In another apparent blow to the biofuels industry, two leading food researchers--Joachim von Braun of the International Food Policy Research Institute (IFPRI) and Robert Ziegler of the International Rice Research Institute--called yesterday for a moratorium on grain and oilseed-based biofuels (see the Economic Times report here) in response to global food shortages and rising prices.
The evidence against biofuels is piling up. Although biofuels alone are not responsible for the current food crisis (a perfect storm consisting of a drought in food-producing regions of Australia and rising global demand for food in general and meat in particular are big factors in the spiraling costs of food staples), von Braun estimates that a moratorium on certain biofuels in 2008 would reduce maize prices by 20% and wheat prices by 10% in the next two years. Other research I've read corroborates von Braun's estimates, attributing as much as 20% of the current rise in food prices to biofuels.
There is also growing consternation about the overall environmental impacts of biofuels, (like the growing dead zone in the Gulf of Mexico from nitrogen runoff in the American corn-belt, the massive amounts of CO2 emissions released from the drainage of peat lands for biofuel feedstock cultivation, and the threats to biodiversity from clearing tropical forests in Southeast Asia for palm oil and other biofuel feedstock plantations).
Interestingly, von Braun and Ziegler do not condemn all agriculture-based biofuels. They still support sugar cane-based fuels. National Geographic produced an excellent piece several months ago comparing the life cycle Co2 emissions, energy balance and retail price of different biofuels. Their analysis favors sugar cane-based ethanol over corn-based ethanol, although there are still sustainability concerns over increasing land in and around the Amazon being converted to sugar cane cultivation.
Von Braun and Ziegler are right to urge governments to question their biofuels policies. But let's fight the urge to condemn biofuels with the same enthusiasm that we adopted them. Today's biofuels may be far from perfect, but tomorrow's biofuels offer tremendous hope. A growing body of literature is touting the promise of cellulosic ethanol and biofuel derived from algae. In an ideal scenario, governments will remain bullish on biofuels but will channel investment and incentives toward second generation biofuels, rather than targeting increased production of today's imperfect biofuels.
Wednesday 30 April 2008
Grameen USA (Queens)
In an earlier post, I wrote about Grameen's plans to open microfinance operations in the US. Following up, here is a NYTimes article on the grand opening.
The article states about 175 people have receieved loans ranging from $500 to $3,000. The starting interest rate is 15%, as this WNYC article states. One interesting thing about the area which Grameen opened up their office, is the fact that the area is quite diverse. The first loans were made through the South Asian community, but it seems the plans are to reach out to other minority groups in the area.
Here, is an earlier NYTimes article which has some interesting responses from women who have taken out loans from the Jackson Heights office.
Full disclosure: I grew up in this very neighborhood. In my opinion, I think its a great idea, and I really hope its successful. They did get the location right by having the office right on 74th street. Its in the heart of the immigrant community there, and right near a subway stop!!
What does everyone out in internet-land think? Will Grameen succeed in America? In the latter NYTimes article, an actual customer expressed doubts on whether Americans can be counted on their word. How successful is the strategy of targeting immigrant communities? That area is quickly gentrifying (as is everywhere in NYC), will that have an effect on plans for expansion? Can the group model work in the US?
Welcoming more questions and answers.. (CMF??).
The article states about 175 people have receieved loans ranging from $500 to $3,000. The starting interest rate is 15%, as this WNYC article states. One interesting thing about the area which Grameen opened up their office, is the fact that the area is quite diverse. The first loans were made through the South Asian community, but it seems the plans are to reach out to other minority groups in the area.
Here, is an earlier NYTimes article which has some interesting responses from women who have taken out loans from the Jackson Heights office.
Full disclosure: I grew up in this very neighborhood. In my opinion, I think its a great idea, and I really hope its successful. They did get the location right by having the office right on 74th street. Its in the heart of the immigrant community there, and right near a subway stop!!
What does everyone out in internet-land think? Will Grameen succeed in America? In the latter NYTimes article, an actual customer expressed doubts on whether Americans can be counted on their word. How successful is the strategy of targeting immigrant communities? That area is quickly gentrifying (as is everywhere in NYC), will that have an effect on plans for expansion? Can the group model work in the US?
Welcoming more questions and answers.. (CMF??).
Monday 28 April 2008
The fix for climate change? Incentives
The winds of change are blowing in the
For
Although energy efficiency may seem like a no-brainer and indeed is a win-win situation for all concerned, barriers remain to EE achieving scale. Energy savings companies (ESCOs) have provided an effective model for scaling up EE in other countries. ESCOs develop, install and finance energy efficiency devices for their clients and generally earn profit through retaining a portion of the client’s energy savings. The ESCO market has not developed in
Agriculture demand side management (DSM) represents huge potential energy savings. A staggering 35-40% of total electricity consumption derives from groundwater pumping for agriculture. The USAID-funded WENEXA (Water-Energy Nexus Activity, http://waterenergynexus.com/) project is pioneering work in this area. The key to agricultural DSM, it seems, is to develop the right incentives to ensure that both farmers and utilities/distribution companies benefit from the installation of more efficient water pumps.
At the risk of being glib, addressing climate change in India and everywhere else is really a matter of creating the right incentives—incentives that support innovation and deployment of renewable energy and energy efficiency, promote reforestation and avoided deforestation, support farmers to change agricultural methods and price pollution. The PM’s national action plan for climate change is due in June. Let’s hope this plan includes a mix of appropriate and targeted incentives that will enable
The Food Crisis as Diplomatic Opportunity?
There is an interesting comment made by Nancy Birdsall and Arvind Subramanian in the OP-ED of 25th April, Wall Street Journal. Interesting because the articles tries to bring out how rising food prices can lead to win-win situation to “collectively agree to policies that promote trade and efficiency” in forum like WTO. The last few negotiations over at WTO didn’t pan out anything substantial and the authors hoped, this time the rising food price might be seen as a boon as the focus of negotiation will shift from agricultural subsidies and high tariff barriers – the two main issues the developed and the developing nations were at loggerheads.
Despite this interesting argument, I am still little less optimistic about the future outcome (read, success in terms of win-win situation) at WTO. This is mainly because of India negotiating stance - the much touted leader of developing group of nations at WTO. Typically, trade negotiations revolve around issues relating to market access — the ease with which countries can sell in one anothers' markets. Though the WTO has curbed tariffs barriers, the cause of concern is the non-tariff barrier (NTB) that are used to prevent market access to genuinely competitive producers. Since any negotiation involves give and take, gains would be most if a country gets access to the markets of other nations in the product(s) in which it has comparative advantage.
The problem with negotiating within a group is each country's interest may not always be best represented. Before the formation of the WTO, India was not very active in the GATT forum, but preferred to discuss trade issues at Unctad in association with G-77 (an association of developing countries).
A Passive Stance?
Even during early days of the WTO, India's negotiating stance at various ministerial meetings was often criticised as being passive or excessively defensive, that is, not pressing hard for market access for its exports.
Over the last few years, however, New Delhi has realised the advantages of a collaborative negotiating strategy and the number of submissions to the WTO in association with other developing countries has increased.
It has played a key role in the formation of a number of developing country groupings, the G-110 and NAMA (non-agricultural market access)-11, being the latest, at the Hong Kong Ministerial (December 2005).
Enhancing Market Access
Though India was not focussed on NAMA, ahead of the Cancun ministerial, it submitted many proposals to enhance market access in manufacturing products.
In 2005, India made a joint submission with Argentina and Brazil seeking increased market access.
Indirect negotiations towards increasing export of non-agricultural products were, however, always in place. Indian submissions under General Council mainly focused on hindrances to trade in textile and garments, increasing use of anti-dumping measures, etc. In addition, submissions made under the WTO Rules have focused on adverse impact of the preferential Rules of Origin (ROO) requirement, as also anti-dumping and countervailing measures on industrial products.
Relative to agriculture and manufactured items, India has been more aggressive in negotiating market access for services. But this is not surprising as India's comparative advantage lies in this sector. Trade in services accounts for 30 per cent of India's exports; India's business process outsourcing (BPO) sector is a $ 7.7-billion industry — seven times its Chinese counterpart.
In addition, the movement of natural persons (Mode 4), mostly from the Information Technology sector, contributes significantly to India's export earnings. Therefore, growth of service sector and getting market access for the same have always been priority areas for India.
Its stress has primarily been on Mode 1 (cross-border supply, such as BPO) and Mode 4 (movement of natural persons), both of which are subject to several barriers.
India is usually criticised for not giving enough market access to services falling under Mode 3 (commercial presence in the domestic market, such as foreign banks setting up operation in domestic market).
India is using this argument to negotiate a better market access for services falling under Mode 1 and Mode 4 — areas in which India has comparative advantage.
Coming back to agriculture, unlike many developing countries, India is rather passive when it comes to negotiating for greater market access.
Given its limited agricultural export interest, India has maintained a defensive stance. On the contrary, Brazil, Mexico, Chile, South Africa, etc., with greater exports interest in agriculture, are quite proactive on this issue. Also, India is unwilling to reduce tariffs barriers for agricultural commodities.
It is not because farmers in India are inefficient (the actual difference between world price and domestic price is less) and that India needs high tariffs to protect them. The government fears that reducing tariffs will harm marginal farmers. Hence, India's defensive stance when it comes to reducing tariffs on agricultural items.
Advantage India
On the other hand, Mode 1 and Mode 4, where India has comparative advantage, are not areas of strength for many G-20 or G-24 countries.
Naturally, India has to ally with developed countries, such as the US and Australia, on this issue.
For instance, in 2005 it submitted a joint proposal at the WTO in association with the US and Taiwan on trade in computer and related services.
Current Stance
Thus, India's negotiating stance has been on ensuring better market access in the case of agriculture and manufacturing, with limited commitment on the domestic front, and in the case of services, the approach has been proactive in the areas of core competence (Modes 1 and 4).
The future success of collaborative negotiation by developing countries is not too obvious.
Though groups such as G-20 and G-110 are formed to get greater market access for developing countries' exports, there exist considerable differences among members.
Forming a `negative' alliance against the EU-US agricultural policy has been an easy exercise, but sustaining it through `positive' steps — that is, through joint offers — would be difficult, unless the members have something to offer to trade among themselves.
Post by Nilanjan Banik
Despite this interesting argument, I am still little less optimistic about the future outcome (read, success in terms of win-win situation) at WTO. This is mainly because of India negotiating stance - the much touted leader of developing group of nations at WTO. Typically, trade negotiations revolve around issues relating to market access — the ease with which countries can sell in one anothers' markets. Though the WTO has curbed tariffs barriers, the cause of concern is the non-tariff barrier (NTB) that are used to prevent market access to genuinely competitive producers. Since any negotiation involves give and take, gains would be most if a country gets access to the markets of other nations in the product(s) in which it has comparative advantage.
The problem with negotiating within a group is each country's interest may not always be best represented. Before the formation of the WTO, India was not very active in the GATT forum, but preferred to discuss trade issues at Unctad in association with G-77 (an association of developing countries).
A Passive Stance?
Even during early days of the WTO, India's negotiating stance at various ministerial meetings was often criticised as being passive or excessively defensive, that is, not pressing hard for market access for its exports.
Over the last few years, however, New Delhi has realised the advantages of a collaborative negotiating strategy and the number of submissions to the WTO in association with other developing countries has increased.
It has played a key role in the formation of a number of developing country groupings, the G-110 and NAMA (non-agricultural market access)-11, being the latest, at the Hong Kong Ministerial (December 2005).
Enhancing Market Access
Though India was not focussed on NAMA, ahead of the Cancun ministerial, it submitted many proposals to enhance market access in manufacturing products.
In 2005, India made a joint submission with Argentina and Brazil seeking increased market access.
Indirect negotiations towards increasing export of non-agricultural products were, however, always in place. Indian submissions under General Council mainly focused on hindrances to trade in textile and garments, increasing use of anti-dumping measures, etc. In addition, submissions made under the WTO Rules have focused on adverse impact of the preferential Rules of Origin (ROO) requirement, as also anti-dumping and countervailing measures on industrial products.
Relative to agriculture and manufactured items, India has been more aggressive in negotiating market access for services. But this is not surprising as India's comparative advantage lies in this sector. Trade in services accounts for 30 per cent of India's exports; India's business process outsourcing (BPO) sector is a $ 7.7-billion industry — seven times its Chinese counterpart.
In addition, the movement of natural persons (Mode 4), mostly from the Information Technology sector, contributes significantly to India's export earnings. Therefore, growth of service sector and getting market access for the same have always been priority areas for India.
Its stress has primarily been on Mode 1 (cross-border supply, such as BPO) and Mode 4 (movement of natural persons), both of which are subject to several barriers.
India is usually criticised for not giving enough market access to services falling under Mode 3 (commercial presence in the domestic market, such as foreign banks setting up operation in domestic market).
India is using this argument to negotiate a better market access for services falling under Mode 1 and Mode 4 — areas in which India has comparative advantage.
