hello everyone welcome back to conversations with tyler today the guest is michael kramer recent nobel laureate in economics michael welcome thanks obviously you're famous as an economist but i'd like to start with the notion of michael kramer as founder in my notes i have it that you founded at least five non-profits with a sixth to come what is it about founding that for you is so enjoyable oh that's um
i do like doing that um and um you know i i guess i it's great to feel like you're having an impact on people's lives and i think that some of the uh things that i've founded have gone on to have that impact and you know that's very exciting and it's obviously also an intellectual challenge to think about how how to how to put things together and how to grow a team and um and get something get something moving but what
comparative advantage of yours is it using so a lot of economists will produce ideas and let other people do all the founding right so what is it that you bring to founding that's special to you so you know i think one of the things as as i think there's a lot of relationship between the experimental method and um and the things that are needed to help found organizations and i think that's something that i think there's historically in
economics you know many of us have seen research uh something that's divorced from doing things in the real world and in some cases even antithetical to it i think that's really different in many other fields you know if you look at nobody thinks it's strange that people who are in in computer science go on to found firms or that people who are uh researchers in in biology go on sometimes to found firms obviously
plenty of people in computer science or in biology who aren't interested in that but people don't think it's strange that there's some people in those fields who do and i think we're now getting to a time in economics where i don't think i'm i'm unique in this i think many economics researchers researchers and development economics in particular have gone on to found uh organizations and and those have had had real impact
um so let me i could explain a little bit more about i don't think this is exclusively tied to development economics into the experimental method but i could explain a little bit more about why i think the experimental method and and contemporary development economics research does have a natural affinity for that that i get why you have a natural affinity so if i think about your o-ring model as you know that predicts the less
productive people in an organization in a way drag down the productivity of the more productive people now you're one of the most productive people you might think according to o-ring theory you know maybe you should found with abhijit and esther but not with anyone else right there's not a certain kind of comparative advantage in that model so how do you think about the economics of you as founder what how should i model that well
you know i think that i'll just give you know an example um it wasn't i guess the the most recent thing that i've been involved in in founding was an oregon co-founding uh was organization called precision agriculture for development um and what that organization does is it um it works on mobile phone based agricultural extension at least that's where it started it's now broadening out and you know that's something that
requires um we use tools from experimental economics we do a b tests we use ideas from behavioral economics so it's using a lot of tools from economics but um you know it also takes a bunch of many other skills to to found things uh and to operate an organization so i don't think it's a matter of uh those other people being less skilled i think it's a matter of people being skilled in different areas do you think you will ever found a
for-profit in developing economies um i don't i don't uh i don't have any plans to but i don't know i don't always have friends uh have plans in advance so who knows and what's the first organization you founded or co-founded uh the first organization it was an organization uh called world teach which placed uh volunteers i spent a year teaching uh secondary school in kenya and after teaching in kenya when i was
living in kenya i'd be asked to teach in schools uh frequently and it was uh there were at that particular time i think situations really changed there was a lot of demand for um for for for teachers um and there were lots of people in the us who are interested in volunteering so it seemed there was a role for something to match them together um so that organization uh that was one organization but um you know um
i've i've more recently um one one i guess a lot of people who found ngos often go on or found organizations are sometimes going to be funders uh people go from being founders of for-profit tech firms to being vcs and you know one organization i've been involved in uh for ten years now is development innovation ventures which is part of the us agency for international development and what usaid does is it sorry what development innovation
ventures does is it it helps invest in innovations for development sometimes those are non-profit organizations sometimes they're for-profit sometimes they're started by development economics researchers sometimes they're started by uh by by others um and one of the reasons why i think why i was saying that i don't think this is something uh unique to me is that when we look at our track record we see
quite a few i think a really strong record of success and um and a lot of that uh is development economics researchers now your current work on advanced market commitment why do you think that advanced market commitment is more politically popular than patent buyouts right um so maybe it's useful for me to give a little bit of background on this i had written an academic article many years ago uh proposing a particular way to
that the public sector could the government could buy out patents and then put the put the intellectual property in the public domain the idea is this would provide a way of rewarding innovators um without some of the distortions accompanying monopolies and um you know i think i like the idea academically but it didn't really go anywhere politically and you know the idea was i was thinking very much about pharmaceuticals
um i think this is speculation but i think the pharmaceutical firms are very they're obviously very attached to the current system of intellectual property and i think they felt that they may have felt that if they sold their patents and put them in the public domain that would weaken the legitimacy of that of that system or it was just very different than what they were used to whereas the idea of selling their products um
