Your Daily Tao

To round off the book, Martin Ford speaks about the threat of increasing unemployment and how this actually empowers corporations, who can easily switch between states or countries that offer them the best tax policies and subsidies.

One solution he speaks about is that of a Universal Basic Income. He believes that states/countries should set up their Sovereign Wealth Fund and use these proceeds to fund it. Such an idea should be worth testing out as human output continues to get more productive than ever.  Universal Basic Income can be set at extremely low levels, and we can use that to test out the impacts on employment and mental health on the populace.

The reality is that awarding more college degrees does not increase the fraction of the workforce engaged in the professional, technical, and managerial jobs that most graduates would like to land. Instead, the result very often is credential inflation; many occupations that once required only a high school diploma are now open only to those with a four-year college degree, the master’s becomes the new bachelor’s, and degrees from nonelite schools are devalued. We are running up against a fundamental limit both in terms of the capabilities of the people being herded into colleges and the number of high-skill jobs that will be available for them if they manage to graduate. The problem is that the skills ladder is not really a ladder at all: it is a pyramid, and there is only so much room at the top. Throughout our economy and society, machines are gradually undergoing a fundamental transition: they are evolving beyond their historical role as tools and, in many cases, becoming autonomous workers. Carr views this as dangerous and would presumably like to somehow put a stop to it. The reality, however, is that the astonishing wealth and comfort we have achieved in modern civilization are a direct result of the forward march of technology—and the relentless drive toward ever more efficient ways to economize on human labor has arguably been the single most important factor powering that progress. It’s easy to claim that you are against the idea of too much automation, while still not being anti-technology in the general sense. In practice, however, the two trends are inextricably tied together, and anything short of a massive—and certainly ill-advised—intrusion of government into the private sector seems destined to fail at any attempt to halt the inevitable, market-driven rise of autonomous technology in the workplace.

Martin Ford takes a rather bleak approach to the idea that increased education can help deal with the displacement of jobs. First of all, automation and the vast displacement of manual and easily repititive jobs is inevitable. It is those whom believe that education (training poeple to be coders) that will find themselves going against Ford’s opinion.

I pretty much agree that there is a fundamental limit to the number of high skill jobs that we can create, though education can defintely help open up more opportunities and jobs. I don’t necessarily think that job openings for skilled labour to be fixed though, and I think higher education can help alleviate some of the impact.

There is an often-told story about Henry Ford II and Walter Reuther, the legendary head of the United Auto Workers union, jointly touring a recently automated car manufacturing plant. The Ford Motor Company CEO taunts Reuther by asking, “Walter, how are you going to get these robots to pay union dues?” Reuther comes right back at Ford, asking, “Henry, how are you going to get them to buy your cars?” While that conversation probably never actually took place, the anecdote nonetheless captures a key concern about the ultimate impact of widespread automation: workers are also consumers, and they rely on their wages to purchase the products and services produced by the economy.

A rather short anecdote, that is obviously not true, but one that I found to encapsulate extremly well the essence of the dangers of widepsread automation and jobs loss.

A strong economy relies on sustainable consumption within the consumers, and most developed economies have benefited from having a strong middle class that had enough incomes to spend in the past few decades. If technology does indeed continue to drive further inequality, our economic performance will definitely begin to suffer.

That is when the “doom and gloom” scenarios come in, and solutions such as cash transfers from the rich to the poor via taxation and welfare will probably need to happen.

If the higher-education industry ultimately succumbs to the digital onslaught, the transformation will very likely be a dual-edged sword. A college credential may well become less expensive and more accessible to many students, but at the same time, technology could devastate an industry that is itself a major nexus of employment for highly educated workers. And as we’ve already seen, in an entire range of other industries, advancing automation software will continue to impact many of the higher-skill jobs these new graduates are likely to seek. Even as essay-grading algorithms and robotic tutors help teach students to write, algorithms like those developed by Narrative Science might have already automated much of the routine, entry-level writing in many areas. There may also prove to be a natural synergy between the rise of MOOCs and the practice of offshoring knowledge-based jobs. If massive online courses eventually lead to college degrees, it seems inevitable that a great many of the people—and a high percentage of the top-performing candidates—awarded these new credentials will be located in the developing world. As employers become accustomed to hiring workers educated via this new paradigm, they may also be inclined to take an increasingly global approach to recruiting.

