Mobile Banking... Too Much, Too Soon?

Alice Liu spoke to us and extolled the virtues of mobile banking, holding the M-PESA program up as a beacon of success and a harbinger of things to come to both the developing and industrialized world. On the surface, m-banking and microfinance seem like incredible ideas. Currently, it is not profitable for banks and nonbank financial institutions to issue credit to low-income people. This is true in the wealthiest countries of the Western world and the poorest countries of central Africa. Even when issued to someone with a one hundred percent chance of repaying a loan, when the loan is small, there is very little profit for the bank to make on such a small loan. When we add the variable that low-income people inherently have the greatest chance of default on their loans and have very little collateral to post against the loan, we see why banks have historically ignored the microfinance, small loan market.
However, this market did not cease to exist because banks and other financial institutions deemed them unprofitable. Thus, the emergence of microfinance and the contemporary prevalence of microloans. While there is very little profit to be made on each individual loan, if enough microloans are made and if people repay them with interest in full, there is enough profit to be made to incentivize non-traditional financial services institutions to enter the market. The fundamental idea underlying microfinance is that people in developing countries have great, profitable ideas just as people in industrialized nations do but do not have the necessary capital to realize them. As I explained in my first blog post, since developing countries are likely still on the steep part of the development curve, there are many more significant investment opportunities than the already developed, largely tapped out market in industrialized countries where we are constantly fighting the natural progression of diminishing marginal returns. Many of these microfinance organizations were created based on the belief that the recipients of these loans will be so grateful for the opportunity that there will be very little default on these loans.
While this makes intuitive sense, the obvious problem is the technological barrier that restricts access and communication between lenders with money (in the Western world) and the people who need credit (in the developing world without the technological or digital infrastructure necessary for instantaneous communication). This is why Alice Liu believes m-banking, or the ability to use the mobile phones that many people in developing countries already have, to conduct their banking can revolutionize microfinance and the global economic market. The main problem that comes to mind is not an indictment of m-banking or microfinance but simply a reality of capitalism. When investors see a profitable market, or arbitrage opportunity, they seek to exploit it. M-banking may be so successful that it will make the microfinance market enticing enough for more profit-seeking investors to enter the market. The problem with this is that there are very few restrictions or regulations on m-banking as it is a new, emerging market. Much of governmental regulatory efforts are still trying to catch up with the ever evolving financial market that has seen nonbank financial institutions come to dominate the market in recent years. I fear that until an adequate regulatory structure is put in place to curb the inevitable predatory lending, we may be putting the cart before the horse.

Don't Believe Everything You Read... On Facebook

Like it or not, social media has become a part of every day life. More and more, Facebook and Twitter are supplanting face-to-face social interactions. With so many people constantly connected and information so readily available, it is only natural that people have begun to use these media for more than just superficial social interaction. For the first time in 2008, with the campaign of Barack Obama, we saw the effect social media could have in the political arena. With people constantly connected and sharing instantaneous information, the ability to disseminate ideas and galvanize support—both generally and monetarily—has immensely changed. These changes have cut both ways. I would argue that the democratization and viral capability of information through social media has done much more harm than good.
While people are no longer reliant on a few media sources to get their political information, the quality of their information has decreased. On the Internet and on social media sites, it can be very difficult to distinguish between what is credible and what is not. Furthermore, social media practically demands a simplistic, abbreviated way of disseminating information. Twitter limits each tweet to 180 characters or less. Facebook statuses are even shorter. Increasingly, the norm is for people to quickly scroll through their Facebook or twitter feeds and move on to another site. This means that the political information people consume is limited to short buzzwords and captions. In politics, ideas are often complex and nuanced. On twitter, things are usually simplified and sensationalist. Certain political ideas simply cannot be boiled down to a single hash tag. And this is what is scary about the idea that young people could be receiving a majority of their political information from social media. First of all, what their friends post already restricts the information they are receiving. Secondly, it has become common practice to read the status accompanying a video clip or watch the first few seconds rather than watching the entire video and understanding its political context.
For example, Cornell in Washington resident, Tom March, posted a video of an exchange between Congressman Ron Paul and Federal Reserve Chairman Ben Bernanke when Bernanke was testifying in front of the congressional committee Congressman Paul sits on. Tom posted the video on his Facebook, insinuating that Ron Paul made Bernanke look stupid when discussing the gold standard. And this is what 90% of Tom’s Facebook friends took away from seeing this video without actually watching it in its entirety. In reality, it was clear from watching the video that what Ron Paul thinks he knows about economics does not even approach what Bernanke actually knows as Bernanke seemed exasperated with Paul’s uninformed questions. Through social media, it has become very easy to intentionally, or merely incidentally, spread misinformation and disinformation. If successful democracy is born out of informed citizens, the proposition that future generations will get most of their news from social media is a frightening one.

