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Is the New York Times Ethicist a Better Economist than…..The Economist?

Jishnu Das's picture

The Sunday before last I woke up to a couple of articles in the New York Times Magazine and The Economist. In the first article, the New York Times ethicist was asked a question about Halloween candy: Are dentists who purchase candy from kids (thus protecting their teeth) and donate it to poor families engaging in “thoughtless, unethical and unprofessional” behavior?  The Economist article summarized research on cash transfers to the poor, concluding that “Giving money to poor people works surprisingly well. But it cannot deal with the deeper causes of poverty”. In both articles, the fundamental question is how we measure and judge improvements in welfare based on what people consume. But while the ethicist takes the question head on, The Economist does not even get the question right.

A dentist examines a young child's teeth To see this, recall that in welfare economics there are two rationales for government interventions to make people better off. First, governments fix market failures. If the market does not produce efficient outcomes, the government can use taxes and subsidies to make things better. Externalities are classic examples. I don’t worry that my pollution makes others worse off and therefore “over pollute”. But the government can tax that pollution to the point where I behave “as if” I care about others.

Second, governments redistribute income by giving cash to the poor. If, in society’s judgment, an alternate distribution of consumption is better, government could achieve that distribution by redistributing “endowments” or cash from one party to another.

Within this framework, giving cash always increases the welfare of the recipients; what we also worry about is the extent to which market failures circumscribe the ability of society to do better.

My main problem with the article in The Economist is that the framing question “Does giving cash to the poor work well?” is meaningless and devoid of substance. The fundamental problem in posing the question this way is that you have to immediately ask: “work well for whom?” Depending on whose preferences we are interested in, maybe the program worked terribly (Oh no! Households did not buy more soap) or maybe it worked superbly (whatever they bought, people given the cash must have wanted to buy that stuff and were therefore better off). Unless we are willing to pre-specify the preferences of poor Kenyan farmers and make very clear that this is what we want them to do with the cash, the question cannot be falsified.

If you are worrying that The Economist’s question takes us back to a situation where those sitting outside poverty and far away from the daily grind of the poor decide what is good for the poor, you should be. And, not surprisingly, it leads to ridiculous conclusions. For instance, The Economist notes that giving cash increases enrollment by (only!) 23%, but cash conditional on enrollment raises it by 41% and therefore concludes that conditional cash is better for raising the human capital of the next generation. That is an error.

Apart from the problem that conditions may get more kids into school, but not make them learn more, what if households spent the money on medicine for a sick parent who can now earn more? What if they spent it on food for their children so they ate better for a while? Or on bed-nets? What about a toy so that their children could have a little fun? Each of these could have raised the human capital of the next generation even more than being sent to a school where children learn little and face the constant fear of physical abuse. To be sure, you may claim that there are particular market failures that make cash a less attractive proposition, but the evidence for such market failures cannot be based on relative comparisons of enrollment changes under different programs. Who decides that an increase in enrollment from additional cash of 41% is “good”? Why not 20%? Why not 80%? If it were 500% and the adults stopped eating, would we be satisfied?  And this does not address political economy issues that Shanta raised in his previous blog: Cash can create greater incentive for political accountability around the delivery of quality services.

And (gasp) what if they spent it on a bottle of beer at the end of a 12-hour shift or working in the field so that they could relax? Is that really so bad?

To be clear: The answer “does giving cash work well” is a well-defined question only if you are willing to say that “well” is something that WE, the donors, want to define for families whom we have never met and whose living circumstances we have probably never spent a day, let alone a lifetime, in.

Has our hubris really taken us that far? What happened to respect for the poor?

From there The Economist article degenerates, with “findings” that CCTs “work well” when the conditions are on things that people would not purchase without the conditions (I am serious; cut through the jargon, and that’s what it says). If by now you are tearing your hair out, join the club.

Or you could read the New York Times Ethicist, Chuck Klosterman, whose answer to the candy question is compassionate, ethical, and fine economics. Here is the bit that is required reading:

It’s not difficult to imagine a similar situation wherein a cardiologist offers to buy tobacco from his at-risk teenage patients, only to donate the cigarettes to a homeless shelter. But even that doesn’t strike me as sinister. Adults have the right to decide what they put into their bodies, even if it’s not to their advantage. A degree of shared knowledge about the consequences must be expected. If someone shopping at the food cupboard sees free Twix bars, he needs to realize that cookies coated in chocolate and caramel are not going to make his (or his children’s) teeth stronger. That’s not a remotely unreasonable expectation, regardless of social class. It would be different if this was the only food available, or if he and his family were forced to eat it — but that’s not what’s happening here. What’s happening is that candy is being made available to people who might not have it otherwise. Medically, you would argue that this is negative. But that’s not the only factor to consider.

If someone is frequenting a food cupboard, it can be assumed he’s not in a position to spend a lot of money on small luxuries; free candy isn’t going to change anyone’s life, but it might make it better for 10 minutes. Obviously, this practice (very slightly) raises the likelihood of people getting cavities and gaining weight and finding themselves at risk of diabetes. Some would insist that society has an ethical responsibility to stop people from harming themselves in any way (and to any degree). I am not one of those people. I think it’s O.K. for the dentists to donate this candy. They should, however, also donate toothbrushes and floss. But they should be doing that anyway.

That’s exactly right. Health is not welfare, neither is education. So, can we please stop making judgments about what poor people should and should not do with money that is redistributed to them? Look, I understand that donors are worried about people not using the money “responsibly”. But, as my colleague Paul Niehaus, a professor at UC-San Diego, a fine theorist and one of the founders of Give Directly told me, “Substance abuse is a real issue that we shouldn’t trivialize, but it is pretty ironic the number of conversations I have had with development people about the poor and their drinking—over drinks.” This debate caters primarily to the fears of rich donors, all paragons of virtue who top the charts in the world’s leading beer drinkers. If we can stop the waste of resources and brainpower on answering questions that stem from a purely elitist mindset, we can start (again) by asking: What are the market failures, and how do we fix them? Because redistributing cash was one of the two things that governments were supposed to do, fixing market failures was the other. So yes, cash is not a panacea for poverty, and that’s something we have known for a long, long, time. But it also goes a long, long, way.
 

