Animals and Economics

Why are we so obsessed with animal imagery to explain economic phenomenon?  Bulls and bears are the most prominent example, but there are also Asian Tigers, the Chinese Dragon, and more recent (and irritating) Indian elephant and African Cheetah Generation.  My guess is that these symbols are much easier to process than the complex realities that actually characterize economies.  Like hero narratives dominate popular understandings of history (“Gandhi led India to freedom”, “Lincoln freed the slaves”), current situations are also more digestible when presented in simple terms.

Interestingly, animal metaphors seem to be preferred over industrial or mechanical ones (Chinese Rocket Economy?).  Does this represent an acknowledgement that, these change processes are organic and unpredictable, not mechanized and standardizable?  Probably not, but I still like the thought.


In defence of the NGO SUV

My boss recently told me that the India chief of a very large environmental INGO moved here from a corporate sector job in Singapore and took a paycut of 50%.  His annual income went from INR 4,00,00,000 (that’s four crore to you non-South Asians out there – USD 896,000) to half of that.  One could look at this in two ways:

1. This guy’s awesome – he left $$$ to do some good in the world.

2. Whoa this guy is making so much $$$ while working at a non-profit…how immoral.

Which brings me to the main point of this post – why does conventional wisdom tell us that development type work should not be monetarily well rewarded?

That's our tax money at work

It is easy to think of the development sector as being completely different from the corporate world.  In the latter, it is assumed that people will act in ways to maximize personal and institutional profit.  In the former, personal motivation is supposed to come from some intrinsic desire to “do good”, while institutional performance is measured not by the bottom line but rather by some (often abstract and arbitrary) development indicators.  There has been a lot of interest in the last few years on better defining success, the most visible example being the Millennium Development Goals, but it seems to me like the labour market in development still works on the assumption that people are in this industry to do good.  There are many problems that this creates:

1. It makes hiring and firing processes very complicated. How do you rate someone who is awesome at managing projects but doesn’t care about the poor?  Can you fire someone for being shit at their job but really caring about poverty?

2. Looking at market wage rates, development sector professionals are usually underpaid. While I don’t know if such a study has been done, I would hypothesize that if we take, for example, all the economics graduates from a particular liberal arts college in the last 20 years and look at their income in the first 5 years after graduation, then we will find that those working in NGOs, think tanks etc are paid less than their peers in the corporate world, even when controlling for GPA and such.

3. Given that money flows in development are largely top-down, the idea that one should be paid below market rates follows the money and finds its way to the lowest level workers too.  This is a big problem in the Indian context (and I would imagine others too), because there are a large number of people who are in development because they just need a job and want to support their families and not because they want to save the world.  These guys start out with NGOs, get some training and become more qualified in, e.g., doing surveys, then leave for the private sector where they earn a lot more money.  There is little incentive to stay in development when they see that even their superiors are earning less than entry-level people in, e.g., a for-profit market research firm.

Now to the SUV, which is often used as a symbol of the cost-inefficient ways of aid workers (side note – hilarious SEAWL post on drivers).  The nice car serves a very important function that is easy to ignore – incentive to work hard and stay in the development industry.  This is probably not true when foreign “experts” visit “the field”, since locals are acutely aware that those guys are just special, but rather when local superiors hang out with local field staff.  Status indicators like nice cars (and they’re Toyotas…hardly super fancy) and, much more importantly, competitive pay cheques, will encourage people to continue working in organisations doing socially desirable work.  If donors are serious about wanting to find local solutions etc, then they need to create a system that encourages locals to look for these solutions.  Right now, there is a much greater incentive to join a better paying job in the private sector.

There is obviously much more to this topic but I fear this post is already long enough that, if you’ve made it this far, you’re probably alone. I don’t mean this to be a defence of all aid spending and I have no doubt that current mechanisms are hugely inefficient (e.g. one of my friends at the IMF told me they installed new TVs at the DC headquarters so people could watch the football World Cup – that is ridiculous). But I think the decision makers in this sector are woefully out of touch with field realities.  While World Bank senior economists may have given up lucrative jobs in the private sector to work in development, the majority of local level development workers are probably more interested in the pay cheque than in the social benefits of their work.  Local solutions are great, but there needs to be a structure which incentivizes finding them, and SUVs might be part of that structure.

Dhoni’s Temple

I have been working in Jharkhand for the last few days.  Jharkhand is one of India’s poorest and least educated states.  It is also home to our recent World Cup winning captain, the great M.S. Dhoni.  I really like Dhoni, but I am disturbed by some of the reactions to our victory.  Two things in particular bother me:

1. Governments of several Indian states have given a lot of land and money to cricketers who are already millionaires.  These guys don’t need more land or money.  I hate that my tax money is going to them.  Dhoni was already earning more than $10 million/year two years ago, Sachin drives a ferrari and other cars, and Yuvraj Singh earns some $4 million/year just from Reebok.  These guys can now look forward to, among other things, a lifetime of free first-class travel on Indian railways.  What a waste of money.  (one gift I found amusing rather than annoying – Dhoni is receiving an honorary doctorate, without having ever completed a bachelor’s degree.  haha)

2. One would think that winning the cricket world cup would be down to some natural talent, a lot of hard work, good coaching, luck, match-fixing, etc.  But speaking to people around here, it seems the real reason we won was that Dhoni frequently visited and received blessings from the Mata Deori Temple.  The Man of the Series, Yuvraj Singh, also immediately thanked his guru after the victory.  Yuvraj’s mother said in a TV interview that the guru gave him excellent advice like “stay calm and don’t get out”.  One billion other people could have said the same thing.  But back to the main point – I fear that when high-profile events like this are attributed to gods/God-type things, we risk creating a culture where hard work is not encouraged.  To be clear, people don’t really believe that devotion is a sufficient condition for success, but many do think it is a necessary one.

