Americans in Ghana spend a lot of time being asked for stuff. Plenty of the things we are asked for are ridiculous (sums of money equal to half our monthly salaries, our hands in marriage). But honestly, we Americans, who worship individualism and self-sufficiency, aren't really the givey-receivey types anyway.
The fact is, the average Ghanaian is just as likely to give to an American generously as he or she is to ask for a generous gift. Unfortunately, Americans who only frequent ex-pat establishments often don't get to see this, as the ex-pat scene often attracts those people looking only for a rich source from which to ask. When you get out into Ghanaian communities, you see the other side of things. In my first week back from the states, I was given more things for free than I was asked for:
Receiving gifts can be more uncomfortable than being asked for them, especially when the person you are receiving the gift from appears to be poor compared with you. The things I have been offered have always been things that the giver could give without noticeably hurting their own well-being, even if the price I would have been willing to pay for the item would have improved it. The truly valuable thing I think I get from receiving gifts are lessons in being humble enough to accept a gift, open enough to permit the social tie the gift creates, and savvy enough to know when a gift is appropriate.
Chris Blattman recently blogged about the moral absurdity of running regressions where the dependent variable is “war deaths”. While looking at death, illness, hunger, and poverty through the lens of statistics may seem rather reptilian, I think many researchers have emotional reactions to the data they work with. For me, these connections hit hard and unexpectedly, often when I am tired and working late, and they come despite efforts to be dispassionate about the data I am looking at.
Survey editing is prime territory for emotional connections to data. When editing surveys, you see the story of an individual respondent in a way that you don’t when you are looking at columns of aggregated data . Once, I was reading a survey where a respondent reported that a household member had experienced a headache. I turned the page to the question on outcomes of health events. The headache had resulted in death for that household member—despite the family spending an amount equal to roughly one-fourth of Ghana’s annual GDP per capita on health care for that individual. The shock of the outcome hit me almost physically. Another respondent reported testing positive for HIV. Sitting alone in the Tamale office at night, I struggled to pull myself together, shoo the bugs out of my computer keyboard, and make my way home.
The “death” outcome became a dependent variable in regressions I later ran looking at determinants of health outcomes. Luckily, there were very few events of death in my sample. We also looked at a number of food insecurity events: individuals going to bed hungry, or not eating for an entire day, for example. These were, unfortunately, common among our respondents. I don’t deal well with feeling hungry myself, and for me, food insecurity statistics evoke desperately sad, human images: a man’s disappointment at foregoing his favorite fish; a young student trying to sleep before an exam while feeling the distracting ache of hunger; an elderly woman going without food for a day so her grandchildren can eat; a mother having to tell her thin children there is no food today.
These emotional connections often seem like a distraction, something that prevents us from approaching our analysis logically and dispassionately. In all honesty, part of my attraction to quantitative research tools might be to protect myself from these types of emotional connections to problems. But it our ability to have these connections, even through layers of statistics, is tied to a very deep belief in the importance of what we are doing, and that counts for something. Hey, at least I’m not working in finance.
Chris Blattman’s blog recently critiqued an article by Dan Pallotta arguing that earmarking funds for programs with proven impact is actually less impactful than using the money for further fund-raising efforts. Pallotta makes an argument that spending on fund-raising allows you to, in essence, leverage your funds and get a much higher return on investment than you would if you’d spent that money directly on programs.
Blattman makes two counter points:
1. The effectiveness of the programs you are funding feeds back into your ability to use your money to raise more funds.
2. It’s not clear that lack of funds is the binding constraint in aid.
I’m a bit skeptical of Blattman’s second point—I thought I was out here getting malaria to make sure that scarce development resources were spent on programs with the highest impact. I think it is more correct to think of funds and good practice as being similar to labor and capital—in most circumstances you can add more of one or the other and improve outcomes, but are most effective when increased together.
