News and Announcements
IPA Research Affiliate John List was quoted in an article in Nonprofit Quarterly examining donor behavior.
John List, an economist at the University of Chicago has tested matching programs for their capacity to encourage people to give more. List found that a matching program did inspire more people to give, but offering a higher matching ratio decidedly did not lead to larger donations. People whose donations would be quadrupled gave the same amount as people whose donations would simply be doubled. “People get utility or satisfaction out of giving to a good cause. And they do not care how much public good is provided,” concluded List.
One theory about why people are less likely to give if they are more analytical has to do with what is termed here the “drop in the bucket effect,” or the sudden realization that one’s contribution pales in the face of overwhelming need. “If you really did the calculus,” List said, “my 25 dollars to the Sierra Club means nothing on the margins. So if I wanted to be really analytical about it, I’m not going to give.” List asserts that it follows that encouraging donors to give to the most efficient, best organizations might mean that less money actually gets donated.
John List, an IPA Research Affiliate, has been cited in a Boston Globe article exploring the psychological dynamics involved in people donating.
Another prominent theory to emerge from the research is that people give because of social pressure. [...] Those aren’t the reasons we like to think of ourselves as donating, but experimental research on charity tends to support the notion that donating and thinking occupy separate realms. Jonathan Baron, a psychologist at the University of Pennsylvania, asked a group of participants which charity they’d rather give to: one that achieved its goals so efficiently that it could spend 20 percent of its money on advertising, or one that required more money to do the same amount of good, and thus spent less on promotion. Though the first charity was technically more efficient, people tended to favor the latter: What mattered to them was seeing more of their own money at work, Baron concluded, rather than the amount of good it did.
This conclusion is bolstered by the findings of John List, an economist at the University of Chicago, who tested the effectiveness of so-called matching programs, in which a major supporter agrees to match the contributions of individual donors. List expected to find that matching programs enticed people to give, by creating the (correct) impression that their money would go further. But List’s results were curious: While charities that offered a matching program did inspire more people to give than charities that didn’t, he was surprised to find that a higher matching ratio didn’t lead to larger donations. People whose donations would be quadrupled — a huge increase in the power of their gift — didn’t donate any more money than people whose donations would simply be doubled. “People get utility or satisfaction out of giving to a good cause. And they do not care how much public good is provided,” List said.
Read the full piece, which contains many thought-provoking insights.
"Randomised trials could help show whether aid works"
IPA Research Affiliate David McKenzie is mentioned in this Economist news story on the effectiveness of randomized trials, calling back to the Millennium Villages Project that has stirred up some controversy in the development impact sphere this year. Relevant Excerpt:
Michael Clemens of the Centre for Global Development, a think-tank, and Gabriel Demombynes of the World Bank says that a randomised trial is needed to disentangle what the millennium programme is doing from what is happening anyway. In such a trial, each village would be paired with a similar one not getting the same help—and the results compared.
This stirred up a hornets’ nest. In a vitriolic letter to another critic, Mr Sachs calls the idea “that one can randomise villages like one randomises individuals…extraordinarily misguided”. Randomised trials cannot work in villages, he insists, because they are too complex and dynamic. Comparing a millennium village with a randomly chosen one “will add surprisingly little”; the proper comparison is with a region or a country as a whole.
David McKenzie of the World Bank then took up the cudgels. He pointed out that if the impact of the project were as great as its backers claim, it should be discernible even against a shifting background; that, in practice, randomised trials can be used to evaluate complex, dynamic processes, not just simple, static ones (though they have to be designed properly); and that comparing a favoured village against another after the intervention has started—which is being done—isn’t a randomised trial in the proper sense (properly, one should select pairs of villages, then choose one of the pair randomly as the subject of the programme).
Get those economists started early! IPA Research Affiliate John List created headlines in Chicago with a special economics course designed and taught to 8th graders by U Chicago professors:
Several eighth-grade students in Chicago Heights School District 170 are taking an economics class taught by instructors from the University of Chicago.
Twenty eighth-graders representing all nine District 170 elementary schools are learning about economics in an 11-session course that will end this month. A second group of 20 District 170 students will take the same course starting in January.