wasn't so much and so you can avoid some of the distortions of of monopoly the the monopoly you know one of the key distortions of monopoly is that uh when the price is high due when there's monopoly pricing less of this gets sold when less of this gets sold you know that's harmful for for many products but in the case of pharmaceuticals that can be that can be you know very harmful to human health so the um the approach was
commit in advance to buy the efficient quantity at the um and then some for some products in particular vaccines it's fairly easy to know roughly what the efficient quantity is in advance so commit to buy that in advance and then that can get to the both create an incentive for vaccine development and leave the efficient quantity to be to uh to be purchased uh in the case of many childhood vaccines the efficient
quantity is enough to vaccinate and pretty much the entire birth cohort obviously in practice you can't reach quite everybody so that idea was um that idea did turn out to be politically acceptable um and a number of countries together with the gates foundation pledged 1.5 billion dollars to finance the purchase of a vaccine against the disease called pneumococcus but in particular there was already a vaccine for the strains of pneumococcus
that were common in the developed world but there had no firm had yet developed uh a vaccine against the strains of pneumococcus that were common in the developing world so they they pledged that if firms did develop that they would they would purchase it um or they would help finance the purchase and that led um to three three different uh pneumococcus vaccines have now been developed uh against the strains that are common
in the developing world and seven hundred thousand you know hundreds of millions of people have been vaccinated and seven hundred thousand lives are estimated to have been saved by those pneumococcus vaccines so i think that's a you know tremendous example of a success i would actually you know often when we think about founding we think about founding organizations that wasn't a case of founding an organization
that was a but it was a case where a lot of issues had to be thought through the economics issues but you know many other issues as well and um and the policy took um or i don't say the policy took off really the policy was adopted in the case of pneumococcus and then there's been additional work to try to use this in in other other settings as well and a few other examples so the political economy and legitimacy issues aside
is the main micro difference between patent buyouts and advanced market commitment simply price versus quantity uncertainty or is there some other kind of strategic behavior that might make advanced market commitment better how do you think about that trade-off let's say you didn't know what was the quantity that you needed yeah so i think it's very hard to i think it's very very hard to use advanced market commitments for
innovations that you don't even know that you need ahead of time so in the case of let's say a malaria vaccine we can say look we ne we know we need a malaria vaccine or um and you can you could potentially say we have a process fda trials or the european equivalents or others uh for for deciding when something has passed that goal so then you can use an advanced market commitment if you think about the opposite case
let's say the post-it note you know we didn't know we needed the post-it note until it was developed so it's very hard to have an advanced market commitment or prize or something like that to uh to get to incentivize the development of innovations that we we never knew we needed until they were invented um and so i i personally think it would be worth seeing if we could explore uh patent buyouts as well i think that
there's a different or a different tool for encouraging innovation that's worth considering do you think your ideas on advanced market commitment can improve say how military procurement is done today or do you view that as another example of advanced market commitment is there something special to doing something in very limited doses so malaria vaccine covet 19 vaccine this sort of hit-and-run approach you enter you leave
it's hard for outside parties to gain the system very much but if you do it over decades there's eisenhower's military-industrial complex and the big mess that you get right with high costs a lot of overruns is that amc or is that somehow people not heeding your work oh so i would say okay so i let me break that into pieces um so you know i think one one question that you raised is oh if you do this over time maybe people
learn to game the system i think that could be true but i also think that the system designers will learn over time how to do it and i think that's one big insight from the experimental method on that you know it's not just the experimental method but we've rediscovered it there which is something that every every founder every innovator knows which is it's not a one-time event you've got you need a continual cycle of testing
adapting and you know coming up with the new version etc so i think there are a lot of details in how you implemented events market commitment i don't want to claim that you know everything that the pneumococcus advanced market commitment got everything right i think it probably could be improved over time so hopefully they'll be learning learning on both sides of the of the table on this issue of the
political economy let me let me uh without going to the military example let me say one thing that i am concerned about with uh advanced market commitments which is i think there's a tendency so when we rachel glenister and i wrote a book on advanced market commitments proposing the idea we focused on malaria we then set up uh were i was involved in in co-chairing a working group at the center for global development
that working group recommended both a technologically distant target like malaria and a technologically closer target pneumococcus what the political system went with was that technologically closer target pneumococcus and i think that i think that partly is due to political economy reasons you know the politicians want a quick win the bureaucrats wanted to quick win and their firms uh or other entities that are going to be pushing the things
that they think they've got a technological advantage on that are technologically close so i think that is an issue i think i you know personally i think it would be from in terms of the economics i think it would make sense to really try a technologically distant uh product i think some of the some of the um i i think there's some advantages of advanced market commitments for technologically digital products
