Paolo Abarcar

How Much is a Year of School Worth?

2012-01-25T17:01:00.000-05:00

Ah yes. No other topic in the field has launched a thousand regressions -- the theme of my last two weeks. For some reason, my labor and development class have separately arrived at this topic at the same time without any coordination. How much does an additional year of school increase a person's income, holding everything else constant? That is, what is the returns to education?

Estimates vary but it's around 7% for the US. That is, an additional year of schooling increases earnings by 7% on average. The number is higher for developing countries. In Brazil, it's over 10%, according to a paper we were just discussing by Lam and Schoeni (Lam is my professor). Psacharopoulos pegs it at 11.2% for low income countries and 11.7% for lower middle income countries like the Philippines. He has a nice paper comparing the rate of returns in different places here.

Interestingly, Duflo provides evidence (in a really nifty paper [I can't link to the published version]) that the estimates are probably overstated. She makes use of a large scale increase in school construction in Indonesia as a policy experiment. Nonetheless she finds a rate of return in the range of 6.8-10.6%.

I'm wondering whether anyone has done work estimating it lately for the Philippines. This one's quite dated. I assume it could be tricky given that educated people have a higher unemployment rate than less educated ones. Plus, international migration is nontrivial.

As for me, I am personally left to reflect on the question, what is the rate of return I get from getting a PhD? I have a sinking feeling it's very small. It doesn't matter. I have other things I maximize on.

Are Institutions Insignificant?

2012-01-24T23:48:00.002-05:00

Or in other words, is President Aquino's emphasis on "kung walang corrupt, walang mahirap" overstated? Francis Fukuyama weighs in:

Over the past decade the mantra in both development studies and comparative politics has been “institutions matter”—that is, you aren’t going to get economic growth or other human development objectives in the absence of institutions like rule of law, transparent and accountable governments, low levels of corruption, and the like.

The empirical basis for this assertion is actually much weaker than many of us would like to think, however. Plenty of countries, beginning with China, have grown very rapidly over the past generation in the absence of what is now called “good governance.” Indeed, the US and Britain charted the industrial revolution with governments that were substantially more corrupt and less capable than they are today.

...The Bank of England became independent only in 1998; there is no British constitutional court and therefore no judicial checks on legislative power; not just 2/3s but a fifty percent plus one majority in the House of Commons is sufficient to overturn any law in the land, including any protecting England’s fabled press freedoms.

Whenever I read articles like this, I wonder -- what exactly do people mean when they say "institutions"? Do we know what it is? How do we measure it?

Perhaps the very reason there is scant empirical evidence on the effect of good institutions on development is because it is simply poorly defined, or people just can't agree on what it means and therefore talk over each other's heads. Fukuyama here rebuts by presenting himself, scant empirical evidence.

I do suspect sometimes that we what we mean by "institutions" is simply everything else that we can't explain or understand -- that is, the residual. Any thoughts on this from someone more knowledgeable?

The Twitter Democracy that is Sweden

2012-01-20T10:24:00.001-05:00

And here you thought the Philippines' "More Fun in the Philippines" campaign topped them all.

In December, officials from the country's tourism board decided that they would hand over the reins of their @sweden Twitter account to a different citizen each week.

So far, the project, which has been called "the world's most democratic Twitter account," has featured tweets from a female priest, an advertising executive and an organic sheep farmer, Reuters reported.

This week, Sweden's tweets are from Hanna, "just your average lesbian truck driver."
"Gosh, I really enjoy being @sweden," tweeted Hanna. "They'll have to grab the account out of my dying hands.

I like the Swedes more and more. Open, diverse, and democratic, But I wonder how they fare on migration policy.

Hat tip to Marginal Revolution. The full article is from Global Post.

Are CCTs encouraging poor children to attend terrible schools?

2012-01-18T09:27:00.001-05:00

In case you've missed it, Lant Pritchett and Berk Ozler have been going at it in the blogosphere on conditional cash transfers (CCTs). Here's the first post with Pritchett questioning whether CCTs raise enrollment but force poor children into terrible schools.

Take Uttar Pradesh in 2010. By the end of lower primary school (grade 5) only one in four children could divide. Even by grade 8, the end of upper primary only 56 percent could. Similarly, by grade 5 only 44 percent could read a level 2 paragraph and by grade 8 still only 77.6 could. A large plurality of children, even of those that had persisted and been promoted through eight full grades or primary school—roughly 8000 hours of available total instruction—were either illiterate or innumerate or both...

Suppose you are a child from a poor household approaching adolescence in Uttar Pradesh who has struggled through years of schooling without learning anything, been promoted from year to year with no attention to your actual learning, perhaps even regularly beaten or threatened by teachers. You might consider dropping out of this “fierce” thing called school.

But wait. The development technocracy with its latest rigorous research methods and can-do, expansion of “what works” attitude has the solution to your drop-out problem: they will threaten your mother. This is a wildly new popular class of programs called “conditional cash transfers” which has spread from its origins in Mexico and Brazil to over 30 countries.

Also, have economists got themselves confused about the "conditional" on "conditional cash transfers?" Berk Ozler provides an excellent reply.

What are the learning effects of CCTs, aside from their enrollment effects? It does seem that this is a good research question to pursue moving forward. For now, I am a bit sympathetic to Ozler's argument but only because Pritchett's claim needs more evidence aside from an anecdote.

Ah, if only these sort of fierce debates also appeared in our politics. This Corona impeachment is a historical event for our country but how I wish we also debated our social programs/policies with as much gusto and careful presentation of evidence and analysis.

Intelligence is irrelevant

2012-01-11T21:24:00.001-05:00

The people who fail to graduate from MIT, fail because they come in, encounter problems that are harder than anything they’ve had to do before, and not knowing how to look for help or how to go about wrestling those problems, burn out.

The students who are successful, by contrast, look at that challenge, wrestle with feelings of inadequacy and stupidity, and then begin to take steps hiking that mountain, knowing that bruised pride is a small price to pay for getting to see the view from the top. They ask for help, they acknowledge their inadequacies. They don’t blame their lack of intelligence, they blame their lack of motivation.

During my freshman year, I almost failed out of differential equations. I was able to recover and go on to be very successful in my studies. When I was a senior, I would sit down with the freshmen in my dorm and show them the same things that had been shown to me, and I would watch them struggle with the same feelings, and overcome them. By the time I graduated MIT, I had become the person I looked up to when I first got in.

You feel like you are burnt out or that you are on the verge of burning out, but in reality you are on the verge of deciding whether or not you will burn out. It’s scary to acknowledge that it’s a decision because it puts the onus on you to to do something about it, but it’s empowering because it means there is something you can do about it.

So do it.

I got this from a post by Ben Casnocha. It's apparently from a Reddit thread of a HS student asking for advice about applying to MIT.

India became poorer because it had become richer?

2012-01-09T10:31:00.000-05:00

Paradoxically, one of the main reasons that India (and the rest of the world) became poorer was because India had grown less poor.

That is Angus Deaton in his presidential address at the 2010 AEA meetings critiquing the recent revisions to the international poverty line that moved it from $1 per day to $1.25 per day. The change increased the number of poor people by half a billion people.

The international poverty line is calculated by averaging the national poverty lines of the 15 most poor countries. India used to be in this group. But when it became richer, it graduated from this group, raising the poverty line.

I am studying this incredibly complicated business of trying to count the global poor. It seems like a dry topic but it surprises me how there are still many debates even about such a basic issue of counting. It is important of course that we continue to talk about this: we usually cannot change what we cannot count very well.

I am turning sympathetic to Deaton's case that maybe we should just ask people if they think they're poor.

Do Children Choose Rationally?

2012-01-08T17:20:00.003-05:00

As we delve into utility theory for our next class, my intermediate micro students are asked to reflect upon this wonderful 2001 paper by Harbaugh et al. in the AER exploring one of the most central arguments in economics. Do people actually behave rationally? Do children?

In this paper we report on the results of an experiment that tests whether children make rational choices about consumption goods. We studied 7- and 11-year-old children and, for comparison, college undergraduates. The experiment tests variations on what might be seen as the most basic requirement for rationality, namely that choices must obey transitivity. If a person picks A when given a choice between A than B, and B when given a choice between B and C, then barring indifference rationality requires that he must pick A when given a choice between A and C. We also examine how rationality, as measured by several different tests of transitivity and by a simple measure of the size of the violations, changes with age and mathematical ability.

...We presented our participants with 11 different choice sets. Each choice set was a list of between three and seven bundles, with each bundle consisting of a number of small bags of potato chips and a number of boxes of fruit juice. We used goods that would typically be consumed quickly because we wanted as little possible interaction between decisions in the experiment and outside influences...

...Using this experiment, we find that at age 7 children's choices about consumption goods show clear evidence of rationality, though also many inconsistencies. By age 11, choices by children with below-average mathematical ability are as rational as choices by adults with above-average intelligence, although even these adults' choices show many inconsistencies. Based on our results, we conclude that, to the extent the assumption of utility maximization is useful for modeling choice behavior by adults, it is also appropriate for children...

