Confession

From the department of weird: "Fewer confessions and new sins", from BBC News. Apparently the Catholic Church has made up some new sins.

"The Catechism of the Catholic Church states that "immediately after death the souls of those who die in a state of mortal sin descend into Hell". The new mortal sins were listed by Archbishop Gianfranco Girotti at the end of a week-long training seminar in Rome for priests."

So here they are:

"Environmental pollution
Genetic manipulation
Accumulating excessive wealth
Inflicting poverty
Drug trafficking and consumption
Morally debatable experiments
Violation of fundamental rights of human nature"

I'm trying not to blaspheme here, but what a minefield. Let's try to ignore from the start the problem that all the things that they're trying to avoid here are covered by the good ol' seven deadlies. Right off the bat, "morally debatable experiments" is semantically identical to "experiments", so science is a sin. At least "genetic manipulation" fits with the ethos of the Church. I have no idea how one "inflicts poverty". Define "drug". Define "rights". Define "excessive". Ugh.

Anyway, the economics-related point here is that this made me think of the "value of income" stuff from yesterday. Is it OK to "accumulate excess wealth" if you use it to alleviate poverty, or are we to be banned from accumulating wealth altogether? Is the Church guilty of ignoring the righteous consequences of an expansion in the amount of stuff to go around? If we can't do productive stuff, will that "inflict poverty"? I feel like this in an implicit damnation of capitalism, but the moral judgment of capitalism - just like the moral judgment of socialism, anarchism or indeed anything - is not that easy.

I actually think it makes it worse that this comes from an obviously traditional institution. It's great that there are forces out there trying to promote social awareness and conscience, but that list is ridiculous. Give me pride, envy, gluttony, lust, anger, greed and sloth, and stop trying to be trendy.

Money. Again.

Stop me if you think that you've heard this one before. No preamble:

"But there is a much bigger problem, one that challenges the very foundation of the presumed link between per-capita G.D.P. and economic welfare. That’s the assumption, traditional in economic models, that absolute income levels are the primary determinant of individual well-being."

It's déjà vu all over again, as they say. I've challenged this before (see here for GDP, here for money and here to hammer the point home), and of course money-centrism remains misconception number one about the practice of economics, especially the type of welfare economics the article is talking about. Again, I can only reiterate that agnosticism over people's likes and dislikes is a tenet of the practice of economics, and assumption and approximation only serve to make our questions answerable.

Getting off that familiar track, this instance is actually especially fun because it comes from a New York Times article which begins:

"DOES money buy happiness? This week, Senator Byron Dorgan, Democrat of North Dakota, will join a long line of people who have taken serious stabs at trying to answer that thorny question. He will hold a hearing exploring whether traditional economic measures like per-capita income accurately capture people’s sense of well-being."

Strange how Senators spend their time, really. Surreality aside, Robert Frank, the author of the article, does cite some neat hypotheses on the money issue, so I'll try to forget the economics equals money lament for a second. The object of investigation is how income inequality affects general wellbeing.

"[surveys find] that when everyone’s income grows at about the same rate, average levels of happiness remain the same. Yet at any given moment, the pattern is that wealthy people are happier, on average, than poor people. Together, these findings suggest that relative income is a much better predictor of well-being than absolute income."

That's probably bad news for the Senator. I propose Dorgan's Razor: to make everyone happy, make each person richer than everyone else. Oh dear. Is that a depressing impossibility result? If everyone had the same income, would we all be miserable because we were all no better off than anyone else? Seems a little extreme. Perhaps that points to the weirdness of the money metric generally.

It's not all bad news, though:

"Yet in many other categories, greater levels of absolute income clearly promote well-being, even in the richest societies. The economist Benjamin Friedman has found that higher rates of G.D.P. growth are associated with increased levels of social tolerance and public support for the economically disadvantaged. Richer countries also typically have cleaner environments and healthier populations than their poorer counterparts."

