Open The Echo Chamber

One of the dangers of acting as a critic is drifting into troll territory, where you are constantly complaining and finding fault, but rarely adding constructive ideas to the conversation.  I fear that my concerns with contemporary food security conversations are headed in that direction.  And, well, USAID asked on twitter, which probably violates my late father’s first rule of cross-examination: never ask a question for which you don’t want an answer.

So, over the next few blog posts I am going to try something that many academics and critics would never risk: I am going to put some ideas down about how we perhaps should be building food security programs right now.  You all can have at these.  I can make some changes and edits.  We can argue some more.  And somewhere in there, maybe something that is both workable and more likely to actually work will emerge.

The major points of how I think we ought to be addressing world hunger look like this:

1)   Get over production: it’s rarely about production, and focusing on it draws us away from the real causes of hunger

2)   Embrace complexity: sectoral responses are doomed to fail. Please stop programming sectoral responses, and start thinking integration

3)   Create exit points: a critical problem in agricultural development is the all-too-rapid march to market integration, without appropriate attention being paid to the new risks such integration creates. In most places where agricultural development takes place, market integration predicated on the simplification of existing agricultural activities to even fewer crops is a recipe for disaster that removes the safety nets that the rural poor have already created.

4)   The future is already being fed: while we live in a world of economic and environmental change, these changes are not linear.  We’ve already seen extremes of both that represent conditions beyond what we expect to see as the “new normal” in the future. Why not figure out what people did to address those extreme events, and build off of that?

I will elaborate each of these points in its own blog post over coming days.  The goal will be to make each point clear and actionable. The other goal is to present a real alternative to what I firmly believe are misguided initiatives dominating the contemporary food security conversation. We’ll see if I can pull it off.

While all the current screaming in Washington is about the fiscal cliff, an aspect of USAID’s aid efforts has already slipped off its own precipice, and is hanging by the roots of a dried-out shrub.  The farm bill is stalled – some analysts don’t expect any movement until April 2013.  Given all of the fiscal challenges the country faces, this might sound reasonable – but within the aid and development world, the deferral of the farm bill is setting up a trainwreck.  The Office of Food for Peace’s (FFP) Title II programs are authorized by the farm bill.  In the absence of a new bill, a number of FFP’s authorities expired at the end of the fiscal year (September 30^th).  The rest of Title II’s new awards, which are authorized by the farm bill, will expire at the end of the calendar year.

What is Title II?  According to the Foreign Agricultural Service of the USDA:

Title II provides for the donation of U.S. agricultural commodities by the U.S. government to meet humanitarian food needs in foreign countries. Commodities may be provided to meet emergency needs under government-to-government agreements, through public and private agencies, including intergovernmental organizations such as the World Food Program, and other multilateral organizations. Non-emergency assistance may be provided through private voluntary organizations, cooperatives, and intergovernmental organizations. Commodities requested may be furnished from the Commodity Credit Corporation’s (CCC’s) inventory acquired under price support programs or purchased from private stocks. The CCC also finances the costs of ocean transportation to ports of entry, or to points of entry other than ports in the case of landlocked countries, or when the use of a point of entry other than port would result in substantial savings in costs or time. The CCC may also pay transportation costs from designated ports of entry or points of entry abroad to storage and distribution sites, and associated storage and distribution costs for commodities, including pre-positioned commodities, made available to meet urgent or extraordinary relief requirements.

Who cares?  Title II funds authorize a huge chunk of the FFP program each year.  There are some limited community development funds, and similarly limited emergency food security funds.  In fiscal year 2009, this was a $2.6 billion program.  Billion, with a B.  For FY 2012, the appropriated amount was $1.466 billion, down significantly but still a huge share of the global food aid budget.  Note that this is the aid that the United States moves through various NGOs and intergovernmental organizations like WFP, so if Title II grinds to a halt, these organizations and their work will be severely compromised.

