Response from Oxfam: Governance, land grabs and tricky statistics

by Ricardo Fuentes-Nieva and Marloes Nicholls

It is encouraging to read the post from Aid Thoughts. We appreciate the time he put into Oxfam’s analysis on large scale land deals. Indeed, we were hoping that our blog would spark debate and bring more attention to this topic.

As a quick summary, we took two databases, the Land Matrix and the World Governance Indicators and found that land deals are more likely to occur in countries with lower levels across different governance indicators.  We specified that “This analysis is only the first step towards a more in depth research project. Next steps include a more in depth analysis on the determinants of the number and location of deals

Aid Thoughts seems to take issue with the use of this kind of analysis when they are so preliminary. There are two things to say to this:  Firstly, and as Aid Thoughts acknowledges, there is other evidence in the development literature that points to the fact that land deals are concentrated in poorly governed countries. Our conclusions were not based only on our analysis and we used the best evidence at hand (both internal and external) to generate a better understanding of the problem (which Aid Thoughts actually helped with his critical review). So, we stand by our decision to publish the preliminary results.

Now, there are a couple of things to discuss on the technical front of his critique. Here are some:

 

1) Investors or governments?

AidThoughts replaces governance indicators with income per capita because they better explain the existence of land deals. This leads him to suggest that “Maybe investors aim for countries who are more willing to sell off land, not because they are poorly governed, but just because they are poor.” This is an interesting idea but if we put aside the regression tables and reflect for a moment, is it sensible to think that land investors are attracted to countries for being poor? Why would investors be attracted to the characteristics of poverty, such as poor infrastructure, limited public services and low levels of education and health? A more interesting hypothesis that AidThoughts raises, and which we think is worth exploring too, is that it might not  be investors who target countries, but bad governments who sell the land of their citizens.

 

2) Truncated sample bias.

AidThoughts recognizes that running OLS with two control variables, as reported in Table 3, is not serious analysis (and yet he managed to muddle the significance of the estimators in his table). But what’s really puzzling is that, in order to prove his point, he then goes on to throw the entire kitchen sink of governance indicators into the next table (Table 4). These indicators are highly correlated amongst them, and it is difficult to find a sensible explanation to specify the model that way.

He then goes on to say of this table:

“In column (1), prior controlling for income, only one of the relationships we expected to see has returned: countries rated low on the rule of law index are more likely to have land deals. Political stability/violence is also associated with land deals, but unfortunately that wasn’t part of Oxfam’s theoretical model. Now, voice and accountability is positively correlated with land deals! Of course, most of these relationships vanish when we toss in income, although it is worth noting that the rule of law measure keeps its significance and sign. So the relationship between governance and land sales seems to be a lot more complex than the Oxfam brief is suggesting.”

That’s a lot of explanation for a badly specified model that includes highly correlated regressors. But that’s not even the most puzzling part of that table. AidThoughts then tries to explain the number of land deals with the same variables but he does not correct for the truncated sample (look how his sample drops from 212 and 183 in the first two columns to just over 50 in the last two). Ignoring the bias in the observed sample is a mistake and something we had identified as a problem, and that’s why we suggested exploring  a double hurdle estimation to understand the issue better.

 

3) Reported land deals bias.

Aid Thoughts briefly mentions the potential problem of bias in the Land Matrix, but we don’t agree that he identified the right direction of bias. He argues that land deals are more likely to be reported in developing countries by diligent activists than in developed countries like the UK. On the contrary, we argue that land deals are much less likely to be ignored in richer countries with freer press, more access to information and better organized civil societies. Does Aid Thoughts seriously believe that a land deal can be more easily concealed in the UK than in the DRC?

Overall, we are very encouraged by Aid Thoughts’ response. He mentions that he can be convinced of the problem with more data and more, better data is on its way according to conversations we’ve had with the people managing the Land Matrix. So here’s our proposal for Matt: let’s work together – rigorously and objectively – on this issue in the next few months to try to better understand what’s driving the land rush. The problem deserves as much attention as we can give to it.

Economics 101 and the wrath of Oxfam

“If only you knew the power of the dark side! In my day it was discussed in section 4.2 of the textbook.”

In the morning, before I get up and have breakfast or exercise, I like to stay in bed a little longer and read over the morning’s news and latest blog posts. This puts me at great risk, because it increases the chance that I’ll come across something that will really annoy me and thus spoil my pleasant morning. This is indeed a first world problem, but nevertheless one which has led to this blog post.

