Get Involved - Call for New Organisers

Want to join the Rethinking movement? We are looking for new organisers! Contact Yuan at rethinkeconomics.org to get involved :)

Newsletter Coordinator - Gather together news from around the RE network for our fortnightly letter. Let the world and our members know what is happening.

Secretary/Note-taker - Keep us all organised and up to date. Attend RE meetings and help us follow up on projects we agree to do together, by keeping all members of the group informed as to what has been discussed and agreed.

Media Coordinator - Be the front line for responding to the many print, online, radio and tv requests we get each week. Organise who is responding to what. You can also do interviews yourself if you like.

New Groups Liaison Officer - Take care of the expanding Rethinking Economics network. Be the first point of call for new groups who want help in starting up (can be grouped into locality or language if you prefer).

All these roles will be given plenty of training, help and contact with existing organisers to ease you into the role. Don’t let lack of experience stop you from getting involved!

Meet the Rethinkers: Dimitri Stoelinga of Laterite, Development Economics Research

Dimitri (right) with his co-founder, Sachin

Yuan’s Interview with Dimitri Stoelinga of Laterite (Development Economics Research - http://www.laterite-africa.com/), Kigali, Rwanda

“Economics is still in its early stages of development. When you go into an economics course, you should go in with a sense that this is a discipline that will change a lot in the next few years. Be anti-disciplinary. Do not let intellectual boundaries confine you.”

May 27^th 2014 – Beijing, China and Kigali, Rwanda

Tell us a little about yourself – where did you grow up? What brought you to the path of studying economics?

I’m half-Greek, half-Dutch, and my parents always moved around. I chose to move around too, living in France, India, Angola, the US, Kenya, Rwanda, Malawi …I studied economics because I lived for a long time in Africa, and I really wanted to move back. I wanted to be involved in economic development.

I went to the Kennedy School to do the MPA in International Development. After that, I worked for the World Bank in Washington, and then in Kenya. I was getting frustrated with the whole set-up - I didn’t think it was the right place for a young person to be.

Why did you feel the World Bank was not the right place to be?

From a personal perspective, it was the work model itself. I felt the projects we were doing were not designed to fit the needs of the country itself. Economists from Washington would fly in and design a research project. Then they’d sell it to the local government. So we ended up with very large, very technical projects, based on little local context, and for which there was not much local ownership.

In Africa, the consultancy you get tends to be like that: fly-in, fly-out. We wanted to replace that model, and start research companies immersed in developing countries, which is why we started Laterite in Rwanda.

You mentioned that there was a “mismatch of people and projects.” What do you mean by this?

The World Bank has fantastic people - very committed, hard-working, who believe in what they're doing. But for operational roles – managing, let's say, a couple of large scale projects – they have economics PhDs with little operational and practical work experience outside the World Bank or academia.

So the mismatch comes from not understanding the local context, and thus focusing on tasks that exercise the skills one has, rather than tasks that exercise the skills the local project needs?

I think so, yes. What the World Bankers bring is logical design. On paper it makes sense - but in practice things are different, and what the country needs might be different.

To me this sounds like one of the general problems with economics teaching: on paper it all looks coherent, but in practice we may need very different tools! 

For yourself personally, what were the highs and lows of your Economics education?

One of the highs was definitely discovering all the possibilities of statistics and data analysis. I had a great professor, Alberto Abadie, who tries out all sorts of new program evaluation techniques and has come up with some fantastic ideas and tools – to give you one example, "synthetic controls". Another prof, Cesar Hidalgo, was looking into how to use network analysis and applying it to economics through exports networks.

All of this innovative data analysis fascinates me – and goes much beyond the linear regression framework that bugs economics research today.

The low? Definitely theory. So long as you understand the basic dynamics of a system, it felt very unhelpful for anyone’s career to study the amount of theory we did at Harvard. It felt both disconnected from reality and also at times misleading.

In what way do you think it was misleading?

