The PBO Director shortlist

The post of Director of the South African Parliamentary Budget Office (PBO) has now been vacant for almost two years after the previous Director resigned under a cloud.[1] That means two Parliaments (the 5th and 6th) have been in violation of their own legislation – the Money Bills Amendment Procedure and Related Matters Act (2009, amended 2018).[2]

I worked for two years at the PBO, leading some of its most important projects at the time, and have written at length in the past about its failures (e.g. on nuclear procurement), its importance, why the filling of the Director position is crucial and my own role in trying to remedy the institutional rot/dysfunction. Some of that accountability work is ongoing.

It took over a year for MPs to agree that the post should be advertised and almost a year has elapsed since then before the shortlisted candidates were finally decided on in a meeting on 4 September 2020. While it is possible that the Covid-19 pandemic delayed the process, it was already glacial prior to that and there was little impediment to finalising the list via a virtual meeting of the kind that eventually took place. The previous meeting of the committee took place in December 2019.

Given the broader political dynamics in the country, it seems likely that the delay has been the result of:

  1. Political lobbying as to who should be deployed to this post (paid at the level of a Director General but with only a small staff complement)
  2. Lack of prioritisation of the issue given widespread institutional challenges across all three arms of state and the relative disregard of the role of legislatures.

As reflected in the minutes of the Parliamentary Monitoring Group, there are 9 candidates on the shortlist. These include: the current chairperson of the Financial and Fiscal Commission (FFC), a former CEO and acting chairperson of the FFC, the current acting deputy director general of the Budget Office in the National Treasury, and all three current deputy directors of the PBO. Originally the committee staff had shortlisted 8 candidates but one further candidate (the Treasury official) was added during the meeting. The minutes of the meeting suggest some inconsistency in the application of the experience requirement, with candidates having 10 – 12 years experience being shortlisted and others with more years not being shortlisted. (This may be because of different notions of what constitutes experience for this purpose but it is not clear).

Candidates will need to go through a clearance process by the State Security Agency at the highest clearance category (‘Top Secret’). The discussion in the committee reflected the lack of knowledge of the PBO’s functioning among both the Parliament officials informing the process and MPs themselves. All parties appeared to be of the view that a PBO Director likely would not need to handle classified information. As the first staff member of the PBO to have received classified information through formal channels on behalf of the Office, I can attest to the fact that this is incorrect. What role the SSA should play in relation to this kind of process is of course another matter, since in principle it presents an opportunity for the Executive to interfere in an undesirable fashion (albeit that seems less likely under the current administration).

In principle, candidates should also meet the requirement of being ‘fit and proper persons’. [Declaration: this requirement followed from an amendment to section 15 of the Act which I proposed as part of a public submission in 2018 and was accepted by MPs]. In practice it is unclear at this point how this requirement will be checked. And whether information from the public will be solicited for this purpose. My view is that it should be: if you have any such information on any of the candidates, I suggest sending it to the secretary of the committee.

The nature of PBOs is such that it should be protected from political influence and partisanship of all kinds, not least in the appointment of its staff. Furthermore, whoever is appointed should be able to put whatever personal and institutional views they may hold, or have held, aside and conduct their analysis and research in a competent, fully public interested, non-ideological and non-partisan way. Unfortunately, this seems highly unlikely in the South African case. Instead, what is likely to happen is that the appointed candidate will be the one who is seen as most amenable to whatever the agenda is of the grouping(s) that holds the greatest sway over the appointment.

 A faction within the governing ANC along with some opposition MPs and civil society organisations will favour a ‘Treasury-aligned candidate’. (Note: this need not necessarily by a candidate from Treasury, though such candidates may well fit the bill). An alternative faction in the ANC along with other opposition MPs and different civil society groupings may favour a more ‘anti-Treasury’ view. There are 4-5 candidates who, in my view, can be reasonably located in one of these two categories. But one should also not rule out the possibility of an opportunist whose objective is really just to secure the post and sells themselves to one or both parties as necessary. As the reader will see, I am not convinced that any candidate is likely to be appointed who is squarely committed to what the role truly requires.