The economics class is the brainchild of District 170 Supt. Thomas Amadio and University of Chicago economics professor John List.
“This is probably only one of a handful of middle school social sciences classes in the country that teaches ideas like opportunity cost or supply-and-demand in an experiential way,” List said.
The students were selected after an application and interview process conducted by Amadio and other District 170 administrators.
“Economics and technology are the future, and I want to increase my knowledge of both,” said Wilson School eighth-grader Dante Jones, who is one of the students taking the course.
The class is held in the District 170 Distance Learning Center at Washington-McKinley School in Chicago Heights. Each student is provided a laptop computer, and the DLC is equipped with state-of-the-art technology.
Update: Check out this video of District 170 students interacting with their instructors, and get more info on the program.
IPA's New Haven-based Data Coordinator, Matt White, was featured in a video interview with the New Haven Register where he discusses his experience working with IPA's Urban Micro-Insurance Project in Kenya.
Jua Kali is both a place and a type of freelance worker in Nairobi, Kenya, where White devoted a year of his life. It’s where hundreds of poor metalworkers are helping White find out if new economics can solve some age-old problems.
“People are living in destitute poverty. You’re stepping over streams of sewage, and kids are just running around,” says White, data coordinator for Innovations for Poverty Action, a New Haven-based nonprofit. “Jua Kali is where they work. Always in the background there, you can hear the sound of hammers.”
White spent parts of 2010 and 2011 in Kenya to test one of the hottest topics in global economics: micro health insurance. This is the idea of providing very cheap health insurance to poor workers who have little or no access to basic health care.
“Micro health insurance has become increasingly popular,” White, 23, explains. “Money is being spent on it. But does it work? Is it worth investing in?”
That’s where White’s group enters.
Innovations for Poverty Action steps in, develops a randomized control study of the situation, conducts the study and determines whether or not an anti-poverty program is having the desired effect. The subjects range from school attendance and agriculture to clean water and mosquito nets.
IPA has completed more than 80 such studies since 2002 and has more than 300 ongoing projects in dozens of countries, including the U.S.
“There are things you can’t know by just guessing,” White says. “You can either just go along thinking that something that seems like a good idea is a good idea, or you can do a scientific evaluation.”
Read the entire article and watch the video here.
From Psychologist Art Markman, Ph.D.'s HuffPost blog, IPA Research Affiliate Eldar Shafir's research is highlighted in showing how a positive or negative outlook can impact one's life.
When you are focused on the negative side of things, you often focus on rejecting options rather than selecting them. Witness what is happening with the GOP primaries now. Republican voters are focused on eliminating candidates rather than finding ones they like. Research by Eldar Shafir shows that when people are trying to reject options, they weigh the negative information about the options more heavily than the positive information.
Summary: "Steven Radelet’s accessible new book argues that much of the credit for Africa’s recent economic boom goes to its increasingly open political systems. But Radelet fails to answer the deeper question: why some countries have managed to develop successful democracies while others have tried but failed."
It is well known that the 1970s, 1980s, and 1990s were a disaster for the countries of sub-Saharan Africa. In a period when other underdeveloped regions, especially Asia, were experiencing steady economic growth, Africa as a whole saw its living standards plummet. Nearly all Africans lived under dictatorships, and millions suffered through brutal civil wars. Then, in the 1990s, the HIV/AIDS epidemic exploded, slashing life expectancy and heightening the sense that the region had reached rock bottom. It was no surprise when an intellectual cottage industry of Afro-pessimists emerged, churning out a stream of plausible-sounding explanations for Africa's stunning decline. The verdict was simple: Africa equaled failure.
What is less well known is that Africa's prospects have changed radically over the past decade or so. Across the continent, economic growth rates (in per capita terms) have been positive since the late 1990s. And it is not just the economy that has seen rapid improvement: in the 1990s, the majority of African countries held multiparty elections for the first time since the heady postindependence 1960s, and the extent of civic and media freedom on the continent today is unprecedented. Even though Africa's economic growth rates still fall far short of Asia's stratospheric levels, the steady progress that most African countries have experienced has come as welcome news after decades of despair. But that progress raises a critical question: what happened?
