I’ve been dreading writing the intro to these links all week. How on earth do I come up with something mildly amusing and facetious when all week the news on the front pages, the videos and stories on my twitter and the garbage being spewed by (some) people in positions of authority has been so profoundly depressing – and enraging? I’m not going to pretend I have anything helpful to add to what’s going on in the US, where one-third of people killed by strangers are killed by the police, and where just 6% of white police officers believe changes are needed for black people to have equal rights. Instead, let me repeat something I said about race and recruitment in the UK in a meeting I had while I was still a civil servant. I think most people understand the world in part by using simplified ‘mental models’ as shorthand for complexity. If they think ‘economist’ they have a mental model of what an economist looks like, behaves like, speaks like. Even if these models are only lightly held, they represent a hurdle for those that don’t fit them, and in a world where competition for jobs is fierce, this matters. As an economist, one thing I’ve learnt is that small frictions can have big effects.
- Economics has more than its fair share of counterintuitive concepts. I recall a friend of mine, one of the smartest people I know, sheepishly admitting that they didn’t understand how the gains from trade worked. I had to reassure him that this was because no-one gets comparative advantage without studying it (damn you, David Ricardo!) One of the best things about Planet Money is how well they explain basic economics for non-economists, and I loved this podcast, in which they answer questions like ‘where does the money go when people stop spending?’ without ever needing to use such arcania as ‘velocity of circulation’ (transcript).
- On the other hand, sometimes economics really is completely intuitive. Anna Stansbury and Laurence Summers look at the declining share of national income accruing to labour in the US and come to the conclusion that many, many non-economists would have leapt at: it’s because of declining worker bargaining power. The whole piece is worth reading, particularly the conclusion that there is no reason to be fatalistic about the distribution of market income; the policy prescription is fairly obvious.
- This is a great write-up of a new paper by Emma Riley looking at the effect of using mobile money to provide finance to female entrepreneurs. In previous studies, finance provided to female entrepreneurs has had much less effect on their profitability, but this paper finds substantial effects, in part because disbursing money this way gives women more control over the use of the funds. Related: Emma also has new results (with Mahreen Mahmud) that investigate the effects of Covid lockdowns on incomes and consumption in Uganda. Spoiler: they’ve been bad.
- There’s absolutely no need to dunk on economics’ track record in forecasting again here: it’s already taken more hits than Cool Hand Luke. But this piece by Branko Milanovic is really good: it breaks down the various kinds of uncertainty that are particularly problematic for attempts to forecast the economic recovery from Covid19. Related: Tim Harford on the asymmetric impacts of the recession and how some sectors and firms may never bounce back, while others will change substantially.
- As I said last week, I’m not going to use this blog to round-up of all the great CGD writing every week – that job does is done elsewhere. But I really liked this piece by Scott Morris, Clemence Landers and Alysha Gardner, which considers four scenarios for the future composition of IDA allocations. Of their four plausible scenarios three see a substantial increase in the grant component of IDA allocations – a good thing, but one that might require a few gymnastics to finance.
- More Tim Harford, proposing that you do stuff as early as possible, rather than at the last possible minute. As you have no doubt inferred from the fact that this e-mail is getting to you some time after six pm on a Friday evening, I am most definitely on his side here.
- This week I have discovered how I’m going to bankrupt myself: it’s called Cameo and it’s the most ridiculous and brilliant thing ever. Ever wanted to send your enemies a demotivational message from The Million Dollar Man, Ted DiBiase? It’s yours for 60 quid! Do you want to append a video of Samir screaming ‘This is a suck!’ to your latest referee report, followed up with a pithy suggestion for a new robustness test? Sold for thirty pounds! Wee-Bey’s realisation gif? Recreated for a cool £50! On the off chance you don’t want to spend your life savings buying videos of Bruce Buffer announcing your entry into your Zoom meetings (a mere £250 a pop), please distract yourself with Jean-Ralphio.
Have a great weekend, everyone!