I think Blattman’s first point is completely correct. Pallotta is right that fund-raising can increase impact, but program impact is fundamental to fund-raising effectiveness and meaning. Donors should be attracted by good programs. In a rational world with perfect information, donors would know exactly how much money they wanted to spend, and they would choose the program with the highest impact-per-dollar. This is how these institutional funders Pallotta is complaining about behave. However, in the real world, human behavior is less rational and more suggestible. If fund-raising can actually increase the number of dollars out there to be used on development, it can indeed be highly impactful. Note that fund-raising that just diverts funding from one project to another from a fixed pool of resources doesn’t get to claim this—unless the program it diverts money to is more impactful that the program it diverts money from.
Which brings us to the next point-- if your programs don’t have impact, it doesn’t matter how much you leverage your dollars- you are just using more money badly. Palotta’s proposal to use seed money to fundraise is similar to the concept of hedge funds. Hedge funds can’t make huge returns without leveraging their initial funds with loans, but if they don’t put the leveraged funds in investments with good returns, they are just wasting everyone’s money.
Palotta also argues that you often can’t know what is going to be impactful ex ante. That may be true, but that doesn’t mean you should throw in the towel and give up on trying to target impactful programs. Market investors often can’t know which stocks will take off, but no investor would throw money at one without trying to make an educated assessment of its future value. If funding truly is a scarce resource, you have to have some standard for choosing which programs to fund and which not to.
Polatta may be right to encourage donors to allow their funds to be used for further fundraising, but this only makes sense in concert with an emphasis on evaluation. After all, what is the point of all that fundraising if you aren’t going to do anything good with it? And for fundraising to matter, Blattman must be wrong about money not being a binding constraint. If money is a binding constraint, then you can’t fund everything, and it becomes all the more crucial to have some way of assessing the best programs.
I've spent 36 hours on Ghanaian bus trips in the past month, much of it watching Nigerian ("Nollywood") movies. The Cinderella story is a common theme in many of these movies: a poor village girl, or sweet middle-class modern city girl, meets a young African prince, who buys her lots of stuff, defends her from his disapproving parents, and takes her away to live in a palace.
I had an interesting conversation about women, love and money with several male Ghanaian colleagues the other day. All three of them agreed that women, in general, loved men for their money. One of them said that he was glad he married his wife My male American colleague gallantly came to the defense of my gender, and contended that while this might be true for some, it was untrue for most, and it was impossible to "love" anyone for their money anyway. One coworker suggested that American women were less likely to love a man for his money than Ghanaian women.
With Nigerian Cinderella fresh in my mind, wasn't so quick to dismiss the attraction of money, but instead asked what was wrong with that? What we find attractive is influenced by our needs, and what society admires. Marriage has long been an economic union, and ability to provide economically has been necessary to that union, and socially admirable. And it is no more shallow than many of our other criteria for love-- which is a more accurate reflection of character, the looks a person was born with, or the money they earned? (We will put aside the money a person was born with for the moment.)
The major difference between West African women and American women is that for West African women, economic survival is much less assured-- and hence a greater need. If the Cinderella fantasy still limps through American culture, it should be unsurprising to find it prevalent in West Africa, where many women do not have the luxury of discounting their mate's ability to provide economically. If men want women to marry them for attributes other than money, they should do all they can to empower women to provide for themselves, so they will have that freedom.
Also, they should consider their decisions to have multiple wives and mistresses. When being able to provide for multiple women becomes a mark of status, it only reinforces the link between money and relationships. Treat women like people, not objects, and they will treat you as people, not meal tickets.
I was visiting microfinance groups again. Today's group was just about to receive their first loan.
While discussing the community, the group had an interesting complaint: a man in the neighborhood, noting soil erosion and worrying that his home would be affected, bought--as in paid for-- a truckload of trash and had it dumped on the eroding slope. I should note that buying garbage here is just absurd, because there is no garbage collection, so garbage sits around in piles until somebody burns it.
The community was understandably upset at having a load of garbage dumped in the middle of the neighborhood, but when they confronted the man, he tried to start a fight. The microfinance organization plans to help the community complain to a local official, and hopefully they will convince the man there are more hygienic ways to prevent erosion.
A friend sent me this blog entry from Createquity, a blog about arts in society that occasionally dabbles in critiquing the field of economics. The entry makes the case that economics is flawed in how it values welfare, and that economists don’t care about poor people.
