Friday, June 20, 2003

belated posting of something written while in transit:

You Know You’re A University of Chicago Economist-in-training when:

(1) you have learned the entire greek alphabet through your core economics sequence and the attending required calc 150s and math 190s; you can read entire lines of text that don’t have english words in them, and regularly use the words ‘maximisation problem’ and ‘solving first order conditions’ in conversation with other people [who turn out to be other U of C economists]

(2) you read Stiglitz’s Globalisation and its Discontents on the flight home as light summer reading, and borrow a pen off a crew member because you realise that you can no longer read anything academic with feeling the intense desire to annotate and underline the ‘important’ parts in your book such that the original text becomes almost obliterated under the weight of your comments, such as ‘The IMF is so full of shit.’

(3) in fact, you’re having more fun with Stiglitz than with In Style magazine or Bill Bryson’s A Short History of Nearly Everything which you have been dying to read but cannot bring yourself to read as long as Stiglitz remains unfinished, and you’re showing signs of finishing the entire book on this flight home, sleep be damned. the flight attendant comes over with another flight attendant and asks that you show her what you’re reading, and when he says ‘just reading the title makes my head hurt’ you just laugh sheepishly and think to yourself ‘but I’m having so much fun…’

I feel like I’m being sucked into the world of developmental economics. I mean, I’ve known for a while that I’m really more interested in macro issues than in micro issues – other people can take care of that, I guess is my attitude toward it, they don’t need another microeconomist poking around asking what the demand for microchips is. reading Stiglitz right now is making me rethink my stand on market efficiency and ‘market fundamentalism’ as he calls is: I think I’m as guilty as the IMF is of too robust a belief in the power of the Market. I would like to imagine that markets, given conditions like perfect information, will always clear. and perhaps they do, and they will always produce the efficient outcome for the given set of circumstances, but that doesn’t mean that the outcome they produce is socially optimal. markets are amoral and contain no values other than efficiency: trusting the future of the poor and the young to the power of the amoral market is something that I don’t think I’m willing to accept just yet. hopefully I will never be brainwashed into thinking that the market will take care of everything.

I know I said in an earlier post that I have a strong belief in the markets, but with some reservations. well these are precisely my reservations – the ones that Stiglitz raises in Globalisation. that economists, and markets, don’t necessarily take social costs into consideration when making their decisions on where to allocate resources or what policy to follow. the markets don’t see the greater picture: that economic macrostability must support social stability which in turn support economic stability, and this leads to sustainable growth of a desirable kind, rather than the flash-in-the-pan followed by long decades of recession or stagnation and then collapse, as experienced by the Latin American countries in the last decades of the twentieth century. as human beings we have to make decisions about what we think is desirable, and then ask the markets to find a good way for us to get there, instead of letting impersonal market forces make those decisions for us. I guess what I really want to argue is that on a micro level markets clear, but on a macro level this isn’t true, and also that even if they do clear consistently, their results may not always be socially optimal. [CAN you argue that? can you have micro markets clear and not macro ones, if macro markets are aggregates?]

I know this isn’t the most economic of arguments, and if I tried I could probably come up with some economic arguments associated with the notions of social cost and economic stability being tied into social stability, as Stiglitz does [constantly reiterating that it’s not just bad policy but bad economics to have policy that causes society to fall apart] but honestly, that’s not really what I’m concerned with at this point. as a human being and an economist I’m more concerned with education systems and healthcare and eradicating poverty. it would be nice if there were some efficient way to do this, but if the cost of gaining efficiency is too high –in human cost, in the numbers of children who will not be able to attend school and get out of the cycle of poverty grinding them into the ground in their rural agricultural societies—then I don’t want it. so there. I guess I’m finally starting to realise that macroeconomics and indeed the entire discipline of economics doesn’t exist in a vacuum; it has to be part of a greater social plan because it affects all areas of human existence, not just the breadwinner’s.

all right, I’m going to have to ask for some leniency here: I’m sitting in Narita waiting for my connecting flight to singapore –we got in early, I have an hour and a half to wait, why don’t I recognise anyone singapore isn’t that big- and I’ve just gotten off a twelve hour flight and barely feel human. but Stiglitz’s book made me think and I wanted to get this down before jetlag wiped it out of my brain. [they’re calling for people to board a United flight to new york. I’m seriously tempted to jump on that and go to new york. but that’s the exhaustion speaking, plus the THOUGHT of another thirteen hour flight makes me want to kill someone] it’s also really hot. I mean REALLY hot. it’s airconditioned in the terminal and I’m still roasting – and I’m wearing a short dress with no sleeves. I can’t imagine what singapore will be like when the sun rises tomorrow morning.

so back to the IMF: to think that I once wanted, really badly, to work for the IMF. I mean, the whole POINT of going for an MAS scholarship was to get central banking experience so that I could eventually wind up at the IMF in Washington. or perhaps I’d have to get a Ph.D before I could do that but well that was the idea. I thought the IMF was a good and necessary idea. I barely remember the Asian Economic Crisis that swept our part of the world in 1997-1998: I was still in secondary school, my brain was barely awake much less able to grasp simple economic concepts, and I thought – hey, the IMF sounds like a good idea to me. and then for some reason I learn more about the IMF in History7 of all things, as part of the international institutions part of the paper, and I think to myself: ooh, lender of last resort, central banker to the world, sounds like a good idea to prevent precisely the kind of thing we lived through, without really thinking about what they were doing and what had happened to our neighbours back in 1997-1998.

it’s disappointing for me to realise now that the IMF is a failure at what it’s supposed to do –provide liquidity to prevent banking collapses around the world, to provide geoeconomic stability in partnership with the World Bank, which provides funding for development—and consistently sticks its nose in where it has no mandate to be: Stiglitz calls it ‘mission creep’. [incidentally I’m very proud of myself for remembering the World Bank’s real name, IBRD] it because it is backed mostly by US Treasury money and will is as much a tool of american foreign policy as the UN –another great disappointment. and the worst thing is the IMF is both very bad at what it’s supposed to do and what it’s not supposed to do but does anyway. which is really sad. even taking Stiglitz with a pinch of salt –which is hard to do because he sounds eminently reasonable and backed by fact, which is more than the IMF can claim at this point- the IMF has done a really bad job in recent times, in fact since the Reagan-Thatcher partnership took over the global economy with their emphasis on free markets and breaking the backs of the labour unions. I’m not sure what the record of the World Bank is –as the former chief economist of the World Bank Stiglitz has very little to say about its track record—but I don’t imagine it could be worse than the IMF’s at this point. fewer people seem to hate it in comparison.

why is it that we have such crappy global governance? it’s depressing to realise that people really are constantly driven by partisan, personal interest or special interests rather than the interest of humanity or even the interests of the countries that they are proposing to help. taxation without representation, we call it, and on a global scale: and we come back to the issue of collective action problems, and we come back to the problem of concentrated benefits and diffuse costs. unfortunately the costs are diffused over the groups of people who can least afford them: the poor, the uneducated; and the benefits are concentrated in the groups that least need them: the rich, the multinational conglomerates, the special interest groups that can make or break an election result.

and people ask me why I don’t LIKE humanity. can I please stay in academia for the rest of my life, where I can pretend the real world with all its problems doesn’t exist except as a theoretical problem for my brain to solve?


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