Economist Best Quotes

And it is funny because economists are not real scientists, and because logicians think more clearly, but mathematicians are best.

One the one hand, our economists treat human beings as rational actors making choices to maximize their own economic benefit. On the other hand, the same companies that hire those economists also pay for advertising campaigns that use the raw materials of myth and magic to encourage people to act against their own best interests, whether it's a matter of buying overpriced fizzy sugar water or the much more serious matter of continuing to support the unthinking pursuit of business as usual in the teeth of approaching disaster.

Why is it so important to have fun? Because if you love your work (or your activism or your family time), then you’ll want to do more of it. You’ll think about it before you go to sleep and as soon as you wake up; your mind is always in gear. When you’re that engaged, you’ll run circles around other people even if they are more naturally talented. From what we’ve seen personally, the best predictor of success among young economists and journalists is whether they absolutely love what they do. If they approach their job like—well, a job—they aren’t likely to thrive. But if they’ve somehow convinced themselves that running regressions or interviewing strangers is the funnest thing in the world, you know they have a shot.

There are two visions of America a half century from now. One is of a society more divided between the haves and the have-nots, a country in which the rich live in gated communities, send their children to expensive schools, and have access to first-rate medical care. Meanwhile, the rest live in a world marked by insecurity, at best mediocre education, and in effect rationed health care―they hope and pray they don't get seriously sick. At the bottom are millions of young people alienated and without hope. I have seen that picture in many developing countries; economists have given it a name, a dual economy, two societies living side by side, but hardly knowing each other, hardly imagining what life is like for the other. Whether we will fall to the depths of some countries, where the gates grow higher and the societies split farther and farther apart, I do not know. It is, however, the nightmare towards which we are slowly marching.

But in both instances, the dissemination of the information diluted its power. As Supreme Court Justice Louis D. Brandeis once wrote, "Sunlight is said to be the best of disinfectants.

People do more for their fellows than return favors and punish cheaters. They often perform generous acts without the slightest hope for payback ranging from leaving a tip in a restaurant they will never visit again to throwing themselves on a live grenade to save their brothers in arms. [Robert] Trivers together with the economists Robert Frank and Jack Hirshleifer has pointed out that pure magnanimity can evolve in an environment of people seeking to discriminate fair weather friends from loyal allies. Signs of heartfelt loyalty and generosity serve as guarantors of one s promises reducing a partner s worry that you will default on them. The best way to convince a skeptic that you are trustworthy and generous is to be trustworthy and generous.

Sunlight is said to be the best of disinfectants.

The late maverick economist Kenneth Boulding perhaps best summed it up when testifying before the U.S. Congress, declaring that “anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist.

Economist Marvin Harris described women as a "literate and docile" labor pool, and "therefore desirable candidates for the information- and people-processing jobs thrown up by modern service industries." The qualities that best serve employers in such a labor pool's workers are: low self-esteem, a tolerance for dull repetitive tasks, lack of ambition, high conformity, more respect for men (who manage them) than women (who work beside them), and little sense of control over their lives.

His best chance of doing so is to engage the public’s emotions, for emotion is the enemy of rational argument.

The lesson about food is that the most predictable and the most orderly outcomes are always not the best. They are just easier to describe. Fads are orderly. Food carts and fires aren't. Feeding the world could be a delicious mess, full of diverse flavors and sometimes good old-fashioned smoke.

It was John Kenneth Galbraith, the hyperliterate economic sage, who coined the phrase “conventional wisdom.” He did not consider it a compliment. “We associate truth with convenience,” he wrote, “with what most closely accords with self-interest and personal well-being or promises best to avoid awkward effort or unwelcome dislocation of life. We also find highly acceptable what contributes most

Well, one of the best ways to control people in terms of attitudes is by what the great political economist Thorstein Veblen called “fabricating consumers.” If you can fabricate wants, make obtaining things that are just about within your reach the essence of life, they’re going to be trapped into becoming consumers. You read the business press in the 1920s and it talks about the need to direct people to the superficial things of life, like “fashionable consumption,” and that’ll keep them out of our hair.

There are three men on a train. One of them is an economist and one of them is a logician and one of them is a mathematician. And they have just crossed the border into Scotland (I don’t know why they are going to Scotland) and they see a brown cow standing in a field from the window of the train (and the cow is standing parallel to the train). And the economist says, “Look, the cows in Scotland are brown.” And the logician says, “No. There are cows in Scotland of which one at least is brown.” And the mathematician says, “No. There is at least one cow in Scotland, of which one side appears to be brown.” And it is funny because economists are not real scientists, and because logicians think more clearly, but mathematicians are best.

Some economists, when thinking about long memory, are concerned that it undercuts the Efficient Market Hypothesis that prices fully reflect all relevant information; that the random walk is the best metaphor to describe such markets; and that you cannot beat such an unpredictable market. Well, the Efficient Market Hypothesis is no more than that, a hypothesis. Many a grand theory has died under the onslaught of real data.

Adam Smith FRSE (baptised June 5, 1723 O.S. / June 16 N.S. – July 17, 1790) was a Scottish moral philosopher and a pioneering political economist. He is also the founder of economics. One of the key figures of the intellectual movement known as the Scottish Enlightenment, he is known primarily as the author of two treatises: The Theory of Moral Sentiments (1759), and An Inquiry into the Nature and Causes of the Wealth of Nations (1776). The latter was one of the earliest attempts to systematically study the historical development of industry and commerce in Europe, as well as a sustained attack on the doctrines of mercantilism. Smith's work helped to create the modern academic discipline of economics and provided one of the best-known intellectual rationales for free trade, capitalism, and libertarianism. Adam Smith is now depicted on the back of the Bank of England £20 note. Source: Wikipedia

In Levitt’s view, economics is a science with excellent tools for gaining answers but a serious shortage of interesting questions. His particular gift is the ability to ask such questions. For instance: If drug dealers make so much money, why do they still live with their mothers? Which is more dangerous, a gun or a swimming pool? What really caused crime rates to plunge during the past decade? Do real-estate agents have their clients’ best interests at heart? Why do black parents give their children names that may hurt their career prospects?

None of this excuses anyone from mastering the basic ideas and terminology of economics. The intelligent layman must expect also to encounter good economists who are difficult writers even though some of the best have been very good writers. He should know, moreover, that at least for a few great men ambiguity of expression has been a positive asset. But with these exceptions he may safely conclude that what is wholly mysterious in economics is not likely to be important.

