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Tuesday, December 28, 2010

Links I Liked

1. Ask not what a person's weakness is, ask what keeps him up at 2am.

2. The Economist apparently overstates the U-bend link between age and happiness. Poor form from them. The incident vindicates my new approach to reading stuff online: trust journalistic pieces less, trust blogs more. via EconJeff.

4. Who would've thought the crane game in arcades manipulates your chances of winning?  Anyone know whether slot machines work the same way? I've always had the feeling. Herein lies the key to making money.

5. Since when have we started talking about "development?" Martin Ravallion from the World Bank visualizes his answer using Google's new N-gram tool.

Lottery of Life

It's a good reflection piece for the season. More here. HT to Chris Blattman

Monday, December 27, 2010

The Top and Worst Foods in the Philippines the eyes of a tourist. And the number 1 worst food turns out to be... *drum roll please*... the Jollibee burger:
Unleash the God's of war I might as well have spat on the Filipino flag as condemn the Jollibee burger to being the worst food in The Philippines. Why? Jollibee has permeated its way into Pinoy national pride as much as the Queen of England is revered in the UK. It's a shame then that the tiny salty dry meat pattie smothered in a mix of translucent warm ketchup with additional cold thick mayonnaise, and (if you are lucky) a single withered piece of lettuce lying under some shiny plastic cheese slice that's then sandwiched between two stale sickly sweet buns could well be voted the national food of The Philippines!
...for some reason Jollibee won’t make its ingredients public, nor its exact meat source (100% beef can mean anything, how’s the BSE testing in The Philippines these days?), nor its environmental policy. Yes, it’s very cheap food. But at what cost...
One question I often encounter here in the US is what's Filipino cuisine like. Is it curry based like Indian food? No. Is it spicy as Thai is? Not really, but it does have a lot of spices put into it. To add to the difficulty, there are many kinds too, and I am often left with my cop out description that it is oily, unhealthy, but yummy.

I really wonder why, inasmuch as we have many Filipino migrants abroad, our food hasn't gained recognition in the same intensity as  Indian, Thai, Japanese, and Vietnamese cuisine. We have good food is the thing. Is it a problem of marketing to foreigners? Where are our migrant entrepreneurs?

How can we promote our food better to internationals? Perhaps talking to foreigners is the best way to get an answer. Travel blogs are a good place to start. And I wish the tourism board takes this into account.

Okay so now I am craving sisig, lechon manok, and isaw.

Friday, December 24, 2010

The UN Security System

The United Nations now offers your home the same security that countries have enjoyed for years. If your house is broken into, they will send unarmed observers to watch the burglars and then spend months debating the appropriate nonbinding resolution.

In case you haven't seen, this was from a while back. Hilarious. I've not had as much time to blog due to school commitments but winter break seems a great time to get back to it.

Merry Christmas to everyone.

Thursday, December 23, 2010

Seriously, a National Pet Day

Well aren't we the entitled. This just in from the Wall Street Journal: "Some analysts say Mr. Aquino will likely face pressure to move some holidays around or add additional ones to appease Filipinos with the means to enjoy their full slate of holidays."

Furthermore, "there is also the risk of further holidays being voted into law. Bills pending in the country's Congress could create as many as eight new holidays, including a new National Pet Day, a day to celebrate the Chinese Lunar New Year and another to commemorate Mr. Aquino's parents."

Great. Let's have a day off for our pets.

Today's Greatest Force for Development?

Is it microfinance? Is it conditional cash transfers? Below is a slide from David Mckenzie's presentation a month ago on migration and development. Just saying, for all the coverage these other development programs get...

Now if only we could harness the potential of that blue bar on the right even more for developing countries. The data is from David's working paper here.

Sunday, December 5, 2010

Migrants score the goals that get the Philippines past Vietnam

And yet another reason why you need not live in the Philippines to contribute to your home country. Chris Greatwich and Phil Younghusband score the goals that secure our historic 2-0 win over defending champions Vietnam in the AFF Suzuki Cup.

Wait a minute - Greatwich and Younghusband. Are those even filipino names, you say? Both are half filipino. Greatwich lives and coaches in the US while Younghusband lived in England all his life, and played with Chelsea, prior to moving back "home" recently. Wikipedia notes that "early in 2005, the Philippine Football Federation was alerted to Younghusband's eligibility by a mysterious gamer who allegedly found out about their lineage via playing Football Manager. He and his older brother, James, were eventually called up to the South-East Asian nation's football squad, amidst much fanfare."

We are increasingly getting more and more players into the national team who do not live and play in the Philippines. The same is true for our men's basketball team. It's probably the best strategy for winning. Our best players comprise of people who are abroad, lived abroad.

I will not go so far as to say that this means a good way to develop the Philippine economy is to let our best and brightest go abroad, but what I will do say is this: perhaps the most efficient way to make our Philippine team competitive is to let our brightest young stars go abroad, train there, and play there.

Tuesday, November 23, 2010

Why is Nobody Scared of the Brain Drain in Batanes?

My last post on migration, responsibility, and Winnie Monsod got around more than a 1100 views from all over the world. That is much more than a small grad student like me could ask for. Many thought I made sense; but even more disagreed and cited my lack of intelligence. And so I thought I'd anger a few more people by furthering the argument. This time, I am bringing with me some data.

Judging from the comments I received, I realized many people are worried about this so-called "brain drain." Well then, I thought, if this is a cause for concern, we should probably figure out to what extent we have this drain. In other words, we should find out, how many educated individuals are living outside the Philippines.

It turns out the academic literature provides an answer. The go-to estimates are done by Beine, Doqcuier, and Marfoulk. Using Census data, they measure the brain drain as the fraction of people born in each country age 25 or over who have attained tertiary education (completed 13 or more years of schooling) who now reside in an OECD country. The number for the Philippines in 2000 is 13.6%.

But here's what I thought would be a little bit more interesting. What if we calculated, in general, the "brain drain" for each of the provinces in the Philippines and figured out the fraction of educated individuals living outside the province in which they were born. Certainly the people who are afraid of the brain drain must also be concerned about this, because leaving is tantamount to a net cost, wasting the resources of the province given to educating, nurturing a person.

So here's what I got*. I used 1990 Census data because that's the latest dataset where the province of birth is coded. The estimation procedure used is the same as the paper cited above. If you don't believe me, download the raw data directly from IPUMS. (I intentionally eliminated some provinces from the data to make the chart fit the space, but here's the complete picture)

The first thing that jumped into my mind upon seeing this data was, "My God, why aren't people concerned about the brain drain in Batanes?" With 55% of their educated living outside the province, the people left behind must be incredibly impoverished. There should be an uproar. Local officials should be guarding every single one of their high school and college graduates and prevent them from leaving because this would mark a waste of Batanes's prized human capital.

But no such thing happens. In fact, it would be absurd if this happened, since Batanes claims to enjoy something close to an absence of poverty. The place is a fantastic tourist destination, and it appears that there is almost zero crime. If we take Batanes as an example, then there appears to be nothing to worry about.

13.4% of our educated live outside the country. That appears to be a small number if you take the Philippines to be a small island with respect to the whole world, is it not?

Of course, I have to be careful about making strong conclusions here. Batanes after all is a single example. And we cannot make causal statements from these data alone. Internal migration might be different from international migration (but the burden of proof is to show that it is so much different that the contribution of migrants in the latter is much less than it is in the prior). Also, I have not ruled out anything for sure. I have merely casted doubt on those who are so sure to conclude that migration of the educated is tantamount to inflicting great harm to those left behind. It isn't that unambiguous.

But perhaps what we can glean from this data at least is the fact that migration is more natural than we think it is, among skilled workers. By revealed preference, we can say that people prefer to move and value this opportunity greatly, if given to them. For who would ever want to live in a world where you were restricted?

