So how do you feel about not winning the lottery?

"Here's to exogenous shocks to our neighbour's wealth"

“Here’s to exogenous shocks to our neighbour’s wealth”

Happy New Year. So I’ve been thinking a lot about the charity GiveDirectly recently. They were my charity of choice a year ago and I am planning to make another donation soon. For those of you who are not in the know, GiveDirectly makes unconditional cash transfers to poor people in Kenya and Uganda. For every dollar I donate, roughly 91 cents of that ends up with a household, which is then free to do whatever they want with it.

The other day GiveDirectly sent me an e-mail which linked to a series of interviews with residents of a single village that had been on the receiving end of these unconditional transfers. What is particularly astonishing is that the charity not only asked recipients how they were faring (pretty good, thank you very much), but roughly half of the interviews are with households which were not deemed eligible.

What I might have expected was a degree of unhappiness or animosity over not being selected to receive a $1000 USD transfer. GiveDirectly uses its own methods of determining whether or not a household is classified as “poor” (in the village in question it was households without a metal roof on their primarily residence). Even though (I presume) the charity goes through great pains to make the selection criteria transparent, to people on the ground the whole endeavour might seem a bit, well, random. A bit like a manna from heaven.

Recently, three academics who have previously studied GiveDirectly released a paper suggesting that these transfers do have some sort of negative spillovers on households that didn’t receive the transfer. Johannes Haushofer, Jeremy Shapiro and James Reisinger found that non-recipients in villages which received GiveDirectly transfers reported substantially lower levels of life satisfaction. So if this negative spillover, which I will go ahead and call the Haushofer Effect (there – I just branded it – coming to a book store near you), really exists, then I would expect a substantial amount of lamentation in the GiveDirectly interviews of non-recipients.

To the contrary, most non-recipients said that, overall, they were happy that their village had received the transfers. I found this hard to believe, but after going through 50 interviews of non-recipients, most replied positively to the question “Are you, overall, happy that GiveDirectly came to your village?,” a handful replied neutrally, and only one was vocally unhappy about it. There was another question aimed more at the negative effects of not being selected, and even then only about 25% responded with identifiably-negative comments.

So what is going on here? Why is the Haushofer Effect not appearing in these qualitative interviews? As much as I would like to believe that people do feel happy about seeing their neighbours get a shitload of money, I think I am more likely to believe one of the following:

(1) People don’t want to appear selfish, especially in front of a charity which might might might might give them a ton of cash some day. One respondent actually spelled it out: “”I am happy with your coming with the hope that one day I will also benefit.”

(2) The more complicated answer is that there is something about the conditionality of the question that changes its meaning. These families might be honestly happy about the fact that their neighbours (who are poorer) got transfers. But all the negative externalities associated with that (envy, local prices, etc) still make them unhappy in aggregate. A great example of this appeared in a recent episode of This American Life, where Neil Drummond tried to reconcile the fact that he really was happy his old friend Ta-Nehisi Coates had found fame and fortune with the reality that their friendship was slowly dissolving as a result of it.

(3) This village is different than the average village in the study above in some unobservable way.


I have no sense as to which answer is the most likely. And none of it will stop me from donating to GiveDirectly again. That said, while the charity should be praised for putting these interviews up on their website, they could take a step further and link to the paper on negative spillovers.


Update: GiveDirectly’s Max Chapnick has a helpful reply/explanation in the comments below, rightly pointing out that the academic paper I cited relies on within-village randomization (rather than GD’s method of targeting poor households), so the Haushofer effect might be primarily driven by the unfairness inherent in that lottery mechanism. This is a pretty plausible reason for the differences between the empirical study and the informal interviews.

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’lethwielding 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.


Is your mobile phone rape free?

I wish I could have made that title up – but I didn’t. That was Save the Congo, who basically just directly equated cell phone purchases to rape. QED.

And they did this how? Through shock and awe: `Unwatchable‘ is a film they just released in which a gang of British soldiers attacks an upper-class white family in the Cotswolds. Young women are raped. Men are shot. Gonads are severed and fed to survivors.

No, this isn’t a second-rate Michael Haneke knockoff, but it feels like it. It’s pretty awful, and apparently based on a true story. Still, that doesn’t necessarily mean that mobile phones are the main drivers of rape in the DRC or that kneejerk legislation like the Dodd-Frank bill makes sense. We need intelligent discussion to work our way through these problems – I don’t see any room for shock tactics like this.