so that's a the political economy issue that i would say is i mean i don't want to claim it's the only one but that's the one that's most prominent for me is there something you would not dominate that's specific so solar-powered space stations a trip to mars or what do you want to do yeah well look i would love to have say a malaria vaccine uh i think would be you know would be a great example i think there are um let me give you
another example and look i'm going to give examples that are from uh the world of development economics but i completely agree with you these could be used in many other settings as well um so a lot of people in developing countries cook with um you know a small fire in their house and that creates incredible indoor air pollution and that's estimated to kill millions of people a year it also produces um not just
uh carbon emissions but some things that are some chemicals are actually much worse for global warming than that per per unit of uh of you know of per year volume and there have been efforts to develop cleaner stoves and that um now those haven't gone that far in part because they haven't found something that consumers want to use so i think that's actually a great case for an advanced market commitment
because part of the idea of an advanced market commitment is you have to meet certain technological thresholds but you also need to get customers willing to put up something so we could say look if somebody produced a cleaner stove um and if if consumers were willing to pay ten dollars for it or uh then there could be an additional twenty or thirty dollars worth of subsidy for example i mean details would have to be thought out but
uh that would be another example but sure just so that we could have things to reduce uh reduce recidivism rates we could have programs to um to address uh educational challenges um um there's a there's a whole host of areas in high income countries or in the united states where we could really there are technological challenges that for whatever reason are not attracting quite the level of of effort that
tech companies are putting into into other fields and if we want more innovation we could promise to reward them if you think the market risk premium is off for very large investments for biomedical research do you think the same is true for smaller investments you know it is what are the microfoundations of what goes wrong with the market risk premium on biomedical investment does it plague all venture capital firms for biomedical ideas
or just the big stuff because it's a liquidity issue and so for vaccines we need advanced market commitment but for ordinary investments venture capital will work just fine what's your view oh i you know there may be issues around around risk i'm not that's not necessarily where i would go first in terms of the market failures associated with vaccines um you know the first market failure associated with vaccines is just a
straight communicable disease extra if we thought about individuals buying vaccines on their own you know when i take a vaccine that benefits uh would benefit you if you're closer and you're nearby but you know indirectly it even benefits you because i don't in fact somebody they don't in fact somebody you know eventually that they don't infect you um you could subsidize only the buyers right you could have vaccine vouchers
let the production side take care of itself and capture the externality that way but presumably there's something wrong with the generation mechanism um so i it turns out you know there's a there's a whole host of distortions here so we do subsidize vaccines governments are do a lot of the purchasing but governments are i think then there's a commitment problem at least in in some countries governments aren't necessarily going to
pay the full social value of the vaccine uh they may pay less than that and um and if if that's the case then firms might not be adequately incentivized they may be incentivized but maybe not adequately incentivized to produce to produce the good if we think about something like malaria for example there are many different governments involved you know many for example many small african countries
no one of those countries has an incentive to say well let's let's let's pay uh let's pay a price that would uh generate the socially appropriate incentives to develop a malaria vaccine so there's a global public good problem there in addition to everything else so uh there's quite a few distortions in in vaccine markets i think that i think that in general however we don't think that monopolists capture innovators capture that much of
the value it's a fairly small fraction the social people have estimated the social rate of return to private investment in r d often estimate numbers like 70 percent so i don't think it's limited to vaccines that might be an extreme case but i would actually be in favor of trying to boost r d incentives in a in a wide variety of fields not just uh not just some of the ones that are um that we've you know that we've mentioned
so far i've seen estimates they're actually from one of the groups you founded that a deworming pill could cost as little as 50 cents a year per person in many parts of africa so why isn't deworming done much more oh i've actually been you know very you know you could say the glass is half full you could say that you're half empty you can say it's half full or you can say it's you know almost three quarters fall i
think it's about three quarters fall um you know so you know i when i first got involved in deworming it was testing a small ngo program um we found you know phenomenal effects of that so um you know the original work found education health gains and education gains now we've found um we've tracked people over 20 years and we're seeing people are have a better standard of living they're earning more um following the following the early
results we presented the results the government of kenya to the world bank you know kenya scaled this up nationally uh then in part with assistance from the world bank um primarily just to convey in some of that information indian states started doing that and then the national government of india uh took this on so they're reaching yeah a little bit hard to know the exact numbers but probably 150 million people
a year um so it's a it's and you know many other countries are doing this as well so um it's it's actually quite widely adopted but there's still a massive residual right what's your best explanatory theory of why the residual isn't smaller it would seem to be a vote winner uh african countries fiscally are in much better shape than they used to be they're more democratic public health is looks much better the response to kovat19 has
