20 Jul 2017

Review: Development Projects Observed

Albert O. Hirschman wrote this book in 1967 with the permission of his home university (Harvard), the funding of the Brookings Institution and Carnegie Institute, and the cooperation of the World Bank, which provided access to their projects in El Salvador, Ecuador, Ethiopia, India, Italy, Nigeria Pakistan, Peru, Thailand, and Uruguay.

In his preface (p xi), he notes a key finding of his research:
In the end, my argument amounted to denouncing attempts at trait-making [proposing and implementing a project that may not fit with local conditions] under certain conditions. Some narrow-latitude tasks simply go beyond the capacity of a society as presently constituted and are therefore likely to end in failure.
This passage previews what promises to be an insightful early critique of today's International Aid Community -- one that I have criticizedmany. times. It also indicates that this book is still well worth reading 50 years after its publication.

Perhaps the most important reason for reading this book is Hirschman's accessible and conversational style of connecting academic curiosity with realistic critique. You can already tell in the first few pages that you are reading the words of a man who has learned a few key lessons after seeing a lot -- as well as the words of a man who knows that his story is not the only one. Every "development project" has a unique character.

Hischman is known for coining new terms ("Exit Voice Loyalty"). Here, he coins "the hiding hand," which hides surprises that drive a project off its planned course and hides people's capacity to solve those complications. Hischman is therefore pessimistic that we know what we are doing but optimistic that we can actually achieve a lot despite that. When using this term, he is quick to contrast the bureaucrat with the entrepreneur, in that the former is more shy about taking a chance and less eager to innovate to prevent failure. These attitudes may determine the difference between bureaucratic failure and entrepreneurial success on the same project.

After introducing and discussing this idea, Hirschman has four chapters on Uncertainties, Latitudes and Disciplines, Project Design (trait taking and trait making) and Project Appraisal (the centrality of side effects).

I'm going to rush through notes for the rest of the book because (a) you should read it and (b) I'd write a LOT more if I merely described all the great insights in this book of less than 200 pages.

On Uncertainties, Hirschman warns that projects cannot be "copy pasted" when local conditions matter (e.g., irrigation schemes). From the opposite side, he suggests that projects that can happen "anywhere" are less likely to fail from unforeseen (local) conditions such as a division of labor among groups that do not talk to each other for political, religious or other subjective reasons that have nothing to do with the project. These divisions matter in any conditions but they make it much harder to "deal with the hiding hand" because groups see failure as a time to grab their share instead of look for a cooperative solution.

In Latitudes and Disciplines, he discusses how it may be useful to have "freedom to adopt" OR useful to lack that freedom, as options can facilitate compromise or make it harder to force compromise. Such situational circumstances can make or break a project, depending on its leadership. Leaders thus might work hard to help a project succeed to protect their reputation, but they may also choose a path that leads to larger harm. (This happened with the Metropolitcan Water District of Southern California when they built the Colorado Aqueduct in the 1930s and had no customers -- they supported sprawl via cheap water as a "solution" -- see my dissertation.)

Hirschman points out that corruption in construction need not lead to corruption in operation if construction and maintenance are separated. If they are both under one roof, then watch out -- especially if it's a monopoly service like energy, trains or irrigation! (He also makes the apt comparison of slums to planned communities, pointing out that slums are probably more efficient in delivering what their poor residents -- rather than planners or ideologues -- want.)

Under Project Design, he notes that a trait-taking project "takes as given" local conditions, which makes it more likely that the project will succeed by adding to those conditions, contra a "trait making" project that forces locals to fit the planners' vision. (See Scott on this issue.) He warns against projects that lack time or site constraints, as they are most likely to wander and attract corruption.

In Project Appraisal, he warns against aggregate benefit-cost analysis that ignores benefits to one group and costs to another or counts some costs but not others -- two themes I explored in this paper [pdf] on desalination projects.

Bottom Line: I give this book FIVE STARS for its interesting and entirely relevant of the process of designing and building the big projects that "develop" societies, projects that require a strong community to ensure that the commons are protected and extended for the benefit of all. I wrote this review in extreme haste, but don't let its brevity mislead. I plan to read this book again every year or so to remind myself of the big picture in human cooperation. You should too.

