Book Review: The Idealist by Nina Munk

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I heard about this book from Marginal Revolution. Here are some excerpts. It’s a concise and interesting book, great for anyone interested in economic development and foreign aid in Africa.

Journalist and author Nina Munk presented a vivid narrative of how Professor Jeffrey Sachs at Columbia University initiated the Millennium Village Project, a large-scale development program aimed at eliminating extreme poverty and creating opportunities of economic development in Africa. The project has been subject to wide scrutiny especially from development economists like Esther Duflo ever since its birth. It is criticized as untransparent, poorly enforced, and sloppily evaluated.

Sachs expected the project to eradicate extreme poverty and provide a pathway for sustainable economic development among the ultra poor in Africa. This can be seen in his speech in Ruhiira, Uganda:

In five years we are going to end hunger in this community. In five years we are going to bring malaria completely under control. In five years we will have hospitals and clinics through the whole community. In five years you will have beautiful crops. Step by step, poverty will become something of the past!

He probably still holds this aspiration now. But from what I have read in this book, there are four main reasons why this project is unlikely to achieve its goals.

First, it is fundamentally hard to teach people how to be self-reliant, and simply giving them money is not a solution. Many African countries have been receiving aid for as long as they can remember, and their incentive to be self-dependent is low. As Ahmed Mohamed, the former director of MVP’s Dertu project, puts it:

Our people have refugee syndrome. There are so many handouts here. Free food, free medications, free water, free education. And now we come in and talk to them about empowerment.

Second, development projects initiated by foreigners but without the supporting local infrastructure is doomed to fail.

Third, development programs that are not aligned with preexisting market conditions are likely to fail. David Siriri, the person in charge of MVP’s Ruhiira office, once encouraged farmers to grow maize using effective farming methods, hoping that increased yields will lead to higher incomes for them. While the farmers did enjoy a big harvest, they were unable to sell their surplus maize because of the limited demand for maize. To increase the incomes of the poor, development agencies need to consider the dynamics of local markets as well.

Last but not least, cultural conventions and religious beliefs sometimes prevent program beneficiaries from making the most out of development projects. Believing that “everything is written” gives an individual little incentive to work hard because anything can be taken by a supernatural power at anytime. Traditions can also make people economically irrational. For example, Somalis hoard camels even when it makes no economic sense to do so, only because camels symbolize wealth in their culture.

It is a bit poignant for me to see villagers not appreciating the efforts of the MVP staff but asking for more. Common complaints about MVP include lack of transparency, inadequate community participation in decision-making, vaguely defined ownership, etc. Well, all the benefits brought by MVP are essentially a windfall for them, so I guess their high hopes for follow-up work is warranted.

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Célestin Monga on creating jobs in Africa

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This Thursday Duke Center of International Studies invited Célestin Monga from the World Bank to give a talk about unemployment in Africa. The topic of his talk was artfully named “Jobs: An African Manifesto”.

Monga started his talk with some startling statistics. The unemployment rate in Sub-Saharan Africa is 17%, second highest in the world following Middle East and North Africa (22%). If we look at underemployment, 49% of the Sub-Saharan Africa population falls into this category (54% for Middle East and North Africa, unsurprisingly). Moreover, the percentage of population employed full-time is only less than 20% in Sub-Saharan African. Even if people are employed, most are involved in the low productivity agricultural sector. In Cameroon. only 2% of the population are employed in the government, 4% in the private sector, while 94% are in the agricultural and informal sector.

The importance of creating jobs in Sub-Saharan Africa cannot be overstated. With half of the population under 25, and about 2 to 3 million young people entering the labor force every year, the lack of jobs can lead to serious social unrest that will hurt economic development further.

The highlight of the talk is Monga’s new approaches to create jobs in Africa. He argued the traditional remedies to unemployment (including changes in hiring and firing practices, changes in benefits, reduction of the tax wedge, changes in wage bargaining institutions, implementation of active labor market policies and job applications) are ineffective. There are three major flaws of these policies. First, these are often misguided demand policies. Austere fiscal and financial policies to “restore macroeconomic stability” have not led to development. Second, laissez-faire policies alone often fail to attract investors. Third, it is difficult to improve the business environment (the policy recommendation often given by the World Bank) in Sub-Saharan countries.

If the traditional ways have disappointed us, what are our alternatives? Monga emphasized Africa’s low labor costs as a comparative advantage. This will become increasingly evident as China no longer has cheapest labor in the world. He also encouraged African countries to adopt less rigid fiscal policies that allow for targeted profitable investment. In addition, he suggested monetary policies should take on new roles of fostering growth and job creation as well as providing access to credit, instead of maintaining price stability (note that much of the inflation in Sub-Saharan Africa is imported).

At the end of his talk, Monga offered his views regarding how political economy plays a role in tackling the unemployment problem. New approaches to combat unemployment need to yield “quick wins” for politicians to stay in power to make long-term growth schemes possible. Governments should let foreign investment find a way to be incorporated into the local economy (see recent protests against Chinese investors). Identifying and setting priorities is important too, as he said: “Sometimes the government spends money building roads all over the place and each project gets little, and at last nothing is built and nobody is pleased.”