probably been better than many people expected say in senegal possibly in kenya so why not do deworming more so you know i think that um there's the people who have worms are pretty poor people the richer people are less likely to have worms with any given society richer people are probably more politically influential there's also something about you know if if worms are they gradually build up in your body
and your one worm is not going to do that much damage the problem is when you've got lots of worms in your body that and even there it's going to you know take time so you it's not you know i've had malaria i don't think i've had worms i hope i haven't um you know when you have malaria you feel terrible and you go from feeling fine to feeling terrible and then you take the medicine you feel great um afterwards um if you've
with worms it's much more like a chronic thing and you when you expel the worms from your body that's sort of gross and so you don't i don't think even at the individual level do you have the quite the demand that you would that um that would be commensurate with the scale the problem that's a sort of a behavioral economics explanation so i think there are political issues and then i think there are uh behavioral
issues i would actually say that a huge huge issue this sounds very boring but this falls between the ministry of health and the ministry of education you know the the and each one of them has different priorities you know the ministry of health is going to be they're worried about delivering things through clinics they're worried about hiv malaria tuberculosis as it should be ministry of education thinks you know our job is to
you know they're worried about teacher strikes so it's very easy for something that falls betw either to fall between the cracks or be the victim of turf wars and you know it sounds it sounds uh too small to be how can that really get in the way but i think anybody who spent time working in governments understands those things can very easily get in the way i in some ways it's surprising uh how much progress has been made but i do
i i'm actually uh here's one way the political economy works in favor um you know if you're you mentioned democracy i think that's a factor i think when you've got i actually find i don't want to be necessarily a big fan of politicians but in some ways politicians hear how much this costs and they think they can affect that many people for that small amount of money and they're like hey i want to get on that
you know maybe i can you know this is something i cannot claim as an achievement so um i you know i we saw that in kenya we saw that in india if i think of michael kramer on the issue of economic growth i see at least three stanz strands rather the first is the very famous population paper there's a kind of increasing returns with market size the second is your i think 1993 jme paper with larry summers good policy or good
luck where growth rates vary a great amount and a lot of that is due to luck or positive real shocks and then there's the work on education which would seem to imply growth is pretty stable over time because human capital doesn't change that rapidly the current michael kramer of 2020 sort of how do you put that all together and think about growth in the in the best possible model where do you stand now um so i've actually so so
your one insight is uh from the study of growth is a fundamental driver of growth in the long run is technological change and so i think one thing that we economists should be thinking about more is what are the institutions to increase the rate of technological change and to try to direct it to human needs and that's one of the reasons why i've been excited about advanced market commitments patent buyouts
i think we've got a set of institutions uh primarily intellectual property institutions but also research funding institutions and you know those i think we should be experimenting and trying trying new approaches to this and you know trying to improve things over time so i would say that would be one key message about about economic growth um another um another paper that i'm working on recently with jack willis and yang yu
you know looks at something that um so when i was in graduate school in the 90s i studied economic growth robert barrow was my advisor you know one of the things i learned is that there's not unconditional convergence poor countries some models predict poor countries would catch up to rich countries but and maybe they do if you condition on if you take countries that have similar policies or similar human capital
but overall country poor countries don't catch up well you know i was teaching my class my development economics class a few years ago and thought i better update my slides and uh you know we looked at that again and
um that's totally changed actually since the yeah this was something that was uh after the 90s this pattern changed now poor countries are catching up to rich countries and it's not just driven this isn't just a matter of india and china
um or you know this is a broad-based uh phenomenon so i think that's something if that i think is very exciting and you know very encouraging you know in a world where um within certain countries there's been apparent increases in inequality if you look at a global level there's also been this tremendous lifting of people out of poverty and i think that's very exciting but don't don't you find it puzzling that the
global economy is really much larger than 40 or 50 years ago but total factor productivity or measured rates of innovation seemed to be down the pharmaceutical pipeline at least pre-cove it is commonly described as drying up or slowing down and yet there's so many more consumers out there for drugs does this in some way invalidate or raise doubts about increasing returns to scale theories that maybe market size doesn't matter very much so my um
you know the the the view that we took that i took in my paper in the 90s on this um was very much you know follow it you know i was a near contemporary of chad jones um and i think chad's fundamental insight um there are and they put it technically first uh chad what's the production function for new technologies clearly having existing technologies helps you invent new technologies so having calculus helps you invent
spacecraft or aircraft but on the other hand it's not clear that it helps you that that you that an improvement in existing technologies helps you one for one in in uh in developing new technologies in some sense it's getting harder and harder to invent new technologies and you know chad's work at the time showed that and you know more recent work that chad has done so we're facing a in that world we're facing it's the
