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Seven ways to think like a 21st-century economist

Phil Hay's picture

Having just published her new book called Doughnut Economics, Kate Raworth —a senior visiting research associate with Oxford University's Environmental Change Institute—is touring the world, appealing to people to break their global worship of growth; redesign money and finance; and to create economies that are regenerative and redistributive, and serve the interests of people worldwide, not just Audi drivers.    

As Raworth readies her slides for the presentation, it feels like more ritualistic torture is on the way for devotees of economics.  Scorned and roughed up for not warning beforehand about the 2008/9 financial crisis, and then lumped in with the backlash against "experts" in the recent UK Brexit vote, economists are being force-fed humility these days. Perhaps it's just a market correction towards the real calling for economists which John Maynard Keynes once envisaged as, "If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid."

Kate Raworth's flier for the May 11 event at the World Bank, promised that her game-changing analysis and inspiration for a new generation of economics thinkers will be "simple, playful, and eloquent."

Raworth starts off with her trademark pitch that "economics is the mother tongue of public policy" but when confronted with climate change, inequality, and the other arresting challenges of our present age, its hallowed ideas are centuries out of date and need to be junked. She uses the image of a doughnut to chart social and planetary boundaries consistent with achieving the SDGs and to depict where the "sweet spot" of progressive human prosperity lies. Threats to social justice and the planet's future lie outside the doughnut ring in pulsating red beams.

Quote of the week: Trevor Noah

Sina Odugbemi's picture

“I see most things in terms of finance and investment and marketing. In school, one of my favourite subjects was business economics. I had an amazing teacher who went beyond the syllabus. And so even now, in life, I read economics textbooks and I try to dabble in financial accounting, just to understand the world.”

-
Trevor Noah – South African comedian, television and radio host.

Quoted in Financial Times Weekend print edition December 17, 2016 "Life" by Michael Skapinker
 

Review of Doughnut Economics – a new book you will need to know about

Duncan Green's picture

https://flic.kr/p/9XqtbSMy Exfam colleague Kate Raworth’s book Doughnut Economics is launched today, and I think it’s going to be big. Not sure just how big, or whether I agree with George Monbiot’s superbly OTT plug comparing it to Keynes’s General Theory. It’s really hard to tell, as a non-economist, just how paradigm-changing it will be, but I loved it, and I want everyone to read it.

Down to business – what does it say? The subtitle, ‘Seven Ways to Think Like a 21st Century Economist’, sets out the intention: the book identifies 7 major flaws in traditional economic thinking, and a chapter on each on how to fix them. The starting point is drawings – working with Kate was fun, because whereas I think almost entirely in words, she has a highly visual imagination – she was always messing around with mind maps and doodles. And she’s onto something, because it’s the diagrams that act as visual frames, shaping the way we understand the world and absorb/reject new ideas and fresh evidence. Think of the way every economist you know starts drawing supply and demand curves at the slightest encouragement.

In India, eliminating tuberculosis isn't just a health issue — it's an economic one

Jorge Coarasa's picture



On February 1st, India’s finance minister presented the Union Budget for 2017-2018, and announced the government’s plan to eliminate tuberculosis (TB) by 2025. This is a welcome move. While ridding people of the burden of any disease is a worthy goal by itself, TB elimination provides perhaps one of the strongest cases for public intervention from an economic point of view.

All communicable diseases present what economists call externalities: infectious people can infect other people who in turn infect others and so on. In fact, economist Phillip Musgrove used TB in particular to illustrate this: “no victim of tuberculosis is likely to ignore the disease, so there is no problem of people undervaluing the private benefits of treatment. Rather, the cost of treatment--and the fact that they may feel better even though the disease has not been cured-- may lead people to abandon treatment prematurely, with bad consequences not only for themselves but for others. The rest of society therefore has an interest in treating those with tuberculosis, and assuming at least part of the cost.” Reducing TB incidence could generate benefits of $33 per dollar spent, prompting The Economist to put TB among their list of ‘no-brainers’. According to the Stop TB Partnership, ending TB globally could yield US$ 1.2 trillion overall economic return on investment.

How to manage revenues from extractives? There’s a book for that!

Rolando Ossowski's picture
 
Offshore oil and rig platform. Photo: © curraheeshutter / Shutterstock.


Countries with large nonrenewable resources can benefit significantly from them, but reliance on revenues from these sources poses major challenges for policy makers. If you are a senior ministry of finance official in a resource-rich country, what are the challenges that you would face and how can you strengthen the fiscal management of your country’s oil and mineral revenues? Consider some of the issues that you would likely encounter:

For many resource abundant countries, large and unpredictable fluctuations in fiscal revenues are a fact of life. Resource revenues are highly volatile and subject to uncertainty. Fiscal policies will need to be framed to support macroeconomic stability and sustainable growth, while sensibly managing fiscal risks. Also, there is a question of how to decouple public spending (which should be relatively stable) from the short-run volatility of resource prices.