If you study the words in ads for a real-estate agent’s own home, meanwhile, you see that she indeed emphasizes descriptive terms (especially “new,” “granite,” “maple,” and “move-in condition”) and avoids empty adjectives (including “wonderful,” “immaculate,” and the telltale “!”). Then she patiently waits for the best buyer to come along

What is the use of beauty in woman? Provided a woman is physically well made and capable of bearing children, she will always be good enough in the opinion of economists. What is the use of music? -- of painting? Who would be fool enough nowadays to prefer Mozart to Carrel, Michael Angelo to the inventor of white mustard? There is nothing really beautiful save what is of no possible use. Everything useful is ugly, for it expresses a need, and man's needs are low and disgusting, like his own poor, wretched nature. The most useful place in a house is the water-closet. For my part, saving these gentry's presence, I am of those to whom superfluities are necessaries, and I am fond of things and people in inverse ratio to the service they render me. I prefer a Chinese vase with its mandarins and dragons, which is perfectly useless to me, to a utensil which I do use, and the particular talent of mine which I set most store by is that which enables me not to guess logogriphs and charades. I would very willingly renounce my rights as a Frenchman and a citizen for the sight of an undoubted painting by Raphael, or of a beautiful nude woman, -- Princess Borghese, for instance, when she posed for Canova, or Julia Grisi when she is entering her bath. I would most willingly consent to the return of that cannibal, Charles X., if he brought me, from his residence in Bohemia, a case of Tokai or Johannisberg; and the electoral laws would be quite liberal enough, to my mind, were some of our streets broader and some other things less broad. Though I am not a dilettante, I prefer the sound of a poor fiddle and tambourines to that of the Speaker's bell. I would sell my breeches for a ring, and my bread for jam. The occupation which best befits civilized man seems to me to be idleness or analytically smoking a pipe or cigar. I think highly of those who play skittles, and also of those who write verse. You may perceive that my principles are not utilitarian, and that I shall never be the editor of a virtuous paper, unless I am converted, which would be very comical. Instead of founding a Monthyon prize for the reward of virtue, I would rather bestow -- like Sardanapalus, that great, misunderstood philosopher -- a large reward to him who should invent a new pleasure; for to me enjoyment seems to be the end of life and the only useful thing on this earth. God willed it to be so, for he created women, perfumes, light, lovely flowers, good wine, spirited horses, lapdogs, and Angora cats; for He did not say to his angels, 'Be virtuous,' but, 'Love,' and gave us lips more sensitive than the rest of the skin that we might kiss women, eyes looking upward that we might behold the light, a subtile sense of smell that we might breathe in the soul of the flowers, muscular limbs that we might press the flanks of stallions and fly swift as thought without railway or steam-kettle, delicate hands that we might stroke the long heads of greyhounds, the velvety fur of cats, and the polished shoulder of not very virtuous creatures, and, finally, granted to us alone the triple and glorious privilege of drinking without being thirsty, striking fire, and making love in all seasons, whereby we are very much more distinguished from brutes than by the custom of reading newspapers and framing constitutions.

Economists studied what people did, rather than what we said, because we did what was best for us.

Of course, government economists have been doing their part as well to try to sugar-coat the pill of tax increases. They never refer to these changes as “increases.” They have not been increases at all; they were “revenue enhancement” and “closing loopholes.” The best comment on the concept of “loopholes” was that of Ludwig von Mises. Mises remarked that the very concept of “loopholes” implies that the government rightly owns all of the money you earn, and that it becomes necessary to correct the slipup of the government’s not having gotten its hands on that money long since.

Many neo-liberal economists and political scientists argue that it is best to leave all the important decisions in the hands of the free market. They thereby give politicians the perfect excuse for inaction and ignorance, which are reinterpreted as profound wisdom. Politicians find it convenient to believe that the reason they don’t understand the world is that they need not understand it.

It was John Kenneth Galbraith, the hyperliterate economic sage, who coined the phrase “conventional wisdom.” He did not consider it a compliment. “We associate truth with convenience,” he wrote, “with what most closely accords with self-interest and personal well-being or promises best to avoid awkward effort or unwelcome dislocation of life. We also find highly acceptable what contributes most to self-esteem.” Economic and social behaviors, Galbraith continued, “are complex, and to comprehend their character is mentally tiring. Therefore we adhere, as though to a raft, to those ideas which represent our understanding.” So

The art of reasoned persuasion is an iterative, recursive heuristic, meaning that we must go back and forth between the facts and the rules until we have a good fit. We cannot see the facts properly until we know what framework to place them into, and we cannot determine what framework to place them into until we see the basic contours of the facts. The great economist Friedrich Hayek said, “Without a theory, the facts are silent.

Economist Marvin Harris described women as a 'literate and docile' labor pool, and 'therefore desirable candidates for the information- and people-processing jobs thrown up by modern service industries.' The qualities that best serve employers in such a labor pool's workers are: low self-esteem, a tolerance for dull repetitive tasks, lack of ambition, high conformity, more respect for men (who manage them) than women (who work beside them), and little sense of control over their lives.

Isn't there a flaw in the logic of that phrase - speak truth to power? It assumes that power doesn't know the truth. But power knows the truth just as well, if not better, than the powerless know the truth. Enron knows what it's doing. We don't have to tell it what it's doing. We have to tell other people what Enron is doing. Similarly, the people who are building the dams know what they're doing. The contractors know how much they're stealing. The bureaucrats know how much they're getting in bribes. Power knows the truth. There isn't any doubt about that. It is really about telling the story. Good fiction is the truest thing that ever there was. Facts are not necessarily the only truths. Facts can be fiddled with by economists and bankers. There are other kinds of truth. It's about telling the story. As a writer, that's the best thing I can do. It's not just about digging up facts.

That’s one reason (we’ll see more reasons in the next chapter) why locavores have such a misguided philosophy. It overlooks that some parts of the world are running out of water and that trade of food—often long-distance trade—is the best or indeed the only real answer to that problem. Very often, trading across

The bottom line is that Germany is still an underappreciated food country. Furthermore, buying bread, cheese, and especially sausage in the supermarket will almost certainly not be disappointing. The best ethnic food in Germany is often from groups that don’t make their way in very large numbers to the United States.

There are three men on a train. One of them is an economist and one of them is a logician and one of them is a mathematician. And they have just crossed the border into Scotland and they see a brown cow (and the cow is standing parralel tot the train). And the economist says, 'Look, the cows in Scotland are brown.' And the logician sais, 'No. there are cows in Scotland of which one, at least, is brown.'And the mathematician says, 'No. There is at least one cow in Scotland, of which one side appears to be brown. [I]t is funny because economists are not real scientists, and because logicians think more clearly, but mathematicians are best.

That’s one reason (we’ll see more reasons in the next chapter) why locavores have such a misguided philosophy. It overlooks that some parts of the world are running out of water and that trade of food—often long-distance trade—is the best or indeed the only real answer to that problem. Very often, trading across a distance solves more environmental problems than it creates.

The chief merit of the price system is that it makes effective use of information that is not available to any single decision maker. When the price system is overridden, information is discarded. When information is discarded, resources are misallocated. When resources are misallocated, prosperity suffers. If you’re trying to make people prosperous, relying on prices is your best strategy.

Economists comparing the economic growth of various countries have found a strong positive correlation between GDP growth and measured social trust. The effect even seems to apply when comparing different states in the U.S., with one study finding that a ten percent increase in trust translated to about a half percent increase in per capita income growth and even a positive effect on employment rates.

There are clearly many ways to more equitably share the wealth that lies beneath our feet. Ostrom was quick to point out, however, that there is no panacea for managing land and its resources well: neither the market, the commons nor the state alone can provide an infallible blueprint. Approaches to distributive land design must fit the people and the place, and may well work best when they combine all three of these approaches to provisioning.44

WE WILL ARGUE that to understand world inequality we have to understand why some societies are organized in very inefficient and socially undesirable ways. Nations sometimes do manage to adopt efficient institutions and achieve prosperity, but alas, these are the rare cases. Most economists and policymakers have focused on “getting it right,” while what is really needed is an explanation for why poor nations “get it wrong.” Getting it wrong is mostly not about ignorance or culture. As we will show, poor countries are poor because those who have power make choices that create poverty. They get it wrong not by mistake or ignorance but on purpose. To understand this, you have to go beyond economics and expert advice on the best thing to do and, instead, study how decisions actually get made, who gets to make them, and why those people decide to do what they do. This is the study of politics and political processes.