Comments

Submitted by Lance Horsman on

Hi Jishnu

Thank you for the very good article. I live in south Africa, and am a MBL student at Unisa. I have been in business management for the past 15 years, have owned several small business, which I began at the age of 19, because I couldn't find employment as a marginalised white male. I am currently 38. I would just like to add a comment on your colleagues observation that they discuss over drinks the fact that the poverty that they aleviate should not be utilised to buy drinks. I would only add, that if you can afford to pay for your beer, and all of your other expenses are covered, and you'r contributing in general, then you've earned the right to buy a beer if you want to.

The problem is not the fact that poor people may buy a beer - it is the irresponsible use of funds provided which will perpetuate the situation in which they live. This just means more handouts later on. One of the deep, psychological reasons that people give to charitable institutions is because they want to make a difference. If they give money that goes towards 'sin' type items (cigarettes and alcohol) they are no longer making a difference - they are simply enabling a drunk. Nobody want to be that enabler.

thank you

Submitted by Jishnu on

Thanks, Lance. My problem with donors trying to define what constitute 'responsible' use is that it assumes that certain kinds of uses are irresponsible, without understanding why those choices may be made. Look, if you are a donor, you could always tell people that you are giving money to them and you want them to spend it in a certain way. I don't have a problem with that; it is, after all, your money, and you should do with it as you please. This is a contract between the person who gives the money and the person who receives it. But equally, I think it is our job, and that of magazines like The Economist, to always clarify that it is The donors preference that is being imposed on the recipient. In my own work, I usually find that rather than imposing our preferences, it is more useful to understand the constraints and problems that the poor face in their everyday lives, and try as hard as we can to solve them. My worry is that the narrative of blame---the poor are poor because of the choices they make---insulates us too much from a shared responsibility. A shared responsibility of making sure that the opportunities that the poor have are just as good as those the rich enjoy in their lives, or at least a whole lot better than they currently are.

Submitted by Dave Evans on

My favorite example of this thinking gone wrong in the Economist article is where it highlights a woman bailing her husband out of prison as a poor use of the funds. It's pretty easy to imagine that getting one of the household breadwinners (he was interviewed at his place of work) out of jail is an increase in productivity.

What's more, we have lots of evidence (from Tanzania, from Burkina Faso, from Peru, etc.) that people - on average - DON'T spend the money on booze and the like. So even if we don't respect the question (i.e., why is it our business what they spend the money on?), we already have the answer.

Submitted by Robert Palacios on

Excellent. Particularly liked the idea of buying a toy and the discussion over drinks.

Submitted by Jishnu on

Thanks!

Submitted by ato sam-ghartey on

hi, i am a marketing officer with an insurance company in ghana, and i have read your piece, it is quiet elucidating, the issue with this donor instructions on how aid must be used is quiet mind boggling at times,in my country GHana, a member of parliament, gave a brief description of how money given to poor men to improve their well being have found their way in wasteful ventures. He regretted thathe should have rather channeled the cash to the wife of this poor man, who in his view would have helped to improve upon the lot of that man and his family.In another issue a woman who's daughter was engaged in prostitution at the age of 12 years because the mother could not get money to feed them was asked by a radio presenter how much the girl's mother will need as capital to start a business to feed her household, the woman said ghc300.00 was enough for her, and subsequently she was given ghc500.00 to her surprise, to conclude women when given donor aid tend to utilize those monies prudently than if it is given to a man.

Submitted by Jishnu on

Thanks, Ato for sharing your thoughts. So, here is something interesting. In the first conditional cash transfer, PROGRESA in Mexico, the transfers were made to women precisely because people thought that women would manage the money and spend it better. However, since then several studies have given the transfers either to men or women and tried to see whether it makes a difference. There are two kinds of results. When given to households, it appears to make little difference on a host of measures. When given to smal businesses, if the business owner is a women, the cash has little impact on profits, but if the business owner is a man, it boosts profits and this boost lasts a while. I think this is one of the very important trends that has started in the work that the research group here at The World Bank, and wider in the development community--which is to really try things out, often with surprising results. What do you think?

Thank you Ato and Jishnu for sharing the thoughts above. On the issue of whether men or women would do better with donated money, I had a lot of trial and error experiments in Nigeria and Kenya about 4 years ago and concluded that impoverished enterprising women produced more growth with small capitals under $500 than men. When the investment was over $500, men performed better and there are lots of social reasons for that. This experiment was on a small sample size but it allowed us (ICAfrica)to focus our small charity's operation to work with women because we did not have a lot of funds to risk. This decision also meant that we were able to reach a lot more women, supporting more impoverished children. We measured impact of intervention by how much it improved the recipient family per dollar spent. Also, our risks were low because we targeted only those women who were already very busy trying to create viable economic income sources for their families. They already knew how they wanted to grow their ventures to earn the income that will bring their families above the poverty line but did not have the small capital required and were un-bankable.

Submitted by Jishnu on

Eugene

Thanks for sharing. This is fascinating. David McKenzie in our research group has been looking at this and finds different results in Ghana. Perhaps if you could look at his work http://poverty-action.org/sites/default/files/McKenzie-Paper.pdf, and see whether your approach was different (and if so how), it would add enormously to this debate. The social reasons you mention above sound very important. I don't know either country well, so if you can elaborate, that would be great.

Submitted by Jishnu on

Thanks!

