In a recent experiment, a team of scientists trained a vervet monkey to open a container of apples, a task no other monkey in her group could do. She was well-compensated for this service by the other monkeys, who began to spend a lot of time grooming her (apparently, grooming is the monkey unit of exchange). Then, the scientists trained another monkey in the group to get the apples, and the “price” for the service (ie the amount of grooming the apple-providing monkeys received) went down. NPR Correspondent Alex Bloomberg explained:

[W]hen there was a monkey monopoly on the skill, the monkeys paid one price. But when it became a duopoly, the price fell to an equilibrium point, about half of what it had been. And this all happened despite the fact that we’re talking about monkeys here. Monkeys can’t do math.

What’s the point, other than research studies are really bizarre? Acquiring a sought-after new job skill leads to a higher income, even among monkeys. And, monkey markets can still set prices, even though the market participants can’t add, sign contracts, or talk. And, perhaps, complex markets can be the product of an unintentional, spontaneous order:  Out of the chaos of many monkeys running around hitting one another on the heads, pulling nits off each other’s fur, following only the simple rules of monkey hierarchies and monkey appetites…a functioning market emerges.

The Most Remote Place in the World is Three Weeks from Anywhere

Along the lines of our recent post, Africa Desperately Needs Trade Links: A Pictorial Essay, check out this feature from the New Scientist.

Bad Bosses Suck (Worse than War?)

I can think of lots of reasons why a local aid worker in Iraq might forego a secure paycheck and quit their job. Long lines and indignities at the security checkpoints to get in and out of the Green Zone every day. The dangers inherent to working with foreigners, like the threat of kidnapping or injury to themselves or their families.

But a paper based on conversations with local and international aid staff working in Iraq found that staff attrition and high turnover was more commonly caused by plain old bad bosses and poor treatment of staff. That’s not to say that poor management and dangerous environments aren’t linked in some causal way.  The paper pointed out that difficulties of aid worker life in hostile environments, like the lack of frequent contact with beneficiaries, problems building trust, and disparities in the amount of risk assumed by Iraqis vs international staff, magnify the effects of bad management.

I’m sure these “lessons learned” are old news to anyone who’s done aid work amidst hostilities.  But they are worth noting this week as observers of the attack on the UN guesthouse in Kabul asked whether there will soon be a Green Zone in Afghanistan, and in light of last month’s decision to bump up the amount of non-military aid the US gives to Pakistan, which may (or then again, may not, depending on how the aid is distributed) give aid workers a larger footprint there.

China in Africa

Finally, a couple notable books out to shed light on the little-understood subject of China’s  aid to Africa: The Dragon’s Gift: The Real Story of China in Africa by Deborah Brautigam, and China into Africa: Trade, Aid, and Influence, a collection of essays published by Brookings.

Bill Easterly has been a frequent critic of the rights-based approach to development, most recently in his article in the FT focusing on the “right to health.” For as long as I’ve known about the rights-based approach I’ve agreed with him. Recently, though, I’ve seen the light.

For those unfamiliar with the rights-based approach to development, it starts with defining inalienable human rights—and then seeks to ensure that those rights are enforced. The idea is that if you help people assert their rights and strengthen relevant institutions to respect those rights, everyone wins.

My epiphany on the rights-based approach came during a conversation with a friend on why practices in some areas are susceptible to evidence while others are not. My friend mentioned a conversation he had recently had with a cardiologist who noted that the practice of cardiology has essentially changed completely in the last five years. Why? Because the fear of malpractice suits made all cardiologists pay close attention to the latest research and adjust their practice accordingly. Simply not keeping up with the latest innovations was grounds for a costly lawsuit. We began joking about how the field of education would change if a parent could sue a school district because their child wasn’t taught to read the using the techniques proven most effective.

That’s when the hidden brilliance (brilliance, I tell you!) of the rights-based approach hit me. As Bill has shown in his books and the Aid Watch blog, practices that have proven ineffective and even harmful remain staples of the development industry for decades. No amount of evidence, or lack thereof, seems to have much impact on practice.

