Piles of cash and a town of solutions in Kenya, Nigeria (Summer School)

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and the case against the tape brothers. Short episodes, clear takeaways, every afternoon. Consider this, listen on the NPR app or wherever you get your podcasts. This is Planet Money, from NPR. [Music]

[Music] Welcome back everyone to Planet Money Summer School World Tour. The only international economics degree where the invisible hand points to the departure gate. It's the final boarding call that I run. I'm Robert Smith.

This summer, we are on a quest to find lessons we can learn from other countries that just might work back here where we live. In each episode, we'll have fascinating case studies and a hometown tour guide that also happens to have a degree in economics. Our destination today, Kenya, specifically a small town that taught the world a better way to do economics. We'll also have a stop over in Nigeria where they've come up with a novel way to grow small businesses free money. It works.

Just make sure you take notes along the way. Anything we mention might appear on the final exam, which will allow you, traveler extraordinaire, to get a souvenir diploma, festooned with all the passport stamps. [Music] Helping us through customs in Nairobi is Tavnit Suri, a professor at MIT's Sloan School of Management.

Hi, it's nice to be here. Thanks for having me. You are fifth generation, Kenyan? Technically fourth, it depends how you count. You know, my family moved from India in the late 1800s with the British and the British took a bunch of people to build roads in railways in that part of the world.

Always amazes me that when they got done with roads in railways, they asked them to go back and they said, "No, we'll just stay."

Well, I mean, I've been there. It is a lovely place. It's understandable. But that is not why summer school is stopping in Nigeria and in Kenya. It's stopping there because this is a place where economics isn't just theory. It's real life. There is commerce everywhere. Hundreds of people on each block, so in different things.

“And you must appreciate this as a business school professor.”

There are so many case studies around. You know, I love being back in almost any African city. I always feel there's a vibe to them that's quite different. There's people on the streets. There's people trying to sell something. There's people trying to jump on a bus, go somewhere, do something.

You can kind of see the entrepreneurship of all of this right in front of you, right? And this becomes so much more important when you realize that unlike most of the world, places like Nigeria are still rapidly growing in population. I think by 2050, Nigeria will have more people than the United States. So you have this vibrant growing country with lots of young people that could become a lot larger part of the global economy. Absolutely. And with their demographics, sort of the number of youth on the African continent is extremely large.

By 2050, 35% of the youth think 18 to 25 year olds is going to be in Africa, right? And so it will be a place where there'll be a large labor force at some point. In other words, the perfect place to stop for economic students on a tour. Not only the future of the global economy, but an incubator for new ideas. That's what we're going to hear about today.

Ways to have a richer, healthier population with more businesses and more jobs. Sounds great.

First up, we will take a look at a program in Nigeria that tries to solve that business part of the equation by creating a mash-up of shark tank and the watery.

And we'll have our business school professor break it all down for us after our break. This week on the NPR Politics podcast, we uncover a pattern in political ad spending. As the midterms get closer, Republicans are leaning into an issue they've won on before. Immigration. We look at their message and also what Democrats are saying on the issue in a very different way. Listen now on the NPR Politics podcast.

Oh, hey there. I'm Brittany Luce.

“And I don't know, maybe this is a little out of pocket to say, but I think you should listen to my podcast.”

It's called it's been a minute. And I love it. And I think you will, too. Over the past couple months, over 100,000 new listeners started tuning in.

Okay students, stay together on this tour.

“That's why I have this big planet money flag.”

We are back with planet money summer school on our way to Kenya, but with a stopover in Abuzha, Nigeria. Professor Tav meat Siri is along for the ride professor.

What should our students think about as they listen to this very first case study?

Okay. Imagine your small business and imagine you have great ideas. Of course. But you need a bunch of money to sort of build out these ideas. Who would you go to for that money? Would you go to a bank? Would you go to a venture capital fund?

Would you go try and raise money through some other means? How would you get that money? Great question. And the same question faced by small businesses in Nigeria, where the government came up with a very clever solution.

As one economist said, quote, is this the best development program in history? As a student, you decide. Planet money's Alex Goldmark and Noel King tell us the story. In 2011, laureate Ahasan had a paint business in Abuzha, Nigeria. She sold house paint. She sold industrial paint.

