Poverty is a big word. It is multi-dimensional. It is complex in its causes, it is hugely complex in its implications, and it is perhaps the most intractable of all social challenges that humanity faces. Poverty has been the characteristic condition of humanity since its birth. It is not the existence of poverty that should surprise us but rather that some significant portion of humanity in the relatively recent history (about 100 years or so) are not living in poverty. Though it is not as inescapable as death, poverty has been much of human history’s most common condition. Ending poverty on a global scale will require a combination of technical ingenuity, enlightened political leadership, compassionate societies, and such on a global scale. Just technology alone cannot solve any problem as enduring and non-technical as the complex problem of global poverty.

You know that Monty Python skit involving a dead parrot. The character that John Cleese plays comes to the pet shop to return a parrot which he had “purchased not half an hour from this very boutique.” The problem was that the parrot was dead. The shopkeeper insists that the parrot — a Norwegian blue — is not dead. It is, he variously claims, merely resting; pining for the fjords; that it prefers to kick back. John’s character is frustrated and finally explodes:

“It’s not pining, it’s passed on. This parrot is no more. It has ceased to be. It’s expired and gone to meet its maker. This is a late parrot. It’s a stiff. Bereft of life, it rests in peace. If you hadn’t nailed it to the perch, it would be pushing up the daisies. It’s rung down the curtain and joined the bleedin’ choir invisible.

Viz-a-viz the metabolic processes, he’s had his lot. All statements to the effect that this parrot is still a going concern are from now on inoperative. This is an ex-parrot.”

I feel a bit like that guy. I repeatedly keep insisting that technology is not the answer to all of the world’s problems. Technology helps only on those aspects of a problem that are technical in nature. So here’s yet another of my attempts at explaining why I think technology cannot solve the problem of global poverty.

In its most general formulation, problems involve constraints and their solutions involve choices within those constraints. If there were no constraints in a system, there would be no problems. To the extent that any particular problem has a solution at all, the solution involves making choices. Good solutions are the consequence of correct choices. Technology often relaxes some constraints to some degree, and thus expands the choices available. This expansion of choices is good but it is not costlessly so: greater choice implies a greater burden in making the correct choices. In other words, when the choice set expands, the chances of making the wrong choices also goes up.

Specifically in the case of mobile phones, we can immediately note the constraints that it relaxes. It essentially makes long distance communication of information possible. But then so do carrier pigeons, smoke signals, semaphores, the telegraph, the pony express, and land line phones. Mobile phones have an advantage over those earlier technologies because it is better, cheaper, faster, more accessible. So the second constraint the mobile phone pushes back is financial. For a given amount of money, you get more capacity. Third, the technology is transferable and is easily adopted. You don’t need to be literate, and you don’t need expensive terminal equipment.

What economic function does the mobile phone serve? It reduces transaction costs, to put it in economics terms. When you use the phone to ask for directions perhaps, you save time that you would have otherwise wasted in going round in circles. When you call ahead to fix up a meeting, you avoid a wasted trip if the person is not available. Telecommunications is a substitute for transportation in many instances.

By reducing transaction costs, the efficiency of the process goes up. That is, increased productivity and therefore more production for the same effort. More production, in turn, means more stuff. More stuff for a given population means more stuff per person. Stuff, as you all know, is what it is all about. If a person has too little stuff, he is poor. To the extent that global poverty can be helped through increased production of stuff, and to the extent that more efficient communications helps in production, only to that limited extent can cell phones affect global poverty.

Technology is an amplifying mechanism. Another way of saying that is that technology enters the production function multiplicatively. You have to have something to amplify to be able to use an amplifier. If there is no signal, no matter how powerful the amplifier, there will be no output. The productive capacity is multiplied by technology but where there is any production going on and what is being produced is a consequence of choices that were made outside of technology. That is the bigger challenge because the ability to make the correct choices is something that cannot be as easily imported as the importing of technology.

In the end, affluence — which I define here as the absence of poverty — is a consequence of correct choices made deliberately and consciously over the long term. Affluence is the result of economic policies made by thoughtful and wise policymakers. The existence and the necessity of such people is independent of the level and sophistication of the available technology. To solve our problem of poverty, technology is definitely necessary but it is far from sufficient.

Related links:

(1) Stuff and Ideas.

(2) The Importance of Producing Stuff.

(3) The Tathagata’s Sermon on Economics.