But if we adopt the rights-based approach, think of what we could accomplish! Right now, the poor can’t sue an aid agency or NGO for malpractice, no matter what they’re doing. But if we recognized the rights of the poor as expressed by the rights-based approach, then they could hold aid agencies accountable by suing for having their rights violated. I wonder how many aid programs wouldn’t be covered under the right to freedom from “arbitrary interference with privacy, family, home or correspondence.”

It goes further. Imagine a world where Ethiopians sue USAID for delivering in-kind food aid because their rights (specifically the right to adequate food) have been violated. Or Kenyans sue DfID because its support for education hasn’t been adjusted to reflect the latest research on what actually helps children learn more (surprise, it’s making teachers accountable to their communities not the civil service!)

Dare we hope for a day when the poor from around the world file a class action suit against the UN High Commissioner for Human Rights for advocating a rights-based approach to development without evidence that it does anything other than perpetuate bureaucratese and wasted aid dollars? Finally making aid accountable to the poor is just a few rights away!

All we need now is to really adopt the rights-based approach—and of course a new NGO to handle all the class action suits. Anybody got a catchy acronym?

P.T. Bauer was a brilliant development economist who began writing in the 1940s, and published many influential works throughout the 50s, 60s and 70s, when most of his profession favored central planning and government solutions.*  Bauer preferred bottom-up solutions and focused on the importance of institutions to align incentives and provide information to promote social cooperation and economic growth.

Relying on basic economic principles and logic, Bauer made bold arguments that are surprisingly relevant today.

Bauer said: The vicious circle of poverty “is in obvious conflict with simple reality.”

Proponents of the “poverty trap” explanation argue that underdeveloped countries are so poor that individuals can’t save enough to support the investment necessary to generate economic growth.  The only way to break out of the cycle is through external funding.

Bauer argued that the poverty trap cannot be a binding constraint.  The mere existence of prosperous individuals and societies—most of which have emerged from poverty without the assistance of foreign aid—flies in the face of the poverty trap.    While it is true that poor people can’t save as much relative to rich people, if the right incentives are in place, small scale savings will lead to small scale investment, which in turn will generate marginally higher incomes leading to medium scale savings and investment, thus creating a “friendly circle of wealth.”

Bauer said: “Guilt-ridden people hope to assuage their feelings simply by giving away money…without questioning the results: what matters is to give away money, not what results from this process.”

At the recent World Bank annual meeting, the Development Committee praised the World Bank’s “vigorous response” to the global financial crisis, which they quantified as “a tripling of IBRD commitments to $33 billion this year and IDA reaching a historic level of $14 billion.”

While most development agencies profess a commitment to measurable results and outcomes, “results” in development are puzzlingly often equated with volume of loans given or number of grants handed out. According to Bauer, the reason for this apparent contradiction is that collective guilt has replaced individual responsibility. Because the West feels responsible for the lack of development in the rest of the world, what matters is to give away money, not actually see results.

Bauer said: “Foreign aid is demonstrably neither necessary nor sufficient to promote economic progress in the so-called Third World and is indeed much more likely to inhibit economic advancement than it is to promote it.”

Foreign aid inflows alter the incentives of recipient governments, argued Bauer, increasing the power of the (often dictatorial) government, promoting dependency and encouraging rent seeking.  Aid ignores the fundamentals that are necessary for economic development: the primacy of property rights and the importance of informal norms and culture for economic change.

Bauer said: There is a “need to restate the obvious.”

If Bauer said it all, why is it still so vital that new research follow in his footsteps?

Bauer’s answer comes from George Orwell, who lamented in 1939: “we have sunk to such a depth that the restatement of the obvious has become the first duty of intelligent men.”  What may be obvious to some is counterintuitive for many.

There is a need to restate the obvious.

—

*Update:  Thanks to astute readers for prompting us to be more precise on the time when Bauer began writing. As a few of you pointed out, Bauer’s influence spanned many decades: he published his first major work, “The Working of Rubber Regulation,” in 1946,  and continued publishing through the 1990s. A collection of Bauer’s essays, entitled “From Subsistence to Exchange,” with an introduction by Amartya Sen, was published in 2000, two years before his death.  The opening sentence of the blog has been changed to more accurately reflect this. – Eds.

