Stumbling and Mumbling

Living on a dollar a day

What exactly does it mean to live on a dollar a day? Here's a fascinating paper (pdf) that tells us, by drawing on evidence from 13 countries. Some highlights:
1. "The average person living at under $1 a day does not seem to put every available penny into buying more calories...Food typically represents  from 56 to 78% [of household spending]."
Despite this, hunger is common. Among the extremely poor in Udaipur, only 57% said their household had enough to eat in the previous year, and 72% report at least one symptom of disease.
2. "The poor generally do not compain about their health - but then they do not complain about life in general. While the poor certainly feel poor, their levels of self-reported happiness or health are not particularly low."
3. Spending on festivals - religious ceremonies, funerals and weddings - is high. In Udaipur, median spending on these by people living on $1 a day was 10% of income.
4. In several countries, the extremely poor spend about 5% of income on alcohol and tobacco.
5. In the Ivory Coast, 14% of people on $1 a day have a TV - and 45% of those on $2 a day have one.
6. Many of the extremely poor get income from more than one source. Cultivating their own land is not always the main source of income.
7. Participation in microfinance is not as high as you'd think. The poor seem unable to reap economies of scale, therefore.

Vaccination: good for growth

The Economist reports that vaccination programmes are good for economies:

In the case of many vaccines, there are non-medical benefits, too, in the form of costs avoided and the generation of income that would otherwise have been lost. These goods are economic.

This corroborates this idea of mine, and suggests these guys are right too.

Vaccination and growth

Owen Barder excepted, few people have given Gordon Brown the acclaim he deserves for launching the International Finance Facility for Immunization.
This is a useful response to meanness and stupidity: the meanness of governments in not fulfilling their moral obligations to poorer countries; and the stupidity of bond markets in being prepared to lend at record-low real interest rates.
One interesting question, though, is: what's the link between life-saving vaccination programmes and subsequent economic growth?
Bog-standard neoclassical economics says vaccination could be economically damaging. Keeping kids alive will merely decrease the capital-labour ratio. This will encourage firms to use cheap labour and discourage investment. It's pretty widely agreed that, across countries, there's a negative relationship between growth in population and growth in GDP per capita.
Luckily, there's a more optimistic possibility. Anything that increases people's probability of living a long life increases their incentive to get an education; the pay-offs to schooling are poor if you die at 15, but good if you live to 60+. And increases in education can lead to sustained growth.
If you think this is unlikely, just consider this paper (pdf) by Michele Boldrin and colleagues. They show that increased survival probabilities in the 18th century led to - and possibly caused - the rise in GDP growth associated with the British industrial revolution.
You might think this story doesn't apply to vaccination of children. What matters for incentives to get an education are survival probabilities for people of working age, not for pre-school children.
But there is a link. If children survive childhood illnesses, families can reach their optimum size with fewer births. And the fewer childbirths there are, the greater are  the survival prospects for women.
This in turn should increase the education of girls. There's no point educating these if they'll die in childbirth. But if they do survive, there's more value in educating them.
It's possible, therefore, that IFFIm will raise long-term economic growth. To do so, however, requires that the increased demand for education be met.  And it requires that girls be encouraged to get an education - and jobs - as well as boys. As Bill Easterley says here (pdf):

Development happens when many agents have the institutional environment that allows and motivates them to take small steps from the bottom.

Could this institutional environment include non-sexist attitudes?
Another thing: Speaking of Mr Barder, can I recommend you read this?

What do we owe the world's poor?

Charity dictates that we support this appeal. But does our obligation to help the world’s poor go beyond this? Do we have a deeper moral duty to help than mere charity?

This question hasn’t gotten anything like the attention it deserves.

The government’s position is clear, though implicit. The Department for International Development’s budget this year is £4.5bn. Spending on social security will be £127.3bn. It clearly believes, therefore, that our duties to relatively poor Britons are vastly greater than our duties to absolutely poor Africans.

But are they? There are four separate arguments that we have a much stronger duty to help the world’s poor than these numbers suggest.

1. Utilitarianism. The money we westerners spend on luxuries could save the lives of the poor, or vastly improve them. Maximizing happiness therefore requires huge cuts in luxury spending here to finance global redistribution. Peter Singer has said: “Whatever money you’re spending on luxuries, not necessities, should be given away.” This is one implication of utilitarianism which Richard Layard overlooks.