People who approach debate like this are absolute nutters and should be kept as far away from the discourse as possible.

Some thoughts on and from `The Crisis Caravan’

I picked up The Crisis Caravan recently (War Games in the UK), Linda Polman’s full-on assault on the neutrality of the humanitarian aid industry.

Polman’s basic thesis is that even if humanitarian aid workers and other NGOs adhere to the basic tenants of neutrality (noting that they often don’t, their lack of selectivity often leads to:

  • The direct prolongment of conflict, by keeping the `losing’ side in the game long (Biafra, the old Ethiopian government, the remnants of the Hutu regime in Goma)
  • The indirect prolongment and  exacerbation of conflict, inducing the players to make war nastier in order to raise their profile and bring more aid during the cease-fire cash in (Sierra Leone).
  • Their association with other parties which inevitably damage their claims of neutrality (e.g. being directly or indirectly controlled by coalition forces in Afghanistan).
  • Nasty situations in which the people they are helping aren’t really victims in the traditional sense (the heavy, heavy NGO presence in the Goma refugee camps after the Rwandan conflict, where the genocidier regime had relocated after being driven out by the RPF).

For the aid critic, Polman’s book is a pretty entertaining read and I find many of her arguments convincing. That said, the book is rife with anecdote – much of the information she presents is gleaned either from first-hand observation or discussions with (often anonymous) members of the humanitarian aid industry.

This opaqueness is amplified by imprecise and unsubstantial remarks: she often makes statements like “Most of the NGOs in the world do this” or “the majority of the money went here.” These statements not only often lack quantification, but they also lack footnotes, which brings us dangerously close to Dambisa Moyo territory. There’s also an odd focus on Dutch-based aid (Polman is based in the Netherlands), so often the viewpoints isn’t entirely representative of the average donor.

There’s some pretty damning stuff on food aid during the war in Ethiopia. This isn’t to be confused with the Bono-BBC punch-up, that was over direct diversion of food aid for other (war-related purposes). What Polman is suggesting is that the government used the distribution of aid for its own means, to help drive people out of the rebel-contested north:

Thousands of Western aid workers and journalists flew in along with the money. They were forced to change their dollars for local currency at rates favorable to the regime, and this alone helped to keep the Ethiopian war machine running. Food aid from INGOs was used as bait to lure starving villagers into camps. They were held there awaiting deportation to the state farms in the south. A life of forced labor lay ahead. They government army that guarded the camps took a share of the food aid and even requisitioned trucks from aid organizations to move people out.

The compulsory trip southward took an average of five days. About six hundred thousand people were moved, and an estimated one hundred thousand of them perished on the way. In November 1985, the Irish Times put that figure to the initiator of Live Aid, Bob Geldof. The singer shrugged. “In the context [of the famine], these numbers don’t shock me,” he told the reporter……

In some camps where deportations met with resistance, government troops shut the INGOs’ food distribution centers, so that people became hungry again and changed their minds. In other camps, INGOs were forbidden to feed the starving children of parents who put up a struggle. When around six thousand children died of starvation in one camp in late 1985 even though there was enough food for them, MSF France could bear it no longer. Comparing Ethiopia to Cambodia under the Khmer Rouge, the organization left the country.

Also, less surprising but still pretty grim are the dire inefficiencies of aid in Afghanistan:

Another example was given by Clare Lockhart, adviser to the United Nations in Afghanistan from 2001 to 2005. She investigated a house-building project in Bamiyan Providence. It began in the summer of 2002 with $150 million in the kitty. First the money was transferred by donor governments to an aid agency in Geneva, which allocated 20 percent to its own organization and then handed over implementation of the project to an organization in Washington, D.C. That agency also kept 20 percent for itself and passed the job on to another organization, which kept 20 percent and subcontracted the task of implementation once more. With the money that was left, the final organization in the sequence bought a consignment of wooden beams in neighboring Iran. It was delivered to Afghanistan by a transport company owner by the governor of Bamiyan Province for five times the normal freighting fee. When at last the beams arrived in the villages selected to receive the aid, they turned out to be too heavy for the loam walls of Afghan houses. The villages decided the best thing to do with the timber was to chop it up and use it to fuel their cooking fires.