The most common critique I still hear against economics is that economists assume away irrationality. Our models are inappropriate, divorced from reality. Although this may hold some truth, I argue that assuming rationality is still the baseline case to consider. Inasmuch as physics benefits from first analyzing a frictionless world, social science benefits from first looking at the ideal case and then putting in place certain imperfections.

Also, there is now a whole subfield in the profession devoted to exploring what happens when people act irrationality.

More Fun in the Philippines

2012-01-05T23:22:00.001-05:00

The new slogan doesn't particularly strike me, but the campaign seems promising, especially if it is able to utilize social media effectively, as it looks poised to do (I hope it does!). You can almost imagine the website being highly interactive, where tourists can post their Philippine adventures and locals can give tips -- a virtual place to meet up.

Here's the link to the website #itsmorefuninthephilippines

I did my part today during the first day of classes by introducing myself to my students as a native Filipino who grew up in the country where the legendary Manny Pacquiao hails. This generated reactions from Floyd Mayweather fans, as expected. But I did promote the Philippines as a wonderful country to visit.

There are over 9 million Filipinos overseas - 10% of our population. These folks make the most natural ambassadors to potential tourists in the country. The challenge lies in how to mobilize this group to get their friends, their friends' friends, to take another look at the Philippines,

I hope those at tourism can make use of them, us, somehow.

The Danger of Stories

2011-12-25T23:07:00.001-05:00

From Tyler Cowen, speaking at the TedX Talks.

…we should be suspicious of stories. We’re biologically programmed to respond to them. They contain a lot of information. They have social power. They connect us to other people. So they’re like a kind of candy that we’re fed when we consume political information, when we read novels. When we read nonfiction books, we’re really being fed stories.

…So what are the problems of relying too heavily on stories? You view your life like “this” instead of the mess that it is or it ought to be.

…narratives tend to be too simple. The point of a narrative is to strip it way, not just into 18 minutes, but most narratives you could present in a sentence or two. So when you strip away detail, you tend to tell stories in terms of good vs. evil, whether it’s a story about your own life or a story about politics.

…As a simple rule of thumb, just imagine every time you’re telling a good vs. evil story, you’re basically lowering your IQ by ten points or more. If you just adopt that as a kind of inner mental habit, it’s, in my view, one way to get a lot smarter pretty quickly.

I find this great advice for life, but maybe more specifically to us researchers doing analytical work. Things are never as simple as they seem; there are invisible effects and unintended consequences which anecdotes often obscure.

The full transcript is available here. The excerpts are taken from Chris Blattman's blog.

What do you want it to be?

2011-09-13T18:35:00.002-04:00

I am reading some high quality debates (and jokes) lately for my class in labor economics. This one is on economists, and the assumptions we make.

An official at Treasury asks three experts, “What’s 200 billion plus 200 billion?” The first expert, a mathematician, immediately responds, “Four hundred billion, of course.” The second, an economist, kind of grimaces and says, “Well, that depends . . .” But the third expert, an econometrician, doesn’t immediately answer. Instead, he gets up and quietly closes the office door. Once he’s sure no one is listening, he leans over and whispers in the official’s ear, “What do you want it to be?”

I never thought this joke was very deep, but thinking about Leamer’s (1983) paper made me appreciate it more. Insightful jokes typically exaggerate to make a point, so let’s assume what is really being asked is a hard question like “How will consumer spending be affected by $200 vs. $400 billion in fifiscal stimulus?” The econometrician is well aware that by playing with assumptions—what control variables and instruments to use, what functional forms to pick—it’s possible to obtain pretty much any desired coefficient on government spending in the consumption function.

What struck me for the first time upon rereading Leamer (1983) is that the economist is really the hero of this joke. He knows what the econometrician knows, but he’s willing to admit it. In Leamer’s words, “All knowledge is human belief; more accurately human opinion.” In contrast, it is the mathematician who is really misguided, by expressing a false degree of certainty. My view, like Leamer’s, or the economist in the joke, is that there is no way to escape the role of assumptions in statistical work, so our conclusions will always be contingent. Hence, we should be circumspect about our degree of knowledge. In the words of Maimonides: “Teach thy tongue to say ‘I do not know,’ and thou shalt progress.”

-- Keane 2010 on the Journal of Economic Perspectives

The Classics of Development Economics

2011-09-10T11:59:00.000-04:00

"This class will proceed like a Great Books class, where we will read, critique, and learn from the classic papers in development economics." But as I glance at the syllabus, I notice that 98% of the 100+ papers assigned were written after 2002.

History and Development. Misallocation of Capital. Corruption. Infrastructure. Leaders. Property Rights. Media. Ethnic and Social Divisions. Conflict, Violence, and War. Inequality. Poverty Traps.

I wonder if Raj will allow me to post his syllabus online.

Yes, this is the state of development economics and there is no better time to be in field. Much of the exciting, creative work is being done now and there is a huge opportunity to contribute.

Why Can't We Be More Like Kenya?

2011-08-06T14:23:00.003-04:00

Yes, I am asking that question. Kenya is the first "low income country to have an open government data portal".

From the World Bank's Let's Talk Development:

On July 8th 2011, President Mwai Kibaki launched the Kenyan Open Data Initiative, making key government data freely available to the public through a single online portal. The 2009 census, national and regional expenditure, and information on key public services are some of the first datasets to be released. Tools and applications have already been built to take this data and make it more useful than it originally was.

...with over a hundred requests from the public for new datasets on the opendata.go.ke site, it's clear that there's a desire for more information. People want data similar to what they might want in the USA: land registry, company registrations and employment statistics to name a few. Kenyans also want data that citizens of more developed countries may be less likely to ask for: fire protection information (how many fire engines are there per county?), school payment disbursement data (do government funds actually reach schools?) and livestock populations.

Open data in Kenya is special: it comes at a time of national change; it’s got a head start on tools and expertise from the global open data community and it’s happening in a country where the information ecosystem is still maturing.

Setting an Example for Transparency

2011-08-02T22:22:00.002-04:00

The Center for Global Development, where I used to work, has a new transparency policy: "we will post the data and the code that underpins our analysis."

CGD analyses should be acts of social science. By some definitions, a sine qua non of science is replicability. The responsibility for replicability is especially great for research that aims to influence policy and ultimately affect the lives of the poor. Bruce McCullough and Ross McKitrick put it well in their report, Check the Numbers: The Case for Due Diligence in Policy Formation:

When a piece of academic research takes on a public role, such as becoming the basis for public policy decisions, practices that obstruct independent replication, such as refusal to disclose data, or the concealment of details about computational methods, prevent the proper functioning of the scientific process and can lead to poor public decision making.

It is a good example to set, especially when one calls on aid organizations and governments to be transparent. It's pretty timely as well; I'm thinking about the groups currently calling for the Freedom of Information Act in the Philippines to pass. Are they being transparent?

Guess this means more work for my old research assistant friends back at CGD. Maybe it's time to ask for a salary raise? Ha!

CSR driven more by PR than helping?

2011-08-02T19:37:00.004-04:00

This paper provides an empirical investigation of the hypothesis that companies engage in corporate social responsibility (CSR) in order to offset corporate social irresponsibility (CSI). We find general support for the causal relationship: when companies do more “harm,” they also do more “good.” The empirical analysis is based on an extensive 15-year panel dataset that covers nearly 3,000 publicly traded companies. In addition to the overall finding that more CSI results in more CSR, we find evidence of heterogeneity among industries, where the effect is stronger in industries where CSI tends to be the subject of greater public scrutiny. We also investigate the degree of substitutability between different categories of CSR and CSI. Within the categories of community relations, environment, and human rights—arguably among those dimensions of social responsibility that are most salient—there is a strong within-category relationship...

The working paper is here, via @Bill_Easterly. I am filing this under papers-to-read-after-my-prelims. I am stressed for time.

Mechanism Design and Why Government Auctions Matter

2011-07-31T22:33:00.005-04:00

All roads lead to mechanism design. It is the last topic covered by any advanced microeconomics course here in the US.

The setup is thus: we want to achieve a social goal. Maybe it is the efficient allocation of resources or the equitable distribution of wealth. Whatever it is, we imagine how a most benevolent dictator would do things, and that is the aim we envision.

The problem is almost philosophical. People have different motivations, different goals that compete. These goals are not stated explicitly and people cannot be counted on to care for society's aim as a whole, although some might.

How can we then fashion the rules of the game in such a way that people, diverse as they are, left on their own devices, can move towards the goal we envision. Does such a "rule" exist? If so, what are the possible rules or mechanisms we can implement to drive people towards this goal?