I will refrain from publicly speculating about how I think the process will, or should, play out in terms of the candidate who is ultimately selected. However, in the past I have indicated that given the historical dysfunction of, and misconduct in, the institution an outside candidate is likely to be preferable. And I continue to hold that view. Parliament partially sabotaged any such candidate by allowing staff renewals and appointments under a brief reappointment by the previous Director, thereby leaving any new Director with some staff who may be a liability. However, a suitably motivated and strategic new Director should be able to improve conduct and culture – as well as remove staff who resist that process.

The PBO is an institution with great potential to serve the public good. One can only hope that the current Parliament makes an appointment that puts it back on the right path, rather than consigning it to further stagnation and membership of a list of institutions with highly paid staff that do little for the public good. It is welcome that much/all of the process will be in the public domain. But as we saw with the appointment of the current Public Protector, transparency of that sort does not mean substantive transparency or guarantee a good outcome.

Note: I did not apply for the position in question and have no material or other interest in the outcome except to the extent that I am invested in the public interest role the PBO is supposed to play.

[1] This article incorrectly says one year.

[2] For those who don’t know: most legislation is introduced by the Executive and then approved by Parliament, but in special cases Parliament may draft legislation itself – most notably in relation to the conduct of its own affairs. The Money Bills Act is one of the few such pieces of legislation.

A letter rejected by the South African Medical Journal

Throughout South Africa’s Covid-19 pandemic response, I have been raising concerns about the basis for the government’s decisions – starting with an op-ed when the lockdown was announced. It has been particularly concerning how uncritical academics and journalists were at the outset. I am still in the process of writing a number of academic pieces on this, but unfortunately these will only come out later in this year or next year. One effort I made in the interim was to write a cautionary letter to the South African Medical Journal, which has been responsible for publishing some concerning editorials that contribute to the problematic stance of the South African academy. Today I received notification that my correspondence was rejected as “The editors have determined that this submission is not appropriate for this journal and will not be considered for publication.” Given that the pieces criticised were journal editorials, this is perhaps not very surprising. Decide for yourself.

Unmitigated praise of government’s Covid-19 response is premature and inconsistent with available evidence

A recent editorial[1] expresses concern with statements by the Minister and Department of Health[2,3] and Medical Research Council (MRC)[4] in response to remarks attributed to Dr Glenda Gray[5,6] relating to the government’s approach to lockdown regulations and public health consequences of the lockdown. I concur with the authors on the primacy of Constitutional principles of free speech and academic freedom for members of the Ministerial Advisory Committee (MAC) on Covid-19, and the institutional independence of the MRC (which has now found no transgression[7]). However, premature, unsubstantiated statements about government’s response to Covid-19 contribute to an environment of uncritical praise that preceded, and arguably contributed to, the controversy in question.
The theoretically optimal policy response to Covid-19 remains unknown under the usual standards of academic and scientific justification, given extensive uncertainty about characteristics of the virus itself along with the dynamics of contagion, morbidity and mortality in different populations and contexts. Furthermore, thorough assessment of the efficacy and optimality of government responses can only be made on evidence that will become available after the pandemic is over. Only preliminary assessments are possible at present and cannot be exempt from basic standards of justification and evidence. The authors’ statements[1], as with others elsewhere[8], do not meet such standards and thereby undermine impartial, evidence-based criticism. For example:

Notwithstanding the concerns raised above, the Minister of Health’s management of the country’s COVID-19 pandemic, to date, is laudable

And:

SA’s response to COVID-19 has been swift and science based, and merits praise

The apparent premise, that “other governments around the world have not grounded their response to the pandemic in science and evidence”[1], is too low a bar. The British government, for example, has rightly been criticised not for failing to use science and evidence, but for doing so selectively and secretively[9]. Yet the authors fail to critically examine the composition and conduct of the MAC, asking only for “involvement of experts from academia outside of the biomedical sciences, and statutory bodies”[1].
There is evidence that contradicts this stance. As noted by others[10], and reflected in international open Covid-19 databases[11], South Africa has not been forthcoming in publishing detailed data on testing, screening, contact tracing and patient characteristics – despite international calls for transparency[9,12]. Even more concerning, while the original lockdown decision was premised on modelling[13], only limited details of the strategy and basis were provided much later[14] while current projections and model details have only recently been made public[15].