A lot of what’s out there right now is very interesting – RCTs, Duflo and Banerjee’s work – but just applying, say, game theory, or some microeconomic models, will never really work in a local context. We barely use any theoretical models learnt from economic theory in our work.

What is the alternative – what do you use instead?

Data and empirical evidence. A lot of the tools we have are for post-event analysis: RCTs and evaluations after the fact. There are very few tools that have been developed for pre-event analysis or project design. We need to find better ways of testing why certain types of interventions are likely to work or not ahead of time, and do that in a very rigorous way. This could be through games or specially designed surveys, that happen on a large scale before projects and policies are rolled out.

This reminds me of the “participatory econometrics” movement – see http://www.cultureandpublicaction.org/bijupdf/EPW_ParticipatoryEconmetrics.pdf

Economists have tried to make economics a scientific discipline, with formulae and models, but at the end of the day, we know that few of these models really work, and they have very little evidence-base or real-world application. So I applaud the movement to Rethink!

Inspiration. What two thinkers, artists, creators, come to mind when you think of those who have inspired you or helped you along your way?

My top two are two professors: Cesar Hidalgo, at MIT. He’s a physicist by profession, and through studying physics became a master of network analysis – from natural, biological networks, to mobile phone networks, export goods networks. He’s been doing all this with tools completely unknown to the economics profession. What I admire is how anti-disciplinary he is; how he rejects disciplinary boundaries, and takes things from various fields. (http://chidalgo.com/ - https://twitter.com/cesifoti)

And very personally, Alberto Abadie. He helped me a lot along the way, giving me advice. I took from him the idea that you don’t need to work with real data, per se; you can work with synthetic data, with as much predictive value as real data.

Recommend one book we should read in the next half-year.

I’m very inspired by network theory, and how to apply it to economics. The book that introduced me to this was Linked, by Albert-László Barabási.

And one piece of music to listen to.

I spent five years of my life in Mali, which is the place I’ve stayed the longest. I absolutely love Malian music – it’s a world in itself. I’d recommend the song Amana Quai, by Vieux Farka Touré (the son of Ali Farka Touré): http://www.last.fm/music/Vieux+Farka+Tour%C3%A9/_/Amana+Quai

      If you could have a wish-list of 3 items, or 3 words, for the future of your project, what would they be, and why?

Grounded – in the local context. It affects how you ask questions, how you communicate, how you contribute without duplicating existing effort.

Anti-disciplinary – meaning, beyond disciplines. Not being stuck to one discipline, and working with people from many disciplines.

Human – principled in what we think is right. Sticking to what we believe in. Doing good.

What advice would you give to other young economists, and Rethinkers in general, starting out on their journey?

My sense is that economics is still in its early stages of development. When you go into an economics course, you should go in with a sense that this is a discipline that will change a lot in the next few years. I think this change will be brought by changes in data: new visualisations, big data analysis, new methods borrowed from other disciplines. And also, don’t neglect network theory – learn about it and how it might apply to some of the problems you want to solve.

Go in open-minded, and embrace all the new techniques! Try and master data. The empirics will make a huge difference to the discipline.

We’re setting up the Laterite Lab, where our team members do research together, and eventually we want to develop this into a more sort of formal lab, where we have people from different disciplines trying out new tools. We are currently recruiting new researchers: please get in contact via http://www.laterite-africa.com/.

Who are we?

We are most likely to be aged 18-34....

We are from London, Berlin, Oxford, Cambridge, Vienna, New Delhi, Lisbon, Manchester, São Paulo, Barcelona, New York, Paris, Copenhagen, Islamabad, Rome, Kuala Lumpur, Singapore, Santiago, Lahore, Belo Horizonte, Melbourne, Rio de Janeiro, Washington, Bangkok, Brussels, Calcutta and many, many more!

The Economics of Information in the 21st Century: A Review of Jaron Lanier's Books

Author: Dave Hochfelder

Jaron Lanier, You Are Not a Gadget: A Manifesto. New York: Vintage, 2010. 240 pp.