Despite the lack of bibliographical rigor, I’d still recommend picking up the Crisis Caravan if you are interested in this sort of thing – just be wary of some of the claims being made here. It would be better if there was an open debate about Poleman’s assertions (some of them are even empirically testable). Thoughts from others?

Big fish in big barrels

We're going to need some more bloggers

Yaaaar, call me Ishmatt,

It be nearly a yaaaar since this here vessel the Tweetquod happn’d upon and rammed that thare 1 thousand thousand t-shirt’d kraken known only as the Sadlar. It was as brutal leviathan as I evar did see. But the haaaaaarpoons from the great Tweetquod and har sister vessel  the Blogosphaaaar fell’d that great sea beast, which sank baaneth the waves amidst squirts of inky harterade.

That seem’d a lifetime ago, and we thought that arrre captain had given’ up the dream of go’in after thar sea creatures, for they be very laaaaarge and mute  and not so easy to teach about the concepts of efficient uses of in-kind aid and the proper representation of NGO overheads (whare I come from, NGO stands for “Not Going Overboard”).

I had figur’d that we’d be heading back to dry land, whare we could get away from the tricky business of chasin’ around them mighty mastodons, fellin’ them one by one in an attempt to induce good behaviaaaar. Maybe we could instead think about slapping them with a tax of 100 pieces of gold for every shaart they send, or providing them with some other kind of direct incentive to behave correctly, rather than spinnin us in circles trying to be a winnin’ some grand argument.

Yet me hopes were dashed when, when we ware nearly back to port, the first mate Starbuck Schimmelpfennig spotted that all-destroying but unconquering whale, goes by the name of World Vision, for some reason dressed head to flipper in Pittsburgh Steelers t-shirts. I was a’hoping that cooler heads would be prevailing, and for a while things seem’d pretty quiet aboard the Tweetquod and the Blogosphaaar, but then the first mate just said that was because we were all a’scaaaaared of that thaaaar whale.

And I had been thinking that we were quiet because maybe the crew was gettin’ tired of chasing them whales, or maybe because thaaar be bigger fish to fry, but then them haaarpoons started being thrown from all directions. Even them haarpooners over at the blog run by Parseasterly, who casts a shadow over all others,  couldn’t resist letting loose into at the whale of an NGO.

But the great Christian leviathan just flipped and flapped and sank beneath the sea over thar,  and a great call went above deck to give chase. And I thought: maybe I could be wrong (and I most certainly have been before), but maybe it’s time we tried a different approach.

The Drama’s Done. Why then here does any one step forth?


The lost pact to end poverty porn

As early as 1994, at the start of the genocide in Rwanda, several of the world’s largest aid organizations signed on to a code of conduct intended to govern communication with the press and the public. It was compiled by the International Federation of Red Cross and Red Crescent Societies (IFRC). Signatories to the code agreed that in their briefings, publicity and advertising they would acknowledge victims of disasters to be “dignified human beings, not hopeless objects.

That’s Linda Polman in her book on humanitarian aid, The Crisis Caravan (War Games in the UK). Expect a review sometime in the near future.

The list of signatories to that code are here, comprising nearly 500 NGOS, including many organizations we’re familiar with today (like MSF). It’s disheartening, but not surprising, that so many signatories went on to ignore this part of the code – I fear the fundraising incentives are a little too strong for this one.

Perverse incentives in fundraising

On Wednesday, Kim Kardashian is going to die a little. So is her sister, Khloé, not to mention Lady Gaga, David LaChapelle, Justin Timberlake, Usher, Serena Williams and Elijah Wood.

That day is World AIDS Day, and each of these people (as well as a host of others — the list keeps growing) will sacrifice his or her own digital life. By which these celebrities mean they will stop communicating via Twitter and Facebook. They will not be resuscitated, they say, until their fans donate $1 million.

More here. I can think of a few more tweeters that I think should join in. And isn’t $1,000,000 a little low? How about $500,000,000?

An international charity calls for…. no more aid?

We don't need no stinkin' aid budget.

I stumbled upon this piece through Dambisa Moyo’s twitter feed, which seems to be entirely dedicated to linking to pieces which agree with her:

My proposal is simple, the Government should stop trying to manage international aid projects but should replace all its international aid with an additional GiftAid supplement for the UK’s International Aid charities. Then the giving public can decide the level and type of international aid, and both government and charities would save considerable administrative costs.

