Economics & Marginalia: May 26, 2023

Hi all,

It’s taken till the end of May, but the weather in England has finally shifted away from Winter; I spent the day in Oxford yesterday in the bright sunshine (thankful that the Blavatnik School is, somehow, a suntrap on all sides), and there is perhaps nowhere better in this country to spend a sunny summery day. The finals students were in their theatrical (some would say ridiculous) exam garb, Gloucester Green was transformed into a huge food market with a Sri Lankan rice-and-curry stall and the Oxfam bookshop on St. Giles continued to be a black hole for my finances. Still, not all is good with the world: we lost Tina Turner, and for someone who grew up in the 1980s and 1990s it’s hard to think of many more iconic characters; and Martin Amis (of whom I read more in the 1990s than any other author; I still think of my first reading of The Rachel Papers as a landmark in growing up—I had never read writing quite like that, as poorly as all subsequent readings of it have fared.) He was a genius. And LeBron James is threatening retirement, which to me will be more of an era-defining event than anything else I can think of. Since I turned 20, he has dominated, in one way or another, the landscape of professional basketball. I have forgotten how to think about the sport without making an allowance for what he might do or achieve. A lot has ended, or threatened to end this week.

1. I’m now around 23,300,183,191 parts into my continuing series “Migration is good for the poor”, so it’s nice to add one to its companion series, “Migration is good for poor countries”, too. This excellent VoxDev write-up of new researchby Jose Bucheli and Matias Fontenla uses a clever design to investigate the effects of return migration of Mexican emigrants to their home municipalities in Mexico, and documents substantial and widespread effects on economic and social development. These results are not driven by a subset of returnees or a subset of regions to which they return, but are found everywhere; the skills, capital, confidence and experience that migrants develop by moving abroad to make a life helps them improve their home countries when they return, too. I remember a visit to Nepal some years ago where I spoke to staff at an organization who work with returning Nepalese migrants who explained the typical cycle of migration and returns, each time making a new, more substantial investment at home. Migrants don’t typically forget home (I never have). And we usually contribute both where we go and where we came from.

2. Paddy Carter writes extremely well about why it can make sense for development finance institutions to invest in the financial sector, and specifically larger banks than microfinance institutions. He makes many very good points, and I particularly like his extensive discussion of why it can be preferable to do big imperfect things than small but closer to perfect interventions. I think there are two places I disagree, or at least have more questions. First, while I agree that Africa is far from a position where more financialisation of its economy would imply low- or negative net benefits, but I don’t think the relationship is as simple as ‘money gets put to productive uses, and when they’re used up, its put to unproductive uses’; rather it gets put where it’s easiest to make more money, productive or not. We do need to think carefully about whether a marginal investment will be mainly productive or mainly unproductive relative to alternative investments. And secondly, this is a really difficult question and many times we may simply not know enough to answer with any real certainty. Ultimately, I think that’s ok! It’s also true of other competing uses of aid, and on balance I am happy that some portion of our money is used this way, because getting money out to businesses is really important, and we need to try the best ways we know how to. Highly recommended.

3. Via Marginal Revolution I found this paper about the misallocation of labour across home and outside-the-home production, and the effect on productivity of getting that allocation better. I think this is one of the best attempts I’ve read to come up with a credible macro estimate of the economic effects of the economic empowerment of women.

4. Want to get published but don’t know where to submit? David McKenzie has the data on acceptance rates, impact factors and time-to-decision at all the major development economics journals. He does this every year, and it’s a valuable public service every time.

5. Don’t read this before bed: it will give you nightmares.First Andrew Gelman on…, well the title tells you what you need to know: “If you do not know what you would have done under all possible scenarios, then you cannot know the Type I error rate for your analysis.” If you got interesting results but they weren’t definitive and decided to do another, larger study, but you aren’t sure you would also have done a larger follow-up had you got results that pass the typical benchmarks for significance testing, then you just fundamentally cannot know what the likelihood of having a false positive is. He seems largely unfazed by that. I… am less sanguine. And, just for that extra nightmare: yet another form of bias to factor in to how you form expectations from prior research.

6. I have a very nice example of this phenomenon waiting to be written up soon: “a solid majority of Americans wish their government would spend less money overall, while also spending more on almost everything in its budget.” It is difficult to elicit beliefs about how things should be done from people, because they both have terrible knowledge about how they actually are done (and believe they have good knowledge of it) and make little attempt to reconcile wildly contradictory positions, preferring to make each a strong position and damn the impossibility of being satisfied. Tim Harford explains.

7. Succession will soon (already has?) reached its conclusion. I confess that I’m still somewhere early in the first season because my patience for TV about people with no redeeming characteristics has declined to zero as I’ve aged—though in my defence, none of The Sopranos, The Wire or Deadwood has any major characters of whom that is a good description—but many people love it and it’s moved The Ringer to get their list of the 40 greatest TV show endings ever completely wrong (I’ve discussed this multiple times, but the correct answer is Six Feet Under [don’t click if you don’t like spoilers], and the only incorrect answer that isn’t shameful is The Good Place). Nevertheless, the point of a list is not to be right, but to be enjoyably wrong, and it’s managed that. After how strongly you all came through on both good detective shows (my wife and I have devoured Vera, Montalbano and have eyes on Endeavour, thank you all very much) and board games (we’ve ordered Wingspan already and have others lined up), am I missing any shows from my pantheon? Apart from those already mentioned, it includes Frasier, Veronica Mars, Rumpole and Yes, Minister. What’s have I missed? Thank you, and…

Have a great weekend, everyone!

R