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Re: How Do We Talk About Economics

Recipient profile picture Eleanor
i
12 July
Dear Eleanor,
I’m not Paul Krugman. But I enjoyed the letter that you wrote to him on ‘thinking about economics’. Perhaps I can share a few thoughts with you because I am curious as to what you might make of them. (For context, my background is in economics and finance. And I’ve spent far too many years of my life as a soulless quant for big business and big government.) Firstly, to your question: Have we learned anything since the financial crisis? As you know, scores of books and papers have been written about the subject. But in my opinion, the answer is both yes and no. Yes, in the sense that the crisis reaffirms many things that we already know. Robert Shiller, Andrei Shleifer and others, for example, have written much about the anatomy of price bubbles, financial contagion, and the double-edged swords of credit and confidence. While I am not privy to the post-crisis changes to Dodd-Frank, Basel III, and other accords, many experts say that the political-regulatory response does resolve the moral hazards, arms-races, snake-oil, and quality controls that plague our financial institutions. Hence, my hesitant no. So perhaps we haven't learned anything at all. Financial amnesia, memory fade, and intellectual hubris are recurring themes in financial history. Part of the problem stems in the negative externalities that markets generate. Risk tends to migrate to regions in which oversight is poor (so problems, by definition, are difficult to spot before the fact). What’s desirable for the individual risk-taker is not necessarily healthy for the entire system. The crisis showed, for instance, how excessive leverage, risk-taking, and shoddy products in a tiny corner (i.e., subprime products) can then spread like wildfire to everywhere. This is also why I watch the market for cryptocurrencies and banking in China today with some concern. You add that there is “a lack of economic education and therefore economic understanding in [your] country.” I agree with you that basic financial literacy is essential, especially for marginalized communities. But as an economist, I must admit that I worry a bit about a world in which everyone thinks like an economist. Such a sad world that must be, don’t you agree? The problem, as I see it, is twofold. Firstly, economics is inherently political and values driven. In her book Doughnut Economics, Kate Raworth explains, for example, how students tend to become more selfish after taking courses in microeconomics and game theory. The problem is worsened in part by the profit-seeking machines of capitalism; and the fact that mainstream economics continues to teach narrowly under its neoclassical paradigm. I should also add that not once in my undergraduate studies, in between all the theorems and models, was financial history or ethics mentioned. Social discourse is healthiest when there is a diversity of opinion. So if we’re to broaden our economic education, we have to be careful in how we discuss the role of the market and the state. We otherwise risk leaning further into the ideological positions that you’ve talked about. Better and safer, I think, is to have more scientists, ethicists, engineers, designers, artists, community leaders, and so on, in our leadership circles to cultivate the ‘wisdom of crowds’. In my opinion, the world does not need more economic thinking or lawyering. We need more people to ask the right questions. And we need of more diversity in academia, government, and business. Social and economic policy is complex, yes. But it is not string theory. We know roughly the steps we need to take to address poverty, disease, climate change, and other pressing issues. The main challenge is execution, organization, coordination, and representation. Finally, the communication problem you cite is an immense challenge. And here I have little to offer, for many things in economics are nebulous. Even simple models of wage dynamics and minimum wage policies are fraught with unintended consequences. Rarely does the real world conform to our toy models. Even the most well-meaning policies can backfire in counterintuitive ways. Clearly, academia has to get better at communicating complexity and uncertainty outside their ivory tower. And the news media and public must accept that many ideas cannot be reduced into a single headline or directive. We also need to foster greater tolerance for mistakes and experimentation because so many things in economics are unclear until we pilot them. But much of this is unlikely to change until our incentives and attitudes change too. And change of this sort is difficult because everyday folk have so much on their plate already. It's almost unfair to expect more from them. Perhaps something like Collate is a nice place to start—an opportunity for people from different backgrounds to exchange perspectives and viewpoints. I hope some of my comments will resonate with you. But thank you for getting me to think! Warm regards, Tobias P.S. Paul Krugman is a great lecturer, isn’t he? I remember attending a similar talk at my own campus. I hope he’ll respond to your questions. But if not, he has plenty of books and essays for you to follow up on.

Tobias Lim

Author profile picture Tobias Lim

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    Dear Jacob Rees-Mogg, As preparations for the Conservative party conference are underway in my home city of Birmingham, I am writing to you in your position as Business, Energy and Industrial Strategy. This is a very salient time for me to write to you, as your party’s co...

    What are your views on the state of American politics and leadership today?

    Tobias Lim on 2 October
    Responses: 0

    Dear Erik SuarezΦ, [highlight=transparent]I saw your tweet about Collate a few days ago. [1] As an early adopter of the platform myself, I have to agree. I’ve been using Collate as an opportunity to reach out to public figures, to improve my writing, and to muse about ...

    Dealing With Our Gelatinous Ignorance

    Tobias Lim on 3 October
    Responses: 0

    Dear Kareem Abdul-Jabbar, [highlight=transparent]Firstly, I want to say thank you for your newsletter. For basketball fans around the world, your achievements, both on and off the court, have achieved a sort of mythical status. So it makes me happy that one of the greatest-of...