Caroline Hoxby on Expanding College Enrollment for Low-income High-achieving Students

Professor Caroline Hoxby from Stanford gave a talk about her project with Sarah Turner (Virginia) on expanding college access for low-income capable students. This study sheds light on the importance of information on making life choices and the often underestimated impacts of peers in personal development.

She motivated the topic by showing the audience the college application decisions of high-achieving students from rich and poor families. The differences are striking. Students from high-income families apply to a carefully constructed portfolio of schools, most of which closely match their abilities (in terms of test scores). They apply to a few “safe choices” just to back up. Students from low-income families, however, rarely have a portfolio. Many of them apply to nonselective colleges which are much worse than what they can possibly get. A question naturally arises: Since low-income high-achieving students know their ability levels by pre-test scores, why don’t they apply for good schools which provide them with better resources?

Several explanations are proposed. The most convenient explanation is students from poor families are worried about high costs of better schools. But a closer look at the college costs lowers the credibility of this claim. Colleges which are more selective are actually cheaper to attend — probably because they have better finances and offer more scholarships. Note that low-income students may not know this fact. And lack of such information is likely to deter them from applying for good schools. Another hypothesis is that the matching between universities and poor students do not happen as efficiently as we would like to. Low-income students are spread out and universities may not have publicized enough to this geographically dispersed population. The third explanation is that they simply don’t want to go to a selective college. The distant, uncertain benefits of going to a school with higher ranking may not be high enough to justify the pain from leaving home and friends. Sticking with what you are familiar with is always a safe choice.

With these thoughts in mind, Professor Hoxby designed a randomized controlled trial measuring how different interventions impact college application decisions among low-income high-achieving student. For one treatment group, she mailed application brochures containing guidance from informed high school counsellors about college choices. The brochures are considerately customized, including comparisons between schools outside their states and schools within states which they are more familiar with. There are two other treatment groups: fee waiver group and parent intervention group. The former provides coupons for application fees (which these students are eligible for in the first place) , while the latter provides customized college application guidance emphasizing parents’ concerns (e.g. costs) and written in simpler language.

Their econometric model is very simple. They didn’t include co-variates because none of those were significant. Results suggest that fee waiver coupons seem to serve as “earnest money”. Students are much more likely to look at the materials inside the envelop if they see the free money first. This may also release the guard of parents, who often open their kids’ envelops. Treatment group students are indeed more likely to apply schools which match their abilities.

The data have just come out and is only a one-year survey. Much remains to be learned about the academic performance, social networks, earnings, and other choices of these individuals in the future. With survey data, response rate is always a problem. In this case, a big proportion of the treatment group students didn’t even look at the materials. This restricts the power of the conclusion as we now have a limited and probably censored sample of treated observations. Making things clear is an inherent difficulty in this survey: they were only able to provide students with very limited information of this study or students will find out the aim and incentives will be distorted.

“Barbarians” with sophistication: James Scott on the Art of Not Being Governed

Yale professor and celebrated writer James Scott gave a talk at Duke today. He walked us through a set of interesting ideas in his new book The Art of Not Being Governed. A similar interview is here. His main argument is that Southeast Asian upland people choose their living arrangements, farming practices, and even illiteracy (over which I have doubts) strategically in order to remain stateless.

The area he refers to is called Zomia. It is a mountainous region consisting of parts of seven Asian countries. The people in this area have remained anarchist throughout the history.

He first pointed out that sedentary crop farming is usually necessary to establish states, as can be demonstrated by civilizations in major river valleys all over the world. However, states can also emerge without sedentary farming. For instance, trade and transportation centers can also turn into states.

States have control over its territory and interact with areas beyond its territory — “barbarian peripheries”.  Historically, states trade with and demand labor (slavery) from peripheries. This statement is no longer after World War II for two reasons. First, accurate positioning technologies have increased states’ capacity to occupy the full territory. Second, “barbarian peripheries” are no longer fiscally sterile. Their rich natural resource deposits are often necessary for states to advance in science and technology.

Hills, valleys, and wetlands are three geographical environments that lead to different population arrangements and institutions. Wet rice cultivation is widespread in valleys because of good irrigation, while slash-and-burn is more prevalent in hilly areas. According to Scott, societies are more egalitarian in hills than in valleys. Kingdoms are more likely to occur in valleys. One reason may be that wet-rice farming requires skills and is likely to differentiate households with different level of productivity in terms of income. On the contrary, slash-and-burn requires little sophistication and is likely to generate similar incomes for all. Another reason may be that valley residents are likely to produce more surplus, and the increase in surplus calls for an institution — a state — to allocate the surplus, to facilitate trade among people, and to establish norms and regulations.