Coming back to agriculture, unlike many developing countries, India is rather passive when it comes to negotiating for greater market access.
Given its limited agricultural export interest, India has maintained a defensive stance. On the contrary, Brazil, Mexico, Chile, South Africa, etc., with greater exports interest in agriculture, are quite proactive on this issue. Also, India is unwilling to reduce tariffs barriers for agricultural commodities.
It is not because farmers in India are inefficient (the actual difference between world price and domestic price is less) and that India needs high tariffs to protect them. The government fears that reducing tariffs will harm marginal farmers. Hence, India's defensive stance when it comes to reducing tariffs on agricultural items.
Advantage India
On the other hand, Mode 1 and Mode 4, where India has comparative advantage, are not areas of strength for many G-20 or G-24 countries.
Naturally, India has to ally with developed countries, such as the US and Australia, on this issue.
For instance, in 2005 it submitted a joint proposal at the WTO in association with the US and Taiwan on trade in computer and related services.
Current Stance
Thus, India's negotiating stance has been on ensuring better market access in the case of agriculture and manufacturing, with limited commitment on the domestic front, and in the case of services, the approach has been proactive in the areas of core competence (Modes 1 and 4).
The future success of collaborative negotiation by developing countries is not too obvious.
Though groups such as G-20 and G-110 are formed to get greater market access for developing countries' exports, there exist considerable differences among members.
Forming a `negative' alliance against the EU-US agricultural policy has been an easy exercise, but sustaining it through `positive' steps — that is, through joint offers — would be difficult, unless the members have something to offer to trade among themselves.
Post by Nilanjan Banik
Sunday 27 April 2008
It is not just Farmers!!
Just when I thought, our policy makers have to really find a solution for our farmer's problems this struck me hard. An excerpt -"While the global teen suicide rate is 14.5 per 100,000, a 2004 study by the Christian Medical College (CMC), Vellore, reported 148 for girls and 58 for boys in India. "
Among various reasons cited in the article, education and stress on education stand tall!. This is commentary on need of proper eduction systems/policies in India. And read this to know what is really cooking up with gen-next of India, (talks of one among many problems).
Among various reasons cited in the article, education and stress on education stand tall!. This is commentary on need of proper eduction systems/policies in India. And read this to know what is really cooking up with gen-next of India, (talks of one among many problems).
Thursday 24 April 2008
A good read
Got hands on a very good book lately. India 2008 published by Business Standard. If I can quote from the introduction: "the problem ofcourse, is that policy arguements in India tend to go in cirlces, not forward. Everyone is giving you his or her point of view, no one is listening to the other person's arguement, and so the same things get said over and over again, yet nothing changes.... ...Debate ends only when a new policy has been tried and shown to have worked -like tax reform, industrial delicensing or tariff reduction. Undeterred, some protagonists join issue on some other front. One is reminded of Oscar Wilde who said, "I don't like principles, I prefer prejudices.'
The list of people who have contributed to the book, include Nachiket and I felt elated. People who don't go circles and want to take things forward were part of the book. Please look at IFMR and ICICI Foundation websites for what he and his team work for/on.
The list of people who have contributed to the book, include Nachiket and I felt elated. People who don't go circles and want to take things forward were part of the book. Please look at IFMR and ICICI Foundation websites for what he and his team work for/on.
Wednesday 23 April 2008
Who Killed the Farmers?
Doug's interesting blog "The Confusing Reality behind Farmer Suicides" and the insightful comments prompted me to put my thoughts together on the issue of farmer suicides and see if there is a possibility of tying together various strands of thought being expressed.
At times I wonder why is that everyone seems to have some opinionated reaction when it comes to ‘Farmer Suicides’ and not so opinionated ones on ‘Farmer Murders’ or something like ‘Non-farmer Suicides’ (economists studying crime or epidemiologists aside!). Are we still unable to identify and solve some fundamental problems afflicting our socio-economic or geo-political systems when we come across regular news items on farmer suicides or a not so regular glance through some touching statistics indicating these mortality trends?. From a policy perspective, to arrive at alternative solutions (at least workable) one needs to decipher the problem at hand from an unprejudiced Rawlsian ‘veil of ignorance’ kind of platform. But the increasingly popular debacle of ‘Farmer Suicides’ poses some formidable challenges and it becomes even more complicated given some concealed realities and some analytical tricksteries.
‘Suicide’ is the act of intentionally terminating one's own life, or in a metaphorical sense, the "willful destruction of one's self-interest". Suicide may occur for a number of reasons, often related to depression, shame, pain, financial difficulties or other undesirable situations. ‘Suicide’ being a rare event, relatively higher incidence among a sub-group could be indicative of a larger socio-economic malaise. For every individual committing suicide, there could be many more in a state of despair (distress). There have been 1, 56,562 farmer suicides during 1995-2004. From these, more than four-fifths are males. The suicide mortality rate (SMR, suicide death per 1, 00, 000 persons) for male farmers nearly doubled in ten years from 9.7 in 1995 to 19.2 in 2004. SMR for male non-farmers has veered around 13; it increased from 12.6 in 1995 to 14.2 in 1999 and then decreased to 13.4 in 2004 (Source of SMR data is the National Crime Records Bureau-NCRB and SMR for farmers are normally based on interpolated/extrapolated population for cultivators (even age adjusted) using 1991 and 2001 census). In 2004, states with SMR for male farmers higher than the national average are Kerala (183.0), Maharashtra (57.2), Andhra Pradesh (44.5), Tamil Nadu (43.7), Karnataka (35.4), Goa (32.1), undivided MP (27.7), Sikkim (40.5), Dadra & Nagar Haveli (42.5), Delhi (49.4) and interestingly Pondicherry (1495.4)!! (Pondicherry is special because of the low population as well as lower share of farmers in the population) Together these states account for nearly four-fifth of farmer suicides in 2004, more than half from the states of Andhra Pradesh, Karnataka, Kerala and Maharashtra.Socio-economic risk factors like indebtedness, crop failure, asset erosion (like sale of bullocks), decline in social position, burden of daughter’s/sister’s marriage, suicide in a nearby village, addictions, dispute with neighbors/others, health problem, a recent death in the family, history of suicide in the family etc. could be hypothesized to have some causality with suicide in a household. These factors are not mutually exclusive. They can be correlated as well as covariant risks. Any framework analysing farmer suicides should take into account factors like asset holding (class holding of lan-size etc.) and an effective case-control approach can show differntial impact of the identified drivers of suicide.
Farmer Suicides are clearly symptomic of the systemic agrarian crisis ailing India. It is not only the markets that have bypassed the low income farm households, but also the flippant and ill designed public policies. Vidarbha is just one popular example. And thanks to Mr.P.Sainath and the omniscient media, the issue of farmers' suicide has indeed become ubiquitous. Suicides being at the intersection of physico-psychological drivers, the socio-economic reality brings in a host of differential conditioning. Suicides stand at a critical juncture between defined rationality and perceived irrationality and is an outcome of choices made under complex conditioning. In the context of farmers’ suicides, some very interesting observations I have made:
I will deal with the fundamental ‘Idiosyncrasies of Vidarbha’ and possible remedies in my next blog.
At times I wonder why is that everyone seems to have some opinionated reaction when it comes to ‘Farmer Suicides’ and not so opinionated ones on ‘Farmer Murders’ or something like ‘Non-farmer Suicides’ (economists studying crime or epidemiologists aside!). Are we still unable to identify and solve some fundamental problems afflicting our socio-economic or geo-political systems when we come across regular news items on farmer suicides or a not so regular glance through some touching statistics indicating these mortality trends?. From a policy perspective, to arrive at alternative solutions (at least workable) one needs to decipher the problem at hand from an unprejudiced Rawlsian ‘veil of ignorance’ kind of platform. But the increasingly popular debacle of ‘Farmer Suicides’ poses some formidable challenges and it becomes even more complicated given some concealed realities and some analytical tricksteries.
‘Suicide’ is the act of intentionally terminating one's own life, or in a metaphorical sense, the "willful destruction of one's self-interest". Suicide may occur for a number of reasons, often related to depression, shame, pain, financial difficulties or other undesirable situations. ‘Suicide’ being a rare event, relatively higher incidence among a sub-group could be indicative of a larger socio-economic malaise. For every individual committing suicide, there could be many more in a state of despair (distress). There have been 1, 56,562 farmer suicides during 1995-2004. From these, more than four-fifths are males. The suicide mortality rate (SMR, suicide death per 1, 00, 000 persons) for male farmers nearly doubled in ten years from 9.7 in 1995 to 19.2 in 2004. SMR for male non-farmers has veered around 13; it increased from 12.6 in 1995 to 14.2 in 1999 and then decreased to 13.4 in 2004 (Source of SMR data is the National Crime Records Bureau-NCRB and SMR for farmers are normally based on interpolated/extrapolated population for cultivators (even age adjusted) using 1991 and 2001 census). In 2004, states with SMR for male farmers higher than the national average are Kerala (183.0), Maharashtra (57.2), Andhra Pradesh (44.5), Tamil Nadu (43.7), Karnataka (35.4), Goa (32.1), undivided MP (27.7), Sikkim (40.5), Dadra & Nagar Haveli (42.5), Delhi (49.4) and interestingly Pondicherry (1495.4)!! (Pondicherry is special because of the low population as well as lower share of farmers in the population) Together these states account for nearly four-fifth of farmer suicides in 2004, more than half from the states of Andhra Pradesh, Karnataka, Kerala and Maharashtra.Socio-economic risk factors like indebtedness, crop failure, asset erosion (like sale of bullocks), decline in social position, burden of daughter’s/sister’s marriage, suicide in a nearby village, addictions, dispute with neighbors/others, health problem, a recent death in the family, history of suicide in the family etc. could be hypothesized to have some causality with suicide in a household. These factors are not mutually exclusive. They can be correlated as well as covariant risks. Any framework analysing farmer suicides should take into account factors like asset holding (class holding of lan-size etc.) and an effective case-control approach can show differntial impact of the identified drivers of suicide.
Farmer Suicides are clearly symptomic of the systemic agrarian crisis ailing India. It is not only the markets that have bypassed the low income farm households, but also the flippant and ill designed public policies. Vidarbha is just one popular example. And thanks to Mr.P.Sainath and the omniscient media, the issue of farmers' suicide has indeed become ubiquitous. Suicides being at the intersection of physico-psychological drivers, the socio-economic reality brings in a host of differential conditioning. Suicides stand at a critical juncture between defined rationality and perceived irrationality and is an outcome of choices made under complex conditioning. In the context of farmers’ suicides, some very interesting observations I have made:
- Suicide Mortality Rate (SMR) which is expressed as a ratio of number of reported suicidal deaths per 100000 population tend to be low, something like let us say 14 for India on an average. But if in some sub-group of the population, for instance SMR among Male farmers in geography happens to be 150, then it is symptomatic of some serious problem- Analytical or otherwise. Farmer’s suicide data in most states face credibility issues and measurement errors are rampant.
- If unnatural deaths are reported as Suicides, then we can easily increase SMR in a community and if there lies some vested political interest or other incentive structures that promote this, then things get more complex!! One reference can be made to the compensation mechanism which the state has in place for families of those farmers who reportedly committed suicide; on the other hand the Indian Penal Code has provision to punish those who attempted it: So on the whole it at times boils down to a game of incentives vs. disincentives under conditions of acute distress.
- In places like Vidarbha where we have the highest density of Pesticide consumption in India, proximity to highly subsidized state provided Pesticides are rampant and in such conditions there is bound to be higher incidence of suicides by pesticide consumption for the distressed farmers. In U.S it could well be thought of to be substituted by Shot-guns!
- Apart from acute depression out of socio-economic and physico-psychological realities, one fact remains hidden in most of these discussions. Proximity to nearest hospital for treatment of poisoning cases is a grim reality of the poor infrastructure in some parts of rural India. When someone attempts suicide, in the absence of immediate and appropriate medical attention, it might well turn out to be a fatal. This seems to be consistently transforming 'would have been attempts' into an addition to the already non authentic SMR figures.
I will deal with the fundamental ‘Idiosyncrasies of Vidarbha’ and possible remedies in my next blog.
Tuesday 22 April 2008
Whats new with Panchayats ??
At the Centre for Development Finance, some of our work (including mine) includes researching Centrally Sponsored Schemes. In the course of deciphering government policy papers, I have come across this very interesting document from the Union Minister of the Panchayati Raj, "Inclusive Growth through Governance" (April 2008).
The recommendations in the document span a wide range, including:
Training for panchayat representatives
The creation of rural non-farm business hubs (something I believe IFMR Trust examines)
Incentives for Panchayat perfomance
The section on financial recommendations, I found very interesting, and from my work on centre-state transfers, a recommendation I very much agree with.
4.7. The proposed Central Scheme and Programme Monitoring System should enable the tracking of both release of funds and submission of progress reports and utilization certificates by each Panchayat. It should also function as a financial information system, so that all Panchayats are aware of when funds are released by Central and State governments. All notifications regarding funds released to the States should be communicated to all levels of Panchayats to facilitate planning.