These are the questions I have pondering on for the past few days. We are given problems where we are tasked to find appropriate mechanisms. Quite interestingly, the answer is almost never "let the markets run freely," although it seems outsiders always think that as economists, this should always be our answer. Free markets only work under the assumption that information is perfect, everyone's goals are well known, and there are no externalities. This is not the case. And surely, the world works in a different way.

I think mechanism design can be most clearly explained through the classic problem of who the government should task to build the next tollroad. The government wants to make sure the selected contractor is the best one for the job, that it could build the highway in the least cost with the best materials. But the problem is the government doesn't know what the motivations of each firm is, how efficient their production would be, and how each of them value the project. The government could spend loads just figuring this out. The contract might be given to the wrong firm.

In such a case, we find that an appropriate mechanism is to auction off the contract, like in a first price auction. Auctions work because it can be proven that each firms best strategy would be to submit bids equal to their true valuation. This allows the government to identify the most efficient firm, the one most worthy of the project. It provides the government with most revenue. BUT this only works as long as -- and the proof heavily relies on this -- firms are prevented from colluding and rigging the ballot. This is why the way government procurement is done matters a lot.

My head hurts from studying too much. But at the moment, I'm relishing the realization that there's a load of theory that goes behind such simple things as auctions.

Send our Boys Abroad

2011-07-30T22:31:00.004-04:00

Etheridge, Gier, Younghusband, Schrock, Jonsson. Here are some of the names of the side we fielded to meet Kuwait in the 2nd leg of the Fifa World Cup qualifiers. None sound Filipino. None play their football in our country. Yet I hear no one complaining that they should represent the Philippine team, who have done our nation proud. Why should anyone complain? These five and a couple of others - Greatwich, De Jong, Hinrich, Ott, Burkey - are part of the reason why the Philippine Azkals have been named the 2nd most improved side in the world.

Not that anything about this should strike you as strange. Around the world, you see the same trend. Here's the French football team. Count the number of players that appear French. How many of these players still play in France? I don't think any of them, except the goalkeeper, does.

In 2003, top English football club Arsenal went on a record-breaking unbeaten run of 38 games -- an unbeaten season in the English Premier League, where competition is fiercest. The side was dubbed the "Invincibles." The team was composed of all foreigners, except two.

It's a world of globalized labor we live in and the benefits can be most clearly seen in football. The migration of talent allows tantalizing sides like Barcelona, Manchester United, Real Madrid, and AC Milan to develop. It is this same process that allows Younghusband, Schrock, Etheridge and others to grow into the stars they are for the Philippine side.

There are questions now on how we can make the Philippine side stronger for upcoming competitions. I am surprised no one has suggested this before: I say send the best of our boys to play in clubs abroad. It will do them and our country good.

(Thanks for Corrine Elum, who sent me the list of players)

The SONA in a Word Cloud

2011-07-25T08:00:00.005-04:00

As expected, but I'm disappointed there was nothing on the legislative agenda. The problem with reform without legislation backing you up? Everything can be reversed by the next administration.

Was the Larry Summers Scene on the Social Network True?

2011-07-23T21:18:00.005-04:00

In case you've missed it, this interview has made the rounds in the blogosphere lately.

MR. ISAACSON: So was that scene in the social network true?

DR. SUMMERS: I've heard it said that I can be arrogant.

DR. SUMMERS: If that's true, I surely was on that occasion. One of the things you learn as a college president is that if an undergraduate is wearing a tie and jacket on Thursday afternoon at three o'clock, there are two possibilities. One is that they're looking for a job and have an interview; the other is that they are an asshole.

DR. SUMMERS: This was the latter case. Rarely, have I encountered such swagger, and I tried to respond in kind.

The full video is here. Felix Simon provides a short profile and a good summary of the interview here. Summers' view on US macroeconomic policy is worth reading, whether you care about the US or not.

Optimistic Much? Conditional Cash Transfers are Not Enough.

2011-07-23T04:01:00.012-04:00

Mahar Mangahas criticizes the latest Philippine Development Plan's "inclusive growth" strategy:

“Inclusive growth” is the current buzzword or fashion statement among those economists and development biz types who insist that macro growth is the key to success, yet grudgingly concede that it hasn’t delivered on promises to uplift the masses...

The Plan’s other chapters are on “macroeconomic policy,” “competitive industry and services sectors,” “competitive and sustainable agriculture and fisheries sector,” “accelerating infrastructure development,” “towards a resilient and inclusive financial sector,” “good governance and the rule of law,” “social development,” “peace and security,” “conservation, protection and rehabilitation of the environment and natural resources.” With conditional cash transfers, health, and education mentioned only in passing, and undeserving of even a sub-chapter, this Plan isn’t too focused on “inclusive growth.

I, for one, am willing for the government to focus almost solely on anti-poverty programs, and let growth take care of itself.

I agree that growth is not the only thing. But Mahar Mangahas is too optimistic about these anti-poverty programs. I like the CCT, I really do. In fact before people started raving about it in the Philippines, I mentioned in my blog that it should be the next "thing." (Sorry for the brag.) But it seems now we are being over optimistic about what these types of programs can achieve. Conditional Cash Transfers is the buzz phrase.

What is the BEST evidence on CCTs so far? The evidence is strong that it increases schooling. Child health and nutrition are also improved. CCTs reduce child labor. It increases consumption. This paper is a good summary of the literature. But how much does it actually reduce income poverty... not many make that very strong claim.

Is it still a program worth doing? Sure. But it's NOT a substitute to growth.

I've said this again and again recently, so pardon the insistence that this is important, but in the Philippines, the unemployment rate for the educated is higher than the uneducated. Getting people to go to school through CCTs is part of the equation, but will it be enough to lift households out of poverty when the transfers end? I doubt it. Without structural change, I just don't see it.

Programs will be programs. They end. The money coming from the World Bank will run dry. Let's move on from gushing about the conditional cash transfer program we are currently implementing. It's insufficient.

Mr. Mangahas ends by saying that the promise laid out by the report of reducing poverty by 10 percentage points in 6 years has never been done. Like the true social scientist that I am, I am skeptical. Never? I may be wrong (and a little bit pilosopo), but what was the rate of reduction during the greatest period of growth in the history of man, the industrial revolution?

***DISCLOSURE: I have not read the full Philippine Development Plan Report***

Level-Up By Reading the News

2011-07-20T17:32:00.007-04:00

Or should I say, badge-up? Google badges may have been overshadowed by the release of google+ but it's another one of those simple but ingenious ideas coming from my favorite company. Earn badges by reading the news.

The idea is similar to the system used in games like World of Warcraft, a most addicting game, where you level-up your character by accumulating experience points, achieving missions, and doing quests.

Google applies the same incentive structure to reading and hopes that it would increase readership. It's unique; you level-up yourself by reading more. Now imagine if this catches on, and people would read more, get more fun out of this task, with the same intensity that gamers play their RPG games. Public awareness would increase. And perhaps those history teachers would not have such a hard time convincing their students to master their current affairs.

Now if only there was a way to apply the same addicting incentives to work. Imagine what could happen to productivity if workers attacked their tasks with the same gusto as World of Warcraft players to combat their online enemies. That would be the day.

What's the Legislative Agenda, Mr. President?

2011-07-20T00:31:00.012-04:00

Forgive me if I join the chorus of those who would predict what would be said in the SONA on Monday. I would like to bet on these. The president will highlight the recent success in government revenue collection and the subsequent upgrading of our country's credit rating to BB+. There will be short mention of the conditional cash transfer program and its progress (although as my friend points out, that was "so last year."). An announcement will be made about the expansion of a community development program, KALAHI-CIDSS, which will allow government units in 21 provinces to fund and create their own local development initiatives. It's unique; it's massive. The US, through its Millenium Challenge Corporation is funding $120M of it.

If any of these turn out to be correct predictions, it's only because the president has shown himself readable in his first year. He is a project-oriented person. In this, he has found success.

The most exciting part to me about this SONA then is not what the president will say about projects but what the president will say on the legislative front. No one will disagree with me when I say this administration has so far taken policy for granted. The legislative agenda in the past year has been incoherent at best. The president ran under banner of anti-corruption and anti-poverty -- "kung walang corrupt, walang mahirap" -- but how the RH and divorce bills fit into this framework, I am left wondering. Should those be the priority? Population control to me remains a dubious anti-poverty strategy, and the empirical research on the topic confirms this, although I agree that the bills would do wonders for women's health and rights.

Whatever happened to the Freedom of Information Act? I cannot think of another policy that embodies "kung walang corrupt, walang mahirap" more. Recent research in India suggests that such a policy substitutes for bribery. No other law is politically easier to pass. For how can anyone reasonably argue against transparency? The costs would be marginal for releasing government data to the public.

There is also the pressing need to discuss the labor code. Recent data on the Philippine labor market, as I have blogged before, is horrifying. The unemployment rate is significantly higher for college educated filipinos than for uneducated ones in the domestic market-- 10% compared to 3% respectively. The returns are negative. It is of no wonder than that workers flee for foreign employment. But the situation in Saudi Arabia will make matters worse. No conditional cash transfer program or project can mend this problem. The country needs some change of policy.