I generally agree that economics does not value welfare perfectly—as, I would guess, many economists would as well. A basic tenant of economics is that we can’t directly measure utility (I covered this in my intro to econ class, anyway). We know there are some rules that define the relationship between utility and the price we are willing to pay for things. For example, if a person is willing to pay more for an apple than an orange, we assume the apple had greater utility to that person than the orange. So we use the amount that people are willing to pay for things as an imperfect proxy for utility.
As this relates to poverty, economists do know there are declining returns to income/consumption. Imagine you give a child $1, and she buys a doll. You give her another $1, and she buys candy. Since she chose to buy the doll first, she must value the doll more than the candy, so the first $1 was of greater value to her than the second $1. The difference in those values will be starker when comparing the first $1 of income that a person spends on food or shelter to the millionth $1 of income that the person spends on a designer purse.
While we can recognize these things in individual situations, it is very hard to account for them more broadly. The author compares a poor consumer to a rich consumer who are both competing for an auction item. While the author’s example contains some problematic details (for example, the rich consumer thinks the item is something else, which is an example of a widely recognized market failure: imperfect information), the main problem with the example is that while the author can assert the poor consumer values the item more, in real life, this can be difficult to ascertain. In some cases it is clear—a starving poor person must value a sandwich more than a person who just ate a seven course meal. But how do you know who values a flat screen TV more? Just because that guy who lives in his parents’ basement says there is no way a millionaire could value a TV more than he does doesn’t mean it’s true.
Attempting to assign more utility to the same dollar value creates problems. Measuring welfare differently for each consumer ignores the supplier. While selling a flat screen TV to the basement boy for $50 instead of to the millionaire for $5000 might result in more welfare for the consumer, what about the supplier who just lost $4950? To the supplier, $1 is $1, whether it comes from basement boy or the millionaire. Even if the welfare gain to the consumer is enough to outweigh what the supplier lost, there are also incentives to consider. Economics often has to make trade-offs between what is immediately welfare maximizing and incentives. Using dollars to measure welfare gives people incentive to produce things that are valuable to other members of society. Society doesn’t value basement boy’s couch-warming service. It does value whatever good or service the millionaire (or his grandfather) provided. When we use dollars to measure values, we are measuring in units of value to society as a whole, not to individuals.
In some cases, trying to take some of these effects into account may make sense. Imagine trying to measure GDP, taking declining returns to income. One could argue that that would be a useful measurement, as it might capture welfare gains from using what we produce more equitably. Instead of just estimating the market price of every good and service produced in the economy (quite a task in itself), we’d have to track who consumed each good and service, then try to figure out where that spending ranked on that consumer’s priority list. Have fun doing this for exports!!
None of these points are intended to refute the argument that welfare is imperfectly accounted for in economics. They are merely intended to explain why economics measures welfare in a way that can seem callous: it’s the best we’ve come up with so far.
In addition to the fact that economics cannot perfectly capture welfare, there are things that economics cannot capture at all: morals. Economists can tell us the cost of providing food stamps, subsidized housing, or free education; we as a society must decide if we think that cost is enough to justify allowing some of our population to have inadequate food, shelter, or education. Economists can tell us the costs of measures to protect endangered species; we must decide if those costs outweigh the costs of losing one of earth’s creations forever. Economists can tell you the economic benefits of legal abortion; we must decide if aborting an embryo is wrong. Economists believe that we should make informed decisions, and try to provide as much information as possible about the economic costs and benefits of each alternative. It may or may not be true that economists value helping poor people less than the average citizen (however, I would note that economists who vote Democratic outnumber those who vote Republican by 2.5 to 1, suggesting that economists support social safety net programs as a rate higher than the general population). But if society decides that helping poor people is not worth the costs estimated by economists, then perhaps society needs to look critically not only at economics, but its own values.
I have worked in economic policy and research in Washington, D.C. and Ghana. My husband and I recently moved to Guyana, where I am working for the Ministry of Finance. I like riding motorcycle, outdoor sports, foreign currencies, capybaras, and having opinions.