Money buys happiness after all

Money buys happiness after all

Aid Watch

Does happiness rise with income? Are people in poor countries less happy than people in rich countries?

Much of what we thought we knew on this topic comes from a famous 1974 study by economic historian Richard Easterlin. Easterlin found that within countries, rich people tended to be happier than the poor. But contrary to expectation, rich countries as a whole were not happier than poor countries. And even stranger, in the US, when per capita income rose sharply from 1946 to 1970, bliss did not rise alongside it.

To the best of our knowledge, there is not yet any research debunking The Beatles' well-established Can't Buy Me Love Hypothesis (1964)

Easterlin resolved this seeming contradiction—known as the Easterlin paradox—by hypothesizing that "[t]he increase in output itself makes for an escalation in human aspirations, and this negates the expected positive impact on welfare." That is, having more stuff actually tends to make people want more stuff, and doesn't make them any happier.

The Easterlin paradox has been crumbling, but is not altogether demolished, with new expanded datasets and recent research. A great summary of research collected in a newly published volume International Differences in Well-Being, edited by Ed Diner, Daniel Kahneman, and John Helliwell, plumbs voluminous new data (World Values Survey and Gallup World Polls from a larger set of countries) to update our knowledge.

One important refinement in these new studies is the distinction between feeling happy from day to day (more a mood, perhaps) and long term "life-satisfaction." The Easterlin paradox does NOT reliably hold with "life-satisfaction."

Bill lays out exactly which parts of the Easterlin hypothesis appear to be holding up over time, and which are collapsing under the weight of the new data, in a new review published today in the Lancet.

If the Easterlin paradox no longer holds true—particularly the lack of difference between rich and poor countries on average happiness—what are the implications for development policy?

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Does Microfinance Work?— A Review of the RCT Literature

Does Microfinance Work?— A Review of the RCT Literature

Financial Access Initiative Blog

In the past, the microcredit movement was driven by inspiring stories, but today donors and investors increasingly see the importance of measuring impacts. In order to credibly establish program impacts, having control groups is central, and the development of randomized controlled trials (RCT) is moving methodological possibilities forward.

Some of the most well-known researchers in the RCT field include, Abhijit Banerjee and Esther Duflo, who just released their new book Poor Economics this week, and Dean Karlan, who co-wrote the recently published More than Good Intentions with Jacob Appel. The findings from their RCTs are central to the stories told in both these books.

Nonetheless, after 30 years of microcredit and the rise of randomized trials, we still don't have an impact evaluation that is ideal, but we're getting closer. So we at FAI decided it was time to do a little round-up of what the RCT research from our archive suggested on the subject of whether microfinance works. We've thrown in a couple of additional and newer papers on the subject for good measure.  You'll see that while the results don't tell us that microfinance works all the time to solve every problem we hoped it would, the RCTs do tell us a lot about what is working and what is not working in individual programs. So perhaps we need to get more specific with our questions. Instead of asking whether microfinance works, maybe we should be asking when, how, and why it works, and also what we can learn from situations where it doesn't have the intended effect.

• "The miracle of microfinance? Evidence from a randomized evaluation." Abdul Latif Jameel Poverty Action Lab Working Paper. Banerjee, Abhijit, Esther Duflo, Rachael Glennerster, and Cynthia Kinnan. 2009.
• "The impact of microcredit on the poor in Bangladesh: Revisiting the evidence." Morduch, Jonathan, and David Roodman. 2009. "" Financial Access Initiative and Center for Global Development Working Paper.
• "The impact of microfinance: A review of methodological issues." Goldberg, Nathanael, and Dean Karlan. 2006.
• "Impact of credit: How to measure impact, and improve operations too." Goldberg, Nathanael, and Dean Karlan. 2008.
• "Randomized trials for strategic innovation in retail finance." Goldberg, Nathanael, Dean Karlan, and Jonathan Zinman. 2008.
• "Expanding credit access: Improving microfinance operations and measuring performance with credit scoring." BASIS Brief (November). Karlan, Dean, and Jonathan Zinman. 2007.
• "Expanding microenterprise credit access: Using randomized supply decisions to estimate the impacts in Manila." Karlan, Dean, and Jonathan Zinman. 2009. Financial Access Initiative and Innovations in Innovations for Poverty Action Working Paper.