Chang concludes:

Mr. Easterly says that economic growth does not come from “experts” like me but entrepreneurs, like Ju-Yung Chung, the legendary founder of Hyundai. He conveniently omits the details that prove my point: before it succeeded in the world market, Chung’s auto venture was supported by decades of import bans, export subsidies, and tariff protection.

For  Easterly, these salvos only strengthen his original argument that Chang finds “spurious patterns in partially random economic outcomes.” Chang’s rebuttals on infant industry protection and growth rates under neoliberal vs. interventionist regimes are further examples of  ”selective use of evidence (confirmation bias) and excessive reliance on too little data.”

Easterly continues:

Chang misses the point on how the evidence for any one good thing—like representative democracy—is only reliable in the very long run (lots of data) and cannot be confirmed or rejected with only a few examples (too little data). So he refutes my case for democracy with lots of data—by reliance on too little data (whether women in one country—Switzerland—could vote after 1971? Of course this is not trivial from a moral standpoint, but its weight as evidence is minuscule). The now-rich countries have been more democratic than the rest of the world on average in the long run and have been steadily increasing in democracy.

Mlodinow’s book [The Drunkard's Walk, reviewed in the same article] warned that our brains are so hard-wired to misunderstand randomness that we make the same mistakes even after somebody points out the mistakes. I have been guilty of this myself in my own career, and unfortunately Chang now does the same with this letter.

Find the full exchange here.

I am Africa-bound and will go off the Internet for the next 2 weeks (out of choice, not technological constraints). Laura will be running the blog in my absence. When I come back I will tell you about any experiences of interest.

Maybe when I come back I will also wearily comment on the latest aid-and-growth regression paper, the 1 millionth attempt to resolve the relationship in a cross-country growth regression literature that is now largely discredited in academia.

All the best,
Bill

The Gateses’ mission wasn’t just about gratitude, but to sell the simple—and, some might argue, simplistic—message that US government investment in global health works. They weren’t asking for money for themselves (the Gates foundation already has so much money to spend each year that they discourage individual donations), but rather to lobby US policy makers and citizens to continue the increasing American investment in global health.

Americans only hear the horrible stories about disease and malnutrition in the developing world, the Gateses said. The idea behind their new public advocacy initiative, the Living Proof Project, is to tell the stories of people in the developing world who are alive today because of US interventions in global health.

The reduction in mortality for children under five, from 20 million deaths per year in 1960 to eight million per year in 2008 is, Bill Gates said, one of the biggest accomplishments in the last 100 years. This happened because of higher incomes and smart spending on global health, and Bill says the US is largely to thank for it.

The Gateses talked about success in decreasing prices and increasing access to anti-retroviral treatments for AIDS patients, and praised the “American tax dollars” that have enabled “slow but real progress” towards finding an AIDS vaccine.

Bill Gates also talked about making “substantial progress” against malaria for the first time since the 1970s, arguing that scaled up indoor spraying and bednet distribution since 2004 has led to large reductions in malaria cases. [We’ve written posts on the Gateses’ erroneous use of African malaria data three separate times, with spectacularly non-existent effect on the Gateses.]

Gates went on to address some arguments that “skeptics” (who could they possibly be?) might level against the optimistic approach to global health.

There have been problems with corruption, he acknowledged, “if you look back at the history of aid” and “some of it ended up in the pocket of the local dictator.” But today’s global health spending, he argued, is different because it is more measurable. With health interventions, “we can measure the impacts, we can make sure the vaccines are getting to the children,” he said, though he left unclear how you identify the corrupt link in the chain from funding to inputs to outputs involving many separate actors.

To those concerned that aid creates a culture of dependency, Gates again pointed at history, saying that nearly twice as many countries in the 1960s received aid compared to today. Countries like Egypt, Brazil and Thailand, he said, are “not net recipients of aid.”  He predicted that the world will see increasing numbers of countries currently on aid becoming self-sufficient. We hope that includes the many countries that have become steadily more aid-dependent for five decades.

