Kruse Kronicle

How to Increase Intergenerational Mobility

Intergenerational mobility is low in the US. Economist Timothy Taylor discusses findings from a recent study investigating how we might make improvements: Intergenerational Mobility and Neighborhood Effects. The unique study incorporates 20.5 million Americans and enables them to analyze down to the city block level.

 

The study determined that neighborhood (.5 mile radius around family) is twice as significant in determining upward mobility compared to family status. Two policy options to consider:

 

First, empowering families to move to locations with greater opportunities. For a variety of reasons, low-income families have significant barriers to relocating for better opportunities. The article shows that when low-income people are provided with brokerage services (much like wealthy professionals get when being relocated), they relocate at dramatically higher rates.

 

Second, rebuilding impoverished neighborhoods with the institutions and resources necessary to achieve upward mobility for people who live there. This one is more problematic to measure and, therefore, more difficult to address confidently. But it does seem to suggest neighborhood development, including economic development, is more critical than isolated aid to families. It seems aid to families without a corresponding improvement in societal support systems is ineffective. 

Why Population Control Is Not The Answer to Climate Change

Population control is sometimes championed as a way to fight climate change. Bernie Sanders recently raised this idea. The world population is growing. There are 7.7 billion people today. According to United Nations estimates, there will be nearly 11 billion in 2100. Extra people mean extra CO2 emissions. While two children per woman may seem reasonable, women in the poorest countries can average five or sex. Sanders and others believe this excess fertility is why the world population is growing. Fewer children will mean less CO2. Unfortunately, this perception is decades out of date.

We are already at "peak children." Globally, there are 680 million children under the age of five. U.N. projections show a peak of 700 million in about 2060. There are projected to be 650 million children in 2100, fewer than today. Yet the overall population will grow by nearly 50%. How can that be? The compounding effect of people already born will drive population growth over the next century, not excessive birth rates.

Trends in Fertility

Assume women have two children over their lifetime. They replace themselves and one other. Population size will be stable from generation to generation. (The actual replacement fertility rate for an affluent nation is 2.1 children per woman.) Throughout history, the total fertility rate has been six or seven children. One-quarter of children died before their first birthday. Another sizable percentage died before age five. Many of those who made it past five died before marrying and having children. High fertility rates ensured a couple of children would survive to continue the family.

As affluence emerged and health practices changed (first in Europe and then spreading elsewhere), more children survived into adulthood. We needed fewer births to perpetuate a family, but it took a while for customs related to fertility to adjust downward. That lag between declining death and fertility rates led to the population explosion that began two centuries ago. That growth accelerated into the twentieth century and continues into its final stages today. As recently as the 1960s, the global total fertility rate was as high as five children per woman.

Today, the global total fertility rate is about 2.4 and dropping, but the rate is not evenly spread worldwide. Europe, the Americas, China, Japan, and other regions have fertility rates below the replacement rate, well below it in many nations. A handful of smaller poor countries have fertility rates of five or six, but they also have some of the highest child death rates. The world average is fast approaching the 2.1 replacement rate. However, because the global fertility rate has usually been higher than the replacement rate for most of us now living, it means the cohort of people born one year is usually larger than those born the previous year. So let us think about what that means for the future.

The Compounding Effect in Future Fertility

To keep things simple, assume going forward that we birth the same number of children each year, the death rate stays the same, and no one lives past one hundred years. Now say there are 100,000 people aged 100. By next year, all will have died. The group that was 99 will now be 100. Because more of them were born, there will now be maybe 105,000 people 100 years old. After two years have passed, the new group of 100 hundred-year-old people will be the people who are 98 years old today. They will be a still larger group. That will continue for one hundred years.

At the other end of the age continuum, we have the largest number of children ever born in a year and the largest age cohort alive. A year later, this youngest age cohort will replace a smaller cohort a year older than them. But keep in mind that the number of women of childbearing age will increase yearly for the next forty-five years. Therefore, each year the total fertility rate will need to fall slightly below the replacement rate if the population is to stabilize. It can then rise to the replacement rate after forty-five years. This will continue until 2120, when each age cohort is the largest age cohort that has ever existed for that age. This is the primary driver of population growth in the future, but there is at least one other key factor. (Clearly, I am oversimplifying to illustrate my point. We are not down to replacement rate fertility, so there is still some marginal population growth due to "excess" fertility.)

Furthermore, actual global death rates are not constant. They are dropping. People are living longer. So not only is each age cohort larger than before, but it is also living slightly longer. This, too, contributes to population growth over the coming decades.

Therefore, we would need considerably less than replacement-rate fertility to limit global population growth substantially. In fact, there are credible projections of a population peak of fewer than nine billion. Demographers once assumed transition to low fertility and death rates would stabilize at about the replacement rate. Instead, the fertility rate has dropped well below the replacement rate in nearly every affluent nation, in some cases nearly one child per woman. This may look like a good thing from the narrow view of CO2 emissions. From a holistic standpoint, many social scientists are troubled. Depopulation can be as destructive to human well-being as overpopulation.

The Depopulation Problem

A vibrant society needs a critical mass of productive workers relative to its dependents (primarily children and the elderly.) This is the dependency ratio (dependents divided by workers multiplied by 100). With excessively low fertility rates, it is possible to have a great imbalance with many seniors and too few workers to provide for society. We have already seen that current U.N. projections say we will have nearly the same number of children now as in 2100, but the overall population will be almost 50% larger at eleven billion. That growth is a consequence of a burgeoning number of elders. A smaller population of nine billion may mean fewer total people but an even worse dependency ratio.

Modest help may come from lengthening the number of years people work or a higher participation rate in the workforce for working-age people but at some point, that will be insufficient. Then consider the possibility of medical breakthroughs that cure cancer or dramatically reduce heart disease. That means more people living longer, intensifying the dependency ratio imbalance.

As an ever-shrinking number of people (potentially a minority of the population) is expected to support everyone else, improving living standards will begin to stall and possibly reverse, making the world ripe for any societal dysfunctions. It will not take eighty years for this challenge to become real. Japan is already struggling with these issues. China is already headed down this road. One can envision China opening up to immigration from the remaining regions with the highest fertility rate and investing its resources in growth economies. However, if every nation is headed to fertility rates well below the replacement rates, it is only a temporary fix. The dependency ratio for a world with eleven billion people is already a challenge. The only way to get a peak population under nine billion people is to achieve fertility rates well below replacement rates, substantially intensifying the dependency ratio imbalance just a generation or two down the road. (For more detail, see the Brookings' piece, How will we cope when there are too few young people in the world?)

Decoupled Economic Growth

At the most basic level, climate policy must be about economic growth decoupled from CO2 emissions. Population growth is one issue driving this need for economic growth. But also consider people are advocating for a $15 living wage for every worker in the United States. That would put nearly every U.S. worker in the top 10% of wage earners in the world. Meanwhile, despite astonishing improvements in human well-being around the world and the dramatic reduction in extreme poverty, there are still hundreds of millions of people in extreme poverty. A couple billion more have more stable lives but still live well below standards we would consider tolerable. If it is a matter of justice that everyone in the U.S. has a $ 15-an-hour living standard, then it is only just that all citizens of the world have something approximating that standard. The only way that happens is through economic growth. Measures like population control are shortsighted and potentially disastrous. The principal mission is decoupling economic growth from fossil fuel consumption and other disruptive measures like decoupling land use from agricultural production.

Extreme Poverty is Vanishing. What Does That Mean in Practical Terms?

Throughout human history, 90% of people have lived at a subsistence level - at or under what economists today call the extreme poverty line. Between 1820 and 1980, that percentage shrank by half to 44%. Between 1980 and 2005, it halved again to about 22%. During the next ten years, it has more than halved to less than 10%. Remember that while these percentages were shrinking, the global population grew from one billion to more than seven billion.

That is all good, but most people don't relate well to statistics. Is there some way to visually capture what this means in concrete terms?

Gapminder has an excellent graph that gives a sense of what it means to move from extreme poverty. The left column indicates how the extremely poor live relative to the features listed on the left. The second column is indicative of the life to which they emerged. 

The graph is also instructive in dividing living standards into four levels. Many of us who went to school in the 1960s to 1990s have tended to see a binary world - developed and undeveloped, first world and third world, rich and poor, the West and the rest. That has ceased to be the case. It has been on a trajectory away from a binary world all during our lifetimes. At the bottom of the graph, you will see seven yellow human figures. Each stand for one billion people. Most of the world is now concentrated in the middle and moving upward or to the right in this chart. The percentage of people in level one is now well below one billion and shrinking rapidly.

Gapminder Dollar Street has visited 264 families worldwide and taken photos of their homes and belongings. The links to photos of the households are arranged in columns like the chart, allowing you to walk through the houses and get a sense of what it means to live at various living standards. It is an excellent resource.

"Is Fair Trade Fair?" - Primer on Free Trade Coffee

What are the economic merits of Free Trade Coffee? In this video, my friend Victor Claar (professor of economics at Henderson State University) gives a 25 minute presentation about the economics of fair trade. It was originally presented at the Macmillan's EconEd Conference last year. The audience is economics teachers, but the presentation is accessible to laypeople. His advice at the end of the video is mine as well. Claar also published a monograph on the topic Fair Trade? Its Prospects as a Poverty Solution.

Don't Forget the Good Stuff

It is easy to become obsessed with the challenges and threats we see before us today. It is easy to lose sight of the bigger picture and not see the tremendous good happening in the world. Here are six social indicators pointing to improving the quality of life for billions around the globe. Setbacks and brief reversals are inevitable, but increasingly, the challenges we face are of our own making, like tribalism and authoritarianism. Let us be vigilant in addressing our challenges without losing sight of the bigger picture.

More Evidence of an Improving World - HDI

The world is becoming a better place. It is not a utopia. We are not without substantial challenges. But we are becoming (as in movement along a trajectory) better (as in measurably improved according to a standard.) 

The Human Development Index is a United Nations measure of well-being combining income, literacy, education, and life expectancy data. Here is the index for the world nations in 1980 and 2012. The reality is that we are living through the most astonishing transformation toward human well-being in all of history. You can find the interactive version of the chart at Our Data.

 

Rosling Univeristy (How to be smarter than a chimp)

Are you smarter than a chimp? There is a good chance you are not when it comes to knowledge about global socioeconomic trends. For years, Swedish global health expert, Hans Rosling, has been giving Ted talks and making presentations about global trends. One of his favorite teaching tools is to ask people a question like this:

Globally, over the past 20 years, the rate of extreme poverty has:

1. Doubled.
2. Stayed the same.
3. Decreased by more than half.

Now chimps will randomly select, giving each answer a 33% chance. Yet when Rosling asks audiences, at least half will say A, a sizable percentage will say B, while a few will say C. Yet C is the correct answer! This is the case with one variable after another. Audiences routinely score worse than chimps, choosing the most negative option.

An old adage states, "It isn't what we don't know that gets us in trouble. It's what we know that ain't so." That we routinely pick the wrong answer more often than chimps shows that we have bias.

In the Ted talk, How not to be ignorant about the world, Hans' son Rosling notes that part of the problem is our education system. Teachers go to college at a particular point in time and learn the state of the world at that time. But they tend not to learn about ongoing developments. The data has often been hard to come by and hard to interpret. So teachers are biased by what they learned years ago. (Reporters have the same problem.) But there are other factors.

During our evolutionary history, our brains became wired to notice threats. Hunters walking through the brush who were attentive to the possibility of tigers lying in wait likely survived those who went about carelessly enjoying a beautiful day. So when we reflect on broad human trends, we fixate on perceived threats. What was useful for us in the wild is counterproductive as we try to interpret socioeconomic trends. If you want to outscore a chimp on an exam about global well-being, Ola Rosling suggests that you must drop your predispositions and adopt these four rules of thumb:

1. Assume most things are improving.
2. Assume most people are in the middle of a distribution, not a binary of rich and poor.
3. Assume social development precedes becoming wealthy. (Don't assume that a population must be rich before meeting basic social needs.)
4. Assume you are exaggerating the threat if the topic is something you personally fear.

Additionally, Hans, Ola, and others have been working to build the Gapminder website to provide you with data that can be presented in meaningful ways. But one of the most important contributions the Roslings have made is their collection of entertaining and informative videos. In this post, I include every video I can find with a brief annotation. (I'll add more as I find any.) Many videos overlap or cover similar data but are all well worth viewing. So here is your resource for becoming smarter than a chimp. Don't say I never gave you anything.

(This link also has links to most of these videos, including some shorts not listed here: Gapminder Video)

Hans Rosling's 200 Countries, 200 Years, 4 Minutes (2010)

If you are just getting acquainted with Rosling, I'd begin here. This four-minute presentation gives you a quick sense of what he is talking about.

 

Hans and Ola Rosling: How not to be ignorant about the world. TED June 2014

This is the second video to watch. The front half is Hans making his case that the world is improving, and the back half is Ola explaining, as I recounted above, why we are so disinclined to see positive change.

 

Hans Rosling: The magic washing machine. TED December 2010

This is the third one to watch. This is one of my favorites. While fully embracing the concern about the environmental impacts of economic growth, Rosling shows the importance of economic growth through the story of the washing machine.

 

THE REST ARE IN CHRONOLOGICAL ORDER

Hans Rosling: The best stats you've ever seen. TED February 2006

The TED presentation that kicked it all off. He focuses on the positive changes underway in the world. He points to his efforts to liberate, integrate, and animate data and to find ways to present data the public finds understandable.

 

Hans Rosling: New Insights on Poverty. TED March 2007

Rosling shows that social development tends to precede economic development. He addresses the issue that, unfortunately, economic development has always been based on fossil fuels. Higher yields, technology, and markets are key to ending poverty, but more dimensions like human rights, environment, governance, economic growth, education, health, and culture need our attention. The ending has a great surprise!

 

Human Rights and Democracy Statistics- Gapminder c. 2008

Rosling describes why human rights are so hard to describe and evaluate.

Source

Yes they can! - Gapminder c. 2008

Rosling explains that poor nations will one day become prosperous, and we should welcome that.

Source

Poor Beats Rich in MDG Race - Gapminder c. 2008

Rosling shows that countries that have developed from poverty to well-being have done so faster than Western nations. Poor countries today can make the transition much quicker because of what previous countries have learned.

Source

What stops population growth? - Gapminder c. 2008

Small families are the key to ending population growth, and the key to small families is childhood survival.

Source

Hans Rosling: Insights on HIV, in stunning data visuals. TED February 2009

Uses Gapminder data to show nuances in how AIDS has spread and what it takes to defeat it.

 

Hans Rosling: Let my dataset change your mindset. TED June 2009

This is the third video you should watch. Rosling deconstructs the dichotomy of wealthy and developing nations and challenges the idea of thinking in sweeping terms like "Africa."

 

The Joy of Stats with Professor Hans Rosling - Gapminder c. 2010

Rosling shows how making data available and animating empowers people to make better decisions, sometimes without realizing they are using statistics.

Source

Hans Rosling: Asia's rise -- how and when. TED Nov 2009

Rosling forecasts when China and India will catch up with the USA and UK.

 

 Hans Rosling: Global population growth, box by box. TED June 2010

 Rosling says that child survival is the new green. This video explains why.

 

Hans Rosling: The good news of the decade? We're winning the war against child mortality. TED September 2010

Rosling breaks down the remarkable trends in child mortality. Education of women accounts for at least 50% of the drop.

 

 

Hans Rosling: Religions and babies. TED April 2012

Religion is not a factor in family size. There is no significant difference between Islamic and Christian countries regarding births per woman. The defining difference is economic well-being.

