Abhijit Banerjee on how well we understand the Economic Machine

The problem, in the end, is that we economists and development experts are still thinking in machine mode—we are looking for the right button to push. Education is one such button. Within education, there are more buttons: Economists talk of decentralization, incentives, vouchers, competition. Education experts talk about pedagogy. Government officials seem to swear by teacher training. If only we could do it right, whatever the favored “it” might be, we would be home free.

The reason we like these buttons so much, it seems to me, is that they save us the trouble of stepping into the machine. By assuming that the machine either runs on its own or does not run at all, we avoid having to go looking for where the wheels are getting caught and figuring out what small adjustments it would take to get the machine to run properly. To say that we need to move to a voucher system does not oblige us to figure out how to make it work—how to make sure that parents do not trade in the vouchers for cash (because they do not attach enough value to their children’s education) and that schools do not take parents for a ride (because parents may not know what a good education looks like). And how to get the private schools to be more effective—after all, at least in India, even children who go to private schools are nowhere near grade level. And many other messy details that every real program has to contend with.

This is from Abhijit Banerjee's article full of all kinds of interesting insights. Banerjee, an economist, is at MIT.

Making aid work

Abhijit Banerjee starts the debate on international aid to poor countries and how to make it work, that leads to quite a few responses. The following excerpt is the central point in Banerjee's article:

Randomized trials ... —- that is, trials in which the intervention is assigned randomly -— are the simplest and best way of assessing the impact of a program. They mimic the procedures used in trials of new drugs, which is one situation in which, for obvious reasons, a lot of care has gone into making sure that only the interventions that really work get approved, though of course not with complete success. In many ways social programs are very much like drugs: they have the potential to transform the life prospects of people. It seems appropriate that they should be held to the same high standards.

Tyler Cowen's NYTimes column (which I linked to yesterday) describes a study (by a team that includes Abhijit Banerjee) that uses randomized trials in the area of microfinance in Andhra Pradesh.

Abhijit Banerjee on the merits of universal public services

The MIT economist seems to be in India, with the result that business newspapers have profiled and interviewed him. Here he is, talking about the importance of aligning interests of the middle class with those of the poorer classes:

In one sense, the system is not designed to work, i.e., deliver the goods, as employees are the top priority of the system. Political will needs to be generated, and that can happen when the interests of the middle class coincide with those of the poor. If there is demand from the non-poor, the likelihood of the administration taking action is greater.

For instance, availability of railway tickets gets a priority over streamlining the public distribution system (PDS). If concerns of the poor can be tied up with that of a segment that can complain, government will respond faster.

At another place, he talks about how targeting services just to the poor is inferior to universalization of the same services:

Targeting does not work. It leads to corruption. Universalising is more effective. I favour direct cash transfer to people. Technology should be used more aggressively. The administration of the old age pension system in South Africa is an example of cash transfer system that has worked with active use of technology. The government should not shy away from giving money.

It makes more sense to get rid of all the schemes and programmes for poverty removal, stop topping up expenditure on existing schemes and instead give money to people directly. ...

Among the bloggers I read, Kuffir has been a strong and passionate advocate of shutting down a whole bunch of (leaky and corruption-ridden) 'poverty alleviation' programs in favor of a direct dole. [See his posts here and here and the links therein].

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Related: Earlier posts on Abhijit Banerjee's work (with links).

MIT Technology Review profiles Esther Duflo

A few years ago, economist Esther Duflo, PhD '99, found a problem that threatened to stump her. In the rural villages of Udaipur, a district in northern India with one of the worst child mortality rates in the world, parents were spurning health clinics' offer of free immunizations against deadly diseases such as measles and tuberculosis. Only 2 percent of local children were being immunized by age two.

Duflo, MIT's Abdul Latif Jameel Professor of Poverty Alleviation and Development Economics, specializes in finding unorthodox ways to help the world's poor. So she concocted an experiment with MIT-based collaborators Abhijit Banerjee and Rachel Glennerster, along with officials from Seva Mandir, a local nongovernmental organization. In some villages, they offered parents about two pounds of free lentils when they brought their children in for shots. Before long, families started streaming into these clinics. About four in 10 children got immunized where free lentils were available.

According to mainstream economic thinking, the success of the lentil giveaway made no sense.[...]

The profile is by Peter Dizikes. Prof. Duflo is a 2009 MacArthur 'Genius' Fellowship winner. Her colleague and collaborator, Prof. Abhijit Banerjee won the Infosys Science Prize for humanities / social sciences.

Relevant economics

David Leonhardt ran a survey of economics asking them "which economists were managing to do influential work on the crucial questions facing modern society."

He says there was a "runaway winner": "the small group of economists who work at the Jameel Poverty Action Lab at M.I.T., led by Esther Duflo and Abhijit Banerjee, were mentioned far more often than anyone else." Here's a short description of their work:

The basic idea behind the lab is to rely on randomized trials — similar to the ones used in medical research — to study antipoverty programs. This helps avoid the classic problem with the evaluation of aid programs: it’s often impossible to separate cause and effect. If aid workers start supplying textbooks to schools in one town and the students there start doing better, it could be because of the textbooks. Or it could be that the town also happened to hire a new school administrator.

In a randomized trial, researchers would choose a set of schools and then separate into them two groups. The groups would be similar in every respect except for the fact that one would receive new textbooks and one wouldn’t. With a test like this, as Vinod Thomas, the head of independent evaluation at the World Bank, says, “You can be much more accurate and much more clear about the effect of a program.”