The recommendations in the document span a wide range, including:
Training for panchayat representatives
The creation of rural non-farm business hubs (something I believe IFMR Trust examines)
Incentives for Panchayat perfomance
The section on financial recommendations, I found very interesting, and from my work on centre-state transfers, a recommendation I very much agree with.
4.7. The proposed Central Scheme and Programme Monitoring System should enable the tracking of both release of funds and submission of progress reports and utilization certificates by each Panchayat. It should also function as a financial information system, so that all Panchayats are aware of when funds are released by Central and State governments. All notifications regarding funds released to the States should be communicated to all levels of Panchayats to facilitate planning.
One small step closer to englightenment
Churchill once said of Stalin that he was a “riddle wrapped in a mystery inside an enigma.” The same might be said of the Indian administrative system.
Today, with Jawahar’s help, I came a little bit closer to unraveling this mystery by figuring out how the system of local administrative boundaries -- wards, panchayats, blocks, taluks, tehsils, and districts – all work.
Ok, so many of you may already know most of this stuff, but when I queried my colleagues around the office there was widespread confusion about some of the details of how this all works – esp. the relationship of blocks to Taluks and the difference between Taluks and Tehsils (there is none). Here is the definitive account, straight from Jawahar’s mouth.
- Districts You probably have a good understanding of what a district is, so I won’t dwell on this one. The head person in the district is the District Collector. District collectors are usually recently accepted IAS officers.
- Taluks, Talukas, and Tehsils are all the same thing. (In some states they call them Taluks and in some states they call them Tehsils.) A Taluk or Tehsil is a subdivision of a district (though in a few rare cases, a Taluk may spread across more than one district) in which revenue collection activities (e.g. – land tax) take place. The head person in a Taluk is usually called a Tehsildar.
- Blocks are subdivisions of a district in which program disbursement activities (e.g. – spending on NREG, Indira Awas Yojana, etc.) happens. The head person in a block is the Block Development Officer.
- The block and Taluk systems run completely independently and block and Taluk boundaries are usually completely different even though they are of roughly the same size.
- A panchayat (or gram panchayat or GP) is a subdivision of a block in which local administration and program disbursement activities take place. Panchayati leaders are locally elected but the system of election varies from state to state.
- Wards are subdivisions of panchayats. Ward leaders are locally elected but the system of election varies from state to state.
- The system for cities is slightly different. In cities, there are no Taluks or Blocks. Instead there is a corporation (in the case of large cities) or a municipality (in the case of a medium size city). There are still wards though.
There’ll be a quiz on all this tomorrow.
Friday 18 April 2008
Ronald Ross, Human Subjects and Randomized Evaluations
“In one of the bottles very small mosquito grubs were found, showing that the mosquitoes’ eggs had been hatched. The contents of this bottle, minus the dead bodies of the mosquitoes, was given to a native, Lutchman, on 25th at 8.0 a.m. on payment, after full explanation of the nature of the experiment. The contents of the other bottle was given to another native in a similar way. I think myself justified in making this experiment because of the vast importance a positive result would have and because I have a specific in quinine always at hand.”
-Ronald Ross, 1895.
Perhaps a bit of clarification is needed for that quote. It is from a letter that Ronald Ross, the man who proved that mosquitoes are the vector for malaria, wrote from what is now Andhra Pradesh to his mentor in England. Prior to his great discovery, Ross thought it possible that malaria was contracted when humans drank water which contained mosquito larvae. In order to test this hypothesis, Ross fed this “mosquito larvae water” to local Indians in Secunderabad to see if they would contract malaria. Ross argues that this was ethical because the subjects were given “full explanation” and he was prepared to supply them with quinine, a somewhat effective antidote to malaria at that time, immediately after they contracted the disease. Plus, Ross decided that the ends justified the means. Understanding how malaria was contracted was simply worth the illness of a few natives.
Here at CMF we are in the business of doing experiments on human subjects. I believe that we conduct our projects with the highest ethical standards and a portion of our projects are sanctioned by the Institutional Review Board's of major universities in the US, committees empowered by the U.S. Government to approve human research.
But then again, Ronald Ross surely thought he was doing enlightened work of the “highest ethical standards” (and of course one could reasonably argue that the US Government is no great moral authority). We can hope that researchers have truly become beacons of morality and that advances in anthropology and greater cultural exchange has led to less exploitation of the marginalized for the good of science. We can be optimistic and believe that by constantly reminding ourselves of Hitler’s use of human experimentation, we won’t do the same.
The subject for this blog came to me as I was considering the morality of doing a hypothetical experiment in which 100 villages are selected in a district, out of which the members of 50 villages will all be given cell phones, and the people of the other 50 villages will be given nothing. The researchers would survey these villages every year for three years to see just how effective cell phones are for raising income levels. This hypothetical is typical of the design for most CMF projects.
Often, researchers argue that because of limited resources in the world and to attain a greater understanding of how to eradicate poverty, this sort of study can be incredibly useful. The researcher might say, “If we could give cell phones to everyone in the world, we would, but that is not possible, so using these phones for research is an efficient use of a resource. Perhaps we will find that the government should subsidize cell phone purchases, and then we would be helping millions of people. And we have not done any harm to individuals, but only given away an asset.”
I essentially agree with this argument, but with one caveat. Perhaps some harm is done to those who did not receive the cell phones. Some economists have argued that we see our economic position in comparison to those around us, rather than in absolute terms. This is referred to as relative deprivation (the literature on whether this is an important phenomenon is inconclusive). The idea is that village members in Bihar do not compare their situations to Americans in Chicago suburbs, they compare themselves to those in their village and perhaps those in their block or district. Keeping up with the Sahus. Again, the argument can be made the government does this constantly, by administering programs where the benefits are not equally distributed. But at least in the governments case there is at least the concept that they are trying to do the most good for the community (maybe that is a stretch).
To be honest, this is not a complete hypothetical. On the research study I currently manage, I have personally seen village members/human subjects, who heard that an asset was being given away that they did not receive, express their anger and sense of deprivation.
This is not an argument that the research community should not conduct human subject randomized evaluations of this kind, but I do believe this is an issue that deserves thought. Plus, it is always good to consider whether you and I have not come so far in the last 100 years and may be more like Ronald Ross than we think.
-Ronald Ross, 1895.
Perhaps a bit of clarification is needed for that quote. It is from a letter that Ronald Ross, the man who proved that mosquitoes are the vector for malaria, wrote from what is now Andhra Pradesh to his mentor in England. Prior to his great discovery, Ross thought it possible that malaria was contracted when humans drank water which contained mosquito larvae. In order to test this hypothesis, Ross fed this “mosquito larvae water” to local Indians in Secunderabad to see if they would contract malaria. Ross argues that this was ethical because the subjects were given “full explanation” and he was prepared to supply them with quinine, a somewhat effective antidote to malaria at that time, immediately after they contracted the disease. Plus, Ross decided that the ends justified the means. Understanding how malaria was contracted was simply worth the illness of a few natives.
Here at CMF we are in the business of doing experiments on human subjects. I believe that we conduct our projects with the highest ethical standards and a portion of our projects are sanctioned by the Institutional Review Board's of major universities in the US, committees empowered by the U.S. Government to approve human research.
But then again, Ronald Ross surely thought he was doing enlightened work of the “highest ethical standards” (and of course one could reasonably argue that the US Government is no great moral authority). We can hope that researchers have truly become beacons of morality and that advances in anthropology and greater cultural exchange has led to less exploitation of the marginalized for the good of science. We can be optimistic and believe that by constantly reminding ourselves of Hitler’s use of human experimentation, we won’t do the same.
The subject for this blog came to me as I was considering the morality of doing a hypothetical experiment in which 100 villages are selected in a district, out of which the members of 50 villages will all be given cell phones, and the people of the other 50 villages will be given nothing. The researchers would survey these villages every year for three years to see just how effective cell phones are for raising income levels. This hypothetical is typical of the design for most CMF projects.
Often, researchers argue that because of limited resources in the world and to attain a greater understanding of how to eradicate poverty, this sort of study can be incredibly useful. The researcher might say, “If we could give cell phones to everyone in the world, we would, but that is not possible, so using these phones for research is an efficient use of a resource. Perhaps we will find that the government should subsidize cell phone purchases, and then we would be helping millions of people. And we have not done any harm to individuals, but only given away an asset.”
I essentially agree with this argument, but with one caveat. Perhaps some harm is done to those who did not receive the cell phones. Some economists have argued that we see our economic position in comparison to those around us, rather than in absolute terms. This is referred to as relative deprivation (the literature on whether this is an important phenomenon is inconclusive). The idea is that village members in Bihar do not compare their situations to Americans in Chicago suburbs, they compare themselves to those in their village and perhaps those in their block or district. Keeping up with the Sahus. Again, the argument can be made the government does this constantly, by administering programs where the benefits are not equally distributed. But at least in the governments case there is at least the concept that they are trying to do the most good for the community (maybe that is a stretch).
To be honest, this is not a complete hypothetical. On the research study I currently manage, I have personally seen village members/human subjects, who heard that an asset was being given away that they did not receive, express their anger and sense of deprivation.
This is not an argument that the research community should not conduct human subject randomized evaluations of this kind, but I do believe this is an issue that deserves thought. Plus, it is always good to consider whether you and I have not come so far in the last 100 years and may be more like Ronald Ross than we think.
Wednesday 16 April 2008
How do you measure Greenhouse Gases?
How do you measure Greenhouse Gases?
Each greenhouse gas traps the sun’s energy to varying degrees. This is called the chemical’s radiative forcing (or global warming potential– [GWP]). By measuring and describing a greenhouse gas in terms of its global warming potential, its radiative forcing can be converted to a similar unit of carbon dioxide equivalents. The radiative forcing of a gas is dependent on how it reacts with long-wave radiation coming from the Earth and how long lived it is. For example, one molecule of SF6 warms the planet to a similar extent as 23,900 molecules of CO2.
Carbon Dioxide (CO2)
Atmospheric Lifetime (Years): 50-200
Global Warming Potential (100 Year): 1
Methane (CH4) 9-15 21
Atmospheric Lifetime (Years): 50-200
Global Warming Potential (100 Year): 1
Nitrous Oxide (N2O)
Atmospheric Lifetime (Years): 120
Global Warming Potential (100 Year): 310
HFC – 134A
Atmospheric Lifetime (Years): 15
Global Warming Potential (100 Year): 1,300
HFC – 404A8
Atmospheric Lifetime (Years): >48
Global Warming Potential (100 Year): 3,260
Sulfur Hexafl uoride (SF6)
Atmospheric Lifetime (Years): 3,200
Global Warming Potential (100 Year): 23,900
(Source:http://www.sustainableunh.unh.edu/climate_ed/greenhouse-gas-invnt/1990-2003_UNH_GHG_Report.pdf)
Each greenhouse gas traps the sun’s energy to varying degrees. This is called the chemical’s radiative forcing (or global warming potential– [GWP]). By measuring and describing a greenhouse gas in terms of its global warming potential, its radiative forcing can be converted to a similar unit of carbon dioxide equivalents. The radiative forcing of a gas is dependent on how it reacts with long-wave radiation coming from the Earth and how long lived it is. For example, one molecule of SF6 warms the planet to a similar extent as 23,900 molecules of CO2.
Carbon Dioxide (CO2)
Atmospheric Lifetime (Years): 50-200
Global Warming Potential (100 Year): 1
Methane (CH4) 9-15 21
Atmospheric Lifetime (Years): 50-200
Global Warming Potential (100 Year): 1
Nitrous Oxide (N2O)
Atmospheric Lifetime (Years): 120
Global Warming Potential (100 Year): 310
HFC – 134A
Atmospheric Lifetime (Years): 15
Global Warming Potential (100 Year): 1,300
HFC – 404A8
Atmospheric Lifetime (Years): >48
Global Warming Potential (100 Year): 3,260
Sulfur Hexafl uoride (SF6)
Atmospheric Lifetime (Years): 3,200
Global Warming Potential (100 Year): 23,900
(Source:http://www.sustainableunh.unh.edu/climate_ed/greenhouse-gas-invnt/1990-2003_UNH_GHG_Report.pdf)
The Great Consumption Loan Debate
*This post is in part a response to an earlier blog entry by Doug Johnson, “Some Notes from the Field.” See complaints 1 and 2 from the list of issues about microfinance that Nachiket Mor and Bindu Ananth heard in the field.
I often forget that once I have come to a conclusion about an issue, the rest of the world does not simply jump on board. From studying the literature and logically considering the issue of whether MFIs should force/encourage/ask people to use their loans for only “productive” purposes rather than for consumption, I now strongly believe that financial providers can do a great deal of good by providing loans with no strings attached (i.e. no rules about how that loan can used).
My opinions about the value of microloans were greatly informed by Jonathan Morduch’s excellent and very readable paper, “Income Smoothing and Consumption Smoothing.” Morduch’s paper discusses the different methods poor households use to smooth their income and consumption, and whether informal markets allows for the kind of borrowing and savings that allows for households to take intelligent risks. The details of the papers arguments go far beyond the scope of a blog entry, but I strongly encourage those interested to read it.
