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Is King Cash Facing a Coup D’etat?

Data privacy today is of greater importance and cognizance than it has ever been in the past. Among American consumers there is mounting distrust of both the government and corporations with respect to invasive data collection methods and unethical data uses. Most of the conversation thus far has revolved around the internet, social media, and giants in this realm such as Facebook and Google. And while they are well deserving of critique, why is the same skepticism not applied to Visa and Mastercard? Credit card behemoths and banks have the ability to collect, analyze, and monetize data on every purchase ever made— with the exception of cash transactions. Cash provides an essential consumer protection from the government and corporations as an inherent data opt-out. Yet, it is slowly losing relevance and in effect being phased out by newer technologies. The preservation of cash as an option to consumers is of paramount importance despite its shortcomings. Cash’s eventual disappearance will cause far-reaching and insidious consequences, which we can already witness starting to take hold abroad.

The-For-and-Against-Cash

The US dollar, in both its physical and digital iterations, is the most important world currency. In recent years, as money demand has grown alongside the digitization of many transactions, the question has been raised – where is our physical currency being held? About 5% is in bank reserves, another 5% is in American households, and an unbelievable 90% of U.S. currency remains unaccounted for. Much of it is held in foreign countries; estimates range from 50% to 70% of U.S. paper currency is abroad. Most of this is kept in hundreds as a store of value by Russian oligarchs, international drug kingpins, and of course other countries’ treasury reserves. However, this ghost currency is also floating around in America’s informal economy; from illegal activity to under the table employment. Many critics argue against physical currency precisely because of its use in illegal activities. Harvard macroeconomist Kenneth Rogoff postulates that a transfer to a cashless society would hurt the economy in the short term because of a decrease in demand for illegal products and services. However, he also states that if just a fraction of the lost tax revenue from unreported activities (which could make up as much as 7-10% of overall GDP) were recovered, this would more than make up the difference. But the same reason for which cash is chosen to evade the law – anonymity – it is also essential for consumers. And the use of cash for tax avoidance is not a strong enough reason to go completely digital. In fact, other theorists believe that getting rid of cash would not necessarily solve the problem. According to the UK Treasury and Home Office, cash is only the third most popular channel for money laundering, behind banks and accounting firms. Moreover, if the desire is to stop tax evasion, governments should concentrate their energy on the use of offshore financial centers, not cash.

Governments may additionally argue that the discontinuation of cash would help economic growth in other ways too. With a cash society, the movement of money is slow and expensive. Operating in cash is claimed to cost the U.S. approximately .5% of its GDP every year. This is undoubtedly an attractive reason to switch, but in the grand scheme it is unwise to sacrifice freedom for marginal revenues and growth.

It’s not just governments that find cashless society attractive though. There are certain interest groups that also see going cashless as ultimately beneficial. Small businesses, for example, argue that going cashless makes them more secure. They feel safer without the use of cash- there is no risk of money being stolen on site. However, this neglects a serious flaw with cashless economies in general: they are much more vulnerable to cyberattacks. Cyberattacks pose a risk to the stability of the entire national and even global economy long-term, but more tangibly, an immediate theft risk to consumers. Based on existing protections from banks, consumers are often at higher risk than they may realize. In digital banking, banks generally claim any transactions conducted online with an individual’s password is of their volition, so money is not replaced or refunded.

Even more pressing is that in a cashless world, there is an entire forgotten echelon of society that would be completely disenfranchised – the low income. Low income individuals, along with the elderly, homeless, recent immigrants, minors, and other groups often cannot open bank accounts and thereby could not at all participate in a cashless economy. This has to date been recognized as a significant problem and is the reason that in many U.S. cities and states there is existing legislation that mandates businesses to accept cash. However, this is not true everywhere; many countries, particularly in Europe, allow businesses to refuse cash. This could be possible too in the United States, perhaps if the Swedish model of government subsidized bank accounts for low income individuals were introduced. Regardless, the looming issues of data privacy remain.

The Consequences of Cashlessness

The most pivotal issue with a cashless society is data privacy and the preservation of anonymity. The presence of currency in general, who holds it, and who controls it, is a statement of power in itself. Cash counteracts this and acts as a public good. Since it is held in common, the power is widely dispersed throughout the economy and between consumers. There is no central point of failure or central point of control. However, governments around the world are seeking to gain control over their currency flows and have the ability to do this very effectively through digitization. This can manifest itself in one of two ways.

One is that all money must be held in bank accounts, giving banks, credit card companies, and other financial services providers, already unruly characters, an unprecedented amount of control over an individual’s personal finances. These companies work together to record purchases, share and compile information, and exploit spending patterns for targeted marketing. Take Paypal for example: they claim they are protecting user data, but their terms and conditions outline the non-associates which they may pass data onto, including Facebook, Axium, Oracle, and more. However, this option may still be more attractive than the following because there are a number of financial service providers to choose from. The competition between them can be used to drive demand for greater transparency and consumer protections. Already growing awareness over privacy issues has lead to the new Apple Card. It is unique from Visa or Mastercard in that it only shares data with credit agencies and no further partner corporations.

