Economists Do It With Models

Warning: “graphic” content…

Bookmark and Share
Economists’ Never-Ending Quest For Efficiency, Philanthropy Edition…

August 23rd, 2011 · 5 Comments
Books · Economic Growth · Fun With Data · Policy

Last weekend, I went to Cape Breton to give a talk at a TEDx event. In case you don’t know, Cape Breton is wayyyy on the eastern part of Nova Scotia, and isn’t particularly flush with convenient flights into the area. So my weekend looked something like this:

This observation is actually kind of relevant- the theme of the conference was how to think intelligently about how to revitalize the area, since Cape Breton has suffered from a declining population and loss of industry in recent (and some not so recent) years. I couldn’t really give a talk on how to move the island in order to be more conveniently located for business purposes, and I’m not so familiar with the specific issues facing the island, so the best I could do was to give a talk about how to correctly measure the impact of potential social policies and economic development initiatives.

Not surprisingly, my talk was an attempt to steer people away from the correlation versus causation problem, or, in this case, specifically the “post hoc ergo propter hoc” problem. In other words, people have a tendency to look at initiatives and draw conclusions of the form “well, things got better once the program was implemented, so the improvement must have been because of the program.” This reasoning is incorrect since there is no comparison to what would have transpired had the program not been implemented.

One way to get around this problem is to revert back to the middle-school science project approach and conduct controlled experiments. The logic is that if a researcher constructs an experimental group and a control group so that the only difference between the groups is the treatment, any differences in outcomes for the two groups can be properly attributed to the treatment. In fact, this is what Professor Esther Duflo does in developing countries in order to assess the impacts of different social policies such as malaria bed net distribution and immunization incentives:

You can see comments and even download a version of the talk here. If you are the reading type, Prof. Duflo co-authored a book about her experiments called Poor Economics, which is also pretty interesting.

An economist friend of mine informed me that $7 malaria bed nets can reduce infant mortality by 20 percent, so it’s pretty clear that figuring out how to get these things to the people who need them (and getting those people to use them properly) is of the utmost importance. In fact, economists do, quite literally, put their money where their mouths are. For example, TAMTAM is a nonprofit organization founded by economists, and its main goal is to distribute malaria bed nets to rural communities in Africa in accordance with the methods that have been shown through the research of Professor Duflo and others to be the most effective and efficient at reducing the incidence of malaria. Similarly, the Bill and Melinda Gates Foundation hires economists to evaluate how to allocate philanthropic resources efficiently.

Research into program effectiveness is beneficial on multiple levels. The obvious level is that resources can be used more efficiently and for greater impact than if people have to guess about what works and what doesn’t. The less obvious level is that people are likely more willing to donate to fund these sorts of programs if they are confident that their contributions will have a significant impact.

I must admit, however, that Cape Breton, at least visually, doesn’t exactly seem like it needs my help:

Tags: Books · Economic Growth · Fun With Data · Policy

5 responses so far ↓

  • 1 Tabatha // Aug 24, 2011 at 7:21 am

    Jodi, I LOVED your talk. It was of great interest to me. Over the years I’ve often thought about whether or not the programs the government has put in place here have actually helped or hindered, and always wondered how they could ever be properly “measured”.

    Thanks so much for making the trip – it was great to have the opportunity to hear your thoughts. 🙂

  • 2 syed faisal raza rizvi // Aug 24, 2011 at 11:22 pm

    hy jodi m Bs(Econ) Student m 21 Yrs Old I like ur Lectures So mUch m Frm Pakistan Peshawar Will U Marry Me………

  • 3 proxykat // Dec 28, 2013 at 11:04 am

    What’s up, all the time i used to check website posts here in the early hours in the break of
    day, because i enjoy to find out more and more.

  • 4 Kareem // Oct 5, 2014 at 3:19 am

    We can conclude that with Hannah Montana and Britney mini games spears!
    It may not be thinking that it’s a complete world.

  • 5 Steven // Jan 28, 2015 at 11:40 pm

    Economist is the subject that has no end and the moment we understand this better chance of success we are going to have. I mostly love doing long term trade and there I get massive help from my broker OctaFX as they have great section for news and all the latest update so that helps me understand the market better and of course than I also get great results thanks to this amazing broker that I am trading with for past 2 years.

Leave a Comment