We’re all the 1%, but we’re no Scott Bakula

Did anyone ever notice that Sam Beckett avoiding leaping into African people?

Writing in Foreign Policy, Charles Kenny points out that, when you consider the global income distribution, middle-class Americans are actually part of the global 1%.

So by global standards, America’s middle class is also really, really rich. To make it into the richest 1 percent globally, all you need is an income of around $34,000, according to World Bank economist Branko Milanovic. The average family in the United States has more than three times the income of those living in poverty in America, and nearly 50 times that of the world’s poorest. Many of America’s 99 percenters, and the West’s, are really 1 percenters on a global level.

His point is sound – it’s one that has been made repeatedly by development gurus in response to the Occupy Wall Street protests. He goes on to make the case that we not only need more redistribution from the middle-class within countries, but across them as well. I’m sympathetic to this argument – `local’ inequality surely pales in comparison to the injustice of global inequality, the latter being associated with millions of people still stuck in absolute poverty.

Yet it’s clear from his writing in general that, when considering public policy, Kenny gives the welfare of people within and outside of the US equal weight. This is typical of those involved in international development – we wouldn’t be in this field if we cared only for our own (although maybe that statement is a little self-serving).

These preferences are consistent with John Rawls’s veil of ignorance (discussed earlier here), the argument that policy should be set before we know what position in society we will assume, a bit like Scott Bakula/Sam Beckett in Quantum Leap. For example, we might feel differently about US immigration policy if we thought there was a chance we might be born in Haiti. Kenny touches upon this briefly while discussing Herbert Simon:

Nor did the Western 99 percent “earn” most of their wealth, any more than the top 1 percent “earned” theirs. It’s the luck of where you’re born, according to the late Nobel Prize-winning economist Herbert Simon, who estimated that the benefits of living in a well-functioning economy probably account for 90 percent of individual income.

While I completely agree with this line of thinking – welfare weights shouldn’t be nation-specific, I think it’s a problematic way to convince others to embrace policies which are already unpopular, like taxing the middle class or easing restrictions on immigration.

Why? I think that most people just don’t feel the same way:  average levels of altruism for foreigners are certain to be lower than for other citizens, so we should be wary of making arguments which are too dependent on non-discrimination. People still see citizenship as part of a social contract – we’re all in this boat together, even if we were randomly assigned to it. Those that ended up in leaky boats are not our immediate concern (again, not the way I feel).

There are no simple solutions to the challenge of getting people to broaden their concept of the `boat’ to include other nationals, although one could argue that the international Occupy protests, for all their faults, have actually helped in this regard.

The CSAE Blog

Now for a bit of shameless self-promotion (although this should be the first and last time I’ll bring this up) – we’ve just started up a blog for the Centre for the Study of African Economies, the research centre where I’m based. New posts can be found on the main page here.

Expect updates discussing the centre’s work and also some material from the researchers themselves. The hope is to make it a little more accessible than your average institutional blog. For Twitter users, there’s also a CSAE twitter account now – enjoy!

The Worf effect and NGO rhetoric

Today is a good day to fight poverty!

It is a huge challenge for TV writers to convincingly put their characters in peril. On a show like Star Trek, every new alien threat has to be at least temporarily convincing, even though we all know the crew of the Enterprise will eventually prevail at the end of the day.

One way to convince the audience that a threat is plausible is to let the toughest character on the show be easily defeated by this new threat. If the biggest badass on the show can be conquered so quickly, we suddenly have good reason to believe that the new threat is very real and very credible.

As this is a particularly effective way of creating tension, writers abuse it all the time. However, over time this has the unfortunate side effect of undermining the tough character’s credibility, as audiences rationally update their beliefs about the character’s badassery. Eventually, this `tough’ character ends up appearing comically ineffectual, which itself cripple’s the writer’s attempt to convince the audience that anyone is under any real threat.

This is called the Worf effect, named after the Klingon security officer from Star Trek: The Next Generation, who is repeatedly and effortlessly knocked around by everyone else on the show, despite being renowned for his martial prowess.

Let’s think a little bit about the rhetoric over poverty, charity and aid. NGOs (and many donors) face a credibility problem – they need to convince us that they are effective, bat’leth-wielding badasses. Yet at the same time, they want to keep attention on the great challenge of global poverty. There are a number of ways to do this, but quite often, advocates depend on depressing statistics (number of children who die every second), poverty porn and grave warnings.

As one shots – these can be effective at convincing us that the fight against poverty is deadly serious, but over time, we begin to notice that the statistics are still depressing, despite the efforts of well-wishers. We begin to doubt the efficacy of institutions that constantly tell us that things are awful out there – if they were more capable, wouldn’t things be getting better more rapidly?

The answer? Focus on showing your effectiveness, not just telling us about it. Another TV trope term is the informed ability – one we as the audience are supposed to take for granted, but that we never really see in action. We’re supposed to take the efficacy of all these organisations for granted when we donate. This is bound to undermine everything in the long run – Worf needs to win every now and then if we’re going to continue to take him seriously.

 

Stay in school, until you learn that correlation ≠ causation

I am bothered by this tweet by Justin Wolfers:

The answer to Wolfer’s question: you might convince a lot of children to get more (or less!) education than they need to.

It’s incredibly easy to estimate outcomes for people in given education categories, but this tells us very little about the causal impact of education. More or less the first identification problem you learn in an econometrics class concerns estimating the returns to education when you can’t observe ability. The problem is that high ability people are likely to get more education and have better labour force outcomes than low ability people. Hence, the results above could be driven partially (or totally!) by selection.

