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Posts Tagged ‘development economics

The world is not a zero-sum game, but it matters if you think it is

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Question: A farmer in your neighbourhood has had an exceptionally productive 2016. He has managed to double wheat output, and his favourite cow – Daisy – was awarded first prize in the national competition. What is the reason for the farmer’s success? Is it: a) He has worked very hard, b) He was lucky, or c) he put a spell on the rest of the farmers in his village?

This is an example of the type of survey questions a team of Harvard economists have been asking to subsistence farmers in the Democratic Republic of the Congo on several visits over the last few years. In contrast to what one might think, the answer to this question is almost always the same: C. Witchcraft and supernatural beliefs are widespread in Africa and throughout the developing world. One aim of the research group is to identify how these cultural traits affect economic decision-making. Clearly, if my answer to this question was that the farmer’s success was due to hard work, I would conclude that the way to excel is to work harder. But if my understanding is that this farmer somehow cheated – that his success was due to a spell he put on the rest of the community, and that his gain was our loss – then my takeaway is that I need to spend more of my surplus not on investing in my farm, but on bribing the local spiritual leader for favours.

The belief that the world is a zero-sum game is widespread. Like these Congolese farmers, many of us believe that the success of one member of our communities must be to the detriment of others. In some cases, this is, of course, true: when one bowler takes 7 wickets in an innings, it leaves only 3 scalps between the remaining bowlers. But, generally, the world is not zero-sum. China’s success is not a consequence of America’s decline, despite what the Trump propaganda machine says. Trade, as economists have known since David Ricardo, can be mutually beneficial, even if it means that the benefits and costs of growth are not shared by everyone equally. My neighbour’s financial success after she designed and marketed a new app is not the result of her ‘stealing’ my success.

But beliefs of a zero-sum world are widespread, and results in what has become known as the Tall Poppy Syndrome. I’ve seen this in action: students that excel sometimes draw the envy of their poorer-performing peers. And it has consequences: the envious ones believe that the good student must have achieved the high marks because of external factors, such as being the teachers’ favourite. They avoid taking responsibility for their own mediocre efforts. The star student, depending on the sanction of the envious ones, also reacts, either by withdrawing from social interaction or, worse, by putting in less effort in the next test to avoid standing out.

The Tall Poppy Syndrome is prevalent in all societies, but its density and effects are likely to vary. If TPS is more concentrated in poorer communities, for example, it will hamper social mobility, reinforcing both the poverty and the cultural beliefs itself. Development economists are therefore hoping to not only identify the causes of these beliefs but also how to change them.

This will not be easy: beliefs are difficult to measure accurately, and their origins may be deep in history. Nathan Nunn and Leonard Wantchekon’s work several years ago showed how the Atlantic slave trade still affects trust in African societies: people that today live in areas where most slaves were captured are more likely to distrust their neighbours and the government. In a new paper, Oded Galor and Ömer Özak show that people’s belief about time preference – whether you have a long-term horizon or not – were affected by what type of crops their ancestors grew. Both trust and time preferences are necessary ingredients for development. As Adam Smith already pointed out in the eighteenth century, trust is necessary for specialisation and exchange. A long-term horizon allows one to forego future income, invest in the present and earn the higher future returns. It affects our propensity to save, to adopt new technologies, and, as Galor and Özak show, even our likelihood to smoke.

If these cultural beliefs are so deeply rooted and have such a pervasive influence over our behaviour, what can be done to change them? This is difficult to answer and requires the interdisciplinary efforts of psychologists, economists, anthropologists and neuroscientists. The answers they provide may not only contribute to sustainable development and social mobility, but may have applications elsewhere. Marketers may have to design products that appeal to those with a zero-sum worldview, or managers may have to lead teams of people where some ascribe to this view. The incentives that motivate people who have Tall Poppy Syndrome, for example, are likely to be different to those who are less envious of their successful colleagues.

Our beliefs about the world shape our economic decision-making. We are only now beginning to understand how it does, and what to do to change it.

