Ripost to Rupert

Rupert Scofield has replied to my retort to his review, etc. Clearly neither of us has swayed the other much, but I appreciate the friendliness and honesty, not to mention vividness, of his latest post.He has conceded to me the argument over what the economic studies say. So his main thesis now is:

I think David, in his faith in the power of numbers, has strayed too far from the path of Common Sense. Example: If, as David concludes, there is value to be found in the creation of an industry that has corrected---for many millions of people---the “market failure” of financial systems in Developing Countries, is it logical to then conclude that the impact on global poverty of this gargantuan investment has been zero?Are we to believe that joining millions of people who earn their living each day in the informal sector, and who previously had no access to credit or savings services, and now do, are not materially better off as a result of it? I think these two conclusions marry up like drunkards in a Las Vegas wedding. Let’s get them across the border to Mexico for an annulment.

He then tells a couple of good stories of encounters he has had with borrowers, the first being of a borrower who says she climbed from poverty thanks to microcredit. He concludes:

David would say “No causality!” Rupert would say “Hey, listen to the woman! Maybe she’s not making it up!”

I’d respectfully correct a few things Rupert says about me:

• The thrust of my analysis of the econometric impact literature is actually about my lack of faith in the power of numbers---about why I doubt most microfinance impact studies. That said, Rupert’s description is fair to the extent that I do think the results of the new, experimental studies need to be taken seriously, and that in my judgment they trump small, ad hoc assemblages of stories.
• I don’t hate stories. Chapter 3, 4, and 7 include lots of them, and not for the purpose of disparagement. I know that people understand and explain the world through stories. I do think though that in talking of microfinance, in particular of whether it should receive charity, we should tell stories that are representative. And we should judge representativeness through rigorous analysis of evidence of both the narrative and numerical kinds. I don’t see Rupert doing that. I would say “Listen to that woman, and to a bunch of other women who are selected in some transparent and representative way.”
• I do not conclude that the impact of Rupert’s career on poverty has been zero. I conclude, rather, that zero is the best estimate given limited rigorous evidence of the impact of microcredit on the income and spending levels of clients. For more see Why Celebrate Institutions that Deliver a Service that Doesn’t Reduce Poverty. Yes, that is a pretty serious challenge to Rupert’s work, especially since I think it should affect funding for microfinance. But I’d like to avoid exaggerations of my certainty that imply sloppy reasoning.
• Just for the record, I don’t describe microfinance as reducing “market failure.” The term is jargon and it elevates an unrealistic economic abstraction to the level of an ideal.

A last point: as lovely as Rupert's metaphor is, the one about drunkards in matrimony, I don't think it applies. It doesn't violate common sense to suggest that a massive ramp-up in a lending industry could hurt people.