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Category: Economics

Published January 9, 2012

How to (Maximize the Likelihood That You Will) Do Well in Your Economics Class

(This is an update on a post I had initially written at the start of the calendar year. I figured it would come in handy, as many of us are busy writing our syllabi for the spring semester.)

“I have studied a lot for this test, but I didn’t do well. How can I do better next time?”

This is a question I hear a lot. Because I teach the core undergraduate microeconomics course in a public policy school, where not all students like economics, it is a question I probably hear more often than my colleagues who teach microeconomics in an economics department.

Instead of saying the same thing over and over again to different students, I thought I should write down my thoughts about how one can maximize the chances one will do well in one’s core economics classes (e.g., micro, macro, or econometrics). You can download my handout on the topic here.

Published January 6, 2012

Always Something New Out of Africa?

[T]here is a great deal more to Africa than wars and famines.

The problem is that news, as defined by news editors throughout the media, is when something important or interesting happens. There is no conspiracy about African coverage (though there is a great deal of laziness among editors who are happy to limit their story selection to images of dramatic disasters.) And news organizations must cover stories of starvation and war as they would cover disasters in the rest of the world. The question is where are the African stories that show the fuller picture?

Years of covering Africa taught me not to go on holiday at Christmas or in August when nothing much happened in the world. That was when desperate news editors with space to fill might finally run that article on Namibia’s politics or Mali’s nomads. But there was always the eternal nagging news editor’s question: “So what?”

That’s Richard Dowden, in a post over at African Arguments.

In a way, it’s comforting to know that development economists are not alone, and that the “So what?” question is not exclusively asked to development economists by other, non-development economists.

Dowden’s Africa: Altered States, Ordinary Miracles, which I have read on Kim Yi Dionne‘s recommendation (it is compulsory reading in her African politics class), is a highly readable introduction to Africa in all its diversity. It’s a great read if, like me, your African experience is limited to about five countries. I imagine it’s an even better read if all you know about Africa is from reading the news.

Published January 5, 2012

Coordination Failure, Self-Fulfilling Prophecies, and Rising Food Prices

Fiorenzo Conte, in a post on the London School of Economics’ Development Studies Institute’s student blog, makes a crucially underappreciated point when it comes to food prices:

The price spike was ignited by a series of decisions which made a lot of sense from the perspective of every individual actors who took them. Each of this “rational” choice was dictated by the goal of achieving the food security in each country in face of a growing fear that the world was running out of rice. More precisely the fear that there might have been a shortage because the shortage never materialized in reality. Rational choices compounded by fear determined the very irrational outcome of a price spike.

The first culprit was the government of India which made “food for all” its flagship. (…) To do so it banned the export of rice out of the country. (…)

The next thing was that rice prices soared by 20% overnight. Governments all over Asia rushed to buy as much rice they could and hoard it in the expectation of a future scarcity of rice signaled by the price jump. (…) What government officials in the Philippines did was to tell their people to eat less rice so that the government could have bought less rice (and this was probably the least reasonable of the reactions). In response to this Filipinos rushed to buy as much rice as they could because they understandably interpreted the message from the government as “we are running out of rice.”

In a recent American Journal of Agricultural Economics article (ungated version here), Will Martin and Kym Anderson estimate that almost half of the increase in rice prices between 2006 and 2008 was due to country-level policies such as the ones described above.

This is a classic case of coordination failure (and, in the case of the Philippines, of a self-fulfilling prophecy). Unfortunately, global policy makers have very little say as to what goes on within countries. Even if they did, international organizations react way too slowly to be effective during food crises — this is especially true of the United Nations (the “colossus with feet of clay” analogy is particularly apt here), a little less so of the World Bank and the IMF.