ehealth now

In the US, health care costs are becoming increasingly unsustainable. In 2008, the United States spent 2.4 trillion dollars on health care, or roughly 16.2 percent of GDP. This is far more than any other industrialized nation. In fact, no other OECD country was within 5 percentage points of the US in terms of total health expenditure as a percentage of GDP (OECD Health Data 2011). All signs point to this spending continuing to increase astronomically. In the last forty years, total medical spending has increased 79% more rapidly than CPI (Peters 2010, 270). At this rate of growth, by 2017, health spending will be approximately 20% of GDP—meaning 1 out of every 5 dollars in the US economy will be devoted to health spending (CMS NHE Data 2011). The US spends more gross dollars, a larger percent of GDP and more per capita GDP than any other industrialized nation on health care. Basically, health care costs in the United States are becoming increasingly unsustainable.
Many health economists have proposed various ways to bend the proverbial health cost curve. Health care costs are primarily driven by two main factors—price and usage. Since the price of health care is increasing at a similar rate in the US relative to other industrialized countries, the next most logical way to cut health care costs is to decrease usage. This would involve the difficult and controversial decision to ration care. However, these are not the only ways to lower health care costs. There are many who believe the implementation of health technologies can make the health care industry much more efficient, eliminate fraud, eradicate waste and decrease exorbitant health care costs. By implementing modern health technologies, many feel that the quality of health care can be improved while simultaneously lowering costs—something rare in any industry.
The health care industry has been slow to adopt the many computer technologies that have proliferated in almost every other industry. For example, while banks can instantly electronically alert us when our balance is low, doctors do not have the ability to instantly give us the results of a blood test. While most industries now use electronic record keeping, paper records continue to persist in healthcare. In the American Journal for Managed Care, Newt Gingrich asserts that these problems “have kept healthcare shackled to the past.” The HITECH Act, a provision of the stimulus bill, as well as the Affordable Care Act has put forth a lot of money to incentivize the healthcare industry to modernize and effectively employ these new technologies. Health ICTs and electronic records can help to eliminate medical errors due to coordination issues and unorganized paper records. This is one of the few ways that the US can hope to provide better quality healthcare at a lower cost without restricting access to care or eliminating expensive treatments. The federal government has already invested billions of dollars in health ICTs and e-health. The main drawback of making so much patient information electronic is the security and privacy issues. However, while this is always a concern, it is not a reason to forgo the overwhelming benefits of the wide-ranging implementation of health ICTs. The technologies can allow doctors to see patient data and medical records, see how other doctors are treating similar problems and see the exact cost of each treatment. Just as so many industries have realized the incredible benefits of integrating contemporary technology into their business model, it is time for the health care industry to catch up.

Laptops for Everyone?

We have finite resources. When examining any policy whether it is local, national or international, we must always remember that money spent on one policy in one area necessarily means that the very same money cannot be spent on something else. Allocation of funds is always going to be a zero-sum game. Therefore, it is not enough just to look at the explicit costs of a policy when evaluating its costs and benefits. We must also look at opportunity costs.