We might get away with this without a total disaster.  For example, FEWS-NET shows a lot of stress in the horn of Africa right now, but projects improving situations over the next few months.  But if Title II grinds to a halt, and any major food crisis hits (which could include food price spikes), FFP will little capacity to do anything about it.

Congress cannot agree on much these days, but I suspect there are few in that august body that think it is OK to leave the world’s poorest and most vulnerable to their fates because they can’t get their legislative act together.  Let’s hope they figure this out.  Soon.

In my previous post, I objected to the way in which Tyler Cowen’s recent NYT blog post pushed the dominant “crisis of production” narrative in discussions of food security.  In my opinion, the recurrence of this problematic claim in various popular outlets has a lot to do with people’s relatively surficial understanding of food security and the causes of hunger in the Global South.  For some reason, development seems to lend itself to dilettantism…at least in part, I suspect, because people assume that the global poor are so bad off that any new ideas would be an improvement on what is there.  Of course, there is also the subtle, durable assumption that poor people (especially of darker skin tones) somehow (re)produce their problems because they don’t think rationally/clearly/etc*.  Such arguments fall apart when they are tested with actual evidence, but most op-eds and policies have nothing to do with evidence…

This problem extends beyond how we talk about the poor themselves to how we think about the governments under which they live.  While governance (not the same as government, folks – please try to remember this) is really important to development outcomes, it is not everything…and government (as in the formal rules and structures of governance in a particular place) can be even less important, as many of the global poor live beyond the reach of the state.  So blaming the state and its policies for hunger can be a pretty tricky proposition. When Cowen, in an offhand way, wades into the role of the Malawian government as an illustration of how his presumed production shortfalls are exacerbated by problematic government policies, his lack of understanding of the African context becomes clear:

many African nations have unhelpful policies toward agriculture. Malawi, for instance, subjects corn to periodic export and import restrictions as well as to price controls, all of which thwart development of a well-functioning market. When market speculators save corn in anticipation of greater scarcity, they may be punished by law. These restrictions of market incentives exacerbate the basic supply problems.

First, Cowen cherry-picks Malawian government actions to make this point.  While price controls and import/export restrictions have been used, there is another side to Malawian intervention in the markets: the subsidization of inputs to boost overall farm productivity.  As a result, he ignores the near-perfect correlation between the years when the government intervenes in input markets – effectively, when the Malawian government subsidizes fertilizers – and the years when Malawi is a net food exporter to the extent that it can pay for the entire subsidy several times over (this correlation has proven very durable and very vexatious to some of the more theologically-inclined free marketeers out there).  In the case of Malawi, some market intervention, however distortionary, actually does work to ensure adequate food production within the country each year. Which gets to a much larger point: the Malawian government is doing this not out of ignorance or irrationality, but because it is being responsive to citizens whose short term needs are so dire that to take a long-term only view would result in mass morbidity, if not mortality, in the short run.

For example, in a priori assuming that Malawi’s decision to punish market speculators when they “save corn in anticipation of greater scarcity” (one person’s “saving” is another’s “hoarding”), Cowen fails to parse between the needs of an efficient market (a means of transmitting future price situations into current pricing decisions) with human needs (a means of obtaining adequate food such that members of the household do not die) – in most places I work, there is a large disjoint between the two.  It is this disjoint that the government of Malawi, and indeed many governments around the world must negotiate.  It is this disjoint, and its attendant reality, that is Cowen’s second major problem, as he doesn’t really understand it.  This reality has two parts:

1) Yes, in the long run markets can transmit information about pricing and preferences that can lead to more productive and useful decisions, but in contexts where people are living on a dollar a day, their margins for error are small and their ability to wait for markets to work things out is limited.