But fear best thrives in the present tense. That is why experts rely on it; in a world that is increasingly impatient with long-term processes, fear is a potent short-term play. Imagine that you are a government official charged with procuring the funds to fight one of two proven killers: terrorist attacks and heart disease. Which cause do you think the members of Congress will open up the coffers for? The likelihood of any given person being killed in a terrorist attack is far smaller than the likelihood that the same person will clog up his arteries with fatty food and die of heart disease. But a terrorist attack happens now; death by heart disease is some distant, quiet catastrophe. Terrorist acts lie beyond our control; french fries do not. Just as important as the control factor is what Peter Sandman calls the dread factor. Death by terrorist attack (or mad-cow disease) is considered wholly dreadful; death by heart disease is, for some reason, not.

The ethical aspect may be set out, and then the economic. Whose task is it to mix them; to combine? Certainly not anyone who, however skilled in one, is ignorant of the other. Surely, if the economist does not like the task or feel apt for it, he cannot complain if the parson essays it and, with the best of intentions and no discipline, reaches conclusions which do injustice to economics. It is a combined study of peculiar balance and interpretation, and perhaps has not yet developed a proper technique of its own.

China’s one-child policy was crafted by military scientists, who believed any regrettable side effects could be swiftly mitigated and women’s fertility rates easily adjusted. China’s economists, sociologists, and demographers, who might have injected more wisdom and balance, were largely left out of the decision making, as the Cultural Revolution had starved social scientists of resources and prestige. Only the nation’s defense scientists were untouched by the purges, and they proved not the best judges of human behavior.

In a representative statement from 1963, he claimed, “Man does not know most of the rules on which he acts; and even what we call his intelligence is largely a system of rules which operate on him but which he does not know.”60 This deference to the precognitive or the pre-rational is what separated him from the rational choice and rational expectations models of Chicago School economists, who professed much more faith in the possibility of both formal mathematical modeling and forecasting. As he explained in his Nobel speech, Hayek saw such efforts as not only presumptuous but misleading. The best one could hope for was pattern prediction.

...the campaign was also among the most heated in recent memory, or short -term anticipation. The soon-to-be Opposition Leader never tired of listing the promises the new Prime Minister would break; she in turn countered with statistics of the mess he’d create as Treasurer, in the mid-eighties. (The causes of that impending recession were still being debated by economists; most claimed it was an “essential precursor” of the prosperity of the nineties , and that The Market, in its infinite, time -spanning wisdom, would choose / had chosen the best of all possible futures. Personally, I suspect it simply proved that even foresight was no cure for incompetence.

In Economics as almost everywhere else, with all our cleverness, we have become decidedly less wise, while knowing more and more about less and less. We have lost the sense of proportion--so indispensable for every economist--while analysing the curiosities of hypothetical economic situations and forgetting what has a bearing on real economic life. In spinning out the fine threads of the New Economics, we forget the most elementary principles of economics, and while stressing what might at best in highly exceptional circumstances we overlook what are almost perennial truths. While proudly parading our elaborate equations we unlearnt that simple common sense which consists in reckoning with human reactions and institutions as they really are.

Sometimes he wondered if it wasn’t all a giant con, the gaggle of letters after his name, the dinners with Angela Merkel and Narendra Modi, the notes from Gordon Brown and Larry Summers. They were like those fake Oscar statues bought at ‘World’s Greatest Photocopier’ or ‘Best Lightbulb Changer in the Galaxy.’ When he died only his writing would remain, until it was rendered obsolete when oil and coal ran out and the species established its first settlement on Mars. Professor Chandra was the foremost trade economist in the world, could phone any finance minister in any country at any time and have them take his call. And yet, what if he had only convinced himself that the world envied him? What if, in reality, they felt sorry for him with his swollen ego and his Savile Row suits and his sculpted tri-continental accent?

In a seminal 1981 paper, the economist Sherwin Rosen worked out the mathematics behind these “winner-take-all” markets. One of his key insights was to explicitly model talent—labeled, innocuously, with the variable q in his formulas—as a factor with “imperfect substitution,” which Rosen explains as follows: “Hearing a succession of mediocre singers does not add up to a single outstanding performance.” In other words, talent is not a commodity you can buy in bulk and combine to reach the needed levels: There’s a premium to being the best. Therefore, if you’re in a marketplace where the consumer has access to all performers, and everyone’s q value is clear, the consumer will choose the very best. Even if the talent advantage of the best is small compared to the next rung down on the skill ladder, the superstars still win the bulk of the market.

I’ll say it: I am lucky enough to not have to work, in the sense that Jesse and I could change how we organize our life to live on one income. I work because I like to. I love my kids! They are amazing. But I wouldn’t be happy staying home with them. I’ve figured out that my happiness-maximizing allocation is something like eight hours of work and three hours of kids a day. It isn’t that I like my job more than my kids overall—if I had to pick, the kids would win every time. But the “marginal value” of time with my kids declines fast. In part, this is because kids are exhausting. The first hour with them is amazing, the second less good, and by hour four I’m ready for a glass of wine or, even better, some time with my research. My job doesn’t have this feature. Yes, the eighth hour is less fun than the seventh, but the highs are not as high and the lows are not as low. The physical and emotional challenges of work pale in comparison to the physical and emotional challenges of being an on-scene parent. The eighth hour at my job is better than the fifth hour with the kids on a typical day. And that is why I have a job. Because I like it. It should be okay to say this. Just like it should be okay to say that you stay home with your kids because that is what you want to do. I’m well aware that many people don’t want to be an economist for eight hours a day. We shouldn’t have to say we’re staying home for children’s optimal development, or at least, that shouldn’t be the only factor in the decision. “This is the lifestyle I prefer” or “This is what works for my family” are both okay reasons to make choices! So before you even get into reading what the evidence says is “best” for your child or thinking about the family budget, you—and your partner, or any other caregiving adults in the house—should think about what you would really like to do.

I want to convince you that intellectual property is important, that it is something that any informed citizen needs to know a little about, in the same way that any informed citizen needs to know at least something about the environment, or civil rights, or the way the economy works. I will try my best to be fair, to explain the issues and give both sides of the argument. Still, you should know that this is more than mere description. In the pages that follow, I try to show that current intellectual property policy is overwhelmingly and tragically bad in ways that everyone, and not just lawyers or economists, should care about. We are making bad decisions that will have a negative effect on our culture, our kids’ schools, and our communications networks; on free speech, medicine, and scientific research. We are wasting some of the promise of the Internet, running the risk of ruining an amazing system of scientific innovation, carving out an intellectual property exemption to the First Amendment. I do not write this as an enemy of intellectual property, a dot-communist ready to end all property rights; in fact, I am a fan. It is precisely because I am a fan that I am so alarmed about the direction we are taking.

