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December 11, 2009

Disillusion

Filed under: Uncategorized — admin @ 1:04 pm

Today, I have come across fairly robust data contradicting two of my previously held ideas.  First, lack of effectiveness in microcredit financing schemes to create long-term increases in quality of life for the poor…  As this was one of my favorite development tools, I am disappointed.  Second, what happened to proof reading?  The role of mobile telecom as an instigator of development has long been a favorite theme.  While I know it is tough to get reliable data out of developing countries, how is it that the Economist (of all publications), can publish two articles which quote the exact same metric, with different data?

At issue is the notion that increases in mobile telephone penetration causes a given economic stimulus effect.  By increasing the rate by 10%, should cause x% GDP growth.  In the first article that amount is .8%, the second, .6%.  Not a big difference in absolute terms but relatively speaking there is a 25% difference in result.  What other economic transaction would be accepted with a 25% variance?  How about your paycheck?  Any takers? =)

It’s ok though, Deloite has come along with a study claiming the number is actually 1.2% (double the lower estimate in the Economist).   Here and here and here.  Sheesh.

In any case, I note that none of these researchers is brazen enough to claim the relationship is actually linear.  Even if I get 1.2% boost from that 10% of customers, how much do I get from the next 10%?  Typically, these segments are not going to be equivalently productive as a measure of resource input.  Giving cell phones to people who can use them productively is one thing.  Raw adoption rates is another.  Oh, wait, that’s right, we are assuming the markets are rationally distributing resources to the areas of greatest utility.  Hmmm, how is that working out for us?

Quick google check for rational market theory….  Oh, right, not so hot 😉

If we are possibly going to convince developing countries to liberalize their markets, we have got to do a better job of making the case than this.

In other news, I was chatting with MA the other day about a certain philosophical theory, and her response was:

MA:  If you do that, I will give you so little rope that it can’t be represented in three dimensional space.

Me:  That’s hilarious.  I’m going to blog that.

MA:  You often say that, but you rarely do.

Me:  True….

3 Comments

  1. I will take the 25% as long as it is 25 % more, and of course now you got me curious on the “certain philosophical theory” but I guess I won’t ever find out

    Comment by Karin — December 11, 2009 @ 3:56 pm

  2. What I find particularly interesting Matthew is the argument that mobile phone penetration leads to a large and measureable economic stimulus, that its effects can be analytically and statistically measured in terms of impact.

    No doubt it has an economic benefit in facilitating greater levels of economic activity within the macroeconomy, but to suggest in itself that greater mobile phone penetration will lead to economic growth is proposterous. I agree with your argument that this is an exceptionally poor example of what market liberalisation can do.

    Trivia: at which side of the rope length does the rope begin and end?

    Comment by Adam — December 15, 2009 @ 8:32 pm

  3. trivia answer: According to Heidegger (or any other constructive realist) it would begin on the side you pick it up on, and ends on the opposite =)

    Yes, I don’t think anyone can make a supported argument for cell phones being causal. There are wishful thinkers who want to evangelize that point, they do so without clear data. Unfortunately, doing business in developing nations often involves that sort of dart-board projection among private sector and public sector folks. Judging ROI for tech investments is extremely hard in fully developed economies…

    Comment by Matthew — December 17, 2009 @ 9:40 am

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