Good intent along with science- and evidence-based decision-making are not sufficient to ensure the best policy decisions are taken. Transparency in evidence, modelling, decision-making, use of expertise and balancing of societal priorities is paramount. The South African government has performed badly on some of these dimensions. Rhetoric of “unity and solidarity” in that context potentially undermines the role of dissent, rather than deference, in contributing to the public good. Unsubstantiated and premature praise may contribute to a sub-optimal response to the pandemic.

1. Singh JA. Freedom of speech and public interest, not allegiance, should underpin science advisement to government. S Afr Med J. 2020 May 26;
2. Mkhize Z. Health Minister’s statement on Prof Glenda Gray’s public attack of government based on inaccurate information [Internet]. National Department of Health; [accessed 26 May 2020]. Available from: http://www.health.gov.za/index.php/2014-03-17-09-48-36/2014-03-17-09-49-50?download=4247:statement-by-minister-mkhize-prof-glenda-gray-public-attack-of-government-20-may-2020
3. Human L, Geffen N. Health department boss calls for investigation into Glenda Gray. GroundUp [Internet]. 22 May 2020 [accessed 26 May 2020]; Available from: https://www.groundup.org.za/article/health-department-boss-calls-investigation-glenda-gray/
4. Herman P. SAMRC board apologises for Prof Gray’s comments, bars staff from speaking to media. News24 [Internet]. 25 May 2020; Available from: https://www.news24.com/SouthAfrica/News/breaking-samrc-board-apologises-for-glenda-grays-comments-bars-staff-from-speaking-to-media-20200525
5. Karrim A, Evans S. Unscientific and nonsensical: Top scientist slams government’s lockdown strategy. News24 [Internet]. 16 May 2020 [accessed 16 May 2020]; Available from: https://www.news24.com/SouthAfrica/News/unscientific-and-nonsensical-top-scientific-adviser-slams-governments-lockdown-strategy-20200516
6. Karrim A. I didn’t criticise the lockdown, but the regulations ‒ Prof Glenda Gray after Mkhize slams criticism. News24. 21 May 2020
7. SAMRC. Media statement from the SAMRC Board [Internet]. 26 May 2020 [accessed 26 May 2020]. Available from: https://www.samrc.ac.za/media-release/media-statement-samrc-board
8. Academy of Science of South Africa (ASSAf). Public Statement on COVID-19. 18 May 2020.
9. Alwan NA, Bhopal R, Burgess RA, Colburn T, Cuevas LE, Smith GD, et al. Evidence informing the UK’s COVID-19 public health response must be transparent. Lancet. 2020 Mar;395(10229):1036–7.
10. Marivate V, Combrink HM. Use of Available Data To Inform The COVID-19 Outbreak in South Africa: A Case Study. Data Science Journal. 6 May 2020; 19(1):19.
11. Xu B, Kraemer MUG, Xu B, Gutierrez B, Mekaru S, Sewalk K, et al. Open access epidemiological data from the COVID-19 outbreak. The Lancet Infectious Diseases. 2020; 20(5):534.
12. Barton CM, Alberti M, Ames D, Atkinson J-A, Bales J, Burke E, et al. Call for transparency of COVID-19 models. Sills J, editor. Science. 2020; 368(6490):482.2-483.
13. Republic of South Africa. President Cyril Ramaphosa: Escalation of measures to combat Coronavirus COVID-19 pandemic [Internet]. 23 March 2020 [accessed 25 May 2020]. Available from: https://www.gov.za/speeches/president-cyril-ramaphosa-escalation-measures-combat-coronavirus-covid-19-pandemic-23-mar
14. Abdool Karim SS. SA’s Covid-19 epidemic: Trends & Next steps. Presentation for the Minister of Health; 13 April 2020. [accessed 16 May 2020].
15. Silal S, Pulliam J, Meyer-Rath G, Nichols B, Jamieson L, Moultrie H. Estimating cases for COVID-19 in South Africa Update: 19 May 2020. South African COVID-19 Modelling Consortium; 19 May 2020.

Why is Parliament violating PAIA?

In May 2018 the Parliament administration solicited bids for a forensic investigation into accusations of misconduct at the Parliamentary Budget Office. The forensic investigation commenced in June 2018 and was completed by the end of July (within the very limited time-frame given by Parliament). The Director of the Parliamentary Budget Office, Mohammed Jahed, resigned shortly thereafter accompanied by strenuous denials that the resignation related to the investigation into misconduct.