I think that's quite true. and in fact the people who understand this the best are those who are carrying out the control and domination in the more free societies. like the U.S. and England, where popular struggles have have won a lot of freedoms over the years and the state has limited capacity to coerce. It is very striking that it's precisely in those societies that elite groups—the business world, state managers and so on—recognized early on that they are going to have to develop massive methods of control of attitude and opinion, because you cannot control people by force anymore and therefore you have to modify their consciousness so that they don't perceive that they are living under conditions of alienation, oppression, subordination and so on. In fact, that's what probably a couple trillion dollars are spent on each year in the U.S., very self-consciously, from the framing of television advertisements for two-year olds to what you are taught in graduate school economics programs. It's designed to create a consciousness of subordination and it's also intended specifically and pretty consciously to suppress normal human emotions. Normal human emotions are sympathy and solidarity, not just for people but for stranded dolphins. It's just a normal reaction for people. If you go back to the classical political economists, people like Adam Smith, this was just taken for granted as the core of human nature and society. One of the main concentrations of advertising and education is to drive that out of your mind. And it's very conscious. In fact, it's conscious in social policy right in front of our eyes today. Take the effort to destroy Social Security. Well, what's the point of that? There's a lot of scam about financial problems, which is all total nonsense. And, of course, they want Wall Street to make a killing. Underlying it all is something much deeper. Social Security is based on a human emotion and it's a natural human emotion which has to be driven out of people minds, namely the emotion that you care about other people. You care. It's a social and community responsibility to care whether a disabled widow across town has enough food to eat, or whether a kid across the street can go to school. You have to get that out of people's heads. You have to make them say, "Look, you are a personal, rational wealth maximizer. If that disabled widow didn't prepare for her own future, it's her problem not your problem. It's not your fault she doesn't have enough to eat so why should you care?

Part of the problem is the extraordinary place that economics currently holds in the social sciences. In many ways it is treated as a kind of master discipline. Just about anyone who runs anything important in America is expected to have some training in economic theory, or at least to be familiar with its basic tenets. As a result, those tenets have come to be treated as received wisdom, as basically beyond question (one knows one is in the presence of received wisdom when, if one challenges some tenet of it, the first reaction is to treat one as simply ignorant—“You obviously have never heard of the Laffer Curve”; “Clearly you need a course in Economics 101”—the theory is seen as so obviously true that no one exposed to it could possibly disagree). What’s more, those branches of social theory that make the greatest claims to “scientific status”—“rational choice theory,” for instance—start from the same assumptions about human psychology that economists do: that human beings are best viewed as self-interested actors calculating how to get the best terms possible out of any situation, the most profit or pleasure or happiness for the least sacrifice or investment—curious, considering experimental psychologists have demonstrated over and over again that these assumptions simply aren’t true.2

If you can’t make a good prediction, it is very often harmful to pretend that you can. I suspect that epidemiologists, and others in the medical community, understand this because of their adherence to the Hippocratic oath. Primum non nocere: First, do no harm. Much of the most thoughtful work on the use and abuse of statistical models and the proper role of prediction comes from people in the medical profession.88 That is not to say there is nothing on the line when an economist makes a prediction, or a seismologist does. But because of medicine’s intimate connection with life and death, doctors tend to be appropriately cautious. In their field, stupid models kill people. It has a sobering effect. There is something more to be said, however, about Chip Macal’s idea of “modeling for insights.” The philosophy of this book is that prediction is as much a means as an end. Prediction serves a very central role in hypothesis testing, for instance, and therefore in all of science.89 As the statistician George E. P. Box wrote, “All models are wrong, but some models are useful.”90 What he meant by that is that all models are simplifications of the universe, as they must necessarily be. As another mathematician said, “The best model of a cat is a cat.”91 Everything else is leaving out some sort of detail. How pertinent that detail might be will depend on exactly what problem we’re trying to solve and on how precise an answer we require.

In theory, the fact that the rich countries own part of the capital of poor countries can have virtuous effects by promoting convergence. If the rich countries are so flush with savings and capital that there is little reason to build new housing or add new machinery (in which case economists say that the “marginal productivity of capital,” that is, the additional output due to adding one new unit of capital “at the margin,” is very low), it can be collectively efficient to invest some part of domestic savings in poorer countries abroad. Thus the wealthy countries—or at any rate the residents of wealthy countries with capital to spare—will obtain a better return on their investment by investing abroad, and the poor countries will increase their productivity and thus close the gap between them and the rich countries. According to classical economic theory, this mechanism, based on the free flow of capital and equalization of the marginal productivity of capital at the global level, should lead to convergence of rich and poor countries and an eventual reduction of inequalities through market forces and competition. This optimistic theory has two major defects, however. First, from a strictly logical point of view, the equalization mechanism does not guarantee global convergence of per capita income. At best it can give rise to convergence of per capita output, provided we assume perfect capital mobility and, even more important, total equality of skill levels and human capital across countries—no small assumption.

The Princeton economist and wine lover Orley Ashenfelter has offered a compelling demonstration of the power of simple statistics to outdo world-renowned experts. Ashenfelter wanted to predict the future value of fine Bordeaux wines from information available in the year they are made. The question is important because fine wines take years to reach their peak quality, and the prices of mature wines from the same vineyard vary dramatically across different vintages; bottles filled only twelve months apart can differ in value by a factor of 10 or more. An ability to forecast future prices is of substantial value, because investors buy wine, like art, in the anticipation that its value will appreciate. It is generally agreed that the effect of vintage can be due only to variations in the weather during the grape-growing season. The best wines are produced when the summer is warm and dry, which makes the Bordeaux wine industry a likely beneficiary of global warming. The industry is also helped by wet springs, which increase quantity without much effect on quality. Ashenfelter converted that conventional knowledge into a statistical formula that predicts the price of a wine—for a particular property and at a particular age—by three features of the weather: the average temperature over the summer growing season, the amount of rain at harvest-time, and the total rainfall during the previous winter. His formula provides accurate price forecasts years and even decades into the future. Indeed, his formula forecasts future prices much more accurately than the current prices of young wines do. This new example of a “Meehl pattern” challenges the abilities of the experts whose opinions help shape the early price. It also challenges economic theory, according to which prices should reflect all the available information, including the weather. Ashenfelter’s formula is extremely accurate—the correlation between his predictions and actual prices is above .90.

When the time comes, & I hope it comes soon, to bury this era of moral rot & the defiling of our communal, social, & democratic norms, the perfect epitaph for the gravestone of this age of unreason should be Iowa Senator Chuck Grassley's already infamous quote: "I think not having the estate tax recognizes the people that are investing... as opposed to those that are just spending every darn penny they have, whether it’s on booze or women or movies.” Grassley's vision of America, quite frankly, is one I do not recognize. I thought the heart of this great nation was not limited to the ranks of the plutocrats who are whisked through life in chauffeured cars & private jets, whose often inherited riches are passed along to children, many of whom no sacrifice or service is asked. I do not begrudge wealth, but it must come with a humility that money never is completely free of luck. And more importantly, wealth can never be a measure of worth. I have seen the waitress working the overnight shift at a diner to give her children a better life, & yes maybe even take them to a movie once in awhile - and in her, I see America. I have seen the public school teachers spending extra time with students who need help & who get no extra pay for their efforts, & in them I see America. I have seen parents sitting around kitchen tables with stacks of pressing bills & wondering if they can afford a Christmas gift for their children, & in them I see America. I have seen the young diplomat in a distant foreign capital & the young soldier in a battlefield foxhole, & in them I see America. I have seen the brilliant graduates of the best law schools who forgo the riches of a corporate firm for the often thankless slog of a district attorney or public defender's office, & in them I see America. I have seen the librarian reshelving books, the firefighter, police officer, & paramedic in service in trying times, the social worker helping the elderly & infirm, the youth sports coaches, the PTA presidents, & in them I see America. I have seen the immigrants working a cash register at a gas station or trimming hedges in the frost of an early fall morning, or driving a cab through rush hour traffic to make better lives for their families, & in them I see America. I have seen the science students unlocking the mysteries of life late at night in university laboratories for little or no pay, & in them I see America. I have seen the families struggling with a cancer diagnosis, or dementia in a parent or spouse. Amid the struggles of mortality & dignity, in them I see America. These, & so many other Americans, have every bit as much claim to a government working for them as the lobbyists & moneyed classes. And yet, the power brokers in Washington today seem deaf to these voices. It is a national disgrace of historic proportions. And finally, what is so wrong about those who must worry about the cost of a drink with friends, or a date, or a little entertainment, to rephrase Senator Grassley's demeaning phrasings? Those who can't afford not to worry about food, shelter, healthcare, education for their children, & all the other costs of modern life, surely they too deserve to be able to spend some of their “darn pennies” on the simple joys of life. Never mind that almost every reputable economist has called this tax bill a sham of handouts for the rich at the expense of the vast majority of Americans & the future economic health of this nation. Never mind that it is filled with loopholes written by lobbyists. Never mind that the wealthiest already speak with the loudest voices in Washington, & always have. Grassley’s comments open a window to the soul of the current national Republican Party & it it is not pretty. This is not a view of America that I think President Ronald Reagan let alone President Dwight Eisenhower or Teddy Roosevelt would have recognized. This is unadulterated cynicism & a version of top-down class warfare run amok. ~Facebook 12/4/17