She sold textured paint. She sold paint that fills in the cracks in your wall. The paint company was called "Larklox Paint" and it was really, really small. The employee I had was just me. I was the production manager. I was the marketer. I was the delivery person.

I was everything. Except the security. That was the whole company, her and the security guard. And being so small was a problem because customers would try out her paint. And they would say, this seems great.

I want to place a big order.

“How about I come down to your office and we'll sign the papers?”

Which is where things would get awkward. Because she didn't have an office. And I kept telling him, "No, no, no, you call me whenever you want. I will just be there. I will be there." She just had her car.

And when clients would see that, they would say, "I'm sorry." And that's when they would back out. She needed the office to keep the clients. But she needed the clients to be able to afford the office. She felt trapped, stuck.

And then one day she was at home listening to a little music. Music has a way of helping me a lot. So I had this lead to a radio in my room.

Then I would always listen to help me get up at my emotions.

It was at my bedside. So I was listening to it. And it was this announcement. This ad comes on. And it was like the radio was talking right to her.

It was an ad for what seemed to be some sort of program to help small businesses grow bigger. It may be small today, but it will be after you win! The youth enterprise and your vision competition. Your win is a nationwide job-spiration project. I'm amazed that a federal government went behind young Nigerians.

The government was having a nationwide contest where it would be giving away millions of dollars to people trying to start businesses. No experience necessary. No strings attached. Just go to the website and sign up.

Larry had heard this ad. And she knew immediately what it was. A skin. Okay, so that ad. Not a scam.

I met the person behind it. My name is Ngazi Okongjiao Iwala. She goes by Dr. Ungozi. And she was the finance minister for Nigeria at the time. She looked out and she was facing this big problem.

Unemployment.

There are 8 million young people in Nigeria who need jobs.

That's like a quarter of all youth.

“But the thing about those young people is they are super go-getters, right?”

It everybody wants to run something. And they want to expand their businesses. Someone to create new businesses but don't know how. They're hitting this wall. Money.

They need more of it. But the thing is, it's really hard to get a small business loan in Nigeria. Maybe you go to a bank and you try. But think about it from the point of view of the bank. Most of these businesses are one person.

They're really small. And it's hard for a bank to tell a good one person Paint company from a bad one person paint company. She thought, since what these entrepreneurs need is money, why don't we just give them money?

Just find tiny businesses and then hand them piles of cash. What if you gave Larry at the woman who sells paint? $50,000. That's a lot of money. That's about 10 times what Larry would normally make in a year.

So Dr. Ongozi takes this idea. And she starts shopping it around within the Nigerian government. And right away, some questions come up. How will we money tell these people? How will we make sure they don't fall by the wayside?

They just get the money and divert it to some other use. If banks have a tough time handing out the money to small businesses, how is the government going to decide which are the right people to hand it out to? Dr. Ongozi says, don't worry.

Don't worry. Here's how we're going to do it. We're going to have a contest, a massive nationwide contest.

A few sheets of paper with an idea, a budget, a charter too. And we'll read them. We'll pick out the best ones and we'll hand out those piles of cash. The president of Nigeria, good luck, Jonathan. He liked the idea.

And he said, go figure it out. There were a lot of challenges.

First off, this is a country where the government has a hard time

even keeping the electricity on. And now they're going to vet tens of thousands of business plans, even people within the Nigerian government were thinking, how are we going to pull this off? The logistics were going to be one problem,

but then there was this other problem. Corruption. Corruption is not unheard of in Nigeria. So how do you make sure that the officials running the contest

“don't just give the money to their connections, to their friends and family?”

That only people who are connected get their chance. And ordinary people will not. That was the even bigger skepticism. They had to figure out a fair way to give out the money. And a way that looked fair too. They found judges outside of the government and outside of Nigeria

to do the grading. And they decided also to take the names off of the application, so the judges wouldn't know who was who. But that's still left the question. How do you predict which business will succeed?

Who do you give the money to? And this is where they brought in David McKenzie. My job I work in the research group at the World Bank, and so if I typically come in when people have got an idea and they want to know, doesn't work.

McKenzie had an interesting idea for how to pick the winners. Just do it randomly. Sure he said you can look at their business plans. Maybe pick out the few that seem great, throw out the terrible ones.

