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.