The second option for digitization is the government holding everyone’s money in central bank bank accounts. This would solve the issue of unbridled corporate power, and to be fair the government is generally held to relatively higher standards of transparency. However, it presents its own issues.

Governments could use their financial power to isolate certain individuals from participating in the economy, potentially for politically or socially motivated reasons, whereas this is not possible in a cash economy. Already, the U.S. government can seize funds from an individual or company bank account without even a formal conviction. This is a power that has historically been abused. During “Operation Choke Point,” in which the U.S. government claimed that it was simply cracking down on predatory lending, it also financially went after moral opponents such as the pornography, gambling, and firearms industries. Private credit card companies do this too. Many pornography providers have switched to using crypto-currencies like Bitcoin in order to avoid the excessive fees that are charged by credit card companies. Moreover, even if many are sympathetic to these quasi-sin taxes, it’s not long before they may creep into more ambiguous areas, dictated by partisanship and special interest groups.

For example, consider a future in which the government places a charge on individuals that make donations to abortion providers such as Planned Parenthood. One’s inability to make anonymous donations would threaten the existence of certain organizations and voices, arguably violating the constitutional right to privacy. This right is not explicit in the U.S. Bill of Rights but can be reasonably implied from the fourth amendment right against unreasonable search and seizure (“to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures”) and by the fifth amendment right to avoid self incrimination (“shall be compelled in any criminal case to be a witness against himself”). An even broader interpretation, such as that favored in the U.S. Supreme Court case, Citizens United v. FEC, could cite the first amendment freedom of speech as granting freedom to make anonymous donations. Considering unchecked political donations and their implications does slightly complicate this argument. However, the aim of this article is not to comment on whether or not dollar limits should be applied in political finance, or if corporations deserve the same rights as people, but to stress the importance of anonymity for citizens. Without the preservation of anonymity, of which cash is an integral part, citizens are vulnerable to corporate and governmental abuse.

Global Digital Currencies

The disappearance of cash, while seemingly not immediately relevant to the United States, is likely not a distant future. There is an ongoing international digital currency race that will only continue to gain traction at an accelerating speed. The most malicious and determined character in this race is China. China’s central bank is set to release the first digitized domestic currency in an act of financial innovation and suffocating state control. China’s new digital currency will be unique and morally questionable in that it allows the central bank to not only track the movement of money but in some cases supervise transactions. They plan to use big data analytics to seek and find money laundering. This will supposedly help to expose corruption — if you accept the presupposition that the Chinese government is not corrupt itself. The new currency, which will initially be available in banks and on the Chinese equivalent of Apple pay, Alipay, will trigger several effects upon its highly anticipated release. First, it may push Chinese consumers to switch their money into anonymous crypto-currencies like Bitcoin. This would cause a depreciation of the Yuan, benefitting the Chinese export market but harming morale. Yet, it may be stopped by the Chinese government, which has previously criticized crypto-currencies like Facebook’s Libra, stating only governments have the right to create digital currencies. The simple fact that the government would even have the ability to stop this, and further dictate which purchases consumers can make, is inherently the issue with digital currency. Moreover, when considering the Chinese are already world leaders in artificial intelligence and facial recognition, it is not hard to see that this is a further power grab. As for the worst case scenario of increasing Chinese authoritarianism— look to the Uyghurs.

The possibility of creating state run digital currencies has also attracted the interest of North Korea, Venezuela, Russia, and Iran. North Korea, a pioneer in digital crime, has already made headway in mining, crypto-jacking, and hacking exchanges in existing digital currencies. The North Korean government has already stolen over two billion dollars worth of digital currency in order to fund its weapons program. And, its own crypto-currency would give it the power to avoid U.S. sanctions to a greater extent. Iran and Russia are similarly motivated to avoid sanctions and attempt to weaken U.S. supremacy in the global financial system. The Venezuelan case on the other hand, is unique and a testament to the government’s continued mismanagement of the economy. Maduro has released a digital currency, the “petro”, whose value is linked to the value of a barrel of oil, and is claimed to provide a solution to the country’s runaway inflation issues. However, “petro” hasn’t yet been successful- it can be found almost nowhere. Some independent crypto-currencies have made headway in Venezuela, though. The crypto-currency “Dash,” for example, is now being accepted as a form of payment at select locations of Church’s Chicken in Venezuela.

There are some democratic nations working to develop digital currencies, too. Sweden, for one, is hoping to soon release the E-Korna. But, Sweden is a special case. The country already functions on a mostly cashless basis, the EU has strong data privacy laws, and the Swedish people have an unusually high degree of trust in the government and new technology. However, even given all these positives, the most important factor is that cash will still be accepted legal tender. The Swedish government even cautions that every household sets aside cash in the event of mass power failure or hacking.