2) There is a presumption that the anticipatory price signal will result in actions to address the problem before the shortage actually hits.  However, the causes of shortage generally extend well beyond the management capacity of any single state.  In short, transmitting shortage signals into the present only serves to prolong the challenges that the Malawian poor are going to face, without producing any effective policy or market response because there is no government capacity to respond.  In short, why transmit the emergency into the present when you are going to need help to address it now or in the future?  This is why many African states punish hoarding…though they could be looked upon as comprising a de facto futures market, hoarders transmit not just information, but shortage into the market and onto very vulnerable populations earlier than would otherwise be the case, undermining safety and security sooner and to no good end.  Given the option of an efficient market populated by a lot of dead people and an inefficient, or even broken market populated by live people, most African states are going with the latter.  Until someone sorts out how to set up functioning markets near-instantly, builds enough financial resilience into African livelihoods to weather this sort of market behavior, or builds the financial and infrastructural capacity of African states to a point they can manage this short of shock without external assistance (or some combination of the three), states will continue to be forced into this sort of decision, and will make the same choice.  I am not convinced that the manipulation/corruption of markets Cowen describes is a cause of hunger as much as a symptom of a hugely problematic global political economy that no one small country can effectively manage.

In short, the situation in Malawi is very common in sub-Saharan Africa.  For most countries, the issues I raise above have been in play since independence.  The typical African country is dealing with a set of pressures that make straightforward economic decision-making nearly impossible – from state-building to market-building, these countries cannot just make economic decisions, they must make political-economic decisions that reflect the immediate reality around them.  Government is easy…until you actually have to govern.

*This is not to absolve all poor people of all responsibility for their situations. The global poor, like everyone else, are human – they are subject to emotions, biases, prejudices, etc. that sometimes do cause major problems for their well-being.  However, it has been my experience that this is not a dominant cause of the problems of poverty…mainly because if these problems were exacerbated more than they were helped by the efforts of the global poor, we’d have a lot fewer poor people because they would mostly have died. The global poor make fantastically difficult decisions about the allocation of scarce resources every day with a shocking degree of success…something we overlook at our peril.

While I appreciate the overall sentiment behind “World Hunger, the Problem Left Behind”, Tyler Cowen’s op-ed piece in the New York Times earlier this week, in trying to put forth an important message he reinforces really problematic understandings of hunger. Cowen, like so many others, continues to frame food security and hunger issues as a crisis of production and productivity.  Citing Michael Lipton, Cowen writes:

Rwanda and Ghana are gaining, but…most of the continent is not. Production and calorie intake per capita don’t seem to be higher today than they were in the early 1960s. It remains an issue how Africa’s growing population will be fed.

First, production and caloric intake per capita are not necessarily directly linked.  As I have observed elsewhere on this blog (and as Hans Herren and I argued at the New America Foundation/Slate event Feeding the World While the Earth Cooks), there is a massive loss problem in most food systems that more than accounts for most food shortages in the world today.  Considering the absolutely remarkable explosion of the African population since 1960, when it held about 300 million people and today, when it holds 870 million, holding the line on per-capita production means that people effectively tripled the agricultural output of the continent.  But when you lose 40% of that production between the farm gate and market, you are going to get a disjoint between production and caloric intake that has nothing at all to do with the skills of the farmers or their on-farm circumstances.  Are there ways to augment production and improve it?  Probably, but this is not the central problem at the moment, nor is it the low-hanging fruit.  Don’t reengineer the ecosystem, just fix the road!

It would be good to see some serious discussion of food insecurity that did not center on agricultural productivity.  It seems that the urge is to start from the hardest end of the process to fix, perhaps because it is in the fields that food goes from abstract to concrete. It is hard to argue that the biggest problem is loss in the supply chain, because that is harder for people to see.  We need more posters of rotting loads of food on the back of trucks, and less pictures of dusty fields with stunted crops.  Maybe that would start to shift the narrative?

Ben Leo at ONE.org (formerly of CGD) put forth an intriguing proposal recently on Huffington Post Impact: It’s Time to Ask the World’s Poor What They Really Want.  In short, Ben is trying to argue that the current top-down definition of development goals, no matter how well-intentioned, is unlikely to reflect the views of the people these development goals are meant to benefit.

