On vocabulary and observation at the ASSA (a little late, but you know what they say…)

As a first-time job market candidate, the annual ASSA meetings every January are stressful and busy and kind of terrible, but as I’ve gone more and more, I’ve realized they’re kind of awesome. My two favorite events are the CSWEP mentoring breakfast and the CU reception, but everywhere you go, you’re running into people you want to have a conversation with, people you haven’t seen in a year or more, people who want to ask you something or share something exciting. I spent most of the weekend hearing about cool papers, having great conversations about economics, and seeing people I care about. I’m a big fan, turns out.

Even if it’s 0 degrees F and we’re all tromping around in the snow that the city won’t clear.

But I digress. One of the other events I was excited for this time around was the T. Schulz memorial lecture put on by the Agricultural and Applied Economics Association. I like ag economists.

The lecture was given by Michael Kremer of Harvard. It wasn’t a traditional lecture in the sense there wasn’t much talk of big ideas or themes. He really just presented a new paper, which was a bit disappointing, but, taken at face value, ultimately interesting.

The paper was trying to ascertain the extent to which asset-collateralized debt would be successful in an experimental setting in East Africa (yes, likely a community that has seen plenty of these interventions). Most of the debt we take on in the US is asset collateralized, if you don’t pay your car loan, they take your car, for instance, but it’s not like that in many other parts of the world. Collateral for loans, especially small loans, often comes in the form of guarantees from family or neighbors, or some cash reserve itself, or sometimes none at all. So, asking whether individuals saw these loan as different is an interesting question if someone is trying to institute them.

Perhaps the most important result is that people were paying back their loans, and not only paying them back, but paying them back early, which Kremer attributed to debt aversion.

As Kremer started in on his preliminary results, the first things I heard were not his interpretation, but rather whispers from all sides around me.

“Neighborhood effects.”

“Peer effects.”

“Why should we think debt aversion is driving this behavior?” There seemed to be a consensus, at least in my part of the audience, that individuals were paying back their debts not because they disliked having debt, per se, but that they thought it made them look bad in the eyes of their neighbors. Some of the first questions following the lecture pertained to the interpretation of the observations.

Two ideas immediately came to my mind during this exchange. The first has to do with quantum physics and how when we observe something, we change it. The second is that many of the whispers around me could be re-interpreted as a discussion of social norms. In the peer effects interpretation, borrowers could see their peers repaying and thus be more likely to repay. And in the social norms sense, borrowers could perceive that having debt is not seen well by the community and thus be more likely to repay. It seems that much of the debate could have been settled by a survey question or two regarding attitudes about debt, social norms around debt, and the perception of debt aversion on a community level. “What percentage of people in this community pay their debts on time?” or “How are people who don’t pay their debts treated in this community?” Or something like that.

It strikes me that the language economists and other social scientists use to explain similar phenomena are often very different. Also, it seems that Kremer could have fairly quickly disabused his critics of their notions had he conducted at least a little surveying on debt aversion and social norms.

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Development Bloat

Marc F. Bellemare has a piece in Foreign Affairs today on development bloat, or how myriad causes and niche agencies and mission creep are harming the ultimate goal of development, to increase and stabilize incomes for the poor around the world. His argument is that funneling money to secondary needs diverts resources from meeting the basic ones, the ones that,if met, would ultimately lift everyone out of poverty.

Many of the things promoted nowadays by development — breastfeeding, the use of cookstoves, gender equality, environmental sustainability, an independent media, Internet access, and so on — fall into place naturally once people have met their basic needs, such as clean water, plentiful and nutritious food, and found a steady source of income. In other words, many conditions targeted by idealistic development goals arose in wealthier countries as byproducts of higher incomes, and trying to provide them at the same time as more fundamental things puts the cart before the horse.

It’s an excellent, important read and though I’m with Marc on most of his points, gender equality doesn’t belong on this list. Stabilizing incomes is necessary and great and ultimately the goal, but if half of your population (or often more than half of your population) is systematically denied access to those basic needs, it doesn’t matter that much that they’re being “met” on a national- or community-level.

In an extensive review of the literature, Esther Duflo shows that development itself, or higher incomes, does not necessarily lead to gender equality. If it’s something we care about, and I believe that we should, then a dedicated policy infrastructure devoted to improving outcomes for women and girls is necessary to ensure that development works for everyone.

The unit of analysis

Bill Easterly put a quote on his non-blog yesterday from a Jane Jacobs book, Cities and the Wealth of Nations, (now almost 30 years old) on the unit of analysis in development questions. It makes a case for considering other units of analysis than the nation.

Nations are political and military entities… But it doesn’t necessarily follow from this that they are also the basic, salient entities of economic life or that they are particularly useful for probing the mysteries of economic structure, the reasons for rise and decline of wealth.