I find the point that this passage makes to be even more relevant during the environment we find ourselves in today, where there is increasingly more jobs and education being held online.

The internet and education can be great levellers in terms of opportunities, but it could lead to negative consequences if too much change happens too fast. We’ve already seen the rise in anti-migrants sentiments in developed countries all over the world. Much of this is driven by economic insecurities of the average person.

Would these problems get exacerbated when increasing amount of higher value educational opportunies and hence, jobs, becomes remote opportunities in the developing world?

Voters adjust their views based on what they see happening on the ground, even when they are initially biased. The female policy makers in India are an example. Whereas the Delhi elite remained convinced that women could not be empowered by legal fiat, citizens on the ground were much more open to the opposite view. Before the policy of setting aside one-third of the seats of panchayat leaders to women, very few women were ever elected to a position of power. In West Bengal, in GPs that had never been reserved for women leaders, 10 percent of the pradhans in 2008 were women. Not surprisingly, the share jumped to 100 percent when the seats were reserved for women. But, once a seat that had been reserved went back to being open, women were more likely to be elected again: The share of women elected increased to 13 percent for currently unreserved seats that had been reserved once in the past and to 17 percent if they had been reserved twice. The same thing applied to city government representatives in Mumbai. One reason for this is that voters’ attitudes toward women changed. In West Bengal, to measure prejudices about competence, villagers were asked to listen to a recording of a leader’s speech. All villagers heard the same speech, but some heard it spoken in a male voice, and others in a female voice. After they heard the recording, they were asked to judge its quality. In villages that had never had reserved seats for women, and therefore had no experience of a woman leader, men who heard the “male” speech gave higher approval ratings than those who heard the “female” speech. On the other hand, in villages that had been reserved for women before, men tended to like the “female” speech better. Men did recognize that women were capable of implementing good policies and changed their opinion of women leaders. The temporary reservation of one-third of the seats for women could thus lead not only to some additional drinking water sources but also to a permanent transformation of the role of women in politics.

The final passage I’ll be posting from this book. What I felt this passage really exemplifed was a really good reason for “enforced” representation in politics.

I am not one that is usually in favour of identity politics. I usually also have doubts over forced representation in business or politics, such as regulating a certain percentage of board members to be female etc. For me, I tend to think the since everyone is equal to me, there is no need to enforce or celebrate any kind of representation.

This passage does prove the case for representation. In the case of female leaders, just by reserving seats for women, the stereotypes and pre-conceived notions of people can be challenged and change. That to me, is an extremely compelling case for why representation works and has made me think more deeply about my previous stances.

In many cases, reserving seats for minorities can also provide inspiration and help break stereotypes that even other members of the same minority group might have.

However, there was an interesting coda to Reinikka and Svensson’s story. When their results were released in Uganda, there was something of an uproar, with the result that the Ministry of Finance started giving the main national newspapers (and their local-language editions) month-by-month information about how much money had been sent to the districts for the schools. By 2001, when Reinikka and Svensson repeated their school survey, they found the schools were getting, on average, 80 percent of the discretionary money that they were entitled to. About half of the headmasters of schools that had received less than they were supposed to had initiated a formal complaint, and eventually most of them received their money. There were no reports of reprisals against them, or against the newspapers that had run the story. It seems that the district officials had been happy to embezzle the money when no one was watching but stopped when that became more difficult. A generalized theft of government funds was possible, it seems, mainly because no one had bothered to worry about it. The Ugandan headmasters suggest an exciting possibility: If rural school headmasters could fight corruption, perhaps it is not necessary to wait for the overthrow of the government or the profound transformation of society before better policies can be implemented. Careful thinking and rigorous evaluations can help us design systems to keep corruption and inefficiency in check. We are not “lowering our ambitions”: Incremental progress and the accumulation of these small changes, we believe, can sometimes end in a quiet revolution.