 

 DON'T PANIC — Hans Rosling showing the facts about population. BBC November 2013

 A one-hour investigation into the dynamics of population growth using stories about real live families interspersed with Rosling's entertaining presentation of data.

 

Don't Panic - How to End Poverty in 15 Years. BBC September 2015

No embed is available.

You can view the video here.

Here is a link to a series of short videos on how to use development data visually.

An introduction to visualising development data

 

Half of Global Wealth Owned by 62 People: How Oxfam Lies While Telling the Truth

Once again, Oxfam is circulating that 62 people have as much wealth as the bottom half of the world's population. Think about that for a moment. When you read that, what do you think that means? Particularly, what is wealth?

Many people will interpret "wealth" as financial assets. Many others realize wealth includes the value of our non-financial possessions. Therefore, Oxfam says that if you add up the value of all our possessions, 62 people own half. Right? Wrong! Though that is the message they want you to hear.

Terminology lesson. The sum of your financial and non-financial possessions is your total assets. Wealth is your total assets minus your debt. Wealth is your net worth. Oxfam misconstrues wealth as total assets. (As this has been thoroughly documented in the press for years, we can only assume the misrepresentation is intentional.)

Thanks to Reuters reporter Felix Salmon, who dug into Oxfam's sources, we know Oxfam uses Credit Suisse Global Wealth Databook to calculate their numbers. Here is how it works (using the 2015 Databook):

• Step 1: Find the global wealth total. Page 90 says it is $263 trillion.
• Step 2: Find the percentage of wealth owned by the bottom 50%. Here are the percentages of global wealth for the bottom five deciles of wealth ownership from lowest to highest (p. 148): -0.3 + 0.1 + 0.1 + 0.3 + 0.5 = 0.7%.
• Step 3: Calculate the amount of wealth for the bottom half. Multiply $263 trillion by .07%. That gives $1.84 trillion.
• Step 4: Get a list of the wealthiest people in the world and then add them up until you get to $1.84 trillion.

That may seem right at first glance but look at this graph from Credit Suisse's Global Wealth Report 2015. (p. 15) It shows what percentage of each decile lives in which region of the world. I've added two notations.

Note that the United States has 10% of the world's least wealthy people (circle 1). China has none of them (circle 2)! How is that possible? Because the bottom number for wealth on the left side of the chart is not zero. It is a negative number. The middle-class American with a mortgage, student loans, and consumer debt totaling more than the value of her home, bank account, and other possessions, is less "wealthy" than a Chinese peasant farmer who owns virtually nothing but also has no debt. The entrepreneur who borrowed a million dollars for his business is even "poorer" than these two. This is who Oxfam is grouping in its bottom 50% of wealth. It is a meaningless comparison. But the deception does not stop there.

Oxfam builds a narrative that the increasing concentration of wealth at the top has the corresponding negative effect of making people poorer at the bottom. Their misrepresentation of wealth as total assets gives us no insight into this claim. I will suggest that income is a more critical issue for the poorest people in the world than wealth or total assets. One must have an income that at least meets basic needs before she can begin to save, invest, and buy capital goods.

Extreme poverty, measured by income, is rapidly disappearing. The percentage of people living on less than $1.90 per day has shrunk from almost 40% in 1990 to less than 10% today (and we have added an extra 2 billion people.)

(Source: Washington Post)

Furthermore, the global income distribution has been progressively moving toward a bell curve distribution and away from a bi-modal distribution, with wealthy people clustered at the top and very low-income people clustered at the bottom.

(Source: Business Insider)

And this chart shows how the mean and median global per capita income numbers keep rising, also noting that the global GINI coefficient declined from 68.7 to 64.9 between 2003 and 2013. (Lower GINI number means more equality.)

(Source: Conversable Economist)

As I have continued to learn about these issues, I keep coming to this graph as a discussion starter on economic inequality.

(Source: Pew Research)

To me, this chart suggests that recent trends in technology and globalization have benefited billions of people who once lived in bare subsistence poverty. There is a small minority of people at the left of the chart who are not being touched by these changes, most of them living in counties with turmoil and failed nation-states. At the extreme right are the owners of capital who have benefited from productivity and expanded trade. Middle-class people in developed nations have experienced downward pressure on their wages due to technology and a burgeoning labor supply in a global economy. However, living standards are not just a function of wages but also the cost of living. A case can be made that the developed world middle class had improvements in living standards because globalization kept the cost of living lower than it otherwise would have been. That does not show up in this chart. It is more complex, but a chart like this is a better place to begin a discussion.

In short, Oxfam wants to promote a narrative that casts global capitalism primarily as an exploitative enterprise, a zero-sum game where the growth of wealth at the top necessarily means the reduction of wealth at the bottom. The narrative intuitively makes sense. Some version of this thinking is common, but it is virtual gospel on the left where the moral compass is directed predominately by equalization rather than a robust conceptualization of justice. But it is wrong. It is as ideologically myopic as the "free markets and democracy fixes everything" mantra on the right.

Finally, let me be clear about what I did not say. I did not say I thought that the growing concentration of wealth at the top was good, that there are not masses of people who need substantial improvement in their economic well-being, that global capitalism is an unqualified good, or that there are not profound economic injustices in the world. I did not speak to any of Oxfam's proposed policy solutions. Discernment of economic issues is complex and requires our best efforts at sound analysis to bring lasting and just change. Oxfam's misuse of the data to support ideologically predetermined policies does not help. They are telling the truth about the numbers they use, knowing the numbers they use will lead most of us. That is what I'm addressing.

 

How Nobel winner's work links international aid and poverty

AP: How Nobel winner's work links international aid and poverty

Angus Deaton has dug into obscure data to explore a range of problems: The scope of poverty in India. How poor countries treat young girls. The link between income inequality and economic growth.

The Princeton University economist's research has raised doubts about sweeping solutions to poverty and about the effectiveness of aid programs. And on Monday, it earned him the Nobel prize in economics. ...

... He also hit upon what the Nobel committee called an ingenious way to discover whether families in poor countries spent less to care for daughters than for sons. Among other things, he studied how much households spent on "adult" items, such as beer and cigarettes, to see whether families consumed things differently depending on the sex of newborn children.

His surprising conclusion: They didn't.

Another Deaton study challenged the once-popular notion that malnutrition caused poverty by making people too weak to find work. He found the relationship worked the other way: Being poor caused people to be malnourished. ...

I'll need to read more.

World Bank: Extreme poverty 'to fall below 10%'

BBC: World Bank: Extreme poverty 'to fall below 10%'

The World Bank has said that for the first time less than 10% of the world's population will be living in extreme poverty by the end of 2015.

The bank said it was using a new income figure of $1.90 per day to define extreme poverty, up from $1.25.

It forecasts that the proportion of the world's population in this category will fall from 12.8% in 2012 to 9.6%. ...

... However, the report's authors said the "growing concentration of global poverty in sub-Saharan Africa is of great concern".

Extreme poverty in that region is seen as falling from 46.2% in 2012 to 35.2% at the end of 2015. ...

... The World Bank says the downward trend is due to strong growth rates in developing countries and investments in education, health, and social safety nets. ...

... And the bank warned that poverty is "becoming deeper and more entrenched in countries that are either conflict ridden or overly dependent on commodity exports".

1990: 1,959 billion = 37.1% of world's population.
1999: 1,747 billion = 29% of world's population.
2012: 902 million = 12.8% of world's population.
2015: 702 million = 9.6% of world's population.

The world has improved since 2000 – but not because we planned it (Think Bonsai)

The Globe and Mail: The world has improved since 2000 – but not because we planned it

Millennium Development Goals: ...

... The headline goal, of cutting the proportion of people living in poverty in half, was achieved five years early, in 2010, by which time a billion people had left absolute poverty. And now the rate of poverty has fallen to less than a third of its 1990 level (that is, from 47 per cent of the world's people to 14 per cent).

The other MDGs saw impressive outcomes. The percentage of malnourished people has been cut in half. So has the number of children dying before the age of five, and the percentage of people without access to clean drinking water. The maternal mortality rate has almost dropped by half. The number of primary-age children out of school fell from 100 million to 57 million; the primary enrollment rate in sub-Saharan Africa rose to 80 per cent from 52 per cent. New HIV infections annually fell from 3.5 million in 2000 to 2.1 million in 2013. ...

... There's a problem with all the self-congratulation, though: Nobody has been able to find any connection between those impressive outcomes and anything done by the UN since 2000.

Charles Kenny and Andy Sumner of Washington's Center for Global Development have spent the decade tracking the progress of the UN's goals. In a series of studies, they've found that in most areas the goals had little or nothing to do with the outcomes. ...

... What did cause the world to improve so dramatically between 2000 and 2015? In large part, two things: After 1990, the old closed, nationalist economies of the postcolonial era and the Cold War broke down (with ugly results at first) and gave rise to the set of phenomena we call "globalization." And after 2000, countries in Asia, South America, Eastern Europe and much of Africa started developing better institutions of government, education and health. Stronger liberal economies and stronger states worked wonders.

The UN's new post-2015 goals at least recognize that economic growth is crucial (they call for an astonishing 7-per-cent growth a year in the poorest countries). It may, in fact, be the only key factor – and it's the one the UN can't control.

In fact, what is needed is a healthy economic ecosystem grounded in efficient and just soci0-economic structures, with markets providing a real-time feedback loop through which a society can be adaptive to ever changing priorities. That ecosystem needs to be justly connected to the larger ecosystem of global productivity and exchange.

There is a common tendency to believe that development can be achieved through top-down analysis, planning, and implementation. This is generally the U.N. Millennium Development Goals model. Such projects are rarely effective. It presumes that experts can correctly identify the most critical needs, that the priority of those needs will stay constant, and that they can identify which levers to flip to get the optimal outcome.

Mohammad Yunus uses the image of the Bonsai tree to illustrate the problem. The tiny Bonsai tree grows from the same seed as the tall tree in the forest. The difference is that the Bonsai tree has only the nutrients of the tiny pot in which to grow. The poor are Bonsai people. They can grow as strong and tall as anyone else if planted in the right soil. The right soil is healthy socioeconomic structures and inclusion in networks of productivity and exchange.

The U.N. approach has elements of paternalism. The poor can reasonably address their own needs if the "right soil" is present. Because of geopolitical concerns or pure ineptness, the West has too often played a role in "degrading the soil." This article again reminds us how impotent so many of our "big idea" solutions are. The critical factors lie in the less-than-glamorous work of building healthy institutions.

Tom's Shoes: A Closer Look (Adam Ruins Everything)

This video is funny and disturbing at the same time. Good intentions, stereotypes, and warm fuzzies can be destructive. Thinking with an economic lens that evaluates actual outcomes is essential. Yet, attempts to introduce such a lens are usually met with strong resistance. It feels so right; how could it be wrong? As I've said repeatedly - We need to do mission with warm hearts and cool heads. We need to think and observe, not just emote and respond.

Don't Panic - How to End Poverty in 15 Years (Hans Rosling)

YouTube: Don't Panic - How to End Poverty in 15 Years (This World documentary)

"The legendary statistical showman Professor Hans Rosling returns with a feast of facts and figures as he examines the extraordinary target the world commits to this week - to eradicate extreme poverty worldwide. In the week the United Nations presents its new goals for global development, Don't Panic - How to End Poverty in 15 Years looks at the number one goal for the world: eradicating, for the first time in human history, what is called extreme poverty - the condition of almost a billion people, currently measured as those living on less than $1.25 a day.

Rosling uses holographic projection technology to wield his iconic bubble graphs and income mountains to present an upbeat assessment of our ability to achieve that goal by 2030. Eye-opening, funny and data-packed performances make Rosling one of the world's most sought-after and influential speakers. He brings to life the global challenge, interweaving powerful statistics with dramatic human stories from Africa and Asia. In Malawi, the rains have failed as Dunstar and Jenet harvest their maize. How many hunger months will they face when it runs out? In Cambodia, Srey Mao is about to give birth to twins but one is upside-down. She's had to borrow money to pay the medical bills. Might this happy event throw her family back into extreme poverty?

The data show that recent global progress is "the greatest story of our time - possibly the greatest story in all of human history". Hans concludes by showing why eradicating extreme poverty quickly will be easier than slowly.

Don't Panic - How To End Poverty In 15 Years follows Rosling's previous award-winning BBC productions Don't Panic - The Truth About Population and The Joy Of Stats."

"Orphans" Versus The Abandoned: The Church's Complicit Role in Poverty

FCS Urban Ministries: Big Heart to Love the Abandoned

 

Bob Lupton has an excellent piece on how most orphans in Haiti are, in fact, children who have been unwillingly abandoned because their parents are without the means to care for them. Yet faith-based "orphanages" market these children as orphans. He concludes:

 

"There are still many true orphans in Haiti whose parents have died or disappeared. Good orphanages are certainly needed as are good adopting families. The Corrigan's have adopted two of these orphans themselves.

 

But something is quite wrong when the prevailing non-profit orphanage system – mostly faith-based – "creates" orphans by mislabeling them and markets them as abandoned, yet does little to correct the underlying problem that forces their parents to give them up. It is a classic case of rightly motivated people rushing in to rescue the perishing, establishing emergency ministries that do in fact save lives, but failing to shift to empowerment strategies as the crisis becomes chronic.

 

When poverty becomes an industry supported by misinformed donors that enables professional workers to maintain a western lifestyle under the guise of alleviating poverty even as they perpetuate dependency, that industry must be challenged. Shelley and Clay Corrigan are doing just that. And in the most productive, self-sustaining, family-strengthening way."

 

Amen!!! Pope John Paul II defined poverty as exclusion from networks of productivity and exchange. The answer is inclusion. In short, economic development. But understand that if you champion economic development, you will be outside most of the Church. Much of the Church will reject you because, to them, compassion=relief aid. It is grounded in how it makes you feel with no critical thinking about the collective impact. The Church's progressive wing will mostly ignore you, except to occasionally denounce you in the name of social justice for promoting "neoliberal economics," exploitative global capitalism, and having supplanted God with economics. The poor of the world deserve more from us.

Fair Trade: Does It Help Poor Workers?

From Marginal Revolution University.

Trends in Extreme Poverty (Spoiler: The Poor Are Not Getting Poorer)

Globally, the number of people living in extreme poverty ($1.25 a day) is shrinking. The global poor are not getting poorer. The world population grew from 4.5 billion people in 1981 to 6.9 billion in 2010 - a 60% increase. The percentage of people living in extreme poverty in developing nations dropped from over 50% to 21%. (From about 1.95 bil. to 1.2 bil., estimates are now well below one bil. in 2015.)

That doesn't mean life just above the extreme poverty line is desirable. That doesn't mean there isn't a great deal more to do. But let's be honest about the trajectory. And let's also be honest that central to the decline in extreme poverty has been the inclusion of the poor in networks of productivity and exchange - that is to say, they embraced some form of market capitalism. Unqualified dismissal of "capitalism" (rarely defined by critics), as some religious leaders are prone to do, should be challenged.

Source: World Bank - State of the Poor

Food Deserts Are Not The Problem

National Bureau of Economic Research: What Drives Nutritional Disparities? Retail Access and Food Purchases Across the Socioeconomic Spectrum

Food deserts are not the problem when it comes to poor nutrition for low-income people, at least according to this study.