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Cash transfers: What are they good for?

Cash transfers: What are they good for?

Aid Watch

There is convincing evidence from a number of countries that cash transfers can reduce inequality and the depth or severity of poverty. For example, in Brazil a combination of cash transfer programmes accounted for 28 percent of the total fall in the Gini index (a summary measure of inequality) between 1995 and 2004….

Well-designed and implemented cash transfers help to strengthen household productivity and capacity for income generation. Small but reliable flows of transfer income have helped poor households to accumulate productive assets; avoid distress sales; obtain access to credit on better terms; and in some cases to diversify into higher risk, higher return activities. These intermediate outcomes help draw poor people into the market economy on terms that allow them to benefit from and contribute to growth.…

There is robust evidence from numerous countries that cash transfers have leveraged sizeable gains in access to health and education services…However, transfers have had less success in improving final outcomes in health or education.  Cash transfers can help the poor overcome demand-side (cost) barriers to schooling or healthcare, but they cannot resolve supply-side problems with service delivery (e.g. teacher performance or the training of public health professionals). Cash transfers therefore need to be complemented by ongoing sectoral strategies to improve service quality.

From a new paper on the evidence for cash transfers from Britain's aid agency.

I've heard people talk about cash transfers as the next silver bullet. They're frequently mentioned in conversations about what's "new and innovative" in aid. Studies like this one, that synthesize what we know so far and point out where knowledge is still uneven, can help calibrate those expectations.

 

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Held Hostage: Funding for a Proven Success in Global Development on hold in Kenya

Held Hostage: Funding for a Proven Success in Global Development on hold in Kenya

Global Development: Views from the Center

By Justin Sandefur - I was dismayed to learn recently that school-based deworming in Kenya — one of the most celebrated and cost-effective successes in global development in 2009 — was not repeated in 2010.   The story of how that happened offers an object lesson in the gritty difficulties of translating evidence into policy. Intestinal helminths, aka worms, infect [...]

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More Than 1 Billion People Are Hungry in the World - By Abhijit Banerjee and Esther Duflo | Foreign Policy

http://www.foreignpolicy.com/articles/2011/04/25/more_than_1_billion_people_are_hungry_in_the_world?page=full

Aging Alone: King George’s Home for the Elderly in Freetown

Aging Alone: King George's Home for the Elderly in Freetown

Scarlett Lion

In January, I went back to the King George Home for the Elderly in Eastern Freetown, a place I'd visited in 2010 and taken many photos. It's a strange place — it's rare for the elderly to live in group homes in sub-Saharan Africa, but most of the people at King George's lost their children during Sierra Leone's civil war. There's a word for children who lose their parents — orphans — but no word for parents who lose their children. King George's is, in some senses, a place of deep sadness and isolation. And yet, it's also a place where people have made friends, cut each others hair, and spend the day chatting and listening to the radio.

To see photos from my previous trip, check this out, or visit the whole series on my homepage.

It was so wonderful to be back – I was greeted with such warmth and kindness, hugs and laughs. The article in BBC's Focus on Africa had made it to Freetown and the residents, for once, didn't feel ignored.

Like many unfortunate Sierra Leoneans, Fatu Sesay Maya lost both of her hands during the civil war to fighters who asked victims if they wanted "long sleeves" or "short sleeves." She speaks no English or Krio, a language common in the capital and elsewhere, but still spends her days saying "Hawa, hawa," meaning yes, yes, in Limba, a language from Northern Sierra Leone. Despite her disability, she is still relatively self-sufficient.

Prince Jarret, 80, shaves his friend Daniel Koroma's head on a sunny morning in February. Though both men lost their children and their families during the war and were alone and rejected by their communities, they've found each other at King George's.

Charles Doe rests quietly one afternoon. He spends most days playing his guitar and harmonica, alone in the corner where he lives and listens to the radio. "It is my best friend," he says of the guitar. "It can't lie." He once dreamed of being a musician.  During the war, all of his children died and he lost track of his other relatives. King George's has been his only home for the last decade.  He says he would like his guitar to decorate his coffin.