There’s been little substantive commentary on the speech in the news or blogosphere so far. Judging from the tenor of the enthusiastic real-time comments from viewers during the speech (“What can we do? Who to call or write?” and “I love hearing about the positive progress we have made…it is so rare that this fact is broadcasted,” for example), the Gateses were preaching to the choir.

This NPR interview,  though just seven minutes long, is actually meatier than the Gateses’ speech. In it, the interviewer gets Bill and Melinda Gates to talk honestly about why the Gates Foundation behaves differently than governments (“we can take risks where a government won’t or can’t”), and how their entrepreneurial approach to development problems allows them to acknowledge failures and change their approach midstream. Great!

Melinda Gates retells the story of delivering the rotavirus vaccine (but without the relentlessly optimistic spin from the speech). They worked with a scientist to develop a lifesaving vaccine, but failed with something much more mundane: producing the right packaging. They didn’t realize that they needed to put the doses in small containers so that it could be refrigerated all the way from the lab to remote locations in Nicaragua. She said: “You just learn from it and say okay, that’s a small mistake we made, and we’re not going to make that mistake again.” Kudos again! Would you mind if we called you “searchers”?

But all of this left us with one big unanswered question.  If the Gateses indeed have a much-improved aid model, then why this big campaign to defend US government aid agencies (including USAID), whom we and many others have documented do not change in response to – or even acknowledge – failures?

Actually, we have also previously argued that aid has been more successful in health than in other areas.  However, one petty and parochial concern we had about the progress reports is that Bill and Melinda Gates continue to make a case for malaria success stories based on bad or fake data that we have criticized on this blog already twice. The Gateses were aware of our blog because they responded to it at the Chronicle of Philanthropy.

Yet they continue to use the WHO 2008 World Malaria Report as their main source for data on malaria prevalence and deaths from malaria in Africa. As we pointed out in the earlier post, the report establishes such low standards for data reliability that some of the numbers hardly seem worth quoting. From the WHO report: “reliable data on malaria are scarce. In these countries estimates were developed based on local climate conditions, which correlate with malaria risk, and the average rate at which people become ill with the disease in the area.” Where convincing estimates from real reported cases of malaria could not be made, figures were extrapolated “from an empirical relationship between measures of malaria transmission risk and case incidence.”

In Rwanda, which the Gateses say showed a dramatic 45 percent reduction in the number of deaths from 2001 to 2006, a closer look at the WHO data shows that there is an estimate of 3.3 million malaria cases in 2006, with an upper bound of 4.1 million and a lower bound of 2.5 million. And, according to which method is used to estimate cases, the trend can be made to show that malaria incidence is actually on the rise. The Gateses also highlight Zambia as a “remarkable success,” claiming that “overall malaria deaths decreased by 37 percent between 2001 and 2006.” While they provide no citation for this figure it appears to come from the very same WHO report, which concedes that compared to African countries with smaller populations, “nationwide effects of malaria control, as judged from surveillance data” in Zambia are “less clear.”

The downside of all this is that it appears we are having no effect whatsoever on the Gates’ use of fake or bad numbers and thus on the highest profile analysis of malaria in the world. The Gateses ignore our recommendation (and that of others) that they invest MUCH more in better data collection to know when GENUINE progress is happening. (Would Gates have put up with a Microsoft marketing executive who reported Windows sales were somewhere between 2.5 and 4.1 million, which may be either lower or higher than previous periods’ equally unreliable numbers?)  Are we insanely pig-headed for insisting that African malaria data be something a little more reliable than if the Gateses had asked the pre-K class at the Microsoft Day Care Center to give their guess?

Well, this is the third time we are saying this on this blog, so maybe we should give up. When people like the Gateses are so tenacious in the face of well-documented errors, it’s time for us economists to shift from normative recommendations (don’t claim progress based on pseudo-data!) to positive theory (what are the incentives to use bad numbers?)