Jessie Handbury, Ilya Rahkovsky, Molly Schnell

NBER Working Paper No. 21126
Issued in April 2015
NBER Program(s):   HE

The poor diets of many consumers are often attributed to limited access to healthy foods. In this paper, we use detailed data describing the healthfulness of household food purchases and the retail landscapes in which these consumers are making these decisions to study the role of access in explaining why some people in the United States eat more nutritious foods than others. We first confirm that households with lower income and education purchase less healthful foods. We then measure the spatial variation in the average nutritional quality of available food products across local markets, revealing that healthy foods are less likely to be available in low-income neighborhoods. Though significant, spatial differences in access are small and explain only a fraction of the variation that we observe in the nutritional content of household purchases. Systematic socioeconomic disparities in household purchases persist after controlling for access: even in the same store, more educated households purchase more healthful foods. Consistent with this result, we further find that the nutritional quality of purchases made by households with low levels of income and education respond very little when new stores enter or when existing stores change their product offerings. Together, our results indicate that policies aimed at improving access to healthy foods in underserved areas will leave most of the socioeconomic disparities in nutritional consumption intact.

An Anti-Poverty Program That Really Works

Pacific Standard: An Anti-Poverty Program That Really Works

"The study, run by an international team of economists, included 10,495 households in Ethiopia, Ghana, Honduras, India, Pakistan, and Peru. Almost half of the families in the study lived on less than $1.25 a day.

The specifics of Graduation varied by country, but the basic premise was the same. All the Graduation programs gave families some kind of "productive asset," such as sheep, goats, seed corn, bees, or small shops. They all provided training on how to build a business using the assets, and gave food or cash aid to the families for up to a year, in part to discourage them from eating or selling their "productive asset." The programs also gave families access to a savings account, and some programs required that families contributed to the account regularly.

One year after the program ended, researchers found that Graduation families bought more, owned more, spent more time working, were more politically active, and missed fewer meals than similar families who hadn't enrolled in the program. The changes were all statistically significant, but, the researchers note, not very large."

The Rise in Global Per Capita Income and Decline in Global Inequality

The Economist: Some good news for development economists

Why "Sustainable Development" is Not the Answer

New York Times: A Call to Look Past Sustainable Development - Eduardo Porter

If billions of impoverished humans are not offered a shot at genuine development, the environment will not be saved. And that requires not just help in financing low-carbon energy sources, but also a lot of new energy, period. Offering a solar panel for every thatched roof is not going to cut it.

"We shouldn't be talking about 10 villages that got power for a light bulb," said Joyashree Roy, a professor of economics at Jadavpur University in India who was among the leaders of the Intergovernmental Panel on Climate Change that won the 2007 Nobel Peace Prize.

"What we should be talking about," she said, "is how the village got a power connection for a cold storage facility or an industrial park."

Changing the conversation will not be easy. Our world of seven billion people — expected to reach 11 billion by the end of the century — will require an entirely different environmental paradigm....

... The "eco-modernists" propose economic development as an indispensable precondition to preserving the environment. Achieving it requires dropping the goal of "sustainable development," supposedly in harmonious interaction with nature, and replacing it with a strategy to shrink humanity's footprint by using nature more intensively.

"Natural systems will not, as a general rule, be protected or enhanced by the expansion of humankind's dependence upon them for sustenance and well-being," they wrote.

To mitigate climate change, spare nature and address global poverty requires nothing less, they argue, than "intensifying many human activities — particularly farming, energy extraction, forestry and settlement — so that they use less land and interfere less with the natural world."

As Mr. Shellenberger put it, the world would have a better shot at saving nature "by decoupling from nature rather than coupling with it."

This new framework favors a very different set of policies than those now in vogue. Eating the bounty of small-scale, local farming, for example, may be fine for denizens of Berkeley and Brooklyn. But using it to feed a world of nine billion people would consume every acre of the world's surface. Big Agriculture, using synthetic fertilizers and modern production techniques, could feed many more people using much less land and water.

As the manifesto notes, as much as three-quarters of all deforestation globally occurred before the Industrial Revolution, when humanity was supposedly in harmony with Mother Nature. Over the last half century, the amount of land required for growing crops and animal feed per average person declined by half. …

… Development would allow people in the world's poorest countries to move into cities — as they did decades ago in rich nations — and get better educations and jobs. Urban living would accelerate demographic transitions, lowering infant mortality rates and allowing fertility rates to decline, taking further pressure off the planet.

"By understanding and promoting these emergent processes, humans have the opportunity to re-wild and re-green the Earth — even as developing countries achieve modern living standards, and material poverty ends," the manifesto argues. …

Read the whole thing. Decoupling is essential. We have already seen this with land use. We are using no more land for agriculture in the United States than we were 100 years ago. Before that time, it took a fixed amount of land to feed each person. That same decoupling is developing worldwide, but it could be accelerated. The amount of energy consumed per unit of GDP has now begun to decline. We see this decoupling with other resources. Add a move to solar and nuclear power in combination with decoupling, and we have a real chance to drive down carbon emissions drastically.

I haven't yet read the whole EcoModernist Manifesto linked in the article, but the parameters and reasoning laid here are the best articulation of my views on economic development and sustainability that I have read.

Welfare is Key to Entrepreneurship and Economic Growth

The Atlantic: Welfare Makes America More Entrepreneurial

A common perspective among political conservatives, especially of the libertarian and Tea Party varieties, is that welfare is a drag on economic growth and a disincentive to initiative. Paul Ryan wants a safety net and not a safety hammock. Some libertarians don’t even want the net. It would be better to let people take their own risks. Money taxed away by the government is money that people could have used to buy goods and services and boost the economy.

I do not dispute that government programs could be a drag on the economy, but this conservative narrative is grossly incomplete! Entrepreneurship and economic innovation are, at the heart, calculations about risk. By taking a bold step, what are the chances I will be better off (however I measure that), and what are the chances I could lose everything? Do the chances of being “better off” outweigh the status quo, especially if I could lose even what I have now? So here is the key point: By reducing the risk of losing everything, we tip the risk calculation toward taking more risk and economic growth.

... Take food stamps. Conservatives have long argued that they breed dependence on government. In a 2014 paper, Olds examined the link between entrepreneurship and food stamps, and found that the expansion of the program in some states in the early 2000s increased the chance that newly eligible households would own an incorporated business by 16 percent. (Incorporated firms are a better proxy for job-creating startups than unincorporated ones.)

Interestingly, most of these new entrepreneurs didn’t actually enroll in the food stamp program. It seems that expanding the availability of food stamps increased business formation by making it less risky for entrepreneurs to strike out on their own. Simply knowing that they could fall back on food stamps if their venture failed was enough to make them more likely to take risks. ...

... The rate of incorporated business ownership for those [CHIP] eligible households just below the cutoff was 31 percent greater than for similarly situated families that could not rely on CHIP to care for their children if they needed it.

The same is true of recent immigrants to the United States. Contrary to claims by the right that welfare keeps immigrants from living up to their historic role as entrepreneurs, CHIP eligibility increased those households’ chances of owning an incorporated business by 28 percent.

The mechanism in each case is the same: publicly funded insurance lowers the risk of starting a business, since entrepreneurs needn’t fear financial ruin. (This same logic explains why more forgiving bankruptcy laws are associated with more entrepreneurship.) ...

... American men were more likely to start a business just after turning 65 and qualifying for Medicare than just before. Here again, government can make entrepreneurship more appealing by making it less risky. ...

... Sometimes, though, a robust safety net may serve to discourage entrepreneurship. The best path in such cases, however, may not be to cut the program, but rather, to reform it. When France lowered the barriers to receiving unemployment insurance, it actually increased the rate of entrepreneurship.. Until 2001, citizens on unemployment insurance had little incentive to start businesses, since doing so would terminate their benefits. Instead of gutting the program, the state simply decided to let anyone who founded a business keep drawing benefits for a limited period, and guaranteed that they would be eligible again if that business failed. The result: a 25 percent increase in the rate of new-firm creation. ...

Other examples are reported. You get the picture. Here is the conclusion.

... The evidence simply does not support the idea of a consistent tradeoff between bigger government and a more entrepreneurial economy. At least in some cases, the reverse is actually true. When governments provide citizens with economic security, they embolden them to take more risks. Properly deployed, a robust social safety net encourages more Americans to attempt the high-wire act of entrepreneurship.

The challenge is not the particular size of government. The issue is the precise programmatic design of any given program. Markets generate a real-time feedback loop that allows independent individuals to prioritize their choices. Government has fewer effective ways of being adaptive and responsive. I lean toward market solutions where practical. Yet, there are some deliverables that markets alone cannot generate. How this mix should all come together is a topic on which reasonable people can disagree. But the idea that government cuts necessarily lead to more economic vitality is no more valid than the idea that wildly throwing money at welfare programs helps people. The real world is far messier than ideologues are willing to grant.

Stop Trying to Save the World (Good Intentions Are Not Enough!)

New Republic: Stop Trying to Save the World: Big ideas are destroying international development, Michael Hobbes

One of the first classes I took in the economic development program at Eastern University was a class where we spent the entire semester studying the wide variety of economic development models that had been tried. Few worked. The best attempts led to very modest improvements. The worst had perverse unintended consequences. The overall message? Economic development is hard to do well!

I missed this article by Michael Hobbes from New Republic last November. It is a 6,000+ word essay, but it is one of the best reads I have seen on the need for careful ongoing assessment, and it is a warning of the inefficient - even perverse - consequences when we do not empirically test our assumptions. Here are some key excerpts.

Maybe the problem isn’t that international development doesn’t work. It’s that it can’t.

He points to these examples:

In the late ’90s, Michael Kremer, then an economics professor at MIT, was in Kenya working on an NGO project that distributed textbooks to schools in poor rural districts. Around that time, the ratio of children to textbooks in Kenya was 17 to 1. The intervention seemed obvious: Poor villages need textbooks, rich donors have the money to buy them. All we have to do is link them up.

But in the early stages of the project, Kremer convinced the researchers to do it differently. He wanted to know whether giving kids textbooks actually made them better students. So instead of handing out books and making a simple before-and-after comparison, he designed the project like a pharmaceutical trial. He split the schools into groups, gave some of them the “treatment” (i.e., textbooks) and the others nothing. Then he tested everyone, not just the kids who got the books but also the kids who didn’t, to see if his intervention had any effect.

It didn’t. The trial took four years, but it was conclusive: Some of the kids improved academically over that time and some got worse, but the treatment group wasn’t any better off than the control.

Then Kremer tried something else. Maybe the kids weren’t struggling in school because of what was going on in the classroom, but because of what was going on outside of it. So again, Kremer split the schools into groups and spent three years testing and measuring them. This time, the treatment was an actual treatment—medication to eradicate stomach worms. Worm infections affect up to 600 million children around the world, sapping their nutrition and causing, among other things, anemia, stomachaches, and stunting.

Once more, the results were conclusive: The deworming pills made the kids noticeably better off. Absence rates fell by 25 percent, the kids got taller, even their friends and families got healthier. By interrupting the chain of infection, the treatments had reduced worm infections in entire villages. Even more striking, when they tested the same kids nearly a decade later, they had more education and earned higher salaries. The female participants were less likely to be employed in domestic services.

And compared with Kremer’s first trial, deworming was a bargain. Textbooks cost $2 to $3 each. Deworming pills were as little as 49 cents. When Kremer calculated the kids’ bump in lifetime wages compared with the cost of treatment, it was a 60-to-1 ratio.

This is perfect TED Talk stuff: Conventional wisdom called into question, rigorous science triumphing over dogma. As word of Kremer’s study spread, he became part of a growing movement within international development to subject its assumptions to randomized controlled trials.

Based on his analysis, Kremer went on to ramp up a deworming NGO, but Hobbes notes the NGO stopped testing after their initial research. Additional testing by others revealed more nuance.

It’s an interesting question—when do you have enough evidence to stop testing each new application of a development idea?—and I get that you can’t run a four-year trial every time you roll out, say, the measles vaccine to a new country. But like many other aid projects under pressure to scale up too fast and too far, deworming kids to improve their education outcomes isn’t the slam-dunk its supporters make it out to be.

In 2000, the British Medical Journal (BMJ) published a literature review of 30 randomized control trials of deworming projects in 17 countries. While some of them showed modest gains in weight and height, none of them showed any effect on school attendance or cognitive performance. After criticism of the review by the World Bank and others, the BMJ ran it again in 2009 with stricter inclusion criteria. But the results didn’t change. Another review, in 2012, found the same thing: “We do not know if these programmes have an effect on weight, height, school attendance, or school performance.”

Kremer and Evidence Action dispute the way these reviews were carried out, and sent me an upcoming study from Uganda that found links between deworming and improved test scores. But the evidence they cite on their own website undermines this data. Kremer’s 2004 study reporting the results of the original deworming trial notes—in the abstract!—that “we do not find evidence that deworming improves academic test scores,” only attendance. Another literature review cited on Deworm the World’s website says, “When infected children are given deworming treatment, immediate educational and cognitive benefits are not always apparent.”

Then there’s the comparison to textbooks. Kenya, it turns out, is a uniquely terrible place to hand out textbooks to kids and expect better academic performance. When Kremer reported that textbooks had no overall effect, he also noted that they did actually improve test scores for the kids who were already at the top of the class. The main problem, it seems, was that the textbooks were in English, the second or third language for most of the kids. Of the third-graders given textbooks, only 15 percent could even read them.

In the 1980s and early ’90s, a series of meta-analyses found that textbooks were actually effective at improving school performance in places where the language issues weren’t as complex. In his own paper reporting the Kenya results, Kremer noted that, in Nicaragua and the Philippines, giving kids textbooks did improve their test scores.

Here is the crux of it:

But the point of all this is not to talk shit on Kremer—who has bettered the world more with his career than I ever have with mine—or to dismantle his deworming charity, or to advocate that we should all go back to giving out free textbooks. What I want to talk shit on is the paradigm of the Big Idea—that once we identify the correct one, we can simply unfurl it on the entire developing world like a picnic blanket.

There are villages where deworming will be the most meaningful education project possible. There are others where free textbooks will. In other places, it will be new school buildings, more teachers, lower fees, better transport, tutors, uniforms. There’s probably a village out there where a PlayPump would beat all these approaches combined. The point is, we don’t know what works, where, or why. The only way to find out is to test these models—not just before their initial success but afterward, and constantly.

I can see why it’s appealing to think that, once you find a successful formula for development, you can just scale it up like a Model T. Host governments want programs that get more effective as they get bigger. Individual donors, you and me, we want to feel like we’re backing a plucky little start-up that is going to save the world. No international institution wants to say in their annual report: “There’s this great NGO that increased attendance in a Kenyan school district. We’re giving them a modest sum to do the same thing in one other district in one other country.”

The repeated “success, scale, fail” experience of the last 20 years of development practice suggests something super boring: Development projects thrive or tank according to the specific dynamics of the place in which they’re applied. It’s not that you test something in one place, then scale it up to 50. It’s that you test it in one place, then test it in another, then another. No one will ever be invited to explain that in a TED talk.

Hobbes goes on to explain that testing means more money spent on overhead. That overhead would lead to greater effectiveness and, in the long run, lead to a bigger bang for the overall buck, but everything we do now is oriented toward keeping overhead as lean as possible. We ramp up projects that end up being incredibly wasteful. Sometimes they can be downright destructive.