Final Thoughts – Why Data Privacy is Important The increasing surveillance of our lives limits our freedom and impacts our behaviors. The way we spend says so much about who we are and what we stand for, and our financial freedom is deeply imbedded into our constitutional and human rights. Even more than that though, the effect is insidious, the growing surveillance changes how we think and how we behave. Consider the Foucauldian idea about the connection between panopticon prison and discipline within society. The design of a panopticon prison is similar to a two way mirror. There is a central guard tower surrounded by prison cells on all sides, which guards may see into, but for prisoners it is unknown if the guards are present. Since the prisoners do not know when they are being watched they are on high alert at all times. They internalize the gaze of the guards and thereby permanently change their behavior —whether or not they are actually being watched. This is the underlying idea of the surveillance state and the government’s ability to remove anonymity from money would further enhance this effect. Of course, cash represents only one small part of the overwhelming data privacy problem. Yet, it would be foolish to take for granted the mundane and to wait until it’s explicitly threatened to start paying attention. This is not a condemnation of digital currencies, but a plea to preserve cash as an option for those who would prefer to buy and sell without surveillance.

January 2, 2020 0 comment

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Asia Economics Featured Print Article Religion

New Age Yogis and the Commodification of Spirituality

written by Eden Ballard

This article was published as part of our Spring 2019 print edition, the entirety of which may be found here.

One of the most basic human instincts is to search for a sense of belonging. Often, this is found through religion; believing in a higher power or powers not only facilitates a sense of purpose in life but also helps people connect to one another. However, religion and spirituality are not as cut and dry as they used to be. The global market has had a drastic and transformative impact on belief systems for people all over the world. With religion decoupled from place, sacred things have become commodities that can be traded and adapted to accommodate various cultural demands and ultimately reflect local politics. This effect can be traced by looking at the practice of yoga, a historically spiritual practice that has been processed and transformed into a sellable good that has comfortably integrated into the global market.

A Brief History of Yoga

Today, yoga is worth up upwards of $80 billion[1]the global market as a result of classes, retreats, equipment sales, and associated products. Although its status as a commodity is fairly recent, yoga began being practiced in modern day India around 3000 BCE as a way to achieve harmony between the heart and soul on the path to divine enlightenment and provided a basis for what would stem into Buddhism and Hinduism. As the centuries have passed, yoga has traveled and evolved to fit the demands of markets around the world and now has dozens of variations. In the past, yoga emphasized mindfulness and connection through the pillars of love, kindness, and compassion. In contrast, modern yoga typically prioritizes health benefits over spiritual benefits… although some people embrace the spirituality as well. Even though this ancient practice has a relatively clear history[2], the political and spiritual components of modern yoga are strained and complex and thus, impossible to generalize.

Because of its intimate ties to religion, yoga has caused extensive discourse. The physical benefits of yoga are universally appealing to those who decide to pursue it but for some, practicing spirituality outside of their normal beliefs is unacceptable. This conflict is circumvented in several different ways including prohibiting the mindfulness and spiritual practices of yoga and focusing on it as a sport or adapting the names of the poses relative to the local cultures. These maneuvers have allowed yoga to be adapted into various markets all over the world and made into a global commodity. Pierre Bourdieu, French sociologist, anthropologist, and philosopher, called people like the ones engineering these changes “cultural specialists” and explained that they “ransack various traditions and cultures in order to produce new interpretations and uses that can be consumed.” And consumed it is. Yoga, in various forms and interpretations, is taking off around the world.

Qualifying the Spirituality of Modern Yoga Practices

In many secular places, there is an inverse relationship between the number of people practicing yoga and popularity of organized religion. People that otherwise feel disconnected from the religions they were brought up with find the filtered spirituality of western yoga to be appealing. Brigid Delaney, Senior Writer for the Guardian Australia, wrote about how “Australians are losing their religion but their craving for meaning and moral teaching appears stronger than ever.” This trend is clearly visible in North America as well where religion is on the decline[3] but the yoga industry is booming. One in five Americans[4] describe themselves as spiritual but not religious – partially due to the influence of yoga. Delaney also wrote an article[5] on her attempt at delving into the world of yoga in an effort to clear her mind and strengthen her body. She wrote, “In many respects, yoga is the perfect pastime for our age – the meditative elements give us the opportunity to find peace and stillness in a time of increasingly hectic and crowded information, the instructional bits give us moral lessons in the absence of traditional religion, while the stretchy, bendy, sweaty physical stuff is a great way of countering eight or more hours a day spent hunched over a computer.” Yoga, effectively, has helped meet the demand for connection coming from a generation of people who feel disconnected and disillusioned.