task of technological events is getting harder and harder over time we see that the macro level see that at the micro level we see that in the increasing size of teams needed to develop new innovations um the task ahead of us is getting harder and that means that where there's a race between the total resources that are going into innovation and the and the increasing the increasing difficulty of the task
so you have those two forces uh operating against each other i have no doubt that the increasing size of the market and the fact that there are now many people who are you know contributing to technological changes helping us uh but the issue is we're we've got a harder and harder task ahead of us but if there's some constraint out there limiting the benefits from larger market size what is indeed the constraint you would
wish to target so you're michael kramer you're put in charge of everything and you can target the constraint that's slowing down growth what's the first thing you look at so yeah if you so the first thing i would look at is the thing that we have the most control over which is the institutions we use to try to advance technology and so if you believe chad and you know i i i do um the um there's just something
fundamental about the technology that about the progress of technology which means that it's getting harder over time to to have a constant growth rate of technology we invent more technology but we don't increase the growth rate over time and that's that's just something inherent about technology obviously that could change it could be that when we get ai working well enough we actually get to an incredibly virtuous cycle and you
know we head off to a singularity where um you know the ai gets smarter and smarter over time so there's nothing we don't know whether that's a fundamental constraint but if that's whether that's a constraint or not there's not much we can do about it but what we can do is we can think about the myriad institutions and we talked about ip institutions there's also research funding questions should we be funding research the way we
do or should we be saying look it's not a matter of writing a grant proposal you know after once you're five years past the phd we're going to fund you based on what you've accomplished not based on your grant proposal that's a you know one exam i have no idea what the question is what the answer is to that uh should we have you know should the committees be uh be different size than they are now should they be uh should we say that
we're going to fund something as long as somebody really likes it rather than take the average of the committee view um when we're thinking about government grants you know there's a bunch of questions about what the optimal way to do research funding is and i think we should be experimenting with this trying to learn more about how do we set up institutions uh to you know there's questions about research publication process
um to try that's the thing that we can control and i um i think that should be a priority for anybody who cares about economic growth let's say the current michael kramer sets up another high school in kenya what is it that you would do that the current high schools in kenya are not doing what would you change you're in charge right um so i think we've you know the um i think we've learned a lot in education
research in in recent years so one thing that we saw in kenya but was also seen in india and many other places is that it's very easy for kids to fall behind the curriculum curricula in developing countries tend to be set at a fairly high level similar to what you would you'd see in developing countries however kids are facing all sorts of disadvantages and there are all sorts of problems in the way the system works
um it's often high teacher absence kids are sick kids or kids don't have the preparation at home often so kids can fall behind the curriculum but whereas we've had the slogan in the us of no child left behind in developing country education systems focus on kids at the top of the distribution so what's been found is if you can set up and there are a whole variety of different ways to do this either remedial education systems or
some technology aided systems that are adaptive that go to where the kid is we've seen huge gains from this in india and we're starting to see adoption of this in in africa as well and that that can have a very big impact uh at you know quite low cost another thing is um i think it's called structured pedagogy which is just providing you know very detailed lesson plans for teachers and that can be done in a variety of
ways um and you know we're seeing big effects from that as well um so you know the good news here as in a lot of development is you know we if we try a variety of things and if we think about it using using theory and using the tools of economics and tools of other disciplines we can really make progress does it work just to pay the students for better grades um so i've i'm you know my understanding i'm not a expert on on that
on that uh type of work let me give you two contrasting results um so i think some of roland fryer's work on that if i remember right was in the u.s wasn't so encouraging but i'll tell you one thing that i think i am reasonably excited about um so i've done some work with um through rebecca thornton and and willow friedman and ted miguel on um on scholarships um where so in a lot of developing countries you
have to pay uh have to pay something to go at least go to secondary school if not primary school even primary school it's officially free but they're often fees um so there was a program in kenya that said if kids did well in up at sixth grade their fees would be covered for seventh and eighth grade and these were in poor schools so you know this was going to poor kids so what we saw was obviously there's a direct benefit of allowing kids
more kids to go into higher grades of school but we also saw that kids were putting in more effort in response to this and not just the kids at the top of the distribution but throughout the distribution it also looked like teachers were putting in more effort as well because they they were motivated to try and help their students do better so i think having some sort of um merit scholarship program um is something that you know i i don't
want look there are some flaws in our paper i don't want to claim we should i don't know whether we should scale up maybe we should because it doesn't seem saying that kids who do well in school can go on to the next level of education doesn't seem that controversial so maybe we should scale it up i don't want to claim the evidence is totally definitive on it we could test this more learn about how to make