#2 from 2016: The 2016 Multidimensional Poverty Index was launched last week. What does it say?

Duncan Green's picture

Our Top Ten blog posts by readership in 2016. This post was originally published on June 14, 2016. 

This is at the geeky, number-crunching end of my spectrum, but I think it’s worth a look (and anyway, they asked nicely). The 2016 Multi-Dimensional Poverty Index was published yesterday. It now covers 102 countries in total, including 75 per cent of the world’s population, or 5.2 billion people. Of this proportion, 30 per cent of people (1.6 billion) are identified as multidimensionally poor.

The Global MPI has 3 dimensions and 10 indicators (for details see here and the graphic, right). A person is identified as multidimensionally poor (or ‘MPI poor’) if they are deprived in at least one third of the dimensions. The MPI is calculated by multiplying the incidence of poverty (the percentage of people identified as MPI poor) by the average intensity of poverty across the poor. So it reflects both the share of people in poverty and the degree to which they are deprived.

The MPI increasingly digs down below national level, giving separate results for 962 sub-national regions, which range from having 0% to 100% of people poor (see African map, below). It is also disaggregated by rural-urban areas for nearly all countries as well as by age.
 

More replication in economics?

Markus Goldstein's picture
About a year ago, I blogged on a paper that had tried to replicate results on 61 papers in economics and found that in 51% of the cases, they couldn’t get the same result.   In the meantime, someone brought to my attention a paper that takes a wider sample and also makes us think about what “replication” is, so I thought it would be worth looking at those results.  
 

The global technocracy confronts an inconvenient beast

Sina Odugbemi's picture
Power concedes nothing without a demand. It never did, and it never will.  --Frederick Douglass
 
Suddenly, the tumultuous on-rush of clarity. As the technocrats and leaders who run the global economic system reflect on widespread angry reactions to globalization and rapid social change, a new language is permeating the discussion of economic issues. Top economic policy leaders are now saying that ‘inclusive growth” is crucial. They are saying globalization must “work for everyone”. We are hearing exhortations about paying attention to public opinion (that famously unruly and inconvenient beast!). According to Larry Summers, a notable commentator on these matters, (in a Financial Times piece titled: “Voters sour on traditional economic policy”):
People have lost confidence in both the competence of economic leaders and in their commitment to serve the wider public rather than the global elite.

A number of traditional economic leaders in the public and private sector seemed to be making their way through the traditional grief cycle – starting with denial, moving to rage, then to bargaining and ultimately to acceptance of the new realities.


Will anything change though? There is reason to be skeptical. For, at bottom, the issue is that the global technocracy insists on economic policy being the exclusive preserve of experts. So, once the experts do the numbers and they declare a trade agreement beneficial that should be the end of the matter. Or, once the experts decide that what appears to be a high level of immigration to the ordinary citizen is actually economically helpful they tell leaders to ignore public opinion and go for it. The point, naturally, is not that expert input into policymaking is not crucial. Of course it is. The point is: it is just an input. Wise leaders must add other considerations.

Quality education needed to boost women’s economic empowerment

Keiko Inoue's picture
Better educated women secure brighter futures for themselves and lift entire households out of poverty.



While Hillary Clinton is cracking the glass ceiling, if not yet shattering it entirely, in the United States by becoming the first female presidential nominee of a major political party, recent analysis on U.S. women in the workforce presents a more sobering finding.

Blog post of the month: The 2016 Multidimensional Poverty Index was launched last week. What does it say?

Duncan Green's picture

Each month People, Spaces, Deliberation shares the blog post that generated the most interest and discussion. In June 2016, the featured blog post is "The 2016 Multidimensional Poverty Index was launched last week. What does it say?" by Duncan Green.


This is at the geeky, number-crunching end of my spectrum, but I think it’s worth a look (and anyway, they asked nicely). The 2016 Multi-Dimensional Poverty Indexwas published yesterday. It now covers 102 countries in total, including 75 per cent of the world’s population, or 5.2 billion people. Of this proportion, 30 per cent of people (1.6 billion) are identified as multidimensionally poor.

The Global MPI has 3 dimensions and 10 indicators (for details see here and the graphic, right). A person is identified as multidimensionally poor (or ‘MPI poor’) if they are deprived in at least one third of the dimensions. The MPI is calculated by multiplying the incidence of poverty (the percentage of people identified as MPI poor) by the average intensity of poverty across the poor. So it reflects both the share of people in poverty and the degree to which they are deprived.

The MPI increasingly digs down below national level, giving separate results for 962 sub-national regions, which range from having 0% to 100% of people poor (see African map, below). It is also disaggregated by rural-urban areas for nearly all countries as well as by age.


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