Can the right story increase your income or help the poor?

See Think Positive, Climb Out of Poverty? It Just Might Work by Seema Jayachandran in The NY Times. Even if these programs work, they raise an important question: if everyone gets the "right" story told to them, would we all become richer?

Excerpts:

"In Kampala, Uganda, students who watched a feel-good movie about a chess prodigy improved their academic results. In Oaxaca, Mexico, clients of a microcredit organization were successfully trained to have greater aspirations for the future. And in Kolkata, India, sex workers in brothels were imbued with a sense of empowerment that helped them to take concrete steps to improve their lives."

"In Kampala, Uganda, for example, a study by Emma Riley, a graduate student at the University of Oxford in Britain, examined the effects on students of watching a movie, “Queen of Katwe,” starring Lupita Nyong’o and David Oyelowo. The Disney movie is based on the life of Phiona Mutesi, a girl from a poor township in Kampala, whose father died of AIDS when she was young.

Ms. Mutesi went on to become a champion chess player, representing Uganda in international competitions, an achievement that exceeded what many students in Uganda had expected for themselves or even thought possible.

To encourage them to aim higher, students preparing for their national exams were shown the movie. When they took the exams, they performed better than a control group that instead watched a Hollywood fantasy movie, “Miss Peregrine’s Home for Peculiar Children,” that did not feature an appropriate role model. Significantly more of the “Queen of Katwe” movie watchers had scores high enough to gain admission to a public university."

"The Kolkata, India, experiment, conducted by five scholars based in the United Kingdom and India, ran a short course on personal growth for 264 sex workers, who had often felt stigmatized and powerless. After participating, the women had measurably greater self-esteem and a stronger belief that they could determine the course of their lives. More concretely, they began saving more money and getting more frequent health checkups.

These successes suggest that even traditional anti-poverty programs work partly because they lift people up psychologically. For example, a program designed by a nonprofit in Bangladesh that has also been used in India, Ethiopia, Peru and other countries has given poor people livestock plus training on how to care for the animals.

This aid package has raised participants’ incomes more than might have been expected, based on the direct monetary value of the animals and the education. What helps to explain the outsize impact is that participants started working more hours."

Critics of anti-poverty aid have charged that it encourages laziness, but in this case, the opposite happened. The assistance motivated people to work harder. The extra work was partly a rational calculation: Productive assets like cows or goats magnified the payoff from labor. But it’s also true that participants’ mental health improved, which likely made them able to work more.

Better mental health is also one of the striking benefits of the cash grants that the American nonprofit, GiveDirectly, has given to poor households in Kenya."

"Hope isn’t a cure-all. In none of these examples can we be certain that it actually explains the gains in people’s income or education. And instilling hope without skills or financial resources is unlikely to be enough to lift people out of poverty."

"unrealistically high aspirations can be so discouraging that they are harmful. Repeatedly falling short can deplete motivation.

Still, it is welcome news that poverty-alleviation programs can amplify the good they do just by making a better life seem — and actually be — within reach."

Economists as Storytellers

By Donald J. Boudreaux. Excerpts:

"Paul Heyne (1931-2000), who taught for most of his career at the University of Washington, was one of the 20th century’s greatest teachers of economics. He excelled in the classroom, in popular writings, in public lectures, and in his indispensable textbook, The Economic Way of Thinking.

Paul made economics relevant and, hence, interesting. And perhaps the single best piece of advice that he offered to his fellow economists is to tell what he called “plausible stories.”

Far too many professional economists today ignore this advice, even when teaching an introductory class to freshmen. Indeed, wrongly thinking it to be hostile to scientific rigor, they hold this advice in contempt."

"My own take on economic methods is deeply influenced by Hayek. It is influenced also by Deirdre McCloskey who insists that whatever methods work to further our understanding are legitimate methods."

"Although verbal stories have nothing of the appearance of Science, they are a legitimate and scientific method of gaining – and of sharing – understanding. In fact, for some purposes, verbal stories are by far the method that works best. 

Consider Leonard Read’s famous story “I, Pencil.” In unassuming prose, Read revealed the surprising though indisputable truth that the amount of knowledge necessary to make an ordinary commercial-grade pencil is inconceivably greater than is the amount of knowledge that can be comprehended by a single individual or by a committee of even the most genius of individuals. (In 1776, Adam Smith told a similar, although much shorter, story about an ordinary woolen coat.)"

"Leonard Read’s long-time secretary, Jeanette Brown, told me that Read one day in 1958 squirreled himself away, alone in his office at the Foundation for Economic Education, and for hours did nothing but contemplate a pencil. This contemplation – combined with Read’s extensive reading of great economics texts – is what Jeanette believes to be the source of Read’s insight as told in “I Pencil.”  

If Jeanette is correct – as to me she seems to be – in what way is Read’s pondering a pencil and thereby discovering the insights that he shared in “I, Pencil” less deserving of the label “scientific inquiry” than is, say, an astronomer pondering the night sky through a telescope and thereby discovering a previously unknown star? 

Both inquiries uncover truths that are objective in the sense that they can be conveyed to other people, each of whom is free not only to challenge or to accept the claimed truths, but also to use those truths as tools in the search for other truths.

Economics, when done well, is the telling of such stories. The stories told are not fantasies or fictional. They are, a Paul Heyne said, plausible. And they are fascinating!"

See also Economists Love Fables And Parables (Or, What Is The Essence Of Economic Analysis?)

Economics resembles storytelling more than mathematics

Even Nobel prize winning economists are talking about narratives

See Narratives, Imperatives and Moral Reasoning by Armin Falk and 2014 Nobel economics winner Jean Tirole.