Onike Williams, 71, has lived at the King George home for more than fifteen years. Her family, who tolerated her speech impediment before the war, abandoned her as soon as they could. She never had any children, and mutters that people say, "I an ugly woman-o." Despite what others may think, Onike smiles all the time and is quick to laugh.

Thomas Daniels is younger and more able than many of the residents at the King George home, but he is no less alone. He was working for an iron ore company in Liberia when war broke out in there and in Sierra Leone and he was never again able to locate his wife or children. He assumes they died in the war.

Daniel Williams lost his family and his vision during Sierra Leone's civil war. He plays harmonic, recorder, and he sings. His best friend lives in the bed next to him, and his also named Daniel.

"In the name of the Lord I greet you! I am the most stupid fool in the world!" is the way Egbert E. Emens greets most people, most days. He lost his wife and several children during the war. His son put at King George's because he could not care for Egbert while he was working during the day, and Egbert had been wandering off and exposing himself to children in the neighborhood. There's a huge range of mental and physical capacity among the residents at King George's.

Remie Edwards sits outside on the porch of her building one afternoon. On some days, she is talkative and friendly, offering blessings and laughing with the other residents. On other days, she is combative and quiet and prefers to be left alone.

Mamie Ballay was once a beauty — and she still is. She goes to great lengths to keep up her apperance at King George's, getting her hair plaited regularly and asking the care takers to paint her toe nails. She didn't like the first photo I took of her because her dress was red, and she said she looks better in pink. I think she looks nice in both.

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The Rebranding of Philanthropy

The Rebranding of Philanthropy

Tactical Philanthropy

A lot of effort has gone into rebranding philanthropy from "giving away money" to "making a social investment". While the shift has supporters and detractors, I think the most useful and interesting way to think about the underlying motives for the shift is as an attempt to move philanthropy from the "should" category (you "should" work out, eat healthy, call your mom and give to charity) to the "want" category (you "want" to have fun, feel good about yourself, eat yummy food). My post last week about the rebranding of baby carrots as "junk food" and the lessons to be learned for philanthropy was meant to tap into this line of thinking.

In the Fast Company article about baby carrots being branded as junk food, the carrot company CEO talked about how most all of the advertising companies who applied to work with them tried to make baby carrots more fun, but kept returning to their status as a "health food". It was only the winning advertising company who completely took baby carrots out of the "should" category (you should eat healthy food) and put them into the "want" category (you want to eat this cool, fun, tasty product).

This weekend at the grocery story I ran into this new packaging of Mandarin oranges:

The basic concept is similar to the junk food baby carrot campaign. Note the plastic, shiny packaging, the "cool" character on a skateboard, the tagline "One of life's sweetest pleasures", and the "grab 'n go" handle.

But the company doesn't go all the way. The product was in the produce department, not in the snack food aisle, and they still stick the "healthy snack, naturally sweet" tag on the packaging.

Of course, while philanthropy does make people feel good and can be marketed in the "want" category, a major part of what makes people feel good is the idea that they are doing good for others. It is like a health food that only tastes good if you believe it is healthy.

In this hilarious segment of Curb Your Enthusiasm, Larry David finds out just how bitter the giving experience can be when he suddenly feels like his giving is in the "want" category instead of the "should" category. When he suddenly feels like his giving is something he's doing for himself instead of others, his giving loses its meaning and value. (warning: some explicit language at the end of the segment)

(Click here to see the video if you are viewing this in an email)

So what's the answer? I don't know. But I do know that philanthropy shouldn't be in the "guilt" category. Those things you do because you "should" even though you really don't want to. I've always thought that the phrase "give back" when used in philanthropy sounds like the donor has "taken" something that must be returned (and in fact, I think many people think about giving this way).

As we explore new blended value propositions, I think it is important that we keep in mind the strange characteristics of philanthropy. It is like really tasty health food, or maybe junk food that's good for you. But whatever it is, it is something people do enjoy and we need to embrace this aspect of the giving experience.

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