In this episode, host Daniel Raimi talks with Kelsey Jack, an associate professor and scholar of environmental economics and international development at the Bren School of Environmental Science & Management at the University of California, Santa Barbara. Jack describes the challenge of improving environmental quality in developing countries, where residents confront a variety of individual pressures that can trump environmental health as priorities, from electricity access to the availability of clean water. Reflecting on her own experimental economics research, Jack contends that paying families to conserve nature can aid those in need while encouraging environmental stewardship.
Listen to the Podcast
- Environmental infrastructure in developing nations: “The poorer you are, the more vulnerable you tend to be to the environment that you live in, and the more dependent you tend to be on having good environmental quality around you. Yet, being able to afford good environmental quality is something we take for granted a lot of the time. The fact that I can stand up right now and go into the kitchen and turn on the sink and get a glass of very clean drinking water without thinking about it—it’s something that people in many parts of the world can’t do.” (3:55)
- Why field experiments appeal to development economists: “One of the reasons that development economists in particular have been leading the charge on using this type of methodology is … we’re always trying to approximate experimental conditions using existing data. But that existing data is really, really sparse in a lot of low-income countries.” (12:09)
- Financial support can encourage environmental conservation: “In many cases—especially if programs [that pay individuals to maintain ecosystem services] are happening in low-income countries where households would not be making a lot of money off the land, anyway—the amount of money that has to be paid to change behavior is actually not huge, because the outside option is not all that lucrative for people. So, it can actually be fairly cost-effective.” (29:02)
Top of the Stack
- Good Economics for Hard Times by Abhijit V. Banerjee and Esther Duflo
- Ministry for the Future by Kim Stanley Robinson
The Full Transcript
Daniel Raimi: Hello and welcome to Resources Radio, a weekly podcast from Resources for the Future. I'm your host, Daniel Raimi. Today we talk with Dr. Kelsey Jack, associate professor at the Bren School of Environmental Science & Management at the University of California, Santa Barbara, and director of the Poverty Alleviation Group at the Environmental Market Solutions Lab. She's also co-director of the King Climate Action Initiative at the Poverty Action Lab at the Massachusetts Institute of Technology (MIT). Kelsey works at the intersection of environmental economics and international development, studying how environmental issues shape economic development, and vice-versa, in developing nations. I'll ask Kelsey about some of the experiments she's done on electricity payments and ecosystem service provision in different parts of the world, and how her research can inform policymaking on sustainable economic development. Stay with us.
All right, Kelsey Jack, from the University of California at Santa Barbara. Welcome to Resources Radio. Thank you so much for joining us.
Kelsey Jack: Thanks so much for having me.
Daniel Raimi: So, Kelsey, we're going to talk today about your work at the intersection of human development and environmental issues, but we always ask our guests how they got interested in working on environmental issues in the first place. So kind of what steered you into this field?
Kelsey Jack: Yeah, thanks. It's a story I actually love to tell. When I was about 14, my parents and I went on a family vacation to Madagascar, which is a little bit of an unusual family vacation, but in the Jack family, that was something we did, which I'm very grateful for. And my 14-year-old self observed, I think for the first time, something that felt morally very gray to me. Previously, everything that I had witnessed, it felt clear to me what was right and wrong.
Specifically what that was is that, in Madagascar, one of the things that a lot of rural households do to meet their livelihood needs is practice what's called slash and burn agriculture, which means that to clear land for farming, they burn the forest. This is one of the most unique ecosystems on the planet, with some of the poorest people, at that point in my life, that I had ever encountered. And it felt to me like just this huge conundrum. What do you do? These households need to feed their families on the one hand, so they need to be destroying the forest to meet their immediate livelihood needs. But on the other hand, the forest that they're destroying is just this incredibly unique natural system.
It made my 14-year-old head explode. And I think it set up this challenge that is exactly what I continue to work on, which is trying to understand the tension between immediate human needs, particularly in poor and developing countries, and the need to preserve the planet that we live on. It was a really powerful and really formative experience that happened relatively early on, and really set me on a track that I feel fortunate to have continued to follow.