As a labor economist, I’m kind of surprised that it’s still an issue, but it seems necessary to reiterate even 30 years after Jacobs brought it up in her book. Though Easterly and Jacobs were talking about wealth and economics in particular, I think the insight is relevant for all kinds of decision making, and especially important when we’re talking about social norms (yes, I’m on a social norms kick–it doesn’t help that a friend told me last night that all my research was boring except for the social norms stuff. I’m here all night, folks).

At the risk of sounding like an echo, I was a bit taken aback last week how many of the people at the conference wanted to talk about scaling up to national level, how to effect change at a national level, and how to measure national-level social norms (some confusion around the term, here), even while admitting how watered down programs get at that level and how difficult it is to generalize across countries. Research suggests that reform and program implementation at that level are not very compatible with leveraging social norms for behavioral change due to lack of identification with the relevant social group (the nation).

Child obesity, Latin America and a good reminder

A few weeks ago, Adam Ozimek and I of Modeled Behavior had a discussion in the comments section here about the soda ban in New York City and the debate around paternalism. When I was slow to respond, we continued over email, just proof that you’re never really going to end a debate with an economist.

Adam was kind enough to send me a link to a piece in the Atlantic, which I thought did a much better job of summing up the arguments against the soda ban and paternalism in general, which I had, up to that point, not seen as convincingly articulated. What I liked about the argument is that it alluded to culture and how creating laws that are both nonsensical and devoid of cultural understanding and social norms makes for really bad law. And this I can totally get behind.

With that in mind, I spent much of last week searching for recent programs in the developing world for adolescent girls. The scope of this new project is rather wide and includes programs aimed at increasing political and community participation by girls, delaying marriage and sexual debut, improving education, health status, and bargaining power, decreasing HIV and violence against women, and so much more. I was thumbing through websites on health and violence and found the program Agente F, partially sponsored by Telefonica, one of the major cell carriers in Latin America. It’s intended to teach kids about healthy eating habits and avoid obesity, which, apparently, is fast becoming a problem in Latin America. I didn’t know. I thought we were still dealing with hunger and poverty, but apparently I’m behind the times. I have been unable to ascertain how widely this program is used, or whether anyone has actually played the game, but it’s interesting in that it has a lot of institutional support, at any rate.

I consider myself somewhat adept at Latin American cultures, and some more than others, having lived and spent time in many Latin American countries. I tell people “buen provecho” when they’re eating and can sing happy birthday in Spanish, Portuguese and Venezuelan (it’s a different song). I know where it’s appropriate to wait in line and where you’ll never get your coffee if you don’t hustle your way to the counter. I can talk to you a little bit about Catholics and saints and am sure to take a shower immediately if I get wet in the rain (RIP, Tomas.). I’m not a native, by any means, and I surely make mistakes, but it’s not a completely foreign world to me.

So I was struck by how many of the questions on the Agente F game I was unable to answer. Not just the ones about how many bones are in the body or how many muscles. Those, I guessed on and mostly did fine. One question in particular asked what should you do to ensure a good night’s sleep? I said exercise, but the answer was take a cold shower before going to bed. I see the logic. Your body needs to cool down before going to bed, and it’s often hot in many Latin American countries, which can make it difficult to sleep, but I thought it was a very odd answer.

A few questions were in this vein. The answers seemed totally foreign to me and reminded me how important cultural context is in creating programs and legislation with the policy goals of influencing behavior and actions. Despite my experience living in Latin America, I’m not a native. I have no idea whether taking a cold shower before bed would sound like a reasonable thing to a Mexican or a Colombian; maybe it’s totally within the realm of reason. Heck, maybe it’s within the realm of reason for natives of the United States and I’ve totally missed the boat. Regardless, culture is an important element to take into consideration when designing programs and laws.

Replication, or the lack thereof, in Economics

My scientist friends have always been puzzled by my responses to questions about replicating studies in Economics. It’s just not done very often. In fields like astrophysics and biology, replication is almost as important, if not more important in some cases, as the novel finding itself, but not so in Economics. I’ve seen evidence that other social sciences are similar and there was some recent debate about the replication of psychology experiments and the failure to come to the same conclusions using similar methodologies. (There were other pieces on this, but this is one that I found today). In short, journals favor novel and interesting outcomes, so obvious or unsurprising results are far less likely to be published. The publication of the novel results leads to a power imbalance (she already published this, so she’s the expert and gets the soapbox). No one wants to fund or highlight research that’s already been done. Replications that confirm are boring and replications that challenge established findings have to be 110% on everything.

It’s really hard to challenge established findings. Look at how long (three years after publication) and how many papers it took for Emily Oster to admit her paper on missing women and Hepatitis B was wrong. Regardless, she still has a job and now tenure at Chicago. Or how many papers have been written challenging Donohue and Levitt’s abortion paper and they still stand by it.

I got a bit far afield, though. Economists are not generally in favor of duplication of effort. If someone’s doing it already, unless you can do it a lot better, you shouldn’t really do it. Hence persistent ideas of comparative advantage and gains from trade.