19 Jul 2017

Links of interest

  1. The billionaire-financed rise of the thought leader (and decline of the public-financed public intellectual) combined with the continued decline in access to academic research and the rise of high-tech (low labor) additive manufacturing may favor Europe over the US (or China).
  2. Magical warfare technologies help "irrational" people win
  3. Economics of the populist backlash
  4. "The Photographic electronic Narrative (PeN) project shares photographs taken by current and ex-offenders on placement at LandWorks: an independent charity which provides a supported route back into the community for people in or recently released from prison"
  5. The hightech war on scientific fraud in the place that's had troubles: The Netherlands
  6. Trump and Pruitt appear not to care about the environment people who live in environments (kinda everyone)
  7. A poetic 1970 essay California water management from Joan Didion
  8. A contemporary plea for mercy from Venezuela
  9. An economist brings realism to the discussion of human behavior (spoiler: math doesnt' hack it)
H/T to DL

18 Jul 2017

Trickle down economics just doesn't work

I wrote this on reddit, but it's worth repeating:

The premise of "trickle down" is that wealth for the rich will result in (some) wealth for the poor. More important, it assumes that the government should get involved by making the rich richer. (This is why the term is considered derogatory.)

So... how do the rich get richer?
(1a) The government gives them wealth ("rents") via a contract, corrupion, or other "neoliberal" policy (I hate that term as often confuses markets and politics); or
(1b) They make themselves rich.

For (1a), see "cheap oil royalties", patent trolls, defense contractors et al. For (1b), see "Bill Gates"

Now, how can it "trickle down"?
(2a) The government taxes the wealth and transfers the $ to the poor. That's kinda counter productive for (1a) (why not just give the royalties to the poor?), but makes sense with 1b.
(2b) The poor somehow benefit from rich people being richer (see Fable of the Bees).

Both of these make no real sense compared to the real source of prosperity for the masses, i.e.,
(3a) Cheap access to education and health care
(3b) Competitive markets (reducing rents)
(3c) Taxes on wealth that pay for (3a)

So, next time you hear ANYONE say "trickle down" just walk away. It's bullshit. A government that wants efficiency and equity will do 3a-c, which is compatible with basic income, carbon taxes, property taxes, etc., btw...

13 Jul 2017

Did you leave the water running?

That's what Cornelia asked me on the phone when she got home one day.

I had left the house with headphones on, so I didn't hear that I had left the water running in the kitchen.

Luckily (?), we pay a flat rate for water as we have no meter, so my mistake -- leaving the tap open for 2 hrs and thus wasting about 0.73 m3 of water ( 120*6liters/min = 720 liters) -- cost nothing. Had we paid the price of metered water (about €1.50/m^3), it would have cost about €1-2, but it would have FELT far more painful (like dropping a coin in the canal).

Anyway, the point of this post is that meters make people think different about water consumption, but so do some other things. I got a plumber to repair a leaking toilet last year (cost about €100) because we were renting out to Airbnb people and a leaking toilet is annoying. The cost was far greater than the water lost (ignoring that I don't pay for that), but it's been nice to have a quiet toilet :)

Bottom Line: Nobody wants to "waste" water, but meters (price incentives) will encourage them to take actions to waste less.

Links of interest

  1. A detailed chronology of Trump's ties with Russia (as of May) and a great podcast on Trump, mining your social media and fake news propaganda
  2. "Hot weather is getting deadlier due to climate change"
  3. Don't like ads and targeting? Use this widget to click them all, thereby destroying the value of the data
  4. Bad idea: "Damming the Rivers of the Amazon Basin"
  5. Tanzanian civil servants focus on new projects instead of maintaining existing water projects
  6. "China's growing water scarcity challenge"
  7. "Micro-irrigation in India: An assessment of bottlenecks and realities"
  8. "the Dutch are likely to become undone by their own progressivism"
  9. The first useful description of "what makes a great wine" that I've ever read
  10. Two military strategists explain how the US is wasting lives and money on war
  11. "Economic theory" needs to be understood as "economic perspective"