Hear, hear.  I made a similar point in Delivering Development. Actually, that sort of was one of the main points of the book.  See also my articles here and here.

But I am concerned that Leo is representing this effort a little too idealistically.  Just because we decide to ask people what they want doesn’t mean that we will really find out what they want.  Getting to this sort of information has everything to do with asking the right questions in the right way – there is no silver bullet for participation that will ensure that everyone’s voices will be heard.  To that end, what worries me here is that Ben does not explain exactly how ONE plans to develop the standardized survey they will put out there, or how exactly they will administer this survey.  So, here are a few preliminary questions for Ben and the ONE team:

1)   Does a standardized survey make sense? Given the very different challenges that people face around the world, and the highly variable capacity of people to deal with those challenges, it seems to me that going standardized is going to result in one of two outcomes: either you ask focused questions that only partially capture the challenges facing most people, or you ask really general questions that basically capture the suite of challenges we see globally, but do so in a manner that is so vague as to be unactionable.  How will ONE thread this needle?

2)   Who is designing the survey? To my point above, what questions are asked determine who will answer, and therefore determines what you will learn.  While the information gleaned from this sort of survey is likely to be very interesting, it is not the same thing as an open participatory process – full participation includes defining the questions, not just the answers.  Indeed, I would suggest that ONE needs to ditch the term participatory here, as in the end I fear it will be misleading.

3)   How will you administer the survey? Going out with enumerators takes a lot of time and money, and is subject to “investigator bias” – that is, the simple problem that some enumerators will do their job in a different manner than others, thus getting you different kinds/qualities of answers to the same questions.  On the other hand, if you are reliant on mobile technology, how will you incentivize those rural populations with mobile handsets to participate?  If you can’t do this, you will end up with a highly unrepresentative sample, making the results far less useful.

This is not to dismiss the effort Ben is spearheading – indeed, it is fantastic to see a visible organization make this argument and take concrete steps to actually get the voices of the global poor into the agenda-setting exercises.  However, this is not a participatory process – it is, instead, an information-driven process (which is good) that is largely shaped by the folks at ONE in the name of the global poor.  If ONE wants this to be more than information-driven, it needs to think about how it is going to let a representative sample of the global poor define the questions as well as the answers.  That is no easy task.

In all sincerity, I am happy to talk this through with anyone who is interested – I do think it is a good idea in principle, but execution is everything if you want it to be more than a publicity stunt…

Since we’re on the topic of messaging, here’s something I’ve wanted to post on for a while.  In response to the Horn of Africa famine, USAID and several partner organizations stood up a campaign called FWD (Famine, War, and Drought) to raise awareness of the situation in the Horn, and to raise funds for relief.  There were all kinds of issues with this campaign, but for me the biggest was how the use of celebrity in the FWD campaign illuminated just how thin celebrity authority can be and still produce an “acceptable” message.

For example, the campaign drew upon Anthony Bourdain, television chef and food critic.  His expertise, when speaking about famine, comes from the fact that he is a (famous) chef, because “chefs understand . . . not only how important it is to eat, but how awful it is when you can’t.” (an actual quote from one of the Bourdain film clips).  This is an odd construction of expertise, when one considers it carefully.  First, it is unclear how chefs might have any greater understanding of how awful it is to be food insecure than any other person.  Second, this presentation hides the fact that the importance of food to Bourdain is rather different than its importance to a Somali forced to flee across the Kenyan border to find food – Bourdain is a chef with a TV show who eats a hell of a lot of good/exotic food and is very well paid to do it.  Food is very important to him.  But probably not in the same way as a mother in Somalia trying to feed her child dirt or dry grass, anything to keep the child from dying.  Finally, because Bourdain’s show “No Reservations” takes him to various exotic locations around the world, there is something of a presumption that he knows about the challenges that face people in that part of the world.  However, Bourdain has never visited an area suffering from severe food shortage on the show, nor has he extensively interacted with someone who is acutely food insecure to experience their diet and context.