I see this as broadly similar to the importance of economic growth for the poor; whatever the value of GDP or income as a measure of individual wellbeing, it's surely the case that societies with more resources can simply afford more, in the truest sense. Those societies can afford more social spending, more sacrifice of stuff for environment, more health; the equivalent of poor countries being able to afford more when less people have to break their backs in subsistence farming.

It's also related to things like the pension "crisis" in aging countries like America, Japan and Britain. The more stuff there is to go round, the less acute the problem of providing "enough" for both the workers and the retired becomes, regardless of how many of each type there are. Further still, it's related to philanthropy, which this article contorts itself to provide an evolutionary explanation for. Philanthropy on the Gates Foundation scale cannot exist without affluence.

Senator Dorgan should be applauded for asking the question of what the goal of GDP growth really means for the wellbeing of the population. A richer set of goals could well be a good thing; perhaps we would be willing to sacrifice some income for greater equality, a healthier environment or the alleviation of global poverty. It's important, though, to ask about the value of affluence not just for the individual but on a large scale too.

Economists in fiction: Noboru Wataya

Not to get too "Dear Diary", but I am reading "The Wind-Up Bird Chronicle" by Haruki Murakami, and, lo, the protagonist's brother-in-law is an economist.

On academia:

"Noboru Wataya chose to remain in academe and become a scholar. He was no fool. He know what he was best suited for: not the real world of group action but a world that called for the disciplined and systematic use of knowledge, that prized the individual skills of the intellect."

Noboru's book, a perfect parody of economics books everywhere:

"Noboru Wataya published a big, thick book. It was an economics study full of technical jargon, and I couldn't understand a thing he was trying to say in it... I couldn't even tell whether this was because the contents were so difficult or the writing itself was bad... Two expressions he had coined, "sexual economics" and "excretory economics," became the year's buzzwords."

Freakonomics, anyone? Fashionomics? Freedomnomics? The most delicious morsel of the lot is Noboru's approach to public debate, what could be the credo and the damnation of positivist economics:

"But if you paid close attention to what he was saying or what he had written, you knew that his words lacked consistency. They reflected no single worldview based on profound conviction. His was a world that he had fabricated by combining several one-dimensional systems of thought. He could rearrange the combination in an instant, as needed. These were ingenious - even artistic - intellectual permutations and combinations. But to me they amounted to nothing more than a game. If there was any consistency to his opinions, it was the consistent lack of consistency, and if he had a worldview, it was a view that proclaimed his lack of a worldview. But these very absences were what constituted his intellectual assets. Consistency and an established worldview were excess baggage in the intellectual mobile warfare that flared up in the mass media's tiny time segments, and it was his great advantage to be free of them."

Welcome to our world.

Noble goals

Talking about growth and development yesterday made me think of the twin institutions that bear the brunt of a decent portion of the anti-growth, anti-capitalist, anti-America, anti-"economics" anger in the world. Those would be the World Bank and the International Monetary Fund (perhaps we could throw the World Trade Organization in too). Remember the Seattle riots around the WTO meeting in 1999? How I sympathize with those who would criticize these institutions, who would debate their goals and their practices. Yet here I go, so help me, to try to raise the defense.

Forget for a moment, if possible, any prejudice for or against these institutions. These were not organizations born of evil purpose. Let's read along with the part of the Bretton Woods agreement that set up what is commonly known as the World Bank:

"The purposes of the Bank are:

(i) To assist in the reconstruction and development of territories of members by facilitating the investment of capital for productive purposes, including the restoration of economies destroyed or disrupted by war, the reconversion of productive facilities to peacetime needs and the encouragement of the development of productive facilities and resources in less developed countries.

(ii) To promote private foreign investment by means of guarantees or participations in loans and other investments made by private investors; and when private capital is not available on reasonable terms, to supplement private investment by providing, on suitable conditions, finance for productive purposes out of its own capital, funds raised by it and its other resources.

(iii) To promote the long-range balanced growth of international trade and the maintenance of equilibrium in balances of payments by encouraging international investment for the development of the productive resources of members, thereby assisting in raising productivity, the standard of living and conditions of labor in their territories.

(iv) To arrange the loans made or guaranteed by it in relation to international loans through other channels so that the more useful and urgent projects, large and small alike, will be dealt with first.