Jaron Lanier, Who Owns the Future? New York: Simon & Schuster, 2013. 416 pp.

The specter of technological unemployment has been haunting traditional economics since at least the Great Depression. Technological unemployment arises from increasing labor productivity due to technological advances like automation and computerization. In the aftermath of the Great Depression, American economist Hans Neisser warned of “permanent” technological unemployment and ended his article with the “inevitable” conclusion that “there is no mechanism within the framework of rational economic analysis that…would secure the full absorption of displaced workers and render ‘permanent’ technological unemployment in any sense impossible.” [1] More recently, in 2012, Nir Jaimovich and Henry E. Siu published an NBER working paper showing that recovery from the last three recessions has been “jobless” because of productivity gains from technology.[2]

Enter Jaron Lanier, a Silicon Valley pioneer turned critic of Web 2.0. In these two books, he lays out a powerful indictment of the technological and economic ideology behind today’s Internet and its likely future development. In particular, Lanier warns of a serious potential effect of networked information technologies: an increasing gap in the distribution of wealth. In a world where information is free, the creators of that information derive no economic value, Lanier argues. Instead, wealth flows upward to those who control the servers that store and disseminate that information. Karl Marx famously noted that “the hand-mill gives you society with the feudal lord; the steam-mill society with the industrial capitalist.” In Lanier’s future, the digital cloud gives you society with a techno-oligarchy.

Traditionally, the workers most affected by technological unemployment were in the manufacturing sector. 3-D printing and new-generation robotics are likely to reduce employment in manufacturing while enabling dramatic increases in output. Lanier, however, warns that workers in the so-called creative and knowledge classes are also likely to fall victim thanks to the technological networks of the 21^st century. File-sharing, for example, has allowed musicians to reach broader audiences while at the same time has eroded their ability to earn a living at their craft.

Lanier offers a solution—allow individuals to monetize the information they share in the digital cloud. He reasons that since this information is valuable to Google, predictive analytics companies, and advertisers, then the people who generate this information should be compensated in the form of “nanopayments” (Who Owns the Future? p. 20).  It is unclear whether the “lords of the clouds” (You Are Not a Gadget, p. 54) will accept this solution, but Lanier argues that it is in their long-term interest to do so. Otherwise, he concludes, the alternative is a world of vastly unequal distributions of wealth and power.

---

[1] Hans P. Neisser, “’Permanent’ Technological Unemployment: ‘Demand for Commodities Is Not Demand for Labor,’” American Economic Review 32 (March 1942): 50–71.

[2] Nir Jaimovich and Henry E. Siu, “The Trend Is the Cycle: Job Polarization and Jobless Recoveries,” National Bureau of Economic Research Working Paper, 31 March 2012. http://faculty.arts.ubc.ca/hsiu/research/polar20120331.pdf (accessed 5 May 2014).

When the Economist Does Bad Philosophy

Authors:  Erin Nash and Joe Seydl

In an article in the New York Times in December 2011, Gregory Mankiw, Chair of Harvard University’s economics department, asserts that “like most economists” he doesn’t “view the study of economics as laden with ideology”.

However, his piece last month in the New York Times entitled “When the Scientist is also a Philosopher” indicates that there has been an evolution in his thinking. He effectively retracts his 2011 statement by admitting to the (in his words) “dirty little secret of economists who give policy advice”, which is that “When we do so, we are often speaking not just as economic scientists, but also as political philosophers. Our recommendations are based….on our judgments about what makes a good society”.

But the reality is that the vast majority of economists are not also trained in political philosophy during their undergraduate education, let alone able to be considered ‘political philosophers’. This is just one of the reasons why more than 42 groups across 19 countries in our global network are rethinking economics and seeking changes to the way economics is taught at universities. 