Daniel Raimi: Yeah. That is so interesting, and it has such a clear through line to what we're going to talk about today in your current work, which is the intersection of environmental issues and development, particularly in low-income nations and low-income parts of the world. Can you start by giving us a quick overview, and maybe an example or two, of how, just in a broad sense, environmental issues and human development intersect? Obviously, the Madagascar example is a great one, but if you could maybe give us a little bit more flavor on some of the other places where you work.
Kelsey Jack: Sure. Yeah. To me, one of the most compelling challenges is the fact that, the poorer you are, the more vulnerable you tend to be to the environment that you live in, and the more dependent you tend to be on having good environmental quality around you. Yet, being able to afford good environmental quality is something we take for granted a lot of the time. The fact that I can stand up right now and go into the kitchen and turn on the sink and get a glass of very clean drinking water without thinking about it—it's something that people in many parts of the world can't do. A big part of how they organize their day is finding clean sources of water. Even then, using the water that they are able to find often requires trips and hard physical labor to carry it.
Oftentimes, this falls to women and children, and even in that case, with a huge amount of investment of time and energy, if water quality is bad it leads, of course, to diseases, and burdens on the household, again, which often fall on younger children. Drinking dirty water, as I'm sure most listeners know, is a leading source of health problems in low-income countries and rural settings in particular. These are the kinds of things that are really important to think about, but again, many of us take for granted, because it's just around us. Environmental quality passes through so many filters, both physical and institutional, before we interact with it. There's this kind of perverse relationship. The poorer you are, the more vulnerable you are to things like poor drinking water quality, poor air quality, et cetera. Yet, those are often the populations that are exposed to the worst quality, air, water, et cetera.
One example that is very compelling is the drinking water one, because, again, it's something that's so convenient in our lives and so inconvenient in so many people's lives around the world. Another kind of similar one is cooking technologies, right? We have the luxury of having either gas or electricity piped into our homes, which makes cooking very clean and very convenient. You can quibble about whether natural gas in your home is as clean as it should be. But, on the other hand, if you compare that to burning firewood that you're collecting yourself, or dung from your livestock, natural gas is pretty clean. Yet again, for most households, the idea of allocating the little bit of income that they have to paying for gas, when you could instead go gather firewood near your agricultural fields, for example, and burn that for "free," the trade off is pretty clear. You're not going to spend a little bit of money that you have on something like improving air quality in your home, when you have so many different demands on that little bit of income.
These are the kinds of tensions that are really, really challenging to think about. What is the role of policy to try and intervene, through public goods that are provided by the state or by the private sector to try to help lower the cost for low-income households of overcoming some of these immediate environmental threats?
Daniel Raimi: Yeah, absolutely. We're going to talk about a couple of those applications of your research in just a second, but before we do that, I think it will be really useful for people to get a sense of how you do this research, because it's different from what a lot of economists do. A lot of economists spend inordinate amounts of time looking through data sets and trying to figure out what might approximate a natural experiment, or something close to a natural experiment in the real world. But your work is largely based on real-world experiments that you actually carry out, which assess the effects of a certain policy intervention or some other type of intervention. Can you give us a little bit of flavor for the benefits and drawbacks of using that experimental approach in the work that you do?
Kelsey Jack: Sure. I'd love to. This approach of using what I'll refer to as field experiments—sometimes referred to as randomized controlled trials—is something that in development economics over the last decade or so has really risen to become a leading method. It's used by many, many development economists, and the Nobel Prize in 2019 was awarded to three development economists who have been leaders in moving this methodology into the mainstream. It's taking off in a number of different fields in environmental economics. It's been a little bit slower to be adopted, for reasons that we can get into. One of the benefits of doing work between environment and development economics is being able to borrow methods from development economics to try to ask questions that have more environmental content.