gave up on the idea of creating “socialist men and women” who would work without monetary incentives. In a famous speech he criticized “equality mongering,” and thereafter not only did different jobs get paid different wages but also a bonus system was introduced. It is instructive to understand how this worked. Typically a firm under central planning had to meet an output target set under the plan, though such plans were often renegotiated and changed. From the 1930s, workers were paid bonuses if the output levels were attained. These could be quite high—for instance, as much as 37 percent of the wage for management or senior engineers. But paying such bonuses created all sorts of disincentives to technological change. For one thing, innovation, which took resources away from current production, risked the output targets not being met and the bonuses not being paid. For another, output targets were usually based on previous production levels. This created a huge incentive never to expand output, since this only meant having to produce more in the future, since future targets would be “ratcheted up.” Underachievement was always the best way to meet targets and get the bonus. The fact that bonuses were paid monthly also kept everyone focused on the present, while innovation is about making sacrifices today in order to have more tomorrow. Even when bonuses and incentives were effective in changing behavior, they often created other problems. Central planning was just not good at replacing what the great eighteenth-century economist Adam Smith called the “invisible hand” of the market. When the plan was formulated in tons of steel sheet, the sheet was made too heavy. When it was formulated in terms of area of steel sheet, the sheet was made too thin. When the plan for chandeliers was made in tons, they were so heavy, they could hardly hang from ceilings. By the 1940s, the leaders of the Soviet Union, even if not their admirers in the West, were well aware of these perverse incentives. The Soviet leaders acted as if they were due to technical problems, which could be fixed. For example, they moved away from paying bonuses based on output targets to allowing firms to set aside portions of profits to pay bonuses. But a “profit motive” was no more encouraging to innovation than one based on output targets. The system of prices used to calculate profits was almost completely unconnected to the value of new innovations or technology. Unlike in a market economy, prices in the Soviet Union were set by the government, and thus bore little relation to value. To more specifically create incentives for innovation, the Soviet Union introduced explicit innovation bonuses in 1946. As early as 1918, the principle had been recognized that an innovator should receive monetary rewards for his innovation, but the rewards set were small and unrelated to the value of the new technology. This changed only in 1956, when it was stipulated that the bonus should be proportional to the productivity of the innovation. However, since productivity was calculated in terms of economic benefits measured using the existing system of prices, this was again not much of an incentive to innovate. One could fill many pages with examples of the perverse incentives these schemes generated. For example, because the size of the innovation bonus fund was limited by the wage bill of a firm, this immediately reduced the incentive to produce or adopt any innovation that might have economized on labor.

One of our nation’s biggest challenges is the upliftment of the 270 million people who are below the poverty line. They need housing, food, healthcare, and they need education and employment, which will enable them to lead a good life. Our GDP is oscillating between 4-6 per cent per annum, whereas economists suggest that to uplift the people living below the poverty line, our economy has to grow at the rate of 10 per cent per annum consistently for over a decade.

At the level of economic theory, the great fallacy in the logic of David Ricardo, the father of free-trade theory, was to view the gains and losses of trade in a static fashion, as a snapshot at a single point in time. In Ricardo’s theory, whose variants are espoused by free-market economists to this day, if nineteenth-century Britain offered better and cheaper manufactured goods, the US should buy them and export something where it could compete—say, raw cotton and lumber—even if that meant the US never developed an industrial economy. By the same token, if twentieth-century America made the best cars, machine tools, and steel, Japan and Korea should import those, and continue to export cheap toys and rice. And if other nations subsidized US industries, Americans, rather than being fearful of displacement, should accept the “gift.” What Ricardo missed—and what leaders from Alexander Hamilton and Abraham Lincoln to Teddy Roosevelt grasped (likewise statesmen in nations from Japan to Brazil), as well as dissenting economists like the German Friedrich List and the Americans Paul Krugman and Dani Rodrik—was that the dynamic gains of economic development over time far surpass the static gains at a single point in time. Economic advantage is not something bestowed by nature. Advantage can be deliberately created—an insight for which Krugman won a Nobel Prize. Policies of economic development often required an active role for the state, in violation of laissez-faire.

In a seminal 1981 paper, the economist Sherwin Rosen worked out the mathematics behind these “winner-take-all” markets. One of his key insights was to explicitly model talent—labeled, innocuously, with the variable q in his formulas—as a factor with “imperfect substitution,” which Rosen explains as follows: “Hearing a succession of mediocre singers does not add up to a single outstanding performance.” In other words, talent is not a commodity you can buy in bulk and combine to reach the needed levels: There’s a premium to being the best.

The social sciences are lagging far behind physics when it comes to theoretical rigor and validity, but physics today has advanced far beyond where it was when the Wright brothers were working on their flight project. The brothers saw the necessity in seeking out the available theories and data and making the best of their material. Within practical politics and political philosophy, the situation is different. Classical philosophers such as Hobbes and Locke did not have the social sciences at their disposal and relied on their common sense, peppered with fragments of stories from abroad. Social scientists have evolved, but philosophy and praxis remain relatively unaltered, by and large proceeding in their pre-scientific state. Keynes once noted that “Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist,” and many a political philosopher takes after them in this respect. Political praxis has evolved, in economic arenas most of all, but the focus that economists have placed on the market has led to a serious imbalance in the relationship between social sciences and policy making. Even more than political philosophy, politics suffers from what psychologists call selective perception: decision-makers tend to seek out research that supports (or that they believe supports) their current positions.

Legends of Bangladesh - A bunch of pure souls who achieved the glory for a country, Bangladesh, will remember forever as the legends of the nation. The world will know them for their work, sacrifice, love and mostly commitment to give best to their country until last breath. Some of them are famous for writing, some are journalism, Actor movie directors, sportsmen, cricketer, Footballer, economist, scientist, photographer, singer, businessman, martyr, architect, magician and so on. Its not enough to salute and remember them, nationwide respect and acknowledgment with proper mind will fulfill their destiny of making a golden country with all those hard work.