What will be on the legislative agenda next year? Any thoughts and comments on what else could be done? I am all ears this Monday.

Development Bingo for the SONA

2011-07-09T20:29:00.007-04:00

One of my fond memories from working at the Center for Global Development in DC is the annual State of the Union Bingos we held. The event would work like a usual bingo game would, except that instead of numbers we would have development words in the boxes of the bingo cards. So every time President Obama would mention something related to development in his speech, like "climate change," "aid," or "health" one of the boxes in the cards would get ticked. There would be prizes and of course a healthy supply of booze. We would hold it in one of the bars downtown. Friends of the center, folks who are interested in development, and staff, especially the young ones, would go.

I share only because some might want to plan a similar event for President Aquino's State of the Nation next week. It's a good way to get people to listen, to show that politics and public policy is fun -- as it really is. I hope someone could catch on to this.

When History was Made

2011-07-06T20:46:00.000-04:00

Whoa.

The chart below shows a population-weighted history of the past two millennia. By this reckoning, over 28% of all the history made since the birth of Christ was made in the 20th century. Measured in years lived, the present century, which is only ten years old, is already "longer" than the whole of the 17th century. This century has made an even bigger contribution to economic history. Over 23% of all the goods and services made since 1AD were produced from 2001 to 2010, according to an updated version of Angus Maddison's figures.

I got this one from the Economist.

A Word of Caution About the RH Bill

2011-07-03T19:26:00.007-04:00

Some tables I pulled from the full report of the National Health and Demographics Survey of 2008. There are two small things I want to point out. First, a whopping 97.8% of women are familiar with modern contraceptive methods.

How does the current RH bill take this into account? This tells me that any proposed sexual education program must be mindful that people already know. What will be the value added? I hope current advocates are thinking hard about this. Knowledge of contraceptive methods is not the binding constraint. (Although perhaps knowledge of side effects is? I'm talking about the last table here.)

Second, considering that religious groups make the most noise against the RH Bill, I find it interesting that, in the end, religion plays such a tiny, tiny part of the decision of women not to use contraceptives.

I have in my computer the micro data for the Survey. If only I had more time, it would be fun to play around with it and see what more it can contribute to the debates because it is so rich with information. But I'll leave it to others at this point; I have exams to look after. To those interested, the data is freely downloadable at http://www.measuredhs.com/ upon request.

Calling health economists?

The Strange and Distorted Philippine Labor Market

2011-06-30T03:39:00.003-04:00

Yet some clues to the problems facing Philippine industry may be gleaned from work by Philippine labor specialists. For example, despite the higher productivity in the urban industrial sector and the need for highly skilled workers, the unemployment rate is higher for college-educated students than less educated workers. In 2008, the college-educated had a 10.6 percent unemployment rate compared to 8.6 percent for those with only high school degrees, 3.3 percent for those with elementary education, and 2.1 percent for those with no elementary schooling at all. This is so much the opposite of what is typical in the developed economies that it suggests the importance of high barriers to entry in the formal job market that are not binding in the low-wage, heavily informal service and agricultural sectors that are more likely to employ the least educated.

Esguerra (2010) points to two features of Philippine industry that would dramatically inhibit job creation: (i) a high industrial minimum wage and (ii) strict employment protection

...

As is well known, competition and investment are hampered by constitutional rules that limit foreign participation in local business to minority status and that prohibit foreigners from owning property with a few limited exceptions such as inheritance. This severely restricts the entry of firms with the greatest knowhow and managerial experience that would benefit the Philippine economy.

It is not a surprise that skilled workers are among the Philippines’s largest exports. Overseas workers on a variety of temporary assignments cannot find employment in their home country because enterprises are heavily constrained in their ability to enter. It is simpler to hire Filipinos abroad than at home with predictable costs for growth and developmental progress...

...

Despite the clear and glaring problems that these and other distortions represent, what are two of the most highly promoted reforms often suggested for the Philippines? Tax collection (or fiscal reform) and infrastructure development.

The last, is a very good question.

This, from a thoughtful new ADB paper by John Nye about labor market rigidities in the Philippines. My former boss, Michael Clemens, describes Nye as a "hyper-brilliant guy, an extremely impressive intellect."

This is a paper I wish my friends in government will read, despite its length. You may disagree with the specific policy implications, but I believe it gives an accurate assessment of the problems facing the Philippine economy that no one is saying.

Should we take the Freedom of Information Act More Seriously?

2011-06-26T23:47:00.002-04:00

Recent empirical evidence from India suggests that we should:

In this randomized field experiment we observe urban slum dwellers of New Delhi, the capital of India, apply for ration cards at the local offices of the Food and Civil Supplies Department. The ration card entitles the holder to subsidized foodstuffs and is the cornerstone of India’s minimal welfare state. To measure the benefit derived from paying a bribe and the effectiveness of an anti-corruption intervention we compare the length of time lapsed before a ration card is issued for confederates randomized into a control group and three treatments—bribepayment, FOI [freedom of information] application, and NGO support.

The findings from the field experiment are striking in their clarity. Only confederates randomly assigned to the bribe and local freedom of information law interventions received ration cards within the experimental time frame of seven and a half months. The maximum legally mandated period during which ration cards must be issued is forty-five days. The fastest way to secure a ration card is through bribery. The FOI treatment is only a little less effective than the graft intervention. NGO support seems to be completely ineffectual in helping the urban poor to secure ration cards

The highlights are mine. The paper is forthcoming in the Journal of Law and Economics. An outdated draft version is here.

HT to Chris Blattman

Just as Beautiful. Just not as Expensive.

2011-06-23T23:34:00.003-04:00

Brilliant new ad from the Department of Tourism. It oozes cocky-smart. This one's a hundred times better than that failed "Pilipinas Kay Ganda" slogan from months ago. I can almost imagine a whole series of these coming out. They're a bit controversial, but it's time we, as a country, showed some balls for a change.

HT to Jayvee Fernandez

An Undersupply of Physicians?

2011-06-15T22:07:00.007-04:00

Here's a follow up on my previous post on keeping medicine and health students in the country. Some might say my argument relies heavily on nurses while what U.P. is trying to do is stem the tide of migrating physicians.

But here's the data on physicians per 1000 people. I hardly think our 1.2 physicians per 1000 people constitutes an undersupply, given that we have a higher number than Thailand, India, and some comparable countries. But I'm no expert so I'll let health practitioners comment on whether the number for the Philippines is sub-optimal or not.

The data is from the World Development Indicators. The latest year for the Philippines is 2004. Not all countries have a data point in this year so they have been dropped.

New U.P. Policy Will Try to Legislate Nationalism.

2011-06-15T09:57:00.007-04:00

Students of medicine or any health related course from the University of the Philippines will now be obligated to serve 2-5 years in the country. As always, they cite "brain drain" -- whatever that is -- as the culprit. I outline here why I think this is an awful policy.

1. Contrary to what people think, we have an oversupply of nurses. Here's a link to an old blog post of mine to elaborate. Viewers of TV Patrol will know this: there was a recent feature on nurses actually needing to pay hospitals to employ them, to give them training because there are just too just many of them. Can you imagine that? UP's policy of preventing health workers from migrating abroad will only exacerbate this oversupply.

2. The real problem is the undersupply of nurses in the provinces. You take care of that problem by thinking of incentives to lure those in Manila to these places. Or by training community health workers. We don't need more health workers in the country by preventing those trained to go abroad; we need a redistribution of human resources.

3. While I can't prove this with hard data at the moment (because it would be too costly for my time to dig into the Survey of Overseas Filipinos), the remittances that these people who go abroad send back amount to X-times the amount that's needed to pay for a UP education. And contrary to conventional wisdom, the high skilled *do* remit. Yes, it's not only the low-skilled OFW housemaids or construction workers.

4. Not that this policy will be effective since people will just go to other schools (too bad for UP they'll lose quality students). Never have I heard that going to nursing in UP in particular was an important determinant in getting a job abroad.

5. Maybe the concern is tax money but are the tuitions of students in medicine and health really depleting the national coffers? Someone should look into these numbers. Judging from the dilapidated buildings in UP that seem to have never been repaired, I doubt this is a very huge amount.

6. Would keeping a disgruntled workforce from migrating abroad be productive? Remember, these will be people who want to go abroad but are prevented from doing so. They will be a frustrated bunch. I would not think of keeping them as good and proper development policy.

To be honest, without any proper explanation of what this "brain drain" is -- is it an undersupply of healthworkers, a depletion of tax money? -- I do not know what goal this policy is trying to achieve except to legislate false nationalism ala Winnie Monsod whom I disagree with here. That is, nationalism in the sense of keeping people where they are for the sake of doing so. But we cannot legislate nationalism.