2. Redistribution as insurance. Ronald Dworkin has argued for redistribution of income on the basis that it replicates the insurance policies we would have taken out before being born, had we had the chance to do so. We should redistribute to the handicapped or unskilled, he says, because we would have taken out insurance against being born handicapped or unskilled, if we could have. Now, it’s a huge misfortune to be born in Niger rather than Nuneaton. So Dworkin’s argument says we should transfer money from Nuneaton to Niger.

3. It’s a logical truth that justice is global, simply because moral principles, by definition, are universalizable; this is Robert Goodin’s argument (pdf). It is no more logical to say I owe more to an Englishman than to a Malian than it is to say that I owe more to one from Wigston than one from Tur Langton because I was born nearer Wigston than Tur Langton.

4. Severe poverty represents a violation of human rights, because it results from an unjust global economic system. This is Thomas Pogge’s argument (doc).

So, what are the arguments against all this? Pogge’s case has been criticized by Mathias Risse.

There are two arguments that are irrelevant for my case. One is the libertarian one, that any forced redistribution is a violation of rights. This argument, though, applies to internal redistribution as well as foreign redistribution. It doesn’t justify us redistributing less to foreigners than to Britons.

Another irrelevant argument is that foreign aid just doesn’t work. Let’s assume this is empirically true; the usual candidates dispute it well. This doesn’t justify redistributing less to foreigners than to Britons for two reasons. First, because there’s also some evidence that redistribution within the UK – at least in the forms it has taken – doesn’t work. And second, take this from Tim Worstall:

By concentrating on financial capital we are missing the reason that development is slow or non-existent. Rather, it is a shortage (or multiple shortages) of human, social and institutional capital that is the constraint, and throwing more money at the problem will not just be useless but will in fact make the problems worse.

This a case for the west helping to build institutions, rather than donate money. It’s not a case for us doing nothing.

Instead, one argument against global redistribution is that – except in extreme cases – the world’s poor are not unhappier than relatively poor people in rich societies. Indeed, one survey has found Nigerians to be the happiest people in the world. This might be because they don’t compare their condition to rich westerners, and so don’t feel deprived, whereas poor westerners do make the comparison and do feel deprived. This might be an argument against Singer’s case for world redistribution. But it’s not an argument for redistribution within a nation, because – as Will Wilkinson points out – it might well be cheaper for relatively poor westerners to change their preferences than for the rich to pay them off.

Another argument against world redistribution is in Rawls’ Law of Peoples. Society, he says, is a co-operative venture between people of similar values. It’s this co-operation that yields duties of redistribution. Because Malians and Britons don’t co-operate with each other, there’s no duty of redistribution between us. Our duty to Malians is to help them become self-governing and self-sufficient, not to give them money.

Richard Arneson, among others, has criticized this (pdf). Even if society is a cooperative venture, he says, this only creates prudential, self-interested, reasons to redistribute income – to stop the relatively British poor rebelling or turning to crime. It doesn’t create a moral argument for redistribution.

Obviously, I’ve only given a very rough sketch here – please follow up the links.

My questions are: how strong is the moral (as distinct from prudential) case for redistributing more money internally than externally? And how is the case for internal versus global redistribution affected by multi-culturalism? If members of British society don’t have shared common values, what is the argument for internal redistribution over global redistribution?

A contemptible hypocrite

The prize for hypocrite of the week goes to Gordon Brown. He called the campaign to make poverty history "the greatest moral crusade of our times." Why, then, does he prefer to spend £6bn on ID cards (on his own estimate) when that money could go on relieving poverty?

And £6bn would make a difference. This paper (pdf) estimates that it would buy insecticide-treated mosquito nets for 45 million African children for the next 9 years. That would generate $6.7bn a year in economic benefits for Africa and save around 50,000 lives a year. That’s 450,000 in total.

You might think it’s a cheap shot to lump together the fight against poverty with ID cards. Not at all. Basic common sense says that, if you have money to spend, you should spend it where it will do the most good.

That Mr Brown prefers to spend £6bn on ID cards rather than on aid to Africa can therefore mean only one of two things. Either he is not applying the elementary principles of economic rationality, or he believes the benefits of ID cards are greater than the lives of 450,000 African children.

Giving, protesting and rationality

Which is best: to give charity to Africa or to protest at the G8 summit? Natalie Solent and Chris Bertram have been debating this. I suspect both are missing a point about the nature of rationality.

Natalie says:

[Protestors] hope to influence one group of leaders to transfer more money to another group of leaders so that the latter will use it to do good…Compare that to just giving money. How likely is it that the chain of causality that the protestors think will do good will actually break at some point?