When the time came to apply for college, I decided against physics and other technical fields, and ended up at the Stockholm School of Economics, focusing on environmental issues. I wanted to do my small part to make our planet a better place, and felt that the main problem wasn't that we lacked technical solutions, but that we didn't properly use the technology we had. I figured that the best way to affect people's behavior was through their wallets, and was intrigued by the idea of creating economic incentives that aligned individual egoism with the common good. Alas, I soon grew disillusioned, concluding that economics was largely a form of intellectual prostitution where you got rewarded for saying what the powers that be wanted to hear. Whatever a politician wanted to do, he or she could find an economist as advisor who had argued for doing precisely that. Franklin D. Roosevelt wanted to increase government spending, so he listened to John Maynard Keynes, whereas Ronald Reagan wanted to decrease government spending, so he listened to Milton Friedman.

What causes recessions? Many economists talk about the need for a consumer economy, but we can't have a consumer economy if people can't afford to consume, and the only way they can afford to consume over the long run is if they create new wealth to either consume at that time or to defer as investments for later consumption. Simply put, the best way to have a functioning economy is to focus on having a wealth-producing economy. But when wealth can't be created in spite of the need for such, the production of wealth has been artificially limited, and this artificial limitation is the root cause of business recessions.

Although China is short of the people it really needs—scientists, economists, doctors, teachers, practically everybody, in fact, except Indian chiefs—it employs its best and brightest in thinking how to update its theology. A mind, as the saying goes, is a terrible thing to waste.

It was the economist John Maynard Keynes, a liberal who believed socialists were well-intentioned idiots, who presented the best approach of the time to taming capitalism. The methods laid out in his 1936 work, The General Theory of Employment, Interest and Money, once implemented, would help spur employment, ensure productive investment, and mitigate crises. Before the Keynesian revolution, the reigning classical theory

BBLR means that if the tax base—that is, the total amount of income, or sales, or property that can be taxed—is kept as large as possible, then the tax rate—that is, the percentage that people have to give to the government—can be kept low. Virtually all economists and tax experts agree that this is the best way to run a tax regime.

The “where-to-be-born” index, published by the Economist Intelligence Unit, claims Switzerland is the best country to be born in. For good reasons. The country is ranked second in global competitiveness, first in patent filings per person, second in human development and first in trust in government. It does this with the seventh-highest share of renewable energy as a percentage of total energy.

The ideological Turing test, suggested by economist Bryan Caplan, is based on similar logic.11 It’s a way to determine if you really understand an ideology: Can you explain it as a believer would, convincingly enough that other people couldn’t tell the difference between you and a genuine believer? If you think Haskell is the best programming language, can you explain why someone might hate it? If you’re in favor of legal abortion, can you explain why someone wouldn’t be? If you think it’s clear that climate change is a serious problem, can you explain why someone might be skeptical? In theory, you would consult believers from the other side to see if you passed the test. But that’s not always feasible. It’s time-consuming, and you may not be able to easily find an audience on the other side whom you trust to give your attempt a good-faith listen. Most of the time, I treat the ideological Turing test as a kind of “North Star,” an ideal to guide my thinking: Does my characterization of the other side at least sound like something they might actually say or endorse?

Juliet B. Schor, an economist who eloquently writes about our life and work in the shadow of consumerism and time pressure, calls the way we choose to operate “performative busyness.

The /utility /economists, according to Wicksell, were committed to a “thoroughly revolutionary programme” precisely on this question of distribution of income.^9 Marshall, and to some extent Pigou, got out of the fix that their theory had landed them in by emphasizing the danger to total physical national income that would be associated with an attempt to increase its /utility /by making its distribution more equal. This argument has been spoiled by the Keynesian revolution. If, as Keynes expected, saving is more than sufficient for a satisfactory rate of private investment, to use it for social purpose is not only harmless but actually beneficial to National Income, while if more total saving is needed than would be forthcoming under /laisser faire /it can easily be supplemented by budget surpluses. Edgworth, as we saw above,^10 and many after him, took refuge in the argument that we do not really know that greater equality would promote greater happiness, because individuals differ in their capacity for happiness, so that, until we have a thoroughly scientific hedonimeter, “the principle ‘every man, and every woman, to count for one,’ should be very cautiously applied.”^11 Many years ago, this point of view was expressed by Professor Harberler: “How do I know that it hurts you more to have your leg cut off than it hurts me to be pricked by a pin?” It seemed at the time that it would have been more telling if he had put it the other way round. Such arguments are getting rather dangerous nowadays, for though we shall presumably never have a hedonimeter whose findings would be unambiguous, the scientific measurement of pain is fairly well developed, and it would be very surprising if a national survey of the distribution of susceptibility to pain turned out to have just the same skew as the distribution of income. If the question is once put: Would a greater contribution to human welfare be made by an investment in capacity to produce knick-knacks that have to be advertised in order to be sold or an investment in improving the health service, it seems to me that the answer would be only too obvious; the best reply that /laisser-faire /ideology can offer is not to ask the question. [pp. 127-8]

What might we aspire to instead, if not more possessions? ‘Wherever and whenever we are excessive in our lives it is the sign of an as yet unknown deprivation,’ argues the psychoanalyst Adam Phillips. ‘Our excesses are the best clue we have to our own poverty, and our best way of concealing it from ourselves.’72 When it comes to consumerism, perhaps the poverty that we aim to conceal lies in our neglected relationships

Only love can bring full freedom, all else brings half freedom. What is half freedom you ask? When in the name of freedom you imprison yourself to one side or sect, everything outside that sect seems evil. For example, fundamentalists choose the side of blind faith, and every act of reason seems like blasphemy - just like cold, sharp-tongue intellectuals choose the side of rationality even at the expense of humanity, and everything illogical seems outdated - or wait, I got a better one - so-called social activists often get so attached to their self-imposed identity of victimhood, that every person with a political, corporate, legal or bureaucratic background seems to appear as devil incarnate. This, my friend, is what I call "half freedom", which by the way, is far worse than the lack of freedom. And even though it manifests as an act of willful choice, when you get down to it, it's just plain old rigidity. And if we want to build a truly just, inclusive and progressive society, this hypocritical half-freedom won't do - what's needed is whole freedom - a kind of freedom that liberates the mind of all superstition as well as ignorant suspiciousness. It's time we realize, yelling about justice without using common sense is just as useless as keeping quiet. What this means is that, we gotta come together regardless of our background - the teacher, the scientist, the student, the copper, the politician, the civil servant, the entrepreneur, the economist, the janitor, the construction worker - every single person from every single walk of life must come forward surpassing all suspicious conspiracy, and contribute the best of their capacity in the making of a real civilized world.

There is a story that George Stigler, one of the leading lights of the Chicago School of economists, gave a seminar at the University of St Andrews on Adam Smith. His opening words, "Adam Smith is alive and well, and living in Chicago," invited the heckle, "And how is the prisoner?" Given that as well as being a formidable historian of economics, Stigler was also a fabulist, the story may have got better in the telling. All the economists who have contributed to this volume have rejected the Chicago reading of Smith. Freeing Stigler's prisoner, they have shown that for Smith, it was impossible to separate economy and society. They have noted that where the Chicago reading emphasised his support for free enterprise and accepted the outcome of markets as being the best possible, Smith instead emphasised the importance of 'commercial society.

THE TWENTY WHITE GIRL NAMES THAT BEST SIGNIFY HIGH-EDUCATION PARENTS* (YEARS OF MOTHER’S EDUCATION IN PARENTHESES) Lucienne Marie-Claire Glynnis Adair Meira Beatrix Clementine Philippa Aviva Flannery Rotem Oona Atara Linden Waverly Zofia Pascale Eleanora Elika Neeka (16.60) (16.50) (16.40) (16.36) (16.27) (16.26) (16.23) (16.21) (16.18) (16.10) (16.08) (16.00) (16.00) (15.94) (15.93) (15.88) (15.82) (15.80) (15.80) (15.77) Now for the boys’ names that are turning up these days in high-education households.