But after that, just pick at random. So okay, they decide they're going to pick a lot of the winners at random. They gave the contest a name, the U-Win competition, and U-Win exclamation plans. They started to get the word out with ads.

“They blanketed the country with radio and TV ads.”

I like most entrepreneurs. I dream big, big. But reality, reality. But you know what? You've enterprise with innovation in Nigeria.

U-Win changed my story! No way! So those ads are all over the country. And, Laureate, all her son, that woman we met earlier, who was selling paint out of her car.

She's listening to the radio. She's in her bedroom, and she is hearing those ads. Over and over and over again.

I headed for the first time.

I ignored it. I headed the second time. I ignored it. But the third time something in me said, "Laria, it's way down to pick up this opportunity.

Try and see. Who woke out for you?" I took out her old laptop. She plugged in her mode and she went online. And she applied. So did 24,000 other people.

And, Laureate, she made the first cut. So she and 6,000 other people, they get invited to the next phase. This is where she would have to write that real proper business plan. Laureate got some help with this part.

The government called all of the semifinalists together, and they put them through these business trainings. Laureate says hers was like this big packed concert hall. They were all kinds of applicants. There was a baker who didn't have the right kind of equipment.

A chicken farmer who said he wanted to expand into catfish and snail farming. There was a guy running a computer school. There were musicians. All kinds of people with ideas for all kinds of businesses. Boy, it was intense from morning till evening.

Afterward, Laria went home. She drafted a budget. She made some sales projections. This was a full comprehensive business plan, just like she learned in the training.

And yep, she's the legible character at the start of her show. You knew it had to be coming. She won. I felt, I couldn't even control my emotions. And I went jumping in my bed.

[laughter] Until my sister would say, "What's wrong with you? Have you won?" "Have you won a lottery?" And I said, "Yes."

Yes. Yes. [laughter]

Lariat got 10 million Naira.

That is about $65,000. And this is a huge amount of money. It's like more than 10 times what she would earn in a year. She used it to hire some people. She got some salespeople.

She got some marketing people. And she rented a proper showroom. She tricked it out with some furniture. She was really proud of. No doubt about it.

This changed her business. Yes, yes. Because I can confidently say, "Now, please come to my office. Oh, we are in so-so, please, oh, you can come here.

Oh, what time? Oh, yes. I'll be ready for you. Oh, I'll be waiting for you. Now, you can look at this and say, Of course, she was able to do this. She was given $65,000.

Not even alone. Just gave her a pot of money. The real question is, "How is her business doing a year from now? Two years from now?" How do all the others do?

“The dentist and the chicken farmer who wants to expand into catfish?”

And the World Bank looked at this. Because some of the winners had been chosen randomly, they could evaluate it like a real experiment.

The results were published and they were pretty remarkable. Chris Blattman is an economist at Columbia University, who studies how to get people out of poverty in the developing world. They remember reading it in my eyes, kind of popping out of my head,

and then reading it a little bit more in depth, because I thought, "No, no, no. This isn't possibly true and getting into the details." And getting so excited, I just shot off a blog post right away.

“That's how he deals with unexpected joy.”

Here's what the report said.

It looked at Lariat on the 1,200 other winners of the U.N. competition, and it found they had created 7,000 jobs. Real jobs that stuck around for years. So the whole thing costs $60 million. And that, through the math, comes out to a cost of $8,500 per job created,

which may mean nothing to anybody else, but to people who look at these things and study them like Chris Blattman, he says that is really impressive. And that is why he picked this as the title of his blog post. Is this the most effective development program in history?

Question mark. Blattman said the thing that stood out to him is that the winners, as a group, use the money pretty well, even though a lot of them were these one-person businesses, and they got more money than they'd probably ever seen in their whole life.

Even though a lot of them were picked kind of at random, he just expected that a lot more of them would fail. I guess I have this idea that entrepreneurship is a little bit more rare. Yes, they screen people for business by competitions, and they were all these stages, but even so there wasn't this magical x-factor that is really, really rare.

It might be something that's a lot more common. So it just struck me that this could apply in a lot of places, possibly. That you could do this kind of program somewhere else. Right. The story was from 2016 hosted by Alex Goldmark and Noel King.