Yes, that’s Andrew Cates, CEO of the international charity SOS Children’s villages, actively calling for the elimination of the entire DFID budget to increase the tax incentives for people in the UK to give privately. It’s such a blatantly self-serving recommendation that I was forced to read it twice just to make sure I understood him correctly. His argument hinges on two assertions: that charities are more efficient than official donors (or recipient governments), and that

The public can choose charity projects which work.

Which, I’m afraid, should read: “the public will choose charity projects which are better at marketing.”

Check this space next week, where I will argue that the UK’s aid budget should replaced with scholarships for young development economists in the middle of their Phds.

Profiting off the poor

Writing on, Josh Berkman finds it unacceptable that ‘social entrepreneurs’ are making a profit off of an extremely poor consumer base:

In many cases, it’s fine to profit from good ideas that can help people, but I’d say there’s something wrong when your target consumer is living on less than two dollars a day and is spending well over half her income to feed her family. It’s not cool to set up shop in a slum or a village without running water in the homes and charge the very poorest residents for products and services they need. The driving ethos behind these so-called new do-gooders appears to be that nothing is free, even if your target consumer makes less in a year than what you paid for your laptop.

Berkman goes on to to suggest an alternative approach: helping local communities and businesses create beneficial projects which tackle the same problems. I disagree with Berkman’s assessment of social entrepreneurs, for several reasons:

The first is a reality check – while social entrepreneurs obviously have an altruistic objective, the sine qua non of their work is profit. However morally objectionable you might  find the idea of poor people purchasing goods and services, without the expected profit, many of those goods and services would no longer be available. Entrepreneurs aren’t sitting on huge piles of cash, just looking for ways to spend it: they have investors who will only commit when they smell a future return (even if they might accept a lower-than-average return for socially-beneficial enterprises). I’m friends with a social entrepreneur who runs a low-cost private school franchise in urban Kenya, where many extremely poor households send their children, glad to pay a low price to ensure a better education. Sans profit, his schools wouldn’t exist, and those families would have to make do with Kenya’s lacklustre public schools.

I sense that Berkman wishes that social entrepreneurship would look a little more like traditional aid and be driven solely by need and pure altruism. Unfortunately, most of aid never reaches those lofty expectations, and even if it did, the above argument still stands: this chunk of money follows profits, not need.

The neccessary synthesis is that profit and need are not mutually exclusive and may be more closely aligned than aid and need. The aid-giver’s dilemma is huge: identifying and meeting true need through a haze of mixed signals, political problems and changing priorities, then attempting to identify the impact of that aid by leaping back over the same hurdles.

The entrepreneur’s problem is much simpler: design and offer a product. If it is valuable to the poor then there will be demand and hopefully profits will ensue. If not, the product fails. Either way, all the risk (and the cash!) is borne by the entrepreneur, which creates enormous incentives to get things right.

One of the most persistent and important criticisms of the aid industry is that the beneficiaries are voiceless – there is no way for the poor to vote on moving money from one project (or donor!) to another. Donors and charities are often ignorant of this, because no one really complains about getting free stuff, whether or not it is the most appropriate assistance. In contrast, the poor vote for goods and services every day with cash from their meager budgets. This is an extremely strong case of revealed preferences: we don’t need to ponder whether or not wildly successful ventures like mobile phones or M-PESA are useful to the poor – their enthusiastic uptake says it all.

Some of Berkman’s concerns are well-founded – the private system is not comprehensive – especially for those most concerned with social protection:

What good is nutritionally enhanced food if the people who need it most can’t afford it when global commodities prices spike or a bad weather year in a far away country creates perilously low crop yields?

But this is where government and/or aid should certainly play a role. It’s perfectly possible for one to complement the other, such as through subsidies , public-private partnerships, and regulation. Social enterprises are never going to be great at providing certain public goods or dealing with externalities, but in the absense of functioning public alternatives there isn’t much room for criticism.

Entrepreneurship is not the ultimate solution to all our woes, but it plays an intriguing and perhaps crucial role in the big picture. I find it much more disconcerting knowing there are people out there wasting millions of dollars of aid money on bad projects than knowing that a few people make an honest buck on products that the poor value.