In the end, the goal of public education is to expand the freedom of people to live a life they have reason to value -- not to limit it. I demand proof that shows the migration high skilled workers cause harmful effects to those left behind. Otherwise, I believe this policy is simply contrary to what public education is all about.

On What Makes a Top University

2011-06-09T23:20:00.002-04:00

A survey of living MIT alumni found that they have formed 25,800 companies, employing more than three million people including about a quarter of the workforce of Silicon Valley. Those firms between them generate global revenues of about $1.9tn (£1.2tn) a year. If MIT was a country, it would have the 11th highest GDP of any nation in the world.

The full article, which talks about the university's 150th anniversary, is here.

In other news, my alma mater, the Ateneo de Manila University celebrates being the first in the Philippines to receive Institutional Accreditation and Level IV Reaccredited status by the Federation of Accrediting Agencies of the Philippines (FAAP). There is a ton to rejoice about of course. It confirms that we are a top school in the country.

But a voice in my head also asks: but how many entrepreneurs has the university produced? How many jobs has the school created through its students?

One looks at top schools like Harvard, MIT, etc. and the people here have a totally different mindset from the folk at usual universities. Watch the Social Network. While people do not talk that way as they do in the movie, the film captures the culture accurately: the goal is always to come up with the next new idea, to create the next new job.

Unfortunately, I still do not quite see this in the Ateneo. It reminds me that despite the awards, we are still far, very far, from being a truly top school. There's no room for complacency.

Legalize Bribe Giving to Reduce Bribery?

2011-06-05T00:01:00.002-04:00

A novel idea from Kaushik Basu, India's current chief economic adviser. The full paper is here; the WSJ article here.

There are different kinds of bribes and what this paper is concerned with are bribes that people often have to give to get what they are legally entitled to. I shall call these harassment bribes. Suppose an income tax refund is held back from a taxpayer till he pays some cash to the officer. Suppose government allots subsidized land to a person but when the person goes to get her paperwork done and receive documents for this land, she is asked to pay a hefty bribe...

The central message of this paper is that we should declare the act of giving a bribe in all such cases as legitimate activity. In other words the giver of a harassment bribe [not the demander] should have full immunity from any punitive action by the state.

It is argued that this will cause a sharp decline in the incidence of bribery. The reasoning is that once the law is altered in this manner, after the act of bribery is committed, the interests of the bribe giver and the bribe taker will be at divergence. The bribe giver will be willing to cooperate in getting the bribe taker caught. Knowing that this will happen, the bribe taker will be deterred from taking a bribe.

Sounds to me like this is a policy we can experiment on and see if it works. At the very least, it's worth a try.

HT to Marginal Revolution.

The Urban Poverty Paradox

2011-06-04T23:32:00.006-04:00

This is the second time I'm quoting "The Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier" because the book is simply composed of many little sharable insights. This one's a good note for city planners: providing expanded public services must not only take into account current under-capacity, but must anticipate the under-capacity generated by the public service as well.

The great urban poverty paradox is that if a city improves life for poor people currently living there by improving public schools or mass transit, that city will attract more poor people...

Cities aren’t full of poor people because cities make people poor, but because cities attract poor people with the prospect of improving their lot in life...

Also,

Indeed, we should worry more about places with too little poverty. Why do they fail to attract the least fortunate?

Of course, it's better to read the book to see the full argument.

Fees for Plastic Bags: Make it a Peso Per, Please

2011-06-01T00:21:00.005-04:00

It's a long shot to claim that this bill on charging fees for plastic bags was influenced by my recent blog post, but I'd still like to take credit for it, however imaginary, as an ego boost.

The bill, also known as the "Plastic Bag Use Disincentive Act of 2011", will require big stores, food chains and similar establishments to charge their customers not less than P5 per plastic bag, regardless of size when buying items or products.

This is a fabulous idea and I've seen it work well in DC, where people are now more conscious to bring their own bags when they go to the grocery.

I believe charging upwards of P5 is too much though. Again, I suggested in my previous post that P1 per bag is enough, since I am afraid this policy might disproportionately hurt the poorer folk. The point of the bill should not be revenue generation, but mere behavior deterrence. And with deterrence, it's enough to go from no fee to some small fee, as opposed to going to no fee to a substantial amount. Behavioral economists would agree with me.

In the meantime, I'm still horrified by the cashier at my local minimart who insists on putting the small shampoo saches I've purchased in a plastic bag. Redundant much? I'll carry them home with my empty hand, thanks.

Commutes that Kill

2011-05-31T09:02:00.001-04:00

My two hour commute last night from Intramuros to Libis, reminded me of this piece on Slate:

This week, researchers at Umea University in Sweden released a startling finding: Couples in which one partner commutes for longer than 45 minutes are 40 percent likelier to divorce. ...

In 2006, Nobel laureate Daniel Kahneman and Princeton economist Alan Krueger surveyed 900 Texan women, asking them how much they enjoyed a number of common activities. Having sex came in first. Socializing after work came second. Commuting came in dead last. ...

Long commutes also make us feel lonely. Robert Putnam, the famed Harvard political scientist and author of Bowling Alone, names long commuting times as one of the most robust predictors of social isolation. He posits that every 10 minutes spent commuting results in 10 percent fewer "social connections." Those social connections tend to make us feel happy and fulfilled. ...

Those stressful hours spent listening to drive-time radio do not merely make us less happy. They also make us less healthy. The Gallup survey, for instance, found that one in three workers with a 90-minute daily commute has recurrent neck or back problems. Our behaviors change as well, conspiring to make us less fit: When we spend more time commuting, we spend less time exercising and fixing ourselves meals at home. ...

It is commuting, not the total length of the workday, that matters, [Thomas James Christian of Brown University] found. Take a worker with a negligible commute and a 12-hour workday and a worker with an hourlong commute and a 10-hour workday. The former will have healthier habits than the latter, even though total time spent on the relatively stressful, unpleasant tasks is equal.

Two economists at the University of Zurich, Bruno Frey and Alois Stutzer, actually went about quantifying it, in a now famous 2004 paper entitled "Stress That Doesn't Pay: The Commuting Paradox." They found that for an extra hour of commuting time, you would need to be compensated with a massive 40 percent increase in salary to make it worthwhile.

Perhaps my time in the States has made me more irritable about Manila traffic, but it really is a waste of time. Plus with gas at ~50 pesos, how does our future look like?

Let me say this: if our public transportation gets better, and I can walk and commute with relative ease inasmuch as I do in the States today, then I will migrate back for sure.

HT to James Choi for the block quotes

Let the Diploma Mills Be

2011-05-26T01:36:00.005-04:00

Harvey Keh in his latest Manila Times column advices the government to close down low-quality nursing schools. I disagree. Harvey tells of the story of Edward, a minimum wage earner, who enrolled in a well-advertised nursing college only to fail the Nursing licensure examinations twice, ending up unemployed and unable to help his family, who invested heavily in him.

I see the problem that Harvey is citing, but I do not think his solution is commensurate to the situation at hand. If the main problem is that people are misled to enroll in "diploma mills", then the appropriate solution is to provide more accurate information for these "Edwards" to make better choices. Or at least to make sure all the information nursing schools provide are correct.

Believe it or not, some people, even with full information, are willing to pay to go to low quality schools. It's the same with cars: some people are willing to pay for used and low quality cars. Because of this, the market for low quality things should be kept open. Otherwise, all that will be left are high quality institutions at high unaffordable prices, inasmuch as all that will be left are high quality cars whose prices will be pushed upwards, to continue the analogy. That's just how supply and demand work. But not everyone can afford to go to an Ateneo or La Salle. Not everyone would even want to. In this scenario, more would not get to go to school.

But because I think that low education is still better than no education, I am skeptical of Harvey's advice.

Let the diploma mills be.

*Note that it's not even clear whether students are failing out because the schools are poor or because the schools simply attract lower quality students, but that's a totally different argument.

Filipino Food Into Escargot

2011-05-19T01:48:00.003-04:00

Food is the main attraction in the Philippines. Whenever I come back, I always ask for what's new, and besides malls, people point me to restaurants that have opened up.

It takes different eyes sometimes to appreciate the huge variety of food here. My foreign friend jokes that in her stay here, she's now eaten food of every color. Red for rambutan, brown for adobo, white for lanzones, yellow for mango, and purple for ube and the Pili nut that Sorsogon is famous for. Okay, maybe except for blue.

One wonders why then, despite the richness of our food, international recognition of it has been lacking. My friend agrees that adobo would be an instant hit, so would halu-halo. But ask a random person in the US and most likely, he would hardly have a clue what Filipino food is. He would know Thai, Japanese, Vietnamese, Indian, Korean, and Chinese, but not Filipino. It is disappointing, considering Filipinos make up a large portion of immigrants in the country.

The french cook snails, call it escargot, and suddenly it's a $100. It's snails for crying out loud. Present a product well, make an experience out of it, and it will sell.