[Aside: I think Bourdain would be fantastic at critiquing food aid...not the system, but the actual food that is delivered – seriously, someone needs to make that happen.  He would probably have some interesting ideas, actually.]

This is not to question Bourdain’s sincerity in his concern for the situation in the Horn of Africa.  Instead, I am trying to highlight that his selection to play this role, and his legitimacy to the viewer when he speaks about famine, does not come from any sort of expertise in addressing famine, war or drought, but from a perception that he knows something about how people eat in many parts of the world.  That is akin to claiming to be an agricultural expert because you’ve stood on dozens of farms in the developing world (something I’ve actually heard someone say).  You are not an agricultural expert, you are an agricultural tourist.  Bourdain’s expertise in food insecurity falls below the level of tourism.

Fine – the celebrity experts aren’t really experts.  We all knew that before I burned 500 words at the front end of this post.  But this matters a hell of a lot, especially when you consider the solutions people like Bourdain were supporting under FWD.  The interventions identified by the FWD website were narrowly technical means of addressing acute need, and did not in any way address the root causes of the crisis that brought about these needs, including climate change, rising global food commodity prices, and long-term political instability. Instead, in an effort to muster support for (much needed) relief efforts, FWD and its celebrity spokespeople once again reduced Africa to a site that has ill health and absence of well-being at its essence and therefore beyond addressing in a fundamental way. In FWD PSAs, a recurrent theme was the phrase “We are the relief,” an echo of Magubane’s critique of celebrity activism’s representations of Africa as, “while not populated by spear-chucking savages . . . completely bereft of doctors, politicians, musicians, or actors.” One only need look to the website’s claim that “US Assistance will continue funding the urgently needed food, health, shelter, water and santitation assistance to those who desperately need help” (website’s emphasis) to understand that there is no clear end to this need under the narrative presented by FWD.  Those affected by the crisis become helpless objects of pity, a problem with a technical solution for the immediate crisis, but no hope for long-term resolution.

Celebrity activism does matter – like any tool, it can be used for good or problematic ends.  But when the celebrity is appointed an expert, their opinions start to shape public opinion and longer-range funding and outcomes.  If they don’t know what they are talking about, they can be sucked into problematic narratives that perpetuate the problems that the celebrities hoped to address through their participation.  Celebrities, learn your material, consult the experts, then choose your causes carefully – you can do some good, but only if you take an active role in ensuring that is what your participation is bringing about.

So, it seems I have been challenged/called out/what-have-you by the folks at Imagine There Is No . . . over what I would do (as opposed to critique) about development.  At least I think that is what is going on, given that I received this tweet from them:

@edwardrcarr what would You do with 1 Billion $ for #development? bit.ly/rQrUOd #The.1.Bill.$.Question

In general, I think this is a fair question.  Critique is nice, but at the end of the day I strive to build something from my critiques.  As I tell my grad students, I can train a monkey to take something apart – there isn’t much talent to that.  On the other hand, rebuilding something from whatever you just dismantled actually requires talent.  I admit to being a bit concerned about calling what I build “better”, mostly because such judgments gloss over the fact that any development intervention produces winners and losers, and therefore even a “better” intervention will probably not be better for someone.  I prefer to think about doing things differently, with an eye toward resolving some of the issues that I critique.

So, I will endeavor to answer – but first I must point out that asking someone what s/he would do for development with $1 billion is a very naive question.  I appreciate its spirit, but there isn’t much point to laying down a challenge that has little alignment with how the world works.  I think this is worth pointing out in light of the post on Imagine There Is No . . ., as they seem to be tweaking Bill Easterly for not having a good answer to their question.  However, for anyone who has ever worked for a development agency, the question “on what would you spend a billion dollars” comes off as a gotcha question because it is sort of nonsensical.  While the question might be phrased to make us think about an ideal world, those of us engaged in the doing of development who take its critique and rethinking seriously immediately start thinking about the sorts of things that would have to happen to make spending $1 billion possible and practical.  Those problems are legion . . . and pretty much any answer you give to the question is open to a lot of critique, either from a practical standpoint (great idea that is totally impractical) or from the critique side (and idea that is just replicating existing problems).  When caught in a no-win situation, the best option is not to answer at all.  Sure, we should imagine a perfect world (after all, according to A World Of Difference, I am “something of a radical thinker”), but we do not work in that world – and people live in the Global South right now, so anything we do necessarily must engage with the imperfections of the now even as we try to transcend them.