It can be easy to look at the many faults in existing political systems and think that we need an “overhaul” or a “revolution”. However, revolution might not necessarily make things better, but worst.

In this book, 1 interesting takeaway is that the authors noted that even in the poorest of economics, simple implementation of checks and balances and evaluations can help reduce inefficiency and corruption. What is needed is a keen and willing mind to study and negotiate through the many factors that cause things to “not work” in the first place. Sometimes, bad policies were good policies at 1 stage of time, and that changing circumstances has caused these policies to not work out. Constant study of these factors and coming up with solutions is necessary over time.

Perfect shouldn’t be the enemy of the good. Incremental progress can sometimes lead to systemtic change over time. Studies of complex systems also indicate this. We shouldn’t be overly disheartened by  bad situations and be ready to make incremental progress, 1 at a time.

When we compared the households in these two sets of neighborhoods, some fifteen to eighteen months after Spandana started lending, there was clear evidence that microfinance was working. People in the Spandana neighborhoods were more likely to have started a business and more likely to have purchased large durable goods, such as bicycles, refrigerators, or televisions. Households that did not start a new business were consuming more in these neighborhoods, but those who had started a new business were actually consuming less, tightening their belts to make the most of the new opportunity. There was no clear evidence of the reckless spending that some observers feared would happen. In fact, we saw exactly the opposite; households started spending less money on what they themselves saw as small “wasteful” expenditures such as tea and snacks, perhaps a sign that, as Padmaja has predicted, they now had a better sense of where they were heading. On the other hand, there was no sign of a radical transformation. We found no evidence that women were feeling more empowered, at least along measurable dimensions. They were not, for example, exercising greater control over how the household spent its money. Nor did we see any differences in spending on education or health, or in the probability that kids would be enrolled in private schools. And even when there was detectable impact, such as in the case of new businesses, the effect was not dramatic. The fraction of families that started a new business over the fifteen-month period went up from about 5 percent to just over 7 percent—not nothing, but hardly a revolution. As economists, we were quite pleased with these results: The main objective of microfinance seemed to have been achieved. It was not miraculous, but it was working. There needed to be more studies to make sure that this was not some fluke, and it would be important to see how things panned out in the long run, but so far, so good. In our minds, microcredit has earned its rightful place as one of the key instruments in the fight against poverty.

Nothing that interesting for me to mention in this passage other than how it summarizes how microcredit can be an effective tool in combating poverty.

Contrary to intuition though, giving more credit/money to these people actually reduced their overall spending on “wasteful” expenditures. It is 1 example that goes against the common intuition that giving poor people money is wasteful as they will be lazy and spend it all on alcohol and snacks.

Rather, the key factor is whether they have something to look forward to in the future. That is also why I believe in direct cash transfers programs such as GiveDirectly. Money is more than just money. It provides them a form of stability and a better vision of the future. By solving whatever urgent pressing need they have (leaky roof, lack of clean water, proper walls), they will be have a much better base to work towards a better future.

Putting these different results together, a coherent story starts to emerge. Girls in Kenya know perfectly well that unprotected sex leads to pregnancy. But if they think that the prospective father will feel obliged to take care of them once they give birth to his child, getting pregnant may not be such a bad thing after all. In fact, for the girls who cannot afford a school uniform and therefore cannot stay in school, having a child and starting a family of her own may be a relatively attractive option, compared to just staying at home and becoming the general “Hey, you” for the whole family, the usual outcome for unmarried out-of-school teenage girls. This makes older men more attractive partners than young boys who cannot yet afford to get married (at least when the girls don’t know that they are more likely to have HIV). Uniforms reduce fertility by giving girls the ability to stay in school, and thus a reason not to be pregnant. But the sex-education program, because it discourages extramarital sex and promotes marriage, focuses the girls on finding a husband (who more or less has to be a sugar daddy), undoing the effect of the uniforms. One thing is relatively clear: For the most part, poor people, even adolescent girls, make conscious choices about their own fertility and sexuality and find ways—though perhaps not pleasant ways—to control it. If young women get pregnant even though it is extremely costly for them, it must reflect someone’s active decision.