This is the paradox: When you improve something, you change it in ways you couldn’t have expected. You can find examples of this in every corner of development practice. A project in Kenya that gave kids free uniforms, textbooks, and classroom materials increased enrollment by 50 percent, swamping the teachers and reducing the quality of education for everyone. Communities in India cut off their own water supply so they could be classified as “slums” and be eligible for slum-upgrading funding. I’ve worked in places where as soon as a company sets up a health clinic or an education program, the local government disappears—why should they spend money on primary schools when a rich company is ready to take on the responsibility?

There’s nothing avaricious about this. If anything, it demonstrates the entrepreneurial spirit we’re constantly telling the poor they need to demonstrate.

My favorite example of unintended consequences comes, weirdly enough, from the United States. In a speech to a criminology conference, Nancy G. Guerra, the director of the Institute for Global Studies at the University of Delaware, described a project where she held workshops with inner-city Latina teenagers, trying to prevent them from joining gangs. The program worked in that none of the girls committed any violence within six months of the workshops. But by the end of that time, they were all, each and every one, pregnant.

“That behavior was serving a need for them,” she says in her speech. “It made them feel powerful, it made them feel important, it gave them a sense of identity. ... When that ended, [they] needed another kind of meaning in their lives.”

The fancy academic term for this is “complex adaptive systems.” ...

So do we give up?

First, let’s de-room this elephant: Development has happened. The last 50 years have seen about the biggest explosion of prosperity in human history. ...

Development, no matter how it happens, is a slow process. ...

The ability of international development projects to speed up this process is limited. ...

And this is where I landed after a year of absorbing dozens of books and articles and speeches about international development: The arguments against it are myriad, and mostly logistical and technical. The argument for it is singular, moral, and, to me anyway, utterly convincing: We have so much, they have so little. ...

To this, I would add one note about faith-based economic development. There is a tendency to turn a tactic into a sacrament. Christians and congregations are frequently using two metrics for mission. First, there is a desire to help those in need. Second, there is a desire for congregants to be engaged in helping others in ways that are meaningful to the congregant. If the latter becomes particularly strong, it is very difficult to alter tactics, no matter how much data you show that demonstrates ineffectiveness and even harm. In my book, the first consideration is an absolute must. To do development that does not achieve the first criteria, no matter how meaningful it is to the congregation, is to dehumanize those in need as instruments for stroking our spiritual self-esteem. And that is why addressing economic issues from a Christian perspective requires both warm hearts AND cool heads.

Globalization and Inequality: Two Complex Decades in One Simple Graph

Pew Research Center: Chart of the Week: How two decades of globalization have changed the world

(Source: Milanovic, B., Lead Economist, World Bank Research Department, Global income inequality by the numbers. Annotations by James Plunkett.)

I have seen the unannotated version of this graph several times, but the annotations really make things clear. The graph shows that much more is going on here than simplistic narratives of "The rich are getting richer, and the poor are getting poorer" (the graph discredits the second half of that statement) and the 1% versus everyone else.

Why Rich People Don't Care About You

Real Clear Science - Newton Blog: Why Rich People Don't Care About You

Examine the income ladder of the United States, and you'll soon stumble upon a surprising fact: Rich people donate a smaller portion of their income to charity than poor people. In 2011, people in the bottom 20% donated 3.2 percent of their earnings. People in the top 20% donated just 1.3 percent.

These numbers don't seem to be anomalous, but there is some nuance. Data from the National Center for Charitable Statistics shows that taxpayers making less than $60,000 donate around 3.75% per year, while those making between $200,000 and $10 million donate less than 3%. However, those making more than $10 million are the most generous of all, donating nearly 6% of their income.*

Psychologists have examined this dynamic even further.

"What we've been finding across dozens of studies and thousands of participants across this country is that as a person's levels of wealth increase, their feelings of compassion and empathy go down, and their feelings of entitlement, of deservingness, and their ideology of self-interest increases," Paul Piff, an Assistant Professor of Psychology and Social Behavior at the University of California, Irvine, announced in a 2013 TEDx talk. ...

... Of course, the wealthy aren't doomed to be Scrooges. For instance, the studies did not examine if there were behavioral differences between those who earned their wealth versus those who simply lucked into it. Also, Keltner insists that the human brain is hardwired to care. The wealthy just have to consciously work to be more cognizant of their fellow humans.

I've read other studies that indicate that the wealthy are just as responsive to needs as less wealthy people, but wealthy people are more isolated from the needs of people farther down the economic ladder. Social distance and ignorance may be factors as big or bigger than selfishness or indifference.

Why I Won't Shut Up About Positive Changes in The World

Most people are exceptionally illiterate about the trajectory of demographic and economic changes in the world, believing the world is decaying. That leads many to disengage in hopelessness. Globalization combined with investment in human capital and infrastructure has put extreme poverty in rapid retreat. The global poor are not getting poorer. The world is getting better!

I have continuously pointed to evidence of these developments through social media for more than a decade. Not infrequently, posts about positive trends are met with incredulity and even anger. How can I speak of an improving world when so many are suffering? It is as if nothing positive may be acknowledged until total success is achieved. Yet the relentless focus on the negative, attempting to shame and guilt people into action (often with distorted and exaggerated data) drives people away from action into donor fatigue and hopelessness. There must be hope that things can get better.

A recent guest preacher recounted a scene from the end of Schindler’s List. Schindler, who saved 1,200 Jews from the Nazis, reproofs himself as he realizes that he might have saved at least one more person if he had sold his car or other possessions. He finds himself in a difficult place. How can he celebrate the lives saved when so many still died? But how can he not celebrate 1,200 lives that were indeed saved?

Endless fixation on the negative leads to despair and diminishes the value of lives that have improved. Such fixation is unwarranted and counterproductive, so I will continue with stories of hope and improvement. We need balance. We need hope. And based on the Barna data below, there is much work to do.

GDP Growing Fastest in Poor Countries

The world's poorest regions have been growing the fastest for at least twenty years. The Economist forecasts world GDP to be 2.9%, Asia and Australasia (less Australia) at 5.7%, and Sub-Saharan Africa at 4.5%. These rates indicate a considerable slowing of growth from recent years. The US forecast is 3.2%. This is more evidence that global inequality is shrinking, even though inequality within many nations is increasing. As the bottom of the economic ladder rises, so does the distance between the bottom and the top. A recent article forecasted that there would be no poor nations by 2050. I think that is likely. See: Gauging growth in 2015

Low-income communities are not needy -- they have assets

Faith and Leadership Blog: John McKnight: Low-income communities are not needy -- they have assets

Most people and institutions that want to serve poor communities are focused on what the residents lack. “What are the needs?” is often the first question asked.

John McKnight says that approach has it backward.

“I knew from being a neighborhood organizer that you could never change people or neighborhoods with the basic proposition that what we need to do is fix them,” he said. “What made for change was communities that believed they had capacities, skills, abilities and could create power when they came together in a community.”

McKnight is co-director of the Asset-Based Community Development Institute and professor emeritus of communications studies and education and social policy at Northwestern University.

He and his longtime colleague John Kretzmann created the asset-based community development (ABCD) strategy for community building. Together they wrote a basic guide to the approach called “Building Communities From the Inside Out: A Path Toward Finding and Mobilizing a Community’s Assets.”

McKnight also wrote “The Careless Society: Community and Its Counterfeits” and, with co-author Peter Block, “The Abundant Community: Awakening the Power of Families and Neighborhoods.” ...

McKnight spoke to Faith & Leadership about asset-based community development and the role the church can play in helping people identify and leverage their strengths to empower their communities. The following is an edited transcript. ...

Excellent piece on asset-based community development. Read the whole thing. More churches need to learn to think this way.

Why employees earn more at big-box chains than mom-and-pop shops (and other observations)

PBS News Hour has a piece Why employees earn more at big-box chains than mom-and-pop shops.

Contrary to widespread belief, big-box stores and chains have increased wages in the retail sector as they have spread, according to “Do Large Modern Retailers Pay Premium Wages?” (NBER Working Paper No. 20313). Retail wages rise markedly with the size of the chain and the individual store, according to the study by Brianna Cardiff-Hicks, Francine Lafontaine and Kathryn Shaw. As retail chains’ share of establishments has risen from one-fifth in 1963 to more than one-third by 2000, the number of jobs that pay better than traditional mom-and-pop stores has proliferated.

Half of the difference in wages between large and small retailers appears to be attributable to differences in the average skill level of workers in the two groups of firms. On average, better workers find their way to the bigger companies. With more levels of hierarchy than small stores, larger establishments also allow better workers to move into management positions, increasing their pay even more.

“The increasing firm size and establishment size that are a hallmark of modern retail are accompanied by increasing wages and opportunities for promotion for many workers,” the authors write. “While retail pay is considerably below that in manufacturing, pay in retail is above that found in service jobs… [These results] contradict the image of the retail sector as one comprised of the lowest paying jobs in the economy.” ...

An anti-consumerism Dickensian narrative frequently emerges among critics of big box stores. Walmart (or another big box) moves into an area, drives out virtuous small businesses and their owners, drives down wages, and throws people into the cold, uncaring machinery of the greedy behemoth. The narrative is wrong at several levels.

First, considerable nostalgia and romance are built into the preference for small businesses. In reality, relative to big box stores, small businesses vary widely in the quality of management. Management and personnel policies are often subject to the quirky whims of the owners. Cross-training to improve skills and opportunities for advancement are minimal. Family nepotism frequently triumphs over meritorious performance. Wages are lower. Big box stores are better on all these fronts.

Second, stores like Walmart do not tend to drive out small businesses. Walmart’s major disruptive impact is on other discount store chains. In fact, Walmart can be a boost to small businesses. By creating high-traffic areas, small specialty businesses can open nearby and draw from the traffic generated by Wal-Mart.

Third, rather than drive down wages, these stores actually pay better wages than the mom-and-pop enterprises. They also offer substantially greater opportunities for learning and wage growth, even management opportunities. And if you think the stores are monolithic soul-sucking monstrosities, I’d invited you to read about Charles Platt’s experience as an editor for Wired, who went to work for Walmart to find out what it was like. See Life at Wal-Mart.

Finally, there is an additional indirect but significant, Walmart impact. Your standard of living can improve in two ways: Increased wages and lower prices. The article makes clear that big box stores like Wal-Mart raise wages. But Walmart also offers a wide range of quality goods at low prices. It particularly does so for food, clothing, household goods, and medicine. These items make up a much higher percentage of the monthly budget for low-income people. Through low prices, big box stores positively impact living standards that disproportionately benefits low-income people.

When Walmart stores open, it is not uncommon to have ten times as many applications as jobs. Wal-Mart tried to open a store in Chicago five years ago, and one source published a map that shows support for the idea by Ward (See here.) The strongest support came from the poorest wards, and support decreased as you moved up the economic scale. The big box stores offend the aesthetic and ideological sensibilities of the wealthy, but low-income people overwhelmingly embrace them.

I do not give a blanket endorsement to the big box stores, but if my wealthier and more intellectual friends are truly concerned about justice and poverty, they may want to dig a little deeper than their moralistic, anti-consumerism narratives take them.

Chronic Hunger Falling, But One in Nine People Still Affected

World Watch: Chronic Hunger Falling, But One in Nine People Still Affected

Although the proportion of people experiencing chronic hunger is decreasing globally, one in nine individuals still does not get enough to eat. The United Nations Food and Agriculture Organization estimates that 805 million people were living with undernourishment (chronic hunger) in 2012–14, down 209 million since 1990–92 (Figure 1).

Keep in mind that the global population grew by one-third during the same period. About 18.7% of the world lived with chronic hunger in 1991, while 11.2% do so today. Had the percentages stayed the same as in 1991, there would be 1,340,000,000 people in hunger instead of 805,000,000. Things are getting better, but we have a long way to go.

It's Time To Admit It: The World Is Becoming A Better Place

Business Insider: OK, Haters, It's Time To Admit It: The World Is Becoming A Better Place

The article includes this graph:

Then this one about poverty:

Many other graphs could be shown about a host of important social indicators, but the article closes with the most important one: life expectancy. Improvements in life expectancy require that a wide range of variables move in a positive direction. For that reason, improving life expectancy is often a proxy for overall well-being.

The author closes with the following:

So complain all you want about how horrible everything is. There's certainly a lot left to fix. But as you complain, remember:

The world is getting better all the time.

Preach it!

Relationships That Make a Difference - Bob Lupton

FCS Ministries Blog: Relationships That Make a Difference

Relationships. Two teenagers tossing a football. A couple falling in love, getting married, having kids. Business partners launching a new venture. Church friends sharing a meal.

Relationships all. Why do we have them? Fun, intimacy, profit, nurture? For social creatures like us, relationships have a whole range of benefits, all of which add value to our lives.

So when an affluent American church says they are building a relationship with a poor African church, what value are they expecting to gain? Relationship-talk is common among churches these days. It usually means something like: “We are not giving them money, not much anyway, not yet. We want to establish a relationship first, get to know them, build mutual trust. Then perhaps we will find healthy ways to invest together in ministry. But it’s the relationship that’s most important.” This is familiar, politically correct mission-speak that’s currently in vogue.

Something had to change when colonialistic missions fell out of favor. But simply channeling funds to indigenous leadership had its challenges. Long distance partnerships, we found, were difficult to manage.

So the alternative was relationships. If we invest time simply being together, learning from each other, experiencing the distinctives of each others’ cultures, then friendships will grow, trust will deepen, and we may find our way into productive, enduring mission together. We hope.

But how long will this take? How long before we can launch into a productive project together – one that will not end in misunderstandings or unhealthy dependency? And, of course, our African friends are wondering how long it will be before we trust them enough to let loose of our ample reserves.

It’s a delicate dance, this relationship building. We wonder when (or if) our relationships will become strong enough or our agendas align well enough to allow a true partnership.

Genuine liking. Mutual respect. Enjoyment of each others’ company. Appreciation of each others’ uniqueness. All important, yes. But is this all we want? At what cost? Cultural exchange is a pricey process.

Come on. Is cultural exchange really what we want? Don’t we really want to do something? Build something. Help someone? Don’t we really want to effect change, make a difference?

How long do we have to wait around pen-pal-ing and guest-swapping before we actually accomplish something of significance?

So what is it in Africa (or our other favorite place of need) that we are really interested in fixing? Saving souls? Africans are far better evangelists than we are and besides, they speak the local language and know the culture.

Building orphanages and schools? That may be fine so long as we make a heavy commitment to fund on-going scholarships and overhead. But, of course, we are well aware of the problems such dependency creates. We also know that education without a good job at the end is futile.

At the risk of sounding unspiritual and upending our mission-trip methodology, why don’t we just go ahead and invest our mission money in something that will make a lasting difference? Like a profitable business that will create legitimate local employment as well as produce a return that can be re-invested.

When local people are working, the need for subsidized social services decreases. A profitable company can provide health care. A business that shares profits enables employees to educate their children. Workers with disposable income can improve their homes, maintain their water supply, build their own churches.

Decent jobs do all of this. And more. Profitable businesses spawn other businesses that create additional jobs. Isn’t it time for us to admit that what works so well for us in our culture may be the very thing that will allow other cultures to flourish?

Legitimate business relationships – now there’s the kind of relationship that adds value.

(Republished with permission)

Reasons to Be Cheerful

Matt Ridley: Reasons to Be Cheerful

We are prone to fixate on problems and threats. The news concentrates on Ebola, the Middle East and Ukraine violence, and the discord in Ferguson, Missouri. But it is important to keep present challenges (and they are more decidedly real) in context. Matt Ridley offers twelve reasons to be cheerful when we look at broader trends.