And this is why I will always argue against the nationalist who insists that the prior should be that migration is harmful, until proven beneficial. The prior should be that it IS beneficial, until proven differently. Otherwise, these internal migration rates won't show up this high. And for all the noise these nationalists seem to make, I have yet to hear cogent evidence on why the costs of migration outweigh the benefits.

*The idea to do this is not originally mine. I credit Michael Clemens, whom I worked for at the Center for Global Development for it. The full paper on which this type of analysis is used is here. I strongly suggest it for further reading.

Saturday, October 9, 2010

Winnie Monsod to Migrants: You Betray the Filipino People

This video of Winnie Monsod's last lecture haunts me. It represents what I have come to despise about nationalism, false nationalism, that is, combined with simple thinking. The part that got to me the most was this. She says:
If you are going to help this country, you've got to be in the country... If any of you have ambitions of going abroad so you can earn more, please disabuse yourself, because by doing that you are essentially betraying the people in the Philippines..."
I take nothing away from her, she seems to have good intentions. But I must respectfully disagree.

People are not less filipino, wherever they may be. Being outside the country for money does not necessarily mean you betray anything, even if you went to a free public school. And responsibility does not imply having to stay put where you were born.

Suppose Monsod is right, then the same should apply to internal movement. Using the same logic, if you are going to help Cebu, then you've got to be in Cebu. Consequently, let's not have educated Cebuanos who graduated from the top high schools there move to Manila, because that's harmful to Cebu.  Let's not have Cagayanons in Manila since they are much needed in Cagayan de Oro. In fact, let's make it policy and let everyone from the provinces sign a contract when they study in Ateneo or UP that stipulates them to go back where they come from. This is fair. Let's not have people move for money, because it would hurt their hometowns. And let's call these people who escape our grasp, betrayers to Cebu and CDO.

Many of us, I assume, would be uncomfortable with this. Perhaps because we implicitly know that the linkages between Cebu and Cebuanos are more complex than it seems, are less simple than whether the latter is absent or present, whether he/she sends money home or not. Perhaps because we know of people, fellow classmates, who have come to Manila from the provinces and stayed, and have been better for it. We dare not call these people traitors. Neither do the ones left behind in Cebu think that way. But we apply a double standard to international migrants.

My girlfriend is from CDO and is now an investment banker in Manila, although her family is back down south. The Philippines (and CDO) are now better because she stays in Manila and does the productive work that she does. If CDO forced her back to Mindanao, then what would she do, it's not like there's investment banking there. She would be unhappy. She would contribute less to the general economy. And in the first place, she would not have invested as much in her human capital as she did. Would this be a great development strategy?

Nobody ever leaves strictly for money. This makes Monsod's claim trivial (i.e. it applies to no one). Either that or she means it to apply to all migrants. Because surely, people move in some part due to economic opportunity. But it is never only that. If you talk to most of OFWs, it's also to give a better future for their kids, etc. To the more educated ones, its probably for career opportunities, to be at the cutting edge of their fields. Or to explore different countries and to learn more. These people do not necessarily love their countries less. Okay, maybe some do not care at all, but the median person, if you look at the data, does. And the average migrant does not send merely trinkets of money home; he sends loads.

Let's not even talk about remittances. Let's talk about Leah Salonga who spent much of her career abroad. Would it have been best for the Philippines, who produced her, nurtured her, to have kept her in its shores? No. She could have been performing at Repertory Philippines all her life but it was much better for her, for her country, that she remained in NYC to become the brilliant star of Miss Saigon. She brought more acclaim to the Philippines than she could have if she had stayed. For this, we celebrate her. I would find it ironic if in a different breath we called her a traitor.

If Monsod is right, then let's call the biggest betrayer of all Jose Rizal. After all, he spent most of his time abroad after being educated by an elite university. That ungrateful bastard! He, who wrote Noli Me Tangere outside the country, surely did nothing to contribute anything towards our nation. This guy would not stay put in Manila; in fact if I remember correctly he was on his way to Puerto Rico when his boat was seized and turned back.

But Rizal could not have written the things he did had he not lived in Madrid, Paris, Germany or even the US for a short while. Alternatively, he could have settled to be the village doctor like he became in exile in Dapitan, and stayed put, but his impact would have been far, far less. History would have taken a different course.

Should responsibility be confined to staying in the place you were born in? It shouldn't be. But if it must be so, then call me irresponsible. I am glad to betray the filipino people.

(to be continued...)

Tuesday, September 28, 2010

Colbert on Immigration Reform

Colbert testifies on Congress about immigration and migrant worker rights. Best testimony I have ever heard. He gets his economics right.

Its pretty clear to me, at this point, that the big debates of the next decade will revolve around immigration and migration. And what of the last big thing, globalization? We tried it and failed. The incomes of countries still show a path of divergence. But it was a globalization of everything but labor.

The population of Europe is getting smaller, the gap between rich and poor countries is growing, and ever more the pressure to migrate will be stronger.

Friday, September 24, 2010

What's the Value of Political Connections?

This one just out, from a paper, which tackles something I'd like to pin down in future work about political connectedness in developing country settings. We all know that political connections are important, but how much are they significant?
[L]obbyists connected to US Senators suffer an average 24% drop in generated revenue when their previous employer leaves the Senate. The decrease in revenue is out of line with pre-existing trends, it is discontinuous around the period in which the connected Senator exits Congress and it persists in the long-term. The sharp decrease in revenue is also present when we study separately a small subsample of unexpected and idiosyncratic Senator exits. Measured in terms of median revenues per ex-staffer turned lobbyist, this estimate indicates that the exit of a Senator leads to approximately a $177,000 per year fall in revenues for each affiliated lobbyist....We also find evidence that ex-staffers are more likely to leave the lobbying industry after their connected Senator or Representative exits Congress.

HT to Marginal Revolution

Monday, September 20, 2010

Just Give Money to the Poor

From the book title alone, "Just Give Money to the Poor" already sounds like an interesting read. I would assume there is heavy discussion of conditional (probably even unconditional) cash transfers here.

"Just Give Money to the Poor makes a convincing case for a simple but powerful idea: that guaranteeing families an assured base income will create a platform upon which they can build their futures." - Joseph Murdoch

Tangentially related to this, it bothers me sometimes that with such high administrative costs, NGOs or aid programs can act like expensive middle men. Think about the costs of, say, hiring expensive "experts" just to figure out what to do, that in the end, don't even work. Are the benefits that arise from these costs enough to generate development outcomes much higher than simply helicopter dropping money to the poor?

I've seen some pretty inefficient NGOs. There is a possibility that simply handing out money to the poor would give a greater return on investment than coming up, and implementing, some development idea.

But I imagine those in the development business would resist this insinuation. Because then, if this were correct, they would be driven out of work.

Saturday, September 18, 2010

DepEd Orders No More Homework on Weekends

An example of bad public policy making is on the news today. Bro. Armin of the DepEd issues the order to effectively ban giving out homework on Fridays.

"Mas maganda ang kinalalabasan kapag mayroon tayong balance between work and play," he says. But who would better know what the proper balance of work and play is than the teachers, and/or parents themselves?

The situation is different per class, per school, per place. Some students respond better when they are given work to be done for the weekend; some don't. It's the teachers who get the feel for this the most when they are in the classroom. Let them decide what policy is best for their situation. Have we reason not to trust them?

The government should not interfere in such small details that are better left to those who are most knowledgable about the situation on the ground. It's good to give a general direction, but I'm not sure about giving explicit directions on very particular matters.

I'm getting the feeling sometimes that we do policy for the sake of just showing we are doing something. Please, let's not.

