Who should receive a cash transfer?, or the paradox of micro-credit

Let’s say you send regular money to a poorer individual in another country.  You might wonder what are the possible rates of return on those funds, and furthermore does that analysis shape to whom you should give the money?

I don’t quite believe the argument I am about to write out, but I can’t yet find the flaw in it either.

Let’s say you find an individual borrowing micro-credit.  It is well-known that rates of interest on these loans often run between 50 to 100 percent, annualized, and furthermore many individuals/families dip into these markets frequently.  Furthermore, very high quality RCTs by Duflo et.al. and Dean Karlan show that micro-credit is not on average harming the families who borrow.

That implies these economies — at least in some their corners — have investments and/or liquidity deployments worth at least fifty percent per annum.  For simplicity, I will use an estimate of fifty percent.

Go to a borrowing individual and give him/her some money for free.  If micro-credit is no longer necessary, you have given that individual a high return.  If it was a cash-free loan, the return to that person would be fifty percent.  By simply giving the money away, it would seem the rate of return would be at least 2x that, or at least one hundred percent.  That is pretty good too.  Of course that individual might stay in the micro-credit market (post-gift), but that implies there are still worthwhile additional uses for the marginal liquidity.  And we’ve already seen that micro-credit does not usually harm those who use it.

So you’ve generated returns of one hundred percent or more with your cash transfer.  This does not require heroic acts of entrepreneurship, merely that the individual was previously a responsible user of micro-credit.

It also requires that these individuals be reasonably conscientious, and do not simply squander their new-found wealth.

But the core recipe is to give to conscientious current borrowers, for very high rates of return.

What is wrong with this argument?

Is the internet good for African politics?

That is the topic of my latest Bloomberg column, here is one excerpt:

A second dynamic is harder to measure or prove, but is also likely positive: greater national unity…

One source of gain is simply that the colonial era is receding ever further into the past. In the meantime, a wide array of media outlets have helped to further African notions of national unity and cultural coherence. Soccer and other athletic teams compete on the world stage, and African players competing in Europe are portrayed as representatives of their nations, not particular ethnic groups. Commercial brands and celebrities help define national identities. Exposure to international media, most of all through smart phones and the internet, cements the notion that these regions are indeed perceived as nations by the outside world and that such designations are likely to stick. Mobile phones have knit together different African regions, and ethnic groups, in closer economic ties.

The notion of a nation as an “imagined community,” to use a term from political scientist Benedict Anderson, is under accelerating construction in many parts of Africa. Cultures and cultural expectations are adapting to current borders, even given earlier injustices, thereby contributing to falling rates of violence and conflict.

Unfortunately, Africa is exposed to a lot of “fake news,” perhaps more than Americans are. The good news, if you would call it that, is that Africans seem to be relatively skeptical of social media as a news source, and they put a relatively high degree of trust in international media.

Better yet is that most Africans say that the internet has improved their politics and economics. For instance, 64 percent of Nigerians reported in 2017 that the increasing reach of the internet was good for Nigerian politics. That number compares to just 43 percent in 2014, and positive impressions of a similar nature are common throughout Africa. For all the talk about social media creating divisions (such as in Myanmar), the net effect of modern technology seems to be greater unity, including with respect to national borders.

Do read the whole thing.

Wednesday assorted links

1. The economics of border walls.

2. “We find that [occupational] licensing reduces equilibrium labor supply by an average of 17%-27%. The negative labor supply effects of licensing appear to be strongest for white workers and comparatively weaker for black workers.”  Link here.

3. Are there more witches than (American) Presbyterians?

4. How economics works (a parable of capital taxation, recommended).

5. Is carbon capture now more feasible?

6. The origins of the Schelling segregation model.

Fading Legacies: Human Capital in the Aftermath of the Partitions of Poland

This paper studies the longevity of historical legacies in human capital. The Partitions of Poland (1772-1918) represent a natural experiment that instilled Poland with three different legacies of education, resulting in sharp differences in human capital among the Polish population. I construct a large, unique dataset that reflects the state of schooling and human capital in the partition territories from 1911 to 1961. Using a spatial regression discontinuity design, I find that primary school enrollment differs by as much as 80 percentage points between the partitions before WWI. However, this legacy disappears within the following two decades of Polish independence, as all former partitions achieve universal enrollment. Differences in educational infrastructure and gender access to schooling simultaneously disappear after WWI. The level of literacy converges likewise across the former partitions, driven by a high intergenerational mobility in education. After WWII, the former partitions are not distinguishable from each other anymore.

That is from Andreas Backhaus, a job market candidate from University of Munich.

