Chris Blattman on the incubation of ideas until opportunity strikes

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Is a factory job better than a cash grant and some training? Chris Blattman and Stefan Dercon have a recent study in Ethiopia where they test these two options with a randomized-controlled trial. Back in December, Chris Blattman discussed with study with Russ Roberts on the EconTalk podcast.

In one interesting bit, Blattman highlights how holding onto an idea and repeatedly seeking an opportunity to implement it can ultimately bear fruit. I transcribed it (abridging a little for readability).

Since you have 300 people lining up for these jobs, instead of taking the first 50 in line who are qualified for the job and hiring them, why not see if we can find a factory owner who will find 150 who are qualified and instead of taking the first 50, we’ll flip a coin and we’ll take 50 out of those 150 qualified applicants as random and we’ll follow them over time and we’ll look at what happens to their incomes and their health and their career trajectories.

I had this idea as a graduate student 10 or 12 years ago, and I always thought, “Every time I meet a factory owner I’m going to feel him out. And I did. Once in a while I’d be on a plane to Uganda to work on one of my projects, usually related to poverty or conflict, and maybe I’d sit by a factory owner, and I’d say here’s this idea that I have, and they’d usually look at me kind of funny. They wouldn’t leap at the possibility. I was just this person they met on a plane, and I was a graduate student. I probably didn’t approach it well, and so it never really materialized.

So I was at a conference in London and there was an Ethiopian businessman who was sort of a real estate mogul. He was giving a talk to a group of development economics at the International Growth Centre, and I approached him afterwards and said, “That was terrific,” and I really enjoyed talking to him and we kept chatting and I said, “I had this idea. I think that your firms not only help achieve growth, but I think they might actually be tools of poverty alleviation. Here’s an easy way to answer that question.” And he said, “That sounds great. Let’s do it.” And so literally five or six weeks later we were on the ground in Ethiopia doing the first randomization.

I recommend the whole conversation.

Do markets change the goods for sale? Do they erode social norms?

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If you’re going to read one review of Sandel’s book, read Deirdre McCloskey’s. If you have energy for one more, read mine.

Consider three true tales:

“Barbara Harris, the found of a North Carolina-based charity called Project Prevention, has a market-based solution [to the problem of babies being born to drug-addicted mothers]: offer drug-addicted women $300 cash if they will undergo sterilization or long-term birth control. More than three thousand women have taken her up on the offer since she launched the program in 1997.”

“It’s not easy to compose an elegant wedding speech, and many best men don’t feel up to the task. So some have resorted to buying wedding toasts online. ThePerfectToast.com is one of the leading websites offering ghostwritten wedding speeches…. You answer a questionnaire online…and within three business days you receive a professionally written custom toast of three to five minutes.”

“As a single mother of an eleven-year-old boy who was struggling in school, Kari Smith needed money for her son’s education. In an online auction in 2005, she offered to install a permanent tattoo advertisement on her forehead for a commercial sponsor willing to pay $10,000. An online casino met her price.”

What should be for sale? Reproductive rights? Tokens of friendship? Skin space? Health care? A love of learning? In this slim tome, Harvard professor and philosopher Michael Sandel explores the expansion of market-oriented thinking into a wide array of new areas, as the examples above demonstrate. Sandel offers about a hundred more: “The reach of markets, and market-oriented thinking, into aspects of life traditionally governed by nonmarket norms is one of the most significant developments of our time.” As he lays it out, markets do two potentially good things: First, markets tend to make the buyer and the seller better off. Otherwise they wouldn’t both be buying and selling. So if people are freely engaging in market behavior (even around things traditionally governed by norms), it is probably making them better off. (Sandel does point out that not all market behavior is “freely” engaged in, as one could argue with the drug addicts in the first example above.) Second, markets pass no judgment on transactions. If people want to buy or to sell their body space, why should a bystander be permitted to block that?

But his largest point against markets is that they may change the nature of the good being bought or sold (i.e., they may “corrupt” the item or the interaction). If selling fast passes at amusement parks and airports changes the nature of interactions in these spaces, then markets are changing the item. If trying to buy students’ motivation by paying them to read books crowds out their intrinsic interest in reading books, then the market behavior is changing the nature of the item for sale. (Sandel partially surveys the evidence on this: The effectiveness is mixed.) That doesn’t mean we shouldn’t ever do it:

“I do not claim that promoting virtuous attitudes toward the environment, or parenting, or education must always trump competing consideration…. If paying underachieving kids to read books brings a dramatic improvement in reading skills, we might decide to try it, hoping we can teach them to love learning later. But it is important to remember that it is bribery we are engaged in, a morally compromised practice that substitutes a lower norm (reading to make money) for a higher one (reading for the love of it).”

Indeed, we have some evidence from teacher incentives in the USA (Jinnai 2016) and from student incentives in India (Visaria et al. 2016) that suggests that after incentive programs are discontinued, some teachers or students perform worse than before the program was introduced. So these are not purely theoretical considerations.