Friday, September 10, 2010

Blame the Economist, not Economics

From Dani Rodrik's weblog:
The problem is that economists (and those who listen to them) became over-confident in their preferred models of the moment: markets are efficient, financial innovation transfers risk to those best able to bear it, self-regulation works best, and government intervention is ineffective and harmful.

They forgot that there were many other models that led in radically different directions. Hubris creates blind spots. If anything needs fixing, it is the sociology of the profession. The textbooks -- at least those used in advanced courses -- are fine.

Non-economists tend to think of economics as a discipline that idolizes markets and a narrow concept of (allocative) efficiency. If the only economics course you take is the typical introductory survey, or if you are a journalist asking an economist for a quick opinion on a policy issue, that is indeed what you will encounter. But take a few more economics courses, or spend some time in advanced seminar rooms, and you will get a different picture.
Case in point, as I started my Micro class last Tuesday, the professor prefaced the lecture by saying that while we will be talking about the simple models that hinge on man being fully rational, and having complete and consistent preferences, etc., we should take these with a grain of salt. These assumptions kill a significant amount of things that are interesting about human behavior.

I am looking forward to the sessions where we will be able to relax these assumptions.

Saturday, September 4, 2010

The Wang and Only

The internet was made for stuff like this.

There is no other country that embraces technology with as much vigor and passion as the Philippines.   My boss once remarked that he was fascinated one day to hear about an interview that was entirely conducted through text message.

Hat tip to The Daily Wh.At. The Facebook page of the brothers is here.

Friday, September 3, 2010

Conditional Cash Transfers Work

As someone who fervently believed, even before the elections, that government policy should address the demand side problem of education, I am satisfied to hear that the Aquino administration is finally expanding the Pantawid ng Pamily Program, the conditional cash transfer program (CCT)

While the opposition is quick to call the program a dole-out, CCTs are actually a good example of social anti-poverty policy that has a solid backing of evidence of its effectiveness. There are a number of academic papers in peer reviewed journals about this - just search for "conditional cash transfers" in google scholar. The seminal article is Paul Gertler's randomized evaluation of Mexico's PROGRESA. The study shows that applying conditional cash transfers in health, the program was able to reduce the illness rates of treatment children by 39.5 percent after 24 months in the program. The results have been similar for programs mainly targeted at education, and administered in different contexts - in Columbia, Nicaragua, Honduras, Jamaica, Turkey and so on and so forth. The evidence coming out from Brazil's Bolsa Escola suggests that about 60 percent of poor 10- to 15-year-olds not in school enroll in response to the program.

Consider this: I've never read an academic paper which scientifically shows that the model of giving houses to the poor works on net (e.g., Gawad Kalinga), or that livelihood workshops work -- and mind you these are things we believe religiously to a fault -- but I am pretty confident that CCTs do work. The theory is, families are able to know what they need better than the government and so based on certain conditions, just give them the money. I think I like this approach better than the government forcing upon the poor that they need textbooks, rice, or other aid.

So to the detractors, I challenge you to show solid evidence that say "livelihood and entrepreneurship programs [have] a multiplier effect and are more sustainable than outright dole outs.” Unless you show me something better and credible, then better not say anything.

That said, I wish DSWD, with the help of the ADB, are smart enough to anticipate an evaluation of the program after 1 or two years.

Thursday, September 2, 2010

The Billionaires of the World

The Philippines appears to have three. Click for a larger picture.

I wish I knew which companies are making billions in the Philippines. And I wish there was one more categorization - which billionaires gained their wealth through entrepreneurship and which through rent seeking behavior.

My theory is that Philippine companies are rewarded more by their political savvy rather than their productive activity. Each administration breeds its own group of millionaires.


Wednesday, September 1, 2010

Good Academic, Bad Human Being - by Mankiw

This is quite dated but relavent to all those who seek to go into the academe, like me. Some sage advice from Greg Mankiw. It's tough to be an academic, especially here in the US. There's this pressure to publish, to come up with good ideas, to seek out the research frontier. There's also a ton of good competition. The question is, what does it really mean to become a good academic.

It all comes down to the definition of "good academic economist." If your goal is to maximize the probability of winning a Nobel prize, or at least to climb up as high as you can on citation rankings, then this advice is correct [focusing on isolated and unique problems instead of real world experiences]. Real world experiences and outside interests are a distraction. Don't take time off from academic pursuits for a job in public policy. Don't ever work on Wall Street or do any consulting. Don't engage in the broader societal debate by writing op-eds or working on political campaigns. All of that takes time away from getting papers published in academic journals.
But don't stop there. If you have this objective, then it is best not to have hobbies, or read novels, or go to the movies. Don't spend time teaching well or mentoring students, except the very best students who can help you with your research. Don't get married or have friends, unless your spouse and friends are PhD economists and can coauthor papers with you. Whatever you do, don't have children--boy, are they a time sink! And if you make the mistake of having children, make sure you spend as little time with them as you can.
In other words, if you want to be the best academic you can be, get ready to be a miserable human being. 
Alternatively, you might decide that, at the end of your life, Saint Peter will not judge you solely by checking the Social Science Citation Index. If so, maybe you should make life choices using a broader objective function--one that encourages you to sacrifice some degree of academic success narrowly construed for a more diverse, more satisfying, and more noble life.

Steve Jobs' Think Different

Steve Jobs explains Apple's marketing strategy in 1997, the one which signalled, or perhaps was responsible for, the company's return to profitability. This is an oldie but goodie.

Here’s to the crazy ones. The misfits. The rebels. The troublemakers. The round pegs in the square holes. The ones who see things differently. They’re not fond of rules. And they have no respect for the status quo. You can quote them, disagree with them, glorify or vilify them. About the only thing you can’t do is ignore them. Because they change things. They push the human race forward. And while some may see them as the crazy ones, we see genius. Because the people who are crazy enough to think they can change the world, are the ones who do.
Hat tip to Ben Casnocha

Tuesday, August 31, 2010

Andrew Wiles' Pursuit of Fermat's Last Theorem

Stumbled upon this documentary today and was moved. Perhaps it is because these past two weeks have just been a barrage of math, and I know how difficult even simple proofs can be. And what this guy did was seriously no simple problem.
And then there is Andrew Wiles, the frail knight who for seven lonely years pursues the proof that has ensorcelled him since childhood. He announces the proof to the world, is featured on the front page of the New York Times and in People Magazine, he has the respect and admiration of his colleagues and then he discovers the proof is wrong.  He works another year trying to fix it but every time he patches one area another fault line opens up. Even speaking of it now you can see and hear his utter despair.  It is not too much to imagine that he was on the verge of a breakdown.  Unforgettable.

From Marginal Revolution.

Tuesday, August 24, 2010

The Never Ending Debate About English and Tagalog

I want to end it. I have an experiment in mind. Why not randomly assign public schools in the Philippines to either have curricula that has focus on English or Tagalog. Let them carry out the curricula for some years. Then collect data on outcomes from students in these schools.

If curricula were truly randomly assigned, then there would be no observable and unobservable difference between schools assigned to either curricula except for the fact that one had an intense focus on English and the other in Tagalog. Because of this, we would be able to determine the pure effect of having instruction in either language.

Then we could provide scientific evidence on important questions that ask whether mode of instruction improves employment outcomes, wages, etc. I wonder whether the DepEd would take up this offer or would even be interested in such an evaluation.

We keep switching curricula with no evaluation plan. In a sense, we are already experimenting. The experiment I have in mind doesn't even need to be implemented nationally.