"Abstract

This paper provides a theoretical framework to explain recent empirical findings on the malleability of morality, and suggest new testable implications. Building on a basic model with image concerns, we introduce the concept of narratives that allow individuals to maintain a positive image when in fact acting in a morally questionable way. We show how narratives, however feeble, inhibit moral behavior in downplaying externalities, magnifying the cost of moral behavior, or in suggesting not being pivotal. We further show that narratives spread virally when negative, but not when positive. We then turn to imperatives, i.e., moral rules or precepts, as a mode of communication to persuade agents to behave morally, and identify the conditions under which Kantian behavior will emerge in an otherwise fully utilitarian environment. We also show how an unwillingness to engage in trade-offs can arise, with implications for the elicitation of moral preferences. Finally, we study how collective decision making and organizational design produces a sub-additivity of responsibility."

Moralizing gods help societies cooperate

See Why You Just Helped That Stranger by Robert M. Sapolsky. According to Wikipedia, "He is currently a professor of biology, and professor of neurology and neurological sciences and, by courtesy, neurosurgery, at Stanford University." Cooperation may be important for economies. How do you get a large number of people in a factory to work together, for example? Excerpts:

"When do religions tend to invent such moralizing gods? A number of researchers—such as Carlos A. Botero of Washington University in St. Louis and his colleagues—have shown that moralizing gods become more common in large-group cultures.

Why? Psychologist Ara Norenzayan of the University of British Columbia (UBC), looking at the size of groups, proposes that as cultures grow, something uniquely human emerges—opportunities to act anonymously. To Dr. Norenzayan, that’s when moralizing gods become useful to maintaining the social order. Even if you do something rotten and no one knows, there’s a Someone who does."

"people who play an economic game anonymously, whether they are religious or not, become more pro-social when unconsciously primed to think about God (by having to unscramble jumbled sentences that make religious references)."

"people in cultures with moralizing gods tend to be more pro-social—a hypothesis tested in a recent paper in the journal Nature by psychologist Joe Henrich of UBC and collaborators, including Dr. Norenzayan. The researchers surveyed nearly 600 people around the world, believers in such faiths as Christianity, Hinduism, Buddhism, animism and ancestor worship.

Subjects had to deal with a simple economic scenario: Here is X amount of money. Divide it between yourself and a geographically distant co-religionist whom you don’t know. Or divide it between that distant co-religionist and a local co-religionist whom you do know. Subjects then answered questions about their religion.

After controlling for various economic and demographic variables, back came a clear answer—the more that people considered their god(s) to be moralizing and punitive, the more generously they divvied up money with that stranger. Thus, the threat of moralizing gods may help to explain some of the human capacity for pro-social cooperation among strangers."

Are we confounding heroism and individualism? Entrepreneurs may not be lone rangers, but they are heroic nonetheless

By Jeffery S. McMullen of Indiana University. March 2017 Business Horizons. The full text of the article is at the link. Here are the last three paragraphs.

"Are entrepreneurs lone rangers? No, but that does not mean that entrepreneurship occurs without heroic individualism. Like entrepreneurship, true heroism is interdependent by its very nature. Even if an entrepreneur were somehow able to go it alone, his or her success would still depend on customers as well as other possible stakeholders (e.g., employees, investors, suppliers, distributors, etc.). Similarly, it is difficult to imagine how anyone could be heroic without a somewhat intimate knowledge of and concern for others’ welfare. Entrepreneurs must bear the costs of their actions before they receive the benefits, which only come if the costs the entrepreneurs incur ultimately benefit someone else.

Therefore, before we declare the heroic entrepreneur a myth, perhaps we should consider the term ‘myth’ as literally as Campbell has. Any innovative act exhibits an element of uncertainty and thus requires a corresponding degree of courage. Although this may only be a moment’s adrenaline rush, it is more likely an extended ride on an emotional rollercoaster that exhausts as well as elates. It is a hero’s journey of existential import and consequence. If this is true, then extraction of heroism from entrepreneurship is misguided, as it would do nothing to correct for scholars’ undersocialization of the entrepreneurial act. Instead, it would merely neglect the courage and sacrifice required from individuals like Elon Musk, who may not act alone, but nonetheless must act if entrepreneurship is to occur.

Ignoring this fact is not only likely to produce bad science but also may affect practice via bad policy. To the extent that policymakers erroneously believe heroism is unnecessary, they are likely to underestimate the costs entrepreneurs must incur not just to succeed, but also to try at all. Lack of sympathy about such sacrifices would likely shape institutional (dis)incentives. Thus, to deny that entrepreneurship is a heroic act is to neglect the need to reward its success and to forgive its potential failure. For these reasons, it may behoove scholars, policymakers, and practitioners alike to think twice before throwing out the baby of heroism with the bathwater of individualism."

Towards a mythic process philosophy of entrepreneurship

By Lauri J. Laine & Ewald Kibler of Aalto University in Finland.  The entire article is at the link.

"Abstract

Drawing on the archetypal theory of the hero's journey, we present an analysis of Stanley Kubrick's 1968 film 2001: A Space Odyssey to theorise on a primordial organisation of entrepreneurial processes. We conclude by discussing opportunities implied by a mythic-process approach in developing new meaning for the ‘beginnings’ and ‘ends’ in the process philosophy of entrepreneurship."

"Highlights

•

We introduce a mythic process philosophy of entrepreneurship.

•

We connect process philosophy to archetypal theory.

•

We examine Stanley Kubrick’s 1968 film 2001: A Space Odyssey.

•

We theorise on a metaphysical organisation of entrepreneurial processes.

•

We develop meaning for ‘beginnings’ and ‘ends’ in entrepreneuring."