Political philosophy is a separate academic discipline with a much longer and richer history than economics, replete with its own body of knowledge, skill sets and methodologies, and importantly, many complex ongoing debates. Mankiw fails to acknowledge and respect this, and through the philosophical mistakes and omissions he makes in his proceeding analysis, it is evident that we should view Mankiw himself as an economist and not also as a political philosopher.    

For example, Mankiw instructs practicing economists and students to “be sure to apply the principle “first, do no harm”. But just what is a harm? Mankiw presupposes a common acceptance of a definition of harm where no consensus exists, especially among academic philosophers. This is the first indication that Mankiw is smuggling morally-loaded material into methodological prescriptions he conveys as morally neutral.  

For Mankiw, the ultimate harm is interfering in what he calls the voluntary agreements made within free markets. This is a type of libertarian philosophy most famously propounded by Harvard philosopher Robert Nozick in the 1970s, but that is very easily countered.

The first key counter argument relates to fairness and inequality. This argument interrogates the background conditions within which so-called voluntary transactions are carried out. If someone is desperate (hungry, homeless, ill, needing to provide for their dependents) or they do not possess the knowledge and ability to bargain on fair terms, then the transaction cannot be considered to be without a type of coercion, and therefore does not count as voluntary. This is one is one justification for not allowing people to sell themselves into slavery, and perhaps one of the key reasons why a society may choose to mandate a minimum wage. Mankiw’s colleague at Harvard University, Political Philosopher Michael Sandel, outlines the fairness and inequality argument in his latest book, ‘The Moral Limits to Markets’.

The second key counter argument relates peoples’ rights. By not intervening in voluntary transactions we can sometimes fail to uphold certain human rights. What is and is not a human right is also somewhat of an open philosophical debate. However, there are compelling arguments that universal access to a certain standard of health care is a human right, and that through providing this we value and respect humans in an appropriate way. This relates to the second key argument within Sandel’s book regarding how we ought to value certain things within society, and how these things can be degraded or corrupted if we engage in economic or market reasoning about them.  

Mankiw may even accept these counter-arguments and agree that ideology lurks underneath his advice. However, he might attempt to argue that economics itself still remains ‘value-free’ because it is only in the application of economic models and the provision of policy advice based on this economic information that the economist is forced to make value judgments. But this does not hold for the following two reasons.

First, the construction of some types of the economic models very obviously demand value judgments on behalf of the economist. For example, discount rates are parameters used within some modeling that represent the rate at which society as a whole is willing to trade off present benefits for future benefits. The discount rate therefore effectively places a value on the welfare of current and future people. In calculating the appropriate discount rate to use, the economist must decide what we owe to future generations. What discount rate economists ought to use in their models is therefore tied up in moral and political philosophy and cannot be answered by using economic data alone.

Second, economists study social phenomena, which in essence is created and then attempted to be understood by humans. As such, economic phenomena are continually manipulated and directed by new ideas, beliefs and assumptions which generates an intrinsic feedback loop between the ideas proffered by social scientists like economists, and the way in which those ideas eventually manifest within, propagate through, and affect the very social world some of these scholars claim to be studying objectively. Many economists are not aware of or do not understand this important relationship. Thus the ontology of the social world mandates that the endeavors of economists are fundamentally not positive, but normative.

Our arguments in response to Mankiw highlight the secondary nature of economics in providing answers to these policy questions and the predominance of political and moral philosophy. It therefore seems there are two options open to society: either economists are cognisant of the boundaries of their discipline and engage and defer to the expertise of philosophers on certain matters; or economists also play the role of a political philosopher.

Both of these solutions necessitate a change to the way economics is currently taught at universities to somehow encompass moral, political and economic philosophy, so that as a minimum, the economist is aware that economics is not an objective, positive science, and that economics and its application are entangled with ideology. It is critical that we understand this and are adequately equipped to navigate the implications that follow with due care.  

Authors: Erin Nash and Joe Seydl – International Organisers for Rethinking Economics in London and New York.  Erin's Twitter handle is @ErinJNash.