Monday, August 16, 2010

And the Madness Begins

Today, I begin my PhD. In the next year or so, professors will try to cram, the last 50 years of knowledge in economics and mathematics into the heads of us poor PhD students. Math (military) camp just started a while ago. There will be a whole month of this for four hours a day. A problem set is due tomorrow. Off we go.

My former boss warned me a few days ago that some time this year, I will wake up and ask myself why I am doing this. When that happens, he says, just put it away and keep pushing.

I'm trying to keep the bigger picture in mind, always. They say doing the PhD is not about the grades, but about the one hell-of-a-good paper you are able to produce after the whole thing. And you only need one. So while I expect the math majors to dominate this first year, I am looking to get the upper hand in having creative ideas ready when the second and third years come around.

Michigan is amazing. I relish the opportunity to be in an environment where scholarship is strongly valued. I cannot even count how many libraries there are (which are open until 2am!). And I like how the professors here, at least the few that I've interacted with, treat me as a colleague and not as a student. I look forward to writing cutting edge papers with them. It's cool to be smart here... there is some way I just don't get this feeling as much in Manila.

Blogging has been few and far between these past couple of days, owing to the lack of internet access at home. But I've been reading at a feverish pace, and I've been learning a lot, so I hope to get back to sharing soon.

Saturday, August 7, 2010

Links I Liked

1. US unlocks $434 million in aid to the Philippines. I'm glad to have had some hand in this as I worked closely with the MCC country selection team this year. RP was always a threshold case but I'm glad they've finally approved our compact.

2. Where are the billionaires? The Philippines has 3.

3. On university websites: what they display vs. what we look for.

4. "If you want to destroy something in this life, surround it with walls." Great TED talk by Elif Shafak.

Wednesday, July 28, 2010

The Politics of Banking in the Philippines: Questions on Reform

Concerned depositors crowd a bank lobby in an October 1968 bank run. Photo credit: From the Lopez Museum collection. Taken from the book

If you want to properly understand the history of banking in the Philippines, it would do you good to realize that in this country "business is born, and flourishes or fails, not so much in the market place as in the halls of the legislature or in the administrative offices of the government."

That quote is perhaps the most memorable from Booty Capitalism: The Politics of Banking in the Philippines by Paul HutchcroftI just finished my whirlwind reading of the book and I highly, highly recommend it, especially to bankers, if you want to get a big picture of your field. Just skip the first few chapters if theory bores you. But I expect that you'll be surprised, just as I had been, to discover that banking here has a colorful history of scandal and conflict. It's not clean; it's not a field devoid of politics.

I summarize in bullet points my major takeaways:
  • One thing is consistent: our banking sector is and has always been dominated by major families. Families went into banking, not so much for profit and productive enterprise, but to fund their business interests (look up DOSRI loans). The loan portfolios of many banks were milked excessively by their owners. This led to the major bank failures (and bank runs) of the 60's, 70's, and 80's.
  • Government regulation by the Central Bank is influenced by personal, familial connections. Owners of banks which failed but had ties with the administration were bailed out, even if the state of the bank was hopeless, costing millions and then billions in taxpayers money. They took our money and ran. This is true pre, during, and post martial law years.
  • Government regulation of the sector is weak. Central Bank officers can be sued personally for duties done officially. So whenever some anomaly was discovered by bank regulators, the strategy was to sue their asses off, intimidate with lawsuits. Now I'm not sure if I read it in this book or some other, but I remember reading about how the Central Bank never won a case. If that's true, it's incredible.
  • Consumer banking remains an incredibly protected industry, with the top 5-ish banks essentially forming a cartel. I just confirmed with a friend yesterday that foreign banks are not allowed to establish more than 6 branches. You can confirm this by experience - have you ever seen a lot of Citibank branches? Hutchcroft contends that this is the reason why real interest rates for savings deposits by major banks are so low while they are able to charge high lending rates. (No wonder my peso accounts do not yield me as much as my dollar ones abroad!)
In the end, the book has urged me to reflect seriously about banking reform in the Philippines. What should be its scope? Ramos tried to break up the cartel by attempting liberalizing the banking sector just as he had successfully done in telecommunications (now we have a more efficient PLDT and BayanTel) and in the airline industry (hurray for Cebu Pacific competing with Philippine Airlines). Should this administration push for the same kind of liberalization and see if it succeeds where Ramos failed?

What can be done to strengthen bank supervision? Incidentally, there is this bill in consideration that provides immunity to BSP officials from charges arising from shutting down errant banks. But I am not sure if this is the right way to proceed. Perhaps we should also revisit bank secrecy laws that protect DOSRI loans.

You did not hear at all about banking reform during Monday's SONA, and it's probably safe to say it is not in this administration's agenda. The priority appears to lie in infrastructure, social development programs, and corruption. Perhaps, rightly so. But the financial sector plays such a key part in all of this, in development - indeed, it almost seems like a prerequisite - that I think this should also be reviewed.

Sunday, July 25, 2010

The Cold War (1945-1998) in 10 mins.

The video depicts the number of nuclear explosions conducted in various parts of the globe from 1954-1998. After watching this, I wonder why anyone would want to spend hours reading any 300+ page book on the history of the Cold War. In around 10 minutes, the data reveals quite a lot.

If I were a history professor, I'd ask my students to write a 3-page term paper about the Cold War by just using this infographic.

Video by Isao Hashimoto. Hat tip to @m_clem

Thursday, July 22, 2010

On Kindness and Cleverness

At that age, I'd take any excuse to make estimates and do minor arithmetic... I'd been hearing an ad campaign about smoking. I can't remember the details, but basically the ad said, every puff of a cigarette takes some number of minutes off of your life: I think it might have been two minutes per puff. At any rate, I decided to do the math for my grandmother. I estimated the number of cigarettes per days, estimated the number of puffs per cigarette and so on. When I was satisfied that I'd come up with a reasonable number, I poked my head into the front of the car, tapped my grandmother on the shoulder, and proudly proclaimed, "At two minutes per puff, you've taken nine years off your life!"
I have a vivid memory of what happened, and it was not what I expected. I expected to be applauded for my cleverness and arithmetic skills. "Jeff, you're so smart. You had to have made some tricky estimates, figure out the number of minutes in a year and do some division." That's not what happened. Instead, my grandmother burst into tears. I sat in the backseat and did not know what to do. While my grandmother sat crying, my grandfather, who had been driving in silence, pulled over onto the shoulder of the highway. He got out of the car and came around and opened my door and waited for me to follow. ... We stopped beside the trailer. My grandfather looked at me, and after a bit of silence, he gently and calmly said, "Jeff, one day you'll understand that it's harder to be kind than clever.
By Jeff Bezos speaking at the 2010 Princeton baccalaureate remarks (HT: James Choi of The .Plan)

What Malacanang Should Disclose to the Public

Through Jeff Smith, I came across this White House report listing all the salaries of White House employees. This reinforces my view that, more than anything else, what astonishes me most about Mr. Obama's presidency is his commitment to transparency. But it must feel weird for these employees to know what their colleagues are paid.

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I am dismayed to learn that all these people were paid more than I did during the time I worked in DC. But there are three people paid $0 per year. What? Didn't know there that many people who were such Obama fanatics to do work pro bono.

And the top paid employees are...

Love, Timothy P.
Hash, Michael M.

who are deputy and policy directors respectfully paid $179,000 per year. Larry Summers gets $172,000. Good to know what economists are paid.

I wonder what Malacanang people are paid.

UPDATE: And just to flex my statistical muscles a bit, here's a graph of the salary distribution across employees. The mean salary is around $83,000 per annum with a distribution that is positively skewed, as expected.

What's Bugging Me About "Too Many Abads"

I write this as an attempt to clear my mind and be objective. The Abads, after all, are good friends. Luis was my classmate and good friend in HS and College. I have visited the family's home and have interacted with them many times. I can personally vouch for their goodness.