The power of modern yoga extends beyond flimsy spirituality found while stretching on plastic mats laid out on the hardwood floors of rec center classrooms. Yoga, in more secular places, tends to be a mechanism for creating community and connection, and helps people feel grounded in an incredibly turbulent world. Delaney talks about how, secretly, she wants to be one of the yoga mat toting, juice drinking, athleisure wearing yoga fanatics that “loiter in the aisles of the organic fruit and vegetable shop.” By donning leggings and slurping green drinks, these people are finding their “Neo-Tribe”[6] – which Z. Bauman explains “helps the individual gain a sense of identity and belonging through identification with a subcultural consumer group.” Basically, buying into this consumption pattern helps people feel less lonely.

Yoga Outside of the West

Although yoga is gaining popularity globally, its spiritual components don’t flourish everywhere the way they do in the west. In places that tend to have stronger conventional religious practices yoga is contentious; the spirituality of yoga is seen as incongruent with dominant religious values. In 2013 the BBC ran an article called, “Does doing yoga make you a Hindu?[7]” The underlying question being are non-Hindu religious followers being subversive by practicing yoga? Can the founding spirituality be successfully cleaved from its physical counterpart in order to make a secular activity that poses no threat to dominant local ideology? The answer is complicated. So much so that the question of whether or not yoga is religious a “vexed question[8]” in Indian politics. Orthodox Muslims believe that sun salutations go against Islamic Law as Muslims are not supposed to bend to anyone, or anything, but Allah. Alternately, the practice of yoga in Indian schools causes concern for some because the chanting “Om” during the practice is too connected to Hindu religion. As a result, many leaders have said they are okay with yoga as long as it is disassociated with religion.

Different countries have handled this question in different ways. Iran, where Sharia law is the rule of the land, yoga classes “make no overt reference to spirituality at all.[9]” To avoid what could be called “blasphemy” the emphasis is instead placed on the physical component by calling it “the sport of yoga.” Where teachers in the west tap into consumer spirituality, teachers in Iran are accredited by the Yoga Federation[10]which promotes “Unity through sport” and simply defines yoga as “a holistic health system with Indian roots stretching back 5,000 years.” Their homepage justifies their practice of yoga as a sport with a quote from B.K.S. Iyengar[11]who says that, “there is nothing wrong in holding a competition on the qualitative presentation of the yoga asanas.” He concludes by saying that yoga “should be competition on the artistic level and not on egoistic body cult.” By placing the emphasis on exhibitive competition, they deliberately neglect the spirituality that people cling to in so many other places. Simultaneously, Iyengar is bashing the imagined community that yoga is creating in the Australia and North America and thrusting it in its least flattering light as an egoistic body cult.

Some places chose to forgo working through the complexities of yoga and spirituality in favor of banning it completely. In 2008, a religious ruling in Malaysia banned the sport in five states. However, in Kuala Lumpur, the capital, physically practicing yoga is allowed as long as chanting and meditation are not. This partial acceptance is standard in other Islamic countries such as Indonesia as well. A profitable compromise that introduces a new commodity while preserving and protecting tradition.

Savasana – Wrapping It Up

Since its creation in 3000 BCE in what is now modern India, yoga has evolved and expanded to accommodate demand in cultures around the world. The religious roots of the practice have been the direct cause of discourse around the world and helped shape yoga into a variety of practices and consumable packages that are woven into the global market. The adaptation of yoga in more secular places has accommodated quasi-spiritual consumerism in places that are experiencing a sense of disconnectedness a result in the decline of religion. Alternately, yoga has been adapted as a sport with an emphasis purely on its physical components so as not to interfere with dominant religious ideology. Although modern practices typically bear little resemblance to ancient practices, the addition of spiritual or physical yoga practices have influenced consumers around the world.

[1] Technavio. “Yoga Is on the Upswing in North America.” December 4, 2015. Accessed April 27, 2019, https://blog.technavio.com/blog/yoga-upswing-north-america.

[2] Yoga Six. “A Quick Reference Guide to the History of Yoga.” March 12, 2018. Accessed April 27, 2019, https://yogasix.com/history-of-yoga/.

[3] Religion News Service. “Religion Declining in Importance for Many Americans, Especially for Millennials.” December 10, 2018. Accessed April 27, 2019, https://religionnews.com/2018/12/10/religion-declining-in-importance-for-many-americans-especially-for-millennials/.

[4] Tara Isabella Burton. “‘Spiritual but Not Religious’: Inside America’s Rapidly Growing Faith Group.” Vox, November 10, 2017. Accessed April 27, 2019, https://www.vox.com/identities/2017/11/10/16630178/study-spiritual-but-not-religious.

[5] Brigid Delaney. “The Yoga Industry Is Booming – but Does It Make You a Better Person?” The Guardian, September 17, 2017. Accessed April 27, 2019, https://www.theguardian.com/lifeandstyle/2017/sep/17/yoga-better-person-lifestyle-exercise.

[6] Russell Keat, Nigel Whiteley, and Nicholas Abercrombie. The Authority of the Consumer. Taylor & Francis, 1994.

[7] William Kremer. “Does Doing Yoga Make You a Hindu?” BBC, November 21, 2013. Accessed April 27, 2019, https://www.bbc.com/news/magazine-25006926.