While it very easy to look at a policy, like giving a laptop to every child in a developing country, and extoll its virtues and benefits, we must remember the harsh reality that the hundred dollars spent on each one of those laptops could instead be spent on something else. If we make the decision that it is best to give these countries aid, it can be very difficult to swallow the idea that we should give children laptops when they do not have food or water. While I understand the old adage about teaching a man to fish rather than giving him a fish and I am often a proponent of treating the cause of a problem rather than the symptoms, this policy still makes me uneasy. While in a theoretical, academic sense, I absolutely understand the need to arm these impoverished children with the technological tools they need to make money and become economically relevant. I understand that simply providing these countries with subsistence materials will only allow them to survive, continuing on the same impoverished path that they are currently on. But at the same time, how can we give these children laptops when there are so many starving to death, or dying because they do not have basic healthcare, or even access to clean drinking water?

It seems like a false choice. While giving these children laptops in the long run may be in their best interest, in the short run, it seems almost cruel. Whole families can be fed for months on a hundred dollars. Are exposing children to the World Wide Web and contemporary technology really a more desirable social outcome? Is this the best use of our funds? When I think about the logistics of giving every child in a developing country a laptop, it just does not seem worth it to me. First of all, computers break. They have bugs. They need regular maintenance. In the developed world, people often spend twenty times as much on a laptop. How many of them do not have some type of IT problem over the next few years? Without a robust technical support system, this policy seems incredibly wasteful. Additionally, as someone who has grown up seeing my peers using desktops, laptops, iPhones and iPads, I have seen firsthand that people find a way to use these machines for senseless games for a majority of their leisure time. It would take an incredibly complex, almost perfectly designed educational system with incredibly technologically proficient teachers to integrate these technologies into the educational system to make this investment worthwhile.

What do I think would be a better investment? Much like Professor Colle put forward in our first week, I would advocate for increased funding for technologically enabled universities. Rather than giving each child a laptop, this policy would instead arm the best and brightest students in each country with a much greater knowledge—both of technology and more traditional studies. These universities can help foster an environment that encourages innovation, learning and success. The recipe for the alleviation of poverty is being healthy, being fed, clothed and sheltered and being educated. People can only be so forward-looking and intellectually curious when they are sick, thirsty or wondering where they are going to find their next meal or where they are going to sleep that night. The challenge will be to promote the funding of these basic human needs while encouraging education. I do not foresee the mass distribution of expensive laptops as a solution to this problem. Universities offer so much to the communities surrounding it. This seems like a solution that will result in much less waste.

I'm Not Biased... See

There seems to be a reactionary trend in journalism lately. As increasingly bitter partisanship continues to become the norm in politics, the focus on the level of bias in the media is at an all-time high. Afraid of being branded as biased, it feels like many journalists are trying harder than ever to look at both sides of the issue. This is a good thing, right? Rather than getting overly simplistic, prejudiced accounts of an issue, we are presented with both sides—allowing us to make our own decisions. This is a sign that media is doing its job, right? Rather than partisan hackery, the media is doing its job to shed light on issues.

But I do not think this has been a positive development. Journalists have reacted by forcing both sides into their analysis out of fear of being branded liberal or conservative. And fear does not lead to good, honest journalism. First of all, the increasing partisanship in American politics is being mirrored in the media. Too frequently, we are presented with both sides of an issue rather than two sides of an issue. There is a distinct difference. Almost every existing issue has more than two sides. By forcing their articles to present the liberal and conservative view of an issue, many journalists are ignoring the nuanced complexities of a multifaceted subject. While a two party system may be an unavoidable consequence of our political structure, it does not mean that the media must follow suit. The media is supposed to be the fourth estate—an independent entity responsible for checking government power by holding up a metaphorical magnifying glass to the government. The media should be disseminating these smaller, lesser-known opinions, not disregarding them in order to put up a bipartisan façade.