In terms of the benefits and costs of this type of approach, to me, the benefits are large. I'm choosing to use the methods, so I'm clearly on the benefits side. The main advantage, of course, is just being able to really cleanly test a hypothesis. So if we're interested in understanding how to get cleaner energy sources into people's homes, we could look around for datasets that collect information on what cooking fuels people are using, for example. But we would run into a lot of problems, namely that the people who are using cleaner fuels are richer. Maybe they're better informed about the cost of using dirty fuels, or any number of different things like that, which would make it pretty hard to overcome to really get a clean estimate of why people are choosing to adopt particular fuels for cooking.
By going out into the world and working with governments or NGOs or other partners on the ground, trying to make it possible for people to use cleaner fuels, we can formulate hypotheses alongside the very actors who have the potential to implement and to make change. We can also overcome the challenge that the researchers face by generating a treatment group and a control group: basically taking the scientific method to the field and saying, "Let's set up this new government program or this new NGO project in a way that we have some comparable villages that are getting access to subsidized liquid petroleum gas, for example, and others that are not.” Through our own data collection we can see what's actually happening to these households: who's choosing to adopt, how it is affecting health, how it is affecting the local environment, or a number of things like that. All of these insights are pieces of data that, in particular in low-income countries, can be really hard to come by. One of the reasons that development economists in particular have been leading the charge on using this type of methodology is to overcome what you were describing about the dataset. We're always trying to approximate experimental conditions using existing data. But that existing data is really, really sparse in a lot of low-income countries.. There's the dual need to have a comparison group that is really valid, but also the need to have really high quality data. To me, those are the objective benefits, the ones that I could probably convince most people of. There's a more personal benefit that I like as well, which is just that I really enjoy being really grounded in the work that I do.
I really enjoy having partners on the ground. I really enjoy having to go to the places that I'm studying and interact with the communities and households that I'm interested in learning about. I think it just makes the research better. I think I develop a lot more intuition for what's actually going on, for what's driving choices, for what trade-offs people are really considering, that maybe we've missed in some existing models but we can feed back into the research questions. To me, it makes the research a lot more immediate and compelling and grounded, because you really have to think carefully about the questions you're asking to make sure that they make sense to people.
That's a benefit. Of course, there are drawbacks. The biggest drawback is that these projects are expensive, A. And they take time, B. It is not the kind of thing where I can go download a dataset off the internet, hire a couple of research assistants and have a paper six months later. It's a process. It requires fundraising. It requires collaboration. It requires managing people on the ground to be doing the data collection. But the trade-off is that you get to design your own study from the beginning, which I think is worth it in a lot of cases.
Daniel Raimi: Yeah. That's so interesting. A lot of that dovetails with some of the research that I've done. Obviously it's very different context, but as someone who researches oil and gas issues, having spent time in those communities and the people who work in the industry and the people who live near the operations is just so valuable for informing research and making sure that the questions we're asking are actually relevant to people's lives.
Kelsey Jack: It really is. I'll just add one thing, which is that, for me and for a lot of people who do this type of research, one of the most challenging things—I mean, this is a small challenge relative to the challenges that many are facing in the global pandemic—is not being able to go to the field and not being able to work. Even if some of the work has been able to continue, I haven't been able to go. I feel like that really puts up a little bit of a wedge between the way that I think about a problem, sitting in Santa Barbara, and the way that I would think about the problem if I got to spend some time on the ground.
Daniel Raimi: Yeah, absolutely. Let's talk now about a couple of the projects you've worked on. You have a couple of papers on this really interesting issue of prepaid electricity metering in South Africa. Can you tell us a little bit about that work, and help us understand what effects it might have by asking people to literally pay as they go for their electricity consumption?
Kelsey Jack: Sure. I was really interested to learn about this technology. It was not something that I was familiar with until I visited South Africa for some other reasons. I started having some conversations with people in Cape Town, and they were describing the fact that the majority of households in South Africa, particularly in Cape Town, get their electricity through what is called a prepaid electricity meter. It's basically exactly what it sounds like. It's an electricity meter that acts a little bit like a prepaid cell phone or a coin operated dryer or something like that. Basically, you put money onto the electricity meter. You go buy, in this case, an encrypted token that represents the value of what you've purchased.