(v) To conduct its operations with due regard to the effect of international investment on business conditions in the territories of members and, in the immediate post-war years, to assist in bringing about a smooth transition from a wartime to a peacetime economy."

This reflects both the origins of the Bank as an institution of post-war reconstruction. The World Bank was set up to help nations and people who were in need. Don't these goals seem kind of noble, or important?

The IMF equivalent:

"The purposes of the International Monetary Fund are:

(i) To promote international monetary cooperation through a permanent institution which provides the machinery for consultation and collaboration on international monetary problems.

(ii) To facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy.

(iii) To promote exchange stability, to maintain orderly exchange arrangements among members, and to avoid competitive exchange depreciation.

(iv) To assist in the establishment of a multilateral system of payments in respect of current transactions between members and in the elimination of foreign exchange restrictions which hamper the growth of world trade.

(v) To give confidence to members by making the Fund's resources available to them under adequate safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity.

(vi) In accordance with the above, to shorten the duration and lessen the degree of disequilibrium. in the international balances of payments of members."

It's a triumph of global cooperation that institutions like these exist, with the aims - broadly expressed - of achieving stability, development and prosperity. It's amazing. Like I said, part of me hates playing devil's advocate for institutions that are routinely characterized as evil tools of evil people in evil countries, but, if you don't like these institutions, at least tell me you don't reject the idea of these institutions.

Yes, we know that these institutions have dropped the ball - to put it mildly - in the past, and that is not an economists versus the world thing, it's just a fact. Yes, it's incredibly, astonishingly misguided to put headquarters of these institutions in the capital of America, and all the more unfortunate given the strong feelings that alone arouses. Yes, the balance of power in the World Bank, the IMF, the WTO, hell, the UN too, is probably a mess.

But here's the rub: I want international cooperation that tries to tame the beast of the global economy, of the complex and difficult problems that arise when everyone in the world interacts while trying to make the best out of what they have. I want to worry about figuring out how to help countries and people who want help, and then giving it. I want to acknowledge that we're all in this together and that our decisions matter for each other.

We - everyone - are the people who can embrace the ideals that gave us unprecedented international cooperation in the aftermath of a bloody and destructive war, and develop those noble ideals into institutions that work, practically, for everyone. I can only quote the first principle of the World Trade Organization: "The first step is to talk". If you believe the institutions are sick, let's cure them rather than let them die.

Life is good: economic growth, war, and $1

The unfriendly face of economics is the bland incantation "economic growth", which, following the "show, don't tell" principle, means "more stuff". Sounds a bit unpalatable, does it not?

We're in measurement-problem-land again, unfortunately. I think a careful normative economist would define "economic growth" as either an increase in the resources (of whatever type) at people's disposal, or some development that helped people get the things they liked (whatever they are). Unfortunately, again, we get stuck a little on what we can measure, using the amount of measurable stuff like income, goods or services to proxy what we'd really like to achieve.

On top of and related to that, there's the diverse backlash against "materialistic" economic growth. My own belief - for what it's worth - is that it's a bit weird that economic growth ascended to such dominance as a policy goal. Being anti-growth is something different entirely, though; by any definition, the role of growth is radically different for the world around me than for the poor.

This recent Economist article argues forcefully that the world is headed in a historically pleasant direction. It's too rich in detail to do justice to here, but among other things it offers a version of the most compelling defense of economic growth: some people are really, really struggling. It stretches empathy to its absolute limit to try to imagine the most crushing poverty in the world, and if that sounds like a cliché, tough.

"In China 25 years ago, over 600m people—two-thirds of the population—were living in extreme poverty (on $1 a day or less). Now, the number on $1 a day is below 180m. In the world as a whole, a stunning 135m people escaped dire poverty between 1999 and 2004. This is more than the population of Japan or Russia—and more people, more quickly than at any other time in history."