After some less formal requests for the report, in March 2019 I initiated an application under the Promotion of Access to Information Act. The Parliament administration first sought to extend the time period for reply and then stopped providing substantive replies – meaning it is now in violation of the PAIA Act. In my most recent letter to the Acting Secretary of Parliament (who is officially the Information Officer for Parliament) I lay out the details of the preceding correspondence and the legal implications.

The big question is: why is Parliament so desperate to hide the report it commissioned?

A note on the philosophy literature on external validity

Later this month (August 2019) I’ll be presenting a paper at the 14th conference of the International Network for Economic Method (INEM). The paper is titled, “From ‘data mining’ to ‘machine learning’: the role of randomised trials and the credibility revolution”. An apparent puzzle is that there’s a session on external validity – which was the subject of my economics PhD, a working paper and short publication – in which I’m not presenting. Surely if I am going to be presenting at conferences on the method or philosophy of economics I should be presenting my work on external validity? The short answer is: I already did in 2012. But I think the longer explanation is also worth giving.

First, the paper I will be presenting at INEM (and ENPOSS) builds explicitly on work I’ve done on external validity (henceforth ‘EV’).

Second, and more importantly, my contribution to the philosophy literature on EV was not just presented at the Evidence and Causality in the Sciences (ECitS) 2012 conference but subsequently finalised as a paper in 2012, revised in 2013. Unfortunately that paper was not published at the time, for reasons that were at best flimsy. Preoccupied with finishing my economics PhD and changing jobs, I delayed resubmitting the manuscript. When I returned to academia in 2016 I discovered that a paper on the subject had been published in Philosophy of Science. More surprising was that, apart from some differences in verbiage and references, the core arguments of the paper seem to be the same as about 30-40% of my own paper but with no reference to that or my work in economics. Then, earlier this year, another paper appeared in the Journal of Economic Methodology. The core arguments of this paper, too, are very similar to the other 30-40% of my paper (dealing with issues like causal process tracing and related matters). In the second instance, my economics work is cited by misunderstood or misrepresented: suggesting that my views are different to the author’s when in fact, as is clear from the 2012/13 paper, they are almost entirely the same.

Needless to say, this creates a rather awkward situation. Not least because I believe, for reasons I will not ventilate in detail at this point, that it is implausible that the two authors were unaware of, or uninfluenced by, my 2012/13 work. But it is now simply impossible to publish my own work, despite clearly having a claim to intellectual priority. These concerns have been taken-up in the relevant fora, but the wheels turn slowly. And it will be informative to test the extent to which academic philosophy is committed to principles of intellectual priority. In the interim it makes for an ‘interesting’ context for intellectual engagement…

Public finance oversight in Gauteng after the elections

Section 120(3) of the Constitution requires provinces to pass a law that guides how they deal with public finance proposals (spending, taxes, etc) from provincial governments. Until 2019 no province had done this. In April of this year, the Gauteng Provincial Legislature (GPL) passed such a law – the Gauteng Money Bills Amendment Procedure and Related Matters Act.

Having such a law is important, but unfortunately the GPL put together a Bill riddled with problems and errors which it then proceeded to rush through in a month without any serious consultation. Some of the problems with the Bill and the process are summarised in this article: https://www.businesslive.co.za/bd/opinion/2019-03-25-gauteng-legislatures-draft-money-bills-act-is-riddled-with-flaws/

A more detailed analysis of the strengths and weaknesses of the Bill is provided by the submission I made to the GPL, at very short notice, in March:
Gauteng Money Bills submission to GPL

With the recent provincial election results suggesting a very narrow numerical majority for the ANC, the problems with the GPL Act may have a profoundly disruptive effect on public finance oversight and decisions in Gauteng. That is concerning, not least for a province that is estimated to be responsible for about 35% of the country’s economic activity and 25% of the country’s population.

Economic justice will not be televised

(Riffing on Gil Scott-Heron: https://www.youtube.com/watch?v=qGaoXAwl9kw)

Economic justice
Will not be televised
It will not be delivered
Like a fast food dinner
By white men
Using black economists
To front for them.