Why is this a problem for convincing kids to stay in school? Well, let’s say I’m a low ability person (or, to be fair, lacking in the type of ability which facilitates traditional education) – I might recognise that I’m low ability and decide to find a decent job that I enjoy after high school, rather than getting more education. Now let’s rewind: after the 2012 Wolfers act is passed, I get this shock of misleading information that the returns to more education are really massive! I then blow more money (either in fees or in foregone wages) on education, only to find that A) it is still hard and B) because I’m low ability, my labour force outcomes are worse than all my similarly-educated peers.

There have been a few studies in developing countries where researchers approximations of the above chart are shown to children – one in Madagascar and one in the Dominican Republic. It turns out that showing children these relationships does cause them to get more education – but we don’t know yet whether what the resulting impacts are. If we think that the entire population is stuck in a low-education trap and needs to break out, this is a good thing. However, if we thought that people are making at least semi-rational choices about the returns to the education, we might be tricking some people into getting more education than they need to.

I’m being a little unfair here – there’s a lot of uncertainty out there: I’m a 28 year old PhD student who still doesn’t know where he is on the ability distribution (yay for 15% unemployment!). I think we should be showing graphs like these to kids, but be more honest about what could be driving the relationships.

Wrestlemania, Kinshasa edition

We manage, white man

Colin Delfosse has taken some amazing photos of incredibly badass magic-wielding Congolese wrestlers.

They come from the streets and their charisma commands respect and admiration. But the heros of the ring are modest in victory : « Kobeta libanga papa mundele » [we manage, white man]. In the last hours of the day, when they have hung up their everyday “occupations”, they put on masks and wrestling kit ready to fight.

Also some more good photos here.

Time inconsistency, Malawi edition

In The Guardian on Wednesday, Bingu Mutharika responds to claims he is becoming autocratic:

“What they are trying to do is to draw a parallel between the leadership of Zimbabwe and Malawi. There is no basis for that. That is totally unfair and uncalled for. I have been very democratic.

“From 2004 until now, there is no single political prisoner in a Malawian jail. Is that consistent with the restriction of democracy in this country? We have been very democratic, we have been very patient. I have asked the opposition to come and see me but they refuse.

“It is simply not true. Because if it were true, all these people would have been rounded up. None of them have. They are free now. If indeed Malawi was starting to be a police state, would they still be walking free? That’s the question.”

In the Guardian today:

A prominent critic of Malawi’s president has been jailed in what activists say is the latest sign that the country is turning into a police state.

Ralph Kasambara, a human rights lawyer and former attorney general, has spent three nights behind bars after a fracas at his law practice in Blantyre.

Quick thought experiment on proven impacts

This is just the result of a tired brain running on empty a thought experiment – it doesn’t necessarily reflect my beliefs, but it might be something I’m worried about. I’m going to be loose with lingo here, so apologies in advance:

Imagine that there is a production function for improving the welfare of poor people, and it has five inputs, A B C D E. As policymakers, we know that there are diminishing returns to each input in turn, and we know that the inputs are complements (the marginal impact of each input increases as the other inputs increase), but we don’t know the exact rate of return on each input. For some, it could be close to zero – and for some it could be massive.

In the state of no knowledge and with constrained resources, we hedge our bets and divide our resources among the five inputs, hoping we are making a difference to the welfare of poor people.

Suddenly, someone comes along and randomly reveals the marginal impacts of intervention A and B, and we learn they are massive and nil, respectively – but we don’t know anything about C, D and E (you could say it’s either too expensive or politically unfeasible to reveal this information).

The question for the evening is, as a policymaker, do you:

  1. Put all of your funding in A and withdraw all of it from B-E.
  2. Only withdraw it from B, put most of it in A but a little in C-E (perhaps you have an idea of what distribution the marginal product of C-E is drawn from, so you fund each accordingly to maximize expected welfare).

If you choose 1), why? If you choose 2) – how do you feel about initiatives that try to direct all funds to `proven impacts’? Are there situations where outcome 1) leads to lower welfare than the no-information scenario?

 

 

White men can’t run experimental games

"Don't mind me, I'm just here as a passive observer."

The  Roving Bandit tipped me off about a (preliminary, so results may change) paper by Jacobus Cilliers, Oeindrila Dube and Bilal Siddiqi which finds that replacing a passive Sierra Leonean supervisor with a white foreigner causes experimental subjects to act more generous in dictator games:

Can the presence of white foreigners in‡uence measured behavior in developing countries? We experimentally vary foreigner presence across behavioral games conducted in 60 communities in Sierra Leone, and assess its impact on standard measures of generosity. We fi…nd that foreigner presence substantially increases player contributions in dictator games, by as much as 23 percent.

This is the first time I’ve seen an explanatory variable labeled “white-man.” It suddenly makes me wonder about every single interview I’ve ever sat in on.

Jacobus sits behind me in the economics department at Oxford – I can’t say for sure if his being there has made me a more giving person or not.

 

Not getting better, Nigeria edition

According to the BBC, poverty Nigeria (used $1 a day threshold) has risen by 6.2 percentage points in the past 8 years.

The NBS admitted there was a paradox at the heart of Nigeria, as the economy was going from strength to strength, mainly because of oil production, yet Nigerians were getting poorer.

What isn’t clear yet (I’ve yet to see the report – would be helpful if someone else wants to comment) is whether or not the NBS’s analysis has any caveats which could be driving this story (differences in sampling, definitions of poverty) etc. I’m also assuming the data was constructed prior to the very recent price hike.

These concerns aside, good god – Nigeria’s been growing at around 6% a year for the past few years and is rich enough to be considered lower-middle income. I think I just felt a disturbance in the force, one shaped like Andy Sumner.