The U-Win contest was eventually shut down in Nigeria. The country changed presidents, and you know how that goes. But the program was copied in Kenya and Senegal. The woman who came up with the idea, Dr. and Gozi, is now the director general of the World Trade Organization, the WTO,

and Lariat's Paint Business, still running. Although she tells us she still struggles to find financing to grow even bigger. We have our professor back now with us. Taffney, sorry. Hey, Taffney. Hi, Robert.

One of the things I learned from this case study is that Nigeria and a lot of the other countries in Africa have what is called the missing middle of businesses. There are a lot of entrepreneurs, one person companies, and then on the other side of the spectrum, there's a lot of large corporations. But there aren't enough mid-sized businesses.

That's the missing middle. Why is this gap happening?

“And what's holding back entrepreneurs like Lariat from growing?”

Yeah, it's a good question. You know, one piece of skills, right? Do you actually know how to run a business? Do you know, are you an entrepreneur? Have you thought of all the pieces?

You know, a second is of course, actual capital, right?

If I want to start a business, I need a bunch of money. Where do I get that money? So you win program was tackling the money problem. One big lottery winning at a time. But I kept thinking how does this program get bigger?

Where are the VC firms or banks that are willing to step in and provide the startup capital that the government is trying to do with this program? You know, if we think of the mid-sized businesses that we think of elsewhere in the world, a lot of banks do something we call cash flow lending. You show me your cash flow in your business.

I see your cash flow and go, okay, I can lend you this much based on your cash flow.

“In Africa, a lot of businesses don't have a way of showing cash flow, right?”

I don't keep track. I don't have electronic records. I don't have an Excel spreadsheet to show you my cash flow. A lot of them are informal, so they're not filing taxes. I don't have a tax return to show you my cash flow.

So some of it is maybe because banks feel like I would have to come out and visit the business to figure this out. And it's very costly to do that process. Hmm, this goes back to a big thing that we talked about a lot in last year's summer school season. The value of institutions to help businesses. You need a system in place with property rights, accountants, you know, a trusted legal system before you can even start to think about giving loans out as a bank.

Yeah, absolutely. So this was kind of a very creative kind of a little crazy thing to do, right?

Where had I wanted to structure that as a loan, I would never give out that amount as a first-time loan or business, right?

So that's the other piece, like, you know, if you're going to try and do something really big, it's not clear you can even recoup when the legal system doesn't work for you and there's not clear property rights around what's owned and what's not owned and by who? Which is essential, right? I always say that land surveyors and title insurance companies may seem like the most boring things in the world, but they are in fact the foundation of a successful economy, figure out who owns what?

but it's really become the center of economic research for the world.

“What are the building blocks of health, education, and prosperity for all?”

We'll figure that out along with the economists after the break. This week on here and now any time, can the $25,000 pick up with Frank Windows change the game for American electric vehicles? We can design, engineer, assemble, all American, and it's affordable and it's something that people love. A Detroit startup says there's an appetite for bare bones, EVs, made in America.

That story on here and now any time, listen on the NPR app or wherever you get your podcasts. From the light bulb to the internet, human history has been driven by innovation and shortwave is exploring how the technology of tomorrow will transform our future. Would you write in a flying taxi? Will AI models fight wars?

Hear about the technological frontier every Monday on tech camp. The new series from Surewave. Listen on the NPR app or wherever you get your podcasts. Hi, it's Terry Gross, host of Fresh Air. Hey, take a break from the 24-hour news cycle with us

and listen to long-form interviews with your favorite authors, actors, filmmakers, comedians and musicians. The people making the art that nourishes us and speaks to our times. So listen to the Fresh Air podcast from NPR and WHY-Y. Alright, everyone.

Stay together. Remember the buddy system. We don't want any of the students getting lost here on the border of Uganda and Kenya.

This is the location for our second case study and it gets to the very core question in economics.

“And all of science really, how do we know what we know?”

What really works and what does it? The show is hosted by Erika Beris and Alex Mayassi. The police were Carol Nikhassa grew up. She says it's not a place she ever expected the rest of the world to care about. I was born and raised in a small town in Western Kenya called Busea.

