People should be paid to study poverty (but maybe not too much)

[The caveat: everything herein is pure pontification, and should not be construed as factual or even well-reasoned. OK?]

A few more notes on the World Bank today, since I've been looking for the people who do the modeling. I found Ms. ASR of Paris, France, and she did the counting-on-your-fingers gesture, going through the list of four or five people who do household-level models. I can't express the depth of my disappointment. This is an organization that spends billions of dollars on projects in economic improvement, and yet it has a half-dozen people who are really good at ex ante prediction without the crutch of regression or general equilibrium models? Now, I should warn you that I am no authority on the structure of the WB, and by no means know everybody there is to know. But I feel that there's a consistent story to be constructed here as to why there is such a glaring deficiency.

The WB is divided into regional departments: Europe and Central Asia (ECA), Latin America and Caribbean (LAC), et cetera. So where do you put the badass economists on the cutting edge of modern economics? They're in the Center, which doesn't do any projects, but contracts to the other departments. Contracting within the company, known from Dilbert as ``Battlin' Business Units'', is in this case a crappy idea. You set internal prices on resources you don't want overused, like the printing department. But if you have good non-region-specific economists, good methods people, they should have a frigging say in every project. Not necessarily the final say, but a contribution.

Anyway, as it is, I am told by Mr. PL of Palo Alto, California, the center needs to sell itself to the regional departments, which induces conservativeness (i.e., non-experimentalness and non-innovativeness). The first manifestation is that there is a preference for ex-post evaluation of projects (aka justification) instead of ex-ante prediction of the potential effects of future projects (aka guessing). After all, any ex-ante predictions is certain to be wrong on at least some scale, and isn't that embarrassing. The other manifestation is in methodology. I've ranted on this before, and I'd be happy to rant about it again, but you can only trust a linear regression so much. The stuff that may be more applicable to a given situation at hand but is at the same time more nonstandard, is less likely to be allowed the time and attention it needs. After all, the science does not need to be cutting-edge or even correct, it needs to sell to people who evaluate the WB but know almost no economics.

The hyperliberal critics are not helping much with this. The general critique is that the old economic methods are detrimental. Unable to distinguish between different schools of economics and different methods, many essayists boil this down as just saying that all economic analysis is detrimental. The focus thus shifts more qualitative analysis, about knowing the people and the culture, with perhaps a few numbers smattered around to give the impression that it's all scientific-like. I don't mean to belittle the understanding-the-culture part, because it is indeed essential to understand that part of the picture well, but you also need the serious attempts at qualitative prediction using modern methods. It all needs to be added together.

The waterfall in the lobby Another pet peeve of mine about the hyperliberal critics of the organizations that work to alleviate poverty, is that the entire concept of planning these things is overdone. Every dollar spent on an economist in Washington is a dollar not spent on food for a starving person. Further, economists who have nice things but study poverty are hypocrites---for example, the upcoming conference on America's role in alleviating global poverty at the Aspen Institute resort---I mean, Aspen Institute conference center.

First, let me say, as an economist who studies things in the way of poverty and inequality, that economists who study poverty and inequality are essential. As much as we'd like all the world's money to go into the alleviation of poverty, there is a quite limited supply of cash for the scope of things which need to be done. The Bank's operations are on the order of half a trillion dollars (I didn't feel like looking up the exact numbers, so please don't use this number as a reference. That's comparable to the US military (around .4 trillion) in absolute amount, but remember that the military is pure expenditure, while the WB balance sheet includes a lot of loans and otherwise restricted or not-quite-useful money, so I'm not sure how useful such a comparison may be). Spending even a billion dollars (0.2%) to make sure that that half a trillion is correctly spent seems eminently sensible to me; and I'm pretty sure the WB's operating expenses are well below that.

The presumption that people who work on issues regarding the poor shouldn't have nice things comes up often. The World Bank's main building is stunning. The lobby is twelve stories high, and yes, there is a waterfall, which is primarily not visible (except from the cafeteria), but adds an audible ambiance to the rest of the lobby. Up on the 12th floor, where the executives live, everything turns `nicer', with more wood, gold-colored wall directories instead of the grey directories on the other floor, and of course a two-story marble, wood, and glass-chandeliered ballroom.

Critics of the WB bring this up all the time (faithful readers will recall that the first time I'd visited, my host was supremely defensive), along with how all the employees seem to wear such nice suits. The logic goes along the lines of that one Emmy clip in Schindler's List: if only I hadn't bought this suit, I could have fed a hundred starving people, and if only I hadn't bought this nice pen, I could have saved another ten, and if only I hadn't eaten breakfast today at inflated U.S. prices, I could have fed four more.

The first failure of the argument is clearly that it is hypocritical. Even the most concerned of hippies buys themselves frivolous stuff at U.S. prices, and pay extra in rent to live in a nicer part of town.

But as anybody who's ever worked for a nonprofit knows, such an argument is also foolish in the long term. It's easy to attract people fresh out of college to be gung-ho and work hard, but it's really hard to get them to stick around. People who know the WB better than I do, such as Ms. ZK of Washington, Columbia, tell me that folks drop off with great frequency, and the better they are at managing the WB's money, the more likely they are to get drawn away to manage Haliburton's. If wood paneling and a waterfall manages to keep people from jumping at the first high-cash offer, then that is a great investment. [I think building costs are an especially good investment because if people buy lunch at the cafeteria under the waterfall instead of going out for lunch, they're more likely to be with coworkers and take a shorter lunch, so the WB has just bought itself a few hundred free person-hours with that waterfall. I'd be in their lobby 24/7 working on poverty issues for no pay myself if they just put a few wireless hubs in there. Also, the lobby is a common good, simultaneously adding value for several hundred employees.]

Conversely, the poverty conference in Aspen, featuring Al Gore, Jagdish Bhagwati (whom I've ranted on before), and other celebrities? I'm not entirely sure. [Don't have any links for ya on the conference yet, but check the news ticker over the next week or two.] Evidently, the only way to get some people to talk about something is to offer them ten thousand dollars a night in nice food and skiing passes. If that's the case, well, I guess that's what you've gotta do if you want them. But the question remains: are the uber-elite pulling their weight? Is the speech that Al Gore's speech writer wrote, which will surely be an inspiration to all who hear it, really providing tens of thousands of dollars worth of inspiration? I shouldn't be trying to outguess the folks at Aspen, who evidently think that it is, but something in my gut says no.

But I'm not an upper-management type, so I clearly have no idea what is offered by personalities such as Al or Jagdish, both of whom are smart folks but don't particularly have much to contribute to poverty alleviation in particular (based at least on what I know of Gore and on Jagdish's book). At this level, these are the characters who not only to want to live OK and have nice things, but want to make sure that they're making more money than everybody else, and that while everybody else has little grey wall directories, the one on their floor is gold. I really don't know what the poverty and inequality community should do with such people: you can't just say fu*k `em and go back to working with reasonable people, because celebrities do indeed have influence whether we like it or not, but it seems that wholly catering to their demands is also sort of the wrong thing to do. Even for those attendees who are not Al Gore, it begins to feel less like valid work in a nice environment and more like purely unproductive `I got to ski with Al Gore' consumption. Maybe I'm just jealous because I wasn't invited and Ms. ZK was.