Is there any way we can market adobo better? Is there a way to market our sisig, mangoes, pinakbet, bicol express, and bangus that will capture the imagination of the western world?

We bring our food overseas but cater it to the OFW market, like that Jollibee in New York. (Not that Jollibee is any good anyway.) But observe filipino stores, in general. Little effort is done to entice foreigners to take part in our food. We do not adopt them to a different palate. This is the problem.

The Bicol Express I had the other day was wonderful.

Notes from the Field: Getting the Feel

2011-05-11T09:44:00.001-04:00

I need a foot massage. In the past three days, I have been accompanying Jaye, our program associate, back and forth Bulan, Irosin, and Sorsogon City to meet with our project's satellite offices, train encoders and to accompany them in some of their interviews. The bus rides have been long. The view, thankfully, has been scenic. We are trying to get people jobs abroad. We are trying to see what happens if the barriers to migration are lowered.

Jaye is an amazing project manager, and compared to her, I feel utterly useless. There is something I admire about her, coming to live here in rural Philippines, even for just a year, to leave a comfortable life in the States. In contrast, I am an eager PhD student, who seems to have brought the wrong guns to battle. The theories I have painstakingly learned in my first year are of no use here at the moment. I am no project manager.

Nevertheless, I am starting to get the feel of this place. I am realizing how important this is: to get a non-cognitive assessment, to take in the environment, to sniff out what the critical issues and questions could be in the research. Sure, many just sit in front of a computer and do some analysis, regressions. But analysis without experience seems impoverishing. At least for me, I feel like I would be able to write a much richer paper now that I will be here for some time.

What is the main benefit of a randomized control trial? Many have praised it for advancing our capability for causal identification in development. But now that I am here in the field, working on one such experiment, could it be that its main benefit has simply been that it has brought more development economists into the field?

Cities aren't structures; cities are people

2011-05-08T03:07:00.004-04:00

I have arrived in Sorsogon City in rural Philippines. Because I have yet to see action in our research project, and there is not much to do yet especially here in the province, I have taken to reading. Currently, "The Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier" is proving to be compelling. In particular, this sequence of passages struck me:

Too many officials in troubled cities wrongly imagine that they can lead their city back to its former glories with some massive construction project -- a new stadium or light rail system, a convention center, or a housing project. With very few exceptions, no public policy can stem the tidal forces of urban change. We mustn't ignore the needs of the poor people who live in the Rust Belt, but public policy should help poor people not poor places.

The hallmark of declining cities is that they have too much housing and infrastructure relative to the strength of their economies. With all that supply of structure and so little demand, it makes no sense to use public money to build more supply. The folly of building-centric urban renewal reminds us that cities aren't structures; cities are people.

After Hurricane Katrina, the building boosters wanted to spend hundreds of billions rebuilding New Orleans, but if $200 billion had been given to the people who lived there, each of them would have gotten $400,000 to pay for moving or education or better housing somewhere else. Even before the flood, New Orleans had done a mediocre job caring for its poor. Did it really make sense to spend billions on the city's infrastructure, when money was so badly needed to help educate the children of New Orleans? New Orleans' greatness always came from its people, not from its buildings. Wouldn't it have made more sense to ask how federal spending could have done the most for the lives of Katrina's victims, even if they moved somewhere else.

Ultimately, the job of urban government isn't to fund buildings or rail lines that can't possibly cover their costs, but to care for the city's citizens. A mayor who can better educate a city's children so that they can find opportunity on the other side of the globe is succeeding, even if his city is getting smaller.

Bravo. Development strictly speaking is not about place, but about people. This should have implications on how we should think about migration and development.

Additionally, I am thinking of Manila, Bayani Fernando, and in some ways Gawad Kalinga. I am thinking of how we should go about rebuilding in areas perpetually hard hit by typhoon.

The Hidden Sources of Love, Character, and Achievement

2011-05-04T19:29:00.011-04:00

Children are coached on how to jump through a thousand scholastic hoops. Yet by far the most important decisions they will make are about whom to marry and whom to befriend, what to love and what to despise, and how to control impulses. On these matters, they are almost entirely on their own. We are good at talking about material incentives, but bad about talking about emotions and intuitions. We are good at teaching technical skills, but when it comes to the most important things, like character, we have almost nothing to say.

The passage is from a book I just finished, "The Social Animal: The Hidden Sources of Love, Character, and Achievement." The focus is on the latest research about the brain, particularly the unconscious, and its implications on how one ought to live life. It reads like a Philo 104 discussion couched in a story, lighter and more entertaining. Keen observers will note that the gist is strongly anti-"the Tiger Mom" way of bringing up kids, referring to Amy Chua's latest book.

Highly recommended. Chapter after chapter, I found myself highlighting tidbits of info I'd like to repeat to myself later on as a guide to life. Some passages I would like to reuse as conversational pieces. Did you know, for instance, that

...most adults have a vocabulary of about sixty thousand words. To build that vocabulary, children must learn ten to twenty words a day between the ages of eighteen months and eighteen years. And yet the most frequent one hundred words account for 60 percent of all conversations. The most common four thousand words account for 98 percent of conversations. Why do humans bother knowing those extra fifty-six thousand words?

The rationalist approach by mainstream economics got bashed, while recent work in behavioral economics got praised. I do not mind. (Note though, as I always like to contend, that no serious minded economist actually believes that humans are perfectly rational beings. No one. It's just easier to start with a model that assumes rationality inasmuch as it is useful in physics to start with a world without friction. And that's when you put in complexity. For how else would one start? What would be the baseline?)

The book however is most rewarding in its discussion of moral reasoning. Plato is given a run for his money here: The notion that morality is all about reason conquering one's passions is taken down. Goodness then, it is argued, is composed of emotion, passion, and perception. It is an argument I have not heard before.

After reading, I felt compelled to do a better job at life. Buy it.

Creepy Hand Model

2011-03-12T08:11:00.000-05:00

An effect of specialization in the economy. Would Adam Smith be proud?

Thanks to Dyuti Bhattacharya for the pointer.

Do You Need a Plastic Bag?

2011-03-05T15:29:00.001-05:00

This occurred to me today, while buying cold medicine at a local pharmacy. What alternative things can we do to save the environment? Mandate managers to train their cashiers to ask, "do you need a plastic bag for that?"

A small detail, I know, but it makes sense since most of the time, we don't really need bags especially for our small purchases. That new book bought, for instance, can just as easily fit into the bag one brought with or without plastic. But we often forget, just like I did today, as I carried home my package in a plastic bag, when I could have simply put it in my pocket. If only the cashier asked me, perhaps I would have remembered.

Do you need a plastic bag? What if all cashiers of small stores asked this question whenever people bought anything? I wonder how much could be saved. It would be a good example of "nudge."

Another good nudge would be taxing plastic bags with a meagre amount, say 1 peso per. While this is such a small amount that in principle would not hurt anyone economically, the concept of loss aversion would say that people would respond significantly by cutting their bag consumption.

How about this as an alternative policy?

Why Getting Rid of Dictators is Not Enough

2011-02-22T15:25:00.000-05:00

A perceptive piece by Arvind Subramanian on why the Arab revolution might not see an economic boom. A fundamental change in the political economy is also needed. While reading this, I was about to say: case in point, 1986 Philippines:

Even if the people of Libya and Bahrain join those of Egypt and Tunisia in overcoming their cursed political systems, the economic manifestations of their rent curses will remain. Even if they become more democratic, because these countries benefit from substantial rents they will have less need to tax their peoples. This precludes the need to reform state controlled industries to create private sector wealth. It also will stop the development of genuine democratic systems, the usual basis for the legitimate taxation of citizens.

The history of economic development suggests that rent-ridden countries create governments with few incentives to build strong political institutions or listen to their people. In Egypt, for instance, these various rents account for about two-thirds of foreign exchange earnings. Directly or indirectly they generate at least a third of government revenues. This is not as large as other oil exporters in the region, like Libya, but substantial nonetheless. And Egypt’s state, in common with others across the Middle East, has used these rents to appease and suppress dissent, creating circumstances in which they have little need to develop competent political institutions.

Weak economic institutions will be the consequences of these nations’ ongoing reliance on rents. These will fail to deliver essential services, such as education and skill creation, in turn limiting the pool of entrepreneurial talent. Such institutions also create bloated bureaucracies, weak legal enforcement of property rights, and obstacles for starting businesses, especially for those outside the regime’s inner circle. Without reforms the private sector will still likely thrive only through connections to a rent-addled state, not because of the raw dynamism found in many Asian countries.

On the Laws of Economics Holding True in a Board Game

2011-02-21T11:33:00.001-05:00

A wonderful piece by the NYTimes on Monopoly, the board game:

The precise details of our classic game are blurred by the alcohol consumed that night and the years that have passed since then, but this much is recalled. We decided that Monopoly was hostile to a free market because it restricted the number of houses or hotels one could buy. We voted that a player could buy as many hotels as a property could physically bear and rents would be raised proportionally.