What has been bugging me lately is, after reading more about "Too many Abads" in the news, is the thought that some of the criticism might be valid and worth pondering upon. Much of course is grossly exaggerated -- you can expect the media to do that. This article yesterday by Bulatlat, comparing the family to the Arroyos is hilarious as it goes over the top, calling out fire where there is yet none.

The question of course is not whether the Abads are competent to receive those government posts. This is an argument that Pres. Aquino easily wins. Luis graduated summa cum laude of Ateneo while Julia, if I am not mistaken, graduated from the Kennedy School (not to say of course that education is the only thing that factors into competence). The question is whether it is right for any one family, no matter how good they are, to hold key positions at the same time.

And here is where my thoughts are divided. To those who do not know the Abads, there is some reason to be uncomfortable with them holding key posts. Just ask yourselves: does it apply to the general case? If another family, some family you do not know, would have done the same in six years time, by chance or by intention, would you be fine with it? The answer for most would be no.

There is some validity to the concern that congresswoman Dina Abad is vice chair of the appropriations committee, Sec. Butch Abad is head of disbursing the funds laid out by that committee, while Julia will be in charge of the President's pork barrel. The validity of the concern rests on how you can prove these three positions lead to conflicts of interests. My suspicion is that these posts were bestowed upon them in a purely coincidental matter and so it is unfortunate that it turned out this way. These are really great people.

But then again the other side of me thinks that leaving behind good institutions are more important than the best that our leaders can offer. That is, this event leaves a bad precedent for other families to argue the same when it's their turn in power.

George Washington was a heck of leader during his time as president and people wanted him, were persuading him, to rule for more than 8 years. But he knew that if he did not step down it would create a bad precedent for other presidents to follow. And so he stepped down, which was what paved the way for Congress to set term limits to power later on during FDRs time. I am told one of the most poignant places in DC is an empty crypt of Washington below the national capitol building. It is a symbol of this simple act which transformed a monument to him to a monument to democracy.

I am not saying that the Abads should step down. I believe the appointments were made separately and in good faith. But the concern voiced out by some is probably not as stupid as it is sometimes phrased.

Wednesday, July 21, 2010

So much for consistency

By a 4-2-1 vote, COMELEC declared that Mikey Arroyo can represent the Ang Galing Pinoy party-list. The majority held that the nominee him or herself need not be a security guard, or marginalized.
Curiously, the nominated representative of another party-list, Ang Kasangga, was disqualified by COMELEC because he himself was not a micro-entrepreneur, the group represented by the party-list.
So much for consistency.
That's my good friend (and future bar topnotcher?), Glenn Tuazon, on the news of today. Incidentally, I make the point just last time that corruption is most pernicious when it is highly variable and decisions are markedly different from case to case.

Monday, July 12, 2010

The Next Best Alternative to Stamping Out Corruption: Make It Calculable

Some very good sentences from Booty Capitalism: The Politics of Banking in the Philippines,
What is striking about many patrimonial states, Weber reminds us, is not the prevalence of corruption per se, but the great variability of corruption. Bribery and corruption have "the least serious effect" when they are calculable, and become the most onerous when fees are "highly variable" and "settled from case to case with every individual official."
This reminded me of a recent conversation with a friend and current government official, who suggested that some civil servants accepted payments to "push and rush paperwork"

I have an idea then. If we cannot rid the bureaucracy of this kind of behavior, why not legalize it? For a standardized extra fee, let us allow companies to have their papers rushed. The fee should be large enough so that not all companies avail of it but small enough so as to deter bribery. I suspect this would reduce under-the-table agreements. And at least we would know who pays. Because if people are doing it anyway, and we cannot beat them, price discriminate.

The same applies to petty corruption done by motorists and the MMDA. Drivers in Manila know that the best thing to do when caught in a traffic violation is to pay up. I mean, why wouldn't you? The "costs" of not doing so is enormous. One has to go to the office, subject oneself to an incredibly long and variable administrative process, and pay fees. My understanding is that it's not so much that people want to do evil in this way but people would just rather avoid this strenuous process. So, why not have the MMDA accept payments for violations and have them issue official receipts?

Of course, I agree that this does not do anything to get at the roots of the problem. I have yet to think about the unintended consequences of such a solution. But this is a creative solution. And I have yet to hear another plausible solution aside from moral persuasion.

Saturday, June 12, 2010

Who are we to say what's best for them? A reply to Randy David

Many like Randy David's article last Sunday about "Education and its Purposes." I agree with most of it but I take issue with his bit about those who take up nursing. He writes:
Not too long ago, every college or university in the country tried to cash in on the thriving global market for nurses. Almost overnight, nursing schools sprouted or expanded, drawing scarce resources away from courses and degree programs that had no immediate market value. The curriculum was re-arranged to make room for those skills that were needed in hospitals abroad, while the general education courses were trimmed down to a minimum. Then, almost without warning, the nursing market crashed, leaving in its wake thousands of unemployed graduates and desperate students who had borrowed money to pay the high tuition being charged... Nothing could be more disastrous for a nation’s educational system than to fasten its curricula to whatever is the current flavor in a rapidly changing global market. The function of education is to prepare people to live in the future.
My question is this: how can you fault filipinos for investing in something like nursing, of reacting to global demand, where the possibility of returns are huge and potentially life changing? i argue that most of the people who take up nursing, otherwise, would not have gone to school, if not for this lucrative option to live abroad. Although this nursing demand does steal away from people who otherwise would have become doctors, accountants, bankers, our next leaders, etc. - the "better" professions perhaps - for most of these people I suspect that this IS their best option, by revealed preference. Most of those who take up nursing are from outside of Metro Manila, not those who have the opportunity to go to private schools like Ateneo and UP which virtually assures a job after college, people not gifted by many other opportunities. How can we fault these people for doing what they think is best for them? Similarly, how can we fault private schools for specializing in training filipinos in nursing, giving them opportunity when otherwise they would have little? Broadening their curricula would incur added costs to them, tuition would be higher, and they would not have otherwise set up business. We need to imagine the right counterfactual here. In an ideal world, sure, let's offer the most well-rounded of educations for these nurses. But we live in a world with budget constraints.

To be sure, investing in any specialized education has its risks that tomorrow's demand won't be the same as today's. This is true for global and local occupations. The only problem would be if the people who choose professions, in this case nursing, are not internalizing these risks properly. But people know these risks when they invested in their education. The burden of proof is to show they do not. Why do we think it's not a careful decision on their part?

If an investment (in education or business in general) fails, it doesn't mean it wasn't worth pursuing. 80% of business startups fail; it doesn't mean trying to start one up is not good investment thinking simply because there is risk of failure.

This is my only issue with this article. It's a bit elitist in assuming that those who choose nursing are not able to know what's best for them and we know what is best for them. Who are we to say this? Are we better in internalizing the costs than them?

In any case, it's unclear if the demand for nursing abroad will stop because Europe's population is aging and so are America's baby boomers. This recession was an economic blip. We know from history that the world economy has never (yet) failed to bounce back and the demand for foreign workers will continue. "The function of education is to prepare people to live in the future," says Randy David. Let us not rule out nursing as a good future career path.

Wednesday, June 9, 2010

Shanghai: Then And Now

The difference 20 years of economic growth makes.



Sunday, May 30, 2010

Then they came for me...

DC has a lot of great (and free) museums but none are as moving as the Holocaust Museum. I found myself there again today. It was my 4th time all in all. And every time, I seem to be struck by something I have not noticed before. Today it was this quote from Martin Niemoller:
First they came for the Socialists, and I did not speak out..
Because I was not a Socialist.