Open questions from Gwern

This is all Gwern, I won’t add another layer of indentation:

Open Questions

Some questions which are not necessarily important, but do puzzle me or where I find standard answers to be unsatisfying (along the lines of Patrick Collison’s list & Alex Guzey; see also my list of project ideas):

  • What is personal productivity and why does it vary from day to day so strikingly, and yet not correlate with environmental variables like weather or sleep quality nor appear as the usual kind of latent variable in my factor analyses? Is it something much weirder than the usual kind of latent variable, like a set of zero-sum measurements drawing on a generic pool of energy or mana?
  • Does listening to music while working serve as a distraction, or motivation?
  • What, algorithmicly, are mathematicians doing when they do math which explains how their proofs can usually be wrong but their results usually right?Is it equivalent to a kind of tree search like MCTS or something else? They wouldn’t seem to be doing a literal tree search because then there would almost never be mistakes in the proof (as the built-up tree of theorems only explores valid inferential steps), but if they’re not, then how are they handling logical uncertainty? Are they doing something like MCTS’s random playouts where lemmas are not proven but simply heuristically given a truth value to shortcut exploration and the heuristic is accurate enough to usually guess correctly and this is why the proofs are wrong but the results are right?
  • Why did Jean Calment live so many more years than other centenarians, breaking all records and setting a life expectancy record which decades later has not just not been broken, but not even approached? Which is extraordinary considering that she smoked, medicine has continuously advanced, the global population has increased, life expectancy in general has increased, and the Gompertz curve implies that, with mortality rates approaching 50%, centenarians should die like flies and ever closer in age to each other and not have occasional enormous permanent 3 year gaps between the record setter (Calment) and everyone since then.
  • Why do humans, pets, and even lab animals of many species kept in controlled lab conditions on standardized diets appear to be increasingly obese over the 20th century? What could possibly explain all of them simultaneously becoming obese?
  • What happened to the famous genome sequencing cost curve after late 2012, which stopped price decreases, damaged genetics, and delayed the advent of whole-genome sequencing by perhaps a decade? Was it really just the Illuminati’s fault?
  • Why do humans have such a large mutation load on common genetic variants? Common SNPs make up a large fraction of variance, even for traits which must be fitness-affecting. Culture or technology slow evolution doesn’t wash when human fitness differentials are so large and so many people died young or as infants, and how did the many deleterious variants get pushed up to such high frequencies in the first place?
  • Why does the immune system so often surface as a genetic correlation or tissue enrichment in GWASes for many things not generally believed to be infectious? Are we missing an enormous range of infections directly causing bad things (or indirectly through autoimmune mechanisms), or the immune system just sort of like intelligence in being a general health trait?
  • Why does catnip response vary so much across countries in domestic cats, and also across feline species, with no apparent phylogenetic or environmental pattern? It is so heritable in domestic cats that a genetic reason is plausible, but if it’s adaptive, what is it doing when catnip doesn’t exist in the ranges of most tested cats, and if it’s neutral why can so many closely-different different animals respond to it in different ways?

TC again: There is much more at the link.  If you don’t know Gwern, you should know Gwern.

Why do so many academics dislike the market?

It seems Nozick was right after all, here is Raul Magni-Berton and Diego Rios:

In this article, the authors explore why academics tend to oppose the market. To this intent the article uses normative political theory as an explanatory mechanism, starting with a conjecture originally suggested by Robert Nozick. Academics are over-represented amongst the best students of their cohort. School achievement engenders high expectations about future economic prospects. Yet markets are only contingently sensitive to school achievement. This misalignment between schools and markets is perceived by academics – and arguably by intellectuals in general – as morally unacceptable. To test this explanation, the article uses an online questionnaire with close to 1500 French academic respondents. The data resulting from this investigation lend support to Nozick’s hypothesis.

Via Rolf Degen.

The Political Economy of Lobotomies in the United States

The actual title starts with: “Gordon Tullock Meets Phineas Gage:”, and here is the abstract:

In the late 1940s, the United States experienced a “lobotomy boom” where the use of the lobotomy expanded exponentially. We engage in a comparative institutional analysis, following the framework developed by Tullock (2005), to explain why the lobotomy gained popularity and widespread use despite widespread scientific consensus it was ineffective. We argue that government provision and funding for public mental hospitals and asylums expanded and prolonged the use of the lobotomy. We support this claim by noting the lobotomy had virtually disappeared from private mental hospitals and asylums before the boom and was less used beforehand. This paper provides a more robust explanation for the lobotomy boom in the US and expands on the literate examining the relationship between state funding and scientific inquiry.

That is from Raymond March and Vincent Geloso, via the excellent Kevin Lewis.

Tuesday assorted links

1. “I still want this, all of it. I want the tears; I want the pain.” (NYT)  Recommended.

2. “Cultural revolutions reduce complexity in the songs of humpback whales.

3. ““If I could have sold off a suicide attempt,” she said in a 2008 interview, “I would have had more time for reading Spinoza.” Duh.”  Link here, that is the excellent Helen DeWitt, interesting throughout.

4. “…we find consistent evidence that dystopian narratives enhance the willingness to justify radical—especially violent—forms of political action.

5. The new “woke”: “Is Lord of the Rings prejudiced against Orcs?

6. On Caplan on educational signaling.

7. Scientist nominations and odds for new fifty pound note.

Best non-fiction books of 2018

First let me start with three books from my immediate cohort, which I will keep separate from the rest:

Kevin Simler and Robin Hanson, The Elephant in the Brain: Hidden Motives in Everyday Life.