But the bank soon began to run out of money. So we did what any government would do. We began printing more of it, by scribbling $500 on scraps of paper. We printed a lot of money.
Prices shot up, which we all knew, even in that inebriated state, was the consequence of expanding the money supply. (After all, the great economist told us, “Inflation is always and everywhere a monetary phenomenon.”)

The inflation became so extreme that we eventually voted to alter the rules again: we’d cut the money supply. Any money we printed that came back to the bank would be taken out of circulation.

A severe depression kicked in, of course. Prices plummeted and it was a race to liquidate assets. One by one the players quickly went bankrupt, and sometime around 4 that morning the game was over.

This got me thinking: Perhaps macroeconomists should start to work with game developers. They could run experiments, say like jack up the monetary supply in World of Warcraft and see how gamers would react.

HT to James Choi for the pointer.

The Triumph of Cities

2011-02-16T14:46:00.002-05:00

The Daily Show
Tags: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

John Stewart interviews Ed Glaeser about his new book, The Triumph of Cities: How our Greatest Invention Makes us Richer, Smarter, Greener, Healthier, and Happier. I am convinced to get a copy, despite the high price Kindle still has for it. There are numerous positive reviews online; and judging from this video, Ed Glaeser seems to be a pretty cool and smart.

I am interested in how cities work (and not work), primarily because they have implications to migration, a topic I would like to work on in the future. But personally, I just find cities fascinating. I've been to some great American ones like New York and Chicago, and I've lived in one, D.C.

Close friends will note that I have made a pact that I will never settle down in a non-city. I'm done with driving, seriously; I would rather much just use public transportation and walk - the best way if you ask me to get a feel of the heartbeat of a place. And cities have this youthful energy in them that draws me infinitely.

If anyone is interested in this sort of thing, I would suggest the canonical 1960's The Death and Life of Great American Cities, by Jane Jacobs if you haven't read. I've written about the book before and to me, it captures very well how we should think about cities, and how to design them.

TY Jeff Smith for the pointer.

GMA Posts Racist Billboard

2011-02-16T01:55:00.004-05:00

Chuvaness.com alerts me to this billboard of GMA's newest soap, Nita Negrita. I knew there was something subtly wrong about the billboard, which disturbed me, but it took me a while to pin it down. It took a friend, CH Herrin, to point out that exactly what's wrong with the frame is that they portray someone who is supposed to be a Filipino African-American with a whitish kid painted black. As if saying that both are the same. They should have hired a real Filipino African-American instead.

I am willing to consider this an honest mistake on the part of producers at GMA Network. The write up about the show hints at good intentions. The poor execution, however, is completely outrageous. If you are still not outraged, imagine this: an American network produces a show that tells the story of an inspiring Filipina nurse living in the US. But they hire, say, Miley Cyrus to portray the role and then paint her brown. Wouldn't that get you up in arms?

Why haven't I seen the the internet community in the Philippines fuming over this? Remember three years ago when we demanded an apology from ABC's Desperate Housewives for their slur about Filipino medical professionals? Where has that cultural sensitivity gone to?

Billboards like this will not fly anywhere else. That this could be put up, even in the best of intentions, says something about our country's lack of racial sensitivity, borne out of the absence of constant exposure to true racial diversity.

Please GMA, take this show down.

ADDENDUM: Cess Celestino informs me that this is like Blackface. Incredible. This makes the Philippines 50 years behind in terms of the civil rights movement.

Adolf Hitler Understood Nudge

2011-01-31T13:48:00.003-05:00

Even before those in behavioral econ warmed up to the idea, Adolf Hitler understood the power of "nudge." In this 1938 voting ballot, he makes it quite clear what you should vote for. The question read: "Do you agree with the reunification of Austria with the German Reich that was enacted on 13 March 1938 and do you vote for the party of our leader; Adolf Hitler?; Yes; No,”

T'was a double question too. Smart.

via Marginal Revolution

Do No Harm and the GK approach

2011-01-30T20:42:00.002-05:00

I got woken up by a tweets yesterday by Dean Tony La Vina. It was from some high level meeting of important people:

@tonylavs: In China, they never scale up programs nationally unless tested in provinces and regions first.

@tonylavs: Dean Arsi Balisacan of UP Economics argued that the choice of what strategy to scale up should be based on evidence.

Ah, this is indeed very encouraging. If public policy can be based more on evidence, I believe we would be able to bring more people out of poverty more quickly and use scarce resources better. Dani Rodrik of Harvard has spoken about this many times. Development should take a more diagnostic approach rather than a presumptive one. The idea is, we really don't know what works. But we will try out many things, many programs, and evaluate each, and see which one to pursue and scale up.

Quite the opposite, I would say to what I would call the "Gawad Kalinga approach," where the idea is to scale up as quickly as possible. I'm sorry, I know many are fans of this program. 700000 houses in 7 years was their motto right? But to date, I have not seen or read any rigorous evaluation done of the program. Does building houses -- pretty ones -- in fact, increase development outcomes like health, employment, education, etc.? Did the housing cause unintended consequences to the families, to surrounding neighborhoods? Nobody knows the answers to these questions because nobody stopped and said, wait a minute, is this the right use of our time? Did we do no harm?

Sigh. Do no harm. I like that. There is much talk lately about developing some ethical code for economists. Perhaps policymakers should adopt one too, just like the one for medical doctors. That is, before scaling up something, we should first make sure that it does no harm.

The Morality Underlying Econ

2011-01-29T09:43:00.000-05:00

From Tyler Cowen on the morality underlying economics:

Even though the predictions of economics are independent of any ethical theory, there are ethical ideas behind normative economic reasoning. An economist who rejects the idea of exploitation in kidney purchases, for example, is treating the seller of kidneys with respect—as a person who is capable of choosing for himself or herself even in difficult circumstances.

Similarly, economists don’t second-guess people’s preferences very much. If people like wrestling more than opera, then so be it; the economist, acting as economist, does not regard some preferences as better than others. In normative terms, economists once again tend to respect people’s choices.

Respect for people’s preferences and choices leads naturally toward respect for trade—a key action that people take to make themselves better off. As we saw in Chapter 9 on externalities, economists recognize that trade can sometimes make the people who do not trade worse off. Nonetheless, the basic idea that people can make decisions and know their own preferences leads economists to be very sympathetic to the idea of noncoercive trade.

Economists also tend to treat all market demands equally, no matter which person they come from. Whether you are white or black, male or female, quiet or talkative, American or Belgian, your consumer and producer surplus count for the same in an economic assessment of a policy choice.

None of this it to say that economists are always right in their ethical assumptions. As we warned you in the beginning, this chapter has more questions than answers. But the ethical views of economists—respect for individual choice and preference, support for voluntary trade, and equality of treatment—are all ethical views with considerable grounding and support in a wide variety of ethical and religious traditions.

Perhaps you have heard that Thomas Carlyle, the Victorian-era writer, called economics the “dismal science.” What you may not know is that Carlyle was a defender of slavery and he was attacking the ethical views of economics. Economists like John Stuart Mill thought that all people were able to make rational choices, that trade not coercion was the best route to wealth, and that everyone should be counted equally, regardless of race. As a result, Mill and the laissez-faire economists of the nineteeth century opposed slavery, believing that everyone was entitled to liberty. It was these ethical views that Carlyle found dismal. We beg to differ.

Hans Rosling Goes 3D

2011-01-27T16:15:00.001-05:00

The data visualization guru at it again. HT: econjeff

As econjeff rightly points out though, 1) one may have objections with the scaling of income and life expectancy, 2) there's a failure to note the lag in Africa's progress. Is convergence really that sure a thing?

Rizal Sent No Remittances

2011-01-26T14:50:00.003-05:00

This took a while but Rizal historian, Ambeth Ocampo responded to my email. I asked whether as a migrant, Rizal sent remittances home:

Rizal did NOT send money home, he was supported by his relatives back home during his studies and even for publication of his books. He worked in Hongkong but didnt need to remit because his parents and spinster sisters joined him. Rizal only gave money to his family after he won the lotto when he was an exile in Dapitan.

The context of course was my post a while back on Winnie Monsod and her claim that you'd have to be in the country to help the country. Recall, she virtually called those who left the country, especially the educated, traitors. I asserted that if this were true, by her standards, then we cannot possibly conceive of Rizal as a hero since a) he spent his working life mostly away from the country and b) now we know he did not send back remittances. He is even worse than today's migrants. But we consider him our national hero.

I am still interested in the question on how big a portion of Rizal's post-university life he spent outside the country. I want numbers. My guess is a big chunk.

Don't Miss Out on the Arbitrage Opportunity of the Day

2011-01-19T13:59:00.007-05:00

I wanted to alert everyone to the arbitrage opportunity of the day up at Living Social.

Standard economic theory suggests that we should act rationally and have an infinite demand for this product. Alas, 527,980 people, including me, have already acted accordingly.