Submitted by Jishnu on

Thanks!

Thanks, Jishnu. Excellent points.

FWIW, welfare theory made my brain turn to noodles in grad school, so I plead both ignorance AND stupidity. And I understand your post to be mostly beef against the way we're evaluating the UCTs, rather than the value of UCTs themselves.

But! My question: aren't unconditional CTs preferable to conditional ones, even in terms of welfare theory? (Isn't this revealed preferences?) Because, if we assume that we (or the government/Social Planner) just don't know what the best welfare enhancing activity is (more days in school, more bednets, bailing the husband out of jail), UCTs give us a quick way to see subjective welfare-enhancers. i.e. People vote with their shillings. Assuming rationality, *any* purchase has got to be welfare enhancing, because people only buy what's good for them? So, by definition, UCTs > CCTs, since people know their own preferences better than Social Planner/professors?

Maybe behavioral economics throws all of this out the window, but, if the Social Planner/professors are subject to the same irrationalities as the beneficiaries, this would still mean that UCTs > CCTs.

Also, from a policy perspective, don't UCTs > CCTs as well? Example: Prof. X's theory clearly shows that the biggest constraint to rural Kenya's growth is low educational attainment. But then everyone goes out and buys a tin roof with the UCTs, suggesting that maybe another few days at a (bad?) school isn't worth investing in. That would certainly be valuable to know for policymakers ("we've got to improve our schools", or, more Machiavellian, "vote for me and everyone gets a new tin roof!").

Submitted by Jishnu on

Thanks for the comment, Angela. I think you hit the nail on the head. The way that economist's USED to think of this was by evaluating the welfare LOSSES from conditional cash, which in its purest reincarnation was "in-kind" subsidies. One excellent example of how this can be done in Hanan Jacoby's paper in Journal of Human Resources (http://econpapers.repec.org/article/uwpjhriss/v_3a32_3ay_3a1997_3ai_3a2_3ap_3a223-249.htm).
Since then, the research is primarily interested in using the design of cash versus conditional cash experiments to shed light on market failures that might make conditional cash a more attractive option. One example is that there could be an externality within families. Parents want children to provide for them in their old age. IF they could sign a contract with their kids, they would educate them to the efficient levels. The problem could be that they can't actually sign these contracts and educating them makes it more likely that they will leave the "farm". Then, because of the commitment problem between parents and children, conditional cash works like a "subsidy" to education, in the classic welfare economics sense. This, for instance, is the gist of Rob Jensen's very nice paper that you can find at http://www.econ.brown.edu/econ/events/jensen.pdf.

Similarly, researchers have used designs where money is either given to the mother or father to see whether there are problems due to bargaining within the household. That is, traditional economic theory modeled households as "unitary", so that parents pooled resources and spent them in the "best" possible way. But that's not the way the world works, and bargaining between spouses could change what is consumed. Interestingly, this research does not find large differences depending on the identity of the recipient on household outcomes--but does find that the gender of the person matters when they are running a business. Here is my colleague, David Mckenzie’s paper on this: http://poverty-action.org/sites/default/files/McKenzie-Paper.pdf. Of course, you can complicate this further: If you gave money to the mother and they spent more on health, but if you gave it to the father and they spent it more on education, which one is better? To deal with this vexing problem, economists' have figured out a way to deduce whether the spending is "efficient" and a very nice paper finds that even when consumption decisions vary according to the identity of the recipient, you cannot rule out efficiency. Here is the paper: http://homes.chass.utoronto.ca/~bobonis/GJBmarriage_nov08.pdf.

Using the design of CCT versus UCTs to uncover "deep" parameters or potential market failures is clearly am important task. There are very specific ways to do this and the framing of the question has to be entirely different from what The Economist article tried to do.

Submitted by Arvind Nair on

Hi Jishnu,

Thanks for the excellent article!

Another potential issue with imposing conditions along with cash transfers, in a government program setting, is with the red tape it creates. The danger is that these 'conditions' could become little more than tools in the hands of the local officials that administer these programs to maintain their power over the population. And, paradoxically, the more finely specified the 'conditions' accompanying the cash transfer, the more power it could grant the local official!

Arvind

Submitted by Jishnu on

That's a great point, Arvind. Thanks. So do you think that conditions increase the likelihood of corruption in the scheme, relatively to just cash? One of the problems with tightly controlled evaluations is of course that they virtually eliminate those kind of problems that are bound to occur in the scale-up, so these implementation issues are seldom looked at. It would be great if you can point us to work on that, since many readers may be interested. Even sharing experiences on how this happens would be super helpful as countries try to design similar schemes.

Submitted by Franciska Eseenam on

Thanks, Thanks, Thanks !!!! Thousends of Thanks ! When I registered to receive News from this blog, I didn't know that it would be so OVERWHELMINGLY interesting.

Once again Thanks to you, and keep the good work on !

Best regards.

Submitted by Jishnu on

Thanks, Franciska for your kind comments. I am glad that you find the blog interesting. Please do suggest issues that you would like to see more discussion on from where you are sitting!

Best

Submitted by Luis Guadarrama on

Good and well written article. However, one could stretch your reasoning and also ask the question: market failures... failures for whom? For example positive externalities are at the root of wealth enhancement, and someone out there may want to cash in at this "failure".

But this is not the road I wanted to take; what I really wanted to express, is that assuming asymmetrical information, the whole idea of public policy is getting people to do (or purchase) things they would not do (or purchase) otherwise. Regardless on wether these people are poor or not. You can cast your doubts all you want on the merit of a policy objective (wether it is enrollment, caloric intake, or quantity of beer consumed by a household). In order to have public policy relevance this objective will need to be specified and measured. This does not imply that one objective is superior to another one, but in policy terms you have to have one. And I'm assuming CT are public policy, since CTs carry loses in efficiency always and must be justified for the greater public good.