it work but i think this is the type of program that also deserves uh you know should be part of a system probably should be part of a system and certainly deserves more testing one strand of your work concerns peer effects there's your paper on the hodge and its influence for college roommates your paper on alcohol use so if pure effects are so strong in the united states again say in high school
how should we restructure how we treat honors classes should we have more of them fewer of them what's the right way to think about uh what you might call intellectual segregation in this country yes it's a great question great question um and i i don't want to claim that i've um i i i don't know the answer to the question but i think we should try and find out let me just i believe there have been some results i'm not not super
familiar with those um with the papers but i believe there's been very positive results from peer mentoring programs i believe that some results in italy you know very recently from this so if you can create incentives for students to help each other out that can be very positive now that does require sort of changing you know this does not seem to be a problem in in most developing countries education systems i know but certainly
you know the us uh can have uh can have a system where it's not cool to do well in school and i can have a culture like that or not cool to do too well in school i don't see that in kenya or and i don't hear about that in india but you know thinking about how can we set up a system of incentives and rewards to try to address that is a really interesting uh question so if you choose so despite saying this isn't even a
problem in in kenya um two students uh um ronak jane and brandon tan who have some i think very exciting they're very preliminary so i don't want to you know i don't want to more work needs to be done on this but they have some very exciting results for kenya suggesting that you were talking about it's paying kids to do well as individuals so they've been trying something level of the classroom as a whole
where they reward the classroom as a whole for doing well and you can imagine that can create possibly create a culture in the class as a whole where you want each other to do well and their initial results on this are actually extremely promising here's a few questions from outside of economics ugali is arguably the kenyan national dish does it taste good no not to my taste there are there are kenyan there are kenyan dishes that uh that do
there's a mixture of uh of uh of uh corn and beans that i i like and then there's you know i have had ogale that was delicious in fancy restaurants in in uh in nairobi that isaac and bt took me to but uh but uh but in general it's a it's a little plan yeah why doesn't harvard square have food as good as that you can get in kenya uh purchasing power obviously high level of education but it's terrible yeah i um
i think there's something about i you know i don't know if this is the case but i think uh transfer populations that turn over a lot may be maybe associated with worse quality food but i'm not sure out of africa the movie do you like it is it any good oh gosh so long ago since i saw it i i don't remember it i i i yeah i don't i don't remember the movie at all what's the ideal kenya trip say i come to you i say michael i'm going to kenya
i have two weeks obviously safari but what else should i do so the great thing about uh yes i'm very happy to be a tourism ambassador for kenya it's it's it's really a great country to visit um so there's if you're into mountains there's mount kenya um there's the coast um um there's um um there is um but i think for you know i think you're totally right that obviously that the top thing is for for americans would be uh safari
because you can get mountains and you can get uh beaches other places uh you know the coast of kenya it's not just the beaches it's the uh swahili culture that's a very interesting uh blend of of cultures there but um but i i think uh game parks have to be um you know very high on the agenda for people and nairobi right now is a cosmopolitan exciting city it's a happening place in a way that it you know i didn't feel
that way about it um in the you know in the late 80s or early 90s but now it's uh it's a very exciting place to be and um and you know if you talk about where you can get uh good food uh um you know you can get good food of a lot of different types of nairobi so um i wouldn't not harvard square uh no what's interesting about reading james joyce um yeah i was just um just re-reading dubliners uh recently um the um
it's also about development economics it is it is it is it's about a it's about a a place that was a a colony and trying to uh to get out of that uh uh uh situation and um with you know people live living very constricted lives and um you know i guess look i don't want to claim this is the most interesting thing about uh about reading that but it's a you know i was talking about nairobi being happening in place well you know i was
in ireland recently that's a happening place as well it's not the uh it's not the dublin of of of of dubliners anymore and um you know i i guess i would say this is uh if i think about i was talking about convergence recently you know the world is you know things are really improving in a lot of the world and it's it can be very easy to forget that in a time of cova at a time of all the other problems that we're having right now
but um but people are people are freer and people are leaving leaving more exciting more open less constrained lives what's your favorite novel um you know i don't know whether it's a novel but maybe the odyssey why the odyssey there are so many so many rich are archetypical stories in there um and you know the um and um you know i it's hard for me to just say why i just uh i just you know when i've gone back to
it i i you know i i really enjoy it so it's again a comparative development tale right turkey doesn't work uh war is bad for economic growth uh don't take too many drugs okay good point good point i hadn't thought of it that way but yes right literature as a whole arguably makes one believe more in what would sometimes be called a cultural backwardness theory of economic underdevelopment so there's something in dubliners about
the perspectives people have on situations they're remarkably local and they're keen in their perceptive and they're highly emotional but the arc at which people make comparisons typically is a very small circle and ireland when it joins the eu and even before then is changing that i think yeah yeah um it's a great um yeah it's a it's a great point i you know if you think about so i choose an undergraduate i didn't study
