Why economists need Tolstoy

Economists can tell you that sanctioning a market for kidneys would raise the supply — maybe save lives — but someone else has to weigh the moral implications of auctioning body parts to the highest bidder.

.. why practice economics if not to try to improve people’s lives?

.. Many of the questions that economists study, such as why birthrates are higher in some places, or why some countries developed earlier, or why some high school students do not apply to the best college they could get into, could be better understood through a cultural lens.

.. They skewer Gary Becker, a Nobel Prize winner, for postulating that all human behavior is “maximizing” — that is, the product of a rational, self-interested calculation. And that, therefore, economics is “a valuable unified framework for understanding all human behavior,” including whom to marry and divorce, whether to have kids, whom to befriend.

.. Literature develops a feeling for how people will behave in ways that economic models cannot.

.. You don’t need a narrative to explain the orbit of Mars (Newton’s laws will do just fine), whereas to assert that a shortage of bread caused the French Revolution, you do.

..  At Stanford, about 45 percent of the main undergraduate faculty are in humanities, but only 15 percent of the students.

.. Then why read Shakespeare? If the reason (as the academy espouses) is simply to deconstruct the authorial “message,” why not just teach the message? Thus, “Les Miserables” could be reduced to “Help the Unfortunate.” And “Hamlet”: Stop moping and do something! No, the reason we read novels is for the experience that the words inspire.

.. History sadly mimics economics in an attempt to systemize, to discover immutable laws. Explanations must be scientific and universal. Contingency or chance — a famine, the timely arrival of a genius or madman, a scientific discovery — are presumed irrelevant. Humanities, ideally, should wrestle with uncertainty. It is a discipline of contingent truths,

 

 

Trump’s top economist makes his pitch for corporate tax cuts

Ryssdal: Without getting into a “he said, he said” argument over the economics of this, because you would win, there are studies that show the opposite of what you say. And let me just give you the anecdotal question here: I’ve talked to some CEOs in the last 10 days and they say ‘Yeah no, I mean, we’re not going to give people a $4,000 raise, what is that?”

Hassett: First, I disagree that there are people that show the opposite of what I say, in the sense that that — you know, as a practical matter that means that you would take my answer and multiply it by negative one, right?

Ryssdal: Well—

Hassett: What’s really happening is that there’s a continuum of results between “workers bear none of the corporate tax” to workers bear, actually there’s some papers that say more than 100 percent.

Ryssdal: Right. Right. But let’s—

Hassett: I’m kind of in the middle there, but there are some people that are below me.

Ryssdal: Without getting into a “he said, he said” argument over the economics of this, because you would win, there are studies that show the opposite of what you say. And let me just give you the anecdotal question here: I’ve talked to some CEOs in the last 10 days and they say ‘Yeah no, I mean, we’re not going to give people a $4,000 raise, what is that?”

Hassett: First, I disagree that there are people that show the opposite of what I say, in the sense that that — you know, as a practical matter that means that you would take my answer and multiply it by negative one, right?

Ryssdal: Well—

Hassett: What’s really happening is that there’s a continuum of results between “workers bear none of the corporate tax” to workers bear, actually there’s some papers that say more than 100 percent.

Ryssdal: Right. Right. But let’s—

Hassett: I’m kind of in the middle there, but there are some people that are below me.

Ryssdal: Let’s take the question in the spirit with which it’s intended, right? I mean there are people who disagree with you, but anecdotally I’m telling you…

Hassett: No, but I’m just characterizing — Can I respond please?

Ryssdal: Of course.

Hassett: I’m characterizing the disagreement, though, as being different from the opposite of what I say. So the people who believe the low end of the literature say that folks will get about $1,000, a $900 pay hike because of this bill. I think that a conservative estimate is $4,000. There are other papers of literature that say it’s a lot more than that. But the range is all positive, and $1,000 is a heck of a lot of money to ordinary people. So even if you take the low end, then I think that you should vote for this bill.

Let’s take the question in the spirit with which it’s intended, right? I mean there are people who disagree with you, but anecdotally I’m telling you…

Hassett: No, but I’m just characterizing — Can I respond please?

Ryssdal: Of course.

Hassett: I’m characterizing the disagreement, though, as being different from the opposite of what I say. So the people who believe the low end of the literature say that folks will get about $1,000, a $900 pay hike because of this bill. I think that a conservative estimate is $4,000. There are other papers of literature that say it’s a lot more than that. But the range is all positive, and $1,000 is a heck of a lot of money to ordinary people. So even if you take the low end, then I think that you should vote for this bill.

Ryssdal: Even though there are corporate CEOs out there who are telling me “Yeah, no, we’re gonna — we have other things we need to do with that money.”

Hassett: Well, what’s going to happen to the CEO who thinks that nothing is going to happen is that a plant is going to locate here that was about to locate in Ireland, and that competitor is going to try to hire a bunch of workers, and then the employer that’s not doing anything is going to have to pay his workers more or lose them to the competition. You know the best way to get a pay raise is to get an outside offer, and this tax policy will give us a whole bunch of new outside offers. That’s where the wage effect’s coming from.

 

Let Them Eat Paper Towels

And the Trump administration seems increasingly to see this tragedy as a public relations issue, something to be spun — partly by blaming the victims — rather than as an urgent problem to be solved.