Best

Submitted by Jishnu on

Thanks for your comments, Luis. I think that some market failures fall in the category you are talking about: If parents want to keep their children at home and cannot sign long-term contracts, then they may under-invest in education. Subsidizing them will lead to greater education provision; alternatively, you could do the same thing by providing social security that is funded by the next generation (so that the government writes the long-term contract) for retirees. But there is another class of market failures as well, which lead to too little trade. Credit market failures are a classic example. The lender is willing to lend at interest rate r and the borrower is willing to borrow at that rate too. So, they should "trade". But they don't because the lenders don't know the riskiness of the borrower, and everyone willing to borrow at interest rate r with bankruptcy protection is "too risky" for the lender to lend to. In this case, public policy can play a big role, for instance, by building up central databases of credit worthiness. These are information failures due to asymmetric information. So, there is a wide range of policy that can address market failures; the key is to tailor the policy to the market failure that has been demonstrated.

Submitted by Rory on

Whilst well argued this article is a bit disingenuous as it does not deal directly with the research that was actually done in Kenya, only on how it was reported in the Economist.

As the research wrap show (link below) they outcomes of the research were very well defined. The research shows that the unconditional transfers were associated with:

1. 33 percent increase in incomes
2. 53 percent increase in value of household assets
3. Reduction of days without food for children by 42%

1 & 2 are exacly related to Welfare in the way that economists think about Welfare Economics. 3, less so, but is arguably a pretty decent outcome.

The author should engage with this important and interesting research and not poo-poo it based upon how it was reported in a public periodical.

https://poverty-action.org/node/6099

Submitted by Jishnu on

Thanks, Rory, for picking up on the distinction between the research and the reporting in The Economist. You are absolutely right--I am not writing about the research. I am writing about the reporting of the research; in the comments thread, I do write a bit about the research. We can disagree about whether it is useful to write about the reporting of the research. I think it is useful for a couple of reasons.

First, it is (unfortunately) likely that many more people will read the reporting rather than the original. If the reporting does not make much sense, we should point that out.

Second, and more broadly, in policy research I often find that there is a process of original research and then there is a process of commentary and translation. There aren't that many people engaged in this second task, but to the extent that we want to engage in policy, it is an important task. I do believe that one of our roles in the institution where we sit is to ensure that this translation is done to the best of our ability and elevates the level of the discussion.

So, I do not wish to "poo-poo" the research, but I do want to make very clear that the commentary in The Economist got it wrong to a large extent. To the extent that I can try and add to that commentary, it may be useful for those who may not read the original research. Thoughts?

Submitted by Anonymous on

Great Article, Jishnu! I recently came across some research that also gets at some of the points you're making:

http://ideas.repec.org/p/sip/dpaper/09-021.html

Submitted by Jishnu on

Many thanks, Anon, for the cite. I did look at the paper and think that it super interesting, particularly given the highly contentious debate around "eating right". Maybe another blog post....

Impressive piece, thanks Jishnu. The donors should get closer to the people they intend to help; if not, it will always be a gap and even a collision between people living in different worlds, and it will always be frustration in the two sides with regard to the intended outcomes. It's necessary to fix this divorce. Thanks!

Submitted by Jishnu on

Thanks, Marcos. Here is something we have all struggled with, and it would be good to get your thoughts. Who represents the people that donors try to help? One way to go is to skip the representation conundrum and directly transfer private goods, like cash, to people. But you also want to fund public goods, because, well identified and well funded, these must have greater impacts on welfare than private goods. In this case, you have to address the problem of representation. Is it the government that represents the people? In which case, should we just give the money to the governments and neither monitor, nor evaluate the impact of our funding? What happens if the major problem is government rather than market failure? Thoughts?

Submitted by Suvojit on

Dear Jishnu,
Thanks for the great post! and for pointing to the elephant in the room in some sense - the role of governments in taxing and redistributing wealth.
My reading of the arguments made by the 'give cash directly' proponents has mainly been in terms of its focus on development agencies (less so on governments). Given that we waste so much of the resources in delivering aid poorly or by just delivering the wrong aid, it may be better to just give cash directly to the poor and see what they do with it. The evidence on this count is interesting, and we can argue about the outcomes we expect, as you do in your post. Even so, the focus seems to be on what is convenient for ‘us’, not necessarily what is good for ‘them’.
The other aspect of this debate is that of administrative capacity. Even delivering cash directly to people when attempted by governments call upon a certain degree of administrative capacity. For many reasons that weaken the implementation chain, the transfers may not be well targeted, may not be received in full, and so on. In those cases to say 'give cash directly' may not be the solution at all.

Submitted by Shanta on

I can't resist jumping in on this conversation. First, if the case for cash transfers applies to donor aid, it should also apply to resource revenues in mineral rich countries. In both cases, the money comes from outside and the citizens aren't able to hold the government accountable for its spending. Second, Suvojit, your point about administrative capacity, if it applies to cash tranfers, should apply just as much to other government programs. If a government cannot manage to distribute cash to its citizens, why do we think it can distribute education, health care, clean water and sanitation? In many ways, distributing cash taxes scarce government capacity less.

Submitted by Jishnu on

Curiously, I agree with both of you. In the sense that what is being identified here is the fundamental limit to empiricism. Following any revelation of a poorly performing government program, the two statements "it's really bad, shut it down" and "it's really bad, give it more money" are logically consistent and frequently made by opposing groups. So, the key issue becomes "what are the most fundamental things that we need governments to provide", and if we can obtain consensus on this, we should fight and fight to improve administrative capacity...or, at least agree that it's the way forward. Unfortunately, over the last deacade, we seem to be going through what I call "The Great Giving Up", which is precisely that the goods that ought to be provided by the government are being increasingly privatized as we realize that poor governance is the limiting factor. Much of this is because governments are, on the other hand, providing many things that they should not be. My hope would be that if this cash debate finally opens up policy discussion on the role of the government in terms of redistribution and the provision of public goods, that would be a critical step forward.