So let’s tot up instead what is going, and could go, right. Actually it is a pretty long list, just not a very newsworthy one. Compared with any time in the past half century, the world as a whole is today wealthier, healthier, happier, cleverer, cleaner, kinder, freer, safer, more peaceful and more equal.

1. The average person on the planet earns roughly three times as much as he or she did 50 years ago, corrected for inflation. If anything, this understates the improvement in living standards ...

2. The average person lives about a third longer than 50 years ago and buries two thirds fewer of his or her children (and child mortality is the greatest measure of misery I can think of).

3. The amount of food available per head has gone up steadily on every continent, despite a doubling of the population. Famine is now very rare.

4. The death rate from malaria is down by nearly 30 per cent since the start of the century. HIV-related deaths are falling. Polio, measles, yellow fever, diphtheria, cholera, typhoid, typhus — they killed our ancestors in droves, but they are now rare diseases.

5. We tell ourselves we are miserable, but it is not true. ...

6. education is in a mess and everybody’s cross about it, but consider: far more people go to school and stay there longer than they did 50 years ago.

7. The air is much cleaner than when I was young, with smog largely banished from our cities. Rivers are cleaner and teem with otters and kingfishers. ... Forest cover is increasing in many countries and the pressure on land to grow food has begun to ease.

8. We give more of our earnings to charity than our grandparents did.

9. Violent crimes of almost all kinds are on the decline — murder, rape, theft, domestic violence.

10. Despite all the illiberal things our governments still try to do to us, freedom is on the march.

11. The weather is not getting worse. Despite what you may have read, there is no global increase in floods, cyclones, tornadoes, blizzards and wild fires — and there has been a decline in the severity of droughts. ... there has been a steep decline in deaths due to extreme weather.

12. As for inequality, the world as a whole is getting rapidly more equal in income, because people in poor countries are getting richer at a more rapid pace than people in rich countries. ...

By all means, let us address the problems at hand, but let us also tap down the tendency to see only the negative and give in to gloom and despair.

Why Are So Many Low-Income People So Overweight? (It's Not Food Deserts.)

Pacific Standard: Why Are So Many Low-Income People So Overweight?

... More recently, in Slate, Heather Tirado Gilligan cites peer-reviewed research to conclude: "[M]ore fresh food closer to home likely does nothing for folks at the bottom of the socioeconomic ladder. Obesity levels don't drop when low-income city neighborhoods have or get grocery stores."...

... That said, I worry about this counter-argument's implications. If healthy food is available and affordable, and if obese, low-income consumers aren't choosing it, it becomes very, very easy to blame the overweight victim in this scenario. In a country that places a big rhetorical premium on individual responsibility, we tend to not only do a lot of blaming the victim—we also seem to kind of enjoy it. ...

... The recent rebuttal to the conventional wisdom that food access doesn't necessarily equal healthier choices—in essence, that poor people could eat well but don't—hardly gives us license to rant, as another commenter did, that "the fact they can't feed themselves is THEIR fault." Instead, it suggests the need for a more nuanced way to think about why so many Americans end up trashing their bodies with corn dogs and cookies when other options are on hand. It's an opportunity, in other words, to rethink the very nature of eating.

We might begin this process by trying to understand diet as a psycho-socioeconomic phenomenon rather than as a matter of food access. There's a critically important aspect to McMillan's story that's essential to this shift in perspective: the people she profiles live lives defined by persistent scarcity—not necessarily food scarcity, but a generalized and even traumatizing kind of material instability. Absolutely nothing about their lives is secure. ...

... The subjects pictured and videotaped in McMillan's story are not just overweight. They're scared out of their minds.

And being scared out of your mind affects how you eat. In their book Scarcity: Why Having Too Little Means So Much, Sendhil Mullainathan and Eldar Shafir write that "scarcity captures the mind." Scarcity, they note, "has its own logic." It doesn't take much imagination to hypothesize that, if your entire material existence teetered on the edge of loss—that is, if you were obsessed with scarcity because you had to be—that you'd likely blow your limited food budget on a bag of cookies and fried gizzards rather than a peck of apples and sweet potatoes. Nobody's saying such a choice would be advisable in terms of maximizing personal or public health. To the contrary, buying crap over carrots means that you are driven to eat by a scarcity-induced craving for the most immediate and gratifying satiation—the kind that sugar, salt, and fat excel at providing. But you remain, in fact, a victim. ...

Reading this post, my mind immediately returned to a post I wrote seven years ago, reviewing Charles Karelis' book, The Persistence of Poverty: Why the Economics of the Well-Off Can't Help the Poor.

... Karelis asks us to imagine being on a picnic when suddenly we are stung by a bee, on the hand, let's say. Our mind is now directed toward the pain in our hand to the exclusion of whatever other physical discomfort we may be experiencing. Karelis has one dab of salve at hand, and he applies it to our bee sting. Our pain is relieved. The salve has a high degree of utility for us.

Now instead of one sting on the hand, we are stung on the hand and the neck. There is still only one dab of salve. Its application to one sting will decrease pain but still be left in considerable distracted discomfort. A second dab of salve would have more marginal utility than the first.

But now let's say we have six bee stings at various locations on our body and still only on dab of salve. The one dab of salve provides minimal relief for us. But each successive dab supplies an increasing quantity of relief.

So what if you woke up daily with six bee stings and had been supplied with six dabs of salve to cover your next six days? Would you allocate them one a day across the next six days, or would you use them all in one day to have at least one day out of the six pain-free? The chronically poor routinely choose the one blissful day. ...

... Therefore, the poor are rationally inclined to spend a small pile of money in one big bang. Buying expensive clothes gets you esteem for at least a moment. Entertainment, gambling, or substance abuse provides at least temporary distraction and relief. Experience tells you there is an inadequate supply of relievers around, so when you have the fortune to get an amount that gives you complete temporary relief, do it! ...

I suspect something similar is at work with food. Food provides comfort from chronic fear and pain. Better to buy some really satisfying food that relieves pain at the moment than to make healthy food choices aimed at long-term health. And that points to another challenge. The chronically poor typically have no long-term time horizon. Debates go on about whether poverty leads to a short-term horizon or the other way around, but expanding time horizons is a piece of the puzzle, as well as finding stability.

Startup Offers Payday Advances Without the Pesky Loan-Sharking

Wired: Startup Offers Payday Advances Without the Pesky Loan-Sharking

"... According to Palaniappan, the real culprit here is the very concept of the payday. The way he see is, there’s no reason people who already have done their work should have to wait several days, or even weeks, to get the money they’ve rightfully earned. So, in May, Palaniappan launched ActiveHours. The Palo Alto startup, which recently raised $4.1 million, makes an app that allows hourly workers to immediately access pay they’ve already earned, without having to wait for their employer’s standard pay cycle.

What’s more, there are no fees. Instead, ActiveHours makes money on tips, asking users to pay what they want. “We’re trying to build something that’s completely aligned with the consumer, unlike what people are used to today in typical financial services, where it’s, in some ways, adversarial,” he says.

Palaniappan is far from the only entrepreneur who sees opportunity in creating an alternative to the payday loan. LendUp, for instance, has raised $64 million to offer loans with lower interest rates that become cheaper over time. ZestFinance, launched by an ex-Googler, is similar. But even these players still rely on fees, both for profit and protection. In this demographic, after all, there tends to be a high rate of delinquency, so even the most upstanding lenders typically account for those losses upfront. But with its no-fee model, AfterHours is a radical departure.

It’s also riskier. The company is betting that when given the choice, its customers—already struggling financially—will still pay for the service it provides. “Some people look at the model and think we’re crazy,” Palaniappan says, “but we tested it and found the model is sufficient to building a sustainable business.”

..."

Universal Basic Income: A Thought Experiment

Conversable Economist: Universal Basic Income: A Thought Experiment

"... What about the politics of a universal basic income? It's no surprise that many who lean liberal like the idea of guaranteeing a basic income. However, the idea has a reasonable number of conservative and libertarian supporters, who like the idea of a program that addresses the basic concern over helping those with low incomes, but in a clean, clear way that involves much less interference of eligibility rules and phase-ins and phase-outs in people's lives. Dolan claims that there are lively debates over a universal basic income happening behind the scenes between those with very different political persuasions.

The idea of a universal basic income is appealing to me in theory, but I have a hard time believing that once enacted, the U.S. political process would be willing or able to leave it alone. One one side, those who favor higher tax rates for those with high incomes would immediate start trying to figure out ways to claw back payments to those with high incomes. On another side, there would be continual pressures to reinstate programs like Food Stamps, or targeted welfare payments for certain types of families, or favored tax provisions for home-buying or charitable contributions or retirement. There would be continual political pressure to alter the amount of a universal basic income, as well. The U.S. political system does not excel at replacing complexity with simplicity, and then leaving well enough alone."

This is pretty much my perspective.

 

Forget "Fair Trade": A Supply Chain Overhaul To Boost Coffee Farmers' Income 400%

Forbes: A Supply Chain Overhaul To Boost Coffee Farmers' Income 400%

This is about a social enterprise on a mission to reinvent the coffee supply chain, giving farmers a bigger and more equitable piece of the action.

Aimed at growers producing specialty-grade, premium, Fair Trade certified coffee, Vega hopes to enable farmers to roast and package their beans  and connect to customers directly via an online subscription marketplace.  As a result, they can make a lot more money than they normally do.

The company, which is based in Leon, Nicaragua, is launching a Kickstarter campaign today. ...

... So, even though advocates of Fair Trade and organic coffee are trying their best, because they work within the usual supply chain, small-scale farmers end up with a paltry share of the pie, according to Ketabi. Each small scale farmer produces about 500 pounds of Fair Trade organic coffee  a year and gets around $1.30 a pound, or $700 a year.  The upshot: Farmers of specialty grade coffee beans earn $1 a pound for a product costing U .S. consumers maybe $20.

Vega’s aim is to cut out most of those other players. To that end, it would set up a processing, packaging  and distribution center located 20 to 30 minutes from farmers. There the coffee would be loaded in pallets, shipped overseas via a U.S. carrier, then  broken down and mailed to consumers.  Farmers would be paid when the processing is done, so it’s not contingent on supply and demand fluctuations. The  founders are still working out the details, but, ”We’ll match the Fair Trade price and pay for the value of the processing on top of that,” says Ketabi. The result would allow farmers to earn up to four times what they typically receive. ...

HT: Sarah Stanley

Measuring Inequality: On Using Snapshots When Only Video Will Do

When it comes to understanding inequality, the debate is frequently burdened with many misunderstandings about data. When talking about wealth inequality, we see statements like "85 people own more wealth than the bottom half of humanity." Wealth is routinely misunderstood to mean money and things someone owns. It isn't. Wealth is someone's total assets minus their liabilities. It is common to have negative wealth. The peasant farmer in rural China who has managed to save $200 and is debt free is "wealthier" than the high-income young M. D. who has a negative net worth due to substantial student loans (i.e., she owes more than she presently owns.) I recently wrote about this in The World's Bottom 10%: 7.5% Live in North America and None Live in China … And Other True But Worthless Facts.

Then there is the constant citation of growing inequality in pre-tax and pre-transfer income in the U. S. (usually just stated as "income") and the need to rectify it through redistribution. But if you only look at pre-tax and pre-transfer income, no amount of redistribution will have one penny of impact. We could transfer $100,000 to every household in the bottom half of the income distribution, and it wouldn't matter because it would be income after taxes and transfers. When we look at after-tax and after-transfer income, we see that there has been little change in inequality between those at the 95^th percentile and those at the 20^th percentile for the last twenty years. See my post, Is Income Inequality Really the Problem? It Depends on What You Call Income.

Today, Arnold Kling reviews Chasing the American Dream by sociologists Mark Robert Rank, Thomas A. Hirschl, and Kirk A. Foster. (See Kling's post: The Longitude of Well-Being) He cites a stat that shows that homeownership rates have remained fairly constant at about 67%. Kling then asks what percentage of Americans aged 55 have owned a home. A) 50%, B) 70%, and C) 90%. Kling says he would have guessed 70% when in fact, it is 90%. The 67% number is a cross-sectional piece of data, taking a "snapshot" of homeownership at a given time. The 90% number is a longitudinal piece of data, taking a "video" of homeownership over time.

… the question that I asked concerns what demographers refer to as longitudinal information. If you follow given individuals over a long period, what sort of cumulative outcomes will you observe? In particular, over a lifetime, how many people will at some point own a home? To answer a longitudinal question, you need to use longitudinal data. To instead use time-series cross-section data risks making serious errors.

Most of the conventional wisdom about relative economic well-being, including the famous studies by Thomas Piketty and Emmanuel Saez, commits the time-series cross-section fallacy. Rank, Hirschl, and Foster did not set out to debunk this fallacy or to attack the many economists guilty of it. Instead, they took what seemed to them a natural approach for studying the evolution of wealth and poverty: longitudinal data. The result, in my reading, is that, like the boy in the fable, they have in an innocent, unintended fashion exposed statistical nakedness among many economists who are regarded as experts on the topic of inequality.

Once you think about it, the truth about homeownership rates makes sense. At some point in our lives, nearly all of us have been renters. In addition, most of us are likely to "downsize" as we grow older, and in the process many of us may choose to rent.

Kling moves on to the authors' discussion of how many years a household spends in poverty or affluence between ages 25 and 60. Kling offers an interesting alternative.

I would be interested in what the data show if, rather than looking at the extremes, one does the opposite. That is, throw out each household's lowest and highest three years of income. For the remaining years of income, take the average relative to the poverty line. If this average is below 150 percent of the poverty line, call it low. If it is above 500 percent of the poverty line (which works out to about 200 percent of the median), call it high. Then calculate the proportion of households that have high, medium, and low incomes by this longitudinal measure.

This would produce a very different breakdown. For instance, suppose that, rather than quitting my job to start an Internet business, I had kept working and that my salary had continued to increase gradually until I reached age 50. In that case, under the authors' measure, our household would be in the bottom of the income distribution, because of the "poverty" of my graduate school years and my failure to achieve the income level that they require for "affluence." However, using my approach, my household would have been somewhere in the vicinity of the boundary between high-income and middle-income. That seems much more reasonable to me.

Overall, as with homeownership data, the longitudinal view of income paints a picture in which life-cycle variation and idiosyncratic factors play a role. This role is overlooked in discussions of inequality that commit the time-series cross-section fallacy.

As I read Kling's piece, I wondered how many people have had pimples. My guess is that the answer approaches 100%. Yet we don't see headlines about acne experienced by more than 90% of people at least one year in their lives. We understand that for most people, this is a temporary life-stage issue. The universe of people for whom acne is an ongoing problem is much smaller. The same is true with poverty. I'm intrigued by Kling's idea of discarding outliers and looking at 90% of the data between the outliers.

The reality is that no set of data or particular lens can tell us the whole picture about issues like poverty and inequality. We must examine the issues from multiple angles to get to the truth. But it is incumbent on us to be aware of what lens we are using at any given time and what that lens is actually showing; in this case, knowing the difference between a snapshot and a video.

Economic Development Links

1. Economist: March of the Middle Class

2. Chrsitianity Today: Poverty Is a Moral Problem - Interview with William Easterly

... The sad thing is that the field and practice of development have too often been on the wrong side of this debate. They've implicitly painted themselves into a corner where they're on the authoritarian side. Then they're backing the autocrats, backing the oppressors against the oppressed. ...

... Any advice for a 20-year-old reading this article who wants to "change the world"?

I love young people who want to change the world!

I think we need rebalancing. A large share of the effort has been going to direct technical solutions to poverty. But this has neglected the other option of advocacy and education for rights as an important moral goal. Rights also work to promote development. ...