economics i did a program called social studies we read weber among other people you know weber talked about the role of culture in influencing economics there was a lot of modern development economics was a reaction to that and perhaps a warranted reaction because i think a lot of weber himself obviously very may be wrong but you know very sophisticated not simplistic but there's a lot of simplistic analysis of
uh you know confucian societies will never grow hindu societies will their hindu rate of growth is inherently low so that people were making clearly you know statements that were um were just wrong it turned out to be wrong and um but even before the economist said look we don't need to uh you know the founding of development like modern development economics who say that people are poor but rational and we can use the same tools of
economics to analyze people in in low-income countries as high-income countries and and that was i think there's a lot to be said for that but i think what we've realized with behavioral economics is that people in high-income countries are not completely rational either and there are certain patterns in the way that they're not rational now those things can play out differently in low-income countries and high-income
countries just due to different institutions but what you're suggesting is something you know much stronger than that that there can be certain ways of thinking and embodied in culture and you know i think that i think those are interesting ideas and people like you know nathan nan uh or alberto alessina uh are doing you know very exciting work on the on the on culture and economics um i i think we need to learn
we have a lot more to learn about how far we can take that and um um but i think it's a i think there's exciting work going on in that area um we have to be careful uh but um and and avoid some of the simplistic approaches of the past and i also think just come back to this point about convergence you know one of the things that a lot of the work on economic history and on culture in particular has emphasizes just how long lasting things
are whether whether societies use the plow uh thousands of years ago effects affects society today that's the claim and i i'm i'm very open to those ideas but what we've also seen is low-income countries really catching up uh and remarkably quickly to higher income countries and that suggests that you know we shouldn't take uh looking into talking about cultures indicating that there's no possibility
for development or for change there's there's clearly that possibility we've seen it country after country in your own intellectual development what did you learn from your arm you know uh my mother was um another uh wrote about literature on the holocaust and um you know one thing that one thing that i i think that brings out is that when there are issues that we can do something about you know we need to do something about
them we we shouldn't uh we shouldn't wait and um and obviously there were people who did things that you know very great cost to themselves uh uh in that situation and and they're doing you know right now in covert are doing things they're risking their lives to you know how people get through the covent crisis um you know i work on international development um you know that's uh at least in part because i feel like there's
we have a this is something that actually fairly low cost to ourselves uh we can help address these problems here the case of deworming this is something that costs you know 50 cents uh a year to address and um um you know i i think this is i guess those values did influence me at this point in your career why move to university of chicago as you're doing this fall basically as we speak right no i'm speaking to you from chicago
um uh that you into your office i'm in my office yeah they left they arguably i didn't know that was allowed yeah no no we can we have to go through certain precautions but uh but i'm speaking to you from my new office to the university of chicago uh you know chicago obviously is a wonderful tradition in economics um one of the things that i was uh that i was very excited about was um talked to president zimmer here of the
university the president of the university of chicago and i was excited about you talked about experience as a founder and i and i've talked about technological change and the need for technological for changes in technology by which i don't i mean gadgets but i don't just mean gadgets i mean institutional change innovation and policies um as well and i think what we've seen is there's a lot of potential to generate that
and you know university of chicago made a a big commitment to development economics in general and i hope we'll be hiring more people uh over time and certainly the slots will be there for that and to create a development innovation lab which i think will use the tools of economics to create practical innovations that can improve people's lives and you know to work closely with partners to develop and refine and iterate on those
innovations so that they can be scaled up and i think what we've seen what i've you know been seen in my own research was true with a lot of research of of jpel poverty action lab at mit and what i've seen in the usa's development innovation ventures is you know when you're investing that type of technology it's not that anytime you're investing in innovation most innovations don't uh don't succeed they don't take off but
you get a few you if you're a venture capitalist you invest and you're investing in google or facebook it's fine if a lot of your other investments don't work and i think it same thing in investing in development innovation and when we did an analysis of the uh rate of return we tried to get a lower bound on the rate of return uh for for the early investments that development innovation ventures at usa admit
and we're getting a five to one lower bound and it's super conservative lower bound i think we'll i i think we'll have a much higher rate in our next uh iteration of this and you know that's that's looking just to be clear what a lower bound this is you know we invested in we had 41 innovations in our early portfolio we looked at the we couldn't quantify the benefits for all of them but there were we found four of them
that reached you know of the nine or ten that reached over a million users we could quantify the benefits for four um if you take the benefits of those four and set them against the cost of our of our of our investments in all uh 41 the ratio is five to one and um so i think and that's already and i think that that will grow over time so um i just think there's a huge huge reward to investing in innovation there's also a scientific reward