Jishnu (jet lagged in Birbhum, West Bengal)

Submitted by Arvind Nair on

Following up further on this, perhaps in the case of cash transfers, we can hope that this fight to improve administrative capacity will be fought with more data and focus on outcomes that has been the case of other public goods provision. With cash transfer schemes, we have the chance, at the outset, to put metrics in place that can measure not just 'leakage' of funds but also, where exactly in the 'chain of delivery' (not the best phrase!) the leakage is happening: is it in identification of beneficiaries? the linkage of beneficiaries to bank accounts? from the government treasury system to the bank accounts? And the thing about cash transfers is also that since the 'good' itself is measurable, the leakage will be too.

Submitted by Jishnu on

Good point, Arvind, but may be a case of the grass being greener,...If the cash transfers go through banks, it's another layer of nightmares to try and figure out what is going on.....ghost recipients, mismatched names, funds returned from banks due to not being claimed, people claiming they did not gret the cash, when it is sitting in their accounts.....all of these things can, and do happen. So, I am glad that you are optimistic, and it would be good to try this out!

Submitted by Suvojit on

I think we need to focus on the normative argument that we are building upon. As you say (and I agree), there is an increasing tendency to ask the government to withdraw - and sure, the government need not make steel, but not stop from running schools - which I have difficulty agreeing with. The state in a poor country is a legitimate representative (in a democracy) and should aim to provide a comprehensive suit of welfare services, and citizens certainly have a right to expect this from their governments. I am not saying the proponents of cash transfers are saying that the government should even withdraw from the infrastructure investments in the social sector, but isn't there a risk that this is the message that big donors or even poor country governments may be taking out of this?
Also, governments that have access to resource rents and/or aid can consider distributing cash - what of governments that have access to no such resources, and are unable to raise sufficient taxes to redistribute?
There are those who may want governments to reduce their role to just dispensing cash if that is the minimum they can do well with a certain degree of efficiency - but this I think imposes the political reality of external and non-state agencies on governments, which certainly are a world apart.
I am not going against evidence-based policymaking here; but I see a strong normative component that forms the fundamentals on which this evidence-base is being built and that should be acknowledged

Submitted by Jishnu on

Oh, I agree with you, which is why I think this is a limit to empiricism. I think you HAVE to go from basic first principles and then move forward. But, ever here, reasonable people can disagree. For instance, should governments provide schooling, or finance it and leave provision to the private sector? The question then becomes whether the government is better as a regulatory state or a provider of education, which takes us back again to the empirical results and their limits. It's a hard one, and something we have been going around without clear answers on what can be done in the short to medium run. As I said in the blog, redistributing cash is one of the well recognized goals of government intervention, and fixing market failures is the second. It has to be a weird, weird world where we claim that the market will fix the market failures...

Submitted by Heather on

Thanks, all, for an interesting thread. I really appreciate the point (made explicit by Jishnu but hinted at by others) that, without some underlying guiding theory or normative view of where we are trying to get (and with the input of which actors at which junctures), one could look at an underperforming gov (or donor) programme and reasonably conclude either "it's really bad, shut it down" or "it's really bad, give it more money." It seems that one of the fundamental limits with the experimental approach ‘we’ have been taking in development is that there is no plan for what to do – in terms of interpretation or action – with anything except solidly ‘good’ results that something we are already doing works. A common third response to an underperforming gov programme is “it’s really bad, maybe we measured wrong or didn’t let it run long enough to let it perform well.”

As one jumping off point, it seems potentially odd that, as we talk increasingly about needing more political economy, we don’t seem to be talking more about political philosophy and normative views of what a state owes its citizens (and others within its borders) and, in turn, what citizens owe to states. (I think David Booth and the APPP work started to take us there with his conversation of development as a collective action problem and I am not sure it has stimulated adequate discussion or reflection.)

Furthermore, somehow added to any normative conversation about states and citizens, we need to layer on normative views of how external donors should behave, given what states *should* provide for their citizens but fail to do so for a variety of reasons. That is, where does giving cash directly “fit?” I don’t feel like I have heard much of this as all, even within conversations about aid ownership (Paris, Accra).

Finally, I’d be interested in a hearing you expand on the idea of the ‘great giving up’ and placing within the historical arc of development practice. If structural adjustment was a forced pruning back of the state, followed by some excitement about bringing states and institutions back in and focusing on their capacity… where are we now? Did we never really get out of the previous distrust-the-state stage or have we already cycled back to it?

Submitted by Jishnu on

Thanks Heather, for your comment. I responded to Suvojit using what looked like the postmodern generator (http://www.elsewhere.org/pomo/ -- generates random essays). I am all for opening up a wider discussion on the role of the state, and I can't see how to have that discussion without bringing in political philosophy, notions of state legitimacy and the relationship between a state and its citizens. That discussion should be had, it will always remain a contested site, and we should ensure adequate space for contestation through argumentation rather than (what Paul Starr calls) "cultural authority". A couple of (negative) examples may help clarify what I mean by encouraging contestation and debate.

One is the idea that we should look for a "champion" or try to get a "seat at the table", to "push our ideas". I find that problematic, first, because it circumvents a larger process of democratic conversation around difficult questions, which in turn undermines the institutions necessary for informed debate. Equally, some of the worst policies around the world have been perpetrated by experts who were convinced that what they were "pushing" would help the poor. Just given the nature of our work, its likely that 95% of the times, we miss important things or just get it flat out wrong. So, ensuring open debate is, for me, an extremely important priority.