Economic justice
Will not be televised
It will not be delivered
By VAT zero-ratings
That benefit the rich
More than the poor.

Economic justice
Will not be televised
It will not be delivered
Like fast food transported by exploited workers
By commissioned research
Elevating the status of a few white men
Using black economists
To front for them.

Economic justice
Will not be televised
It will not be brought to you
Like a hot take
By the tentacles of institutes
Wrapped around civil society initiatives
To promote themselves.

Economic justice
Will not be televised
It will not be delivered
Cold
Like emailed interventions
To protect sexual harassers.

Economic justice
Will not be televised
It will not be brought to you
By men
Defending sex ‘not consensual’.

Economic justice
Will not be televised
It will not be delivered
By the festivities
Of ideological cliques
Shouting about reform.

Economic justice
Will not be televised.

Commentary on VAT zero-rating

Since early 2017 I have been engaging with, and advising, some South African civil society organisations on public finance matters. While I naturally have my own views about many issues, the purpose of this engagement is really to help individuals in these organisations understand the issues well enough to make up their own minds. (Some other economists have the more specific agenda of influencing civil society organisations to support their – the economists’ – positions; an approach which I think is evidently dubious).

One important issue that arose with the tabling of the 2018 Budget was the increase in value-added tax (VAT) by one percentage point to 15%. My view on this matter was that there were major procedural and legal problems with how the increase has been brought into effect and that the National Treasury could have done more to protect poor South Africans from the incidence of new revenue measures. The position of civil society has subsequently honed in on the prospect of expanding VAT zero-rating and increasing various forms of social expenditure.

Some of the demands relating to social expenditure that I have seen seem loosely related to the actual VAT incidence claimed by Treasury, but that is a separate issue. More specifically, I recently argued -in an op-ed in Daily Maverick – that zero-rating itself could be of limited value or even counterproductive. A version of that piece with hyperlinks is provided below for anyone interested in reading some of the background references.

Unfortunately, it appears that no-one currently has the appetite to challenge/query the constitutionality of the VAT Act.

Continue reading “Commentary on VAT zero-rating”

The NDP: some thoughts from 2013

Now that Cyril Ramaphosa is president of the ANC and the country, it seems likely that the government will do more than pay lip-service to the National Development Plan finalised in 2012 but barely implemented in any substantive way by subsequent Zuma-led governments. However, the NDP is far from a perfect document, as I pointed out in comments I made in a piece published in 2013 – most of which remain as pertinent now as they did then. These comments cover the public service and education chapters of the NDP. Later this year I will write something about South African economic policy in general, which will address the (somewhat problematic) NDP chapter on that topic.

Moralising hullaballoo around circulation of The President’s Keepers is misplaced

There was an outcry on South African social media on Saturday the 4th of November, when a PDF version of investigative journalist Jacques Pauw’s book The Presidents Keepers began being circulated online and via the WhatsApp messaging service. A number of prominent media, academic and other South African personalities took to social media to criticise the sharing of this file as ‘theft’, ‘stealing’, ‘immoral’ and ‘pirating’. At best, none of those assertions reflect the nuanced complexities around copyright and the public good. At worst, they merely illustrate misinformed armchair moralising.

There appear to be three different, but often overlapping, premises for these arguments. First, that copyright infringement is illegal. Second, that circulating the book as an electronic file will reduce sales and harm profits for the author and publisher. Finally, that there is something inherently morally wrong in circulating a book in a way that allows people who haven’t paid to read it. I want to argue that only the first argument may be correct and that, even then, it doesn’t follow that it is immoral to distribute the book this way.

Illegality

Whether distributing a PDF version of a book you have purchased or received, without any expectation of private gain, is illegal is a question for copyright experts. The illegality could arise in relation to the converting of the original ebook into an electronic form that could be distributed, and the actual distribution itself. To my knowledge, no-one has been attempting to profit from distributing the PDF file and that has legal as well as moral significance.

