Links I Like [8.15]

Does Fair Trade Help Poor Workers?  (Or read The Taste of Many Mountains)

Turns out the World Bank’s ‘Doing Business’ report isn’t associated at all with actual ease of doing business

Two ways to think about causality

Science isn’t broken, it’s just really REALLY hard

Three Things Secular Development Academics and Practitioners Can Learn from the Faith-Based Development Community… and vice versa

A curated list of technical blog posts about impact evaluation

[Book Review] The Taste of Many Mountains

I write this as I sit in a coffee shop sipping a cappuccino. The coffee beans were grown in Kenya. They had to be irrigated, harvested, packed into bags, imported, roasted, packaged again, transported, marketed, and brewed. The milk was likely farmed in the United States. It was taken from the cow, pasteurized, homogenized, packaged, transported, marketed, steamed, and finally aesthetically mixed into my cappuccino. Remarkably the whole thing cost me only $4.25! I say ‘only’ because, just think about all the people involved, all the families that this product influences. Still I tend to wonder: Who benefited most? And was anyone exploited?IMG_2195

This is the topic of Bruce Wydick’s novel about coffee production and consumption in today’s world. Yes, that’s right, a novel. An empirically minded development economist has written a story (with a setting, a plot, complications, a crisis, a climax, and denouncement). And, I’m not kidding, it is quite a page turner. This is a unique quality of a book with the topic of globalization and agricultural value chains. Not only does the book present the nuances of poverty and globalization, it includes themes of love, life, joy, and lament.

TMM_CoverThe Taste of Many Mountains‘ follows four graduate students – Angela, Alex, Rich, and Sofia – on a summer of fieldwork in Guatemala where they are charged with the task of calculating the value added and profits at each link in the global coffee supply chain. A primary research objective being: is fair trade coffee better for poor farmers than free trade coffee? The answer, of course, is nuanced and rather technical, but this book explains the concept as well as I’ve ever read.

What sets this book apart from other books is it is both a story that doesn’t loose sight of the evidence and a research report that doesn’t loose sight of the story. The story is based on actual research that has recently published in The Review of Economics and StatisticsAdditionally the book is filled with impassioned discussions about the core tenants of international trade economics and the sometimes visceral (perhaps spiritual) call to help the poor and vulnerable. These conversations engage a tension anyone who has spent time in a developing country has likely considered. For example, After Angela’s first day in Guatemala, she has the following conversation with Sofia:

“Sofia, about what we saw today… why? I know I’m probably being too persistent, but why is there so much poverty in places like this?”

“Again, I don’t have a satisfying answer to that question.”

“Try me. I just might be satisfied.”

Sofia turned out her own light and lay in a sleeping bag that she had thrown on her bed. She gazed upward where some lights from the town illuminated the pine boards that made up the ceiling. “Well, it seems to be related to a couple of basic things, one being how people in society organize themselves.”

“You mean institutions? That always sounded king of boring.”

“Trust me, it’s not boring. Understanding them is something people win Nobel prizes for.”

“I guess I don’t really get it,” said Angela.

“The rules of the game that society makes for itself. Institutions either encourage people to make a living by creating or doing things that benefit other people, or by siphoning off what other people have earned doing just that. In rich countries it’s mainly the former, and in poor countries it’s more of the later. When people learn that the rewards of creativity and hard work are mostly confiscated, they don’t bother. So a lot of people say that it’s all about institutions.”

Sofia stopped. Angela figured that Sofia wanted to go to sleep, but she’d had a cup of coffee after dinner, her bed was hard, and she was surprisingly wired even though it had been a long day. So my relatives are poor because their rules of the game aren’t any good, she thought.

“So what’s the other part of it?” Angela asked. There was another pause.

Sofia turned her head on the pillow back to face her. “Well, probably another part of it has to do with things like the aspirations people have for their lives and their identity. Sometimes it’s hard for, say, the son of a peasant to see himself as capable of being anything other than a peasant. But if your dad was a doctor or an engineer, then you might have higher aspirations.”