Remarkable results follow from exploring the idea of opportunity costs. The whole theory of comparative advantage — the fundamental reason why trade is a win-win game — pivots around the idea. One could do worse than to sit and consider opportunity costs whenever one contemplates doing something.

In fact, I would go so far as to claim that economics at its most fundamental is the careful systematic study of opportunity costs. Opportunity costs implies choices and tradeoffs, and is itself the consequence of a fundamental physical characteristic of the universe that we live in. That fundamental fact is that this universe has limits. Each one of us has a limited amount of time and other derivative resources at our disposal.

Economics is about making choices and economic policy is about policy choices. How an economy performs depends on the economic policy choices made by whoever is in charge of making choices. All this should be glaringly obvious and you may have started wondering where all this is leading to. I was coming to that.

The last time I wrote about the craziness of the ICT for development brigade. ICT tools are of course relevant for development in certain cases. But mindlessly applying ICT in each and every place is worse than doing nothing. If you spend scarce resources buying PCs for rural areas, you neglect other more relevant areas where those resources would have helped.

Adult education, for instance, is a crying need in rural India. You can, of course, use a variety of means of achieve that, ranging from blackboard and chalk, to radio and TV, to PCs with literacy software. Examining the economics of the situation could well reveal that blackboard and chalk is the most appropriate means. For a total capital expenditure of Rs 500 and an operating expenditure of Rs 1000 per month, you could make 20 adults literate in 6 months. Per capita cost would then be about Rs 325 (about $7.) Let’s do the numbers if you were to use a PC. Cost of hardware and software Rs. 20,000; power supply for the PC: Rs. 20,000; trained manpower and maintenance per month: Rs 3,000. Total cost: Rs 58,000. Per capita cost: Rs 2,900 (about $65.)

Of course, one could always use the PC for a number of uses, not just adult education. Instead of just educating 20 people, one could use it more intensively by say using it 12 hours a day and thus train 5 batches for a total of 100 people. Still, the PC method would cost Rs 70,000 and the blackboard method will cost Rs 25,000. By using the low-tech method, you save Rs 45,000. Here is an idea. Give Rs 450 as an incentive to the people: become literate for free and when you complete the course, you take home Rs 450. Total cost to the state: Rs 70,000, the same as the high-tech solution. Same expenditure but guaranteed different outcomes.

In the low-tech scheme, you give money to the rural adults. This is an incentive to them and better still, they in turn, spend the money locally which stimulates the local village economy. They buy food perhaps which helps out the farmers. Compare that to the high-tech scheme. The money goes to the manufacturers of hardware and software, which basically means Intel, Microsoft, HP and so on.

I hasten to add that rural India has a wide range of problems. Saying that not all of them are amenable to a high-tech solution also means that there are some problems that are the properly addressed by high-tech solutions. Point to point communcations of all sorts — voice, text, video — are best done using high-tech methods. Compared to carrier pigeons and even POTS (plain old telephone system), wireless WiFi and VOIP (voice over IP) will be cheaper.

Here is the point that I am laboring to make. Here is a simple prescription on how to solve problems.

1. First, identify the problem as precisely as you can. For instance, too many illiterate people in rural areas, for example.
2. Diagnose the problem. This step is most often glossed over. What is the cause of illiteracy? Is it because they do not have PCs? Or is it because they don’t have teachers? Or maybe because they don’t have time to go sit in a class because they have to earn a living by toiling in the fields? Or is it because the upper caste people prevent the lower caste people from going to class?
3. Apply the appropriate remedy that fits the diagnosis of the problem. If it was really a lack of PCs in that village that led to illiteracy, then by all means get those PCs Fedexed immediately. But the vast majority (about 99.99recurring percentage) of humanity has become literate without the aid of PCs. So it is unlikely that the lack of PCs is the cause of the illiteracy. It is more likely something else.

There is nothing wrong with very good headache medicine. But very good headache medicine would do fancy little for you if you have an upset stomach. Psychological counseling is great but will not help a broken car. Administrative problems cannot be solved by technological means any more than casting spells fix a balance of payment deficit.

I am delighted that so many NGOs, pundits, and governments are so gung-ho about the use of ICT for development. More power to them. But if their spending on ICT diverts scarce resources to unproductive silly ill-conceived wasteful exercises, it is a pity that the same sort of idiotcracy still exists that brought the country to the sorry state that we find it in today.