Weekend visualizations

1. NYT has a series of night-time activity visualization of different Syrian cities before and after the break out of the civil war. The country is 83% darker at night than before the war began.

The civil war has so far displaced nearly half the country's population and killed more than 200,000 people. Even Damasacus, under government control, is 35% darker than before the war.

2. FT has this superb visualizations about Twitter activity in Venezuela which starkly shows the extreme levels of polarization of opinion in the country. The graphic below shows the Twitter activity  (about 91000 tweets) networks on the day of President Maduro's claim about having foiled a US sponsored coup attempt.

The red cloud on the right points to tweets from those aligned to President Maduro and that on the left represents the remaining vast variety of Venenzuelan and Spanish-language media and others. The lack of overlap is a striking illustration of the disconnect of the Maduro administration with the rest of the country.

3. The most fascinating is this one about which airports, airlines, and routes within the US are likely to get you fastest to your destination.

High impact education interventions

What are the high impact interventions in education for developing countries? For those like India, which have largely surmounted the inputs and access challenges, and where learning outcomes are the primary concern, I can think of three high impact interventions.

1. Transition from "teaching to the class" to "teaching to the child" - It is now well established that children have differential learning trajectories. Therefore, the conventional approach of "teaching to the class", a large group at that, will not realize uniform learning outcomes. The different initial learning levels among students in a class exacerbates the "teaching-learning" gaps. It is therefore essential that class-room instruction has to be tailored around "teaching to the child" by remediating those lagging behind and bringing them upto speed with the rest.

In many developed countries, smaller class-rooms and highly motivated and well-trained teachers enable "teaching to the child". But in countries with large class-room environments, students at varying initial learning levels, and poorly-motivated teachers, the challenge lies with identifying the right strategy for "teaching to the child". One approach would be to group children across grades based on their initial learning levels, and moving them across groups based on their learning progress. A similar approach can be adopted within each grade too. Another approach would be to divide each class period into two halves, with the second half devoted to remediation of those lagging behind. Alternatively, the same remediation can be done through off-school hours instruction by trained volunteers. All these strategies are most likely to be contextual, to be selected based on the specific conditions available.

2. The adage that you cannot monitor what you cannot measure applies with great force to learning outcomes. Currently, monitoring of learning outcomes does not find place in the realms of data being collected by supervisors. Part of the reason is the sheer difficulty of quantifying primary school learning outcomes, especially in the aggregate, in a meaningful and reliable manner.

Any effective push towards improving learning outcomes requires the development of a credible quantifiable learning levels monitoring framework. This has to be multi-tiered, tailored to meet the functional needs and supervisory bandwidth available at each level of monitoring. A cognitively salient dashboard that enables effective supervision and can be disseminated through tablets and smart-phones can be a powerful instrument to improve learning outcomes.

3. Finally, a first order requirement for the success of all these measures is effective enforcement of accountability. Primarily, teachers and the school establishment have to be accountable to parents and the local community. One way to achieve this is effective functioning of School Management Committees. But SMCs have their limitations and cannot be a substitute for more institutional accountability of the school to local community. A fundamental requirement is to dismantle the current system, where teachers are employees of the state government, and make them employees of the local government. 

Pharma industry fact of the day

Jeff Sachs illustrates the problem with the current patents regime by pointing to the example of Gilead Sciences' block-buster drug to treat Hepatitis C virus (HCV), sofosbuvir, sold under the brand name Sovaldi. He writes,

In December 2013, the Food and Drug Administration approved Sovaldi, and another formulation, Harvoni, which is sofosbuvir used in combination with another drug. Gilead set the price for a 12-week treatment course of Sovaldi at $84,000, amounting to $1,000 per pill. Gilead set the price of Harvoni at $94,000... In the first year of marketing, Sovaldi and Harvoni are already blockbusters, reaping a remarkable $12.4 billion of market sales in 2014, more in just one year than the $11.2 billion price that Gilead paid in January 2012 to buy sofosbuvir from a biotech start-up named Pharmasett. 

The real story is not about Sovaldi's pricing, exorbitant as it is, but that of its development. Sofosbuvir was developed by a team of biochemists led by Professor Raymond Schinazzi at Emory University using National Institute of Health (NIH). In fact, NIH even financed the Phase I and II of its clinical trials. As Sachs writes,

Prof Schinazi set up Pharmasset Inc. as a Delaware corporation in 2004 as his business to develop sofosbuvir and hold the patents on the new prospective drug. Pharmasset raised around $45 million in a 2007 IPO and used those funds and others to supplement the R&D. According to the company's SEC filings, the total Pharmasset R&D on sofosbuvir up through 2011 totaled around $62.4 million. In January 2012, with an eye on sofosbuvir, Gilead paid $11.2 billion to purchase Pharmasett. Schinazi pocketed an estimated $440 million for his shares in Pharmasett... The total private-sector outlays on R&D were perhaps $300 million, and almost surely under $500 million, meaning that the decade-long R&D outlays were likely recouped in a few weeks of drug sales. 