3. BBC: Ending poverty needs more than growth, World Bank says

... "This is simply not enough, and we need a laser-like focus on making growth more inclusive and targeting more programmes to assist the poor directly if we're going to end extreme poverty." ...

4. Mashable: 64% of World's Extreme Poor Live in Just 5 Countries

... Using the most recent data from 2010, the report shows that nearly two-thirds of the extremely poor — that is, those who live on less than $1.25 a day — live in just five countries: India, China, Nigeria, Bangladesh and the Democratic Republic of Congo. ...

5. Wired: The Hyper-Efficient, Highly Scientific Scheme to Help the World’s Poor

... How did ICS know the campaign would work? It made sense in theory—free textbooks should mean more kids read them, so more kids learn from them—but they had no evidence to back that up. On the spot, Kremer suggested a rigorous way to evaluate the program: Identify twice the number of qualifying schools as it had the money to support. Then randomly pick half of those schools to receive the textbooks, while the rest got none. By comparing outcomes between the two cohorts, they could gauge whether the textbooks were making a difference.

What Kremer was suggesting is a scientific technique that has long been considered the gold standard in medical research: the randomized controlled trial. At the time, though, such trials were used almost exclusively in medicine—and were conducted by large, well-funded institutions with the necessary infrastructure and staff to manage such an operation. A randomized controlled trial was certainly not the domain of a recent PhD, partnering with a tiny NGO, out in the chaos of the developing world. ...

6. Christianity Today: How Female Farmers Could Solve the Hunger Crisis

... This gender inequality carries desperate consequences. Lack of basic tools and training means women grow and harvest significantly lower yields than men – not because they can't farm as well, but because they don't have necessary resources. In fact, female farmers do more to increase food security in rural communities than men. Women cultivate vegetable gardens and edible crops close to home, which allows them to watch their children and cook meals. In contrast, men tend to travel further from the house to grow cash crops like tobacco, coffee, and corn – crops that do little to supplement diet. ...

7. Businessweek: Have Higher Food Prices Actually Helped the World's Poor?

... Data, however, pointed in the other direction: The number of people in developing countries who reported that there had been times in the past 12 months when they didn’t have enough money to buy the food their family needed fell by hundreds of millions (PDF) from 2005 to 2009. In 2013 improved FAO estimates backed up the earlier polling reports: The numbers suggested that 842 million people in the 2011-13 period were unable to meet their dietary energy requirements, down nearly 6 percent (PDF) from 893 million people in the 2005-07 period. ...

... Heady suggests the fundamental assumption of previous poverty prediction models—that because poor people eat more food than they grow, they’re hurt by higher prices—did not account for the impact of food prices on wages. In a lot of places, as the prices of food rose, poor people earned more money. Even though they were paying more for food, their increased incomes more than made up for that and they got a little richer. In Bangladesh, for example, rural wages adjusted for the price of food increased by about a third from the middle of 2006 to the end of 2010. (Urban wages remained essentially unchanged.) ...

8. MR University: Water and common pool problem

The general logic here applies to a large number of problems in economic development, not just water. This is one of the key ideas of the theory of property rights.

9. Atlantic: How Sanitary Pads Can Help Women Improve Their Health and Education

... That's the little formula that's fueling Arunachalam Muruganantham's thriving sanitary-pad machine business, an undertaking that's not only making Muruganantham money, but one that will improve women’s hygiene in India and throughout the developing world.

Many women living in poverty use rags, newspaper, or even mud to manage their menstrual periods. None of these work very well and can introduce infections or injuries; they also circumscribe women’s movement. Often, women fear being in public without protection from blood staining. ...

10. Business Insider: Here's Why Mexico Is Increasingly Becoming A Crucial Global Manufacturing Hub...

However, another big beneficiary of rising Chinese labor costs and U.S. economic growth has been Mexico. This has come despite concerns about crime and safety.

Mexico benefits from the North America Free Trade Agreement (NAFTA). At 44, it also has more free-trade agreements than any other country. Mexico also benefits from having its natural gas prices tied to those in the U.S. where prices are substantially lower relative to the rest of the world.

Average electricity costs are about 4% lower in Mexico than in China, and the average price of industrial natural gas is 63% lower, according to a study by the Boston Consulting Group.

The same study found that by 2015, average manufacturing-labor costs in Mexico are projected to be 19% lower than in China. In 2000, Mexican labor was 58% more expensive than in China. ...

11. US AID: Full Speed Ahead on Malaria

Today, the greatest success story in global health is anchored by a continent once known mostly for famine and war. Many countries in sub-Saharan Africa are making unprecedented gains in child survival and reducing the devastating burden of malaria—a disease carried by mosquitoes and a major killer of children.

According to the World Health Organization an estimated 3.3 million lives were saved as a result of the scale-up of malaria control interventions over the last decade. Over the same period, malaria mortality rates in African children were reduced by an estimated 54 percent. ...

12. Huffington Post: Africa Is Richer Than You Think

Africa suffers from another kind of poverty: lack of accurate statistical data. And it is a tragic, messy situation. Nigeria nearly doubled the size of its economy overnight -- a whopping 89 percent -- surpassing South Africa to become Africa's largest economy and the world's 26th largest. What was thought to be a $270 billion economy one day became a $510 billion economy the next day, adding some $240 billion to its economy. To put the change into perspective, it is almost like adding Israel's economy, or more than Portugal's, to Nigeria's economy. It sounds like magic but it is not. Inaccurate economic data is commonplace across much of Africa. ...

13. Atlantic: How to Make Solar Panels Affordable—for Billions

Like the installment plans of the Great Depression, Simpa Networks' "Progressive Purchase" agreements are enabling customers in rural India to get solar power for their homes. ...

14. PBS: Capitalism in Cuba? It’s closer than the U.S. may think

... As an economist who had the opportunity to observe, first-hand, the difficult transitions of China and Russia from state to largely market-based economies, I was astounded by the counter-productive actions of my government. On its own, Cuba was well into a carefully planned transition to a market-based economy. The only impact of additional U.S. meddling would be to set back this process. ...

15. Mashable: 750 Million People Still Don't Have Access to Clean Drinking Water

... Since 1990, 2.3 billion people have gained access to drinking water from improved sources. But despite this progress, 748 million people — 90% of whom live in sub-Saharan Africa and Asia — still use unimproved drinking water sources, according to an updated report the World Health Organization and UNICEF released on Thursday. ...

16. New York Times: What’s So Scary About Smart Girls?

... Why are fanatics so terrified of girls’ education? Because there’s no force more powerful to transform a society. The greatest threat to extremism isn’t drones firing missiles, but girls reading books.

In that sense, Boko Haram was behaving perfectly rationally — albeit barbarically — when it kidnapped some of the brightest, most ambitious girls in the region and announced plans to sell them as slaves. If you want to mire a nation in backwardness, manacle your daughters. ...

 17. Businessweek: The Relentless Rise Of Global Happiness

... The rest of the world, however, is different: The average surveyed person planet-wide reports greater happiness than 10 years ago—which was happier than many reported 30 years ago. That said, it turns out that the factors that lead people to self-report as happy aren’t as obvious as you might think. And this suggests the limits of using happiness as a guide for making public policy. ...

... The World Values Survey presents an additional conundrum: While the share of the world population reporting itself happy has climbed since the 1980s, the average score on a question asking people if they are satisfied with life seems to have declined marginally. ...

 18. Atlantic: Having Kids Probably Won't Destroy the Planet

An overpopulated planet is not necessarily doomed. What matters most is how those billions of people choose to live. ...

How focusing on profit can help the poor

Christian Science Monitor: How focusing on profit can help the poor

Water technology company Xylem makes a profit on its foot-operated irrigation pumps for poor farmers. But those profits allow it to stay around to service its products and develop new ones.

When leading water technology company Xylem started manufacturing simple pumps for smallholder farmers, it wasn't for charity: The company expected to profit.

The new Essence of Life line caters to the everyday water needs of farmers with small plots of land, among some of the world’s poorest customers. Like any of its customers, Xylem expects these farmers to pay for the right product at the right price.

“Many of us in the water business – Xylem and its peers – are engaging in a lot of the same strategies: premium products in premium markets,” said Keith Teichmann, vice president and director of innovative networks and marketing at Xylem in an interview with Global Envision.

So Xylem developed the Essence of Life program to focus on the water needs of the 1.5 billion smallholder farmers who live on less than $2.50 per day, said Teichmann.

By doing so, Xylem became one of the few original equipment manufacturers making water management products directly for the individual smallholder farmer. ...

"Buying ‘Fair trade’ coffee is not really helping the very poor"

Economist: Not so fair trade

BUYING ‘Fairtrade’ coffee is not really helping the very poor, new research suggests. By comparing living standards in Fairtrade-certified producing areas in Ethiopia and Uganda with similar non-Fairtrade regions, four development economists from the School of Oriental and African Studies (SOAS) in London found that Fair Trade agricultural workers often earned lower incomes.

After four years of fieldwork in the coffee, tea and flower sectors in Ethiopia and Uganda, where they gathered 1,700 survey responses and conducted more than 100 interviews, the SOAS researchers found people living in ordinary rural communities enjoyed a higher standard of living than seasonal and casual agricultural workers who received an apparently subsidised wage for producing Fairtrade exports. Women’s wages were especially low among producers selling into Fairtrade markets, according to the researchers. ...

... PS: The Fairtrade Foundation has published a lengthy reply: "We note the innovative methodology and large sample size that SOAS’s research project has used to answer its three research questions, only one of which focuses on Fairtrade. We also note however that the study has not sought to evaluate the impact of Fairtrade’s model and interventions as it has not followed an impact evaluation methodology."

The Poor Will NOT ALWAYS Be With Us

Excellent!

The Poor Will Not Always Be With Us - Dr. Scott Todd from Compassion International on Vimeo.

Is Income Inequality Really the Problem? It Depends on What You Call Income

Are the rich getting richer and the poor getting poorer? Stories about inequality typically talk about how the rich, especially the top 1%, are seeing their incomes grow rapidly while people at the bottom are seeing their incomes stagnate and drop. A gap is widening between the top and the bottom. Is that true?

The Federal Reserve Bank of Minneapolis has just published an interesting report that studies the relative income performance of households from 1967-2012. It compares households at the income distribution's 95th, 50th, and 20th percentiles. The report's distinction between two types of income is revealing: Market income and disposable income.

Market income (pre-tax and pre-transfer income) is what we typically see reported. But when we adjust for taxes (which substantially decreases the income of the wealthy) and add in transfer income like social security, unemployment, and welfare payments (which substantially increases the income of people in poverty), we get disposable income. Disposable income paints a much different picture than market income. Let's look at two important graphs:

The top line in the chart is the ratio of market income (pre-taxes and transfers) of households at the 95th percentile as a ratio to households at the 50th percentile. For example, it appears the households at the 95th percentile made 2.7 times as much as those of the households at the 50th percentile in 1967. By 2012, they were making about 3.6 times as much. The bottom line tells a different story.

Disposable income (after taxes and transfers) follows a similar pattern until about 2000, when the ratio leveled out at just below 3.0, and has remained between 2.9-3.0 ever since. That means that despite market income having risen faster for the 95th percentile compared to the 50th percentile, inequality in terms of what people have to spend at the end of the day hasn't really changed for almost fifteen years.

Then there is this chart:

This chart shows the ratio of the 50th percentile to the 20th percentile. Note the ratio of market income continues to widen with each business cycle. The recessions, shaded gray, result in spikes of unemployment. That expands the ratio, and then the ratio contracts a little as employment improves. The sharp jump at the end correlates with very high unemployment and underemployment.

But the striking thing is the disposable income line. It is flat from 1983 onward (until a slight increase since the 2008 financial meltdown.) There has been virtually no change in inequality between the 50th percentile and the 20th percentile for thirty years!

Some observations:

1. The debate around inequality typically points to the widening gap in market income between the top and bottom. More transfer of wealth is proposed to balance out the income people receive. Market income and disposable income are conflated. If a household with a market income of $15,000 gets transfers of an additional $15,000, for a total of $30,000 in disposable income, they still have a market income of $15,000! Pointing to market income statistics as an indicator that the distribution of income is insufficient is erroneous. By this reasoning, a $15,000 household could get $1,000,000 in transfers, but they would still be "living in poverty" because transferred income is not considered in the income calculation.

2. This analysis focuses only on households in the top 5%, not the top 1%, where so much debate has been. For reasons reported in the article, the data did not lend itself to a study of the very top 1% or 0.1%. The ratio of disposable income of the very top to lower percentiles may be increasing. But the ratio of disposable income is certainly much lower than market income.

3. This study suggests that public policy has been doing a very good job of preserving disposable income ratios for many years. We may want to debate if these ratios are just, but they are not widening.

4. The fact the market income ratio continues to widen, meaning it takes more transfers to keep disposable income constant, suggests that low wages and unemployment, not insufficient transfers, are becoming the problem. Left-leaning figures like Robert Reich argue that the decline of union bargaining and failure to raise the minimum wage are the culprits. Companies aren't paying employees relative to their economic contribution. That leaves taxpayers to subsidize the work that these companies get from low-wage workers. Other economists suggest the labor market is more efficient than that and that most employees are being compensated relative to their economic contribution. While very modest minimum wage increases are likely without much impact on the total labor market, substantial jumps in the minimum wage are likely to lead to automation and off-shoring, thus more unemployment and even more need for transfers than the alleged subsidization of low-wage workers today. Who knows exactly where the truth lies.

We do know that technology and the economy are rapidly changing. That means we need a workforce with the human and social capital to take advantage of such changes. Strong families and educational systems are central to developing that capital, and we know these institutions have weakened for some time. That doesn't help the market income challenge.

The bottom line is that disposable income inequality is not getting worse for the bottom 95%, and it seems likely that whatever inequality is growing between the top 1% and the rest is substantially less than the widely reported market income. Maybe present distributions of disposable income are unjust. That is worthy of debate. But that is different from saying inequality is growing. Market income inequality continues to rise, and what is unclear is if there is a policy fix for this or if this market income inequality is inherent in a post-industrial and digital economy.

Think Progress exaggerates child hunger by 8,000%

Just Facts Daily: Think Progress exaggerates child hunger by 8,000%

... However, instead of reporting the facts of this important issue, a number of influential media sources are greatly exaggerating the problem.

One of these sources is Think Progress, which ranks among the nation's top-15 political websites. In a recent article, Alan Pyke, the Deputy Economic Policy Editor of Think Progress, reports that "more than a fifth of America's children are going hungry," government food "programs have faced wave upon wave of funding cuts," and "America does a slightly better job at feeding adults" than children.

All of those statements are categorically false according to data from the U.S. Department of Agriculture (USDA), the Census Bureau, and the White House Office of Management and Budget. These primary sources show, for example, that on an average day, less than 1% of U.S. households with children have a child who experiences hunger.

These sources also show that the annual hunger rate for children is lower than adults and that federal spending on food and nutrition programs has risen by more than two thirds since 2007, even after adjusting for inflation and population growth.

Below is the documentation of these facts, along with the details of how Think Progress has distorted the truth.

"Food insecure" does not mean "hungry"

The crux of Pyke's misreporting is that he falsely equates food insecurity with hunger. "Food insecurity" is a technical term used by the USDA to categorize households based upon a survey conducted by the Census Bureau.