The second example is a favorite of donors--capacity building. Nick van de Walle, in his wonderful work on the "Permanent Crisis" in Africa takes this head on. His point is that capacity is endogenous to the functioning of the state and he makes it beautifully by showing that even as the number of tertiary graduates in some African countries increased after independence, the "capacity" of the state declined. So, low capacity states are not necessarily states that don't know how to build capacity, its that they may not want to. The lack of state capacity fundamentally reflects an underlying breakdown of the relationship between the state and its citizens. Much of Daron Acemoglu's work shows precisely how such a breakdown can persist for a long time, and its detrimental effects on development. Unfortunately, while perpetuating such a breakdown seems to take precious little (Acemoglu's work often relies on breakdowns arising from colonial rule, for instance), building it back appears to be a long, hard route, with no clear directions from the research thus far.

Submitted by Suvojit on

And paradoxically, the thrust on rigorous impact evaluations seem to be pushing this notion along. Is this a good example of why for policymaking, an overarching theory is more important than just evaluations of small component parts; or is this just ideology over evidence? and even if the latter, is 'ideology' always a bad word?

Submitted by Jishnu on

This is leading us way further than I thought this post would take us..... For what it's worth, I think that contestations over the legitimacy of knowledge and evidence are signs of a healthy discourse. I personally feel that all kinds of knowledge are useful for that discussion and debate, and how that knowledge is interpreted will always remain a contested site. What I would hope for is some equipoise in that debate, so that processes of argumentation are not replaced by the use of authority. So I am all for evaluating 'small' components and I am also all for opening up wider debate on the institutional structure that will allow us to interpret the evidence thus generated within a broader framework. In this model, ideology plays a role because it reflects the structure of decision making when the limits to empiricism are reached.

Sorry for sounding straight out of an essay from the postmodern generator...

Submitted by Graham Long on

The blog is pitched as a question about welfare and preference, but isn't this also/instead a question of rights and responsibilities or permissions and obligations - especially in the context of poverty?

E.g. if I give money in fulfilment of my obligation to help avert a wrong, and then the recipient spends that in a way that does not avert that wrong, what does that do to the distribution of responsibility for the wrong that occurs, and for my fulfilment of my obligation? Doesn't it redistribute at least some (all, potentially?) of that responsibility or liability to the recipient?

Or, what about the case where the recipient has weighty obligations that he could use the money to fulfil (e.g. to his children), and chooses not to spend that money on those obligations when he should/reasonably could have done (in the absence of him doing anything else to fulfil his obligation). In such a case it might not be morally permissible for the recipient to do whatever he wants with the money.

So, isn't the answer to the question about 'working well' dependent on more than just the welfare/preferences of the recipient? And isn't a careful moral account of working well (I'm not claiming that this is what I've given here) something that could ground anyone fairly having a view on these questions, taking due account of relevant justifying and excusing factors. The quote from Klosterman speaks to these issues, it seems to me, though I think they look different in cases with greater wrongs and obligations at stake?

There are going to be some moral requirements of relative cost-effectiveness too in these sorts of cases, it seems to me, at least where resources are tight and obligations weighty and immediate.

Submitted by Jishnu on

Graham, I am a bit out of my field of expertise here. I wrote up something, but didn't like it. Give me a day to think more about this, and get back to you?

Submitted by Graham Long on

Jishnu, put it in an email if you'd like? Blog comments aren't always the best place for fruitful, in-depth discussion of complex issues - hopefully my reply to Heather below elaborates a bit more about the relevance to what you've said.

Submitted by Heather on

Graham: Interesting! Just to clarify, is part of your question that the *purpose* of the cash transfer (or aid in general) on the part of the donor needs to be hammered down -- i.e. is it just to improve welfare now or is there some element of righting past wrongs? I take this to be the point about (donor) obligations and the distribution of responsibility (for righting present wrongs, given historical causes/responsibilities of those wrongs.) Is this what you mean?

The second case, about the recipient's moral obligations, seems like the much tougher question.

Submitted by Graham Long on

Heather - I would agree the purpose of the cash transfer needs hammering down, but that doesn't just mean being precise about the purpose: we have to be exact about the ethical status of the transfer. Is the cash, itself, the object of the obligation (e.g. repaying a loan), or is the cash given in fulfilment of an obligation to a further end? - the latter arguably seems to me the case in respect of poverty relief, and if so the "does it work well" question seems pertinent. (these aren't the only possibilities, e.g. the cash could be a 'no-strings gift' or a 'gift with an explicit purpose')

Most contemporary moral philosophers who write on poverty agree, at least, that those able to help have a duty to do their fair share of alleviating extreme absolute poverty - there doesn't have to be a past wrong for there to be a moral obligation to, as you put it, "improve welfare now", and giving cash to poor people looks like one candidate for fulfilment of that duty in whole or part. The World Bank agrees that ending extreme poverty is an urgent normative demand, FWIW. Skipping a few steps, it seems to me that this could ground a good reason to assess "working well" by asking "is this effectively fulfilling our duties".

Let's make this purely about the donors for a moment. If I have a choice of ways to fulfil my obligation to the world's poor, then how effective each of those methods are is an important question for me. Without knowing this, I can't know how much of any of these activities I need to do - e.g. direct cash, loans, national/international political reform etc. - in order to do what I should. Depending on the resources at my disposal, and other morally significant things I need to do with those resources, it might well be morally preferable, or morally essential, for me to prioritise the most cost-effective activities.

There's a separate issue here that poverty, surely, doesn't neatly map on to a shortfall in (simple) welfare. Ideas like 'capabilities' or 'basic rights' do some work in - or reflect - weightings of different dimensions of multidimensional poverty. This is to some extent independent of the preferences of particular poor people, but I am not sure it is necessarily hubristic (though this is a danger).

I don't know if this helps?