Then they came for the Trade Unionists, and I did not speak out..
Because I was not a Trade Unionist.

Then they came for the Jews, and I did not speak out..
Because I was not a Jew.

Then they came for me..
and there was no one left to speak for me.

Saturday, May 29, 2010

Tuesday, May 25, 2010

What Accomodation Each Country is Requesting for the World Cup

For Brazil: "hot hot coffee, hot hot coffee and hot hot coffee", a lot of cookies and no chocolate. They are bringing Portuguese chefs but will not be "taking over the kitchen"

The Italian team will be bringing their own pasta.

The Mexicans, "their own priest to conduct church services in a church on the premises."

For New Zealand: 8 houses beside a golf course. They would like their players to take golf courses.

The Ghanaian team had only one request - to watch their favorite programs on the African channel.

But the best comes from Diego Maradona, most known for the "hand of God." He has requested for the Argentine team's food to include:
Ten hot dishes a day as well as 14 different salads for every meal;
Three different pasta sauces with each meal and at least three puddings;
A braai once in three days; and
Ice cream to be available all day.
"Other requests included painting the rooms white and buying six PlayStations for players to use during their free time." And this luxury toilet,

You don't believe me. Check out this South African Times article.

Monday, May 24, 2010

A Profile of Esther Duflo: The Credibility Revolution in Development

The New Yorker profiles Esther Duflo, recent winner of the Bates Clark medal for her work on development economics. As I have mentioned in this blog earlier, Duflo is a driving force in what Joshua Angrist calls the "credibility revolution in empirical economics" which has led to a "consequent increase in policy relevance and scientific impact." She is founder of the well known research think tank, the Jameel Poverty Action Lab.

Unfortunately, the article is gated but I provide the parts I loved here:
Within economics, Duflo and colleagues are sometimes referred to as randomistas. They have borrowed from medicine, what Duflo calls a "very robust and very simple tool": they subject social policy ideas to randomized control trials as one would use in testing a drug. This approach filters statistical noise; it connects cause and effect. The policy question might be: Does microfinance work? Or: Can you incentivize teachers to turn up in class? Or: when trying to protect people from contracting malaria, is it more effective to give them protective bed nets or sell then bed nets at a low price?

Not everything can be subjected to trials. But when it can be done well, it should be. On opposition for control trials for development:
When we first started, there was a huge amount of resistance and hostility in the development community. We were reducing the complications of poverty to hard numbers! 'You shouldn't be experimenting on people!' OK, so you have no idea whether [a policy] works -- that's not experimental?

Policy, as much as possible, should be backed up by empirical evidence. On incremental change.
Duflo, borrowing an old phrase of the French left, argues that "there is not going to be le grand soir -- one day the big revolution, and the whole world is suddenly not corrupt. But maybe you create a small little virtuous group here and something else there. All these things are incremental." According to Duflo, the virtue of randomization is that it not only identifies the best remedies; it does so with a clarity that should be attractive to policymakers, who surely want to be associated with ideas that work.

Finally, she makes the profession sound like poetry (for some part of economics is art and heart as well.)
"It can't only be data," Duflo said. "Even to understand what data means, and what data I need, I need to form an intuition about things. And the process is as ad hoc and impressionistic as anybody's."
It can't only be data, but there must be data. "There is a lot of noise in the world. And there is a lot of idiosyncracy. But there is also regularity and phenomena. And what the data is going to be able to do -- if there is enough of it -- is to uncover, in the mess and noise of the world, some lines of music that actually have harmony. It's there, somewhere."

Does this Path Have a Heart?

From blogger extraordinaire, Chris Blattman, I have come across this quote from Carlos Castaneda:
Any path is only a path. There is no affront to yourself or others in dropping a path if that is what your heart tells you to do. But your decision to keep on a path or to leave it must be free of fear and ambition... Try it as many times as you think necessary. Then ask yourself and yourself alone this one question. Does this path have a heart? If it does, then it is a good path. If it doesn’t, then it is of no use. 

Friday, May 21, 2010

Rationalizing Political Dynasties

Suresh Naidu, foreign observer to the recent Philippine elections, shares this encounter with a politician from Davao:
I asked the new mayor of Davao, who is the daughter of the old mayor (and new vice-mayor) what she thought about political dynasties, given that the Philippine constitution has a clause authorizing Congress to legislate against them.

She said: (a) well, anyone can run in the election and (b) you have George Bush 1 and 2, no? Sigh
Like colonial father and son, eh?

I am surprised that a casual search using GoogleScholar shows a very thin existence of academic papers written about the topic. There are almost no published empirical papers even. Sounds to me like a good area to explore.

What books are out there on this topic? I have time to waste this summer.

Thursday, May 20, 2010

Leaders not Thinkers

There’s a reason elite schools speak of training leaders, not thinkers—holders of power, not its critics.
Something random from Jordan Peacock. I searched around and it seems like the line is taken from this article on the disadvantages of an elite education. It is surprisingly a good read. A good note to self.

No reason, of course, for leaders and thinkers to be mutually exclusive. But it does make me wonder -- when Ateneo, or other top schools, speak of leadership, what does it mean?

Sometimes I feel that critical thinking is vastly under-supplied even amongst leaders; we are taught to think in the same way.

HT to Marginal Revolution

Wednesday, May 12, 2010

Where Nobody Knows Where I Went to School

From Time Magazine's interview with Miguel Syjuco, author of Ilustrado. I think I would have answered the questions in exactly the same way.

On what drove him to leave the Philippines:
But I also wanted to see if I could make it on my own. I wanted to live in a place where nobody knew my last name and didn't ask where I went to school. I wanted to get by on my own merit.
On his diaspora:
I'm a Filipino. I'm nothing else but a Filipino. I'd like to be a writer, not just defined by race. It was Jessica Hagedorn who once told me, "Don't just try to be a Filipino writer. Try to be a writer."
It's funny that my boss had the exact same advice for me a few days ago about grad school: "Don't try to be a Filipino economist. Be an economist."

Is the book any good? (Hat tip to Leland Dela Cruz)

Saturday, May 8, 2010

What Every Girl Should Know: Nothing

A New York Times columnist writes about 50 years ago, and the knowledge about birth control,
What women did not have was the ability to figure out what actually worked. The powers-that-be believed that the only appropriate form of birth control was celibacy. “Can they not use self control?” demanded Anthony Comstock, the powerful crusader for the Sexual Purity campaign. “Or must they sink to the level of the beasts?”

Comstock managed to get New York authorities to grant him the powers to both arrest and censor, and he bragged that he sent 4,000 people to jail for helping women understand, and use, birth control. He seemed to take particular pleasure in the fact that 15 of them had committed suicide.

One of his targets was Margaret Sanger, a nurse who wrote a sex education column, “What Every Girl Should Know,” for a left-wing New York newspaper, The Call. When Comstock banned her column on venereal disease, the paper ran an empty space with the title: “What Every Girl Should Know: Nothing, by Order of the U.S. Post Office.”
This was 50 years ago and thankfully, women know better. But do they really? Do filipina women know?

I feel like the worst legacy of the religious movement has been the repression of information. Especially in the RP.

Thursday, May 6, 2010

Contract Teachers

Great stuff from Karthik Muralidharan, professor at the University of San Diego, who presented today a paper on contract teachers at CGD.
We present experimental evidence from a program that provided an extra contract teacher to 100 randomly-chosen government-run rural primary schools in the Indian state of Andhra Pradesh. At the end of two years, students in schools with an extra contract teacher performed significantly better than those in comparison schools by 0.15 and 0.13 standard deviations, in math and language tests respectively. Contract teachers were significantly less likely to be absent from school than civil-service teachers (16% vs. 27%).
The slide I loved most was this. Regular teachers in India are paid 5 times as more than contract teachers.