This annual survey includes a series of questions about food consumption, and if respondents answer "yes" to at least three of ten questions, their households are classified as food insecure. For example, respondents are asked if they ever "worried" that their "food would run out before" they "got money to buy more." For another example, they are asked if they "couldn't afford to eat balanced meals."

According to this survey, 21.6% of children and 15.9% of adults lived in households that were food-insecure at some point during 2012. These are the figures quoted by Pyke, but they do not apply to hunger, especially for children.

The title of Pyke's article is "More Than A Fifth Of America's Children Are Going Hungry." Just to be clear, "hungry" means hungry (not food-insecure), "children" means children (not households), and "going" means currently (not once during the past year). Beyond the standard ten questions in this survey, the Census asked direct questions about child hunger, and the results look nothing like what Pyke reports. ...

... Pyke is not the only purveyor of inflated hunger statistics. PolitiFact, the Pulitzer-Prize winning fact check organization, has alleged: "According to the U.S. Department of Agriculture, 'food insecurity' means that at some point in a year, someone in a household went hungry because the household couldn't afford food."

That claim is in direct opposition to what the USDA explicitly states. Again: "Households classified as having low food security have reported multiple indications of food access problems, but typically have reported few, if any, indications of reduced food intake."...

The article also includes this graph:

I'm glad to see someone do a detailed analysis of these claims about hunger. I hear and read so many widely varying claims about hunger in the U.S. that it is hard to know what is factual. I haven't taken the time to research this myself, and while I didn't know the right number (less than 1%), the 21.6% was just preposterous. It is good to understand how the misconception has occurred.

World Bank: ‘The world has become more equal’

AEI - James Pethokoukis: World Bank: 'The world has become more equal'

Lots of attention being given to a new World Bank study suggesting China may overtake the United States this year as the world's largest economy, adjusted for living costs. But this other World Bank finding, noted by the Financial Times, is also interesting:

When looking at the actual consumption per head, the report found the new methodology as well as faster growth in poor countries have “greatly reduced” the gap between rich and poor, “suggesting that the world has become more equal”.

As the above chart shows, high-income countries in 2005 had 16.4% of global population and 60.4% of global GDP vs. 16.8% of population and 50.3% of GDP  in 2011. Although income inequality within nations may be on the rise, global economic inequality between nations is collapsing.

But here's what is really amazing: Back in 2005, low-income countries represented 7.1% of global GDP vs. 1.5% today. Now it's not as if these nations became poorer. Rather they moved up the income ladder. In 2005, 35.4% of global population lived in "low-income countries." Now that number is just 11.1% as more than 1 billion humans "moved" into middle-income nations which now represent 72.1% of global population vs. 48.2% in 2005. ...

I've seen the graph below, but it points to an interesting dynamic. It seems to suggest as economic growth happens in developing nations, the distance between the top and bottom of the income ladder widens considerably, leading to increased inequality in the nation. But economic growth also seems to move the very bottom of the distribution away from zero. It brings the income distribution more in line with developed nations, thus reducing the inequality between nations.

Global Poverty Is on the Decline, But Almost No One Believes It

Barna: Global Poverty Is on the Decline, But Almost No One Believes It

April 29, 2014—Did you know that, in the past 30 years, the percentage of people in the world who live in extreme poverty has decreased by more than half?

If you said no—if you thought the number had gone up; that more people, not less, live in extreme poverty—you aren't alone. According to a recent Barna Group survey, done in partnership with Compassion International and the new book Hope Rising by Dr. Scott Todd, more than eight in 10 Americans (84%) are unaware global poverty has reduced so drastically. More than two-thirds (67%) say they thought global poverty was on the rise over the past three decades.

Similarly, while both child deaths and deaths caused by HIV/AIDS have decreased worldwide, many Americans wrongly think these numbers are on the rise: 50% of US adults believe child deaths have increased since 1990, and 35% believe deaths from HIV/AIDS have increased in the past five years.

Despite the very real good news, more than two-thirds of US adults (68%) say they do not believe it's possible to end extreme global poverty within the next 25 years. Sadly, concern about extreme global poverty—defined in this study as the estimated 1.4 billion people in countries outside the US who do not have access to clean water, enough food, sufficient clothing and shelter, or basic medicine like antibiotics—has declined from 21% in 2011 to 16% in 2013.

How does this sense of fatalism about global economic and health issues affect Americans' view of the developing world? Does it hinder charitable giving? And are Christians' views any different? ...

Interesting research. I found it interesting how people who regularly attend church are more interested in global poverty and more involved in addressing it than those who don't attend church.

Economics Links

1. Huffington Post: Financially Speaking -- Are We an Illiterate Nation?

... Champlain College's Center for Financial Literacy released its '2013 National Report Card,' which quantifies what states are doing to promote financial literacy in the classroom. Only seven of 50 states surveyed came away from the study with an "A" rating. That's right, a paltry seven states! Of these seven states, only four have a standalone course -- Utah, Tennessee, Missouri and Louisiana.

Thirteen states received a "B" rating, and the remaining 30 states received a "C," "D," or "F" rating. In fact, eight states received an "F" rating. Ask yourself, as a parent, would you be content to have your children bring home similar grades? ...

2. Huffington Post: 40 Financial Things You Should Know by 40

3. Carpe Diem: World market cap reached record high in March, and is $2.4T above pre-recession, pre-crisis level

4. Businessweek: Why Factory Jobs Are Shrinking Everywhere

... But the U.S. jobs slide began well before China’s rise as a manufacturing power. And manufacturing employment is falling almost everywhere, including in China. The phenomenon is driven by technology, and there’s reason to think developing countries are going to follow a different path to wealth than the U.S. did—one that involves a lot more jobs in the services sector.

Pretty much every economy around the world has a low or declining share of manufacturing jobs. According to OECD data, the U.K. and Australia have seen their share of manufacturing drop by around two-thirds since 1971. Germany’s share halved, and manufacturing’s contribution to gross domestic product there fell from 30 percent in 1980 to 22 percent today. In South Korea, a late industrializer and exemplar of miracle growth, the manufacturing share of employment rose from 13 percent in 1970 to 28 percent in 1991; it’s fallen to 17 percent today. ...

5. Forbes: High Tech And Robots Can Create More Low Skilled Jobs, Not Just Destroy Them

As we all wait anxiously for the robots to come and steal all our jobs an interesting finding in a study on the effect of ever higher technology on the demand for low skilled labour. Contrary to what everyone seems to be assuming it is possible for that higher tech to actually increase the demand for that low skilled labour. For the higher tech enables that lower skilled labour to perform tasks that could only previously be done by highly skilled labour. And as the costs associated with whatever the task is fall then we quite naturally demand more of that task to be done. Thus, in certain cases at least, higher tech increases the number of jobs, not reduces them. ...

6. Business Insider: Why Food Prices Are Surging

... In a new report, Morgan Stanley commodities analysts led by Adam Longson attribute the surge in prices to a number of factors, "from weather (in the case of sugar, soybeans and coffee) to disease (in the case of hogs) to geopolitics (wheat and corn)."

The Morgan Stanley analysts don't believe this will continue. ...

7. Atlantic: How You, I, and Everyone Got the Top 1 Percent All Wrong

8. House of Debt: Measuring Wealth Inequality

9. Conversable Economist: An Inequality Chartbook: Long-Run Patterns in 25 Countries

This is an interesting chart from chartbook of income inequality.

10. Brookings: Income Growth and Income Inequality: The Facts May Surprise You

... The broadest and most accurate measures of household income are published by the CBO. CBO’s newest estimates confirm the long-term trend toward greater inequality, driven mainly by turbo-charged gains in market income at the very top of the distribution. The market incomes of the top 1% are extraordinarily cyclical, however. They soar in economic expansions and plunge in recessions. Income changes since 2007 fit this pattern. What many observers miss, however, is the success of the nation’s tax and transfer systems in protecting low- and middle-income Americans against the full effects of a depressed economy. As a result of these programs, the spendable incomes of poor and middle class families have been better insulated against recession-driven losses than the incomes of Americans in the top 1%. As the CBO statistics demonstrate, incomes in the middle and at the bottom of the distribution have fared better since 2000 than incomes at the very top.

11. Wall Street Journal: Ignoring an Inequality Culprit: Single-Parent Families

Intellectuals fretting about income disparity are oddly silent regarding the decline of the two-parent family. ...

12. Mother Jones: What If Everything You Knew About Poverty Was Wrong?

... A sociologist at Johns Hopkins University, Edin is one of the nation's preeminent poverty researchers. She has spent much of the past several decades studying some of the country's most dangerous, impoverished neighborhoods. But unlike academics who draw conclusions about poverty from the ivory tower, Edin has gotten up close and personal with the people she studies—and in the process has shattered many myths about the poor, rocking sociology and public-policy circles. ...

13. Forbes: Thank Goodness We Have Walmart If American Shoppers Are This Poor

... The economic background is that sure, WalMart makes good profits out of what it does. Yes, this includes minimising costs such as the wages they pay out, what they’ll let suppliers charge them. It even includes desiring to put other less efficient retailers out of business, those Mon and Pop stores, and to make those that remain more efficient through that competition with them. But there’s another effect of course: consumers save money through those lower prices.

We call this saving the consumer surplus. It’s not something that ever appears in the normal economic statistics, one good reason being that it’s rather hard to calculate. ...

... A 25% reduction in food expenditures just from the existence of WalMart is an amazingly large sum. It’s also considerably larger than the profits that WalMart makes out of its actions. And that’s from a decade ago recall (the paper is from 2005, the data up to 2003) and it is only recording the consumer surplus from WalMart’s move into food retailing, leaving the impact of the other parts of the company aside. ...

14. Atlantic: How the Rich and Poor Spend Money Today—and 30 Years Ago

15. AEI - James Pethokoukis: No, Walmart isn’t ripping off taxpayers

... I think I’m supposed to be outraged that Walmart isn’t paying some employees enough that they don’t need government anti-poverty benefits. But businesses generally aren’t going to pay workers more than they are worth. If a worker can only generate $8 in value to a company, then the firm isn’t going to pay them $10. Nor should they for some humanitarian reason. If American society thinks some of their fellow Americans deserve higher living standards than their skill set currently warrants, then society should pitch in and subsidize their wages through the Earned Income Tax Credit or even a new, broader direct wage subsidy. ...

16. PBS: How nonprofit workers get squeezed when minimum wages increase

Not everyone who supports raising the minimum wage is in a position to pay their employees more. Nowhere is that more true than in the nonprofit sector. ...

17. NPR: Subminimum Wages For The Disabled: Godsend Or Exploitation?

... Executive Director Gus van den Brink says the Sertoma Centre and other agencies do work to find jobs for disabled people in the community, but the focus should not be on shutting down all sheltered workshops. He says it would be nearly impossible for some people with severe intellectual disabilities to get a job at all. It's sheltered workshops, he says, that give them a chance to work and earn a paycheck.

"Some of the individuals may not even completely understand what the value of that paycheck is," van den Brink says. "But they know they are receiving a paycheck, so they are getting a lot of self-esteem. They are very proud of it."

Even so, Assistant Attorney General Samuels says the Justice Department will work with other states to make sure some workers with disabilities have the opportunity to do their work, as she puts it, at "real jobs for real wages."

18. PBS: What’s the welfare initiative uniting liberals and conservatives?

Some conservatives and liberals are uniting around the idea of a basic income because the current welfare system, they say, is an ineffective bureaucracy that doesn’t respect poor people’s ability to make their own decisions. ...

19. Atlantic: Women's Wages Are Rising: Why Are So Many Families Getting Poorer?

Start by looking at what's happening with men's wages. ...

20. Huffington Post: Gender Inequality in the Labor Market: Don't Call It a Wage Gap

When President Obama announced the Paycheck Fairness Act on Equal Pay Day this week, we applauded his efforts to address the so-called "gender wage gap" but, from a data point of view, mourn the fact that he, like many others before him, is building his case around a flawed number. The oft-quoted statistic that women only earn 77 cents for each dollar earned by a man, is not actually very accurate and distracts legislators and the public at large from coming up with solutions to the real problem -- the gender jobs gap. ...

21. Fortune: Corporate America's foreign cash machine: Signs it may be slowing

As governments coordinate to fix international tax laws on overseas earnings, companies may have to pay more taxes. ...

22. Forbes: How The Wealthiest Families Make And Lose Their Money -- Part 5

... Well-accepted research shows that about one-third of companies in the United States make it to the second generation.  Only around 10% reach the third generation.  If wealth were preserved during this movement away from the privately held business into the publicly traded markets, we would expect to see a greater portion of overall wealth being inherited.  But, the numbers tell us that only about 5% of wealth in the U.S. is inherited.  On the other hand, the wealthiest families of Europe hold two-thirds of their wealth in private companies and only one-third in publicly traded securities.  When we then look at inherited wealth, approximately 85% of European wealth is in its third or older generation.  One-third of European wealth is in its fifth or older generation.  This is an astounding result. ...

Economic Development Links

1. You Decide: Save the People or Save the Planet #StopTheMyth

2. New York Times: The End of the ‘Developing World’

BILL GATES, in his foundation’s annual letter, declared that “the terms ‘developing countries’ and ‘developed countries’ have outlived their usefulness.” He’s right. If we want to understand the modern global economy, we need a better vocabulary.

Mr. Gates was making a point about improvements in income and gross domestic product; unfortunately, these formal measures generate categories that tend to obscure obvious distinctions. Only when employing a crude “development” binary could anyone lump Mozambique and Mexico together.

It’s tough to pick a satisfying replacement. Talk of first, second and third worlds is passé, and it’s hard to bear the Dickensian awkwardness of “industrialized nations.” Forget, too, the more recent jargon about the “global south” and “global north.” It makes little sense to counterpose poor countries with “the West” when many of the biggest economic success stories in the past few decades have come from the East.

All of these antiquated terms imply that any given country is “developing” toward something, and that there is only one way to get there.

It’s time that we start describing the world as “fat” or “lean.” ...

3. Huffington Post: The Paradox of Africa's Growth

... So why is Africa's job growth so weak while its economic growth outlook is just fine, even robust? The reasons are structural in nature and three-fold.

First, much of that 'robust' economic growth in the past decade in Africa has been driven by export of commodities or natural resources. ...

... Second, while Africa needs investments in sectors such as infrastructure, technology and education, much of its finances keep leaking out to the rest of the world. ...

... Third, there is no industrialization, not even in agricultural production, taking place when it should. ...

4. The World Post: Amartya Sen: What India Can Learn From China

The implication of your most recent book is that while democracy, as in India, prevents the worst man-made famine such as we've seen in China during the Great Leap Forward, it does not do well at all in building "human capability" -- literacy, rights of women, basic health care or effective public services and infrastructure.

Both China and India are characterized by rapid GDP growth, widespread corruption, inequality and the princeling problem -- 30 percent of India's parliament members are "princelings"

Yet, as you point out, "China made enormous progress -- even before market reforms -- towards universal access to elementary education, health care and social security." After dismantling and then starting to rebuild its safety net, 95 percent of Chinese today are covered by a publicly funded health care system."

And none of this is to speak of physical infrastructure -- the energy grid, bullet trains, roads, Internet access, sewage systems, etc.

You conclude quite decisively that "Indian democratic practice has failed."

What is the key differentiating factor between India and China with respect to building "human capability?" ...

5. BBC: India's family firms modernise to stay in business

... The family is integral to Indian culture and business. Nearly 85% of all companies in the country are family businesses - and these include big conglomerates such as Tata, Reliance and the Wadia Group.

