YOU write the next DV409 final exam!!

Dear ex and soon-to-be-ex DV409 students,

Now that the teaching year is over, revisions complete, and you have seen (and finished!) the exam, we'd like to hear from you what sort of exam questions you would have liked to see or could suggest for future DV409 exams? Give it a go - we will definitely use all usable ideas!!

Malthusian Growth

One of the take-aways from recent growth theory reviewed in DV409 is that modern growth as we experience it (where better technology leads to higher standards of living) is a very recent phenomenon -only from the last several hundred years. Here is another working paper by Ashraf and Galor that again confirms this surprising but profound observation. You can read the paper online and I reproduce the abstract here:

Abstract:

This paper examines the central hypothesis of the influential Malthusian theory, according to which improvements in the technological environment during the pre-industrial era had generated only temporary gains in income per capita, eventually leading to a larger, but not significantly richer, population. Exploiting exogenous sources of cross-country variations in land productivity and the level of technological advancement the analysis demonstrates that, in accordance with the theory, technological superiority and higher land productivity had significant positive effects on population density but insignificant effects on the standard of living, during the time period 1-1500 CE.

Alternative medicine and Statistics

A good article in this week's Economist Magazine summarises the overall results from one Professor Edzard Ernst's career spent testing the efficacy of alternative medical treatments. Overall his team has found statistically significant efficacy for 5% of all treatments studied. This was reported by the Economist as evidence that 5% of alternative medical treatments were "truly" effective.

But is this the correct interpretation of this outcome? Putting on our statistical hats, assume that NO alternative treatments were any better than placebos, and that Prof. Ernst and his team had examined their efficacy using a 95% cut-off for level of statistical significance. In what percentage of the studies would you expect them to (incorrectly) find that the treatment was statistically significant? (i.e. make a type-1 error) Ha ha!! Is that a coincidence??!

Supply and demand policies to improve educational outcomes

Thanks Anita and Linda for suggesting two interesting pieces on the challenges of improving educational outcomes in the developing world, and the relative merits of supply and demand side initiatives.

Albouy vs. AJR

A major aim of DV409 is to show that our understanding of the world is in a constant state of flux and growth, equip students to continue to follow ongoing debates in economic development, and to enable them decide for themselves which arguments have more merit. To that end, here is the latest salvo in an ongoing debate between David Albouy and Acemoglu, Robinson and Johnson (whose 2001 AER paper should be very familiar to all ID students!) ... Will this settle the matter once and for all??

Study hints for exam time

As everyone gets ready for exams, here is an excellent story in the New York Times about the best methods to learn difficult material well.

Are Trills the next big thing in development?

The strategic use of 'Trills', or shares in GDP, is an idea proposed by Mark Kamstra and Robert Shiller that could help re-allign incentives and fight rent seeking in both rich countries and poor. It is getting some excited attention in the blogosphere these days - what do you think?

The women effect redux and other unrelated links

Thanks Anita for finding another interesting article discussing the pitfalls of female centered development projects.

And while we are on the gender topic...here is an interesting new paper on women, transactional sex and social insurance. Using diaries of sex workers in West Kenya, the authors find that regular clients are a main source of insurance against income shocks.

A forthcoming book by Abhijiit Banerjee and Esther Duflo offers some critical insights on the main challenges faced by development policy today. Not sure about the release date but it should be soon...

The definition of 'Irony'

As some of you may be aware, the son of Muammar El-Qaddafi, Saif Al Qaddafi, recently completed a PhD here at the LSE in the Government department. Here is a link to the full text of his PhD dissertation

A review of two weeks of DV409

Thanks Anita for spotting a review of ALL the topics we addressed in DV409 in the last two weeks.
It discusses the impact of microcredit, how supposedly productive loans are used to satisfy consumption needs, on how not everyone wants to become an entrepreneur and on how the poor need access savings instruments and insurance products....all courtesy of the BBC.

Paying to go to the gym and other problems of self control

As we briefly discussed in class today, consumers tend to be farsighted planners but myopic doers, a terminology introduced by one of the leading figures in behavioural economics, Richard Thaler.

Della Vigna and Malmendier find  some evidence for this when they look at patterns of commitment and attendance of 3 large gyms in the US. Gym goers are often overly optimistic about the probability of going to the gym, subscribing to a monthly membership contract that is more costly in the end than any drop in or 10-class pass contract. You can find a summary of these findings here.

Here  and here  are even more extreme and sophisticated versions of commitment devices to address this problem.