Busea Kenya. It's right on Kenya's border with Uganda. So it's a busy international crossing point. There's lots of truck traffic, hauling things back and forth. It made getting around Busea kind of treacherous when Carol was a kid.

We would write at the back of bicycles that call Bordabodas. And all the time we freaked out whenever those are truck coming because, you know, they're not very safe. Carol eventually left Busea. She studied computers in Nairobi, but her family wanted her to return home. And her father helped her get a computer-related job back in the small town.

A group of economists were doing some sort of study and they needed someone to help with data entry. So, Carol finds herself sitting at a desk and entering the answers to some strange survey questions.

“How many got to have how many TV, how many bicycles?”

So all these questions started nagging me and I was wondering, like, why would you ask someone these types of questions? Carol, the Kesa, eventually met the man who watched how many goats and bicycles people Busea had. Michael Cramer, a soft spoken American with glasses. So I taught high school not far away from Busea. After that, he went off to get his PhD in economics.

He focused on development economics, which deals with all the factors that keep poor countries from growing. So everything from a lack of infrastructure to public health problems.

Michael gets his degree and his thoughts are never far from Kenya.

He advises a friend with a project to help kids in Busea paying school fees, funding school, and Michael suggests that maybe they could do a sort of experiment to see if the project really helped people. It ends up being too small to draw any conclusions, but the money seemed to help a bit. A couple of years later, Michael's friend's nonprofit is trying to take on a bigger project. They want to give textbooks to students at 100 schools in the region.

And Michael, he's ready to try out his experiment idea in a bigger way. He wants to do a randomized controlled trial. Now, randomized trials have been the gold standard in medicine for decades. It's how we tested the treatment for tuberculosis back in the 1940s, the polio vaccine in the 1950s. You have two statistically identical groups.

And you randomly choose one of them to get the treatment and the other one doesn't. In medicine, it's one of the best ways we have of understanding whether an intervention works. The economics in the early 90s, there have been a few studies based on randomized trials, but it wasn't really how things were done. Randomized trials are expensive. They take a lot of time.

So, when Michael sets out to measure the effects of giving out textbooks to school kids in Busea, he's not only trying to help his friend's nonprofit spend its money effectively. He's also trying out a different way of drawing conclusions and economics.

Michael and his colleagues randomly assigned the schools to different groups. This was often listing the schools in alphabetical order and then going, you know, counting off 1, 2, 3, 1, 2, 3, 1, 2, 3. They want to be sure that these groups are all pretty much the same. That one group is in an outlier in some way. One way they do this is by surveying the families.

And this is around the time care on the castle is hired. All those questions about goats and TVs and bikes that she was puzzled by, they were meant to check whether some of the student's families were much wealthier than the others. So, the study gets up and running.

The first year only one group of schools gets textbooks, the next year a second group gets them until all the groups have gotten them.

This goes on for four years, and then Michael gets the results, and there is a big surprise. He expected that as each group received the textbooks their test scores would go up. But instead, he didn't see any difference in average test scores. No difference at all. Even though all these kids now had textbooks.

You know, first I was shocked that wasn't what I was expecting. Second I was disappointed. Yeah, I wanted this to work. And I thought it would work. Michael reflects on what he knows about schools in rural Kenya.

He knows that many kids fall behind. For a whole bunch of reasons, school is taught in English, but most kids don't speak English at home. There are public health problems like malaria and HIV, which can keep kids out of school.

And kids miss school to work or help their families.

And as he's thinking about that and looking back at the data, he notices something that didn't initially stand out. The textbooks did help one group. Students read high test scores to begin with. Their scores improve significantly.

“Eventually, this study led to an important insight.”

Governments in aid groups were spending millions of dollars on textbooks. But a lot of that money was wasted. And so education reformer started focusing more on the kids who weren't doing well. They started emphasizing remedial education. For Michael and for BUSIA, the textbooks study is a turning point.

Michael is like, I want to do more studies like this. Randomized trials that can help solve real problems that people face. And other economists get interested too. Some of them were students of Michael's. They'd help out as research assistants then go on to develop their own projects.

And very, very often that meant working in BUSIA. Because it was a good place to do research. When all of these economists are coming to BUSIA, Carol Nakasa has a front row seat.

So first, we had one expat house.