    Bridges to Infinity and God

    Tobias Lim on 10 October
    Responses: 0

    Dear Michael Guillen, [highlight=transparent]A few weeks ago, I bought a worn copy of your book, Bridges to Infinity, from my local bookshop. The intriguing cover and table of contents caught my eye immediately. And having read the book, I can see why you won awards as a ...

    Nurturing a Child’s Lifelong Love for Books

    Tobias Lim on 13 October
    Responses: 0

    Dear Jan Hasbrouck, [highlight=transparent]I’ve been wondering about ways to improve global education outcomes around the world. In an ideal world, such a policy or initiative should: (1) help students to discover and unlock their potential; (2) not drain the public cof...

    Solitude, Obligations, and a Rewarding Life

    Tobias Lim on 18 October
    Responses: 4

    Dear Fenton Johnson, [highlight=transparent]I want to thank you for writing At the Center of All Beauty. I appreciated your reflections on silence, solitude, and the creative life. I also enjoyed the serenity you evoked as I moved from page to page. More importantly, yo...

    Truss was the first Tory leader in decades to wrap herself in the image of Thatcher. But would the Iron Lady have approved of Trussonomics?

    Sir Anthony Seldon on 24 October
    Responses: 3

    Dear Lord Charles Moore, [color=rgb(34, 34, 34)][highlight=transparent]It is an honour to be corresponding about Lady Thatcher with the most distinguished authority and interpreter of her in the world. [/highlight][/color]   [color=rgb(34, 34, 34)][highlight=transparent]Brit...

    Alternative Technology for Biomedical Waste Disposal, Govandi Deonar Mumbai

    Govandi Citizens #𝑺𝒂𝒗𝒆𝑮𝒐𝒗𝒂𝒏𝒅𝒊  on 28 October
    Responses: 0

    Dear Internet, Story of the residents fighting to shut down the biomedical waste treatment plant in Govandi. It was during the COVID-19 pandemic that I realised that I must join the fight for clean air. As biomedical waste increased tenfold at health facilities an...

    Please, can you tell us how to protect democracy?

    Tobias Lim on 7 November
    Responses: 0

    Dear Jennifer Dresden, [highlight=transparent]I am an ordinary citizen who is concerned about the future of democracy. You know better than I that the US midterm elections will be a bellwether for things to come.[/highlight] [highlight=transparent]You gave a fantastic int...

    Edit Buttons, Selfies and Life

    Tobias Lim on 8 November
    Responses: 0

    Dear Internet, [highlight=transparent]I have sometimes wished for an edit button on this platform. I even went as far as to send the founder of Collate a request for this very feature. I happen to be a clumsy perfectionist, you see. I have an uncanny knack for find...

    Joe biden have big wrong as economically because he distributed billions of dolars in the pandemic .

    Hamit Mumcu on 10 November
    Responses: 0

    Dear Biden, Joe biden have big wrong as economically because he distributed billions of dolars in the pandemic . This was bad thing for economic but that was good as social state . All world effected this progress. All stock markets had big acceleration as posi...

    Thickheaded Corporations

    Tobias Lim on 14 November
    Responses: 0

    Dear Internet, [highlight=transparent]A few months ago, a family-friend who we will call Valerie bought two tickets for herself and her friend for travel long overdue. They were excited to visit someplace exotic after extended lockdowns and closed international bor...

    An Addendum to Gelatinous Ignorance

    Tobias Lim on 14 November
    Responses: 0

    Dear Internet, [highlight=transparent]A few weeks ago, I wrote a short letter about the “[/highlight][color=rgb(17, 85, 204)][highlight=transparent][url=https://www.collate.org/closed_letter/dealing-with-our-gelatinous-ignorance/sender]gelatinous ignorance[/url][/h...

    Why are video games so violent?

    Tobias Lim on 15 November
    Responses: 0

    Dear Michael Kasumovic, [highlight=transparent]I came across an interesting article on [/highlight][color=rgb(17, 85, 204)][highlight=transparent][url=https://newsroom.unsw.edu.au/news/science-tech/why-do-we-play-violent-video-games#:~:text=Kasumovic%20says.,to%20satisfy%20...

    Love, Terror, and Brainwashing — How can we stop cult-like politics?

    Tobias Lim on 15 November
    Responses: 0

    Dear Alexandra Stein, [highlight=transparent]In light of recent political developments, I was looking for books and papers to better understand the nature of human organization and social structure. I found your research on cults especially illuminating. So t[/highlight]h...

    What are your plans for Cressbrook Dale?

    Christopher Crompton on 21 November
    Responses: 0

    Dear Rachel Elnaugh, I have been visiting the Peak District National Park for many years and regard Cressbrook Dale as one of its gems of natural beauty and biodiversity. The woodland and wildflowers through the seasons are a particular joy, and as National Park access l...

    A question about the mindful athlete

    Tobias Lim on 21 November
    Responses: 0

    Dear George Mumford, [highlight=transparent]I bought my second copy of The Mindful Athlete a few days ago. This time, I plan to give it to a friend as a Christmas gift. You see, this friend of mine is facing a series of setbacks and personal hardships. But I am hopeful t...

    Letters to Tarkovsky

    Tobias Lim on 4 December
    Responses: 0

    Dear Internet, When a nobody like myself writes in letter form to a public figure, there is only a small probability that she will see my words amidst the flood of mail and messages that she inevitably receives. Beyond that, there is an even smaller chance that she...

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