[8] Shefali Anand. “Is Yoga Religious? In India, It’s a Vexed Question.” WSJ, June 9, 2015. Accessed April 27, 2019, https://blogs.wsj.com/indiarealtime/2015/06/09/is-yoga-religious-in-india-its-a-vexed-question/.

[9] William Kremer. “Does Doing Yoga Make You a Hindu?” BBC, November 21, 2013. Accessed April 27, 2019, https://www.bbc.com/news/magazine-25006926.

[10] “International Yoga Sports Federation – Directory,” Accessed April 27, 2019. https://www.iysf.org/directory/iran.

[11] “What Is Iyengar Yoga?,” Iyengar Yoga: National Association of the United States. Accessed April 27, 2019. https://iynaus.org/iyengar-yoga/about.

October 17, 2019 0 comment

From Left to Right: Burkle Center Director Kal Raustiala, UCLA Professor Arnold C. Harberger, Deputy-Director Alexandra Lieben, MIT Professor Esther Duflo, Holt Alden, UCLA Professor Edward Leamer, Arturo Siguenza

Featured The International Economy UCLA and the World

Randomized Approaches to Development: An Interview with Economist Esther Duflo

written by Holt Alden

Last week, Generation Editor-in-Chief Holt Alden and Editor Arturo Siguenza spoke with world-renowned economist and Massachusetts Institute of Technology (MIT) Professor Esther Duflo during her visit to UCLA. Professor Duflo is the co-Founder and co-Director of the Abdul Latif Jameel Poverty Action Lab (J-PAL), and focuses on development economics and poverty alleviation. The interview covers a broad range of topics, including the use of randomized control trials, effective policies for governmental organizations like USAID, and advice for students looking to work in international development. The following is a transcript of the interview, edited for brevity and clarity.

Arturo Siguenza (AS): In your experience using randomized evaluations, has there been a development puzzle that has been particularly challenging, or that you consider the biggest puzzle you’ve tackled?

Esther Duflo (ED): Not really, in the sense that most things get partitioned away into smaller things that we can approach, so it’s hard to talk about one big problem. But there are things that are… if you ask me whether there are domains that I understand better after fifteen years of conducting randomized trials, than others, then that is true. For example, one key problem in developing countries is the quality of healthcare, that is really terrible, I couldn’t tell you that I have a good idea of what to do about it. I have maybe a better idea of what the nature of the issue is, but I don’t really have any idea, or the beginnings of an idea, of what solutions would be to improve the quality of healthcare. Whereas there are other domains, like for example in education, where I have a better sense of the problem and what could be done, even if I am aware that there are political constraints to implement what would be done. So there are certainly issues that are a bit thornier than others, and healthcare is certainly one of them.

Holt Alden (HA): Tied into that, you have a lot of experience with a whole host of different types of [development] variables. Are there any that have changed your perspective on poverty, specifically, or that you really want to focus on going forward?

ED: I tend to jump from question to question, partly because, as a reaction to the fact that a lot of development work, in particular in international institutions and other things, tend to be very siloed. So people are education experts, or health experts, or they are agricultural experts, but in fact when you are looking at, you know, a household as a unit, they are involved in all of these things and all of these decisions tend to be taken together. So the fact that they have health issues has impact on their business, and the fact that their business is very risky has impact on their health.

[blockquote align=”none” author=”Esther Duflo”]So I never really saw myself as becoming a specialist in one topic, as opposed to always trying to keep in mind how all of these things are interconnected. Because each of my projects is reasonably narrow, and one thing at a time — not to become narrow as an economist — I keep circling around, shifting perspectives, shifting projects, as a way of keeping honest.[/blockquote]

HA: Do you feel like that has been effective for you in your studies? Have you been able to relate them together?

ED: Yeah absolutely. That is kind of what we tried to do in Poor Economics, our book, with Abhijit Banerjee. The book is structured by chapter, which are by theme, but at the end there is really an effort to say ‘what have we learned’.

AS: Your work has been focused on utilizing randomized control trials. However, it can be argued that this removes the local context and local demands from these projects by universalising the development issues. What is your take with balancing the local context with your randomized trials?

ED: So I would almost say the opposite, that the randomized control trials are extremely local because they are always conducted in one particular area. I guess you could conduct them in several particular sites together but, even then, each site you would have to know pretty well and understand pretty well. In fact, the most common criticism of randomized control trial is the opposite, that it’s very local, that being so local it loses the ability to generalize from one place to another, so it’s funny that you should ask the question the other way [laughs].

It’s basically impossible to conceive of a good project without having a very good sense of the reality in the field.

[blockquote align=”none” author=”Esther Duflo”]And I think that’s one thing that makes development economists, in particular people who run randomized control trials, different from many other people, in particular bureaucrats in developing countries or people who work in large organizations. We often have a much better sense of the particular realities that people confront in a particular problem.[/blockquote]

AS: Have you ever had challenges from a local bureaucrat that is opposing what you are trying to do?