This is nothing new, but what I took out of reading this paper and others on consumption smoothing is that poor households often face unexpected shocks and use borrowing as a form of insurance that allows them to spend enough money on food, health and possibly education or necessary household improvements until their next flow of income. Morduch gives data on how loans are actually used in Hyderabad slums in a recent presentation. Of course, borrowing can lead people to a cycle of debilitating debt or foolish spending, but it is important to focus on the aggregate and not just the worst circumstances. A low-powered study that I discussed in my last blog entry argues for the economic benefits of distributing loans to even marginal clients.
This is not to argue that financial training and programs that give loans with education on how to start a business are not useful or do not have impact, just that they are not they are not the only way to provide social good. Although I have my opinions, the argument about the best and most productive ways to provide loans to the poor is far from settled.
This should probably be the subject its own entry, but another issue that needs more discussion and clarity is what exactly counts as a “productive” or “consumptive” use of a loan. What is buying medicine? Building a latrine? Buying a cell phone (a colleague recently sent me a New York Times article that discusses the cell phone as a development tool)? Paying for a child’s school fees?
Anyhow, it is clear to me that many people do not use their loans solely for starting micro-businesses, and in many cases they probably shouldn’t. It is essential that MFIs consider this issue and try to best understand how they can design loans which meet truly meet their responsible clients needs, whether they want to start a small business or not.
I often forget that once I have come to a conclusion about an issue, the rest of the world does not simply jump on board. From studying the literature and logically considering the issue of whether MFIs should force/encourage/ask people to use their loans for only “productive” purposes rather than for consumption, I now strongly believe that financial providers can do a great deal of good by providing loans with no strings attached (i.e. no rules about how that loan can used).
My opinions about the value of microloans were greatly informed by Jonathan Morduch’s excellent and very readable paper, “Income Smoothing and Consumption Smoothing.” Morduch’s paper discusses the different methods poor households use to smooth their income and consumption, and whether informal markets allows for the kind of borrowing and savings that allows for households to take intelligent risks. The details of the papers arguments go far beyond the scope of a blog entry, but I strongly encourage those interested to read it.
This is nothing new, but what I took out of reading this paper and others on consumption smoothing is that poor households often face unexpected shocks and use borrowing as a form of insurance that allows them to spend enough money on food, health and possibly education or necessary household improvements until their next flow of income. Morduch gives data on how loans are actually used in Hyderabad slums in a recent presentation. Of course, borrowing can lead people to a cycle of debilitating debt or foolish spending, but it is important to focus on the aggregate and not just the worst circumstances. A low-powered study that I discussed in my last blog entry argues for the economic benefits of distributing loans to even marginal clients.
This is not to argue that financial training and programs that give loans with education on how to start a business are not useful or do not have impact, just that they are not they are not the only way to provide social good. Although I have my opinions, the argument about the best and most productive ways to provide loans to the poor is far from settled.
This should probably be the subject its own entry, but another issue that needs more discussion and clarity is what exactly counts as a “productive” or “consumptive” use of a loan. What is buying medicine? Building a latrine? Buying a cell phone (a colleague recently sent me a New York Times article that discusses the cell phone as a development tool)? Paying for a child’s school fees?
Anyhow, it is clear to me that many people do not use their loans solely for starting micro-businesses, and in many cases they probably shouldn’t. It is essential that MFIs consider this issue and try to best understand how they can design loans which meet truly meet their responsible clients needs, whether they want to start a small business or not.
Tuesday 15 April 2008
Some Links I Found Interesting
- Yet another district claims to have achieved 100% financial inclusion
- Yes Bank has teamed up with Obopay to offer a mobile payment solution for Yes customers. While there are already a couple of companies in India which aspire to offer mobile payment solutions for Indian bank clients (e.g. --mCheque and Paymate) these companies seem to have made very little actual progress in terms of implementing their solutions. Also, Obopay's technology is somewhat superior to these companies' in that it doesn't rely on the user to SMS a pin number which prevents would be fraudsters from retrieving a user's pin from the user's Sent SMSs box.
- CIC proves that it's not afraid to enforce RTI.
- Bandhan gets profiled by Business Standard
- Staff of the India Water Portal set off on a road trip
Food Crisis
Your cool toy for the day, from FT.com
Click on "Price Measures" and read some of the countries profiled. Really interesting.
Also a NY Times article on how many Finance Ministers are more concerned about the food crisis than the credit crisis.
(not responsible for productive office time lost).
Click on "Price Measures" and read some of the countries profiled. Really interesting.
Also a NY Times article on how many Finance Ministers are more concerned about the food crisis than the credit crisis.
(not responsible for productive office time lost).
Monday 14 April 2008
Does CDM need to be reexamined?
I would not claim to be an expert on carbon or how the CDM market works. As a layman on the issue, I would read this WSJ article and would conclude that the UN really needs to reevaluate the entire CDM system .
"U.N. regulators are also concerned that some independent auditors of these projects, who are responsible for vetting their environmental legitimacy, have been letting project developers push through ventures of questionable environmental value."
I had no idea that of the CDM approved projects, such a small percentage comes from developing countries. Anyone know of efforts from the UN to try and correct this imbalance?
"U.N. regulators are also concerned that some independent auditors of these projects, who are responsible for vetting their environmental legitimacy, have been letting project developers push through ventures of questionable environmental value."
I had no idea that of the CDM approved projects, such a small percentage comes from developing countries. Anyone know of efforts from the UN to try and correct this imbalance?
Things I Just Don't Understand
Why is it so difficult to get change when paying a bill in India? (For those not familiar with this problem, I don't mean to say that businesses are unwilling to give change -- rather that they simply don't have the cash on hand to provide change.)
In many situations, such as in paying for rickshaw rides, the cultural norm seems to be that it is the payee's responsibility for having exact change and since the seller knows that many customers will simply round up if not provided change there is a definite incentive for them not to carry around any extra cash. This seems to be only part of the explanation though. People really do seem genuinely upset if I hand over a 100 rs to pay for a 30 rs item. The problem appears to be more acute in Mumbai, where some businesses horde 10 rs notes.
Is the RBI not printing enough 10 rs notes?
In many situations, such as in paying for rickshaw rides, the cultural norm seems to be that it is the payee's responsibility for having exact change and since the seller knows that many customers will simply round up if not provided change there is a definite incentive for them not to carry around any extra cash. This seems to be only part of the explanation though. People really do seem genuinely upset if I hand over a 100 rs to pay for a 30 rs item. The problem appears to be more acute in Mumbai, where some businesses horde 10 rs notes.
Is the RBI not printing enough 10 rs notes?
Reuters Delivers Ag Info to Farmers via SMs
Standing in an onion field in a village outside Pune, Chandra Kant can check weather reports, get crop spraying information and find out how much onions are fetching at the local market, all on his mobile phone, for 175 rupees (£2.19) a quarter. The service is being offered by Reuters, better known for offering news and financial information to City workers for whom £2 would not cover a run to Starbucks.
Kant is not yet sure about the service, Reuters Market Light, and wants to wait to see how it performs against the local newspapers and television station but Reuters is hoping that, if it can convince enough of India’s 250m farm workers to sign up, all those rupees could add up to a big business. So far the company has about 250,000 customers in Maharashtra, India’s third-largest state, for its service that provides weather reports over a 50-mile radius and crop prices within a five-hour journey.
From Times Online. A couple of weeks ago I had the chance to speak with Amit Mehra, the manager of Reuters Market Light, about the initiative and was very impressed. One thing which the Times Online article fails to mention is that Reuters Market Light uses a very different, and in my opinion superior, system for gathering and reporting local ag spot prices than that employed by local newspapers. Newspapers typically rely on middlemen to report the range of prices observed in the market each day for a given commodity. The problem with this method is that the maximum and minimum quality of the produce that shows up in a mandi on any given day can vary quite a bit so these figures are often difficult to interpret. Unfortunately, the middle men are usually unwilling to provide more specificity when it comes to prices out of a fear that farmers will then demand a certain price when selling their goods.
Reuters Market Light takes a different approach. Rather than report a range of prices, Reuters provides the exact spot price for a given quality level of each commodity. Doing this takes more effort – the person providing the prices must be able to precisely discern between varying levels of quality -- but it is much more useful for farmers. Once farmers have a feeling for the level of quality for which prices are reported, they can use this as a benchmark for determining the appropriate selling price for their own goods. In interviews with farmers in Gujarat, respondents repeatedly told us that they would greatly prefer a system of spot price reporting based on a single price for a specific level of quality for each good.
Congrats to the Reuters Market Light team for all the good work so far and good luck in the future!
Some Notes from the Field
As I mentioned in last week’s post on the BISWA loan guarantee deal, IFMR Trust and ICICI Foundation have big plans to shake up India’s rural banking sector. (I’ll leave the task of providing a full description of those plans to my colleagues at the Trust who will be able to provide a much better overview than I could.) This week, staff of the IFMR Trust is in the field in rural Thanjavur talking with bank managers, local officials, land owners, and borrowers to get a better idea of the facts on the ground when it comes to banking and the poor. Nachiket Mor, Bindu Ananth, and Janhavi Dave have just sent me a very interesting list of concerns they have been hearing repeatedly from many of the people they have talked to:
- The poor are not responsible consumers of finance. Microfinance borrows only use loan money for “unnecessary” consumption activities such as weddings, funerals and other social functions which leads them further into debt traps
- Lenders should do more to ensure that money is used for productive purposes
- Any extra income that they have, the men drink it away.
- Financial Literacy must precede any lending.
- SHGs (and potentially JLGs) are merely a new breed of money lenders they do not really invest in any productive assets. A few members of the SHGs (those that supply the savings) get rich by on-lending to other members at 3% per month.
- The poor will borrow as much money as they can and run themselves into a debt trap.
- Insurance is not a product that the community members understand
- Variable component of loan officer salary does not encourage the staff members to improve the sales and services, but deters them to take up the job altogether
- Men are not responsible consumers of finance
- Men JLG model does not work
- The money lent to women, is a loan given to the household and not the woman as an individual
- Repayment can happen only on the field
These concerns are certainly not new. Indeed, most of them have been around as long as the microfinance movement itself. Still, the pessimism of many that microfinance loans used for consumption purposes will only serve to worsen the lives of the borrowers never ceases to surprise me. As Nachiket points out, we desperately need more quality research on these issues.
One of the observations, the one regarding SHGs enabling the rise of a new class of money lenders, I found quite surprising. I wonder whether this is representative of SHGs in other areas.
Saturday 12 April 2008
More on the Rajan Report
The responses to the landmark report on financial sector reforms headed by Raghuram Rajan are beginning to pile in.
Overall, the responses have been very positive. (I often wonder if there is selection bias driving coverage of these types of events though. Is there really anyone out there who differs from Rajan in outlook enough to potentially have serious disagreements with the content of his report yet who also follows these issues closely enough to know when the report will be released so that they can write an op-ed in time?) One commentator did point out that the timing of its release could perhaps have been a bit more fortuitous. I was a bit disappointed that the press coverage focused exclusively on the committee’s macro recommendations while completely ignoring its suggestions for increasing financial inclusion. This is too bad as the committee obviously paid great attention to this issue and the reforms it advocates -- such as allowing a wider variety of players to serve as business correspondents (currently NBFCs, a group which comprises all of the largest MFIs, are barred from serving as business correspondents), lifting interest rates caps on small denomination loans, and cautiously allowing greater entry of small deposit-taking local area banks – are both prudent and have the capacity for enormous positive impact. Oh well, I guess this is what the news-reading public cares about.
For some of the better coverage see here, here, and here.
Just to give things a little balance, here is one negative response. I should warn that I didn’t really understand the article.
Overall, the responses have been very positive. (I often wonder if there is selection bias driving coverage of these types of events though. Is there really anyone out there who differs from Rajan in outlook enough to potentially have serious disagreements with the content of his report yet who also follows these issues closely enough to know when the report will be released so that they can write an op-ed in time?) One commentator did point out that the timing of its release could perhaps have been a bit more fortuitous. I was a bit disappointed that the press coverage focused exclusively on the committee’s macro recommendations while completely ignoring its suggestions for increasing financial inclusion. This is too bad as the committee obviously paid great attention to this issue and the reforms it advocates -- such as allowing a wider variety of players to serve as business correspondents (currently NBFCs, a group which comprises all of the largest MFIs, are barred from serving as business correspondents), lifting interest rates caps on small denomination loans, and cautiously allowing greater entry of small deposit-taking local area banks – are both prudent and have the capacity for enormous positive impact. Oh well, I guess this is what the news-reading public cares about.
For some of the better coverage see here, here, and here.
Just to give things a little balance, here is one negative response. I should warn that I didn’t really understand the article.
Friday 11 April 2008
EPW Article - India's Common People: Who Are They, How Many Are They, and How Do They Live?
