Skip to content

Category: Policy

Published June 13, 2012

Remembering Elinor Ostrom

Elinor Ostrom (Source: Wikimedia Commons).

Elinor Ostrom, the first woman to win the Nobel prize for Economics (which she shared with Oliver Williamson), passed away yesterday. She was 78.

The official announcement from Indiana University, where Ostrom spent most of her career, is here.

With Ostrom’s passing, social science lost one of its greats. If you’ve never read anything by Ostrom, you should start with her 1990 book, Governing the Commons. NPR’s Planet Money has a nice writeup:

She was famous for challenging an idea known as the tragedy of the commons — the theory that, in the absence of government intervention, people will inevitably overuse a shared resource.

So, for example, if a village shares a pasture, it’s in the individual interest of each farmer to graze his cattle as much as possible on the pasture even though, in the long run, overgrazing may ruin the pasture for everyone.

“It’s a problem, it’s just not necessarily a tragedy,” Ostrom told us when we spoke to her in 2009. “The problem is that people can overuse [a shared resource], it can be destroyed, and it is a big challenge to figure out how to avoid that.”

But, she said, economists were “wrong to indicate that people were helplessly trapped and the only way out was some external government coming in or dividing it up into chunks and everyone owning their own.”

And here is a lecture by Ostrom, on sustainable development and the tragedy of the commons:

The one anecdote I distinctly remember being told about Ostrom, from one of her coauthors, was that her secret was that she worked all the time, and that it was not uncommon to receive an email from her very early in the morning or very late at night — or both.

In fact, here is proof that Ostrom worked until the very end: an op-ed that carries her name in the byline published the morning of her passing.

I did not know Elinor Ostrom personally, but I have a few friends who did. My condolences to those friends and to those of you who also knew her.

(HT: Lou Brown for the Project Syndicate article; Mike Munger for the video lecture.)

Published June 11, 2012

Chinese Economic Growth and Food Prices

In food policy debates, people often claim that Chinese economic growth — and thus an increased demand for food in China — is partly to blame for rising food prices.

Up until today, however, I had never seen any empirical evidence to that effect. Here is the abstract of a new article by Nelson Villoria in Agricultural Economics:

This article explores the impacts of China’s growth in the international markets of agricultural products along two dimensions: food price inflation and export growth in other developing countries. China’s food imports of vegetable oils have grown dramatically over the last decade, linking China’s economic growth to the recent increases in global food prices. If China is a source of global food price inflation, exporting countries will benefit whether they sell directly to China or not. These direct and indirect linkages are explored using a short-run, partial-equilibrium model of international trade in agricultural products in which consumer prices and trade costs are derived from bilateral trade flows. China’s effects on food prices and exports are estimated by reducing Chinese food expenditures in 2007 by half, roughly China’s level of expenditures in 1995. Results indicate that food prices as measured by CES price indexes in developing Asia, Africa, and Latin America would have been reduced by 1.27%, 0.32%, and 0.22%, respectively. China has been an important source of growth for exporters selling directly to China. There is no evidence of export growth due to an overall increase in food prices caused by China’s growth.

I am not sure setting China’s food expenditures equal to what they were in 1995 is the right counterfactual, but it is really difficult to establish the right counterfactual in this context. This is especially true given that the “right” counterfactual would be an alternate world in which China would not have experienced all that additional economic growth since 1995.

If you believe the counterfactual, however, it looks as though the effects of Chinese growth on food prices are weak, with increases in food prices ranging from 0.2 to 1.3 percent.

Hopefully, these results can help improve current food policy debates. “We can’t be sure of what actually caused food prices to rise” is a sounder basis for food policy than “Increased demand for food in China and India have caused food prices to rise.”

Published June 8, 2012

The Mote and the Beam: Context-Dependent Policy Making?

The Parable of the Mote and the Beam, Domenico Fetti, c. 1619 (Source: Wikimedia Commons)

Every paradigm is informed by its contemporary society, even if they seem unrelated.  The go-to example of this is Freud’s theories, from which we derive “pent up” and “release” and “drives” and “pressures” – all of which are the language of the turn-of-the century steam industrial world.  Whether Freud was right or not isn’t the point– he just sounds wrong because we don’t use steam engines and the brain doesn’t look like an engine anymore.

The point here is that we acknowledge the ideas of prior cultures relied on their context, but we willfully ignore our own immersion in our context.  I [The Last Psychiatrist] read this in The Economist:

However, unlike Freud’s unconscious (a hot, claustrophobic place full of repressed memories and inappropriate sexual fantasies about one’s parents) the modern unconscious is a place of super-fast data processing, useful survival mechanisms and rules of thumb about the world that have been honed by millions of years of evolution. It is the unconscious, for instance, that stitches together data on colour, shape, movement…

Note that this isn’t merely a metaphor or analogy to modern computers – it is an earnest but uncritical assumption of an actual similarity.

More here from The Last Psychiatrist.

What I think is particularly interesting here is how different frames of reference (e.g., the steam engine, the computer) not only lead to different ways of describing the same thing, but perhaps to different actions in response to the same problem.

Does one settle upon different policy prescriptions depending on whether one sees the government as a steam engine or as a computer?

I have discussed time and again on this blog (and in public lectures) the difficulty of truly knowing anything in the social sciences, and the usefulness of controlled experiments in chipping away at our ignorance.

But the question I ask above is, I’m afraid, unanswerable. There appears to be such a thing as context-dependent memory (the “improved recall of specific episodes or information when the context present at encoding and retrieval are the same,” or the reason why if you study drunk, you should also take the test drunk), but context-dependent policy making goes beyond that.

Put another way: Would we care so much about social capital, network effects, and spillovers if the Internet had never been invented?

On steam engines and computers, I was reminded of William Gibson and Bruce Stirling’s The Difference Engine, about which Amazon say:

1855: The Industrial Revolution is in full and inexorable swing, powered by steam-driven cybernetic Engines.  Charles Babbage perfects his Analytical Engine and the computer age arrives a century ahead of its time.  And three extraordinary characters race toward a rendezvous with history—and the future.

The book is thought to have popularized the whole Steampunk aesthetic. I read it in college and didn’t enjoy it half as much as I did Gibson’s Sprawl Trilogy, but your mileage may vary.