I'm trying to figure out what's in it for Amazon in this one. I have some theories. A. They must believe that enough people would eventually lose this or forget that they purchased such a card, that they are able to recuperate the 50% subsidy they are giving to people. B. They are using this as some advertising stint to increase future demand for their service. C. This is a scam. Hopefully not.

What other things could they be thinking of?

Full disclosure: If you refer 3 friends, Amazon gives you the card for free. If you click on my link and buy the card, you'd essentially be my referral.

Classic Milton Friedman in Defense of Free Trade, 1971

2011-01-17T22:39:00.004-05:00

A very lucid and convincing argument for free trade by one of the more important economists of the last century. Say what you will about laissez faire economics -- believe in it or not -- but this is pretty compelling. This is my first time listening to Friedman, seeing him on screen. What a good speaker.

The Q&A portion about the Japanese subsidizing its steel is gold. Great example. The part when he talks about taking into account not only what is visible but also what is invisible is at the heart what social science is about. Put in another way, one must take note of the indirect as much as the direct effect.

I must mention I got the link from Michael Clemens, who is a great source of this kind of stuff and my source for a lot of things.

Public Policy as an Experiment

2011-01-13T17:02:00.002-05:00

Dan Ariely blogs about how we should think about public policy.

For instance, in my ideal world, before implementing any public policy—such as No Child Left Behind or a $130 billion tax rebate or a $700 billion bailout for Wall Street—we would first get a panel of experts from different fields to propose their best educated guess as to what approach would achieve the policy’s objectives. Next, instead of implementing the idea proposed by the most vocal or prestigious person in this group, we would conduct a pilot study of the different ideas. Maybe we could take a small state like Rhode Island (or other places interested in participating in such programs) and try a few different approaches for a year or two to see which one works best; we could then confidently adopt the best plan on a large scale. As in all experiments, the volunteering municipalities would end up with some conditions providing worse outcomes than others, but on the plus side there would also be those who would achieve better outcomes, and of course the real benefit of these experiments would be the long-term adoption of better programs for the whole country.

Exactly my sentiments. Public policy is an experiment, which is why we should treat policy as an experiment. This means a) the starting point must be a pilot program or a study with a rigorous evaluation mechanism, before government enacts large scale changes, b) this should allow us to reverse course once we find that something isn't working. After all, not all of our wonderful ideas should work out.

I think about this in the context of the proposed K-12 program in the Philippines, where the government effectively adds 2 years in schooling for everybody. I am fearful about it. It is an untested idea that is proposed to be implemented in a large scale. What if adding school years does not help at all? We're going to waste valuable resources. Worse, what if the program had unintended harmful effects?

The proposed program is probably backed by some theory that more education leads to better outcomes. But what works in theory does not always work well in practice. The program might not work in the context of Filipino children. The program might deter families from sending their children to school because the time costs of getting an education is higher. I don't know. Who really knows? We will never know unless we run some small scale program and see what the effects are. If it doesn't work, then trash the idea - at least we didn't have to waste resources making it large scale. If it works, then good.

My frustration with the debates surrounding the issue is that people are arguing about the policy based on theories they have in their heads. The government says it will do some consultations. But the issue will not get resolved this way. My suggestion is: let's try it, see how it plays out in the small scale, and then decide if we should implement it as national policy.

The Wikipedia List of Common Misconceptions

2011-01-08T11:52:00.003-05:00

I spent quite some time going through this fascinating list. Some of my favorites are:

1. There is no medical reason to wait an hour after eating before going swimming. (Sorry dad, you were wrong about this)

2. A popular myth regarding human sexuality is that men think about sex every seven seconds. In reality, there is no scientific way of measuring such a thing and, as far as researchers can tell, this statistic greatly exaggerates the frequency of sexual thoughts. (And women I think, think of sex, just as much)

3. People do not use only ten percent of their brains... [and] until very recently medical experts believed that humans were born with all of the brain cells they would ever have. (Not true and happy to know this. Now I know I can drink much and not worry about losing brain cells)

4. Prolonged exposure to cold weather such as rain or winter conditions does not increase the likelihood of catching a cold. Although common colds are seasonal, with more occurring during winter, experiments so far have failed to produce evidence that short-term exposure to cold weather or direct chilling increases susceptibility to infection, implying that the seasonal variation is instead due to a change in behaviours such as increased time spent indoors close to others. Viruses spread more easily when humidity is low which is the case during wintertime.

5. Barack Obama is not a Muslim.

Where is the section on misconceptions in Economics? Marginal Revolution has a list here but there are probably more interesting ones. Also, misconceptions about the Philippines? I know one -- the Philippines was not - never - second to Japan. What other misconceptions are there?

Links I Liked

2010-12-28T18:23:00.005-05:00

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.

3. Free online courses from top universities. HT @legalnomads

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

2010-12-28T09:04:00.001-05:00

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

The Top and Worst Foods in the Philippines

2010-12-27T11:36:00.000-05:00

...in 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.

The UN Security System

2010-12-24T10:25:00.002-05:00

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.

Seriously, a National Pet Day

2010-12-23T20:27:00.002-05:00

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?

2010-12-23T14:43:00.007-05:00

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.

Migrants score the goals that get the Philippines past Vietnam

2010-12-05T13:05:00.006-05:00

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.

Why is Nobody Scared of the Brain Drain in Batanes?

2010-11-23T01:13:00.007-05:00

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.

Winnie Monsod to Migrants: You Betray the Filipino People

2010-10-09T14:00:00.029-04:00

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...)

Colbert on Immigration Reform

2010-09-28T13:42:00.005-04:00

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.

What's the Value of Political Connections?

2010-09-24T18:26:00.006-04:00

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

Just Give Money to the Poor

2010-09-20T17:15:00.002-04:00

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.

DepEd Orders No More Homework on Weekends

2010-09-18T17:53:00.011-04:00

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.

Blame the Economist, not Economics

2010-09-10T18:08:00.001-04:00

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.

The Wang and Only

2010-09-04T18:37:00.001-04:00

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.

Conditional Cash Transfers Work

2010-09-03T16:37:00.003-04:00

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.

The Billionaires of the World

2010-09-02T15:57:00.009-04:00

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.

From visualizingeconomics.com

Good Academic, Bad Human Being - by Mankiw

2010-09-01T16:36:00.003-04:00

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

2010-09-01T16:09:00.006-04:00

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

Andrew Wiles' Pursuit of Fermat's Last Theorem

2010-08-31T17:39:00.002-04:00

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.

The Never Ending Debate About English and Tagalog

2010-08-24T21:23:00.001-04:00

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.

And the Madness Begins

2010-08-16T19:17:00.053-04:00

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.

Links I Liked

2010-08-07T04:30:00.003-04:00

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.

The Politics of Banking in the Philippines: Questions on Reform

2010-07-28T00:51:00.013-04:00

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 Hutchcroft. I 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.

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

2010-07-25T21:44:00.003-04:00

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

On Kindness and Cleverness

2010-07-22T22:05:00.001-04:00

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

2010-07-22T03:26:00.008-04:00

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.

<a href="http://www.socrata.com/Government/2010-Report-to-Congress-on-White-House-Staff/vedg-c5sb" title="2010 Report to Congress on White House Staff" target="_blank">2010 Report to Congress on White House Staff</a>
Powered by Socrata

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"

2010-07-22T02:20:00.010-04:00

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.

So much for consistency

2010-07-21T08:30:00.012-04:00

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.

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

2010-07-12T23:51:00.005-04:00

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.

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

2010-06-12T02:59:00.006-04:00

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.

Shanghai: Then And Now

2010-06-09T21:28:00.002-04:00

The difference 20 years of economic growth makes.

1990:

2010:

Taken from The Business Insider

Then they came for me...

2010-05-30T20:58:00.000-04:00

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.

Walking on Water, Literally

2010-05-29T15:55:00.002-04:00

What Accomodation Each Country is Requesting for the World Cup

2010-05-25T23:12:00.001-04:00

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.

A Profile of Esther Duflo: The Credibility Revolution in Development

2010-05-24T22:10:00.008-04:00

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?

2010-05-24T00:10:00.000-04:00

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.

Rationalizing Political Dynasties

2010-05-21T17:44:00.003-04:00

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.

Leaders not Thinkers

2010-05-20T16:22:00.009-04:00

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

Where Nobody Knows Where I Went to School

2010-05-12T09:41:00.003-04:00

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)

What Every Girl Should Know: Nothing

2010-05-08T20:36:00.000-04:00

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.

Contract Teachers

2010-05-06T22:08:00.005-04:00

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.

The Cult of the Presidency

2010-05-05T23:49:00.005-04:00

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?

A Fearless Forecast on China

2010-05-03T21:56:00.000-04:00

'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.

Taxing Emails?

2010-05-02T15:41:00.002-04:00

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

2010-05-02T13:04:00.008-04:00

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.