But the experiment tells us that contract teachers, who are less educated, less trained, and less paid are just as effective, if not more, than regular teachers. Can you now see the policy relevance?

In a perfect world, we'd like to have well-trained PhDs educate our children even at the elementary level. Sure, why not right? But imagine if you are the Secretary of Education, given a fixed, tiny budget. Which hiring would you give the most bang for the buck? It might be controversial to hire just contract teachers, but it might just be the most effective policy.

I'd like to see an analogous experiment applied to health. While doctors who don't want to practice in rural health clinics are often blamed for poor outcomes in these rural localities (the low doctor-to-patient ratio, blahblahblah), it might just be that the right policy for these areas is to train and hire local community health workers who are less educated and skilled. Sure, in a perfect world, we'd like to have top class physicians service these areas. But it's most likely that the health needs of these areas are so basic that paying so much more to lure a doctor from Manila, trained in surgery even, is not worth the cost. We can moralize all we want about how Manila doctors are greedy because they do not want to serve in, say, Mindanao but the right policy might be to focus resources on getting community health workers. Just a thought.

P.S. This guy Karthik by the way almost lured me away from Michigan to go to San Diego for grad school. Brilliant guy. I've never heard anyone talk so fast. Quick mind.

Wednesday, May 5, 2010

The Cult of the Presidency

Jeff Smith, professor at the University of Michigan, shares this excerpt from the book The Cult of the Presidency. I re-share only because I find this relevant to the Philippine situation. Our constitution was patterned directly after the United States'. It's nice to know how the US intended it to be, and how the executive office has changed for better or worse. A food for thought for constitutional reform.
The chief executive of the United States is no longer a mere constitutional officer charged with faithful execution of the laws. He is a soul nourisher, a hope giver, a living American talisman against hurricanes, terrorism, economic downturns, and spiritual malaise. He—or she—is the one who answers the phone at 3 a.m. to keep our children safe from harm. The modern president is America’s shrink, a social worker, our very own national talk show host. He’s also the Supreme Warlord of the Earth...
It wasn’t supposed to be this way. The modern vision of the presidency couldn’t be further from the Framers’ view of the chief executive’s role. In an age long before distrust of power was condemned as cynicism, the Founding Fathers designed a presidency of modest authority and limited responsibilities. The Constitution’s architects never conceived of the president as the man in charge of national destiny. They worked amid the living memory of monarchy, and for them the very notion of “national leadership” raised the possibility of authoritarian rule by a demagogue ready to create an atmosphere of crisis in order to enhance his power.
This was shared of course amidst Barack Obama's wonderful commencement address at the University during the weekend. I adore that speech by the way. But this made me think again.

Is the presidency too powerful? Ought it be that powerful?

Monday, May 3, 2010

A Fearless Forecast on China

 'Tis somewhat troubling:
China is “on a treadmill to hell” because it’s hooked on property development for driving growth, Chanos said in an interview last month. As much as 60 percent of the country’s gross domestic product relies on construction, he said. Rogoff said in February a debt-fueled bubble in China may trigger a regional recession within a decade.

Sunday, May 2, 2010

Taxing Emails?

I say it's a horrible proposal. Greg Mankiw floats the idea (suggested by one of his readers) in his blog:
I think an excellent Pigouvian tax would be a tax on emails. Many emails involve a negative externality (I don't really want to receive them) and almost all the ones I really want to get are worth much more than a penny or so to the sender. So a penny tax (say) on email would probably generate large amounts of revenue, mitigate an important negative externality, and have minimal inefficient disincentives. Since email servers are necessarily centralized and networked and all email senders are ipso facto connected to an ISP who is charging them for access the transactions costs and evasion problems seem low.
I'm calling him out on this one. Negative externalities refer to social costs that are not already covered by private costs. Pigouvian taxes are a way to correct for these externalities. But in this case, email sent from one party to another does not cost society at large. The costs are entirely shouldered by the sender who takes the time to write and the receiver who takes the time to read. Why tax then?

Ever heard of spam blocking and filters?

What this Blog is About

In lieu of my 50th post, I use Wordle to show what this blog is actually all about. And the most frequent words I use are:

Not at all surprised. But perhaps I should try subtlety more going forward.

Wednesday, April 28, 2010

The World Bank Makes Data Free

and user-friendly, Hans Rosling style. The page makes available over 2000 indicators, documenting the state of the world's economies. Previously, only researchers who paid high subscription fees could access this information but now it's available to everyone. The Philippines' page is below.

Data is even accessible through google public data explorer.

I'm certainly not one to readily cheer the World Bank, but well done. Just about time they did this.

Sunday, April 25, 2010

Development, No Longer Marginalized

After a period of relative marginalization, development economics has now reemerged into the mainstream of most economics departments, attracting some of the brightest talents in the field. It is no longer the preserve of development “experts” who pronounce on the strange ways of the world outside high-income countries, but instead serves as a testing ground for fundamental economic theories and the source of exciting new ideas. There is, of course, nothing entirely new about this. Innovative theoretical ideas from people such as George Akerlof and Joseph Stiglitz were inspired by thinking about the developing world. Pranab Bardhan and T. N. Srinivasan, and, slightly later, Angus Deaton and Mark Rosenzweig also resisted the compartmentalization of the field into development and the rest. Nevertheless the extent to which, today, economists in many other fields routinely think about the application of their ideas and techniques in development contexts, seems unprecedented. This new centrality is excellent news for the field and, we venture to hope, for the world it studies.

We believe that one of the reasons for the field’s vitality is the opportunity it offers to successfully integrate theoretical thinking and empirical testing, and the rich dialogue that can potentially take place between the two. The culture of development economics is particularly well-suited to this tight integration because of the emphasis on collecting one’s own primary data based on the theories that are to be tested...
That's the introduction to Esther Duflo and Abhijit Banerjee's latest paper. Incidentally, Duflo just won the John Bates Clark medal for economists under the age of 40 a few days ago, confirming this notion that development is indeed at the forefront of economics. These are exciting times for the subfield.

Let me clarify though, development here refers to a specific "flavor" of development research now increasingly being referred to as micro-development. The focus in general is with the proper evaluation of social programs, with questions that deal with the particular: how to raise education rates, lessen teacher absenteeism, and improve the provision of credit to the poor, etc. A humbler approach, if you ask me, than old school growth theory, which sought to explain how countries rapidly industrialized, an approach that has been out of vogue for quite some time. The mindset has shifted into coming up with better research designs that rely less on sophisticated econometric techniques. At the center of this is the increasing popularity of field experiments (RCTs) that carefully identify cause and have been easily implemented in developing country settings.

While macro ruminates on how its theories have failed miserably to predict and avert the recent financial crash, development economics is pushing the boundaries of the field. If anything, this should cause more funding to empirical research.

Sunday, April 18, 2010

The Lesser Evil

This, from Patricia Evangelista:
I’m not looking for a messiah, I need a man who will not shove this sorry country down a sorrier hole: who will not lie too often or demand too much, who will not cheat or steal, who will not be the mouthpiece of elite factions or the Catholic Church, who will have the balls to make the decisions that have to be made and will take responsibility when he fails, who will say what he stands for without weaseling out of it the next day, who will not invoke dead brothers and mothers, who will not put his mistresses in mansions while thousands starve, who will not put God over the law and bigotry over democracy, and who will, in the end, remember that his mandate is to the people. And because I know that is asking for too much, I am willing to vote for the lesser evil, once I figure out what the lesser evil is. I have discovered that the system demands men to make compromises and make promises, and that man is not only Joey Salceda. Every man waving from the stage is subject to the vested interests of families and factions and friendships and the smell of government money, and any man who claims otherwise is either a liar or a fool.
Although I agree with much of this, I find that over the course of these campaigns, I find myself less interested in this fight versus good and evil than in the fight over good policy and bad. The morality of candidates is a first order condition for sure and I understand why this is of primary concern. But I have little pre-existing information on who corrupts more, who is more of a liar, and who buys more people out. The information out there, I cannot completely verify whether they are true or not.