Even if such distribution is illegal under copyright law, that does not make it inherently immoral: laws inform moral reasoning, are also informed by it, but need not coincide with it. Pauw’s book provides a great example. It is clear that someone would probably have had to break a law in order to give Pauw some of the information he uses, but from a moral standpoint that can be justified by an appeal to the broader public interest. If, for example, the president was letting cigarette distributors make cabinet appointments in return for cash – arguably a treasonous offence – then breaking tax or intelligence laws to reveal this is surely the morally right thing to do. (As a result, in some instances such actions are protected by other laws, in the form of whistleblowing legislation).

A more complex perspective from economics

The more interesting issues relate to the overall impact on the public good of distributing the electronic version of the book. The moralising critiques expressed above appear to be entirely unaware of a large literature, in economics and other disciplines, on the ‘social welfare’ effects of copyright, and copyright infringement.

In economics the fundamental starting point of the literature is that constraints on the distribution of knowledge and information – defined to include everything from the computer code for spreadsheet software to fiction novels – are bad. The reason is simple: in the modern world it is almost costless to reproduce and transmit information, so if that information yields meaningful benefit to a significant number of people then it is socially inefficient for them not to be able to access it. The critical counterweight to this, is that in order to encourage people and institutions to produce such information they need to be able to collect a reasonable return: if people know that information is freely distributed after it has been produced, the producers may realise they will not get a reasonable return and therefore not produce it in the first place.

In recent times, a third dimension has been added to the literature: the role of behavioural and institutional norms. Specifically, the second dimension above is based on a narrow notion of market interaction in which people only pay for something if they are forced to. But it is well-established across a variety of disciplines that human beings often behave in other ways, reciprocating when they don’t have to. The implications of this for markets can be seen from the rise in online organisations, such as Wikipedia, that create and distribute information freely on the basis of a model under which people voluntarily contribute.

Different groups with different consequences

It should be fairly obvious in applying these three perspectives to the case of Pauw’s book, that simplistic moralising is misplaced. If we want to think through the issue systematically, it is useful to distinguish four groups:

  1. People who already have bought the book
  2. People who were going to buy the book (i.e. they want to and can afford to) but have not yet done so
  3. People who would like to read the book but cannot afford to read it
  4. People who were not going to read the book, whether or not they could afford it.

Initially we can ignore the fourth group: receiving the file makes no difference to them.

One of the strange things about modern publishing is that having the (more expensive) hard copy of a book often doesn’t entitle you to a searchable electronic version. So some people in the first group might benefit if they would later use an electronic version as well, and it would be hard to argue that this is morally or legally illegitimate.

The main interest, however, is in groups two and three: in a basic economic model, the ‘net effect on social welfare’ of distributing the file will depend on the relative numbers of people in these groups, as well as the behaviour of those in group two on receiving the PDF. The well-being of those in group three increases because they can now read the book, whereas cost had prevented them from doing so. What happens to the well-being of those in group two depends on their behaviour, but it certainly will not decrease. The future profits of the publishers and author, on the other hand, depend only on the number of people in group 2 and their behaviour.

As regards group three, it is useful to be reminded of the role that Jacques Pauw is playing. He is an investigative journalist who has a long track record of reporting matters in the public interest. The people who gave him the information used in his book almost certainly did so to bring it to the attention of the South African public, not to make the author or his publishers rich. In other words, the standard concern in the economics literature applies: we want the producers of knowledge to earn a fair due, but we also want the broader social good to be well-served. Given the nature of Pauw’s book, it is not a stretch to argue that it should be disseminated as widely as possible – those who cannot afford the book, the vast majority of South Africans, should not be excluded from reading it.

My own view is that the vast majority of people who were going to buy the book anyway (group two) are unlikely to change their minds just because they received the PDF. One reason is that many people, such as myself, still prefer to read hard copy versions. Another is the principle of reciprocity I noted above: assuming people won’t pay simply because they do not need to ignores vast literatures in psychology, experimental economics and real-world institutions that survive and thrive on the opposite assumption. Furthermore, the hype associated with the distribution of the file could even cause people in group four (who weren’t going to buy the book) to now either read it or buy it.

Some concluding thoughts

In conclusion, let me make a few final points.

First, since we don’t know how different people will react to receiving the ‘pirated’ version of the book, we simply cannot say whether it will increase or decrease sales and profits for the author and publisher. It seems at least as likely that they will increase as decrease, given the arguments I have made above.