Then you punch a code into the meter, and it unlocks the number of kilowatt-hours that you've paid for. Then you start using your appliances, and the meter ticks down based on your consumption. When you run out of credit on the meter, your lights go out. In some ways it's a very basic technology, but one that we're used to in other domains. If you think about the way that we pay for electricity as a service, in some ways, it's an artifact of how historically electricity was provided. There's no particular reason that electricity needs to be a service as opposed to a commodity in terms of how we purchase it. Yet we're all very, very used to the idea that you consume upfront and then you receive a bill that reflects what it is that you've consumed.
So what the prepaid meter does is just flip that on its head. It basically turns electricity into something more like a commodity. If you go buy a gallon of milk, when you're out of milk, you're out of milk. We're sort of used to trusting consumers to keep track of how much milk they have, and it's not a problem if you run out of milk, that's kind of on you to figure out how to get more. But for electricity, we're just not used to that, and so I think the prepaid technology feels like a really big shift. The main reason that it gets used, in particular in low-income countries, is for two main reasons.
One is that, in a lot of settings, it's very difficult to enforce a bill payment. So, in settings where there's not an ability to have a credit history, where it's challenging to deliver bills, where it's challenging to cut people off if they're not paying their bills, then having the enforcement just operate through the prepayment system is extraordinarily useful for the utility company. It takes the whole burden of billing off of the utility company. That is really the core advantage to this technology. This is slightly less important in South Africa, but for example, in India, the fraction of bills that get paid is something on the order of half. In a setting like that, you can imagine the challenges that arise where the utility then really has two choices. They can increase tariffs, which affects the fraction of people who do pay, but there’s still a fraction of people who can get away with not paying. In fact, maybe increasing tariffs leads to more people not paying their bills.
Actually, they're going to be three things. Second, they can lower the service quality, right? You see that in a lot of settings where electricity supply is very intermittent. There'll be certain hours of the day where people are getting electricity flowing through their meter, but many hours of the day when electricity is out. That's a very common phenomenon. Then the third thing also is very common: that utility companies can choose to just not connect poor households in the first place. The utility company realizes that, "this is the type of consumer that's not going to be profitable for us, because we're going to constantly have to chase them to pay their bills, so we just aren't going to connect them in the first place." You see very high connection charges in a lot of parts of Africa, so customers have to pay a lot just to get onto the grid.
There are a variety of reasons that those exist. But one of the benefits of that, from the utility company's perspective, is it screens out the types of households that are less likely to be able to pay down the road. There are other reasons as well, but that's one of them. All three of these artifacts of not paying bills are really problematic for consumers as well. So it's not just that utility company that suffers. If consumers are facing higher tariffs, or worse service quality, or not getting access in the first place, then the old system, the post-paid system, has some pretty obvious drawbacks. In theory, what the prepaid electricity can do is help overcome some of these issues. On the one hand, if the consumer is now responsible for keeping the lights on instead of the utility company, it potentially addresses some of these issues with nonpayment and with access.
Daniel Raimi: That's really interesting. So given those benefits that you described to this approach, at least in this particular context, would you recommend that pay-as-you-go metering become more widely adopted in developing countries? Or are there other trade-offs that we should think about?
Kelsey Jack: There are a few other trade-offs, and I think there's a lot more room for research on this topic. One of the trade-offs is that, for customers that are quite poor and that may have a really volatile income, having to pay up front removes one of the benefits of billing, which is that it helps smooth things a little bit. Billing is basically a form of credit for the consumer. There may be a little bit of extra hardship on particularly poor households, which I think certainly deserves further research. The other really big drawback is that it's very hard to do any real-time pricing on a prepaid meter, because people are paying in advance.
