Economics in Action

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One of the first scholars to grace our lovely discipline was Thomas Malthus. An early proponent of “The end is nigh” syndrome he is mainly remembered for his essay on Population- where he argued the human race was doomed because the population was increasing at a faster rate than our capacity to grow food. Unsurprisingly it was Malthus who claimed for economics the label “The Dismal Science”.

The communist Lenin sharply criticized Malthus theory calling it a “reactionary doctrine” and “an attempt on the part of bourgeois ideologists to exonerate capitalism and to prove the inevitability of privation and misery for the working class under any social system”- and if you don’t understand what that means, don’t worry neither do we.

Fortunately Malthus displayed a trait that many economists would later share – he was wrong. The population didn’t starve and in fact during the nineteenth century the forces of capitalism flourished creating unprecedented wealth for those who owned the means of production. To find why we will need to look at our next great economist Adam Smith.

The Economist is running a feature article on how the world is, gradually and unevenly, becoming more prosperous and peaceful. Yes, wars and genocides are happening right now. Yes, huge numbers live in extreme poverty and millions of children die each year from preventable disease. However, the figures brought together in this article show that, while those things are horrible, far fewer people are experiencing them than in previous decades. Public health, birth control, immigration and Middle East conflict are among the issues touched on.

It’s not easy being a pirate on the high seas. There is always a possibility that your crew will kill you and take your share of the loot. Since piracy is criminal by definition, you can’t call on the police or courts to enforce contracts. So a pirate ship needs a way of keeping order, just as a country does.

Economist Peter T. Leeson of West Virginia University has released a working paper arguing that 17th Century pirates actually used constitutional democracy, achieving this before either the USA or England. This is is an important recurring theme in economics: how self-interested individuals can work together to achieve a common good.

Read More: An-arrgh-chy: The Law and Economics of Pirate Organization (Abstract of the paper on Social Science Research Network)

Peter T. Leeson (2007) An-arrgh-chy: The Law and Economics of Pirate Organization (full paper in PDF format)

Volatile Bangladesh pins hopes on an economist Associated Press proclaimed this month, headlining the story of how the country’s former central bank head Fakhruddin Ahmed was called in to lead its interim government and rescue scheduled elections.

In fact, Bangladesh turned not once, but twice, to an economist to resolve its political deadlock. Dr Ahmed, who worked at the World Bank after his economics PhD from Princeton, took the job after it was turned down by Professor Muhammad Yunus, awarded this year’s Nobel Peace Prize for pioneering micro-credit at the Grameen Bank.

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How can we help the developing countries of Africa? This three-minute BBC radio interview (RealPlayer required) features an interesting take on the issue from Paul Collier, an Oxford Professor of Economics.

Collier points out that Africa has some fragile democracies which are at real risk of falling to a military coup or descending into civil war. The security that comes from stable government makes it more feasible to escape the cycle of poverty. Hence the rich European countries could help by supplying some of their military power, if backed with a legitimate authority.

The UK has the fourth cleanest water in the world, and the fourth highest per capita military spending. A coffee from Starbucks involves resources from up to nineteen different countries. These are some of the hundreds of facts presented in interesting visual summaries by the International Networks Archive. Topics include The Global Arms Trade, the Coming Water Wars and the global success of McDonald’s.

Hatred of immigrants, sometimes translating into violence, is not only harmful to the immigrants themselves but is damaging the South African economy, reports the South African Human Rights Commission.

Immigrants workers and traders not only help the economy by providing skilled labour, but also spend money on goods and services. Traditional prejudices about immigrants from the rest of Africa contribute to an incorrect perception that they are contributing to crime and abusing social services.

Read more: “Xenophobia has an economic cost”, IRINNews.org, 31 July 2006.

Reference: “Report of the Open Hearings on Xenophobia and problems related to it”, SAHRC, 15 June 2006.

Listen to the interview

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Does lack of freedom result in greater support for rebellion in countries like China or Saudi Arabia? And if so, what is the cost of buying off the potential threat of greater instability via faster economic growth?

Research by Robert MacCulloch and Silvia Pezzini suggests that a policy of buying off trouble by going for growth when freedoms continue to be denied requires close to unattainable rates of sustained economic growth. Instead, more should be done to promote political rights and democracy, where revolutionary fervour is strongly increased by lack of freedom. (more…)

Listen to the interview

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In trying to reduce serious political conflicts within countries, it may be more effective to be tougher on the causes of discontent than on the unrest itself. That is the implication of research by Dr Patricia Justino, presented at the Royal Economic Society’s Annual Conference.

Her work suggests that, in unstable socio-political environments, social redistributive policies may be an important means of conflict management. For example, analysis of rioting in India over the past 30 years show that public expenditure on social services has contributed significantly towards the reduction of conflict, whereas the accumulated use of police over time is associated with increases in rioting. (more…)