A must read EPW article for those interested in growth, poverty, and inequality. Sengupta, Kannan and Raveendran (the same Sengupta who headed the Commission on the Unorganized Sector, also a great document) look at the socio-economic profile of the poor.
While, there has been a healthy debate on poverty measurement in India, this paper does not take up that discussion, but rather makes some powerful observations on the composition of the poor and vulnerable (he uses the term "common people") by using broad definitions of consumption based poverty.
Some findings - Using a broad measurement of 2X the official poverty line (consumption) SKR find that more then three-fourths are poor and vulnerable. Three quarters of the Indian population have on average, a daily per capita consumption expenditure of Rs. 20.
1. There is evidence which supports the view that despite high growth, specific social groups have remained poor and vulnerable.
88% of SC/ST are poor and vulnerable in 2004-05, a 2 percentage point drop from 1999-00.
Other Backward Classes saw a drop from 84.5% to 80% in the same time period.
Muslims saw a drop from 87% to 84.5% (however in 1993-94 it was 87.4%!!).
As one would expect, the Work Status of these groups is largely unorganized. In 1999-00 when data permitted identification of unorganized status, 83% of all unorganized workers were poor and vulnerable in 1999-00, and in 2004-05 is down to 79%. SC/ST, OBCs, and Muslims comprised 79% of the unorganized worker population, and in 2004-05 was down to 76%. The incidence of unorganized worker status is quite high among these groups as in 2004-05 we see 95% of SC/ST, 95% of Muslims, and 85% of OBC were of unorganized work status. These are all significantly higher then the 78% of unorganized status of all poor and vulnerable population.
2. Those social groups which are considered lower, have higher threshold levels for education required to cross poverty. To put this in another way, with the same level of education a person who is SC/ST or Muslim is more likely to be poor and vulnerable then someone of a 'higher' social status group.
SKR also show similar marginal decreases in illiteracy and education status over the past few years for SC/ST, OBC, and Muslims.
My $0.02:
Too often reports on poverty and inequality just focus on the dynamics of income distribution . I really enjoyed this paper because, just by attempting to define 'common people', we are able to see the intersection of social and economic deprivation in India, and how closely tied the two are.
SKR make a strong point of show how little improvements have been seen in the social groups of SC/ST, OBCs, and Muslims. Furthermore the unorganized status of these groups, highlight their vulnerability. While generating employment and wage is important, there is a need for an improved social security net and social protection to protect against the highly vulnerable nature of these groups.
There exists a need for multidimensional approaches which can provide insight into the nature of deprivation. Upon reading this study it is easy to observe that social identity and social deprivation is so closely linked with economic deprivation, that addressing economic deprivation alone would not translate into progress.
I love this statement - "And this is what India should strive for by pursuing an agenda of inclusive development and not just inclusive growth".
While, there has been a healthy debate on poverty measurement in India, this paper does not take up that discussion, but rather makes some powerful observations on the composition of the poor and vulnerable (he uses the term "common people") by using broad definitions of consumption based poverty.
Some findings - Using a broad measurement of 2X the official poverty line (consumption) SKR find that more then three-fourths are poor and vulnerable. Three quarters of the Indian population have on average, a daily per capita consumption expenditure of Rs. 20.
1. There is evidence which supports the view that despite high growth, specific social groups have remained poor and vulnerable.
88% of SC/ST are poor and vulnerable in 2004-05, a 2 percentage point drop from 1999-00.
Other Backward Classes saw a drop from 84.5% to 80% in the same time period.
Muslims saw a drop from 87% to 84.5% (however in 1993-94 it was 87.4%!!).
As one would expect, the Work Status of these groups is largely unorganized. In 1999-00 when data permitted identification of unorganized status, 83% of all unorganized workers were poor and vulnerable in 1999-00, and in 2004-05 is down to 79%. SC/ST, OBCs, and Muslims comprised 79% of the unorganized worker population, and in 2004-05 was down to 76%. The incidence of unorganized worker status is quite high among these groups as in 2004-05 we see 95% of SC/ST, 95% of Muslims, and 85% of OBC were of unorganized work status. These are all significantly higher then the 78% of unorganized status of all poor and vulnerable population.
2. Those social groups which are considered lower, have higher threshold levels for education required to cross poverty. To put this in another way, with the same level of education a person who is SC/ST or Muslim is more likely to be poor and vulnerable then someone of a 'higher' social status group.
SKR also show similar marginal decreases in illiteracy and education status over the past few years for SC/ST, OBC, and Muslims.
My $0.02:
Too often reports on poverty and inequality just focus on the dynamics of income distribution . I really enjoyed this paper because, just by attempting to define 'common people', we are able to see the intersection of social and economic deprivation in India, and how closely tied the two are.
SKR make a strong point of show how little improvements have been seen in the social groups of SC/ST, OBCs, and Muslims. Furthermore the unorganized status of these groups, highlight their vulnerability. While generating employment and wage is important, there is a need for an improved social security net and social protection to protect against the highly vulnerable nature of these groups.
There exists a need for multidimensional approaches which can provide insight into the nature of deprivation. Upon reading this study it is easy to observe that social identity and social deprivation is so closely linked with economic deprivation, that addressing economic deprivation alone would not translate into progress.
I love this statement - "And this is what India should strive for by pursuing an agenda of inclusive development and not just inclusive growth".
Selection bias and Roger Clemens
Lots of studies conducted at CMF is based on a principle called randomized trial. This is a common research methodology in pharmaceutical science where patients are randomly divided into two groups and researchers give a new drug they want to test to one group, called treatment group, and a placebo to another, called control group. Since the drug is assigned randomly, on average and with a sufficient number of samples, we can assume that characteristics of patients in the two groups average out. Some of characteristics include factors like innate physical differences, general attitude towards health which may turn into a number of pro-health habits in everyday life which may affect the efficacy of the drug, etc. As a result, researchers can safely assume that the only difference between the treatment and control group is the fact that the treatment group received a real drug, and therefore, any difference between the two groups can be attributed to the drug.
The same logic applies in estimating impacts of microfinance. Previously it was farily common to look at a group of people who signed up for a microfinance program and compare their welfare with those who didn't. The problem with this approach was, those who signed up for a development program may have something inherently different from those who didn't. Maybe those are the ones with entrepreneurship. This is called selection bias.
So what researchers do in a randomization trial is look at an eligible population for a microfinance program, and then provide loans to randomly selected individuals.
It seems like the application of randomize trials, or at least the concept of it, is getting more popular. Knowledge@Wharton reports an interesting case where a randomized trial was called for during the doping scandals that rocked MLB last year.
The same logic applies in estimating impacts of microfinance. Previously it was farily common to look at a group of people who signed up for a microfinance program and compare their welfare with those who didn't. The problem with this approach was, those who signed up for a development program may have something inherently different from those who didn't. Maybe those are the ones with entrepreneurship. This is called selection bias.
So what researchers do in a randomization trial is look at an eligible population for a microfinance program, and then provide loans to randomly selected individuals.
It seems like the application of randomize trials, or at least the concept of it, is getting more popular. Knowledge@Wharton reports an interesting case where a randomized trial was called for during the doping scandals that rocked MLB last year.
IFMR Trust, BISWA, and Grameen Capital India Complete First of Its Kind Microfinance Loan Portfolio Restructuring
Congrats to our friends across town and the people at Grameen Capital India for completing one of the first of its kind deals in the microfinance sector!
Coverage of the deal can be found here, but for those not familiar with terms like tenor or first loss default guarantee here is a basic overview: BISWA, an MFI in Orissa which lends to both SHGs and standard Grameen style joint liability groups, has sold the rights to the future loan repayments on a chunk of its loan portfolio. This means that in the future, BISWA will collect these repayments from their clients but then hand over the money to someone else. To make sure that BISWA still has an incentive to collect all those repayments, they have agreed to cover any gaps in repayment up to 5% of the total value of the chunk sold off (this is what’s known as the first loss default guarantee). To make the deal even sweeter for prospective buyers, IFMR Trust has guaranteed the other 95% of that portfolio.
The final portfolio, with all the guarantees attached, was sold to an undisclosed bank for an interest rate of 6% -- 1.5 percentage points lower than the current rate on government securities (and just about the rate of inflation). The reason that the bank was willing to essential provide a free loan is that all the loans in the portfolio qualify as direct agricultural financing which (as discussed below) the RBI requires banks to lend to.
Crafting deals like this are a big part of IFMR Trust’s ambitious plan to transform banking in India by rolling out a series of full-service regional banks catering to microfinance clients, typical banking clients, and everybody in between. More on this later.
Coverage of the deal can be found here, but for those not familiar with terms like tenor or first loss default guarantee here is a basic overview: BISWA, an MFI in Orissa which lends to both SHGs and standard Grameen style joint liability groups, has sold the rights to the future loan repayments on a chunk of its loan portfolio. This means that in the future, BISWA will collect these repayments from their clients but then hand over the money to someone else. To make sure that BISWA still has an incentive to collect all those repayments, they have agreed to cover any gaps in repayment up to 5% of the total value of the chunk sold off (this is what’s known as the first loss default guarantee). To make the deal even sweeter for prospective buyers, IFMR Trust has guaranteed the other 95% of that portfolio.
The final portfolio, with all the guarantees attached, was sold to an undisclosed bank for an interest rate of 6% -- 1.5 percentage points lower than the current rate on government securities (and just about the rate of inflation). The reason that the bank was willing to essential provide a free loan is that all the loans in the portfolio qualify as direct agricultural financing which (as discussed below) the RBI requires banks to lend to.
Crafting deals like this are a big part of IFMR Trust’s ambitious plan to transform banking in India by rolling out a series of full-service regional banks catering to microfinance clients, typical banking clients, and everybody in between. More on this later.
Thursday 10 April 2008
Yet More Evidence of China's Impeccable Standards in State Journalism
Here. Not India related, but interesting nonetheless.
Oil Subsidies
Oil subsidies maybe forced upon developing countries, not by the West but by market forces. The most recent is in Malaysia.
Wednesday 9 April 2008
If You Only Read One Draft Report on Financial Sector Reforms This Year...
...read this one. My understanding of macroeconomics is woeful so I'm not gonna run the risk of putting my foot my mouth twice in the same day by commenting on the content of the report, but I will say that it's highly readable and does a great job of putting all the key issues in perspective.
Congrats especially to Sona Varma and her team for their work on the financial inclusion chapter. You can find a summary of the main proposals to increase financial inclusion included in the report by Sona here.
Congrats especially to Sona Varma and her team for their work on the financial inclusion chapter. You can find a summary of the main proposals to increase financial inclusion included in the report by Sona here.
Dr. Mor's Priority Sector Paper Cont.
This morning I posted a few comments on Nachiket Mor's recent paper on priority sector norms. A few hours later, Dr. Manohar Sharma of the International Food Policy Research Institute posted some a much more astute analysis of the same paper in the comments section of that post. Out of fear that Dr. Sharma's excellent insights will go unread, I am reposting them here.
The paper makes an important point, namely that for marginal farmers and landless labourers, human labour is a key production input, and “consumption” loans that finance the upkeep this productive input are conceptually no different than production” loans that finance farm machinery or fertilizers. For this reason, they ought to, as Dr. Nachiket Mor suggests, qualify as Direct Finance to Agriculture (DFA) under Reserve Bank of India’s (RBI) priority sector lending directive.
Notwithstanding the above, I have one central comment on the paper: it is not quite clear to me how merely re-classifying consumption loans as DFA, by itself, provides greater incentives for commercial banks to increase net lending to the agricultural sector in general or to marginal farmers/landless labourers in particular.
I raise this point for two reasons: First, I note that under current RBI regulation, interest rate on loans under Rs 200,000 are capped at the bank’s prime lending rate. Individual loans to marginal farmers/landless labourers are thus most likely to be amounts small enough to be subject to this regulatory interest rate cap. Also, per unit transactions cost for lenders is likely to be relatively high for such loan sizes. Hence it is not all that clear whether banks will sufficiently recoup costs incurred in lending small amounts to marginal farmers and landless labourers. The case that Dr. Mor makes would be considerably strengthened if the paper further fleshed out reasons why commercial banks -- currently unwilling to fulfil their DFA obligations even by lending to large farmers in amounts not subject interest rate caps -- will suddenly turn around to service much smaller consumption loans to marginal farmers simply because they are now counted as DFA. Second, commercial banks (like ICICI) are already using a variety of innovative financial instruments to partner with MFIs that provide general-purpose loans to poor rural households either directly or through Self Help Groups (SHGs). I am sure that Dr. Mor himself played a critical role in
some of these innovations. From the point of view of commercial banks, these arrangements are rather nice: the loans qualify as priority sector lending and reach relatively poor households, but at the same time avoid interest rate caps and also shift a significant chunk of administrative costs to the MFIs. So, this leads me to my second question: how will merely redefining this financial portfolio as DFA lead to its net enlargement? Would it not, by simple arithmetic, result in equivalent reduction loans classified as non-DFA credit?