Additionally, there is not always a need to lend equal credence to the other side of an issue simply because not all opinions are created equal. It is not necessary to spend equal time discussing the arguments of a few scientists who claim climate change is a ruse when millions more have scientifically proven it. Certain things are just facts. If I were to drop a baseball and someone argued that it would fall up instead of down, there would be little need to discuss the merits of his argument. As Daniel Patrick Moynihan so perfectly articulated, “everyone is entitled to his own opinion, but not his own facts.”

Now, this is not to say that we should suppress minority opinion. Just because more people believe one thing does not make them right. However, this compulsive need to elevate arguments that are shaky at best to an equal level as strong, factually informed opinions under the banner of impartiality is dangerous. To give more time to an argument than one normally would in order to create the illusion of objectivity actually biases one’s analysis. We often hear about the decline of journalism. We hear it blasted for being biased, for being corrupt, for being sensationalist. But this critique is often obscured. Just as it is dangerous when a journalist does not write his true opinion out of fear, it is dangerous when journalists write in this manner out of fear.

Technology and We

With the advent and proliferation of the Internet, there has been much debate over its effects on intelligence. Does having unlimited instantaneous information make us more informed? Or is it a crutch that allows us to go through life without actually knowing anything? We all know the advantages of computers and the Internet. However, some people have argued that the Internet is actually making us dumber. In his book The Dumbest Generation, Mark Bauerlein argues that the Internet is actually shortening our attention spans. He argues that our generation, having grown up with much of this technology, is less apt to sit down and engage any lengthy text. He even makes the case that despite having more information available to us than any prior generation, we are less knowledgeable—calling us the dumbest generation

While it would be easy to dismiss Bauerlein—especially after his offensive title—as a Luddite technophobe, he does make some valid points. Much of new technology and social media force us to oversimplify. Only so much information can be crammed into a Facebook status or text message. Twitter explicitly limits a single post to 140 characters or less. There are many things in life that simply cannot be adequately explained, analyzed or discussed in these forms without eliminating much nuance and detail, often destroying the crux of its meaning. And this process has symptoms. Knowing that people are apt to skim the headline and then click on another link, news organizations have began to rely on increasingly sensationalist and simple stories in an attempt to hook readers. This has come at the expense of journalism.

For me, this is not some abstract concept. More and more, I see it in myself. I often click on a news story that looks interesting—only to read a couple lines and get distracted. Either I click on a link that takes me to another article that holds my attention briefly, or I open up a new tab in Google Chrome and do something else. If this sounds alien to you, perhaps something called the “F-Shaped Pattern for Reading Web Content” will not. This technique essentially involves reading horizontally across the first few lines of an online text, then skipping down to the middle of an article and reading a few lines there and finally skimming vertically down the rest of the article until you hit the end. When I first realized this lazy habit had an actual name, I was mortified to realize how frequently I commit it.

And anyone who follows politics can plainly see the media adapting (or taking advantage of) our increasingly waning attention spans. Rather than relying on full speeches or debates, politics has been reduced to a series of out-of-context sound bites and video clips. This is not a positive development. This style of thinking does not parallel the technological progress that enables it. It is a marked intellectual regression—a much more primitive way of digesting information and understanding the world. This irony is not a function of our increasingly busy lives. As busy as we are or like to think we are, every generation before us has had the time to sit down and read entire books. And it is difficult to make a case against the values of these increasingly scarce tomes. If anything, this new technology that we have come to rely on should save us time, not cause us greater stresses or time burdens. However, to make sure we have enough time to read all our emails, we skim through news stories, watch short YouTube clips or do both simultaneously by relying on sites like the Huffington Post to get our news.