This list is particularly heavy on the Hebrew, with a noticeable trend toward Irish traditionalism. THE TWENTY WHITE BOY NAMES THAT BEST SIGNIFY HIGH-EDUCATION PARENTS* (YEARS OF MOTHER’S EDUCATION IN PARENTHESES) Dov Akiva Sander Yannick Sacha Guillaume Elon Ansel Yonah Tor Finnegan MacGregor Florian Zev Beckett Kia Ashkon Harper Sumner Calder (16.50) (16.42) (16.29) (16.20) (16.18) (16.17) (16.16) (16.14) (16.14) (16.13) (16.13) (16.10) (15.94) (15.92) (15.91) (15.90) (15.84) (15.83) (15.77) (15.75)

Initially the common ownership theory was dismissed as a loony idea from ivory-tower economists. After all, the airline industry is infamously bankruptcy-prone and looked like poor evidence of anticompetitive behavior, overt or otherwise. Richard Branson, the billionaire entrepreneur, once joked that the best way to become an aviation millionaire was to be a billionaire and invest in an airline. However, the theory gradually started to garner attention. “Are Index Funds Evil?” was the provocative title of one piece examining the subject in The Atlantic in 2017.18

Economists copied their mathematics from the work of 19th-century physicists: they see individuals and businesses as interchangeable atoms, not as unique creators. Their theories describe an equilibrium state of perfect competition because that’s what’s easy to model, not because it represents the best of business. But

In sum, economists (and those who listened to them) became overconfident in their preferred models of the moment: markets are efficient, financial innovation improves the risk-return trade-off, self-regulation works best, and government intervention is ineffective and harmful. They forgot about the other models. There was too much Fama, too little Shiller. The economics of the profession may have been fine, but evidently there was trouble with its psychology and sociology.

To Friedman, a free society is a more moral society, because it respects the moral primacy of the individual. It is only through their own free choices that people express their values, and therefore their individuality and their humanity. Without that freedom, we count no more than sheep. To be truly human, we must be free, and responsible for our own actions. The majority may not approve of what we choose, or may think they know what is best for us; but that gives them no right to dictate what we may drink or inject, nor to force us into military service, nor to steal our property and income for their own purposes.

No life is specially interesting. Almost everybody does the same thing and shares the common career and money-related interests regardless if he is a scientist, an artist or an economist. Almost everybody spends the similar life style — relaxation and satisfaction of the needs of stomach and sex organ. Almost everybody does his best to pass down his genes through originating and nurturing the next generation. Patriotism, intellectuality, religiosity and so on, and so forth are only a pose but not the intrinsic parts of the mental state, of course, if one doesn’t suffer from serious psychological disorder. The commonest thing is delightful if one only hides it. For that reason most men, if not any, tend to wear a mask of patriotism, intellectuality or religiosity in order to give to his ordinary life some “richness of content.

WE WILL ARGUE that to understand world inequality we have to understand why some societies are organized in very inefficient and socially undesirable ways. Nations sometimes do manage to adopt efficient institutions and achieve prosperity, but alas, these are the rare cases. Most economists and policymakers have focused on “getting it right,” while what is really needed is an explanation for why poor nations “get it wrong.” Getting it wrong is mostly not about ignorance or culture. As we will show, poor countries are poor because those who have power make choices that create poverty. They get it wrong not by mistake or ignorance but on purpose. To understand this, you have to go beyond economics and expert advice on the best thing to do and, instead, study how decisions actually get made, who gets to make them, and why those people decide to do what they do. This is the study of politics and political processes. Traditionally economics has ignored politics, but understanding politics is crucial for explaining world inequality. As the economist Abba Lerner noted in the 1970s, “Economics has gained the title Queen of the Social Sciences by choosing solved political problems as its domain.” We

The weakness of our age is in want of great men and women. It is hard to resist the current. Someone must completely detach himself from the ordinary run of politicians if he is to save politics; economists must break with the ordinary run of the mill of capital and labor commonplaces, if economics is to be saved. In other words, we need saints. These are not easy to make. First of all - because we do not always want the best; the best demands sacrifice of the ordinary and the discipline of the lower self. God, in His turn, finds it hard to give, because He gives only the best - moral perfection - and few there are who want it. As Augustine said at one point in his life, "I want to be good, dear Lord...but not now - a little later on.

Particular gift is the ability to ask such questions. For instance: If drug dealers make so much money, why do they still live with their mothers? Which is more dangerous, a gun or a swimming pool? What really caused crime rates to plunge during the past decade? Do real-estate agents have their clients’ best interests at heart? Why do black parents give their children names that may hurt their career prospects? Do schoolteachers cheat to meet high-stakes testing.

Economists sometimes distinguish between three types of goods: private goods, which can be purchased by individuals through the market; club goods, which can only be purchased by a group through some organization like a corporation; and public goods, which can only be purchased by whole communities through the state. This is a very helpful terminological distinction, but it should not be allowed to obscure one very important point. As the example of security guards shows, in many cases the good that is purchased is identical; it’s just that the way it is purchased differs. Rich people pay their security guards personally. Condo owners pay fees to a condo association, which then pays security guards. Citizens pay taxes to the state, which then pays the police. Exactly the same economic transaction is taking place, but it is organized in a different way. So if you ask whether security should be a private good, a club good, or a public good, the answer will be—it depends. Sometimes it is more efficient to deliver security services through the market; sometimes it will be more efficient to deliver them through the state. From the standpoint of society, the goal should be to choose the delivery system that works best in each case.

In 1982, economists at the Brookings Institute estimated that about 62 per cent of the value of a typical American firm stemmed from its physical assets—everything from tables and chairs to factories and inventories. Everything else consisted of more intangible “knowledge assets.” By 1992, the balance had completely reversed. They calculated that only 38 per cent of the average firm’s value came from its physical assets. With the shift towards more knowledge-intensive production processes, it is natural that firms should start to worry much more about employee loyalty. It is relatively easy to stop employees from making off with company property—just post guards at the gate. But when employees leave, they generally take with them all the knowledge and experience they have acquired, and there is no way to stop them. So the best way for a firm to retain control of its assets is to build a strong organizational culture, one that will inspire loyalty and allegiance from its employees. From this perspective, it is entirely predictable that the firms that depend most heavily on the knowledge of their workers will also be the firms that put the most effort into employee retention. Software companies in particular are famous for their efforts to create a corporate culture that will secure employee allegiance.

A system administrator sometimes needs to be a business-process consultant, corporate visionary, janitor, software engineer, electrical engineer, economist, psychiatrist, mindreader, and, occasionally, bartender. As

It is above all in their writings that one can best study the true nature” of the French Revolution, Alexis de Tocqueville wrote in L’ancien régime et la Révolution, of the Économistes or Physiocrats of the mid-eighteenth century, of Quesnay and Letrosne and Morelly and Mercier de la Rivière. The “Economists have had less brilliance in history than the philosophers,” he wrote; they nonetheless express, even more than the philosophers, the “single notion” in which “the political philosophy of the eighteenth century consists.” This is the idea that it is appropriate “to substitute simple and elementary rules, derived from reason and from natural law, for the complicated and traditional customs” of particular societies at particular times. The past, for the Économistes, was “the object of a limitless scorn.” They argued for the abstract and the general; for administrative simplicity, for “public utility” without “private rights,” for “laisser faire” or “the free exchange of commodities” without “political freedoms.