But what I can know are the policies that candidates are putting forth (whether these exist or not). And I can evaluate them based on whether these make sense, are reasonably implementable, and are based on a good understanding of the economy. Corruption will exist, but will the policies be less corruptible than the rest?

It is very hard to keep politicians accountable for their morality, unless of course, big scandals break out. But we can hold them accountable for their policies.

Saturday, April 17, 2010

Grad Students Take a Hit from the Simpsons


Did I just sign myself up for 5 years of scrounging for food? This can't be true. Why don't these guys smooth consumption and borrow from the future? They'll be earning tons then.

HT to Mike Abito.

Friday, April 16, 2010

Indian Call Centers Promote Education

So say Emily Oster and Bryce Millett (HT Marginal Revolution):
Over the last two decades in India there have been large increases in outsourced jobs and large increases in schooling rates, particularly in English. Existing evidence suggests the trends are broadly related. In this paper we explore how localized these impacts are; this has implications for understanding how quickly information about these jobs diffuses. We use panel data on school enrollment from a comprehensive school-level administrative dataset. This is merged with detailed data on Information Technology Enabled Services (ITES) center location and founding dates. Using school fixed effects, we estimate the impact of introducing a new ITES center in the vicinity of the school on enrollment. We find that introducing a new ITES center results in a 5.7% increase in number of children enrolled; these effects are extremely localized. We argue this resultis not driven by pre-trends in enrollment or endogenous center placement, and is not a result of ITES-center induced changes in population or increases in income. The effect is driven entirely by English-language schools, consistent with the claim that the impacts are driven by changes in returns to schooling.
This should take away some negative stigma about call centers. In my view, a call center job, though certainly not prestigious, is still a better job than many people could have otherwise obtained.

Thursday, April 15, 2010

Students Underestimate the Returns to Education

I previously blogged about my critique of Noynoy's education agenda. My main point was that I see the problem of education in the Philippines as one of demand. That is, households do not send their children to school because the returns to education is low: getting a job after college is highly variable, and the pay regardless is small. Thus, education does not look an appealing investment as compared to what households can earn by sending kids to the streets to sell sampaguita or help around the house. Noynoy's education agenda does nothing to address this fundamental problem as he focuses on the supply - buildings, curriculum, schools, classrooms - which previous administrations have also promised and failed to deliver. I suggested conditional cash transfers.

Now evidence from a new paper by Rob Jensen suggests that not only can the returns to education be low (or high) but students themselves underestimate the returns to education:
Economists have long emphasized the link between the market returns to education and investments in schooling. While many studies estimate these returns with earnings data, it is the returns perceived by individuals that affect schooling decisions, and these perceptions may be inaccurate, due to limited or imperfect information. Using data from the Dominican Republic, we find that while the measured returns to schooling are high, the returns perceived by students are extremely low. Students provided with information on the higher measured returns reported increased perceived returns several months later. The least-poor of these students were also significantly less likely to drop out of school in subsequent years. However, there was little or no effect on schooling for the poorest students. Finally, we find some support for the hypothesis that students underestimate the returns to education in part because they rely heavily on information on the returns within their own community, which are downwards biased due to residential segregation by income.
What fascinates me so much about this study is that they discovered that just by informing 8th graders of the true returns to education (the average wages they could get for finishing high school), they were able to increase enrollment to the next term by 7 percent as compared to students not given this information. And the result is statistically significant. Wow.

Maybe part of our next education policy should simply include informing students what they could get paid after high school. This is low cost policy with potentially significant benefits.
There are few examples of policies or interventions that result in a 5 to 10 percent increase in the likelihood of school enrolment or a .20 year increase in schooling, much less interventions that are as inexpensive as this one
This is an example of a fantastic paper - easy to read, relevant, with a careful causal identification strategy.

Wednesday, April 14, 2010

How can you reject a resignation?

From ABS-CBN News, more plagiarized speeches by Manny Pangilinan:
Pangilinan's keynote remarks at the 8th Asian forum on Corporate Social Responsibility (after typhoons "Ondoy" and "Pepeng"), November 2009:
From the streets of Marikina to the flooded plains of Pangasinan, Filipinos should write the next chapter in their stories. Together, we should ensure that the legacy of a terrible storm is a country that is safer and better prepared for the tragedies that may come.
Obama's remarks at the 4th anniversary of hurricane "Katrina," August 2009:
From the streets of New Orleans to the Mississippi coast, folks are beginning the next chapter in their American stories. And together, we can ensure that the legacy of a terrible storm is a country that is safer and more prepared for the challenges that may come...
Okay, there is one thing I don't understand about this debacle. How can you reject a resignation? Seriously, when I tender my resignation from my job in the next few weeks, my boss cannot do anything about it. It's a done deal. I say goodbye.

Now sure, Pangilinan merely offered to resign. But that's a cheeky move on his part that's neither here nor there. He passes the buck to the Board to decide the consequences of his mistakes, of which he says he takes "full responsibility."  But by doing so, he absolves himself. How is that act commendable, as some have suggested? And then how does the Board even find it okay to separate full responsibility from its full consequences?

I'll try to be bold here and voice out what some Ateneans are probably uncomfortable, afraid to even ask but are thinking: could money have played a part somehow in this decision? Is there an economic aspect to this? MVP after all has given the school so much. An empirical study might actually be something cool to do in this situation. I wonder if MVP donations to the Ateneo shoots up after this decision. I wonder if donations by alumni actually go down. What is the overall effect of this decision? How much was he giving to start with? Some document could be available somewhere (can google come to our aid again?). This might just make a good project.

I am just deeply ashamed, I guess. My next blog was supposed to be about how Ateneo ranked well in the latest QS World Universities Ranking. My alma mater is again the top university in the Philippines and number 234 in the world! But I guess it would be depressing to celebrate this now.

UPDATE: It looks like Pangilinan has since irrevocably resigned from his duties from the Board of Trustees. Well done, Sir. Now that is a commendable act.

Monday, April 12, 2010

I am convinced the HDI should be revamped

Thanks to Lant Pritchett's new note on the 20th anniversary of the Human Development Report:
The Human Development Index (HDI) has been a politically and rhetorically powerful counter-point to measures of “development” that focus exclusively on economic indicators, such as Gross Domestic Product per capita or household consumption expenditures. However, the relevance of the HDI is increasingly challenged by success. For instance, by pitching the education component of the HDI at a very low level (literacy and gross enrollment) which has an upper bound, as more and more countries attain near 100 percent literacy and 100 percent gross enrollment of the young the education component ceases to contribute to progress in the HDI. For countries above the low educational thresholds this implies that more progress in education (e.g. expanding tertiary enrollment, improving quality of learning outcomes in primary school) does not raise the HDI while increases in GDP per capita do raise the HDI. Paradoxically, a measure that was intended to promote the importance of non-economic dimensions of human well-being actually has its cross-national variability driven increasingly just by GDP per capita.
Brilliant analysis applying a Rawlsian framework to Amartya Sen's notion of development (which reminds me as an economist, I should get a copy of Rawles's A Theory of Justice soon). Pritchett weighs the pros and cons of using different measures of development. It's a tough read but I urge students of development to read this piece because you will be rewarded.

I previously blogged on "What's the Value of the Human Development Index?" here.