*An edited version of this first appeared in Finweek magazine of 1 December.

Written by Johan Fourie

January 16, 2017 at 08:16

How a pair of glasses – and a cup of tea – can change the world

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Cup of tea 4

I got my first set of eyeglasses at the age of 16. I vividly remember sitting at the back of the physics class and squinting to read the formula on the board, and the embarrassment of having to move to the front. I also vividly remember the joy of facing my friend in the nets when, wearing new contact lenses, I could finally ‘read’ his spinners.

Invented in Italy in the 13th century, eyeglasses were initially used by scribes to allow them to remain productive long after their natural eyesight had deteriorated. But the technology improved over time, and has allowed me and many generations of young and old, male and female, doctors, soldiers, clerks, truck drivers, computer scientists and athletes with hyperopia (farsightedness) to remain productive members of society.

But many millions are not so lucky. The World Health Organization estimates that at least 20 million Africans are visually impaired, and hopes to reduce this figure by 25% by 2020. Many of these are children in schools, struggling to read the board or their prescribed books. This is an example, it seems, where developmental efforts should be focused: an inexpensive solution with long-term benefits for the recipients.

A new study published in the Journal of Development Economics attempts to measure the gains from just such a programme. Paul Glewwe, Albert Park and Meng Zhao report the results from a randomized control trial in Western China that offered free eyeglasses to rural primary school students. Almost 10% of primary school students in these areas have poor vision, but very few of them wear glasses. The authors find that wearing eyeglasses for one academic year increased the average test scores of students with poor vision by an amount equivalent to 0.3 to 0.5 years of additional education.

That is a massive economic return to a small investment, which should raise the question: Why don’t parents make this investment themselves? For poorer families, it seems that eyeglasses are still too expensive. But other factors matter too: parents often lack awareness of their children’s vision problems, and it seems like girls are more likely to refuse wearing glasses. Maybe it’s time to introduce more glasses-wearing female characters in children’s programmes. (Apart from 78-year old Carl in Up, I can think of few Pixar/Disney movies with a lead character with glasses.)

This type of research allows policy-makers to identify the low-hanging fruit of development. Whereas more textbooks, or higher teacher salaries, or even deworming programmes (all policies that have been tested in schools) can be expensive, free eyeglasses will, with a small initial investment, yield large returns for the (often marginalised) individual and society.

Initiatives to improve health can have many other benefits too. Randomized control trials have been done on the impact of everything from washing hands and better toilets, to home-visitation programmes for teenage mothers and promotion programmes aimed at reducing open defecation. (Eliminating open defecation in rural villages, it is found, can increase child height significantly.)

South African researchers are making progress in identifying the low-hanging fruit for local communities. Ronelle Burger and Laura Rossouw, two researchers at Stellenbosch University, are investigating the impact of the Thula Baba Box, a box filled with baby products, clothes, information brochures, basic medicines, toys and other items, and given to young mothers. If the results show a large, positive impact on maternal and child health, there is no reason why the Thula Baba Box cannot be provided, free of charge, to all mothers in the country. Not only is it morally just, but it is a clever investment strategy too.

Sometimes, though, the low-hanging fruit can be as basic as a cup of tea. A new study by Francisca Antman of the University of Colorado-Boulder investigates the custom of tea drinking in 18th century England. One of the unintended consequences of tea drinking, which happened even among the lower classes, was an increase in the consumption of boiled water. She finds that regions in England with lower initial water quality had larger declines in mortality after tea drinking became widespread. This ‘accidental improvement’ in public health, she argues, happened at the same time as people were moving into cities, thus providing a healthy pool of labour needed for industrialization.

The next time you sit down with a cup of tea and a good book (remember those glasses!), remember the profound effect those simple ‘technologies’ have had, and, with the help of researchers and government funding, are still likely to have in much of the developing world.

*An edited version of this first appeared in Finweek magazine of 30 June.