Bryan Caplan, The Case Against Education.

Tyler Cowen, Stubborn Attachments: A Vision for a Society of Free, Prosperous, and Responsible Individuals.

All of those are wonderful, but Stubborn Attachments is the best of the three.  Otherwise, we have the following, noting that the link often contains my longer review.  These are in the order I read them, not by any other kind of priority.  Here goes:

Varun Sivaram’s Taming the Sun: Innovations to Harness Solar Energy and Power the Planet.

Nassim Taleb, Skin in the Game.

Charles C. Mann, The Wizard and the Prophet: Two Remarkable Scientists and Dueling Visions to Shape Tomorrow’s World.

Quinn Slobodian, Globalists: The End of Empire and the Birth of Neoliberalism.

Cecilia Heyes, Cognitive Gadgets: The Cultural Evolution of Thinking.

David Reich, Who We Are and How We Got Here.

Nick Chater, The Mind is Flat: The Illusion of Mental Depth and the Improvised Mind.

Allen C. Guelzo, Reconstruction: A Concise History.

Emily Dufton, Grass Roots: The Rise and Fall and Rise of Marijuana in America.

Philip Dwyer, Napoleon: Passion, Death, and Resurrection, 1815-1849.

David Olusoga, Black and British: A Forgotten History.

David Edgerton, The Rise and Fall of the British Nation: A Twentieth Century History.

Francesca Lidia Viano’s Sentinel: The Unlikely Origins of the Statue of Liberty.

W.J. Rorabaugh, Prohibition: A Concise History.

Victor Sebestyen, Lenin: The Man, the Dictator, and the Master of Terror.

Porochista Khakpour, Sick: A Memoir.

M. Mitchell Waldrop, The Dream Machine: J.C.R. Licklider and the revolution that made computing personal.

David W. Blight, Frederick Douglass: Prophet of Freedom.

Martin Gurri, The Revolt of the Public and the Crisis of Authority in the New Millennium.

There are also books which I think very likely deserve to make this list, but I have not had time to read much of them.  Most notably, those include the new biographies of Alain Locke, Thomas Cromwell, Gandhi, and Winston Churchill.

Overall I thought this was a remarkably strong year for intelligent non-fiction.  And as always, I have forgotten some splendid books — usually it is yours.  Sorry!

The game 12 draw

From an email I just sent:

My view was this: if you play out the main computer lines for 8-10 moves, Black’s position does not really improve, nor are White’s holding moves hard to find (he just has to shuffle back and forth).

Black does not have the structural advantage to enable a later transposition into a favorable endgame.

So it actually is a draw!  (sort of)

Does the agreement[to draw]  have to be non-Bayesian?  There is a “vague range,” and by Magnus Carlsen offering the draw maybe he, as Kasparov suggested, lowered his own chances for the rapid tiebreak (shows some loss of nerve), until they were in the same “vague range” as the game 12 final setting.

So Magnus is saying “I don’t have a way of pressing that is better than my chances in the rapid tiebreak,” and Caruana is agreeing and knows that Magnus knows this.

Maybe not “strictly” Bayesian, but it doesn’t seem crazy to me either.

I thank S. for a relevant conversation on these points.

Tyler Cowen predicts our coming 19th century future

Here is my podcast with New York magazine, with a short excerpt of it offered in print.

And they offer this summary: “On the latest episode of 2038, Cowen predicts that over the next 20 years, “this nation will go back to an earlier version of its politics, which were highly dysfunctional. You had plenty of people becoming president who probably should not have been. And yet at the same time we muddled through that era and emerged as modern America.””

China possible fact of the day

A Chinese researcher claims that he helped make the world’s first genetically edited babies — twin girls born this month whose DNA he said he altered with a powerful new tool capable of rewriting the very blueprint of life.

If true, it would be a profound leap of science and ethics.

A U.S. scientist said he took part in the work in China, but this kind of gene editing is banned in the United States because the DNA changes can pass to future generations and it risks harming other genes.

Here is the full story.  Here is further background.

Best fiction of 2018

This year produced a strong set of top entries, though with little depth past these favorites.  Note that sometimes my review lies behind the link:

Varlam Shalamov, Kolyma Stories.

Gaël Faye, Small Country.  Think Burundi, spillover from genocide, descent into madness, and “the eyes of a child caught in the maelstrom of history.”

Madeline Miller, Circe.

Karl Ove Knausgaard, volume six, My Struggle.  Or should it be listed in the non-fiction section?

Can Xue, Love in the New Millennium.

Anna Burns, Milkman, Booker Prize winner, Northern Ireland, troubles, here is a good and accurate review.

Homer’s Odyssey, translated by Emily Wilson.

Uwe Johnson, From a Year in the Life of Gessine Cresspahl.  I haven’t read this one yet, I did some browse, and I am fairly confident it belongs on this list.  1760 pp.

Which are your picks?