ED: Not really. The worst that can happen, and that can be really bad, is sluggishness, when you need something and it doesn’t happen. And the best that can happen is actually cooperation. We have great projects that we have done in coalition with local governments where you have people who are actually very committed to what they want to do and very creative. So one big goal of J-PAL as an organization is to nurture champions within bureaucracies, identify them, and then work with them.

[blockquote align=”none” author=”Esther Duflo”]So people are education experts, or health experts, or they are agricultural experts, but in fact when you are looking at, you know, a household as a unit, they are involved in all of these things and all of these decisions tend to be taken together.[/blockquote]

HA: With the randomized control trials, similar to what happens in medicine, have you experienced any trial or variable that works so well that you’ve ended the experiment? Are there any ethical dilemmas that you’ve faced in your randomized control trials?

ED: Not really, of the first type — that things work so well we’ve had to stop the trial — because the nature of the data collection… I think it might change now with tablets and stuff like that where we get data coming back soon… but until fairly recently the only way we could get data is going out into the field and doing a survey. The data is coming in too slowly to really understand something…

HA: Or after the experiment…

ED: After the fact anyway. So I have not found myself in a situation where I have thought, “Oh geez this is working so well I should stop.” But there are particular issues of other nature that arise. There have been some projects that I haven’t done because I thought that they would be difficult to do ethically. And in these cases it’s never the fact that I randomize is a problem, but it’s the fact that we always randomized when there is some presumption that it might not work — but at least some presumption that it might work — so you have at least some uncertainty to justify the experiment. But there are cases when you feel that in the process of collecting the data you would learn things that could prompt, or should prompt immediate action, but you wouldn’t want to intervene at the time because that would jeopardize the experiment. That’s the type of situation I have avoided, where sometimes I have not done projects.

AS: In the same sphere, with ethical challenges that may arise, a lot of development projects have the tendency of going fad-to-fad. Have you had any experience dealing with this tendency? Or using methods to dissuade this?

ED: It’s about trying to get away from that, trying to generate evidence on things, things that might be fad or might not be fad. So one of the things we run into, we evaluated microcredit programs which certainly have been a fad, or at least were very popular maybe about ten years ago. We collected one evaluation, and found mediocre results, not very bad and not very good. So everybody said “Well, maybe that doesn’t generalize”, we also said “Maybe that doesn’t generalize, maybe it was just that it was not good, who knows.” So we waited and then some people generated other studies like that. When there were seven studies together, we published them all together in one place and then there was no escaping that that thing isn’t working so well. I think it did some something to the fad.

AS: Did you face any problems with people that were very invested in microfinance?

ED: Yeah, microcredit has been an issue because the people who are… it’s not the case in all programs, there are a lot of organizations that just do things because they want to make a difference but if they find out what they do doesn’t work they move to something else. That doesn’t trouble them more than that, they just want to be helpful. They are not married to one program.

[blockquote align=”none” author=”Esther Duflo”]But microcredit is different. A lot of people who are in microcredit are deeply invested in it and there have been two kinds of reactions. There have been reaction of organizations saying well that’s useful, we need to change what we are doing. That doesn’t mean people don’t need credit, it means that we need to restructure the offering to better meet the financial needs of the poor. And then there are people who just were upset and tried to make it go away. But it’s not going away [laughs]. I can’t make it go away.[/blockquote]

HA: Do you normally work more with private organizations or more with governments, especially on the ground?

ED: So early on, when we just started, we worked mostly with NGOs, but now we work a lot with governments. I don’t know what the balance is across projects but certainly if you look at the most recent projects, there is a lot of government work.

HA: Have you felt that [government work] has been more or less effective, or less fast?

ED: It is less fast, it is more work. It is like pulling teeth. But I don’t know if you could call it more or less effective. Working with NGOs has a lot of advantages, in particular the fact that you can, if you have a good partnership, you can control pretty well what’s happening on the ground because they know pretty well what’s happening on the ground. So you know what you’re doing. If you’re interested in evaluating an impact of a particular action — if you manage to do it well — then working with an NGO is much better.

On the other hand, when we move to policy many things happen. The scale changes, the targeting changes, the quality of implementation changes and you’re not going learn that by working with NGOs. If you want to know the effect of policies… if you want to learn about people it might be more effective to work with an NGO and manipulate just one thing and manipulate it very well. That might be a first step in some developing-a-policy type of continuum. But if you’re interested in changing policy, that first step might be necessary but it’s not sufficient. It serves different purposes. But it’s definitely more involved by the nature of the of the exercise.

AS: In J-PAL have you focused on working more with NGOs or with government organizations?

ED: So there has been this shift. Generally we were working more with NGOs and now there is a lot of work with governments. But it is also a question of age. Younger people work more with NGOs because they need results quicker and they have less money. Once you are a little established you can take more risks and you have more time. Even within J-PAL if you looked at the age of the people who run projects, it would be pretty well correlated, I’m guessing.