Which was rented specifically for the expats. And then the expats, you know, they continued to increase. So we rented a second expat house. So maybe four, five in a house? Oh, wow.

You know, especially the summer. The office would be full of so many white people.

“I think it's good to the point where any white person in town”

would be affiliated to us. By 2010, the studies that are happening BUSIA are starting to remake development economics. One of Michael's students from Harvard, Ted McEl, evaluated the benefits of giving school children medicine for parasitic worms for free,

when a lot of groups were charging for it. It winds up showing the kids are far more likely to attend school if they've been treated. A follow-up study shows that led to better jobs and higher incomes later in life. Treatment is now standard across Kenya. And the Kenyan staffers who helped front studies in BUSIA,

some of them realized this can be my career. Carol was one of them. She started out by just making suggestions to the researchers. Like you fired up proposal and then I think about it. I'm like, oh, how about this?

How about this? I feel like it's just came naturally. After all, she'd been working on randomized trials for years. Pretty much as long as they've been happening in BUSIA. And so, the moment someone accepts your suggestion,

it's also something that makes you to feel like sharing more suggestions in future. Like Carol tells an economist that there are lots of girls having sex with older men in return for money, which raises their risk for HIV.

“The economist, Pascalin DuPah, is like, do they know about the risk?”

Could we change this behavior? So Pascalin created a curriculum to teach girls that older men have higher rates of HIV. The curriculum went out to dozens of schools. And there was a randomized trial to test the results. For me, Has study was awesome in so many ways,

because that was a big problem then. Yeah. Did you feel like you could see it in the data from the study that fewer girls had gone into that kind of dangerous work as a result? Yes, I did.

fewer girls got pregnant. Suggesting there was less unprotected sex. And so, the curriculum started to be used more widely.

In 2014, almost 20 years after Carol first started working on Michael Cremer's textbook study,

she left Busea to get a master's degree at Harvard. And when she graduated, she went right back to Kenya to Busea and founded her own research organization. A kind of one-stop shop for any researcher who wants to run a randomized trial in Kenya. Carol in Kenya.

Carol in the cases says she knows this approach to economics has changed lives in developing countries all over the world. When you see something being practiced in other countries and they tell you, it's also a result of the study that was conducted in Kenya. And when not only Kenya, but in a small town where you come from. Isn't that not nice?

It is indeed nice. That case that he was from 2023 and was hosted by Erika Beris and Alex Mayasi. And a notable follow-up here, Michael Cremer, won the Nobel Prize in Economics. Alongside some of the other researchers who worked in Busea,

Aburgy Benergy and Esther Duflo, they won for the idea of using randomized control trials to effectively alleviate global poverty. We return with our Kenyan economist also a business school professor after the break. The midterms are coming and that means the new cycle, which is already intense, is about to get more intense this fall.

So this summer is a perfect time to make sure your news diet is calibrated.

I'm Leila Faldel on Up First.

We unpack the three biggest stories every morning so you can stay informed and get on with your day in less than 15 minutes. Follow or subscribe to Up First today wherever you get your podcasts. We are back with our Kenyan economist, Topneet Sury, who is currently at the MIT Sloan School of Management.

Hey, Topneet. Hi, Robert. So in Kenya, do people know this about Busea?

“That it is this town of economists beloved around the world?”

No. My parents know, but partly because some of those economists have changed to our house for dinner. You cannot keep an economist away from free food.

When people who are not your parents talk about Busea,

are they proud? The Kenyan was the center of this randomized control trial revolution? Or does it feel a little, I don't know, Ikki to be the world's experimental lab? Yeah, I guess that's a great question, Robert.

I think you'll probably get flavors of both people. Some people who think it's cool that there's been knowledge generated. I think others who think this is weird, and they don't really think we should be part of experiments. I do think, you know, the one question that a lot of people do ask me

as how does this help all of us, right? Does it change policy? Does it get implemented?

“Do we learn stuff that will come back to benefit everybody?”

In some way? And that's a hard question to answer, of course, because we can do the research, whether the government listens to the results and reacts is a whole other separate kind of question. So what do you say when they ask this?

Is it helping real people in Kenya? I sort of say the direct effect of Kenyan policy might not be huge on any given day, but the effect on our global knowledge and how that affects policy more broadly, I think, is quite large.