I remember vividly the slow, horrifying process of understanding what $1 a day means. No jargon: it means that the amount of stuff - any stuff - that a person living on $1 a day can afford is equivalent to the amount of stuff I could afford to buy if I had one US dollar in my pocket every morning, and nothing more. It's not about exchange rates or the price of stuff or anything like that: it's real That's very close to being literally unthinkable.

Yes, the figures quoted in the Economist article are averages, and yes, measurement is a problem. But still:

"A World Bank study of 19 poor countries concluded that every 1% increase in national income per head translates into a 1.3 point fall in extreme poverty... The result [of economic growth] is that the number of very poor people in the world is falling fast—even though many critics continue to believe that the poor have not really benefited from growth. In 1990 those on $1 a day accounted for more than a quarter of the population of developing countries. By 2015, on current rates, the proportion of very poor people should have shrunk to 10%. Moreover, these monetary measures probably understate the real gains from things such as lower child mortality, safer water, literacy and other social achievements. A rich man appreciates his extra cash but this does not compare with what a poor family gains from seeing an infant survive childhood or learn to write."

If you tell me you oppose "economic growth", you'd better be damn specific. I doubt anyone opposes this. This is the variety of difficult that led Robert Lucas to famously declare that "Once you start thinking about economic growth, it is hard to think about anything else." Here's a nice quotation about that quotation:

"The Nobel laureate economist Robert Lucas once said "Once you start thinking about economic growth, it is hard to think about anything else." Non-economists, especially those associated with the environmental movement, regard this as evidence that economics is a form of brain damage, a cancer on our earth. But rural Chinese peasants surviving on less than a dollar per day do not regard economic growth, or Wal-Mart factory jobs, as a cancer."

There are a lot of "development economists" out there these days, and it's easy to be facetious and question the real value in what they do, but goodness, they're dealing with issues whose importance is overwhelmingly difficult to comprehend. I hope they find success.

Not, of course, that economic growth is ever all that matters. The Economist article concludes with the argument that the incidence of war is declining, representing another huge boost to the wellbeing of people around the world. The picture presented there is slightly less rosy than on poverty, but still unusually optimistic. I like the big-big picture view of global trends; putting the modern era in the broadest historical context is a great way to make our problems seem petty and life seem good.

The war talk reminded me of the excellent book "The Bottom Billion" by development economist (the label is mine) Paul Collier, which is a kind of synthesis of much of his, and related, research into the causes of extreme poverty. From the FT review of the book:

"About 80 per cent of the population of developing countries lives in countries whose populations are becoming better off. Billions live in countries that are developing very swiftly. But almost a billion people – 70 per cent of whom live in sub-Saharan Africa – are in economically stagnant or declining countries. In all, 58 countries are in this desperate condition. Yet, as Collier remarks: “An impoverished ghetto of 1bn people will be increasingly impossible for a comfortable world to tolerate.”

Collier argues that these countries have fallen into one, or more, of four traps from which it is virtually impossible to escape. These are the “conflict trap”, the “natural resources trap”, the trap of being “landlocked with bad neighbours” and the trap of “bad governance in a small country”."

Among other things, Collier investigates the link between conflict and poverty. His book is, to me, a triumph of realistic but fundamentally optimistic policy debate founded on careful, broad scientific research. The world is moving in the right direction, argues the Economist, and Collier and his kind are desperately throwing the line to the most impoverished, the most vulnerable. Think of this next time you read the words "economic growth". Whatever it is, it need not be the ultimate goal of human endeavor, but is it an evil?

Experiments

Found at Environmental Economics: a new book called "Environmental Economics, Experimental Methods" has just surfaced, a happy example of (at very least) broadly innovative methods in economics (the experimental part) being wedded to policy questions outside the popularly perceived scope of economics. The book describes a variety of laboratory experiments whose results are relevant to environmental policy. The contents are here (pdf).

The experimental revolution must really have arrived for a book like this to exist. The whole problem of inferring causality in the complexity of the world is an acute problem that science has always tried to solve, one that the social sciences naturally have particular difficulty with. In economics, from this common difficulty came abstract theorizing, econometric inference from real data, and, latterly, randomized trials (aspiring to be cousin to the same in medicine) and laboratory experiments (aspiring to be cousin to the same in psychology).