If a utility company can leapfrog over a prepaid meter and go straight to a smart meter, then that gives them the capability to do both pay-as-you-go or more dynamic or real-time pricing. One of the drawbacks is that it locks utilities into static pricing, which has some drawbacks. It's probably a different conversation, but those are some limitations. So depending on what the trajectory for a utility company actually looks like, those kinds of limitations may outweigh the benefits that we were just talking about.
Daniel Raimi: That's really interesting. I hadn't thought about the demand side of things. That's super interesting. So let's switch now. I wanted to ask you about a different stream of research that you've been working on for quite some time, which is this idea of paying households for providing ecosystem services, such as conserving forests. This sort of goes back to the Madagascar example that you started this with. Can you tell us a little bit about this topic and what you've learned through the experiments that you've carried out in different countries, which include Malawi, Zambia, and India?
Kelsey Jack: It's this idea of paying households to do activities, typically land use-based activities, that generate positive externalities—so good externalities for the rest of the world. Doing this for ecosystem services is something that I think a lot of people in the environmental community are really excited about. There's really not been a lot of very rigorous research to try and figure out how cost-effective these types of approaches are. Even more importantly, and I think more interestingly from my perspective, there hasn’t been a lot of research into how to use a lot of what we know from economics to design contracts to maximize benefits. A lot of the work that I've done has really focused on that latter branch of “how can we take this kernel of an idea and try to really think about leveraging what we know from economics and other kinds of contexts to improve contract design?” That way, we can make them appropriate for the types of settings and the types of populations, and the monitoring limitations and other things like that.
To me, this is this boundless area for interesting economic research, but at the same time, it's a place for really applied work that involves trying to think about the populations in question. Of course, the more complicated a contract, the harder it's going to be to get people to trust it and to be willing to take it up. I've been working for the last couple of years on a project in India, where we're using this type of approach, not to think about forest conservation, but actually to think about creating incentives for farmers not to burn their fields. One of the big environmental issues in India is the fact that after harvests, to clear their fields, farmers use fire, which generates vast amounts of pollution every year. It's been a really intractable problem to deal with through things like fines and prohibitions and stuff.
What we wanted to do is test out how you could create positive incentives. That introduced all sorts of really interesting contract design challenges. One of the things we tested out in this field experiment that just wrapped up, is comparing two systems. First, there’s a contract where you just pay a farmer conditionally on not burning land at the end. So, kind of a classic payment for ecosystem services type of contract, versus a contract where you give some of the payment upfront. The rationale for that is twofold. One, an upfront payment builds trust, and two, an upfront payment can address liquidity constraints. The fact that farmers might need a little bit of cash to be able to hire a piece of equipment or hire some labor which would allow them to avoid burning that land. What we're seeing, this is still preliminary, is that those contracts that included that upfront payment actually seem to be performing better and solving this really challenging problem in a pretty cost-effective way.
Daniel Raimi: Yeah, that's super interesting. One of the other applications of this work that popped immediately to my head, that I imagine some listeners will also be interested in, is the implications of this stream of work for things like carbon offsets, which can be very controversial. Well, they are very controversial in many settings. So, the example would be a landowner who is paid to conserve their forests to allow that forest to continue taking CO₂ from the atmosphere. What does your work tell us about those kinds of markets?
Kelsey Jack: I think those kinds of markets certainly have potential. This is actually a setting where I would argue that the type of research methodology that we've been talking about—having a really rigorous research design, so that you know what the counterfactual or what the world would have looked like absent the payments—is absolutely crucial, right? One of the big concerns about these types of programs is that you end up just paying for forest that would have been left standing anyway, or you end up just paying for what economists would call inframarginal conservation, or what the environmental community would call non-additional conservation. One of the things that a randomized trial or a field experiment can do is really give you that comparison group so that you can actually quantify and measure how much additional forest was conserved, or how many new trees were planted.