AS: Have you seen a type of development project that has been receiving more funding recently? That has been more popular?

ED: There is a lot of interest in governance issues. Governance, corruption, et cetera. So that’s an area that gets easy funding. There’s a lot of interest in gender issues. There’s a lot of interest in crime and post-conflict instability, like fragile states. These are the areas that have a lot of funding lately.

HA: If you were in charge of something like USAID, or some other government agency here, is there some step that the U.S. could take in order to better support developing countries?

ED: I was a member of the President’s Global Development Council, so I can tell you what we said. There were three pillars. One was focusing on environment and climate [change], because it’s going to become a poverty issue and a lot of the problem is generated in the US. It needs international leadership, it’s not something that countries can really deal with on an individual basis. The second was public-private partnership. I have less to say about that, that’s less my area of interest. And the third one was innovation.

So it was, basically, saying look, the aid budgets are small. They are becoming smaller and smaller, both in absolute value and as a fraction of what developing countries have to spend because of how the world is going. Therefore the share of the US in the aid budget is falling, because there are countries like Brazil and China who are now spending a lot of money on other countries.

[blockquote align=”none” author=”Esther Duflo”]So if we don’t do anything, if we continue building a hundred schools here, and paying some beltway bandit to do some half-hearted agricultural project there… we are doomed to irrelevance. The only way to become relevant and really helpful is to take the lead on generating innovation.[/blockquote]

Not just innovation as in widgets, but innovation as in policy innovation. How do you do that? By devoting a considerable amount of your own budget –instead of just doing things– doing things to evaluate them. Or by scaling things up that have been scientifically proven to be effective in helping countries to scale them up. Or by supporting countries to create such innovation units within their own government. So that’s sort of the things we are pushing. I think if I were in charge of USAID I would try to push on the third, on this innovation lever. There is something at USAID called the Development Lab, I think, and they are very proud of it and rightly but it’s about two people [laughs].

AS: Commenting on something you said about not just policy innovation but also tech innovation, has there been a particular technological innovation that has really come up in development?

ED: Cell phones. Generally I’m reasonably skeptical of technology but the cell phones has just… in the space of very few years, it is everywhere and it’s really changed the way that everything works. So cell phones, coming next is the smart phone. I really think it’s going to make a difference. Then, already there but for now just in Kenya, is mobile money. It’s not just in Kenya, its Kenya, Bangladesh, Pakistan, but it’s really huge in Kenya. In Kenya, however you look at it, it seems to be changing lives.

AS: Has there been a particular method of disbursing, or trying to get cell phones out there to people in developing countries? Or has it just grown on it’s own?

ED: No, you know Nokia is a very cheap phone — has very cheap phones. They just spread, people find it useful. You think of innovation that has really commercially succeeded, you think of the cell phone and mobile money and microcredit, to some extent. But microcredit, I don’t know if it has… it’s just a commercial success.

HA: Regarding the cell phones, I think that has definitely been pushed and helped by processes of globalization and has been a really positive benefit. Do you think that globalization overall has helped or hurt impoverished nations? Or is it sort of a balance?

ED: I have no idea. I’m not very good at this type of question, I don’t think anybody knows. What we do know is that there are some distinct positive benefits, like the cell phone, but we also know there are distinct negative impacts on distribution. When you’re looking at India and the districts that were most affected by the rapid liberalization in the ‘90s, these places became comparatively poorer compared to other places less affected by the removal of the trade barriers. So we do know it affects distribution in the poor countries and the rich countries. I think these are the two things we know.

I don’t know the extent to which.. people are suggesting that as countries become closer together and trade more, they grow more. This worked on the Panama Canal and the advent of plane transport, which made some countries which were previously effectively very far away now closer by, and seem to be trading more and becoming richer. So there is some indication in that sense. I think the question of trying to put this together and asking whether it’s a positive or a negative doesn’t make sense. Because whatever is negative has to be addressed anyway and in principle could be. It shows something of our inability to redistribute gains. But there is no theorem that trade produces no losers unless you are able to redistribute. That seems to have been a big lesson.

AS: Are there particular organizations that you’ve seen on the rise? Startups or organizations like USAID who have had major projects that have been making a difference lately?

ED: You want me to name specific organizations doing specific things?

AS: If you can.

ED: An organization that has gotten a lot of attention, and I think rightly, is GiveWell. It is organizing to provide cash transfers to people in Kenya using mobile money. So they are really exploiting the existing mobile money to provide cash transfer with minimal screening and no monitoring whatsoever. They have done an evaluation of that work and they show that people seem to be spending the money perfectly reasonably. So I think it was a useful result and they got a lot of attention for it, rightly.

Not up and coming, but I am actually a big fan of the World Bank. I think that they have a lot of very good economists, they are trying hard. They are a bit disparate, they are doing this and they are doing that, but at the same time they have a lot of people that know what they are doing. By and large, in particular lately, they have supported innovation so that is nice.