Given all of this, I offer the following important caveats to my answer:

1) I am presuming that I will receive this money as individual and not as part of any existing organization, as organizations have structures, mandates and histories that greatly shape what they can do.

2) I am presuming that I have my own organization, and that it already has sufficient staff to program $1 billion dollars – so a lot of contracting officers and lawyers are in place.  Spending money is a lot harder than you’d think.

3) I am presuming that I answer only to myself and the folks in the Global South.  Monitoring and evaluation are some of the biggest constraints on how we do development today.  As I said in my talk at SAIS a little while ago, it is all well and good to argue that development merely catalyzes change in complex systems, which makes its outcomes inherently unpredictable.  It is entirely another to program against that understanding – if the possible outcomes of a given intervention are hard to predict, how do you know which indicators to choose?  How can you build an evaluation system that allows you to capture unintended positive and negative outcomes as the project matures without looking like you are fudging the numbers?  This sounds like constrained thinking, but it is reality for anyone working in a big donor agency, and for all of the folks who implement the work of those agencies.

4) I am presuming there are enough qualified staff out there willing to quit what they are doing and come work for this project . . . and I am going to need a hell of a lot of staff.

5) I am presuming that I am expected to accomplish something in the relatively short term – i.e. 3-5 years, as well as trigger transformative changes in the Global South over the long haul.  If you don’t produce some results relatively soon, people will bail out on you.

All of these, except for 5), are giant caveats that basically divorce the question and its answer from reality.  I just need to point that out.  Because of these caveats, my answer here cannot be interpreted as a critique of my current employer, or indeed any other development organization – an answer that would also serve as a critique of those institutions would have to engage with their realities, blowing out a lot of my caveats above . . . sorry, but that’s reality, and it is really important to acknowledge the limits of any answer to such a loaded question.

So, here goes.  If I had $1 billion, I would spend it 1) figuring out what people really do to manage the challenges they face day-to-day, 2) identifying which of these activities are most effective at addressing those challenges and why, 3) evaluating whether any of these activities can be brought to scale or introduced to new places, and 4) bringing these ideas to scale.

Basically, I would spend $1 billion dollars on the argument “the new big idea is no more big ideas.”

Why would I do this, and do it this way?  Well, I believe that in a general way those of us working in development have very poor information about what is actually happening in the Global South, in the places where the challenges to human well-being are most acute.  We have a lot of assumptions about what is happening and why, but these are very often wrong.  I wrote a whole book making this point – rather convincingly, if some of the reviews are to be believed.  Because we don’t know what is happening, and our assumptions are wide of the mark, a lot of the interventions we design and implement are irrelevant (at best) or inappropriate (at worst) to the intended beneficiaries.  Basically, the claim (a la Sachs and the Millennium Villages Project) that there are proven development interventions is crap.  If we had known, proven interventions WE WOULD BE USING THEM.  To assume otherwise is to basically slander the bulk of people working on development as either insufficiently motivated (if we weren’t so damn lazy, and we really cared about poor people, we could fix all of the problems in the world with these proven interventions) or to argue that there simply needs to be more money spent on these interventions to fix everything (except in many cases there is little evidence that funding is the principal cause of project failure).  Of course, this is exactly what Sachs argues when asking for more support for the MVP, or when he is attacking anyone who dares critique the project.

