In the summer of 2012 I read two books (ok, I read more than two books, these are just two highlights) More Than Good Intentions By Dean Karlan and Jacob Appel and Nudge by Richard Thaler and Cass Sunstien. Both of these books were incredibly insightful and fun to read—a rare combination in books about policy, poverty, economics, and psychology.
I’ve wanted to write a blog piece about these books and their implications for quite some time, but never felt quite ready. That is, until now. What follows is a blog piece that took me over a year to write.
More Than Good Intentions (along with Poor Economics by Abhijit Banerjee and Ester Duflo) are the first books I recommend to anyone who is looking for an introduction to the topic of economics and poverty. I will not spend time reviewing them here as a former Calvin College professor Roland Hoksbergen has already wonderfully reviewed both MTGI and PE in the Journal of Faith & Economics.
Instead of filling pages with head spinning statics on various countries and follow up stories to explain these statistics; these books take a more micro level approach. Rather than add to the (nauseating) debates about aid and development these books carefully cut a path through the work of Easterly, Sachs, Collier, Moyo, and Deaton by examining what works and what doesn’t help the poor escape their poverty. Both books use a “new economics” or a “radical rethinking” to help fight and solve global poverty.
What is this “new economics” and “radical rethinking”?
Behavioral economics is (basically) the marriage between economics and psychology. As an academic field it reexamines all of the (so called) wisdom economists (presumably) know about the world because most of it is (probably) wrong. Humans don’t always act rationally in their self-interest; they often act irrationally or rationally based on a set of standards other than neoclassical dogma. Nudge (along with Thinking Fast and Slow by Daniel Kahneman) are the so called ‘Bibles of behavioral economics’.
The books present a new flavor of political ideology paradoxically called ‘libertarian paternalism’. Libertarian because policy makers don’t explicitly make decisions for people, but paternalism, because people often don’t make good choices; the optimal choice can be encouraged. In the parlance of Thaler and Sunstien we can be ‘nudged’ to be an organ donor, to recycle, to sign up for retirement savings, to eat healthy, to pay taxes, etc. Both the British and United States governments have installed so called ‘Nudge Units’ to help bring this kind of policy to life.
Why all this gushing about books I’ve read months ago? Last week Freakonomics radio published a podcast entitled “Fighting Poverty with Actual Evidence”. The podcast was a panel session with Richard Thaler (author of Nudge) and Dean Karlan (author of More Than Good Intentions). For me, this was just about as good as a podcast can get. What follows are some thoughts about the podcast specifically and the topic of fighting poverty (and building God’s Kingdom) with actual evidence more generally.
The panel session was hosted by an organization called Innovations for Poverty Action (IPA), an organization founded by Dean Karlan. The mission of the organization is to discover what works in alleviating poverty mostly through the use of randomized control trials (RTCs). (The work IPA does around the world is fantastic; allow me to nudge you to check it out.)
The best way to explain RTCs is to draw parallels to the methodology of medical drug testing. Generally there are two groups—a control group and a treatment group. The control group ‘gets’ nothing while the treatment group ‘gets’ the treatment, intervention, thing you want to measure, etc. The effects are then observed and measured.
This method works in the field of poverty alleviation and development is as follows: Say you want to know if giving textbooks away to schools in developing countries will help raise test scores and improve school attendance numbers.
An independent researcher would identify double the number of schools the program has funds to support. Randomly select half of those schools to receive free textbooks, while leaving the other half with none. Then the researcher would compare the test scores of these two groups of schools to see if the textbooks had any sort of recognizable impact. As it turns out, giving textbooks away for free doesn’t work—at least in Western Kenya, where this four-year study took place.
Sounds easy, right?
Well, not quite. Randomized control trials provide great feedback for governments and organizations looking to solve any sort of social problem. The major roadblock is evaluations of this nature are often expensive and always challenging to execute well. Studying human beings in real life is much more challenging than studying a medical drug in a controlled laboratory environment. Human behavior, achievement, and success are dependent on seemingly endless factors. The best randomized evaluations control for as many of these factors as possible, but to do this completely in a real world setting is extremely challenging. It is impossible to say, “Lets run 2008 over again and this time there is no global economic crisis”.
-Building His Kingdom-
My work in Kenya is cut from the same cloth of much of what is discussed above. We started with a question. Would business development be more effective with more thorough support of local churches?
Perhaps you can guess how the project is set up. We selected three churches to work with as treatment groups; all part of different denominations and in different geographical areas of Western Kenya. At the same time we have selected three different churches of the same denominations in the same geographical areas to act as control groups. This will give us an idea of what the impacts of this program actual are.
This information, while interesting, is all-around uninformative without the next step. We have another set of control groups that do business development through local non-profits or financial institutions (the normative vehicle of business development around the world). For these we went outside the country to Ghana and Uganda. With this information we are now able to compare the impacts; i.e. business profitability and growth, capital investment, attitude and calling, etc.
This brings me to a seemingly strait forward conclusion. Years ago the medical profession underwent a revolution of sorts. Instead of fighting disease and sickness with medications based on hunches and textbook theory, they began experimenting, gathering actual evidence, and making informed decisions about what worked and what didn’t.
As we speak this same kind of revolution is happening in the field of poverty alleviation and development. Instead of fighting poverty with interventions based on hunches and textbook theory, researchers are experimenting, gathering actual evidence, and making informed decisions about what works and what doesn’t.
The questions I have for all of us are motivated half by curiosity and half by a desire to push the envelope. Is the Church willing to engage with this sort of methodology in its work to build God’s Kingdom? Is the Church willing to invest in the study of human behavior as it applies to evangelism, missions, and serving the ‘least of these’? Is the Church willing to run experiments and gather actual evidence?
Running experiments, gathering actual evidence, and making informed decisions are how we learn to do good better. Medical labs do it; businesses do it; government policies and organizational programs are starting to do it; baseball teams—at least the good ones—do it (see Moneyball); it is time for the Church to do it. It is time we build God’s Kingdom with God more effectively, with actual evidence.