When my field team and I were returning from a village yesterday, they insisted that we stop at the Mata Deori Temple.  It was already quite late in the evening and visiting the temple required a 20km detour, but they were convinced that to successfully complete our project, we had to visit this place.  I agreed because of the outside chance that Dhoni would be around.  A few weeks ago, when I was working in Chhattisgarh, I was faced with an identical demand –
“We are near (some temple, the name of which I cannot remember)!  Lord Rama walked through this area!!  A visit to this area is not complete without going to the temple,” and then later “We can’t go to (earlier temple) without also visiting (this other temple that’s close by)!!  The visit is simply incomplete.”

The weekend before I came to Jharkhand, I was watching a super-dramatized Hindi news report from “TRIBAL JHARKHAND” about this horrifying practice of piercing the stomachs of 21-day old babies with a scalding iron rod, which supposedly protects the children from developing any stomach problems.  In the village we visited right before going to the temple, all the children had scars from this.  So I asked some adults about it, and they told me it was really helpful, and if children who didn’t have it done did develop any stomach pains later in life, they too would be put through this.  I told my team members about this, and while most of them agreed that it was crazy, one person (who is completing her MSc, though I’m not sure in what exactly) tried to convince me that this might work, as it could somehow transform cells and strengthen the immune system (incredibly, this is what some doctors are saying too).  I am not convinced that this practice is effective, and even if it does have some beneficial outcomes, many children die during the procedure, so there really should be no reason to continue it.  But such is faith, I suppose.

Pomp and government

This post is going to be a collection of a few random thoughts on what governments should and (maybe) should not do.  This topic obviously deserves a lot more thought, but for now here is something related to a recent experience.  I’m sure these bullet points could be organised into a coherent whole, but right now I don’t feel like the effort, so hopefully this works:

Here's the first thing Google spat at me when I image-searched "pomp and government"

  • The first time I remember seriously thinking about this topic was during my first class with Prof Sukhatme.  He corrected someone in our class, who presented the familiar caricature of Adam Smith as a pseudo-anarchist who believed governments should not exist, by saying that Smith in fact saw the government to be a very important institution that should limit itself to three main tasks.  First, government should make sure that the rule of law (especially with regard to property rights and contracts) should be enforced.  Second, government should provide goods and services that would be under-provided by private actors, such as roads and schools.  Third, the government should keep the country/economy safe from external threats.
  • In Prof West’s Public Finance class, our textbook Public Finance by Rosen and Gayer made the very interesting point that government support of museums, national parks, and many artistic projects was often a regressive redistribution of wealth.  When such projects are funded not by direct revenue (like ticket sales) and receive government funding, it is very often the wealthy who benefit more, as they tend to use these services more frequently and in greater numbers than poorer people.  Spending a year in Washington DC, which has probably the best free museums in the world, this point seemed very valid.  The National Gallery of Art, Air and Space Museum, Museum of Natural History, etc. are largely populated by school children on field trips (this seems fair), tourists (who could afford a trip to DC in terms of both time and money), and rich DC residents (including college students, who tend to be wealthier than average Americans).  In general, very few poor people, other than students on school trips, were visible at these places.
  • India recently celebrated it’s 62nd Republic Day, which is supposed to be a celebration of our constitution, but has actually become better known for the huge military parade that blocks off most of central Delhi for an entire week every year.  The direct costs of this are large, as soldiers, police, dignitaries, various government officials, etc are transported to the capital and given accommodation in one of the most expensive cities in the country.  There are also huge indirect costs, as security checkpoints are set up everywhere and traffic in parts of the city becomes even more insane than usual because many arterial roads are blocked, thus costing people large amounts of time.  A VERY conservative estimate would be that 100,000 people (Delhi’s population is estimated at 14 million) lose half an hour of time during Republic Day week due to traffic and bulked up security.  This is 50,000 person hours, or, assuming a (conservative) 9 hour working day, a bit more than 5,555 person-days of lost productivity.

    Once in three years is enough

    Then why do governments spend so much on these kinds of things?  When I raised this topic at my office and suggested that having the parade once in three or five years (if at all) was enough, I was accused of being anti-national.  So I guess part of the reason is that things like big museums and fancy parades help maintain the illusion of a “nation-state”, which is supposed to result in loyalty to the state and government.  With regard to the DC museums, someone told me that it’s important for the nation’s capital to be impressive and intimidating, so I guess part of it is just a symptom of the hypermasculine, “mine is bigger than yours” construct of countries and international relations.  Either way, seems like a silly way to be spending a lot of money.

    Then again, compared to military budgets, all this is peanuts.