Over at From Poverty to Power, Duncan has linked to this blog post by Oxfamer Kate Raworth, who claims that economics textbooks lack the sophistication and tools necessary to deal with the issues that come about from human interaction with the environmental space. She asserts that this diagram represents the current way of economic thinking:

She then points out that this simplistic diagram (which I have yet to come across in a textbook – readers could you help me out? turns out it is from the Wikipedia page for circular flow of income, thanks @brettkeller) ignores three main things:

  1. Environmental degradation (use of natural resources, pollution, climate change).
  2. Unmeasured/non-monetary sectors of the economy (mainly work at home)
  3. Inequality

Let’s deal with her first point, shall we? Raworth claims:

First, the economy does not float freely against a white background. It is embedded within the planet’s environment, drawing on its natural resources and dumping pollutants back out into it. Mention that and an economist will say – ah yes, environmental externalities, we’ll come to those later. But calling nature’s resources ‘externalities’ and leaving them till later has led us to this crisis of climate change. How can it make sense to treat the fundamental resource on which all life depends as a factor external to the system?

First: “externality” doesn’t mean “external to the system,” it indicates a positive or negative impact which a given agent (person, firm, etc) doesn’t normally factor into their decision making. Economists label externalities as such because we think they are important, not because we are trying to shunt them under the rug.

Secondly, climate change hasn’t happened because people picked up Econ 101, didn’t see “the environment” mentioned as anything but an externality (or – admittedly – at all) and decided that it wasn’t important. Climate changed has happened because agents (citizens and firms and governments) don’t internalize the environmental impact of their actions. Not enough people think carefully about their energy usage. Not enough firms are given incentives to consider the environmental impact of their output. Economics has quite a lot to say about fixing externalities for a very, very long time (for example, the idea of Pigovian taxes has been around for more than 90 years), and to claim that climate chance is somehow the result of our way of thinking is a little silly.

Raworth also laments the lack of concern for the “unpaid care economy,” worrying that it will lead us to misunderstand the working lives of many of the world’s women. It is true that this is often left out of the discussion of the economy, but mainly because it’s pretty difficult to measure, not because no one cares about it. It’s also true that Econ 101 doesn’t have a lot to say about household chores or child care, but economics as a whole certainly does – Ms. Raworth would do well to have a look around the JEL classifications codes, especially in D and J. Her assault completely ignores decades of research on the household, the family and interactions between husbands and wives.

Similar things could be said about inequality – yes, Econ 101 is mum about it, often retreating to pareto efficiency without making any normative statements about initial allocations. In fact, much of Raworth’s objection seems to be that economics as a discipline isn’t normative enough, but I see this as a strength. It is up to us as a society, not economists, to determine how much we care about inequality. Yet, public policy requires a complex calculus of weighing different things that we care about; what economics and other social sciences try to do is make that calculus easier, by coming up with many different ways to measure income inequality and poverty, the impact of both on myriad indicators of well-being, including economic growth, health, (increasingly) the environment, and so on.

There is a missed opportunity here: I completely understand Raworth’s concerns and agree with her that we should be urgently focused on internalising the environment and inequality, and do more to measure what is currently unmeasured. Yet these concerns don’t validate her argument that economics is fundamentally lacking. Quite the contrary – we have been talking about externalities for a long time. We’ve been talking about inequality for a long time. We’ve been talking about the household economy for a long time. We have quite a large toolbox – some of the tools are better than others, and some of them are quite flawed, but perhaps a discussion as to which of them are more useful and which need refinement would be more fruitful than a casual dismissal of the way economics is taught.

Should more of these thing be making it into Econ 101? Some of them – like externalities – certainly do. It was one of the first things I learned in my undergrad economics courses. Then most of my lecturers -wrongly – dismissed externalities as something that would be dealt with by the Coase theorem. This is because many of them were libertarians who hated the idea of government intervention, not because economics told them to believe it to be true. Similarly, Ms. Raworth and I share very similar educational backgrounds: we both took the MSc in Economics for Development at Oxford and we both ended up as ODI Fellows in Africa. That our views diverge has less to do with the type of economics we were taught and more to do with who we are. This shouldn’t stop useful discourse – Ranil was taught quite a different style of economics during his masters, yet we managed to write a blog together.

I don’t believe I have the “wrong model of the world” stuck in the back of my head. Perhaps my tool set is weird, imperfect, and overly-mathematical, but that doesn’t stop me from caring about inequality and climate change.