Thus, in both cases, I would suggest that the paper address the additionally factor a little more clearly.
Nachiket Mor on Priority Sector Requirements
In a new draft paper published on his personal website, Mor argues that consumption loans to marginal farmers and landless labourers should qualify as Direct Agricultural Finance (DAF) for purposes of calculating banks' fulfillment of priority sector lending. Currently, a loan to a poor farmer which goes toward the purchase of food or medical treatment is not treated as DAF (one of the most difficult of the priority sector requirements to fulfill) by the RBI while a loan to a well off farmer for the purchase of a tractor is. Mor’s point is that the landless labourer or small farmer himself is, through his labour, an important input into the farming process and thus a “consumption loan” to a landless labourer or marginal farmer has as much potential increase agricultural productivity just as much as an investment in a tractor or new seed type does.
I wholeheartedly agree with Mor’s calls for greater access to reasonably priced credit for landless labourers and marginal farmers, but I’m not convinced that changing the priority sector norms as he suggests would accomplish this or that, even if the change were to take place, it would necessarily result in an increase in agricultural productivity. First, there is already an incentive built in to the priority sector requirements for banks to lend to landless labourers and marginal farmers in the form of the “weaker sections” lending requirement. This requirement stipulates that banks lend 10% of net bank credit to the “weaker sections” of society which include, among other groups, marginal farmers and landless labourers. Currently, the shortfall against the “weaker sections” target is even greater than that against the DAF target. (see here and here for more.) Banks are unwilling to lend to these segments, despite this inducement, because interest rates on loans under 2 lacs in size, which make up the majority of loan demand from these segments, are capped at prime lending rate. (Update: Please see comment from Leena Pillai below for why the "weaker sections" target doesn't provide a real incentive for banks to lend to landless labourers and marginal farmers.)
Second, Mor argues in the latter half of the paper that increased access to credit by the rural poor would allow them to improve their health and thus increase their productivity. Yet, there is another channel through which increased access to credit could affect agricultural productivity: it could increase the cost of production by improving the bargaining power of labourers vis-Ã -vis farm owners. This, of course, would be a good thing but it would also mean decreased ag productivity.
At the end of the day, marginal farmers and landless labourers are ill served by the formal banking sector in India and the government would do well to increase the incentive for banks to serve this segment of society.
I wholeheartedly agree with Mor’s calls for greater access to reasonably priced credit for landless labourers and marginal farmers, but I’m not convinced that changing the priority sector norms as he suggests would accomplish this or that, even if the change were to take place, it would necessarily result in an increase in agricultural productivity. First, there is already an incentive built in to the priority sector requirements for banks to lend to landless labourers and marginal farmers in the form of the “weaker sections” lending requirement. This requirement stipulates that banks lend 10% of net bank credit to the “weaker sections” of society which include, among other groups, marginal farmers and landless labourers. Currently, the shortfall against the “weaker sections” target is even greater than that against the DAF target. (see here and here for more.) Banks are unwilling to lend to these segments, despite this inducement, because interest rates on loans under 2 lacs in size, which make up the majority of loan demand from these segments, are capped at prime lending rate. (Update: Please see comment from Leena Pillai below for why the "weaker sections" target doesn't provide a real incentive for banks to lend to landless labourers and marginal farmers.)
Second, Mor argues in the latter half of the paper that increased access to credit by the rural poor would allow them to improve their health and thus increase their productivity. Yet, there is another channel through which increased access to credit could affect agricultural productivity: it could increase the cost of production by improving the bargaining power of labourers vis-Ã -vis farm owners. This, of course, would be a good thing but it would also mean decreased ag productivity.
At the end of the day, marginal farmers and landless labourers are ill served by the formal banking sector in India and the government would do well to increase the incentive for banks to serve this segment of society.
Can the programme of activities save the CDM?
My answer is maybe. Copout yes...bad answer no. The real determinant of where the Programme of Activities saves the CDM will be if NGOs find a way to realize opportunity. The current manifestation of the Programme of Activities is that people are giving away CFL light bulbs and claiming the emissions reductions.
Environmental benefits=neutral to minimal....remember that CFLs are full of mercury and mercury is bad.
Sustainable Development=negative.
The basic programme has been that CFLs are distributed at a severely subsidized price (almost half of what they should be sold at...worse are those programmes that give them away). The manufacturer or programme sponsor in return receives all the CDM revenue from any reductions made. They are banking on the fact that people will continue to use these light bulbs when their electricity needs expand. But one thing that isn't considered in the equation is that by promoting these light bulbs as 'energy saving' there is the moral hazard that people will just use more electricity...for example, leave their lights on because they think they are saving electricity just by using them.
Now this is a bit of an extreme example, and maybe I am reaching a bit. Yet I still think that this is a threat to these programmes, because there is no accompanying social co-benefits. What really happens in the long run...Do CFLs lead to income generation...lower health risks...stop cancer? I can't even imagine the social additionality these people are arguing for their programmes.
One thing I do think will happen will be a market distortion. If you know someone is going to give you a free CFL, why would you buy one? Why not wait until the programme reaches your neighborhood? And when it is time to buy a new one are you going to wait until someone comes around again or go out and buy a replacement? Also what about the costs of replacing the light fixtures? A lot of people have tube lights which don't readily fit CFLs meant for a single light fixture.
My question is "When are we going to accept that these programs have been in place for centuries but haven't made a serious dent into the problem of poverty?"
Tuesday 8 April 2008
SHGs are under pressure!
SHGs are Self Help Groups of women. The underlying logic of SHG is that it gives women much needed strength (that comes with being together as a group) and SHG becomes a demonstrating agency. Others (meeting, development, finance, govt schemes, education) are all add ons.
There are SHPIs (SHG promoting insitutions, which can be aganwari lady, people from block office, banks, NGOs etc) which help in formation of SHG. The ultimate aim for them is to involve SHGs in some activity (developement or economic) and link them to bank. Linking SHGs to banks is what is called as SHG bank linkage and is kind of microfinance that Nabard always talks about. India has given SHGs and SHG led microfinance to world.
Somebody gave an idea "SHGs are best way to implement schemes", the logic - You work with group of women, you empower them. Government departments took it home. I ridicule this! The only logic people find is that, you easily find women to complete your targets. Well, even if there are bad intentions this logic actually do good to those 15-20 women. The real problem arises when these 15-20 women are target clients for all departments - irrigation, small enterprise/industry, women child care, health department, education, the list is long. It leads to corruption and falsification of facts, far from desired impacts.
And the complexity keeps on increasing.
Now, this group has to avail a loan under SGSY program, The aganwari lady is helping them put on a business (her targets), Dept of small industries are there to tell things (targets), Banks also sometimes get involved in this (SGSY loan target) for getting women ready for SGSY loans. If I were the member of such a group, to whom I would have listened to? And you know sometimes a woman belongs to more than one SHG.
Then there is poaching, one department trying to poach other's SHG. NGOs taking away aganwari lady's SHG.
I got this impression few months back while talking to organizations which work on grassroot.
It hurts when you know people do not care, if SHGs are getting real benefits plus the real of aim of building women - institution is done or not. They just meet targets!
There are SHPIs (SHG promoting insitutions, which can be aganwari lady, people from block office, banks, NGOs etc) which help in formation of SHG. The ultimate aim for them is to involve SHGs in some activity (developement or economic) and link them to bank. Linking SHGs to banks is what is called as SHG bank linkage and is kind of microfinance that Nabard always talks about. India has given SHGs and SHG led microfinance to world.
Somebody gave an idea "SHGs are best way to implement schemes", the logic - You work with group of women, you empower them. Government departments took it home. I ridicule this! The only logic people find is that, you easily find women to complete your targets. Well, even if there are bad intentions this logic actually do good to those 15-20 women. The real problem arises when these 15-20 women are target clients for all departments - irrigation, small enterprise/industry, women child care, health department, education, the list is long. It leads to corruption and falsification of facts, far from desired impacts.
And the complexity keeps on increasing.
Now, this group has to avail a loan under SGSY program, The aganwari lady is helping them put on a business (her targets), Dept of small industries are there to tell things (targets), Banks also sometimes get involved in this (SGSY loan target) for getting women ready for SGSY loans. If I were the member of such a group, to whom I would have listened to? And you know sometimes a woman belongs to more than one SHG.
Then there is poaching, one department trying to poach other's SHG. NGOs taking away aganwari lady's SHG.
I got this impression few months back while talking to organizations which work on grassroot.
It hurts when you know people do not care, if SHGs are getting real benefits plus the real of aim of building women - institution is done or not. They just meet targets!
Global Distribution of Poverty
Presenting research results in a visually attractive manner is almost as important as research itself. Those who are involved in decision making processes in policy or practice have quite different skillsets than those who conduct research, and therefore, informative research results often do not reach target audiences. Visual aids are always useful to attract attentions.
Today, I came across a wonderful website which potentially enables researchers working in the development sector to combine their research results with super cool topographic presentations which can be downloaded not only in the excel format, but also in the shapefile format, which is compatible with GIS software. This superb website is a result of a joint initiative of the Earth Institute at Columbia University and the WorldBank.
It's too unfortunate that they don't have country datasets for India. I really wish they publish the Indian maps soon!
Affirmation Bias and Reporting Research
"It is the peculiar and perpetual error of the human understanding to be more moved and excited by affirmatives than by negatives."--Francis Bacon (1561-1626)***
I recently read this quote from the father of the scientific method in an article on why the value of a certain baseball player was misjudged. Obviously, a baseball player’s value not being correctly understood is not an issue of great importance, yet this article led me to begin thinking about other situations where affirmation bias can truly have a poisonous effect.
I am a reader of “The Economist” and have been for many years. I enjoy the crisp and concise nature of the articles and what I believe is excellent and thorough international coverage. Any reader of the “The Economist” will agree that the magazine takes a pro-capitalism, pro-business and relatively libertarian stance on most issues. The magazine was even created with the intent to espouse the benefits of free trade.
In the August 2nd 2007 edition, the magazine ran an article entitled “In Praise of Usury” which reports some of the findings from Dean Karlan and Joanathan Zinman’s research “Expanding Credit Access: Using Randomized Supply Decisions to Estimate the Impacts.” “The Economist” article argues that perhaps analysts are wrong to be critical of “pricey, short-term and profitable” lending. The article uses Karlan and Zinman’s research, which was on the impact of a South African moneylender expanding credit to marginal clients, as proof that this sort of lending can be profitable for the lender and welfare-improving for the consumer. I recently read Karland and Zinman’s paper to see whether “The Economist” used this research fairly, or whether this was an example of affirmation bias or cherry picking what the magazines editors and readers wanted to hear. In Italics are some sections from the article, and in bold is what I believe is the more balanced reality from reading the article:
Did these profits [to the moneylender] come at the expense of the poor? On the contrary. Despite the demanding terms on offer, those reconsidered for a loan seemed to prosper. Six to twelve months later, they were less likely to go hungry, and their chances of being in poverty fell by 19%. Not coincidentally, they were also more likely to have kept their jobs, perhaps because the credit helped them to overcome emergencies that might otherwise have forced them to abandon their posts. About a fifth of them, for example, spent their loan on transport, such as buying or repairing a car that they might have needed to get to work.
I think the author's use of the word “prosper” is a bit strong. Although all of the statistics in this paragraph are accurate, the authors do not mention that the study found no effect on monthly consumption. The research paper also mentions that their statistics show “no effect on avoiding shocks on margins other than employment.” There is nothing egregious here, but definitely some cherry picking.
The results were not all as happy: the authors found some evidence of higher stress, especially among female borrowers. But people also reported more control over their lives and a more positive outlook. Perhaps the easier access to credit allowed them to take a longer-term perspective, even if “longer term” is measured in months or weeks rather than the more conventional notion of decades.
Contrary to the fears of the credit snobs, the readier access to credit did not tempt the new customers into a debt trap. Over 15-27 months, those reconsidered for a loan were more likely to have a formal credit score. And this score suffered no harm as a result of their easier borrowing.
Overall, the study suggests that profit-seeking lenders do not deserve the fate Dante reserved for them. Far from tempting the poor into unpayable debt, they help them keep their jobs, put food on the table, and build up a credit history. The authors show that poor people can make good use of borrowed money, even if they sometimes struggle to demonstrate this creditworthiness to lenders. If not hell, that is a kind of purgatory.
Again, there is nothing factually wrong here or even ridiculously hyperbolic, it is only the use of a tone which suggest that this was definitive research, and not the “low-powered” test the researchers claim to have done. Karlan and Zinman write in their paper that “We find no statistically significant evidence that consumers make themselves worse off by borrowing, as some behavioral models would predict. However, our standard errors are large and do not rule out economically meaningful negative impacts on some outcomes.” The researchers also mention that they were only able to observe impact over 6-12 months timeframe.
This exercise leads me to a greater question. What should we expect from mass media when reporting on data based research? Obviously, we cannot ask mass media authors to describe every nuance of study design and statistical interpretation, but I do believe we should expect intellectual honesty and an effort not to only take the information from research that affirms what the author or editor already believed.
