James Choi has a paragraph on a new study about fair trade coffee (ht roving bandit). I can’t actually find the study, by Bruce Wydick, but it apparently looks at the effect on farmers of 13 years of involvement in Fair Trade projects and finds no impact. It is kind of depressing when the thing that captures the public imagination is the wrong thing, but no real surprise I suppose.
Jonathan Portes has a nice post on vox eu about what it means to be Keynesian. He blogs at http://notthetreasuryview.blogspot.com/ and for domestic, UK economics is worth a read. For those wanting to get a grip on current macro economic arguments about the UK, it is a nice place to start, as it has some sense of history, and the debates that have gone before. It also helps you understand quite what a game-changer the crisis of 2008 was. And, unfortunately, still is.
This is the first post in a mini series on RCTs. Today, I’ll give some background and try to explore what the fuss is about.
Randomised control trials are not new. As Ben Goldacre likes to say, the first example is in the bible. The idea is simple. It is normally fairly difficult to work out what the effect of some policy intervention is, because there are all sorts of different things going on. To use a medical example, you’re not sure if the medicine you gave made the patient well, or whether it was really just time/placebo effect/exercise/better diet etc etc. Regressions try to estimate the effect of all these different things: controlling for all the factors you don’t care about in order to get an estimate of the factor you do care about.
Enter RCTs. The idea is that you take a large group of people, split them in half (or some other fraction) and then treat the two groups differently. In medicine the best practise is to administer the best pre-existing alternative as the control, and the new thing to the treated group. The fuss is that in recent years economists have started to use this technique to answer big questions. To see some examples look at the leading light of the randomistas, Esther Duflo. In development this has included novel/interesting/gimmicky questions about how to improve educational outcomes. Some have been very interesting because they help us understand something, others feel like they’ve been written to be interesting to non-experts (a kind of ted talk, cool geeky research).
To academics, RCTs have been taken on board because they offer a clear identification strategy. That means you can be fairly sure that you are accurately measuring the effect of your policy intervention. This means good publications. Next in the series I’ll look at the critique of the methods. But for now, here are some good (pro) links on RCTs:
Duncan green has a nice piece reviewing Edward Carr’s book. I haven’t read the book so I can’t, and won’t, comment on that. However, he touched on the flip side to something I discussed in a previous post where it is difficult for non-experts to decide which expert is right when they can’t rely on credentials. Duncan Green charges the book with claiming a different kind of credential: experience of living in the village.
This is undoubtedly a real phenomenon: people get experience of living in developing countries, then get nice jobs, a family and comfortable. Which means most of the people with power have experience of living in developing countries a while ago, and of visiting a few more recently. I don’t think the credential of living in a low income country makes your opinion more valid. It makes the likelihood you’ll have an interesting insight higher, but it doesn’t garantee that what you are saying right now is correct.
Econtalk is a fantastic podcast about economics, where Russ Roberts chats to the great and the good of the academic world. His politics are libertarian and this jars a little sometimes, when I wish he’d press a guest a little further.
One such instance was his interview with Eugene Fama, famous for his efficient market hypothesis. Essentially, he says that prices reflect all information and so an investor can’t predictably beat the market. This view even predicts that some people will appear to beat the market, through pure chance.
Warren Buffet dealt with this kind of view in a lecture in 1984. In the last 27 years, he’s continued to do pretty well, and is one of the three richest men in the world. If stock picking was pure chance, I don’t see how that explains the continued success of the best (of course it could explain short term good performance). I don’t research finance and I don’t follow all the arguments in this, but it appears bizarre to me.
Perhaps anyone that can see how the market is inefficient is able to make more money exploiting through investing than through writing about it, which means academia will tend to. Michael Lewis’ book certainly seem to show that some people predicted exactly where the system was going to break before it did. It certainly doesn’t seem to be an easy time to argue that financial markets are inefficient.
It is frustrating that whatever evidence is produced Fama just explained it away chance, given the track record of success of investors. He also dismissed behavioural finance with no real explanation (and wasn’t pressed on this by Roberts). I guess nothing is more frustrating than listening to two people agree, when you think they are avoiding evidence.
This is not about development economics, but I keep hearing nonsense about learning styles. Here is a short video that sums up some research showing it has, more or less, no theoretical basis or practical use. Its a shame that some academics don’t listen to academic research on teaching.
Here is WIllingham’s book, which has influenced my thinking about learning quite a lot. On top of that, it is a great read.
Excuse the silly title. It is the kind of title I’d like to give a paper but never would. Anyway, Timothy Besley writes in Foreign Affairs about some recent books, but has a rather large an interesting detour about governance in the middle of it. He talks about China being a successful state at the moment, and it is clear that there are different factors that lead to a successful government. He doesn’t get diverted by defining what a successful government is, which I think is a very good thing. China as a good government will clearly raise eyebrows given its human rights record, but he’s talking about the ability to lift a mind boggling number of people out of poverty. It is interesting trying to learn about governance and cultural change from history, as it is difficult to give simple prescriptions based on history. On the example of China, he says:
For all these reasons, the Chinese model is not an easy or attractive model for other countries to follow as they seek to build effective states and thereby reduce poverty. Yet the western European model is problematic, too, since up until World War II, it emerged largely out of the need to fight countless wars.
It really is fascinating trying to work out why we can work together in society, and why we are trustworthy people most of the time. Of course, it is another question how to produce good governance and good societal norms in the future, but we should at least learn from history as much as we can. That doesn’t mean we should prescribe a nice dose of war though…
I’m looking forward to this book which should drill this vein a little more. To get a preview, you could always watch the lecture version below. I’m betting that even in the book length version they don’t recommend a few decades of war.