An earlier post has a bunch of links to Abhijit Banerjee and some of his work. And the NYTimes article itself has a bunch of useful links.

Tyler Cowen on microfinance in India

Tyler Cowen's NYTimes column opens with:

Microfinance is based on a simple idea: banks, finance companies, and charities lend small sums — often no more than a few hundred dollars — to poor third world entrepreneurs. The loan recipients open businesses like tailoring shops or small grocery stores, thereby bolstering local economies.

But does microfinance, in fact, help the poor?

To help answer this question, I visited Hyderabad, India, in June. The Poverty Action Lab at the Massachusetts Institute of Technology, run by Abhijit Banerjee and Esther Duflo, economics professors at M.I.T., and Sendhil Mullainathan, an economics professor at Harvard, has begun a study of microfinance in Hyderabad. The lab is monitoring thousands of borrowers from Spandana, one of the largest microlenders in India. At the end of a two-year trial period, the study will compare microfinance recipients to peers without comparable opportunities. The lab looks for the real-world equivalent of controlled experiments to study which programs actually alleviate poverty; this work is one of the hottest trends in the economics profession today.

Here are the homepages of Sendhil Mullainathan, Abhijit Banerjee and Esther Duflo. And, the website of the Poverty Action Lab is here.

Candidates with criminal records and how to combat them

Here's Abhijit Banerjee et al describing the results of a study:

During last year’s Delhi elections, SNS, an NGO, filed a series of Right to Information cases in order to extract information about the performance of the sitting MLAs. This included how they had spent their annual Rs 2 crore development funds, as well as how often they had participated in the committees where they are supposed to represent their constituents. Hindustan combined this information with data from the mandatory disclosures by all candidates regarding criminal history, education, and personal assets, and printed the same in a concise format for a set of ten constituencies, in the week before the election.

A group of eight NGOs then distributed free copies of these newspapers in 200 polling stations, chosen by lottery to ensure that they were comparable to all the others where the newspapers were not distributed. While candidates with serious criminal records got about 9 per cent more votes in general, the newspaper distribution appears to have effectively cut the electorate’s preference for criminals in half. However, one could make the case that this effect is the result of priming: it is conceivable that the newspaper campaign simply made people more sensitive to this issue.

The piece also discuss some other findings about the role of caste in UP politics -- especially in the perceived rise of criminalization since the 1980s. Here's the abstract of the academic study behind these findings:

This paper examines how increased voter ethnicization, defined as a greater preference for the party representing one's ethnic group, affects politician quality. If politics is characterized by incomplete policy commitment, then ethnicization reduces average winner quality for the pro-majority party with the opposite true for the minority party. The effect increases with greater numerical dominance of the majority (and so social homogeneity). Empirical evidence from a survey on politician corruption that we conducted in North India is remarkably consistent with our theoretical predictions.

Links ...

1. Development economist Esther Duflo of MIT wins this year's John Bates Clark Medal of the American Economic Association. She's the second woman to win this Medal. Here's her home page. [Hat Tip: Amol Agrawal and Swarup].

   Quite a bit of her work at The Abdul Latif Jameel Poverty Action Lab (J-PAL) -- which she co-founded with Infosys Prize (2009) winner Abhijit Banerjee (MIT) and Sendhil Mullainathan (Harvard) -- has been done in India. Here's an excerpt from the NYTimes story:

   One of her own recent studies looked at how quota systems for female politicians affected Indian attitudes toward female leadership. [Another paper] looked at ways to motivate teachers to have better attendance at Indian schools ...

2. Henry Louis Gates, Jr. in NYTimes: How to end the slavery blame game:

   While we are all familiar with the role played by the United States and the European colonial powers [...], there is very little discussion of the role Africans themselves played. And that role, it turns out, was a considerable one, especially for the slave-trading kingdoms of western and central Africa. These included the Akan of the kingdom of Asante in what is now Ghana, the Fon of Dahomey (now Benin), the Mbundu of Ndongo in modern Angola and the Kongo of today’s Congo, among several others.

   [...] In recent years, some African leaders have become more comfortable discussing this complicated past than African-Americans tend to be. In 1999, for instance, President Mathieu Kerekou of Benin astonished an all-black congregation in Baltimore by falling to his knees and begging African-Americans’ forgiveness for the “shameful” and “abominable” role Africans played in the trade. Other African leaders, including Jerry Rawlings of Ghana, followed Mr. Kerekou’s bold example.

3. Ask Dr. Free-Ride: Ethically, which field of science is the worst? Not surprisingly, there is no clear answer, but just look at the links in that post! They contain a short history of scientific skullduggery, misconduct and fraud.

Infosys Prizes for 2010

The Prizes have been announced.

First of all, congratulations to the winners!

Three things that are noteworthy about this year's Prizes:

1. All the Prize winners -- except one -- are working in India. The lone exception is UCLA's Prof. Chandrashekhar Khare, who gets the Mathematics Prize. [Last year, Prof. Abhijit Banerjee of MIT won one of the Social Sciences Prizes; IIRc, his India-centric work was cited as the reason for considering him for what is essentially an "Indian" Prize. Perhaps Prof. Khare has some strong Indian connections].

2. The Social Sciences Prize is shared by two women: Prof. Nandini Sundar and Amita Baviskar. They are the only women among the six Laureates this year.

3. Prof. Ashutosh Sharma of IIT-K gets the Engineering Prize. [And the Jury for this Prize redeems itself after its null result of last year; see my rant about that fiasco]