Addition: this post could also be titled “In which Matt defends microeconomics, but has little energy for macro”

Taking credit

When you have a moment, I'd really like to see your source for that

While the Millennium Village Project’s shaky claim of reducing child mortality resulted in an impressive backlash, these sorts of assertions are not uncommon. Very frequently, donors, NGOs and philanthropists make unsubstantiated claims to impact which go unchallenged, either because they go unnoticed by those who know better or because we’re all just too busy to raise the alarm every time someone makes a bogus claim (or, perhaps, we’re being funded by said entity).

For example, take this tweet by Oxfam international:

That’s quite a claim. What does Oxfam have to back up this claim? The tweet links to an article in the Ghana Business News:

Speaking at a ceremony in Bolgatanga to introduce phase II of the project and to present the donation g, Mrs Rosemary Anderson Akolaa,, Health Advocacy Manager of Oxfam lauded the effort of the TBAs, the Community Health Committees and other stakeholders for their effort at bringing reducing mortality rate in the Region by seven per cent in 2010.

So, one of Oxfam’s managers in Ghana made the claim – what is it based on? To make this claim, Oxfam needs to:

  1. Describe the data it is using to estimate the 7% drop in maternal mortality.
  2. Convincingly show us that this drop is due to Oxfam’s (and partner’s) intervention. For example, did maternal mortality in the Upper East region fall faster than in other regions which did not receive the intervention?
As far as I can tell, Oxfam has done neither of these. Can we stop making claims we haven’t yet made an effort to back up?

Famine prediction bleg

Over at The Guardian, Oxfam’s Max Lawson makes this assertion:

…. we have been banging our head against a brick wall from the beginning of the year, warning that an emergency was on its way. We have been talking for months about the complex combination of conflict, entrenched poverty, political marginalisation and the worst drought in 60 years – but commentators haven’t been interested, and governments don’t engage until the TV crews are on the ground and a disaster has been declared.

Really? I’ve had a (cursory) look, and can’t really find  bold predictions from any NGOs about the coming crisis prior to this Reuters report, which itself was based on Famine Early Warning System report two weeks earlier. It seems to me that Oxfam threw most of its clout behind the  GROW campaign this spring. This in itself isn’t a criticism – Oxfam believes that GROW is part of the solution to preventing future crisises – but would they have really chosen to spend several million dollars on a new campaign if they thought a famine was right around the corner?

So readers, this one is up to you: can any of you find an NGO which used the f-word (famine) prior to the release of the FEWS report? Not a general “we’re going to see more famine in the future” but something akin to “We’re going to see famine or something close to famine this year.”

I’m happy to be proven wrong on this one, but I think everyone was equally caught with their pants down.

Update: that was quick, Oxfam is vindicated (although still no f-word).

Food prices and reliable predictions

Trust me kid, you can't bet wrong with my numbers

I’ve been trying to find some time to put down my thoughts about Oxfam’s new campaign (as well as post the contest results, review two books I was meant to review a long time ago, etc). In the meantime, I’m going to piggyback on Marc Bellemare’s thoughts on Oxfam’s claim that food prices will double by 2030:

This means that you can be reasonably confident in a forecast if it’s two or three time periods (e.g., months for monthly data, years for annual data) in the future. For anything beyond five time periods, however, you are in the dark. In other words, the further into the future you try to forecast, the likelier you are to be wrong.

If Oxfam has been using the same monthly food data I have been using — annual data would mask a considerable amount of heterogeneity; in 2010 alone, food prices have increased by 23 percent — they are forecasting food prices about 228 months into the future. Even using annual data, Oxfam forecasting food prices in 19 years makes for what I would charitably call a very heroic forecast. There are about a dozen more reasons why I think Oxfam’s forecast is wrong, which I might get into if there is a demand for it.

But if you truly believe food prices will have doubled by 2030, there’s a derivative contract I might like to sell you…

For more reasons why these predictions might be dubious see a post I wrote a post a while ago on the unreliability of big reports.

Bellemare’s last point is the most important though. If Oxfam is convinced of this result, why not put some money down on it? The benefits would be obvious: Oxfam will have more money to help the poor with, who would then be facing extremely high prices.

Of course, while Oxfam may believe this prediction now, they are trying to change behaviour so it doesn’t come true – this means that the claims will be incredibly difficult to (dis)prove. If food prices happen to double in 20 years, Oxfam will say “Look! We told you so.” If they don’t, they will say “Look at the disaster we averted!” Either way, the winning narrative will be constructed ex-post.