Just the law of unintended consequences in play. Many times, actions taken that seem intuitive towards an objective (trying to prevent teenage pregnancy) actually goes against and undo other initiatives and derails the efforts to achieve the objective.

It also reflects a shallow understanding from the policy planners. If these girls in Kenya were simply deemed as “irrational” and not knowing whats best for themselves, then any implemented policy would not be effective. What’s needed is to actively understand their motivations and build an active mental model of their thinking process and find ways to push them towards the ideal outcomes.

Likewise, we should not be too quick to generalize solutions and take “uniforms” as the be all and end all solution. The biggest mistakes I have seen are when people rigidly apply their mental approach and solutions (from their previous job or teachings) into a completely different situation.

We should recognize that no one is wise, patient, or knowledgeable enough to be fully responsible for making the right decisions for his or her own health. For the same reason that those who live in rich countries live a life surrounded by invisible nudges, the primary goal of health-care policy in poor countries should be to make it as easy as possible for the poor to obtain preventive care, while at the same time regulating the quality of treatment that people can get. An obvious place to start, given the high sensitivity to prices, is delivering preventive services for free or even rewarding households for getting them, and making getting them the natural default option when possible. Free Chlorin dispensers should be put next to water sources; parents should be rewarded for immunizing their children; children should be given free deworming medicines and nutritional supplements at school; and there should be public investment in water and sanitation infrastructure, at least in densely populated areas. All this sounds paternalistic, and in a way, it certainly is. But then it is easy, too easy, to sermonize about the dangers of paternalism and the need to take responsibility for our own lives, from the comfort of our couch in our safe and sanitary home. Aren’t we, those who live in the rich world, the constant beneficiaries of a paternalism now so thoroughly embedded into the system that we hardly notice it? It not only ensures that we take care of ourselves better than we would if we had to be on top of every decision, but also, by freeing us from having to think about these issues, it gives us the mental space we need to focus on the rest of our lives.

I really like a lot of what this book speaks about, and so I’ll be covering more passages from this book than usual. Following up from the previous passage, what the authors are recommending is for local governments to take more invasive action and making the “default option” the ones that help prevent disease as preventive healthcare is always more cost efficient than reactive healthcare.

While some of us might claim that it to be restrictive and an affront to their personal freedom, it is also true that many of us living in developed cities already benefit from many aspects of paternalism. Our roads, infrastructure are all planned out for us, water is automatically treated and safe, electricity is constant, all things that come from government intervention that we tend to take for granted and yet are things that are not necessarily available to the poor.

By freeing up their cognitive load from thinking about such issues, they will also be free to live more productive lives and focus on making a living.

Since they do not seem to be willing to sacrifice much money or time to get clean water, bed nets, or for that matter, deworming pills or fortified flour, despite their potentially large health benefits, does that mean the poor do not care about health? The evidence suggests the opposite. When asked whether there was a period of a month in the recent past when they felt “worried, tense, or anxious,” roughly one-fourth of the poor in both rural Udaipur and urban South Africa said yes. This is much higher than what we see in the United States. And the most frequent source of such stress (44 percent of the time in Udaipur) is their own health or that of their close relatives. In many of the countries in our eighteen-country data set, the poor spend a considerable amount of their own money on health care. The average extremely poor household spends up to 5 percent of its monthly budget on health in rural India, and 3 percent to 4 percent in Pakistan, Panama, and Nicaragua. The issue is therefore not how much the poor spend on health, but what the money is spent on, which is often expensive cures rather than cheap prevention. To make health care less expensive, many developing countries officially have a triage system to ensure that affordable (often free) basic curative services are available to the poor relatively close to their homes.

The benefits of preventive healthcare is not as salient as that of reactive measures. The fact that the poor might not take the most rational actions towards their own healthcare might not be attributed to the fact that they do not care, but simply that they follow the same heuristics that humans do.

Preventing issues like malaria can be cheap and super cost efficient, but the benefits of these are not as apparent as compared to getting treated afterwards. Thus, they might not necessarily choose to invest in getting preventive healthcare measures when these returns appear arbitrary. What is needed is to be able to nudge and make these preventive measures the default option in policies.