Natalie’s right. If we consider the protestors as a single collective actor, instrumental rationality – aimed at improving Africans’ well-being - would require that they stay home and give the money they save to charity.

However, the protestors aren’t a single collective actor. And instrumental rationality isn’t the only type of rationality. These two facts create a case for protesting.

Case 1. A potential protestor might reason as follows. “Oh no. Some damn fool has called for a protest. If people like me don’t show up, G8 governments will infer that people don’t care about African poverty so they’ll do nothing about it. If I turn up to protest, so too will people who think like I do. And although a big protest won't necessarily do Africans much good, a small protest will hurt them. I want to avoid that.”

In terms of causal rationality, this reasoning is nonsense; there’s no causal link from this person going to Edinburgh to anyone else going. Instead, this is an example of diagnostic rationality – one person’s going to Edinburgh is diagnostic of others going.

Case 2. People don’t protest merely to change policy. They do so to demonstrate what type of person they are. Protesting isn’t causally rational – it doesn’t cause a change in policy – but it is symbolically rational. It’s a way of symbolizing who protestors are.

My point here isn’t to take sides with Natalie or Chris. It’s just to show that there are three different types of rationality that bear on the issue – causal, diagnostic and symbolic. Rational protestors are using either diagnostic or symbolic rationality, not causal rationality. This shouldn’t be an alien idea. If it weren’t for these two types of rationality, no-one would vote.

Good libertarians, of course, should know this. Their reading of Anarchy State and Utopia should have led them to Robert Nozick’s other books – in particular this superb one, in which he shows the many different meanings of rationality.

Buying Zimbabwe

Today is the 138^th anniversary of the US Senate’s approval of the Alaska purchase. This raises the question: why don’t countries sell territories to each other any more?

In theory, one would expect to have seen more such purchases since 1867, because income inequality between countries has risen, meaning that rich countries would sacrifice less to buy out poorer countries.

Indeed, it would be surprisingly cheap to buy a whole country. Take Zimbabwe. In 1999 the Zimbabwean government bought 90,000 hectares of farmland at a price of Z$200 million. If we assume all Zimbabwe’s land is as valuable as this farmland, this valued the country's 39.05 million hectares at Z$86,777 million. Of course, some urban land is more valuable than farmland. But scrubland and mountains are worth less.

Now, let’s assume land prices have kept price with Zimbabwe’s enormous inflation rate since 1999. The value of Zimbabwe now is therefore Z$18644 billion.

With an exchange rate of Z$11417 to the pound, this values Zimbabwe at £1.6bn. This follows from the Mugabe government's own estimates.

Now, you can quibble with the calculations. But if I’m anywhere near the ball-park, this is nothing. It’s the cost of administering immigration policy for a year. And it’s about half of one percent of the £327bn cost of the wars in Iraq and Afghanistan.

This suggests it would be easily feasible, in financial terms at least, for the west to buy out Zimbabwe - and, by extension, other sub-Saharan countries.

All I’m doing here is extending a point made by Keith Hartley (pdf) at the recent Royal Economic Society conference, when he said it would have been Pareto-superior to have bribed Saddam Hussein to leave Iraq, rather than go to war.

And consider the benefits of western ownership of Zimbabwe. We’d bring freedom, good government and (though this would require a little effort) well-defined property rights. All these are essential for economic development. And unlike in Iraq, we’d meet less resistance because we’d have bought off our potential enemies.

Of course, there are tons of details to be worked out. Not least is whether we need to buy whole countries or just parts of them, which could act as beacons for the rest of the region, showing what good government can do.

What could be wrong in principle with this plan? Sure, it violates national sovereignty – though why this (as distinct from democracy) is a value eludes me. And there’s something unpleasant about handing money to dictators. But might it be that the benefits of doing so outweigh the costs?

Put it another way. If you think the war in Iraq was a good thing, how can you oppose this plan, given that it brings freedom and good government to people at a far lower cost?

The case for aid

Tim Worstall at Tech Central Station has some good ideas about how to make foreign aid work better.

Rather than quibble with him, I’d make three elaborations.

Risks and redistribution

The western public believes international risks should be pooled. That’s the natural inference to draw from the huge donations bring given to victims of the Asian tsunami.

But what’s so special about natural disasters? These are not the only risks we might want to pool. There are risks of dying from poverty-related illnesses, or being a victim of a civil war, or of suffering from long-term economic stagnation.

And we in the west do much less to pool these disasters.