Sandel doesn’t offer clear answers, but he poses important questions. As I listened to the audiobook, I alternated between thinking hard about markets in the fields I work in (education, health, social safety nets) and where we should think carefully about the erosion of norms, and being mildly annoyed at what I see as a pretty reductive view of economics (Freakonomics is quoted repeatedly in an effort to define modern economics).

I’m comfortable with far more markets than Sandel is, but maybe not all of them.

Reviews and reactions:
  • Dierdre McCloskey, personal website (economist): Sandel “does, to his credit, give many interesting examples of the moral dilemma in choosing money over status or queuing to allocate things, from selling kidneys to buying baseball players. Yet surprisingly for someone who has taught over the years 15,000 students in his famous course, Moral Reasoning 22, Sandel’s moral ideas in the book have no discernible connection to human moral thinking since Moses and Confucius and Socrates. The kids deserve better. His moral thoughts in fact are two only, and thin versions even of these: that equality is good; and that the sacred can be corrupted by the profane.”
  • Diane Coyle, Independent (economist): “This entertaining and provocative book is full of examples of vulgar commercialisation…. A lot of us will agree that there is far too much of this in modern life. However, there are examples in this book of the expansion of markets in ways that many people, especially economists, would mostly regard as beneficial, but the author argues are degrading…. What Money Can’t Buy will tap into a widespread unease about having to limit government and accept a larger private domain in this age of austerity; and about crass commercialisation when unemployment and inequality are too high. But it does not offer a clear guide to which markets are repugnant, and why.”
  • Philip Badger, Philosophy Now (philosopher): “His argument, which is difficult to resist in several respects, comes down to the point that the increasing commodification of our existence is a form of corruption which undermines both our relationships with each other and the relationship of the individual with society.”
  • John Lanchester, The Guardian (novelist & journalist): “Let’s hope that What Money Can’t Buy, by being so patient and so accumulative in its argument and its examples, marks a permanent shift in these debates. Markets are not morally neutral…. Anyone who is already in agreement with the ideas Sandel is advancing – a fairly numerous group of his readers, I’d have thought – may well want a more sweeping, angrier book, one that is more heated about the morally debased landscape brought to us by the ubiquity of market thinking.”
HT Mario Macis — who does great work on morally controversial transactions — for sharing the McCloskey review.

The respective value of theory and of field experiments

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This is Antoinette Schoar of MIT.

On theory:

Theory is a way of organizing your thinking. In the end it’s setting up a hypothesis so that you have something to test. That’s why I also think that theory is most useful when it gives enough structure that it can actually allow you to refute hypotheses. The most frustrating theories are the ones that are so flexible that they fit any finding. This doesn’t help me to make better sense of the world. But it’s important to start from a theoretical framework rather than just a story because it forces you to be more precise. I think of myself primarily as an empiricist, so theory to me is very helpful when it helps me to unearth new empirical insights.

On field experiments:

What I really like about running field experiments is that even if you’re working with one bank or one NGO because you have to engage with the organization to implement something on the ground, if you want to do a good job, you have to get involved in the details. Which means that you get constant feedback on what is feasible and what is implementable or what is practical and what is just a pipe dream. What sounds great in an ivory tower may be impossible in the real world.

Of course, there are many more things in economics than theory and field experiments, but they are two important things.

From Tim Ogden’s Experimental Conversations: Perspectives on Randomized Trials in Development Economics 

Why don’t people take up savings products?

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This is Xavier Giné at the World Bank

Part of the take-up problem, especially in the case of savings, is that some of these products are pretty crappy. If we see no demand for these products, maybe that’s a good thing actually. If you put money into one of these accounts, check the balance a few times, make a few withdrawals, half or all the money has been eaten up by fees. So the characteristics of the product are very important.

That’s from Tim Ogden’s Experimental Conversations: Perspectives on Randomized Trials in Development Economics.

Beyond savings products, this is important because there is a temptation to lump interventions together (How effective are home-based child care visits? How effective is teacher training?) when in fact there is massive diversity in the particulars of the interventions. Sara Nadel and Lant Pritchett have referred to this as “high dimensional design space,” and Popova et al. document it in the case of teacher training interventions.

There is no reason to believe — ex ante — that all interventions in the same “category” will have the same effect. Indeed, in work Anna Popova and I did analyzing randomized controlled trials of education interventions, we found that in many cases, the variation in impact within categories exceeded the variation across categories, per the table below.

variation

So, as Giné says, “the characteristics of the product are very important.”

Lessons from a very productive economic historian: “Get it done and get it out”

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I’m reading Greg Prince’s biography of economic historian Leonard Arrington. Early on, one of his mentees reports, “One of the lessons that Leonard taught me was to get it done and get it out.”