Otherwise, you're relying on baselines. You're relying on other types of measurement tools that may be a little bit less clean. I think using findings from those kinds of studies, you can start to think as well about different kinds of scenarios. If a contract is only, for example, three years or five years or some relatively short time period, what are the costs and benefits or what are the conservation impacts, the tons of CO₂ sequestered, if the farmer or the land owner then immediately clears all of their land? Or what are they if they leave it in place for another few years, but then revert back to whatever the baseline levels of clearing were? So, you can use that trial period where you have really clear measurements to set up the worst case scenario in terms of the CO₂ impacts. Worst case, you're only delaying clearing by a few years. But even that, for a stock pollutant, can be important.
The more we're doing really careful measurement and really careful quantification, the more this can help to address some of the concerns that have been asserted, such that these are just temporary programs or they're really non-additional or other things like that. This way, we can be pretty conservative about what assumptions we need to put in place and measure basically a lower bound on CO₂ impacts. In many cases—especially if programs are happening in low-income countries where households would not be making a lot of money off the land, anyway—the amount of money that has to be paid to change behavior is actually not huge, because the outside option is not all that lucrative for people. So, it can actually be fairly cost-effective, which is what we're starting to see. It's really an area where as we shine more light on this approach, the more the discussion will start to turn to a fact-based one, as opposed to an opinion-based one.
Daniel Raimi: Yeah. Those are all such great points. And hopefully, it's kind of getting some of our listeners excited about exploring some of these research topics themselves, because as you say, there's so much we don't know and so much that we could know, particularly using these methods that you've been working through.
Kelsey Jack: Yeah, definitely.
Daniel Raimi: So, Kelsey, there are so many more questions that I would love to ask you and love to spend time on, but we're pretty much out of time. So I want to jump now to our last question that we asked all of our guests, which is Top of the Stack. So, we’re asking you to recommend something that you've read or watched or heard related to the environment, even if tangentially, that you think is cool and you'd recommend to our listeners.
And I'll start with a book that came out maybe six months ago, that I'm reading now by Kim Stanley Robinson, it's called The Ministry for the Future. This is an author that we've heard of before. He's written a variety of books that you could sort of think of as climate fiction or cli-fi. We're actually going to have him on the show in a few months to talk about these new books. I'm reading it right now. It's called The Ministry for the Future. It starts off in India with actually a really, really intense scene from the near future. It's a bit disturbing, but it's actually a really enjoyable book. So I'd recommend it to people, The Ministry for the Future. How about you, Kelsey? What's on the top of your stack?
Kelsey Jack: Great. Well, I'm also going to recommend something that came out not too long ago, but what I will do is draw a little bit on development economics. So the researchers that I referred to earlier who won the Nobel Prize for their work on randomized controlled trials and field experiments, two of them came out with a book recently called Good Economics for Hard Times. This is Abhijit Banerjee and Esther Duflo, who are co-founders of the Poverty Action Lab at MIT, which has been doing a lot of the really great development economics work in this area. This book talks through a lot of the big challenges in economic development around the world. What, to me, is really exciting about this is that they devote a whole chapter of this book to thinking about climate change. So this is actually something that recently has undergone a pretty big shift: people who are really working on development and on poverty alleviation around the globe have come to realize that you really have to think about the environment as well.
In particular, you have to think about climate change. These are no longer separate issues. That it's no longer a question of, worry about the planet on the one hand, and worry about impoverished populations on the other hand, that these two things completely go hand in hand. For listeners who are interested in learning a little bit more about other challenges and development, this is a really excellent introduction to evidence-based work in this area, and also includes a chapter, which I think is actually a really kind of hopeful sign, about how climate and development interact.
Daniel Raimi: Yeah. Absolutely great points and great recommendation. I totally want to read that too, so I'll have to add it to my stack as well. Well, once again, Kelsey Jack, from the University of California at Santa Barbara, thank you so much for joining us on Resources Radio and telling us about your work. I know we've only scratched the surface, but hopefully it's really whetted people's appetites to learn more about the work that you do and the methods that you use and this entire world of research.
Kelsey Jack: Well, thanks so much for having me. I've really enjoyed it.
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