A simple characterization of the difference between those last two might be this: the randomized trial method tries to isolate the effect of one thing on another, while the experimental school is entwined with the behavioral economists who seek to isolate the way people act. Clearly this steps on some psychological toes; our method is certainly pretty similar, with the possible exception that we're . We usually get people to sit at consumers and make decisions about what to do while they're interacting (usually anonymously) with other people in the experiment.

I think it's pretty amazing that experimental economics has exploded so quickly to generate a whole (big) book applying its results to a niche like environmental economics. Whatever you make of the experimental field, it's surely a pleasure to see an expansion in the range of scientific methods economists are employing. Logic, math, statistics; now trials and experiments.

On a completely unrelated note, I love this post, from Environmental Economics, about explaining your job as an economist.

"'Oh really, what do you teach?'...
'Economics.' The glazed look...
'Oh so you're in the business school?'"

I bet misunderstanding about what economics is can be even more annoying for an environmental economist than it is for the rest of us...

Why don't we understand economics education?

Increasingly preoccupying my thoughts recently is the remarkable fact that the economics profession doesn't really know anything about how undergraduate courses are received by the students who take them.

Unquestionably, the most common type of research into undergraduate education is the type like this, this, or this (sorry to link to protected academic articles): teaching methods. The semi-famous series by William Becker and Michael Watts derides "chalk and talk" in favor of more creative methods of lecturing. In "Teaching Economics at the Start of the 21st Century: Still Chalk-and-Talk", those authors conclude:

"In contrast to the passive learning environment that characterizes the teaching of economics, class discussion and other forms of active learning, rather than extensive lecturing, are now the dominant forms of instruction in other fields of higher education."

I agree in principle that it's no fun to try to learn - really learn - any subject by sitting in a lecture, but goodness me, "active learning"? How about "devote some time to reading a variety of books and material on the subject you're learning"? How about "sit down with colleagues or experts and talk and listen"? In my life, those have been the most effective ways of getting information and understanding into my head. Am I alone? To me, that's active learning, and it doesn't require fancy technology or a three ring circus, just a good library and good educators with time to devote to small groups of students. Lectures, especially to large classes, must naturally be presented without a lot of nuance.

The cult of the classroom experiment, or demonstration, or performance art, or audience participation, is not, however, the real issue. By far the bigger problem is that we have no idea - repeat, no idea - what students want, expect or get from economics courses. Why do they enroll? Why don't they enroll? Why do they drop out? Why do they major in economics? What do they think economics is about, before, during, after they take economics course? What if they never do? Who do we lose?

Why don't we have the first idea about the answers to those questions? Have we ever asked? The mind boggles. We're try to patch up the wreckage of the lecture system, when all the while we might be sailing to entirely the wrong place in our leaky boat. Forget the method for a moment - what are we even actually teaching?

In a separate article to the one I quoted up above, William Becker's "Teaching Economics in the 21st Century" says:

"Media headlines scream the need to understand macroeconomics. At a minimum, courses in macroeconomics should enable students to have a greater understanding of the economic news as it appears in the Economist, Business Week, and the Wall Street Journal than those without an education in economics."

I've covered this ground before. How about, at a minimum, we teach economics properly? How about, at a minimum, we kick civics into a course where it belongs and actually show students what economics can be, and what it is? Compromising the integrity of an entire field of hundreds of years of intellectual thought with political, philosophical and moral implications so that people can understand the Wall Street Journal? Who wants to understand the Wall Street Journal?! From the same article:

"Departments of economics have two powerful reasons to care about improving the quality of their teaching. First, the contest for resources within institutions of higher education implies that the number of majors and enrollments matter.... Whether students will take more courses in economics or choose to major in the field because of improved teaching is hard to say, but, at least, improved teaching is unlikely to hurt enrollments!"

Hilarious, I'm sure. I'm kidding: it's sickening. Can we entertain the notion that perhaps higher enrollments are not compatible with improved teaching? We are supposed to be running an institute of excellence in learning and thought. Whoring for enrollment is disgusting.