What is the political economy of “impatient optimism”? Here is a possible political economy story – there are two types of political actors: (1) those who care more about the poor and want to make more effort to help them relative to other public priorities, and (2) those who care less and want to make less effort relative to other priorities.

Empirical studies and data that show that aid programs are having very positive results are very helpful to (1) and not to (2), while of course the reverse is helpful to (2) and not to (1). So each type has an incentive to selectively choose studies and data. Knowing this and knowing the public knows this, the caring type (1) might want to signal they are indeed caring by emphasizing positive studies and data, and may have no incentive to actually evaluate whether the positive data are correct or not. So the Gateses might want to say (as they did): “The money the US spends in developing countries to prevent disease and fight poverty is effective, empowers people, and is appreciated.”

If this purely descriptive theory is true, it could explain why some political actors stubbornly stick to positive data even if some obscure academic argues it is false or unreliable.

It cuts both ways – the anti-aid political actors would also have no incentive to recheck their favorite data or studies. Then the debate over evidence will not really be an intellectual debate at all, but just a political contest between two different political types.

Of course, we HATE this political economy theory when it’s applied to US. We are VERY unhappy when people conclude that because we are skeptical about malaria data quality (and thus whether they show progress), therefore we really don’t care about how many Africans are dying from malaria and wish that all government money went to subsidize fine dining in New York. And, the Gateses would probably not be fond of this political economy explanation of their actions and beliefs either. Both of us would prefer the alternative “academic” theory of belief formation, in which it is all based on evidence and data, not political interests.

How to distinguish which theory explains the behavior of any one actor is determined by the response to evidence AGAINST one’s prior position – do you change your beliefs at all? The Gateses seem to fail this test on malaria numbers. We hope we do better when it comes our time to be tested, as we should be.

First, I suggested he conduct a randomized controlled trial of potential mates to identify the one with the best benefit/cost ratio. Unfortunately, all the women randomly selected for the study refused assignment to either the treatment or control groups, using language that does not usually enter academic discourse.

With the “gold standard” methods unavailable, I next recommended an econometric regression approach. He looked for data on a large sample of married women on various inputs (intelligence, beauty, education, family background, did they take a bath every day), as well as on output: marital happiness. Then he ran an econometric regression of output on inputs. Finally, he gathered data on available single women on all the characteristics in the econometric study. He made an out-of-sample prediction of predicted marital happiness. He visited the lucky woman who had the best predicted value in the entire singles sample, explained to her how he calculated her nuptial fitness, and suggested they get married. She called the police.

After I bailed him out of jail, he seemed much more reluctant than before to follow my best practice techniques to find out “who works” in the marriage market. Much later, I heard that he had gotten married. Reluctantly agreeing to talk to me, he described an unusual methodology. He had met various women relying on pure chance, used unconscious instincts to identify one woman as a promising mate, she reciprocated this gut feeling, and without any further rigorous testing they got married.

OK, all of us would admit love is not a science. But there are many other areas where we don’t follow rational decision-making models, and instead skip right to a decision for reasons that we cannot articulate. A great book on this is by Gerd Gigerenzer, Gut Feelings: The Intelligence of the Unconscious. There is also the old idea that not all useful knowledge can be explicitly written down, but some of it is “tacit knowledge” (see any writings by Michael Polanyi).

Is the aid world more like love or science? Probably somewhere in between. Obviously, there is a BIG role for rigorous research to evaluate aid interventions. Yet going from research to implementation must also involve a lot of gut instincts and tacit knowledge. I know experienced aid workers who say that they can tell right away from a site visit whether the project is working or not.

I don’t know if this is true, but certainly implementation involves non-quantifiable factors like people who have complicated motivations and interactions. A manager of an aid project must figure out how to get these people to do what is necessary to get the desired results. The manager (who also has complicated motivations) must adjust when the original blueprint runs into unexpected problems, which again relies more on acquired tacit knowledge than on science. (How to keep the bed net project going when the nets were first impounded and delayed at customs, the truck driver transporting the nets got drunk and didn’t make the trip, the clinic workers are off at a funeral for one of their coworkers, the foreign volunteer is too busy writing a blog and smoking pot, and the local village head is insulted that he was not consulted on the bed net distribution.) Certainly something similar is true also in running a private business or starting a new one – there is no owner’s manual for entrepreneurship.