Steven Radelet's accessible and insightful new book, Emerging Africa, joins a growing chorus of voices explaining how and why Africa has turned the corner. Radelet, who joined the U.S. State Department to work on international development issues last year, was a fellow at the Center for Global Development and has served as a policymaker in both the United States and Liberia, where he advised President Ellen Johnson-Sirleaf. He does a remarkable job of weaving together hard statistical patterns, case studies, and a coherent narrative that explains both Africa's decline and its recent rebound. The book is useful reading both for specialists in the field, who will gain from its detailed description of the experiences of numerous countries, and for those newly interested in Africa, including non-economists, who will find their preexisting notions about the continent overturned. Emerging Africacrystallizes the new conventional wisdom on Africa's recovery. But it also highlights gaps in experts' understanding about its underlying causes.
Read the full review here.
Stephen P. Groff, a member of IPA's Policy Advisory Board and Vice President of Asian Development Bank, writes a compelling statement on how to approach aid effectively, using Korea as an example:
Aid to Asia is coming under particularly intense scrutiny. Many see the growing affluence and ample state coffers in some Asian nations, and understandably question why the region needs foreign aid. Behind this sparkling veneer, however, is another face of Asia, the more than 1.6 billion people who eke by on less than $2 a day -- less than the price of a small Starbucks latte. Asia's poor desperately need the health, education and other social services that foreign aid brings. For the sake of these 1.6 billion, and to better ensure the stability of the region; it's imperative that aid not be cut.
It is equally essential, however, that we ensure this aid delivers as promised, giving donor nations value for money, and poor families a better life. Good intentions are not enough.
A textbook example of how aid can work effectively can be found in the Republic of Korea, where global development partners are meeting in Busan for the Fourth High Level Forum on Aid Effectiveness. Having leapfrogged from "third world" status to a developed country within the course of a single generation, Korea provides a shining example of a country that made development assistance work.
Armed with data, an MIT lab offers fresh insight on some of the world’s most vexing problems
IPA's partner organization, J-PAL, is featured in the Boston Globe highlighting IPA Research Affiliates Esther Duflo and Abhijit Banerjee. Paired with an interesting infographic, the article brings more attention to evidence-based development and research that has followed the publication of Duflo and Banerjee's Poor Economics.
It’s no one’s idea of an MIT laboratory: not a beaker or an oscilloscope in sight. But in a wood-paneled suite, on the third floor of a bland, concrete building, researchers are tackling problems as complex and vexing as any in technology, science, or medicine.
This is the Abdul Latif Jameel Poverty Action Lab, or J-PAL, where economists through precise, detailed studies are trying to find ways to alleviate poverty. For nearly a decade, MIT economics professors Esther Duflo, and Abhijit Banerjee, have worked with a global network of researchers to conduct experiments in the world’s poorest places - where families live on less than $1 day - and reached conclusions that are changing the way economists and policy makers think about development in impoverished areas.
The findings are contained in their new book, “Poor Economics,’’ which earlier this month won the Financial Times and Goldman Sachs Business Book of the Year Award for “the most compelling insight . . . into modern business issues.’’ In the book, the MIT professors argue that antipoverty policies must be built on evidence from careful, controlled tests that detail how the poor live, act, and react.
Duflo and Banerjee came to the study of global poverty from very different starting points. To Duflo, who grew up in a comfortable, academic family in France, global poverty was a remote abstraction. For Banerjee, abject poverty was as close as the ramshackle houses behind his childhood home in Calcutta. They met at MIT when Duflo, as a student, took a course in development economics from Banerjee. After Duflo earned her doctorate in 1999 and joined the MIT faculty, the two founded the Poverty Action Lab in 2003.
Since then Duflo, 39, and Banerjee, 50, have received multiple honors and prizes. In 2010, Duflo was awarded the prestigious John Bates Clark Medal for the best American economist under 40. The year before, she received a MacArthur Fellowship, the so-called genius award.
What inspires their interest in poverty, Banerjee explained, is the idea that the poorest people must deal with different conditions than the rest of the world’s population.
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