how the mixed marriage of economic institutionalism and philosophy can save the world from poverty
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DESCRIPTIONHow the Mixed Marriage of Economic Institutionalism and Philosophy Can Save the World from Poverty. Joshua Bragg Norwegian University of Life Sciences: Business School (UMB). I do not see how one can look at figures like these without seeing them as representing possibilities. - PowerPoint PPT Presentation
How the Mixed Marriage of Economic Institutionalism and Philosophy Can Save the World from Poverty Joshua Bragg Norwegian University of Life Sciences: Business School (UMB)
I do not see how one can look at figures like these without seeing them as representing possibilities. Is there some action a government of India could take that would lead the Indian economy to grow like Indonesias or Egypts?If so, what, exactly? If not, what is it about the nature of India that makes it so?The consequences for human welfare involved in questions like these are simply staggering: Once one starts to think about them, it is hard to think about anything else.Robert E. Lucas, Jr.
Marshall Lectures: On the Mechanics of Economic Development (1988)
Recipe for Economic Growth
Orthodox economics is:
in many ways an empty box
trapped in an idealized, mechanistic view of the world
has obtained a few insights, but the whole basis is deeply flawed
isolated from its roots when economists theorized purely to illustrate and understand the great practical issues of the day
"Why did nobody notice it?" - Queen of England
we are very careful in all our papers to speak of association and not causality. Reinhart Rogoff Response to Critique - Wall Street Journal (April 16, 2013)
Population, when unchecked, increases in a geometrical ratio. Subsistence increases only in an arithmetical ratio.
[scientific theories are] designed specifically to be blown apart if proved wrong; and if so destined, the sooner the better.
Edward O. Wilson in Consilience: The Unity of Knowledge (1998)
utilizing universal postulates of behavior and technology, and the simplifying assumption that the unmeasured variables remain constant Economics is that discipline within social science that seeks refutable explanations of changes in human events on the basis of changes in observable constraints,
1. Pick three random numbers (0-9) X1 X2 X3
2. Now reverse them X3 X2 X1 or 321
3. Where the three-digit num X1 X2 X3 > X3 X2 X1, subtract the smaller three-digit number from the larger; i.e. 321 - 123 = abc
4. X1 X2 X3 - X3 X2 X1 = integers a b c
5. Now add results a + b + c = Y
MONIAC (Monetary National Income Analogue Computer)
created by the "Indiana Jones of Economics", Bill Phillips
A working Phillips Machine can be found at Cambridge University
"It is hard to find [laws] in nature and we are always having to make excuses for them: why they have exceptions big or little; why they only work for models in the head; why it takes an engineer with a special knowledge of real materials and a not too literal mind to apply physics to reality."
- Nancy Cartwright
Economist: On the one hand, but on the other hand Someone please give me a one-handed economist!
The classroom at University of Copenhagen where I first learned about TFPSince we know little about the cause of productivity increase, the indicated importance of this element may be taken to be some sort of measure of our ignorance about the causes of economic growth.
Moses Abramovitz, first economist to attempt to determine the sources of productivity growth (1956)
Romers' Growth Model:
Innovation, economies of scale, education, capital accumulation, etc. are not causes of growth; they are growth. - North and Thomas
Douglass C. North, recipient of the Nobel Memorial Prize in Economics in 1993, for his work in economic history and the importance of institutions celebrating his 90th birthday with Elinor Olstrom (2009 Nobel prize winner in Economics).
Economic Institutions as Determinant of GrowthGeographyCultureLuckInstitutionsProperty rights -> incentive to invest in physical or human capital.Market economy -> incentive to allocate resources efficiently.
Institutions are the rules of the game in a society or, more formally, are the humanly devised constraints that shape human interaction. - Douglass North
Institutions can be non-economic. i.e. Social, Political, Legal
Institutions are a product of our cultural heritage as humans.Cultural heritage is handed down over generations (deeply embedded) as set of institutions and beliefs.
They are the eye-glasses in which we see the world (paradigms) (Muslim, American, tribal, plutocrat)
They produce a mix of good and bad that shape the way we make choices.