So for donors and managers of aid funds, is finding the right project to fund more like econometrics or is it more like falling in love? How about a bit of both?

It seems to be reaching the reductio al absurdum in the current debate on whether to escalate US intervention in Afghanistan.

Let’s review the record:

A few questions about this record:

(1) Why did aid change after partial success?
(2) Why did aid try to do something more ambitious after a less ambitious effort failed?
(3) Was there good evidence (or any evidence) to support each phase of escalation?
(4) Is aid going to keep escalating, like say in Afghanistan?
(5) Should the well-documented aid failures in Afghanistan (see recent stories in the FT and the New York Times) sound the alarm about aid escalation?
(6) Would it be better to do less ambitious things that work rather than extremely ambitious things that don’t work?

In the first, medical researchers found that the usual methods screening for prostate and breast cancer was not as effective as previously advertised. Screening successfully identifies small tumors and the rate of operating to remove such tumors has skyrocketed. But the screening regimen has failed to make much of a dent in the prevalence of large prostate and breast tumors, so their preventative value is not as great as previously thought. Many other researchers had already pointed out that there is no evidence that the relatively new PSA prostate screening test has reduced prostate cancer deaths (a message that failed to make it to my own doctor, who tells me I am definitely OK once the PSA comes back normal). To make things even worse, some of the operations on small tumors were unnecessary and even harmful: “They are finding cancers that do not need to be found because they would never spread and kill or even be noticed if left alone.” The American Cancer Society concluded that too much emphasis on screening “can come with a real risk of overtreating many small cancers while missing cancers that are deadly.”

In the second story, earlier reports of positive results of an AIDS vaccine trial are coming under more and more doubt. The issue is one very familiar to any statistical researcher – did the apparently positive results from the vaccine trial come from random fluctuations in noisy data, or were the positive outcomes definitely more than could have happened by chance? We have the arcane concept of “statistical significance” to answer this. The NYT ran a story a month ago on the same vaccine trial that suggested definite positive outcomes (“statistically significant”), while today’s story features critics of the original trial results who fear the results were just due to random noise (“not statistically significant.”)

Suppose these critics were operating in the aid world. Aid defenders would accuse the critics of not being constructive – these studies were 100 percent negative (so what’s your plan for eliminating prostate cancer deaths, you fancy-pants researcher, if you don’t like ours?) They would accuse them of hurting the cause of financing cancer and AIDS treatment. The attacks on the critics might even get personal.

If this were the aid world, the mainstreamers would dismiss the arguments over statistical significance as some obscure academic quarrel that needn’t concern them. How do I know this? I have criticized Paul Collier on numerous occasions for failing to establish statistical significance for many of his aid & military intervention results. I have argued that he is doing “data mining,” which is pretty much the equivalent of producing lots of results on the AIDS vaccine and reporting only the positive results. But I have yet to find anyone who cares about these critiques – on the contrary the whole American and British armies seem to base their strategies on Collier’s statistical results. In contrast, it’s almost comical to see the heroic lengths to which the writer Donald McNeil Jr. goes in the latest NYT AIDS vaccine story to explain statistical significance to NYT readers. He is saying, hey you really have to get this if you want to know: Did the vaccine in the trial Work — or — Not.

The other feature of both stories is that both throw doubt on excessive confidence in simple panaceas – screening and vaccines. They suggest reality is more complex and that we need to think of new ways of attacking difficult problems like cancer and AIDS. If you are familiar with the aid world, you will know the analogy is exact to how we discuss solving difficult problems like poverty.

So why does medicine welcome critics and aid hates them? Perhaps us aid critics are just not as good as the medical critics. Or perhaps it is because we care so much more whether medicine really works than whether aid or military intervention really works?