Digest: 19 November 2013

 

 

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In Is Economics a Science?, Robert Schiller (for Project Syndicate) discusses the use of the word science to distinguish certain efforts from their more disreputable cousins. Economics is not alone in the history of human knowledge development to have had the term “science” attached as a signifier of deserved respect – indeed much of what we terms as sciences today used this descriptor to set them apart from earlier less robust knowledge systems in the 18th and 19th centuries. “Science” signifies a certain requirement has been met – that the knowledge base is derived from a robust and repeatable process. Politics, astronomy, hypnotism, and chemistry all benefitted from this shift at various points in the last 200 years. Economics suffers in that it is so strongly tied to its policy implications, and that it deals with a more complex field of analysis than other sciences. What it deals with, human behavior, is more complex and dynamic than the subjects of other fields of study, including for example the physical sciences. Just because economics deals with a subject less easy to pin down does not mean that the mathematics involved is mere charlatanism, it merely means that it might take a little time for economics to hone in on its processes, to develop its methodologies further. As it does, just as with other sciences in the past, it will on its own develop the same separation from its roots that astronomy did from astrology.

 

Economic

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In Free Exchange: Hot Air, The Economist discusses the usefulness of models that show the economic effects of climate change.  Such models must pick and choose the factors they take into account, some factors must be left out simply because they are not understood well enough to be modeled.  Two recent studies show that economic models tend to leave out climate tipping-point risks.  These risks are little understood at this stage and so are difficult to model, and yet their potential effects to the environment are highly likely to be enormous and global.  Adding to this uncertainty, creating economic models of such risks produces further complications. Economic models tend to underestimate environmental damage and wrongly assume that long term economic growth rates will consistently grow despite major climate changes. Climate change will have major repercussions for economies around the world, and this particular uncertainty needs to be better factored into economic models if they are to be of use.

 

Environmental 

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In Surviving Climate Change, Michael Klare (for Tom’s Digest) discusses rising signs of a revolutionary public response to climate change.  As climate change increasingly batters us with catastrophic events, people will pay increasing attention and will eventually demand a shift of political policy.  Klare already sees this demand taking form around the world, for example in protests in Turkey, China, Japan and Germany. To the extent governments are unresponsive to this shifting demand they will be seen as obstacles to necessary change. If insufficiently heeded failure of response will have a destabilizing, potentially catastrophic, effect on the social/political/economic balance in those countries. If a similar course takes place in enough countries, the risk of destabilization will necessarily take on systemic proportions – another cost that should be factored into models showing the economic effects of climate change (see “Free Exchange: Hot Air”, article above).

In Catastrophe Bonds: Perilous Paper, The Economist discusses the increasing use of catastrophe bonds and other insurance linked securities  in the spreading of risk to the capital markets.  These alternative risk management mechanisms have developed since the mid-1990s as a result of catastrophic loss events starting with Hurricane Andrew. Holders of these bonds lose their investment if a certain loss event takes place in a specified time, but if that event does not take place they receive their money back with interest. The bonds allow a spread of risk away from policyholders, decreasing insurance premiums, but some fear that the influx of money through these securities distorts prices, and will create a shadow insurance sector with systemic implications. 

 

Political

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In Textbooks Reassess Kennedy, Putting Camelot Under Siege, Adam Clymer (for New York Times) discusses how, seen through school textbooks, JFK’s reputation is changing for the worse.  Clymer discusses how perspectives have changed over time as auras fade and new information comes to light. JFK is no longer seen in quite the same heroic role he held for so long.  For one thing, recordings and records released in the last thirty years have shown him to be far more pragmatic than idealistic.  For another, the way we write history has changed.  Textbooks are not quite so propagandistic as they once were – they now discuss the darker side of the country’s past, not just the glowing side.  Kennedy’s reputation is falling victim to that reassessment.

 

Social

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In The Recorded World: Every Step You Take, The Economist discusses the delicate balance between the desire for free enterprise and the desire to protect liberty.  In the context of modern technology the importance of carefully maintaining this balance is quickly taking on monumental proportions. The ability to record everything has some benefits, but the privacy implications are significant when we consider that we are on the brink of having a society in which a person’s location and movement can be known and monitored at any time. In addition, face recognition technologies are developing quickly, promising an end to individual anonymity. While technological development is an inherent plus, it must be carefully considered and regulated – if it is not, then the reality of privacy will be gone.

In To Fight Obesity, a Carrot, and a Stick, Tina Rosenburg (for New York Times) discusses falling obesity rates among poor children. There are two recognized factors to this slight but welcome development – there have been strong public information campaigns to encourage healthy eating, and there have been strong efforts to bring healthier food to low income areas. Another significant factor though may be the federal Special Supplemental Nutrition Program for Women, Infants, and Children, which subsidizes the purchase of healthy food. The success of this program demonstrates the beneficial effect that the federal government can have on a problem such as obesity. While efforts by local groups can make an important difference, they will not be able to solve the problem on their own.

In What Did Marx Know and When Did He Know It? Capitalism’s Dirty Little Secret, Thomas Magstadt (for Nation of Change) discusses the environmental effects of capitalism and points out in that context Marx may have been a little prescient.  Marx had a notion of what would happen if a capitalist society were allowed to continue over time. He could not perhaps have foreseen that his own skeptical views would be accelerated in their manifestation by the sheer extent of consumerist growth we have seen. While efforts to apply Marx’s socio-economic principles have been discredited (at least from a western point of view), there may still be something to learn as capitalism itself becomes discredited in light of the social and environmental consequences of pursuing it to the extent we have.