However, the recent spate of randomized control trials, particularly in development settings, has prompted more and more debate about the validity of these experiments and appears to have resulted in at least one group that’s eager to test and replicate in order to confirm (or deny?) the validity of certain projects.

Clearly, there are limits to what can be replicated using existing data, and limited funding to collect new data using similar methods.It’s unclear to me how they will choose appropriate experiments to reproduce or test, and as much faith as economists tend to put in a sample size of one, I’d bet we won’t be too happy with a sample size of two, but I think it’s a good start. The Development Impact Blog by the World Bank will keep up with the process of replication, so worth following if you’re interested. I know I’ll be watching.

h/t @JustinWolfers

Though kind of dated now, Daniel Hamermesh’s paper on replication in economics is here.

RCTs and placebo effects

A few weeks ago, a paper was posted on the CSAE 2012 Conference website that seemed to fly in the face of much of the current research that is happening in development economics. The advent of RCTs (randomized control trials) brought about a significant change in the way we do policy analysis, but also in the costs of it. This paper suggested that RCTs were capturing placebo effects. Just like when people believe they are taking curative medicines, they feel better, so do those benefiting from RCTs experience placebo effects from knowing they are part of an experiment.

The answer, according to the researchers, is to conduct a double-blind experiment, where neither the researchers nor the participants whether they were part of the treatment or control.

The paper garnered a lot of attention early on. I noticed many colleagues and others had the immediate and short reaction of “wow” and “yikes”, and I wasn’t the only one. Berk Ozler, at the Development Impact Blog, has a good review of the paper up with a great, punny title. Among other problems:

First, it turns out that the modern seeds are treated with a purple powder in the market in Morogoro (to prevent cheating and protect the seed from insect damage during storage), so the experimenters sprayed the traditional seeds with the same purple powder. As you can immediately tell, this is less than ideal. First, as this is a not a new product, farmers in the blind RCT are likely to infer that the seeds they were given are modern seeds. Given that beliefs are a major part of the story the authors seem to want to tell, this is not a minor detail. Second, if the purple powder really does protect the seeds from insect damage, the difference between the MS and TS is now reduced.

Berk’s analysis is well worth a read. Kim Yi Dionne also addresses placebo effects, though a different paper.

Update: the original post said that this paper was forthcoming in Social Science and Medicine. This is not the case. Sorry for the confusion and thanks to Marc Bellemare for catching it.

Update #2: The Economist has a nice review of this paper up as well on the Free Exchange blog. It doesn’t touch most of the analysis issues, but it does explain well why double-blind experiments might not be useful in Economics. h/t @cdsamii

Why we educate women

The World Bank’s Development Impact Blog has recently been hosting guest posts from job market candidates in economics and a few days ago, Berk Ozler, a regular contributor, decided to synthesize some of the lessons from their papers and one by Rob Jensen (forthcoming in the QJE). With a brief mention of the fact that some are working papers, and certainly subject to change, Ozler concludes that we’ve been going about increasing women’s educational attainment in the developing world in the wrong way. Backward, he calls it. Instead of making it easier for women to go to school by providing school uniforms or scholarships or meals, we should be concentrating on changing women’s opportunities to work. If women see the possibility of work or higher wages or more openings, then they will likely demand more education for themselves or for their female children.

From a purely incentive-based approach, it makes perfect sense. If female children are likely to bring in earnings, particularly if they might be comparable to or even higher than their brothers, then parents have an incentive to educate female children. Higher earnings perhaps mean better marriage matches, but most certainly mean better insurance for parents as they age. Women with their own incomes can choose to take care of their parents.

From a feminist perspective, however, it’s a bit problematic. Such analysis implicitly values waged work over non-waged work, a problem inherent in many economics questions, most apparent in how we measure GDP. We know that increasing women’s education levels is valuable in and of itself, regardless of whether those women go on to work. More education for women means later marriage, lower fertility, reduced HIV/AIDS transmission, reduced FGM, and more.

It’s reasonable to think that regardless of how we set up the incentives–either by showcasing opportunity or reducing the immediate costs of schooling–all of these things will happen. And certainly job creation and the encouragement of seeking new opportunities to work is desirable. But if we choose to focus all of our resources on showcasing opportunity (particularly when it may set up unrealistic or very difficult to achieve expectations. note I haven’t read the Jensen paper yet), then we reinforce the idea that “women’s work”, or work in the home, is worth less than waged work.

In a world where a woman becomes educated in hopes of finding work, but doesn’t, how does that affect her ability to make household decisions? To leave an abusive spouse? To educate her own children, male and female, equally? Jensen’s paper seems to imply the very promise of women’s wages is enough to change bargaining power, but I wonder if that will stick. Does failure to find work, for whatever reason when it is understood to be the sole goal of attaining more schooling, affect women’s status?