If you can have policies that encourage less disease, more education, less poverty on a local level, does that build up to make the whole country richer? Or does that not necessarily follow? I think from what we know it absolutely follows.

I do think that core to the growth of an economy is this thing we call human capital, which is about the education and the health of your population. It's the sort of encodes capital that a human brings to the table.

“How do you figure out what the return on the investment in human capital is?”

What's your variable there? Yeah, so we look at returns to education, for example. There's a large literature on the returns to education. In fact, there's some recent work showing that the gross miracle in Southeast Asia, a chunk of that was education,

but an important part of that was higher education, actually. Less so primary education. So that's the education piece. And then the health piece, again, we measure the returns to health investments. The podcast talked about a deworming study that Michael Kramer and Ted Miguel ran.

And there it actually also resulted in more education,

“because the kids were healthier and went to school more.”

And so these two things are actually tied. We call that a positive externality in economics. Why don't you define that for the class? Positive externality is where if I invest in something, it benefits other people.

So an example is if I'm more educated, and I am working the people around me are more productive because I have more education than they would be otherwise. And the same for them on me. If they're more educated, we can do more stuff together

and I become more productive. As an economist, do you ever get frustrated seeing that we know something? We know something from the randomized control trials, but either no one will listen or government chooses to do something different. Do you ever just bang your head against the wall?

Oh, absolutely every day of heart. Okay. Would we like people to use research and knowledge more in their decision-making? Absolutely. But you can't just bang your head against the wall.

“You have to say, well, what can we do about it, right?”

And so the same academics have been trying to build sort of, you know, policy relationships to try and change that. And I guess a Nobel Prize doesn't hurt when it comes to convincing governments that they maybe just maybe want to look at the data. To have neat, we're asking all of our professors this season,

one final question. If there is something in the Kenyan economy that we could take back here to the United States, that would be useful. What would that thing be? Well, it's not finance or economics, Robert.

But, you know, everybody loves to vote. And everybody shows up to vote. In Kenya, really? Everybody, not everybody 100% but voter turnout rates are extremely high. And as you can imagine, people stand in line for hours and hours on end to vote.

That enthusiasm is similar to how everyone seems to have their own business. People like to get involved in the civic and business life of the country. I think in general, that's one thing that's true is everybody wants to participate in the economy. Think of even young people as I said, right? They're not getting into university and they're frustrated because they want to participate in the economy.

The entrepreneurship piece we saw. There's this sort of wanting to participate in the social and economic life in a very deep way, I think. And that's to voting in politics. You see it in that entrepreneurial spirit we talked about. So that piece I find very inspiring.

“And I think it's up to us to figure out how to deliver on that, right?”

I think that's a good mission statement for economists everywhere. Tagneet, there will be a test at the end of the semester of summer school. Maybe you could help us with defining some of the concepts from today's episode. Sure, with one caveat, I don't have to do any of the grading of that. No, it's all automatic. Everybody passes.

Oh great. Okay. What is this randomized control trial? I should say Nobel Prize winning randomized control trial that everyone's talking about. A randomized control trial is a way of studying the impact of something,

where you basically split a population, a study population into two groups randomly,

and one group gets the intervention and one doesn't. It allows you to sort of estimate the impact of that program very cleanly. A lot of the randomized control trials we talked about in this episode, involved human capital, what is human capital? Human capital is education and health.

So think of it as the capital embodied in our in humans and people. It's investing in humans instead of investing money. Although it does cost money. Sure, yes. It does cost a lot of money.

Finally, we talked about the missing middle as a problem faced by businesses in countries in Africa. What is the missing middle? So the missing middle is where I don't have businesses that are middle sized in terms of their employees. I have lots of very small businesses with, you know, one or two employees. I have a bunch of big businesses that are in the hundreds of employees,

but I'm missing this middle set of businesses that have kind of 5, 10, 15, 20 employees. Tafneet's Surrey from the MIT Sloan School of Management. Thank you so much for coming in and for talking with us. You're very welcome. It's been a pleasure.

I had fun talking with you too. When are you next going to Kenya? Your parents want it out. August. Nice.

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I'm Robert Smith. When I'm not summer schooling,

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