Angela thought about herself for a moment. “My dad was a doctor, at least my American dad. I have plenty of aspirations, but I think also plenty of identity issues.”

The book is stuffed with engaging yet informative dialogues like this one. Discussing cutting edge topics in development economics such as institutions and aspirations to debating the merits and demerits of International Trade Theory vs. World Systems Theory.

It is a really enjoyable read and is applicable for almost anyone interested in helping others across national borders. If I ever get the chance to teach an introduction to development economics class at an undergraduate level, I would seriously consider crafting a curriculum around this book. For those interested, the book also includes a list of references to the papers that inform the various dialogues throughout the book.

And (SPOILER ALERT) Bruce recently wrote about The Flaw in Fair Trade on his blog. But I suggest reading the book.

Why We Do Rigorous Evaluation

Over the past week there has been an interesting debate between activists and academics in the comments section of this article, entitled 10 Reasons Fair Trade Coffee Doesn’t Work by Bruce Wydick.

As the title of the piece hints, Bruce isn’t the biggest fan of Fair Trade coffee. As you can probably imagine, this opinion is not generally accepted. One commenter, Dean’s Beans Organic Coffee Company, (perhaps sarcastically), invites Bruce (who is releasing a book on the global coffee industry) to “see what real fair trade looks like”. Wydick responds,

Thanks for your reply, and it is a great illustration of why we need to do serious academic research and not rely on observations and anecdotes. The differences you observe may partly be caused by membership in a fair trade cooperative. More likely they are due to a selection bias where villages and groups of people who are well-organized and forward thinking do things like join fair trade coops. In other words, many of the differences we observe in communities are due to causal factors other than the program. The reason we do serious research rather than rely on anecdotes and stories is to separate what appears to be true from what is true, on average. There are a number of ways to statistically separate and identify causal effects that researchers to find out what true impacts are. (If you want to explore these, I would suggest with Poor Economics, by Esther Duflo and Abhijit Banerjee as a start.) What is true, on average, and corroborated by paper after paper is that fair trade coffee has minuscule impacts compared to other worthy types of development programs, and it is sad because many people as yourself are unaware of how poorly fair trade coffee performs as an approach to free people from poverty.

This was responded to with misunderstanding and naiveté. Wydick goes on to clarify,

Appreciate the comments people have posted on the article, and I want to respond to a few more of them.

Several people have downplayed the results of “academic studies” in favor of hearing individual voices of producers and others involved with fair trade. When evaluating the merits of a program or an issue, individual voices are important, but not as conclusive as rigorous research that seeks to find the “average” of what the voices (and data) are saying. For example, if any of us had a child who was suffering from a rare form of cancer, we would make our treatment choice based on the evidence the best academic research gives in an evaluation of each type of treatment. And we clearly wouldn’t base such a critical decision on how a certain individual felt who had had the treatment, or, especially, the opinions of those in the pharmaceutical companies who sell the drug, who of course have a conflict of interest in how the treatment is perceived by the public. Development interventions are just as serious as cancer treatments because we are dealing with the lives and livelihoods of people often living very close to subsistence, where bad interventions can prove very costly. They have to be rigorously evaluated to see if their claims hold up.

Academics are kind of in this referee role in a number of areas, and many people do not like their findings. They may conflict with strongly held prior beliefs, identities, and institutions in which they have a personal investment. The case of global warming is another example where academics clearly show a consensus about its existence and causes. Yet there are many who feel comfortable countering the evidence presented in a high-quality study in the journal Science with “how darn cold it was in Chicago last week.” Others will deny global warming because they don’t want to change their habits, and so denying that it exists justifies inaction.

In the case of fair trade coffee, the central purpose of the system is to increase the income of impoverished coffee growers. This is an effort entered into with the best of motives. But research overwhelmingly shows it does not do this well, if at all. Since this is the case, rather than take a defensive posture toward the findings of academic studies, it would be refreshing to see the fair trade coffee industry begin to act more constructively and begin to correct the flaws in the system.

Obviously, I side with Wydick in this debate. I encourage you, however, to read the original article and the ongoing debate in the comments section and decide for yourself.