Submitted by Jishnu on

Graham:

First, your deep question deserves a better answer than I can give. I have asked a couple of people who have thought a lot more about our moral responsibilities to weigh in, and hopefully they will help out. Please, do check back. At the same time, I thought I would put down some thoughts on this, and keep it on the blog so that the thread remains.

I appreciate what you are trying to do here. I wrote a blog primarily from a positivist account of the world, because that was the premise of the original article that I was critiquing. You are arguing that such a positivist account is inadequate for the problem at hand, since deep normative issues are at stake. One simple response, that is surely unsatisfactory, is that economists' are less comfortable with normative arguments, although they are clearly required for important societal decisions. Kaushik Basu's paper on "Gender and Say" is precisely one example of how normative accounts are required for analyzing the validity of certain voluntary contracts.

But we can go further. I am not sure whether the dichotomy you have created between welfare/preferences and moral rights/responsibilities is necessary in this context. It seems to me that the problem remains when taken back one step, by asking: "Whose moral account of the world are we interested in?" After all, we know that much harm has been perpetrated by those who believed strongly in the universality of their moral universe, and were deeply committed to helping the poor, and even further, all of humanity itself. One has to but read Matthew Conolly's chilling account of the family planning movement (Fatal Misconception) to realize that those who were at the helm of the movement indeed believed that their moral accounting was beneficial for the lives of the poor around the world. By posing your question in this way, you perhaps lead us into a moral absolutist position that neither of us holds.

But then, are their limits to moral relativism that a rejection of the absolutist position would demand? Here, I really liked Steven Luke's short book on the dilemma of the relativist and his answer is this: He would like us to look at the problem from the viewpoint of those who are the ultimate receivers (or, as often happens, those who suffer from a norm/policy) and elicit their preferences in assessing a moral relativist position. For instance, in the case of female genital cutting, he asks whether those who are subject to the procedure would agree to thus be subject. And if not, he would ask that our moral relativism not take us so far as to justify such a procedure on the basis of cultural norms.

Take it back to economics, and we are firmly in the realm of representation problems that have raised their head before. Who represents the poor that we want to help? In the case of the family, and giving money to a parent who spends it on alcohol rather than schooling, as economists we worry when this represents a breakdown of the family, whereby the parents no longer represent the interest of the child. In a positivist account, this would be a market failure that has arisen previously in the comments thread. The beauty of market failures was precisely that we never needed to measure welfare in an objective manner.

What I would then claim is that the positivist account, is thus far, at least somewhat more powerful than we may give it credit for. I would still maintain that the original premise of my blog is correct: It is far more interesting--and important--to frame the question in terms of market failures, or, indeed as you have done, in a moral rendering of the universe than in the simplistic fashion it was originally presented.

This can then lead us into the deep issues of representation, democracy and the circumstances under which that representation breaks down, which should surely be the focus of our inquiry.

Best

Jishnu

Submitted by Graham Long on

Hello Jishnu, and thanks for your thoughtful and interesting response. I am not sure I see the appeal of positivism as a response to the deep methodological concerns you raise - although nothing hangs on this for the basic position in your blog, I agree. To start with the bit I am most certain about, it is not clear that an appeal to the consent of those affected or representation of those whose interests are at stake is a satisfactory response to the relativist worry. After all, all these ideas - the value of consent, what representation means and requires, the nature of democracy, are all themselves morally loaded, and hence are themselves either universal or relative (I prefer this over absolute/relative, for complicated reasons I won't go in to).

Note that democracy, to confer legitimacy on outcomes, requires an extensive set of individual rights; consent must be free and unforced (whatever that means); and there is the question of whose interests are legitimately affected. I suspect there is enough diversity in the world over these questions that they do not offer an escape from concerns about relativism. I'm not sure, also, how you get to democracy or representation from positivism alone (but then I don't have to be ;-) )

If this seems a bit remote from economic positivism, let me try to bridge the gap, though here I am outside my comfort zone. If you're committed to counting preferences as mere preferences, and weighing those of individuals equally, then it is not clear how this escapes a charge of relativism: there are plenty of worldviews that see our social world, instead, as a realm of obligation and community, for example. In other words, to make morality largely absent from economic thinking is itself to take a moral position, and a controversial one at that.

It seems like a lot of work is done on the positivist account by the notion of market failure. I am interested to know how far you think this gets you? To be crude, if the parent really wants that crate of beer, and the child's schooling is compromised, but not heavily so, is there a point at which the parent spending the money on beer is the optimal outcome, and so there is no market failure here? I can see scope, of course, to resist aggregation, insist on diminishing returns, discount some preferences compared to others etc. How much filtering and weighting work can you do with the preferences at issue, before an account starts measuring welfare "objectively"?

Best wishes,

Graham

Submitted by Christiana on

I think this is an excellent commentary on a social situation that is becoming critically important with the ever widening gap between the affluent and the poor. Apart from the narrative of blame attributed to the poor, there is the equally false idea that the rich or affluent obtained their wealth solely through better choices or harder work. On the contrary multiple studies have shown that there is very little social mobility across generations. By and large if you are born to privilege and affluences, you are much more likely to attend the same good universities your parents attended, obtain better education and have the luxury to make better choices. Conversely for the poor, when your short term choices involve deciding between food for the next meal or buying text books for your child, it may not be easy to make the choices that allow for improvement over the long term. Sure, there are a few rare individuals who are able to ascend the social hierarchy, but that is not the norm.