Very self-servingly — but I should still cite them — I’m a big fan of IPA, that’s Innovations for Poverty Action. I’m saying that self-servingly because that’s of course our very close cousin. I think they are great, they are an NGO — which we are not — helping people conduct evaluations of their program. They are working in a lot of countries in the world setting up ambitious projects. That would be my three.

[blockquote align=”none” author=”Esther Duflo”]I’d also cite Pratham, which is a massive education NGO in India. When I said in education we try to understand what should be done, even if there are barriers to actually do it, I think Pratham is the one who figured out how to do it. If someone can do it, they can do it.[/blockquote]

HA: Do you have any new ideas or experiments that keep you up at night? That you think will really help innovate, like you’ve been saying, in developing countries? What’s the next step you want to dive into?

ED: I have a two year old and a four year old, and they are the ones who keep me up at night, nothing else. [Laughs all around] I try to not be bothered by other things. There are two things that interest me: one thing is very abstract, one thing is very concrete.

One thing is so concrete it’s not economics anymore, it’s really more cognitive psychology. In fact I’m working with cognitive psychologists; I’m very interested in small kids — that might be related to my having a two year old and a four year old — I’m very interested in how small kids learn mathematics. And the reason why I’m very interested in this question is because… a central problem of education in developing countries is that poor kids arrive in school with a small delay, just because they have not gone to preschool, or have not gone to a good preschool.

[blockquote align=”none” author=”Esther Duflo”]But then the system in developing countries, partly because of colonial history, partly because of insistence in elite bias… it is the total opposite of “no child left behind”. It is many, many children left behind.[/blockquote]

The teacher focuses on the top of the class and doesn’t pay attention to the children who are lagging behind. So a small lagging behind at the beginning turns into not being able to read at the end of primary school and exiting the school system.

My hope is to really harness the best of science –that’s why I went to see the psychologists and said you’ve got to work on some real problems, not just labs– to harness the best of what they know to construct the best curriculum possible for preschool. Then haul it out everywhere such that poor kids arrive with a slight leg-up compared to the richer kids, instead of a slight delay. Therefore this advantage will accumulate over time, that’s kind of my hope. So that’s one thing that I’m very, very interested in. And again, that doesn’t keep me up at night — nothing does — but it would.

On the other end of the spectrum, I’m very interested in the plumbing of public policy. That’s the one thing that might seem too abstract, literally how the government machine works. So, when I talk about plumbing, it could really be the plumbing of how money travels from point A to point B without leaking everywhere in the system. Suppose I come up with some great ideas, either they can be profitable, so market entity is going to take care of it and that’s fine, or they are not but we still want to do it because they have some social value. Then government is going to have to run it. Then the issue is, how is government going to be able to run it without destroying it in the process or losing all the money in the process, et cetera. The issue is, “Can I help government implement what they want to implement anyway?” As opposed to giving them ideas — you should do this, you should do that — how do you help government implement what they want to do anyways. Starting with fund flows, so I have a project on fund flows. Literally, how does the money go from the center to a local place and how does that affect corruption and stuff like that? And also, organizations of monitoring systems and the like. That might seem terribly unsexy but in the end the big ticket items will be there I think.

AS: One final question to wrap up, here at UCLA we also have an International Development Studies program. What advice would you give to young IDS students in pursuing a career in development?

ED: Once you finish your studies, you should find yourself a job in a developing country, if possible in the field somewhere and not in the capital. Spend a few years there and understand how things really work until you contemplate your next step. I think that would be the most important thing.

[blockquote align=”none” author=”Esther Duflo”]I think there are too many people who work in development that — I think there are bureaucrats in developing countries who just have absolutely no idea what it is. Get yourself out there.[/blockquote]

AS: That’s the biggest problem that we’ve learned. There are all these organizations telling developing countries what to do when they’ve never set foot in the country.

ED: It’s not just that, it’s also bureaucrats sitting in Delhi, dreaming up some systems. Going back to the plumbing issue, I was talking about healthcare, saying the quality of healthcare is terrible. So one of the issues is the nurses in the public centers never show up to work. So you write the nurses are really bad people, but then you look at them and their job description, and its some kind of … so she’s supposed to arrive at the center at 8 o’clock and be there from 8 to 8 and do field visits in the meantime, she doesn’t have any vehicle, she has ten villages that she has to visit. It’s 50 degrees centigrade, she has to persuade people to get sterilized, which, of course, they don’t want to get sterilized. So someone has been sitting down saying what is the ideal job description for one of these nurses without thinking one thing about how hard it is. So the way we describe it in the book with Banerjee [Poor Economics] is the three I’s: policies for developing countries are plagued by ideology, ignorance, inertia. You have no idea of the realities in the field, and once that sort of thing is in place it never goes away.

May 3, 2016 0 comment