"In other businesses, what is important is competence and profit. That is the measure of success. But in family businesses it's different," says Mr Bahl.

"What is important is that you are together, that you're working together and living together.

"You care for the reputation, you care for the principles of your forefathers and success or profit or that kind of yardstick is not paramount." ...

6. NewJersey.com: Opinion: Muhammad Yunus reaveals social business as powerful weapon against poverty

Muhammad Yunus pioneered microcredit loans to the poor without requiring collateral, empowered poor women worldwide and won the 2006 Nobel Peace Prize in recognition. Through his newest innovation, social business, Yunus has declared all-out war on the nefarious blight that is poverty.

The objective of social business is to augment healthcare, housing and financial services for the poor, education and nutrition for malnourished children and safe drinking water for all, and introduce renewable energy, such as solar power, to the poor.

Yunus realized that, like cancer, poverty is a multi-layered systemic malady whose cure requires a holistic approach. Microcredit loans alone are not the panacea. To obliterate poverty, microcredit must be bolstered with multi-pronged assaults against all of its components.

Existing business models focus on making a profit and have failed to mitigate poverty. Free-market capitalism is thriving worldwide, yet half of the world’s population lives on $2 a day or less. Centuries of experience have demonstrated that government alone cannot eliminate poverty. Trickle-down economics practiced by charities administered through aid agencies and non-governmental organizations fails when the money supply dries up. International agencies, such as the World Bank, set up to assist developing nations, focus solely on economic growth as the antidote for poverty.

Mixed models that conflate a non-profit model with some profit are inherently antithetical. To those who say, “Why can’t social business investors take some profit, such as a 1 percent dividend?” Yunus’ response is: This is like someone trying to quit smoking asking, ‘Can I take just one puff occasionally?’” Yunus argues that someone willing to take a small profit can be persuaded to take zero profit.

Yunus concluded that poverty cannot be eliminated through economic growth or philanthropy; it has to be targeted exclusively. ...

7. Bloomberg: The Best Way to Spread Democracy Abroad? Welcome Foreign Students

... As it turns out, soft power may be far more effective. In particular, educating future leaders here in the U.S. could be one of the most powerful and cost-effective ways to spread democracy that we have. In 2008, about one in five of the 3.3 million foreign students enrolled worldwide were studying in the U.S., and while that’s still a tiny share of the planet’s 7 billion population, foreign-educated students have an outsize impact on their home countries. Not least, a lot of them end up in very important positions. As many as two-thirds of developing country leaders in the middle of the last decade had studied abroad. A few years ago, a State Department list of senior government officials worldwide who had studied in the U.S. included more than 40 presidents and about 30 prime ministers. The full total may be more than 200. ...

8. Business Insider: Two Simple Charts Show Why China Is Losing Business To Its Emerging Market Neighbors

9. Conversable Economist: Latin America: Modest Progress on Inequality

 

10. Associated Press: Mexico to Trump Japan as NO. 2 Car Exporter to US

CELAYA, Mexico (AP) — Mexico is on track to become the United States' No. 1 source of imported cars by the end of next year, overtaking Japan and Canada in a manufacturing boom that's turning the auto industry into a bigger source of dollars than money sent home by migrants. ...

11. "Immigration Myths Debunked" | LearnLiberty

12. Matt Ridley: William Easterly's new book explores the aid industry's autocratic instincts

... This book is not an attack on aid from rich to poor. It is an attack on the unthinking philosophy that guides so much of that aid from poor taxpayers in rich countries to rich leaders in poor countries, via outsiders with supposed expertise. Easterly is a distinguished economist and he insists there is another way, a path not taken, in development economics, based on liberation and the encouragement of spontaneous development through exchange. Most development economists do not even know they are taking the technocratic, planning route, just as most fish do not know they swim in a sea. ...

13. Mashable: 5 Organizations to Support on World Water Day

In honor of this year’s World Water Day, a number of organizations are working on forward-looking clean-water initiatives.

These initiatives are helping protect our planet's water supply in a variety of ways, from providing water-filtration systems to inventing dynamic clean-water technology. ...

14. Atlantic Cities: Air Pollution Now Linked to 1 out of Every 8 Deaths in the World

According to a new report by the World Health Organization, air pollution is the cause of 7 million deaths a year worldwide, and is the single largest environmental health risk in the world today.

The staggering number — one in eight of all deaths, globally — is more than double previous WHO estimates of those killed by air pollution. WHO says that there is a stronger link between pollution and cardiovascular diseases like stroke and heart disease, and between air pollution and cancer, than previously thought. ...

15. USA Today: Blindness rates plummet in developed countries

Blindness is not a thing of the past, but rates have plummeted in developed countries in the past two decades, thanks largely to the spread of cataract surgery, a new study shows.

Visual impairment that falls short of blindness also has become less common in places such as the USA, Canada, Western Europe, Australia and Japan, says the report published Monday by the British medical journal BMJ.

The international research review, which includes Eastern and Central

Europe, shows rates of blindness dropped 50%, and rates of moderate to severe visual impairment fell 38% overall from 1990 to 2010 in 50 countries. Declines in the USA and Canada have not been that big, but rates already were low by international standards in 1990, the analysis shows. ...

16. Huffington Post: This Invention That Uses Aquarium Pumps Could Save 178,000 Babies Each Year

A new invention uses fish tank aquarium pumps to save the lives of babies in the developing world.

In an effort to battle the high cost of medical equipment, a group of Rice University students developed an affordable machine to help premature babies breathe. Machines called bubble Continuous Positive Airway Pressure (bCPAP) devices help struggling babies born prematurely by breathing for them, but the machines cost thousands of dollars and are, therefore, too expensive for many hospitals in developing countries, according to Rice News.

The design team at Rice invented new bCPAP machines by using affordable aquarium pumps -- making them a fraction of the cost and easier to maintain than the traditional machines. The device costs about $350 to make, while the cost of traditional bCPAP machines used throughout hospitals today is about $6,000, according to CNN. ...

17. BBC: World now 80% polio free, World Health Organization says

The World Health Organization has declared its South East Asia region polio-free.

The certification is being hailed a "historic milestone" in the global fight to eradicate the deadly virus.

It comes after India officially recorded three years without a new case of polio.

The announcement means 80% of the world is now officially free of polio, although the disease is still endemic in Afghanistan, Nigeria and Pakistan. ...

18. Business Insider: Bill And Melinda Gates Think These Are The Most Important Charts In The World

 19. Applied Methodology: Thoughts About Norm Borlaug on the 100th Anniversary of His Birth

Norman Borlaug would have been 100 years old today.  He has been called "The Man Who Fed The World," and "The Father of The Green Revolution."  Norm Borlaug was the first plant pathologist to be awarded a Nobel Prize (1970) - for contributions to world peace. For all of use who are fellow plant pathologists, his work has been particularly inspiring. ...

Does Fair Trade Help?

Marginal Revolution University: Does Fair Trade Help?

Economist Tyler Cowen gives his take on the impact of Fair Trade coffee. For a more detailed analysis, I'd suggest Victor Claar's Fair Trade? Its Prospects as a Poverty Solution.

I know many activists are passionate about Fair Trade coffee, but I don't see their certainty about the benefits reflected by economists who study the practice. I suspect that the same could be said for most commodities. (It may be different with non-commodity efforts like hand-crafted goods.) But generally speaking, I think the advice to buy coffee at the best price and give the excess you would have paid for Fair Trade coffee to a good charity is good advice.

 

Air Pollution Replaces Poor Diet As World's Largest Preventable Health Risk

Forbes: Air Pollution Replaces Poor Diet As World's Largest Preventable Health Risk

Dirty air killed an alarming 7 million people – or, one of every eight human lives lost – in 2012, according to new estimates released today by the World Health Organization (WHO).

The new data shows that air pollution has become the world’s largest single environmental health risk.

n 2010, air pollution ranked as the fourth leading preventable health risk, behind poor diet, high blood pressure and tobacco smoke, according to a major study funded by the Gates Foundation.

Indoor air pollution, primarily caused by burning solid fuels for heating and cooking, accounted for slightly more than half – 4.3 million – of those deaths in 2012.

Outdoor air pollution accounted for the remaining 3.7 million deaths. ...

Economics Links

1. AEI - James Pethokoukis: What MinuteClinics and Google Fiber teach about crony capitalism

... Andy Kessler explains how established Internet service providers are trying to block Google from deploying Google Fiber, its superfast, gigabit broadband service. His solution: “The FCC can change this overnight. Instead of allowing municipalities to dictate onerous terms and laws that lock in (slow) incumbents, the FCC can mandate right-of-way rules similar to those granted Google Fiber to all credible competitors. If only the federal regulator would promote progress and focus on what’s best for the U.S. economy rather than for those it regulates.” Regulation should promote innovation and competitive churn, not protect revenue streams of existing players.

There is a big difference between being pro-business and pro-market. One does the bidding of incumbents, with the result being a static economy. The other promotes competition. Safety nets are for people, not businesses. The result is innovation and dynamism. Right now, America has too much of the former, not enough of the latter.

2. Economist: The politics of poverty. Another two cents.

... Within this miscellany [of the Ryan budget] there are some clues as to the future direction of Republican anti-poverty policies. Mr Ryan recently gave a speech in which he praised Britain’s Universal Credit, a plan to roll lots of government anti-poverty programmes into one. In some ways Britain is a strange place to seek inspiration: the British scheme is hopelessly behind schedule, a victim of the kind of IT snafu that has hobbled the Affordable Care Act. But the thinking behind it is sensible.

The other initiative that looks to have Mr Ryan’s blessing is the expansion of the Earned-Income Tax Credit (EITC) to people who do not have children (at the moment the childless are eligible for this credit but there is a low cap on the maximum payment they may receive). Marco Rubio has already spoken in favour of this. The report from the House budget committee cites plenty of evidence on the power of EITCs to boost the number of people in work. The president’s budget, published on March 4th, includes an expansion of this programme too. ...

3. Bloomberg: Free-Market Bashers Aren't Helping the Poor

... There's a more basic flaw in the thesis that markets have done nothing to help the poor while government programs have done a lot: Where does the government get the money to fund these programs? Economic growth is what enables Social Security checks to get fatter over time. Unless you're prepared to argue that the government is responsible for 100 percent of economic growth and markets for none, markets have to get some of the credit for whatever good government does. ...

... Both markets and government are necessary to improve the lot of the poor, and we ought to reform government programs so that they do a better job of helping the poor participate in markets. That's just common sense, and no study or statistic has given us a good reason to reject it.

4. AEI - James Pethokoukis: Has America finally reached peak food-stamp enrollment?

5. Carpe Diem: US household net worth increased to a new record high of $80.6T in Q4, fueled by stock market and housing gains

6. Bloomberg: Decoupling Happened: U.S. Stocks Soared, China's Shrugged

The idea that emerging markets could keep growing smartly despite the collapse of the U.S. was something romanced quite a bit in recent years. Decoupling, as it’s called, was at least numerically possible. After all, China, Brazil, India, and Russia—the planet’s four biggest emerging economies, which chipped in two-fifths of global economic growth in the year leading up to Wall Street’s 2008 collapse—stood out as the least dependent on exports to America. Upwards of 95 percent of China’s double-digit growth was attributable to domestic demand.

Turns out a decoupling did transpire in the five years since peak meltdown—only it’s the U.S. market that seems to be doing fine while China founders. It’s a divergence of fortunes few would have predicted. ...

7. Slate: The “Made in China” Fallacy

... But are iPhones really “made in China”? More than a dozen companies from at least five countries supply parts for them. Infineon Technologies, in Germany, makes the wireless chip; Toshiba, in Japan, manufactures the touch screen; Broadcom, in the U.S., makes the Bluetooth chips that let the devices connect to wireless headsets or keyboards.

Analysts differ over how much of the final price of an iPhone or an iPad should be assigned to which country, but no one disputes that the largest slice should go not to China but to the U.S., where the design and marketing of such devices take place at Apple’s headquarters in Cupertino, Calif. The largest source of an iPhone’s value—and this goes for thousands of other high-tech products—lies not in its physical hardware but in its invention and the work of the individuals who conceived, designed, patented, packaged, and branded the device.

Taking these facts into account would leave China, the supposed country of origin, with a paltry piece of the pie. The Asian Development Bank estimates that as little as $10 of the value of every iPhone or iPad actually ends up in the Chinese economy.

Now magnify this across hundreds, even thousands of finished goods. Those Nike shoes that count as imports from China, all those flat-screen televisions, Android phones, clothing, furniture, Disney toys and figures. Almost all are the result of ideas generated in the U.S. (or Japan, or Germany, or Korea, and so on), with parts sourced globally and then assembled in China to be sold elsewhere. ...

8. Project Syndicate: The Poverty of Renewables

... Forcing everyone to buy more expensive, less reliable energy pushes up costs throughout the economy, leaving less for other public goods. The average of macroeconomic models indicates that the total cost of the EU’s climate policy will be €209 billion ($280 billion) per year from 2020 until the end of the century.

CommentsView/Create comment on this paragraphThe burden of these policies falls overwhelmingly on the world’s poor, because the rich can easily pay more for their energy. I am often taken aback by well-meaning and economically comfortable environmentalists who cavalierly suggest that gasoline prices should be doubled or electricity exclusively sourced from high-cost green sources. That may go over well in affluent Hunterdon County, New Jersey, where residents reportedly spend just 2% of their income on gasoline. But the poorest 30% of the US population spend almost 17% of their after-tax income on gasoline. ...

9. New York Times - Economix: Q. and A.: A Development Expert on Narrowing Inequality

Branko Milanovic has been studying income inequality around the world for a long time. ...

... Inequality calculated among all individuals in the world, as if they were part of one single nation, has been edging slightly downward over the past 10 to 15 years, mostly thanks to very high growth rates in China and India. These relatively poor giants (particularly India) have pulled quite a lot of people out of poverty and into something that can be called “the global middle class.”

That is the key factor behind the decline of global inequality: The distance between their incomes and the rather stagnant incomes of the middle class in rich countries has diminished. Yet global inequality is still extremely high by the standards of any single country. It is, for example, significantly higher than inequality in South Africa, which is the most unequal country in the world. ...

10. Prospect: “I started off as a libertarian economist, but I’ve come full circle”—Gregory Clark on social mobility

... If you look at England, for example, what we measure is whether you were at Oxford or Cambridge; how long you live, which is another good indicator of social status; occupational status; are you a member of parliament? Now one of the interesting findings here is that it doesn’t really matter which measure you use. For the families we’re looking at, all these things are actually highly correlated. The wealthy at any time are also the educated, members of parliament, those who live long. What the book shows is that there’s an underlying physics of social mobility which all of our political efforts seem to have no effect upon. And the startling conclusion is that we may never be able to change social mobility rates. ...

11. Business Insider: Every 25-Year-Old In America Should See This Chart

12. Business Insider: 13 Money Lies You Should Stop Telling Yourself By Age 40

... By the time you hit 40, rationalizing away your bad money management habits starts to have a serious impact on your financial future (not to mention age you).

Here are some of the top money lies that you should stop telling yourself by age 40: ...

13. Huffington Post: 5 Tools to Tackle Finances in Your Twenties

Your twenties are hard enough already: matriculating from college, finding your first "real" job, moving out on your own, learning how to pay bills for the first time and learning how to navigate adult relationships without the structure of college or free flow of alcohol. It is a scary and awkward time, no one disputes that -- but mastering your finances in your twenties will reduce your stress and increase your net worth in the long run. Below are 5 tools you need to tackle finances in your twenties. ...