They influence the way societies approach problems.
Cultures evolve as beliefs from the past meet new experiences. Both heritage and experiences shape our understanding of the world.
There is a hierarchy of institutions. Political institutions determine the distribution of de jure political power, which in turn affects the choice of economic institutions.
- Robinson, Acemoglu, Johnson (2005)
How do we Establish Causality?Scatterplots, OLS regressions, correlations
Natural experiments- Korea post-WWII- Reversal of Fortune (Colonialism)
Peter Geach (1961) exemplifies how causation becomes difficult to pinpoint when there are numerous and counter-acting causal factors: A heater is capable of warming a room to 25 degrees within an hour, but it might not actually reach that temperature. In addition to the heater, there might be an open window, or even an air-conditioner, disposing towards cooling the room.
*Haunting. Beautiful, but disturbing. Picture taken by photo journalist. Taken at edge of Dandora dumpsite (Nairobi's dump). Sees woman selling jars of jelly. Asks guide as it is strange. He says she got it from the dumpsite. When people fly into Nairobi from abroad and don't finish their meals, the finish them here.*One thought exercise I really enjoy is to put myself in a completely different time and culture. I did my Bachelor's in the Pacific Northwest and sometimes compare life there 200 years ago prior to industrialization versus today. These photographs are the closest we come to what life was like in that area 200 years ago.The Industrial Revolution, with its inherent economic growth, transformed parts of Western Europe and North America from a largely rural population whose low standard of living remained stagnant for thousands of years, to a society where each successive generations purchasing power is greater than the previous and where individuals have the economic means to reach their potential. Industrial Revolution is arguably the most significant event in human history, yet its cause is not yet scientifically explained. Finding the cause of sustained economic growth is the holy grail of economics. If there is one universal cause or set of causes, one could replicate that experience throughout the world.How are the standard tools of the trade in Economics doing? Can they be used to find the holy grail?
20 year old book and same problems today: It is ironic that the science of economics is powerless to prevent or rectify economic crises in a time when the profession boasts of its ability to understand the world given its mastery of applied methodologies and mathematical sophistication.why they did not foresee the financial crisis. In the aftermath of the crisis, an economics paper "Growth in a Time of Debt" influenced austerity movement politicians to justify harsh belt-tightening programs despite deep, widespread economic pain in the US and Europe. The study was based on a data set from 44 countries spanning two centuries. Its authors, Kenneth Rogoff and Carmen Reinhart (2010) argued that countries with a debt to Gross Domestic Product (GDP) ratio that exceeded 90% experience a fall in median growth of 1%, and average growth considerably more. This clear-cut conclusion was taken as a fact and austerity measures were put in place in both the U.S. and Germany in order to bring the ratio below the magic 90% threshold. In the spring of 2013, three years after the paper was written, a graduate student, Thomas Herndon (2013), attempted to replicate the results as an assignment in his econometrics class. Shockingly, he found glaring data omissions and a goofy Excel spreadsheet mistake, which when corrected, led to the opposite conclusion; that debt can actually spur economic growth. The implications of getting the direction of causation wrong in a scientific study used by governments have been tragic, especially for the unemployed and citizens in countries who have not been able to live up to the 90% GDP-Debt threshold (Spain, Greece, Italy) which have lost their international investment opportunities. On closer examination of the data, it is clear that not all debt is created equal. The US sluggish post-war economic growth was due to dismantling the war machine (decreased military spending and women leaving the paid workforce to return to their housework, which is not counted as GDP). What followed the initial contraction of 1945-47 were years of the strongest economic growth of the century. The authors have since issued a response to the criticism of their paper. One statement is illustrative of the problem of econometrics methodology: we are very careful in all our papers to speak of association and not causality1. This subtle clarification speaks to the dilemma in determining causality in economics. By merely reversing the causality, slow growth becomes the cause of high debt levels. This opposite conclusion can also be supported using the very same data, merely by adjusting the timing of the effects.The history of science reveals the birth and death of many schools of thought.In Economics, Adam Smith and Karl Marx developed explanations of economic activity and gr