Second, given the threats from both the South African Revenue Services and the State Security Agency, it seems reasonable to infer that the PDF file was circulated primarily in anticipation of a possible withdrawal of the book. A second motive may have been to get as many people reading it as possible, because of the serious implications its revelations have for our democracy. In that context, it is hard to understand assertions about ‘theft’.

Third, it is ironic that moralisers implicitly reject the possibility that people might buy the book anyway, out of a spirit of reciprocity, while appealing to recipients to delete the file and buy the book. Essentially, they are presuming, in rather patronising fashion, that only their moral incantations will get people to behave in this way.

Finally, it is important to remember the role that investigative journalists play as conduits of information in the public interest. It is perverse to argue that the first priority in this kind of case is profit when what makes it worthy of such strident commentary is precisely its relevant to matters of national interest.

Fortunately, the author of the book seems to have a more nuanced appreciation of these issues than those ostensibly defending his interest.

There will surely be more such incidents and hopefully we will be able to have a more informed, and less moralising, public exchanges in future.

 

Declaration: I received two, unsolicited copies of the PDF file containing the book. I didn’t distribute these further, but have filed a copy away: either in the event that I cannot get a hard copy version, or so that once I have done so I can easily search the electronic copy for reference purposes.

Disingenuous economics

Today a new paper in the World Bank Research Observer by Banerjee, Hanna, Kreindler and Olken announced that there is “no systematic evidence” to support the view that social transfers discourage work. Under different circumstances I might be pleased by this, since I have long believed that claims about welfare-induced voluntary unemployment are mostly ideology-driven garbage. But I am not happy about this paper.

The reason is that the way in which it is written implies that the ‘welfare-induced laziness’ thesis is something conjured up by policymakers and members of the public from thin air. To quote:

despite these proven gains, policy-makers and even the public at large often express concerns about whether transfer programs discourage work.

The authors position themselves, as economists rigorously assessing evidence, against the puzzlingly misguided ‘policymakers’ and ‘public at large’. From this, one would think that economists do not hold such beliefs and have not contributed to them. But you’d be wrong. In fact, a paper published in the World Bank Economic Review in 2003 by Bertrand, Mullainathan and Miller (BMM) claimed that the South African old age pension led young, black men in pension-receiving households to reduce their labour supply. This had a significant impact in South African policy circles, leading a number of local social scientists to challenge the findings of the paper.

Posel, Fairburn and Lund (2006) argued that BMM didn’t adequately account for migration, which changed the conclusions. When I was a Master’s student at UCT in 2006 I wrote a term paper – using data kindly provided by Posel – arguing, further, that BMM’s result using cross-sectional data couldn’t possibly be robust to household formation dynamics:

The primary aim of this paper is demonstrating that, based on existing evidence, one can make at least as strong a case that the pension influences household formation, as that it affects labour supply.

I referred to the BMM paper as a case of ‘perverse priors’. A different approach to the same point by Ranchod (2006) examined the effect of losing a pensioner and his findings called into question the conclusion about labour supply of young men. Ardington, Case and Hosegood (2009) later used panel data to show that differences between households along with migration could explain the finding, rather than an actual reduction in labour supply. To quote them:

Specifically, we quantify the labor supply responses of prime-aged individuals to changes in the presence of pensioners, using longitudinal data collected in KwaZulu-Natal. Our ability to compare households and individuals before and after pension receipt, and pension loss, allows us to control for a host of unobservable household and individual characteristics that may determine labor market behavior. We find that large cash transfers to elderly South Africans lead to increased employment among prime-aged members of their households, a result that is masked in cross-sectional analysis by differences between pension and non-pension households. Pension receipt also influences where this employment takes place. We find large, significant effects on labor migration upon pension arrival.

So, in the South African case, it was well-regarded, US-based economists publishing in a World Bank journal in 2003 who gave credence to the idea that grant receipt led to idleness. Much effort was expended debunking those claims and preventing them from having harmful effects on progressive social policy. It is, therefore, rather outrageous that in 2017 another set of well-regarded, US-based economists publishing in a World Bank journal can pretend as if this never happened.

In my view, this kind of behaviour is characteristic of the failure of critical self-reflection, and taking of responsibility, in economics as a discipline. And it should serve as a cautionary tale to non-economists and economists alike.