The only way to really know what is happening is to get out there and talk to people.  When you do, what you find is that the folks we classify as the “global poor” are hardly helpless.  They are remarkably capable people who make livings under very difficult circumstances with very little resource and limited fallback options.  They know their environments, their economy, and their society far better than anyone from the outside ever will.  They are, in short, remarkable resources that should be treated as treasured repositories of human knowledge, not as a bunch of children who can’t work things out for themselves.  $1 billion would get us a lot of people in a lot of places doing a lot of learning . . . and this sort of thing can be programmed to run over 6 months to a year to run fieldwork, do some data analysis, and start producing tailored understandings of what works and why in different places . . . which then makes it relatively easy to start identifying opportunities for scale-up.  Actually, the scale-up could be done really easily, and could be very responsive to local needs, if we would just set up a means of letting communities speak to one another in a free and open manner – a network that let people in the Global South ask each other questions, and offer their answers and solutions, to one another.  Members of this project from the Global North, from the Universities and from development organizations, could work with communities to convey the lessons the project has gleaned from various activities in various places to help transfer ideas and technology in a manner that facilitates their productive introduction in new contexts.  So I suppose I would have to carve part of the $1 billion off for that network, but it would come in under the scale-up component of my project.  Eventually, I suspect this sort of network would also become a means of learning about what is happening in the Global South as well . . .

With any luck at all, by year 3 we would see the cross-fertilization of all kinds of locally-appropriate ideas and technology happening around the world and the establishment of a nascent network that could build on this momentum to yield even more information about what people are already doing, and what challenges they really face.  We would have started a process that has immediate impacts, but can work in tandem with the generational timescales of social change that are necessary to bring about major changes in any place.  We would have started a process that likely could not be stopped.  How it would play out is anyone’s guess . . . but it would sure look different than whatever we are doing now.

OK, a last thought on the development initiatives and markets thread: let’s leave the predictive markets thing aside for the moment, and get to what I think is a more serious question for development initiatives – do we use all the information we might to evaluate the likely impact of our programs?  I think a lot of folks misread the intent of my initial post – I was NOT suggesting we bet on mortality rates and other direct measures of project effectiveness.  That is something I could see as an academic exercise, but is way too morbid for my tastes, even in that setting.

But everyone who lunged in that direction seemed to miss the point that any major development initiative will, if it succeeds, have radiating impacts through different markets.  That is, a successful food security initiative will change harvest sizes of different crops, thereby influencing commodities markets.  A successful public health intervention might increase the size of the workforce, or its efficiency.  And so on.  My simple thought was that any fund investor worth his/her salt should be examining these initiatives and their expected outcomes to decide 1) if the initiative worked, what markets might be affected, how and when and 2) do they think the initiative will actually work.

If there is no movement around these initiatives, it seems to me that these two factors might be important – at the first step in this decision-making, investors might decide that in the event of a successful intervention, the markets affected might not be accessible or profitable, or the timeframe of any movement in the market might be so long as to make immediate response unnecessary.  Thus, we would see no market response to the announcement of an intervention.  At that point, it doesn’t matter if the intervention will work or not – that assessment never comes into the picture.

However, in at least some cases, I have to think that there are initiatives out there (in a world of rising food prices, I am a bit fixated on food security at the moment) that would affect significant markets, and not only at a national scale (where markets might be illiquid or otherwise inaccessible).  Take the case of cocoa and Cote d’Ivoire this past winter: the civil conflict in CIV cut off a significant amount of global supply, and futures markets got skittish over the further constriction of trade, driving cocoa prices upward.  This is a niche crop, heavily produced by only a few countries, but the price movement could have meant big dollars for a fund that correctly anticipated this trend.  Surely there are (or will be) food security initiatives that could similarly affect the overall supplies of and access to particular (perhaps niche) crops for entire regions, or even shift global availability/perception enough to shift commodities prices in much larger, more transparent markets in the short term. Don’t fixate on national markets for these initiatives – what about really big development movers that could affect global supplies of grain in an era where all the slack has been taken out of various global grain markets?  You can’t tell me that everyone at these trading desks is simply ignoring the food security world . . . surely they are at least assessing through step 1) above.  So if there is no market response to these initiatives, either the timeframe of movement is too distant to warrant interest, or the traders simply don’t think these initiatives will succeed enough to significantly influence the markets in which they trade.  Perhaps the price of oil and its impact on transport is much, much more important than increasing harvest size when it comes to shaping food commodities prices . . . in which case, it would probably be good for those designing food security initiatives to know this at the outset and address it in project design (for example by thinking about transportation issues as integral to the initiative).