and university of chicago is making a big commitment in that area and um and that's what big part of why i came here so you were tempted by the ability to found a new institution yeah in part yes that was a that was a huge motivation for me and i'm very excited about it and what is it you think that you as someone who studied organizations know about managing institutions that maybe just regular managers would not know
so you know there's i think that that if you're working in modern development economics um in particular if you're using the experimental approach um you know some of the things that economists the stereotype of economist is not paying attention to um you're forced to pay attention to so let me give you a few examples you know one of the part of the reason why i originally got into doing experiments was to isolate causal
impact to disentangle you know is it really is it a particular program that's causing something or particular intervention or is it something else and i think experiments are very good for that but when you're doing experiments you're typically working on a uh you've got you're typically working on a concrete problem because that's what organizations they're doing the experiment because they want to solve that problem
and you have to get to know the people who work in that institution you also have to get to know the ultimate customer you know one of the one of the things that uh your business books will tell you is no your know your customer and that means you know yes you want to learn the statistics on the on the customers but you also want to talk to the customers and so development economists will go typically go if it's an education
program they're studying they'll talk to kids they'll talk to the teachers i'll talk to the school principals um you get in the habit of doing that and that's very useful for thinking about for i think for innovation more broadly um another thing is as a as a researcher you and this would be true for any type of researcher but you know you're presenting your research and seminars and you're getting feedback on it you're getting criticism
on it and you're going back and revising things i think that's actually very useful for management one of the problems that managers can have is you know you can convince yourself and i think this might be particularly true in development you can convince yourself that what you're doing is the right way to do things the only way to do things it's very useful to and you may not get feedback otherwise because
um in in develop in research you do and i think that's a you know great thing about about academics um um the um i think one thing about the development modern development economics and experimental economics is that it's iterative so you you try one thing then either the same researchers or other researchers try to improve on it again and it's a constant cycle you know that's again something that
your management books will tell you is is very important so i think there are a bunch you also get used to working with people you have to raise money you have to work with with uh with ngos or governments or firms to talk to them about randomizing um so there's a whole bunch of skills that um that actually are applicable uh beyond just um you know writing a paper um so i i you know if i think about if you think about uh you know give
directly um that's an organization that you know is a very successful ngo but founded by development economist uh paul uh paul niehaus and uh uh uh but there are many many others who are doing things like this and i think it's um i think again in many other fields this wouldn't seem like a strange uh combination of being a researcher and also being a factor final question when it comes to advanced market commitment
what is the very next thing you will be doing so i'm doing a lot of work um on problem of covet and um and some of this work is with people who are involved in the pneumococcus advanced market commitment uh chris snyder uh jin lay others but we're also working with some some other industrial organization economists uh for example susan athei and and uh um and when we think about this problem i think the problem of getting a covet vaccine
is different in some important ways and that's something again something that economics and being close to research and theory will tell you so um um so i think it's you know just to be clear i'm not you know sometimes people have a stereotype of experimentation as opposed to theory i think they're strongest when they're linked um so well we've well we've we've there's a number of different things we've suggested but
one of them is that and is and this is uh you know very much uh with your colleague alex chibar um is very simple because the world economy is losing 500 billion dollars every month due to covet and that means that it's worth investing a lot in trying to develop a covert vaccine even though there's a pretty high risk of failure and it's also worth getting lots of shots on goal now for a variety of reasons which i could
go into the private returns from building out a very large factory for vaccine before we know whether the vaccine is going to work before testing is complete or much less than the social returns i think in this particular case you probably want to it probably makes sense for governments to offer to cover you probably want a mix of push incentives and pull incentives some reward for success but also just some upfront financing
for building those factories ahead of time and that's you know what we've been arguing for and a bunch of countries are doing things like that so the u.s operation warp speed but many other countries are putting in orders for vaccine even ahead of the time the vaccine's been proven to work so obviously risk involved but it's very much a risk worth taking there are other there are other lessons uh they're coming out of the industrial
organization of this like it's very important to invest in supply chain capacity not just in the in the production of the ultimate vaccine we might want to consider ways to get some of the early information from the trials out so we can use it even before the trial is finished we can use it to invest optimally in manufacturing so a lot of insights from studying the economics of this and you know that's obviously a
critically important problem and you know policy makers seem again you know you could say it's a glass half full or half empty i i would say the glasses is at least partially full i'd like policy makers to be investing more in this but they are starting to invest and they are starting to do these contracts um well in advance of availability with the vaccine michael kramer thank you very much great thank you