What if our economy was not built on competition?
Nobel Prize winner Elinor Ostrom
talks about her work
on cooperation in economics.No Funny Business: Social Norms and Joke Theft
Rules are ideas about how people interact with each other. They are the formal laws and social norms that govern daily life. The legitimacy of formal laws often depends on their compatibility with social norms. Social norms can complement formal laws and, in some cases, stand in when formal legal enforcement is absent or inefficient. In a guest post for the Freakonomics blog, Kal Raustiala and Chris Sprigman write about social norms among stand-up comedians...Social Capital and Community Governance
In a related post, Rajiv Sethi explores other situations in which social norms operate as substitutes for formal laws. He points to Elinor Ostrom's work on self-governance among groups of people with collective rights to natural resources... Sethi also points out that social norms can enforce bad equilibria, citing oppressive attitudes about race, gender, or caste. A related issue is the extent to which formal laws and enforcement can change social norms about acceptable attitudes and behavior.
Social capital generally refers to trust, concern for one's associates, a willingness to live by the norms of one's community, and to punish those who do not. While essential to good governance, these behaviors and dispositions appear to conflict with the fundamental behavioral assumptions of economics whose archetypal individual--"Homo economicus"--is entirely self-regarding. We regard these behaviors and dispositions as aspects of what we term community governance. To come up with new policies aimed at widely shared prosperity
We suggest that (i) community governance addresses some common market and state failures but typically relies on insider-outsider distinctions that may be morally repugnant; (ii) the individual motivations supporting community governance are not captured by either the conventional self-interested preferences of "Homo economicus" or by unconditional altruism towards one's fellow community members; (iii) well-designed institutions make communities, markets, and states complements, not substitutes; (iv) with poorly designed institutions, markets and states can crowd out community governance; (v) some distributions of property rights are better than others at fostering community governance and assuring complementarity among communities, states, and markets; and (vi) far from representing holdovers from a premodern era, the small-scale local interactions that characterize communities are likely to increase in importance as the economic problems that community governance handles relatively well become more important.
His academic work is focused on identifying government's appropriate role — through regulations, taxes, or spending — in a market economy. He is currently engaged in a project to estimate the economic costs of climate change and has worked extensively on the Clean Air Act. He argues that government environmental regulation has improved air quality, leading to reductions in infant mortality rates and higher housing values, while also imposing costs through reducing the scale of manufacturing activity. Greenstone also has done research on topics ranging from the beneficial impacts of mandatory disclosure laws on stock prices to the role of antidiscrimination laws in reducing African-American infant mortality rates.Complexity and doom
Complex societies collapse because, when some stress comes, those societies have become too inflexible to respond. In retrospect, this can seem mystifying. Why didn't these societies just re-tool in less complex ways? The answer Tainter gives is the simplest one: When societies fail to respond to reduced circumstances through orderly downsizing, it isn't because they don't want to, it's because they can't.Do we need a bubble?
In such systems, there is no way to make things a little bit simpler – the whole edifice becomes a huge, interlocking system not readily amenable to change. Tainter doesn't regard the sudden decoherence of these societies as either a tragedy or a mistake—"[U]nder a situation of declining marginal returns collapse may be the most appropriate response", to use his pitiless phrase. Furthermore, even when moderate adjustments could be made, they tend to be resisted, because any simplification discomfits elites.
There are two sorts of world. In a normal world, the equilibrium rate of interest is above the growth rate of the economy. In a weird world
, the equilibrium rate
of interest is below the growth rate
of the economy. What's weird about a weird world
is that it needs a bubble
, a Ponzi scheme
, a chain-letter swindle
, for the economy to work well
Utility, The Deus Ex Machina of Economics
Nicholas Bernoulli came up with the St. Petersburg Paradox, a position that stands in stark contradiction to Pascal's Wager, arguing that there is no limit to the amount you should be prepared to gamble in quest of a greater fortune... The classical solution to the paradox was proposed by Daniel Bernoulli who argued that the problem was that a dollar isn't a dollar for everyone. What he suggested was that the value of any given amount of money reduced as you became richer... He called this relative value 'utility
Taking Hope in the Long View
For the first time, more than half of the world will have enough food not to be hungry, enough shelter not to be wet, enough clothing not to be cold, and enough medical care not to be worried that they and most of their children will die prematurely of micro-parasites. The big problems for most of humanity will be to find enough conceptual puzzles
and diversions in their work and leisure lives to avoid being bored, and enough relative status not to be green with envy of their fellows... How did this miracle come about?
The World's Free Virtual School: an interview with Salman Khan
Salman Khan is the man behind Khan Academy
, a 2009 Tech Award winning site with 12+ million views and 1200+ 10-minute "videos on YouTube covering everything from basic arithmetic and algebra to differential equations, physics, chemistry, biology and finance". We talked with him about building "the world's free virtual school", the potential of open-access learning, using the format for sustainability debates, and challenges in growing a non-profit from zero to global impact.
A Short Survey of Network Economics
This paper surveys a variety of topics related to network economics
. Topics covered include: consumer demand under network effects, compatibility decisions and standardization, technology advances in network industries, two-sided markets, information networks and intellectual property, and social influence.
The general idea
is that there are numerous examples of networks of people who share substantial interests in common, and who have a high level of trust in one another that permits them to undertake risky joint activities.
Privilege Is Driving a Smooth Road And Not Even Knowing It
People with more privilege, in contrast, can easily imagine that they are independent. A big mark of privilege is that social and economic networks tend to facilitate goals, rather than block them. This makes it easier to ignore the social and economic networks around us; and it makes it easier for the privileged to imagine their accomplishments are the result of their own pure merit... No one is independent; we all rely on a network of social and economic ties to tens of thousands of strangers, just to get through a single day.
What the Founding Fathers Really Thought About Corporations
Brian Murphy, a history professor at Baruch College in New York, knows a whole lot about corporations in the early days of the American republic. When the Supreme Court struck down restrictions on political spending by corporations in January, the ruling struck him as dramatically at odds with how the Founding Fathers saw the role of the corporation.
Objects into people, people into objects, business value
That is: your species has another skill. Just like you're good at turning objects into people, you're good at turning people into objects. It's easy for you to subordinate actual humans to the beauty of a System. You're terribly prone to slip into ideology, to elevate objects to totems-to-be-deferred-to. "Business Value" is, I fear, becoming one such totem.
The Natural World Vanishes: How Species Cease To Matter
Once, on both sides of the Atlantic, fish such as salmon, eels, and, shad were abundant and played an important role in society, feeding millions and providing a livelihood for tens of thousands. But as these fish have steadily dwindled, humans have lost sight of their significance, with each generation accepting a diminished environment as the new norm.
The Future of Cities
We live in an urban age
. The Future of Cities is a series in which the FT explores the appeal
of the city and the problems
that come with rapid urbanisation
, such as
health challenges, conflict, development and conservation.
The determinants of state fragility
The causes and implications of state fragility – also known as state failure – are not yet well understood. This column explores the determinants of state fragility in sub-Saharan Africa and finds that institutions
– as measured by civil liberties and the number of revolutions – are the main drivers. It says institutions
trump economic, geographic, and historical factors.