And about its real cost of production,

According to researchers at Liverpool University, the actual production costs of Sovaldi for the 12-week course is in the range $68-$136. Indeed, generic sofosbuvir is currently being marketed in India at $300 per treatment course, after India refused to grant Gilead a patent for the Indian market. In other words, the U.S. price-cost markup is roughly 1,000-to-1!

And Gilead's patent on Sovaldi runs until 2028. Talk about long-term rent-seeking! And it is no surprise that others are following suit. Pharma firm AbbVie (which sells autoimmune disorder drug, Humira), recently purchased cancer drug maker Pharmacyclics for an astonishing $21 bn. Pharmacyclics' only marketed product is Imbruvica, a treatment for chronic lymphocytic leukemia and two other rare blood cancers, which was approved in 2013 and is considered a major breakthrough with massive commercial potential.

Update 1 (16/05/2015)

From Peter Singer,

One drug, Soliris, costs $440,000 per patient per year. In contrast, GiveWell estimates that the cost of saving a life by distributing bed nets in regions where malaria is a major killer is $3,400. Given that most of the lives saved are those of children, who even in developing countries have a life expectancy of at least 50 years, this equates to a cost of $68 per year of life saved. Should we really be valuing the life of a person in an affluent country at more than 6,000 times the value of the life of an impoverished child in a developing country?

Importance of Central Bank independence in a graph

Jim Hamilton points to this old Alesina-Summers graphic which shows that greater political control over monetary policy exercised by the legislature and government is associated with higher inflation.

Financial market growth and resource mis-allocation

Gretchen Morgenson points to a recent paper by Stephan Cecchetti and Enisse Kharroubi which finds that overall productivity gains were dragged down in economies with rapidly growing financial markets. They studied 33 manufacturing industries in 15 countries and came to two interesting conclusions,

First, the growth of a country's financial system is a drag on productivity growth. That is, higher growth in the financial sector reduces real growth. In other words, financial booms are not, in general, growth-enhancing, likely because the financial sector competes with the rest of the economy for resources... This is a consequence of the fact that financial sector growth benefits disproportionately high collateral/low productivity projects. This mechanism reflects the fact that periods of high financial sector growth often coincide with the strong development in sectors like construction, where returns on projects are relatively easy to pledge as collateral but productivity (growth) is relatively low... 

Second, using sectoral data, we examine the distributional nature of this effect and find that credit booms harm what we normally think of as the engines for growth – those that are more R&D intensive... We report estimates that imply that a highly R&D-intensive industry located in a country with a rapidly growing financial system will experience productivity growth of something like 2 percentage points per year less than an industry that is not very R&D-intensive located in a country with a slow-growing financial system... By draining resources from the real economy, the financial sector becomes a drag on real growth.

In simple terms, when capital is available in plenty and cheap, it is more likely to get mis-allocated to less-productive sectors prone to asset-bubbles like construction and real-estate and away from more productive but riskier activities like start-ups and entrepreneurial ventures or research and development intensive sectors. They also find that "when finance is ascendant in an economy, it attracts an inordinate number of highly skilled workers who might otherwise take their productivity and brains to non-financial industries." A corollary to this is that real estate and construction asset bubbles generate financial resource mis-allocation effects that adversely affects the real economy.

This mechanism partially explains India's brief high-growth episode of 2003-08. It was associated with cheap and plentiful credit which fuelled a real-estate bubble and construction boom. This was amplified by sharply increased public and private spending on infrastructure sectors - roads, ports, airports, power projects, urban utilities, mining etc. The share of construction sector in the gross value added and total employment rose disproportionately. In contrast manufacturing's share of employment contracted and output remained stagnant. Instead of trying their luck in knowledge-based sectors and manufacturing, entrepreneurial talent flocked to high-return but less productive real estate and infrastructure sectors.

The net result was a growth episode whose foundations were laid on low productivity non-tradeable construction sector. This was unlikely to be sustainable and collapsed when faced with adverse shocks leaving behind distressed balance sheets in both the construction-intensive infrastructure sectors as well as among their creditors. An infrastructure and construction focussed revival of economic growth, without adequate contribution from productivity enhancing tradeable sectors like manufacturing, is only likely to repeat the story. 

Universal health coverage in a graphic

The debate on universal health coverage can be captured in the following graphic.

The best that India can hope for the foreseeable future is to achieve high people coverage, of reliable standards, for a defined basic set of medical conditions, including the more common high-cost  conditions (like heart ailments, dialysis etc). The conditions coverage should also include the provision of generic drugs and all basic diagnostic tests, made freely available for those below a certain income level through public facilities as well as by contracting in from private providers. 

The problems with "universal" in universal health coverage

Professor Lant Pritchett and me have an op-ed in Indian Express today on the problems associated with India's quest for universal health coverage.