Arrington’s massive bibliography evidences that he followed his own advice. David Whittaker compiled the 35 page bibliography for the Journal of Mormon History, including 259 “articles in professional publications and chapters in books,” and more than 35 books, 68 articles in non-professional publications, and many reviews.*

Here’s a little sample:

bibliography

Arrington had amazing concentration: “When he got to the point that he was ready to write the article, he would go down into that office and stay there for 72 hours. His wife would bring him food.” Now, Arrington didn’t contribute equally to every one of these articles. “Not everyone agreed with the division of labor, with some feeling that Leonard’s name appeared at times when his contribution wasn’t sufficient to merit co-authorship…. ‘Of course, that wasn’t unusual for people who were the head of that kind of thing [the historical department he led].'”

But he got those papers out!

As Linda Ginzel at the University of Chicago writes, “If you don’t write it down, it doesn’t exist.” And as Raul Pachego-Vega writes for the Twitter crowd, #GetYourManuscriptOut.

I’d better get back to writing.

* For books, I took the “books, monographs, and pamphlets” section of his bibliography and counted everything over 100 pages.

3 questions to guide every experiment, from Dean Karlan of IPA

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I always try to reduce things to three questions—even in simple interventions like passing out nutritional supplements to infants and toddlers. These are theory-driven questions that you should be using whenever you’re justifying any intervention whatsoever. 

And the questions are 

  1. “What’s the market failure? Why isn’t the market and the invisible hand working?”
  2. “How does this intervention specifically solve the market failure?”
  3. “What’s the welfare impact of solving the market failure?”

Karlan makes the point that experiments should absolutely be driven by theory. But theory doesn’t have to mean three pages of math. The theory can be simple, and the questions above sum up what your theory should predict.

from Tim Ogden’s interview with Dean Karlan in Experimental Conversations: Perspectives on Randomized Trials in Development Economics

The poor don’t use cash transfers on alcohol and tobacco. Really.

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Two years ago, Anna Popova and I put out a working paper examining whether beneficiaries of cash transfer programs are more likely than others to spend money on alcohol and cigarettes (“temptation goods”). That paper has just been published, in the journal Economic Development and Cultural Change.

The findings of the published version do not vary from the working paper: Across continents, whether the programs have conditions or don’t, the result is the same. The poor don’t spend more on temptation goods. But for the published version, we complemented our vote count (where you sum up how many programs find a positive effect and how many find a negative effect) with a formal meta-analysis. You can see the forest plot below. (The results are not substantively different from the “vote count” review that we did in the working paper and maintain in the published version as a complement to the meta-analysis.)

meta-analysis

As you can see, while there are only two big negative effects, both from Nicaragua, most of the effects are slightly negative, and none of them are strongly positive. We do various checks to make sure that we’re not just picking up people telling surveyors what they want to hear, and we’re confident that cannot explain the consistent lack of impact across venues.

Why might there be a negative effect? After all, if people like alcohol, we might expect them to spend more on it when they have more money. We can’t say definitively, but even unconditional transfer programs almost always come with strong messaging: Recipients hear, again and again, that this money is for their family, that this money is to make their lives better, and so on and so on. We know from others areas of economics that labeling money has an effect (called the flypaper effect).

So you can be for cash transfers or against cash transfers, but don’t be against them because you think the poor will use the money on temptation goods. They won’t. To quote the last line of our paper, “We do have estimates from Peru that beneficiaries are more likely to purchase a roasted chicken at a restaurant or some chocolates soon after receiving their transfer (Dasso and Fernandez 2013), but hopefully even the most puritanical policy maker would not begrudge the poor a piece of chocolate.”

Over the last 100 years, most US blacks migrated from the South to the North. Did they find what they sought?

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Yes and no. Better income and better social conditions, but also a black-white pay gap that changed little over time. Why?

Leah Platt Boustan, UCLA economist (and my friend), just wrote a book on it, Competition in the Promised Land: Black Migrants in Northern Cities and Labor Markets.

This is from James Ryerson’s New York Times review

In her rich and technical account, the economist Leah Platt Boustan employs the tools of her trade — resourceful matching of data sets, rigorous modeling of labor phenomena, sweeping use of census figures — to analyze the demographics and economics of the Great Migration as a whole… Her investigation both deepens our understanding of what we think we know and adds new complexities and wrinkles.

I expect it’s excellent.

Has the war over RCTs been won?

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Esther Duflo and Abhijit Banerjee of MIT and JPAL weigh in during an interview in Tim Ogden’s forthcoming book, Experimental Conversations, which I am enjoying thoroughly:

Esther: “I think it’s been completely won in that I think it’s just happening. A lot of people are doing it without us. It’s being used. I think it is now understood to be one of the tools. The argument within the economics profession [over the value of RCTs] had two main consequences, both good. First, it raised the profile. If something was debated, people began to believe it must be significant. Second, it did force us to answer the challenges. There were a lot of valid points that were raised and it forced us to react. We’ve become more intelligent as a result.”

Abhijit: “I am less certain that it has been won. The acid test of whether an idea has come to stay is that it becomes something that no one needs to justify using. … RCTs aren’t there yet: it is true almost everyone is doing them, but many of them are taking the trouble to explain that what they do is better than a ‘mere RCT.’ We need to get to the point where people take RCTs to be the obvious tool to use when possible to answer a particular class of empirical questions.”