.. And as The Washington Postnotes, there’s a very telling piece of editing: One segment showed Forest Service workers clearing a road, but it cut off just before the official being interviewed praised local efforts: “The citizens of Puerto Rico were doing an outstanding job coming out and clearing roads to help get the aid that’s needed.”

Puerto Ricans behaving well, it seems, doesn’t fit the official story line.

.. Meanwhile, it took almost three weeks after Maria struck before Trump asked Congress to provide financial aid — and his request was for loans, not grants, which is mind-boggling when you bear in mind that the territory is effectively bankrupt.

.. Puerto Rico was in severe financial and economic difficulty even before the hurricane, and some of that reflected mismanagement. But much of it reflected changes in the global economy — for example, growing competition from Latin American nations — reinforced by policies imposed by Washington, like the end of a crucial tax break and the enforcement of the Jones Act, which forces it to rely on expensive U.S. shipping.

.. Puerto Rico is hardly the only U.S. region suffering difficulties in the face of global economic change — and such regions can normally count on federal support to help limit the hardship. What do you think West Virginia would look like if Medicare and Medicaid didn’t cover 44 percent of the population? 

.. what would happen to employment in health and social assistance, which provides jobs to 16 percent of the state’s work force, which is vastly more than coal mining?

Tyler Cowen: Jeffrey Sachs on Charter Cities, Paul Krugman, and How to Reform Graduate Economics Education

(33:25)

TYLER COWEN: To pick a success from the past, let me mention Poland. In my opinion, Poland has gone very well. It’s a great country. It’s been a success. If I made the following claim, would you agree with it? That you, Jeffrey Sachs, have done more for economic liberty through the medium and history of Poland than almost any other economist alive today? True or false?

.. In 1989, I made recommendations for Poland. I said several unusual things, like “Don’t pay your debts, get debt cancellation. You need emergency, a billion dollars on this date,” and so forth. Everything I recommended actually ended up happening with US government support.

.. Then in Russia two years later I was asked by Gorbachev and then by Yeltsin to help them, because they saw what was happening in Poland. They liked that. They wanted something similar. So I said exactly the same things, and the US government kept saying, “No, no way, no way.” I kept saying, “But that kept working there.”

I didn’t understand it in some deep sense for a long, long time, how weird this was. I knew it wasn’t the difference of economic advice. I understand what a financial crisis is.

TYLER COWEN: Culturally weird, you mean.

JEFFREY SACHS: No, how weird it was in the historical moment that things that had worked extremely well, had shown themselves, where I had had Brent Scowcroft and Bob Dole and others strongly supporting it, all of a sudden just no support from Washington. The IMF saying, “We’re not going to do this.” I said, “But, Richard Urban, you did that two years ago in Poland.” “We’re not going to do it.” “Why?” Flat.

OK. What’s the lesson of this? Quite important, actually. It’s a little bit off-topic, but very important. We didn’t want to help Russia in 1991. We wanted our unipolar world. I didn’t know that at the time.

 

..  I had had Brent Scowcroft and Bob Dole and others strongly supporting it, all of a sudden just no support from Washington. The IMF saying, “We’re not going to do this.” I said, “But, Richard Urban, you did that two years ago in Poland.” “We’re not going to do it.” “Why?” Flat.

.. What I didn’t understand was everything I said about Poland was immediately accepted because it was good advice and because Poland was going to be a bulwark of NATO. Everything I said about Russia didn’t matter whether it was good advice or not. Russia was on the other side.

TYLER COWEN: But China did it without us, without American help for the most part. What is it about Russia that meant Russia couldn’t do it? The problem was not like a Khrushchev-Kennedy dialog. But Russia must have failed in some other way where China more or less did not. What is that element?

.. JEFFREY SACHS: Many things. First of all, Russia faced in 1991 an extremely acute financial crisis. If you haven’t lived through a deep, deep, deep financial crisis, it’s hard to understand what it is.

.. But there’s a big difference of being a urban industrial, broken, Soviet economy.

TYLER COWEN: Which was deindustrializing eventually anyway.

JEFFREY SACHS: Which had so overgrown the investor heavy industry, and it was in a lot of collapse, versus being an agrarian, impoverished country, as China was in 1978. The pathways were bound to be very, very different. The geography is different, by the way, because China’s just filled with people who could do low-cost labor right at the ports on the east coast of China.

Whereas for Russia, it’s almost basically a landlocked landmass that was running off of petroleum which had collapsed in global price, which had collapsed in the physical facilities in the countryside, with collapsing steel mills, collapsing everything.

 

.. Syria had a huge drought, the biggest in its modern history, from 2006 to ’10. It led to many social ramifications that contributed to the explosion of violence starting in 2011.

This fact of these ecological crises turning into social catastrophes, I think, is a very real phenomenon. We should not presume that somehow we’ll just be able to handle this stuff. I’m told constantly, “Crisis leads to innovation and solution.” The truth is that’s sometimes true, and sometimes crisis leads to catastrophe.

 

.. Just a final word about that. We have so much statistical machinery to ask the question, “What can you learn from this dataset?” That’s the wrong question because the dataset is always a tiny, tiny fraction of what you can know about the problem that you’re studying.

If you want to know about the problem, get out there and learn about it. Don’t think that you’re going to find it in your dataset. For that we need a different kind of epistemological approach and a different kind of teaching approach as well.

I want our students out on the hospital wards, as it were