Of course, there is option 3): traders have no idea what sorts of initiatives are out there, and are operating in ignorance of these potential large drivers.  This is entirely possible, but a bit hard to believe . . .

Lots of comments pouring in via twitter regarding my earlier post on development initiatives and markets.  First, I found it interesting that readers went in two directions – they either took the post to be about prediction markets alone, or they caught the reference to hedge funds and realized that I was talking about “betting” in a much more general sense: that is, in the sense of hedge fund investment, which is really a set of (ideally) well-researched, carefully-hedged bets on the direction of particular stocks, commodities and sometimes whole segments of the market.

For now, let’s take up the issue of predictive markets.  I love Bill Easterly’s response tweet, asking what development initiative I (or anyone else) would bet my own money on.  I think prediction markets are interesting tools.  They are hardly perfect, as like other markets they are subject to bubbles and manipulation, but there is some evidence to suggest that they do yield interesting information under the right conditions.  It would be interesting to set up parallel prediction markets, and populate one with development professionals at agencies and NGOs, one with development academics, and one that blends the two, and then have them start to buy and sell the likelihood of success (as defined by the initiative, both in terms of outcomes and timeframe) for any number of development initiatives.  While I doubt these parallel markets would move in lockstep, I wonder if they would come to radically different assessments of these initiatives.  And we could examine how well they worked as predictive devices.  I’m pretty sure most academics would have started shorting the Millennium Village Project at its inception (academic paper here) . . . so what things would the development blogosphere/twittersphere short today?  What would you go long on (that is, what would you hold in the expectation it would meet expectations and rise in value)?  Have at it in the comments . . .

I’ll address the wider meaning of “betting” that I was also aiming at later . . .

Welcome to a new feature of Open the Echo Chamber, a quick post on something that interests me.  Yes, I am capable of writing less than 1000 words in a post, but most of the time I take on subjects that need a lot of attention.  Going forward, I am going to try to intersperse some “quick thoughts” on the blog for those who lack the 15 minutes and headspace to deal with my longer fare . . .

I’ve been doing a lot of reading about hedge funds lately, and it recently hit me: does anyone in the markets bet for or against development initiatives?  It seems to me that you could – after all, a big initiative from either a multilateral or large bilateral donor will often come with quite a bit of money attached (at least initially), a lot of publicity, and some clearly stated goals that are almost always tied to economic growth or diversification.  So, do investors look at these initiatives and bet for or against them?  I’m not saying they bet directly on an initiative, but on its outcome: for example, do funds look at large food security initiatives in a particular country and bet on the prices of the crops involved in that initiative?

Here is why I care: if nobody is betting on them, it pretty much signals that these initiatives are largely irrelevant.  Either they are not large enough to move any market in the short or long term, or they are not aimed at anything likely to induce a transformation of economy and society through some set of cascading impacts in the long term.  If this is the case, it seems to me we ought to back out of those initiatives right away.  This is not to say that we should not be addressing the needs of the most vulnerable people in the world, but to suggest that an absence of interest in these initiatives might mean that our efforts to address these needs are not likely to come to much.

On the other hand, if we see significant betting on the outcomes of initiatives, it seems to me we might start to look at the direction of this betting (short or long) to get a sense of how things are likely to play out, and start looking for problems/leveraging opportunities as soon as possible.

Just a quick thought . . .