Problems of self control go of course, well beyond gym memberships. A recent paper  describes a randomized experiment that investigates whether problems of self control apply to how people choose to be compensated for work. A shorter summary of the paper can be found here.

The number of potential charter cities in perspective....

Success or no Success?

Here is a list with potential to cheer us up...

A good exercise would be to carefully go through this list and identify whether we have reliable empirical evidence to believe any causal relationship between government policy and stated successful outcomes. This is particularly important in case these "success stories" translate into policy recommendations for a powerful and influential agency like the World Bank. For now, beyond the issues around causality and attribution, the most important contribution of this list is to shed light on the positive side of African development in recent years. This is important as general audiences grow ever more disillusioned with African stories of corruption, pervasive poverty and forseeable failures in reaching the Millennium Development goals by 2015...  

The Millenium Villages debate continues...

Suggested reading from Ingrid!

The importance of low discount rates

As DV409 students saw last term, 'high discount rate' behaviour in governance and policy making was a central focus of macro-development economics. However at the macro level, the underlying causes of high discount rate outcomes are still something of a black box (although there is no shortage of theories).

High discount rate behaviour in individuals (or 'self- or impulse- control' problems) provides plenty of handy examples for illustrating the concept, but in the back of my head I have always more or less assumed that high discount rate behaviour of governments should be an instutitional, emergent outcome from the interactions of an array individuals whose issues with self control were no different from those of any other population.

If you beleive that self control problems in individuals are purely genetic (and have little or no epi-genetic or environmental interactions) then that is probably a sensible conclusion. However if high (or low) discount rates in individuals are partially a cultural or learned behaviour, then it is not so clear. At least one recent cultural phenomenon, the Tiger Mother's parenting manifesto, certainly suggests that. Here is another story from NPR on a recent large scale study that illustrates the enormous importance of self control for life success, and how this can be at least partially taught or influenced.

The extent to which low/high discount rate behaviour is genetic, cultural, and/or institutional has important policy implications. We have seen empirical evidence for all three of these mechanisms - what do you think?

Heaven help Economics!

I still can't decide whether this new paper from world famous economist Robert Barro and his wife (abstract copied below) is evidence that economic decision making permeates even the most unlikely reaches of human (and celestial!!) society, or whether it is just a sign of a coming apocalypse of macroeconomics into absurdity. (Related to Sandra's post below this, there may be a cautionary tale about marriage in there somewhere as well!!)

"Saints Marching in, 1590-2009" by Robert Barro and Rachel Mccleary

Abstract: The Catholic Church has been making saints for centuries, typically in a two-stage process featuring beatification and canonization. We analyze determinants of rates of beatification and canonization (for non-martyrs) over time and across six world regions. The research uses a recently assembled data set on numbers and characteristics of beatifieds and saints chosen since 1590. We classify these blessed persons regionally in accordance with residence at death. These data are combined with time-series estimates of regional populations of Catholics, broadly-defined Protestants, Orthodox, and Evangelicals (mostly a sub-set of Protestants). Regression estimates indicate that the canonization rate depends strongly on the number of candidates, gauged by a region’s stock of beatifieds who have not yet been canonized. The beatification rate depends positively on the region’s stock of persons previously canonized. The last two popes, John Paul II and Benedict XVI (the only non-Italians in our sample), are outliers, choosing blessed persons at a much higher rate than that of their predecessors. Since around 1900, the naming of blessed persons seems to reflect a response by the Catholic Church to competition from Protestantism or Evangelicalism. We find no evidence, at least since 1590, of competition between the Catholic and Orthodox Churches.

Intra-household Dynamics Redux

For those who are yet to find the usefulness of economics (despite DV409's best efforts), here is yet another example of how it can change your life...by helping you manage your relationships!

Branko Milanovic on inequality tonight at the LSE

I've seen some of this material before and it is all very thought provoking - highly recommended
Link to the event information here

Ooops...self-inflicted perils in data collection

Evidence on how the very act of conducting a survey can affect our estimates of the impact of a policy. This adds to the list of effects we have to be mindful of when using primary or secondary data on agent behaviour: the Hawthorne Effect (when participants in a study alter their behaviour in response to being part of the study) and the John Henry Effect (when members of the control group perceive to be in competition with members from the treatment group and change their behaviour accordingly)...

Banking on the move

Here is a new paper on the impact of mobile banking...surprisingly, mobile banking hasn't really taken off in the developed world but it offers great promise for a significant segment of the population in the developing world that still lacks access to adequate banking infrastructure.