The most interesting concept in Scott’s lecture is “runaway crops”. Scott made a case that wet rice production is favorable for tax collectors because rice grows above the ground and matures at a predetermined time. Tax collectors can come at the harvest season and easily demand the amounts due by the household. By contrast, root crops such as potato and maize are easy to grow but not immediately visible at harvest. Such crops will make tax-collection difficult. It is also surprising for me to learn that people seem to adjust their portfolio of farming produces depending on their desired relationship with the state. They may plant crops maturing in different seasons so that one-time tax visits are not profitable for the state.

Although I have found Scott’s arguments about the relationship between geographical features and governance schemes compelling, I still doubt to what extent do the “barbarians” select into such lifestyles.

The five powers of life

This semester has been challenging for me. Thich Nhat Hanh’s celebrated book The Art of Power gives me much useful advice on dealing with pressure. Here I want to share some of the main points in his book.

Thich Nhat Hanh advocates us to develop the five powers — faith, diligence, mindfulness, concentration, and insight — progressively to achieve and maintain happiness. “People who have faith can move mountains”, he says. I am starting to realize the power of determination as I challenge myself.

Concentration is beautiful because it gives us a feeling of “in the zone”. An athlete who trains all day long are less likely to get the most of his training than one who regularly takes breaks to reinvigorate himself. Studies have shown that working in 90-minutes intervals is the most productive. When we relax, we should relax completely — an often neglected aspect of concentration.

Insight requires substantial accumulation of knowledge and proactive thinking. Novice Kung-fu fighters only see the acts and marvel at their sophistication; Kung-Fu masters have their philosophy in mind and responds to each situation with ease.

It is all too easy to get blown away by the difficulty in the process of challenging yourself. Just remember to be like water — flow at your own speed, carry your poise, and reflect things as they are. If you want to start your own mindfulness practice, Deer Park Monastry has a great guide here.

Rigor in program impact evaluation

In my development economics class today, we had Michael Clemens (bio) from the Center for Global Development as a guest speaker. He talked about the impact evaluation of aid. Poverty reduction is appealing especially to people living in the developed world; hundreds of millions of dollars are donated for poor countries and regions around the world. The impact evaluation, however, is often neglected.

By “impact evaluation”, we mean a comparison of the post-project situation with what would have happened had the project not taken place that is cost-effectively rigorous. Clemens suggested three ways to increase the rigor of impact evaluation: independence, consistency, and transparency Firstly, the evaluation should avoid insider judgements as they tend to be biased; evaluation by outside parties such as other scholars/academia or consulting firms are usually more convincing. Secondly, the project should be evaluated for its fixed goals rather than shifting objectives. Thirdly, the information should be made to the public for further inspection.

Jeffrey Sachs advocates the Millenium Village Project (website) and the project is aimed to reduce extreme poverty by half by 2015. The information on the website about impact evaluation sounds encouraging:

Improved drinking water, with household usage increasing from 21% to 68%; Expanded access to HIV testing, from 8% to 28% of adults tested in the last 12 months; Reduced malaria prevalence, from 22% to 5%

But such information can be misleading because (a) it does not show how other regions and districts are doing in the same period and therefore neglects the fixed time effect acting behind both treated and untreated groups, and (b) it does not address the central objective of the project — poverty reduction.

The counterfactual is always difficult to measure because history only happens once. But beneficiaries of the project should be able to provide some suggestions of their satisfaction towards the program and therefore give researchers some idea about its effectiveness.

Clemens also mentioned that the right rigor of impact evaluation does not equal randomization. Difference-in-Difference estimation can be useful in some contexts as well.

Susan Cain “The Power of Introverts”

The TED video is here. It is interesting that introversion tends to cultivate leadership and creativity. In a commercialized society like Hong Kong, extroversion is highly valued and (I think) overstated. It is very frustrating to know that my Hong Kong peers rarely do real reading. By “real reading” I mean reading that inspires contemplation and enriches one’s knowledge of how this world works.

Spiritual leaders tend to be introverts, maybe because they spend more time contemplating about their lives and discover deeper truth in life. They are more convincing because they have faith and persistence in their careers. I read Thich Nhat Hanh’s book The Art of Power, and was amazed by his deep thinking over life and inner strength. He was able to tap into the very core power in our lives and suggest a comprehensive yet easy-to-follow way to use it artfully. He lives a very simple life in a small temple though.

I’m not saying that we don’t need any communication or cooperation. But there’s a growing trend of an overemphasis in “team work”. Susan mentioned in her speech “madness of constant group work”. This is exactly what I have been through in my university. Admittedly, it does benefit me — it teaches me how to deal with difficult people and how to mitigate conflicts within a team. But we also need some space for contemplation in our lives. I object to economic courses adopting too many group presentations. The presentation method is essentially more suitable for the business context. By definition, it focuses more on how ideas are presented instead of how reasonable and deep the thinking behind is.

Of course, education should not be the only way for us to develop our thoughts. Insight can be nurtured from reading, thinking, communicating, and writing.