I suppose the lesson is that it is essential to be vigorous about bearing in mind not just the agenda of a publisher or author, but their intellectual history, when they report statistical evidence. There is no greater bias than the bias towards wanting to be proved right.
*** This entry was inspired by Dan Fox’s article on Baseball Prospectus, “What Would Bacon Do?” which uses the same quote at the top of the article.
I recently read this quote from the father of the scientific method in an article on why the value of a certain baseball player was misjudged. Obviously, a baseball player’s value not being correctly understood is not an issue of great importance, yet this article led me to begin thinking about other situations where affirmation bias can truly have a poisonous effect.
I am a reader of “The Economist” and have been for many years. I enjoy the crisp and concise nature of the articles and what I believe is excellent and thorough international coverage. Any reader of the “The Economist” will agree that the magazine takes a pro-capitalism, pro-business and relatively libertarian stance on most issues. The magazine was even created with the intent to espouse the benefits of free trade.
In the August 2nd 2007 edition, the magazine ran an article entitled “In Praise of Usury” which reports some of the findings from Dean Karlan and Joanathan Zinman’s research “Expanding Credit Access: Using Randomized Supply Decisions to Estimate the Impacts.” “The Economist” article argues that perhaps analysts are wrong to be critical of “pricey, short-term and profitable” lending. The article uses Karlan and Zinman’s research, which was on the impact of a South African moneylender expanding credit to marginal clients, as proof that this sort of lending can be profitable for the lender and welfare-improving for the consumer. I recently read Karland and Zinman’s paper to see whether “The Economist” used this research fairly, or whether this was an example of affirmation bias or cherry picking what the magazines editors and readers wanted to hear. In Italics are some sections from the article, and in bold is what I believe is the more balanced reality from reading the article:
Did these profits [to the moneylender] come at the expense of the poor? On the contrary. Despite the demanding terms on offer, those reconsidered for a loan seemed to prosper. Six to twelve months later, they were less likely to go hungry, and their chances of being in poverty fell by 19%. Not coincidentally, they were also more likely to have kept their jobs, perhaps because the credit helped them to overcome emergencies that might otherwise have forced them to abandon their posts. About a fifth of them, for example, spent their loan on transport, such as buying or repairing a car that they might have needed to get to work.
I think the author's use of the word “prosper” is a bit strong. Although all of the statistics in this paragraph are accurate, the authors do not mention that the study found no effect on monthly consumption. The research paper also mentions that their statistics show “no effect on avoiding shocks on margins other than employment.” There is nothing egregious here, but definitely some cherry picking.
The results were not all as happy: the authors found some evidence of higher stress, especially among female borrowers. But people also reported more control over their lives and a more positive outlook. Perhaps the easier access to credit allowed them to take a longer-term perspective, even if “longer term” is measured in months or weeks rather than the more conventional notion of decades.
Contrary to the fears of the credit snobs, the readier access to credit did not tempt the new customers into a debt trap. Over 15-27 months, those reconsidered for a loan were more likely to have a formal credit score. And this score suffered no harm as a result of their easier borrowing.
Overall, the study suggests that profit-seeking lenders do not deserve the fate Dante reserved for them. Far from tempting the poor into unpayable debt, they help them keep their jobs, put food on the table, and build up a credit history. The authors show that poor people can make good use of borrowed money, even if they sometimes struggle to demonstrate this creditworthiness to lenders. If not hell, that is a kind of purgatory.
Again, there is nothing factually wrong here or even ridiculously hyperbolic, it is only the use of a tone which suggest that this was definitive research, and not the “low-powered” test the researchers claim to have done. Karlan and Zinman write in their paper that “We find no statistically significant evidence that consumers make themselves worse off by borrowing, as some behavioral models would predict. However, our standard errors are large and do not rule out economically meaningful negative impacts on some outcomes.” The researchers also mention that they were only able to observe impact over 6-12 months timeframe.
This exercise leads me to a greater question. What should we expect from mass media when reporting on data based research? Obviously, we cannot ask mass media authors to describe every nuance of study design and statistical interpretation, but I do believe we should expect intellectual honesty and an effort not to only take the information from research that affirms what the author or editor already believed.
I suppose the lesson is that it is essential to be vigorous about bearing in mind not just the agenda of a publisher or author, but their intellectual history, when they report statistical evidence. There is no greater bias than the bias towards wanting to be proved right.
*** This entry was inspired by Dan Fox’s article on Baseball Prospectus, “What Would Bacon Do?” which uses the same quote at the top of the article.
Monday 7 April 2008
Whats wrong with the Pay Commission anyway?
The 5th Pay Commission was instituted in 1994, covering 3.3 million government employees. In 2008, when the 6th Pay Commission has come out with its recommendations, affecting 4.5 million employees. The financial burden on the government is undoubtedly huge. There is so much talk about the private sector and how they compare to their government counterparts. And expectedly, there is plenty of government bashing all around. I was reading an article in ET recently -
"Those who complain about wasting taxpayers’ money when it comes to civil service salaries need to appreciate that the very same taxpayers bear, in the guise of consumers, the cost of fancier salaries and perks in the private sector as well. If shortage of talent forces company managements to pay the few good people they have astronomical salaries, the cost is passed on to consumers in the form of higher prices of the goods and services the companies produce. The question really is whether the taxpayer/consumer gets value for money or not" (27 March Economic Times)
To me, this seems to be a sensible course to adopt. Especially in the light of a constant bombardment by a largely capitalist media. I know I just branded the media - only for want of a better word. I personally think we all make the mistake of assuming we fully understand the inefficiencies of the government and its causes. We are also falsely lulled into thinking we benefit from the most efficient services and products the private sector can offer. Examples abound as to how mistaken we are (think airport taxes, pricing of brands, ad slots on television etc).
And what about performance? Everyone seems to be saying that performance evaluations are the only way to go for the government sector. Yet, when IBM kicked out 800 trainees some time back, it was projected as a disaster. It probably is one, too - I am only leading on the argument.
Then there are the perks that come with a government job. Some people have rightly called for these perks to be monetised. At least that way, a government employee has the choice to invest his money for long-term security. Why is there job security in the government? Probably for this reason - that if a government employee loses his job and remains jobless, he will probably not survive the financial implications. This holds even for our politicians in power. They are pretty much stripped of everything once they are out of power. Hence, they hedge their risks by being...(you know what).
This is a call for reason. It is easy to condemn the government since it is all pervasive and it is non-responsive even to criticism. But when making judgements, we need more reason, some more cold logic.
"Those who complain about wasting taxpayers’ money when it comes to civil service salaries need to appreciate that the very same taxpayers bear, in the guise of consumers, the cost of fancier salaries and perks in the private sector as well. If shortage of talent forces company managements to pay the few good people they have astronomical salaries, the cost is passed on to consumers in the form of higher prices of the goods and services the companies produce. The question really is whether the taxpayer/consumer gets value for money or not" (27 March Economic Times)
To me, this seems to be a sensible course to adopt. Especially in the light of a constant bombardment by a largely capitalist media. I know I just branded the media - only for want of a better word. I personally think we all make the mistake of assuming we fully understand the inefficiencies of the government and its causes. We are also falsely lulled into thinking we benefit from the most efficient services and products the private sector can offer. Examples abound as to how mistaken we are (think airport taxes, pricing of brands, ad slots on television etc).
And what about performance? Everyone seems to be saying that performance evaluations are the only way to go for the government sector. Yet, when IBM kicked out 800 trainees some time back, it was projected as a disaster. It probably is one, too - I am only leading on the argument.
Then there are the perks that come with a government job. Some people have rightly called for these perks to be monetised. At least that way, a government employee has the choice to invest his money for long-term security. Why is there job security in the government? Probably for this reason - that if a government employee loses his job and remains jobless, he will probably not survive the financial implications. This holds even for our politicians in power. They are pretty much stripped of everything once they are out of power. Hence, they hedge their risks by being...(you know what).
This is a call for reason. It is easy to condemn the government since it is all pervasive and it is non-responsive even to criticism. But when making judgements, we need more reason, some more cold logic.
The Confusing Reality behind Farmer Suicides
"We are helpless," says Kailash Kanse, Yavatmal's Assistant Commissioner of
Police (ACP). He summons a clerk and asks him to bring a file of farmer suicides in the district. He reads the figures aloud. In 2005, 92 farmers committed suicide. In 2006, the figure jumped to 196. He couldn't supply the number for 2007, but sources peg it at over 200. The sharp increase in the number of suicides after 2005 gives a clue. During the December 2005 winter session of the state assembly in Nagpur, chief minister Vilasrao Deshmukh had announced the Rs one lakh relief for the families of farmers who committed suicide due to severe debt. "The CM's motive was noble, but it seems to have backfired," says a senior IAS officer who in the past was involved in relief and rehabilitation schemes for farmers in Vidarbha. He did not want to be identified.Villagers almost always know the real cause of a death in their neighbourhood. "But they don't protest because they think it is government money and that it is, after all, going to help a fellow villager," says Vinay Vairale, a documentary filmmaker who has researched the subject extensively in the Vidarbha region.
From ToI. (Hat tip to India Uncut.) I admit that as an outsider, the ag situation in India confuses the heck out of me. For every article I read which claims that there we are in the middle of an acute ag crisis and that farming is no longer profitable due to rising input prices and stagnant farm gate prices of pruduce there is another bemoaning the skyrocketing prices of food and other ag products. Unless farmers are taking a hit to productivity due to weather or some or some other shock (evidence of which is strikingly absent from most of the articles I read on this subject) why aren't rising retail prices translating in higher incomes for farmers? Cotton prices, for example, are through the roof. Why hasn't this translated in higher income for Vidharbha cotton farmers?
Sunday 6 April 2008
Maybe TV Isn't So Bad After All
An old, but interesting link that I just came across:
[Planet read has ] developed a “Same-Language Subtitling” (SLS) methodology,This paper provides evidence that SLS is an effective technique to improve reading skills. In China, virtually every TV program, even those in standard Chinese, is subtitled. I always assumed that the subtitles were added to avoid confusion over the multitude of accents, but after reading this it seems more likely that improving literacy levels is the actual intent.
which provides automatic reading practice to individuals who are excluded from the traditional educational system, or whose literacy needs are otherwise not being met. This is an educational program rooted in mass media that demonstrates how a specific literacy intervention can yield outstanding, measurable results, while complementing other formal and non-formal learning initiatives of the government, private sector, and civil society.
Let Sleeps Dogs Lie
Big B thinks that there are two Indias: "one India is straining at leash, eager to spring forth and live up to all the adjectives that the world has been showering on us recently; the other India is the leash."
Maybe, but if Big B's intent is to subtly characterize the Indian bureaucracy as the leash in this national struggle then his analogy is a bit off because, as seen last week, the Indian bureaucracy is capable of inflicting a strong bite. 66,058 crore worth of a bite to be exact, according to India Today. That's the expected cost of the reforms recommended by the sixth pay commission in its recent report.
Needless to say the report didn't exactly receive a thunderous applause from the popular press. (The title of the India Today story on the report was "Making Us Pay More for Sloth.") The common complaint is that the report advocates pay hikes but, according to many pundits, does not contain any real steps to hold bureaucrats responsible for the performance of their agencies.
Overall, the criticism is well deserved, especially in the the education and health sectors where even the most basic level of accountability -- that of workers actually showing up -- is absent. Yet I'm at least slightly optimistic about the recommendations to allow for performance-based pay increases. (The report recommends annual salary increases of 2.5% for most employees but 3.5% for "high performers" along with the introduction of a performance-based incentive scheme.) I've met a number of government bureaucrats who complain that their departments are completely incompetement and that they are powerless to change things because they are incapable of sacking the worst offenders or reward those who make an effort. At least, if passed, these reforms will allow well intentioned bureaucrats to do the latter.
Maybe, but if Big B's intent is to subtly characterize the Indian bureaucracy as the leash in this national struggle then his analogy is a bit off because, as seen last week, the Indian bureaucracy is capable of inflicting a strong bite. 66,058 crore worth of a bite to be exact, according to India Today. That's the expected cost of the reforms recommended by the sixth pay commission in its recent report.
Needless to say the report didn't exactly receive a thunderous applause from the popular press. (The title of the India Today story on the report was "Making Us Pay More for Sloth.") The common complaint is that the report advocates pay hikes but, according to many pundits, does not contain any real steps to hold bureaucrats responsible for the performance of their agencies.
Overall, the criticism is well deserved, especially in the the education and health sectors where even the most basic level of accountability -- that of workers actually showing up -- is absent. Yet I'm at least slightly optimistic about the recommendations to allow for performance-based pay increases. (The report recommends annual salary increases of 2.5% for most employees but 3.5% for "high performers" along with the introduction of a performance-based incentive scheme.) I've met a number of government bureaucrats who complain that their departments are completely incompetement and that they are powerless to change things because they are incapable of sacking the worst offenders or reward those who make an effort. At least, if passed, these reforms will allow well intentioned bureaucrats to do the latter.