But while Bauerlein clearly has some salient points to make, he falls victim to his own thesis in the titling of his own book. He titles a book lambasting the waning attention spans of the digital generation and the oversimplification of complex ideas with an equally oversimplified title. Rather than clearly articulate his argument about the merits and pitfalls of many new technologies, he decries its users as the dumbest generation. And this argument clearly has no merit. When I saw Bauerlein speak at Cornell, he had trouble defining “dumbest”. And when I asked him to defend his title against his own thesis, he could only laugh and say it was a fair point. Study after study shows that generational IQ scores are continuing to trend up. Furthermore, our generation is much more effective at multitasking than any generation before us. And we are capable of using these new technologies to do incredible things that the generations before us would never be able to dream about.

While Bauerlein makes some interesting points, it seems like he is fighting against a tide that is already coming. Rather than bemoan the negative effects of these technologies, he would be better served to try to find ways to use these technologies to solve the problems he so deftly describes. There are always people who fear progress, especially technological progress. Usually, this fears stems from a lack of understanding. In ancient Greece, when people began to use paper to write things down more and more frequently, Plato feared that people would become incapable of remembering things as they came to rely on this new technology.

Technology can have both positive and negative effects. But it is essentially a tool. People can use it for good or bad. To develop or regress. The problem is that the average 15 to 24 year old now spends only ten minutes reading per day. But reading a full eBook instead of a paperback does not seem any better or worse to me.

The First of Many

At first, the central idea of our first week—that investing in information and communication technologies can spur development—seemed rather intuitive. Growing up in the digital age, I have witnessed firsthand the incredible opportunities that can result from technological proliferation. The advent of the Internet has created new, lucrative economic markets. It has revolutionized the way we can communicate. Social networking has even changed the way we have friendships and relationships. Anyone with an Internet connection effectively has equal access to almost limitless information. It seems technology has already permanently altered the social, political and economic landscapes of most industrialized nations.

So once again the idea to invest in ICTDs in developing countries seems rather intuitive. It is obvious that the world is already heading in this direction. As of 2008, 15 percent of the population in developing countries were Internet users. This figure will only increase with an annual growth rate of 21 percent. It is only a matter of time until these developing nations begin to catch up. This will occur for many reasons, but perhaps most importantly, it will occur because it is so profitable. The slow development that occurred in the United States in the eighties and nineties will be less pronounced since the Internet infrastructure has already been created. If we invest in basic technological and computer education and training programs in developing nations, we will give the people of these countries the ability to benefit from the technology already in place while also expanding the possibility for innovation to an even wider number of individuals and companies.

Despite these investments being so clearly profitable in the long run, it is not clear how profitable they will be in the short-run. First of all, any investment in ICTDs must be large enough and concentrated enough to make a difference. Investing, say one million dollars, and spreading it evenly around the entire developing world will not make enough of an impact to matter. Because of the necessity that any investment be large and due to the uncertain time horizons for recouping the investment, it seems that, at least at first, the private sector will not drive this. It is for this reason that entities like the World Bank invest “around US$800m per year in specific loans and guarantees on ICTs and development, and US$1-1.5bn per year on projects with significant ICT components” (Heeks 626). Moreover, any investment in ICTDs must be coupled with an investment in education. For example, giving iPads to rural Asian farmers with no computer experience will have no significant effect on development. In fact, this type of program would probably have more costs than benefits as the iPads would be expensive, but they would go unused. Again, this is why these investments may not be attractive to the private sector.

However, if we take a cursory look at simple economics, it is clear that these investments will have significant effects if employed correctly. If we assume that technology and capital have diminishing marginal returns and if we assume that people with equal education levels are equally productive, regardless of their nationality or race, one can make the argument that investing in developing countries will be more profitable than continuing to invest in industrialized countries. For example, if two equally educated people are both given computers, they will be much more productive. If you then give them mobile phones, then iPods, then flash drives, they will continue to become more productive, but each additional technological investment will yield smaller returns than the one prior. This will hold true unless the next technology is so innovative that it defies the diminishing marginal returns model. Therefore, if we commit to investing in educational programs as well as to making the investment large enough to be significant, it will be more profitable to invest in these developing countries that are still on the steep part of the diminishing marginal returns curve rather than the flat part where it seems industrialized nations currently reside.