Submitted by Veena Das on

Graham, thanks for clarifying further the issues regarding rights and responsibilities. I would like to suggest that the issues go deeper than simply following the accustomed paths of moral philosophy. Here is why.
First, there is considerable debate on what are the obligations of an individual toward those who live in poverty and the collective ,whether at the level of philanthropically oriented organizations, humanitarian organizations or the state.
Second, the claim that there is broad agreement that we are under some obligation to help the poor stands in need of further clarification with regard to the claims of the distant poor. Ethicists such as Peter Singer have argued that the distant poor have no such claims because it would be impossible to define conditions under which such obligations would be enforceable at the level of the individual.
Now we might say that this is precisely the reason that we must shift from a discourse of charity or aid to a discourse of rights . However, historical and anthropological work has shown that the granting of rights went simultaneously with far greater surveillance on the poor on the part of the State. The very fact that eligibility conditions had to be “verified” through inspections of the households of the claimants with visits by social workers meant that the poor had to “perform” their poverty. Recent work by Clara Han in a low in income neighborhood in Santiago, Chile shows that the bundling of conditions with rights led to the experience of humiliation as households were “inspected” to determine if they met the criteria. It was only the actions of those who shared the same everyday life through kinship or local proximity which helped the poor to deal with what Han calls critical moments.
So imposing of conditionality in granting rights from the State results in tremendous distortions in the way the poor are able to construct themselves as those with dignity. I am afraid that the long history of constituting the poor through the lens of either aid or charity, even when recast as rights cannot completely get rid of the earlier history of stigma. The priorities of many of the poor and he Dalits are to get respect – we must consider if the policies (governmental or imposed by other organizations) inadvertently lead to the stripping of this respect trough the mechanisms of delivery that are imposed. This issue is internal to the design of policy, not its unintended consequence.
Most conditions – e.g. that the poor must be made into working poor to be deserving of State welfare – work with little knowledge of how the poor need to balance various pressing obligations and deal with environments that are extremely hostile. The simple fact that if you live in one of the poor neighborhoods in Baltimore, you will not find any supermarket in your neighborhood and certainly no easy access to fresh food stores means that mothers of young children have to put in long hours of travel in addition to time spent in back breaking jobs in order to find a decent meal for the child. Unconditional cash transfers would at least get rid of the whole government bureaucracies who, as we can see increasingly, simply become the instruments of power in the lives of the poor.
Nevertheless I agree that the issue of what responsibility the recipient has is an important one. If an organization devoted to promoting school education finds that money provided for schools is being spent on alcohol by the family, how should we pose this issue in ethical or policy terms? In ethical terms it does seem that we need to consider the possibility that the promotion of what we think is a good cause (righting a wrong) should be regarded with some caution. After all when certain missionary groups made conversion as a condition to give food or provide schooling, they were working with the assumption that conversion would save the person from some terrible future such as going to hell. We might think it obvious today that the objectives we set are more enlightened and rational – but it will only be retrospectively clear whether the push to immunize all children, to send them to school, or coerce them toward good eating habits as well as the means to achieve these goals were correct or what distortions they produced While moral relativism is not a defensible position if we assume that different worlds are hermetically sealed from each other – perhaps giving some regard to the preferences of the poor and their views of the world might be crucial for relativizing our confidence in our own priorities.
So instead of thinking of moral issues only as thought experiments, how about allowing some experiences of how aid is actually given or finding out what the poor want and how they want those objectives to be fulfilled into our discussions? At least in some places like India, the poor have organized for certain purposes, participated in the democratic process and used courts of law for putting some of their own concerns forward – perhaps learning how to become the “unpoor”.

Submitted by Graham Long on

Veena - thanks for your response - it is good to discuss these issues. I fully agree with you that the participation of poor people is important (where deep and genuine, it fulfils an obligation that goes alongside any claim to an exercise of legitimate power)and I take your point that poverty is very often experienced as humiliation and powerlessness. I agree that there should be a serious discussion of cash transfers with and without strings and what their advantages and drawbacks might be, and if my comments have any merit, it is in their relevance for the metric and consequences of such an assessment.

I am not sure that cash transfers to the poor offer an alternative to aid or rights discourses (were you saying this?). Just for clarity, I take your point that responsibilities can be used as 'strings attached' in practice, but for something to be a human right is to say that access to it should not be conditional: so conditionality is hostile to human rights thought - "you can have your human right fulfilled, but only if you do X" is the wrong message.

More basically, rights or charity offer answers to the question "why help the poor" whether that be in terms of cash transfers or alternatives (e.g. political empowerment). So I was thinking they are present in the background even of the cash transfer policy (I mean, if you don't think it is either morally good or morally required to give money to the poor, why give money to the poor?), and if they are in the background, they might be relevant to assessing whether it works. To sharpen this, giving money (or any aid) to the poor requires justification because (a) that money comes from somewhere or someone else and (b) it could be spent in a number of ways that advanced human welfare.

It would be interesting to know, when poor people ask "why are you giving us money?" what the answer is - how would anyone give an answer that didn't sound patronising, and without echoes of either (a) feeling sorry for them (b) having to, regardless of whether we wanted to or (c) calculating our selfish interest to do so. All of these, I would guess, would have some effect on how the poor construct themselves - I'm genuinely interested how this goes in practice.

I agree that caution about goals is required, but we may disagree about how much. It is worth distinguishing between ends/objectives/goals and potential means here. The retrospective assessment of goals you mention looks at consequences - but aren't the opportunities to flourish offered by education, health care etc. good in themselves - and maybe in a way that cash isn't? To put this more sharply, it seems odd to say "it will only be retrospectively clear whether preventing easily preventable child deaths was correct". And it seems odd to view the consequences of things that are morally required in themselves as "distortions" (but your point is well taken with respect to any particular means of realising an end).

So, when it comes to means, caution should surely be applied to cash transfers too - but I wouldn't pretend to have any knowledge of how the arguments for and against stack up in the end. Even if unconditional cash transfers are what the poor want (and, facetiously, everyone wants them of course), this doesn't seem decisive, on my view - maybe we differ here?

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