It's Raining Smartcards
A European regulator, when asked why Europeans were so averse to having a single standard for products, replied “here in Europe we love standards. That’s why we have so many of them.”
Unfortunately, India seems to be following the same logic in its implementation of smartcard ID systems. Perhaps prompted by the Planning Commission's official endorsement, it seems like every branch of the government has simultaneously decided that a national smartcard-based ID would be a great idea and unilaterally announced plans to implement its own smartcard ID system. Many of these plans, such as the government of AP’s pilot smartcard system for distribution of NREG wages or the government of Rajasthan plan to distribute smartcards to all poor households as part of its implementation of the new Aam Admi Bima Yojana, are well thought out and have huge potential. Others, such as Chidambaram’s recently announced plan to use smartcards for PDS in Haryana, seem to be little more than half-hearted attempts to jump on the bureaucratic bandwagon.
I am a big fan of smartcards and believe that they have tremendous potential to improve the efficiency of government service delivery, but all this rampant enthusiasm for smartcards has me a little concerned. A smartcard-based ID system, like all national ID systems, is a public good with huge up front costs. Establishing a smartcard based system in India would require not only providing physical cards to end clients, but also confirming the identities of the clients, establishing a network of agents and card readers to make effective use of the cards, and setting up a back end MIS to manage transaction information. Due to the high costs involved in implementing such a system, it is unlikely that the initial investment will be justified unless the cards are used to provide several different services. What happens when the Finance Minister realizes that the benefits of using smartcards to deliver PDS is grossly outweighed by the costs? Will he scrap the whole system? This would be a shame because, while the benefits accruing from delivery of PDS services might not justify the costs of the system, if other government were simultaneously delivered via the same cards the benefits would almost certainly outweigh the costs.
This doesn’t mean that government agencies necessarily need to completely plan out what government services would be delivered via a smartcard system from the outset. Rather, they should adopt a strategy of using the smartcards to deliver the most widely used government services first and then layering on other services later. The NREGs and aam admi bima yojana (where it is rolled out), with their near-universal coverage of the poor, are good candidates for initial roll out. Still, for the smartcards to really deliver value, other services should quickly be layered on top of these.
Unfortunately, India seems to be following the same logic in its implementation of smartcard ID systems. Perhaps prompted by the Planning Commission's official endorsement, it seems like every branch of the government has simultaneously decided that a national smartcard-based ID would be a great idea and unilaterally announced plans to implement its own smartcard ID system. Many of these plans, such as the government of AP’s pilot smartcard system for distribution of NREG wages or the government of Rajasthan plan to distribute smartcards to all poor households as part of its implementation of the new Aam Admi Bima Yojana, are well thought out and have huge potential. Others, such as Chidambaram’s recently announced plan to use smartcards for PDS in Haryana, seem to be little more than half-hearted attempts to jump on the bureaucratic bandwagon.
I am a big fan of smartcards and believe that they have tremendous potential to improve the efficiency of government service delivery, but all this rampant enthusiasm for smartcards has me a little concerned. A smartcard-based ID system, like all national ID systems, is a public good with huge up front costs. Establishing a smartcard based system in India would require not only providing physical cards to end clients, but also confirming the identities of the clients, establishing a network of agents and card readers to make effective use of the cards, and setting up a back end MIS to manage transaction information. Due to the high costs involved in implementing such a system, it is unlikely that the initial investment will be justified unless the cards are used to provide several different services. What happens when the Finance Minister realizes that the benefits of using smartcards to deliver PDS is grossly outweighed by the costs? Will he scrap the whole system? This would be a shame because, while the benefits accruing from delivery of PDS services might not justify the costs of the system, if other government were simultaneously delivered via the same cards the benefits would almost certainly outweigh the costs.
This doesn’t mean that government agencies necessarily need to completely plan out what government services would be delivered via a smartcard system from the outset. Rather, they should adopt a strategy of using the smartcards to deliver the most widely used government services first and then layering on other services later. The NREGs and aam admi bima yojana (where it is rolled out), with their near-universal coverage of the poor, are good candidates for initial roll out. Still, for the smartcards to really deliver value, other services should quickly be layered on top of these.
Thursday 3 April 2008
Lessons from the grassroots
There are two distinctly separable parts of having worked in any grassroots organisation. One, the agency. Two, the place itself. But then, the agency links to the place - keeps one from becoming another "development tourist". My two years in Orissa were, to state the obvious, a significant part of my life. There were some real lessons (significant, notwithstanding the random sequencing):
1) It is possible to make a difference to lives of people by sustained intervention at the grassroots.
2) No one wants your sympathy. If anyone sees emotion, you are in trouble. However, admire openly. That usually works.
3) Any change is excruciatingly slow. Patience is key in everything - action and communication
4) People usually don't change. They mostly, merely respond to incentives.
5) Some like to be photographed - some don't. They dont expect you to, but respect this choice.
6) This one was obvious - not all the disprivileged are good souls. So dont just turn up with a bleeding heart. Watch out for the smart ones. If you are one, they can be, too.
7) You are never one among them. And if you become one, it hurts more than it helps. It serves both parties for you to retain your illusions of power and destiny. You are a celebrity - practise that 'wave'.
8) People do not know everything. There is definitely a lot that you can teach them (as long as you find the most un-intrusive way to do it and also are prepared to be open and learn)
9) Learn the language. Works like nothing else even can
Power erases poverty?
Daily Nation from Kenya says "Poverty is not lack of money, or indeed, of jobs. Poverty is the lack of power to determine one’s own destiny. Where that power is present, jobs and money will also be present".
This statement can make one philosophical, may be people get PhDs on it because it is talking about poverty and power thus open ways for one to think right from economics to society to politics to globalization and what not. My brain coined "Economic Crusade" - millions of them led by people, (entrepreneurs....) will start looking for power to get ideas and money thus. There will be hundreds and thousands of enterprises all over, people will use all management tricks. There will be consultants in galore teaching people how to earn power for ideas, which will be a push for these crusades. Hey, if there is crusade there will be blood - economic blood of ideas and all of us will see crusades in light of market dynamics which is cyclic. It is all cyclic.
Well.... the notion of people start thinking about "how to get out of poverty" is noble, but most of them have not done this in thousand years. DN's this philosophy sounds naive to me or it wrote power, while it meant Self confidence, which surely can result in ideas. And ideas are important. One can say power gives self confidence, but power is notorious too. Let self confidence generate power!
Wednesday 2 April 2008
Tuesday 1 April 2008
The Loan Waiver's True Audience
“Poor people cannot repay their loans, so it is a good policy.”
Variations on the quote above were the responses given from half of the dozen SHG members I have interviewed in the last week when asked if they thought the recent farm loan waiver was a good policy. The other half had not heard that the government was forgiving farm loans at all (possibly due to a deficiency in the waiver’s design). The interviewees all live in small villages across Western Orissa and none of them receive any sort of government loan.
When reading sophisticated critiques of the farm loan waiver by well-informed analysts, it is important to remember that this was, if not entirely, at least in part a political decision made to pander to a certain portion of the electorate and certainly not purely an attempt to create a more equitable society (not that this is anything new). Most of the powers that be couldn’t care less about those critiques and are primarily interested in how the larger population perceives the policy.
If you were a poor farmer unable to get a formal loan and, without knowing the details, heard that the government had forgiven loans for some other poor farmers, you would probably be pretty sanguine about the policy. You might even think that the government is beginning to show sympathy for the plight of people like yourself.
It seems clear to me that the people who are most affected by the government’s loan policies are those with the least access to information and the least ability to advance their interests. Although complex critiques of government policy are no doubt useful, they usually preach to the choir. The underlying issue is that often times poorly devised government policies often still serve their purpose politically if the populace is not well-informed.
So what to do? Try to educate the public about the nuances of the policy? Focus entirely on criticizing the policy makers to the point that it affects their reputation? Ignore the public sector and focus on making a difference through private institutions?
I suppose these are the difficult questions that make living in a democracy such an exciting and frustrating dilemma.
Variations on the quote above were the responses given from half of the dozen SHG members I have interviewed in the last week when asked if they thought the recent farm loan waiver was a good policy. The other half had not heard that the government was forgiving farm loans at all (possibly due to a deficiency in the waiver’s design). The interviewees all live in small villages across Western Orissa and none of them receive any sort of government loan.
When reading sophisticated critiques of the farm loan waiver by well-informed analysts, it is important to remember that this was, if not entirely, at least in part a political decision made to pander to a certain portion of the electorate and certainly not purely an attempt to create a more equitable society (not that this is anything new). Most of the powers that be couldn’t care less about those critiques and are primarily interested in how the larger population perceives the policy.
If you were a poor farmer unable to get a formal loan and, without knowing the details, heard that the government had forgiven loans for some other poor farmers, you would probably be pretty sanguine about the policy. You might even think that the government is beginning to show sympathy for the plight of people like yourself.
It seems clear to me that the people who are most affected by the government’s loan policies are those with the least access to information and the least ability to advance their interests. Although complex critiques of government policy are no doubt useful, they usually preach to the choir. The underlying issue is that often times poorly devised government policies often still serve their purpose politically if the populace is not well-informed.
So what to do? Try to educate the public about the nuances of the policy? Focus entirely on criticizing the policy makers to the point that it affects their reputation? Ignore the public sector and focus on making a difference through private institutions?
I suppose these are the difficult questions that make living in a democracy such an exciting and frustrating dilemma.
* Scroll down to see the entry "Blanket Schemes: Bon Pour Rien" by Akhand for more thoughts on the loan waiver
Data Hoarding
Here at the CMF we play well with others when it comes to data. Our operating principle is that we always share data from our projects as soon as the results have been published. (Ok, so there is still only one dataset up on the website just now but there is much more to come in the near future once we have the data all cleaned.) Unfortunately, not all researchers share this principle.
The New York Times has a great article on the disturbingly common practice of data hoarding by researchers. The author is not referring to the practice of limiting public access to data from experiments while the researchers are busy analyzing the data themselves (an entirely legitimate practice – after all, no one would go to the trouble of collecting data if, after collection, anyone could reap the academic rewards of their effort), but to the practice of refusing outside researchers access to data even after results have been published.
The author describes the state of affairs in medical research but the same is true in the area of economics and social science research as well. Ironically, the very institutions which should be taking the lead in ensuring that data is shared publicly (for instance, by enforcing a deadline of say 2 years for sharing data for all studies they fund) are the very ones most jealously guarding their data. Every tried to get access to the data used for a World Bank study? Here is the response I got when I tried: “I regret that this dataset is not in the public domain and therefore we are unable to share it with you.”
Wtf? Not only was the study for which I was requesting data publicly funded (obviously) but I’m willing to bet that the respondents who generously shared their time with the researchers (and believe me, these surveys can take a lot of time) were under the impression that the collected data would be used for the public good.
The New York Times has a great article on the disturbingly common practice of data hoarding by researchers. The author is not referring to the practice of limiting public access to data from experiments while the researchers are busy analyzing the data themselves (an entirely legitimate practice – after all, no one would go to the trouble of collecting data if, after collection, anyone could reap the academic rewards of their effort), but to the practice of refusing outside researchers access to data even after results have been published.
The author describes the state of affairs in medical research but the same is true in the area of economics and social science research as well. Ironically, the very institutions which should be taking the lead in ensuring that data is shared publicly (for instance, by enforcing a deadline of say 2 years for sharing data for all studies they fund) are the very ones most jealously guarding their data. Every tried to get access to the data used for a World Bank study? Here is the response I got when I tried: “I regret that this dataset is not in the public domain and therefore we are unable to share it with you.”
Wtf? Not only was the study for which I was requesting data publicly funded (obviously) but I’m willing to bet that the respondents who generously shared their time with the researchers (and believe me, these surveys can take a lot of time) were under the impression that the collected data would be used for the public good.
Cynical Morning: Renewable Portfolio Standard vs Cap and Trade
The discussion lately seems to be whether a Renewable Portfolio Standard or a Cap and Trade system is a more appropriate way to reduce greenhouse gas emissions...the RPS would require utility companies to either own or source a certain percentage of their total electricity sales from renewable sources...cap and trade sets limits on industries by issuing allowances or permits to pollute—in the event that there is either a shortfall or a surplus of emissions in relation to the issued allowances the individual facility would be able to buy or sell allowances depending on need.
Part of the problem is that RPS is said on one side to be flexible and by the other side to be rigid (command and control legislation). The renewable industry is all for it. They benefit by utilities being forced to either purchase renewable energy credits or to invest in renewable energy generation. Either way there is more money going into the industry. But so far the RPS has proven less than perfect—increased investment has been dependent on government subsidies.
Cap and trade gives more flexibility, but doesn't necessarily reduce overall emissions. Emissions caps are usually determined by setting a base year and mandating that total emissions must be below this baseline. But it is believed to work based on the success of the US SOX and NOX markets.
The real answer is that it doesn't really matter. A portfolio of renewables is necessary for utilities and countries to meet their caps. The only question is who will profit...
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