Grow: The Good, The Bad and The Uncertain

Today, Oxfam launch their big new advocacy campaign, Grow. Unsurprisingly, it’s slick, looks good, and is packed with soundbites that will make their way into umpteen speeches and pub-based arguments in the next few months, with the choice stat being that while $312 billion is spent on fossil fuel consumption subsidies annually, the total volume of ODA for agriculture is less than $10 billion.

The central thrust of it won’t surprise anyone too much: food security, climate change and equity have been at the centre of Oxfam’s sphere of interest for some time now. Grow puts these into a coherent framework. It’s essentially predicated on one central challenge: feeding the world’s poor in the context of increasing demand for food. Achieving this, we are told, is complicated by the ecological challenges of increasing production without causing irreparable damage to the environment, the logistical challenge of dealing with increasingly frequent crises moments in food security and the moral challenge of huge inequity in hunger and in the incidence of the costs of how we currently produce food.

I expect most of you will read the document for yourselves; for now I’m going to give a very quick summary of some of the things I think it does well; some of the things I think might be misguided, and some of the things I just don’t know about.  Opinions, as ever, welcome in the comments.

The Good

Given the name of Duncan’s blog, and his interests, it’s not a surprise that the report contains a pretty decent power analysis of why bad practices are difficult to budge: because the incentives in the current system and the vested interests in maintaining them make ‘bad’ practices profitable for rich and thus powerful groups. The language is very advocacy-document, but it does identify some of the key issues:

We will have to overcome the vested interests that stand to lose out, and which will strongly resist. The powerful elites in poor countries that control land and block reform. The farm lobbies of rich countries that plunder public purses, tipping the playing field against poor farmers. The dirty industries that block action on climate change at every turn. The seed companies whose myopic pursuit of patents undermines public research and leaves poor farmers on the margins. The multinational traders who profit as food markets unravel. The financial institutions that bet on them doing so.

The second thing I really like in the document is the focus on equity, an issue that is slowly returning to the debating table in development. While Oxfam pay much less attention to jobs and work as a motor for improving equity than I would like, I am incredibly pleased to see an entire section on the importance of collective action, and in particular unionism, as a tool for seizing rights.

Finally, the Grow campaign does not just look to donors or the international development architecture (in this I include subsidies and trade as well as aid), but also looks at national, developing country policies and approaches. I like this approach – it’s not about the West saving the world, it’s about the West rectifying some of the problems in the way it engages with the world, and the poor claiming their rights and carving out a niche in a set of global relationships. Oxfam are good at advocacy, so it’s nice to see it aimed broadly.

The Bad

This wouldn’t be Aid Thoughts if I didn’t have some gripes, though. There are two big areas where I’m doubtful. The first relates to one of the good things about the report: it recognizes that there are really powerful vested interests aligned against the changes the report calls for. The problem is that I don’t see a clear strategy for dealing with these interests beyond ‘naming and shaming’ and advocacy for better practices. I suspect this will only make private vested interests (normally corporations) change just enough to buy breathing space. Real success in the sphere depends on changing the incentives at work for these vested interests, by changing their risk/reward/cost ratios. This is the hardest thing to do, but ultimately it’s the one with the biggest potential. How do we go about it? I’m not sure, but I’d like to see an attempt at a strategy.

The other major concern I have with the report is the high regard it has for smallholder farming.

Continue reading

Brassieres without borders

I never thought I’d be writing again about the controversial subject of underwear so soon. The last post, about an initiative to donate underwear to underprivileged Kenyans, generated some heat in the comments sections. Well, things have definitely gotten worse (hat tip to Solarafrica):

The group of nearly 2,000 women were attempting to break the record for the world’s biggest single donation of bras. They gathered outside the Wales Millennium Centre to deliver the brassieres to Oxfam, to help the charity’s ongoing fairtrade project in Africa.

New and used bras are the foundation of a thriving trade which helps women obtain bras for a fair price and supports and helps traders to develop their businesses

It was one thing for a TWACIB-sized NGO to be doing this with new underwear, but used bras? And OXFAM? To support a fair price? Really?

What defines a “fair price” for bras? I can imagine the only reason that bras might be expensive in Senegal is because:

  • import duties and transportation costs of imported bras (note that the latter doesn’t make a price unfair) and/or
  • the local market isn’t developed enough to start manufacturing its own bras.

Importing used underwear from the West doesn’t really help in either of these scenarios, does it?