite things about writing the faiV is when I get the chance to point readers to something they would likely never come across otherwise. So how about a blog post from a woodworking tool vendor about 19th century labor practices, craft unions and the gig economy? Once you read that, you'll want to remind yourself about this piece from Sendhil Mullainathan about employment as a commitment device (paper here), and this paper from Dupas, Robinson and Saavedra on Kenyan bike taxi drivers' version of St. Monday.
Back to modern America, here's Matt Bruenig on class struggle and wealth inequality through the lens of American Airlines, Thomas Picketty and Suresh Naidu. I feel a particular affinity for this item this week having watched American Airlines employees for a solid 12 hours try to do their jobs while simultaneously giving up the pretense that they have any idea what is going on.
2. Our Algorithmic Overlords: Facebook is investing a lot in machine learning and artificial intelligence. Sometimes that work isn't about getting you to spend more time on Facebook...or is it? With researchers at Georgia Tech, Facebook has been working on teaching machines to negotiate by "watching" human negotiations. One of the first things the machines learned was to "deceive." I use quotes here because while it's the word the researchers use, I'm not sure you can use the word deceive in this context. And that's not the only part of the description that seems overly anthropomorphic.
Meanwhile, Lant Pritchett has a new post at CGD that ties together Silicon Valley, robots, labor unions, migration and development. And probably some other things as well. If I read Lant correctly, he would approve of Facebook's negotiating 'bots since negotiation is a scarce and expensive resource (though outsourcing negotiation is filled with principal-agent problems). I guess that means a world where robots are negotiating labor contracts for low- and mid-skill workers would be a better one than the one we're currently in?
3. Statistics, Research Quality and External Validity: Here's another piece from Lant on external validity and multi-dimensional considerations when trying to systematize education evidence. A simpler way to put it: He's got some intriguing 3-dimensional charts that allow for thinking a bit more carefully about likely outcomes of interventions, given multiple factors influence how much a child learns in school. It closely parallels some early conversations I've had for my next book with Susan Athey and Guido Imbens, so I'm paying close attention. And if you can't get enough Lant, you could always check out my current book. Yes, both of those sentences are shameless plugs.
Week of June 5, 2017
1. Social Enterprise: A few weeks ago I noted that Etsy was under pressure from an activist investor for behaving like a B Corp (which it is (was?)). I missed the notice that the investor won: Etsy layed off 80 employees and fired the CEO/Chairman. Here's a piece reflecting on the Etsy saga that is emblematic of much of what I think is wrong in social enterprise rhetoric. The argument that social enterprises have to be ruthless competitors may sound good (to some) but it ignores the exact issue that is at the heart of social enterprises: how do you manage the trade-offs. It's worthless--less than worthless, I should probably say "actively harmful"--to pretend there are no trade-offs or to imply that there is value in advice like "be ruthlessly competitive except for in these parts of your business model." It's why efforts like B Corporations that don't have any governance teeth are a distraction, and why even efforts life For Benefit Corporations that do have governance teeth are fraught.
In other social enterprise-ish news, I can't resist a story about a star rapper, off-grid solar power in Senegal and Chinese investors. You can't either can you? On a more practical level here's Devanshi Vaid on the lack of information flow on social enterprise in India.
And here's Felix Salmon with some remarkably clear reframing of an important wing of social investment: if a foundation endowment can't get high investment returns in the near term, don't cut back on grantmaking, accelerate it!
2. Our Algorithmic Overlords: The Atlantic has a long piece on how cryptocurrencies like Bitcoin, purportedly designed to limit centralized authority, actually can become tools of authoritarianism. You don't have to go all the way to cryptocurrencies though, as I try to frequently point out. Digital currency of any sort can easily become weaponized by authority, even authority that isn't fully authoritarian.
I wasn't sure whether to include this in "Social Enterprise" or "Our Algorithmic Overlords" because it's a bit of both, through an extraordinary lens: Venezuela's bonds. As Matt Levine relates, Goldman Sachs (sort-of) bought some bonds from Venezuela (sort-of) that (sort-of) prop up an authoritarian government apparently bent on starving people. But no one is really responsible for this decision because of the way governance of the investment funds is set-up and which all point back to an index by which fund manager performance is measured. (I know, this is confusing and complicated, but it's worth it). In this case everyone is pointing to some arbitrary set of decisions as responsible for their behavior and denying any responsibility for moral judgment. If we struggle with these issues already, how much worse are they going to get with the arbitrary set of decisions are made by an algorithm that we don't really understand?
But people are more worried about algorithms driving their cars, than about algorithms ruling their moral decisions.