When I first started working for Larry Summers, then chief economist at the World Bank, he was married to a tax attorney, Vicki. He was very supportive of Vicki’s career and used to urge her to “bill like a boy.” His view was that the men considered any time they spent thinking about an issue—even time in the shower—as billable hours. His wife and her female colleagues, however, would decide that they were not at their best on a given day and discount hours they spent at their desks to be fair to the client. Which lawyers were more valuable to that firm? To make his point, Larry told them the story of a renowned Harvard Law School professor who was asked by a judge to itemize a bill. The professor responded that he could not because he was so often thinking about two things at once.

So why are economists obsessed with competition as an ideal state? It’s a relic of history. Economists copied their mathematics from the work of 19th-century physicists: they see individuals and businesses as interchangeable atoms, not as unique creators. Their theories describe an equilibrium state of perfect competition because that’s what’s easy to model, not because it represents the best of business. But it’s worth recalling that the long-run equilibrium predicted by 19th-century physics was a state in which all energy is evenly distributed and everything comes to rest—also known as the heat death of the universe. Whatever your views on thermodynamics, it’s a powerful metaphor: in business, equilibrium means stasis, and stasis means death.

Challenging the earlier economists of his day, Marx was keen to show how the products of capitalism did not just magically appear, nor did they have inherent value. Instead, Marx wanted to show that the value derived from commodities was part of a specific kind of social relationship—one in which the labor power of workers added value to commodities. In this way, the notions of commodities and labor lie at the center of understanding how Marx viewed capitalist relationships as inherently exploitative, as the dominance of one class (the bourgeoisie, or the owners of the means of production) over another class (the proletariat, the working class, or those who have nothing to sell but their labor). Proletarians were lending labor power to the production process, transforming goods into saleable commodities, and receiving only part of the value generated in this process. To Marx, this was wholesale thievery; the expenditure of human effort to produce commodities was the actual expenditure of human life, of the limited time that any of us have on this planet, and it came at the expense of us realizing our actual nature as productive, creative beings that generated meaning through our labor. Marx believed deeply in the notion that humans were creative and that we could be positively world-transformative.Through our labor, we not only make the world, but we also express the best part of ourselves as a species. The hijacking of all of this for the productive ends of the bourgeoisie—for mere profit—was, to Marx, a horrible crime being perpetuated on the weaker by the stronger.

Why is it so important to have fun? Because if you love your work (or your activism or your family time), then you’ll want to do more of it. You’ll think about it before you go to sleep and as soon as you wake up; your mind is always in gear. When you’re that engaged, you’ll run circles around other people even if they are more naturally talented. From what we’ve seen personally, the best predictor of success among young economists and journalists is whether they absolutely love what they do. If they approach their job like—well, a job—they aren’t likely to thrive. But if they’ve somehow convinced themselves that running regressions or interviewing strangers is the funnest thing in the world, you know they have a shot.

It is easy to understand why groups can fail. Bringing people together, giving them objectives and bidding them to work like a team regardless of body chemistry may not bring out the best in them. Moreover, almost all groups carry passengers. In a famous experiment, Max Ringelmann, a German psychologist, found that as more people joined a rope-pulling team, the average effort expended by individual team members fell. Indeed, studies of group behaviour reveal that most of the work in groups is done by a third of the membership.1

(Screening, the theory of which won enfant terrible Joe Stiglitz a share of the Nobel Prize in 2001, is the art of finding out hidden information by forcing people to act, rather than simply murmur sweet nothings.)

Indeed, just that year we had actually rejected a $200-million low-interest loan from the World Bank. I also told Conable, who was bragging about employing the best minds in the world, that hiring smart economists does not necessarily translate into policies and programs that benefit the poor. I

When John Kenneth Galbraith rose to deliver the presidential address of the American Economic Association in 1972, the angular Harvard professor and supremely self-confident adviser to presidents was arguably the most famous living economist in America. From The Affluent Society in 1958 to The New Industrial State in 1967, his critical accounts of capitalism's tendencies to underfund social goods and concentrate corporate control had been fixtures on the best-seller lists. Galbraith's thirteen-part BBC television series on the workings of capitalism in 1977 was to help goad the production of Milton Friedman's counterassertion of 1980, the PBS series Free to Choose, an iconic statement of the new market ideology.

Ellington would be growing up in a culture saturated with an idea you might call the cognitive hypothesis: the belief... that success today primarily depends on cognitive skills - the kind of intelligence that gets measured on IQ tests... and that the best way to develop these skills is to practice them as much as possible, beginning as early as possible. ...But in the past decade, a disparate group of scientists have begun to produce evidence that calls into question the cognitive hypothesis. What matters most in a child's development... is whether we are able to help her develop a very different set of qualities: self-control, curiosity, conscientiousness, grit, and self-confidence. Economists refer to these as noncognitive skills, psychologists call them personality traits, and the rest of us sometimes think of them as character.

Some people would argue that we don’t do a very good job. But taking the long view, that is clearly not true. Consider the historical trend in homicide (not including wars), which is both the most reliably measured crime and the best barometer of a society’s overall crime rate. These statistics, compiled by the criminologist Manuel Eisner, track the historical homicide levels in five European regions. The steep decline of these numbers over the centuries suggests that, for one of the gravest human concerns—getting murdered—the incentives that we collectively cook up are working better and better.

Some economists used to model people as rational agents, idealized decision makers who always choose whatever action is optimal in pursuit of their goal, but this is obviously unrealistic. In practice, these agents have what Nobel laureate and AI pioneer Herbert Simon termed “bounded rationality” because they have limited resources: the rationality of their decisions is limited by their available information, their available time to think and their available hardware with which to think. This means that when Darwinian evolution is optimizing an organism to attain a goal, the best it can do is implement an approximate algorithm that works reasonably well in the restricted context where the agent typically finds itself.

So why are economists obsessed with competition as an ideal state? It’s a relic of history. Economists copied their mathematics from the work of 19th-century physicists: they see individuals and businesses as interchangeable atoms, not as unique creators. Their theories describe an equilibrium state of perfect competition because that’s what’s easy to model, not because it represents the best of business. But it’s worth recalling that the long-run equilibrium predicted by 19th-century physics was a state in which all energy is evenly distributed and everything comes to rest—also known as the heat death of the universe. Whatever your views on thermodynamics, it’s a powerful metaphor: in business, equilibrium means stasis, and stasis means death.

questions Those taking a new leadership role should ask: How is your industry changing and, in particular, how are your customers’ expectations evolving? What are the global developments (for example, increased migration, urbanisation or proliferation of mobile communications) that could benefit, threaten or generally alter the way that you do business? What are the political, economic, social, technological, legislative or environmental trends that could affect your business? What situation best describes the challenges and opportunities faced by the business? Is this clearly and widely recognised? What specific challenges are likely to be encountered? How can they be addressed? What are the major opportunities and what action is needed to realise them? Are there quick wins or low-hanging fruit that can be secured? What are the greatest risks, threats and potential pitfalls? How will these be avoided or overcome? What are the expectations of stakeholders? Are these expectations realistic – do they need adjusting? What should be the priorities?

Thomas Sowell was born in North Carolina and grew up in Harlem. He moved out from home at an early age and did not finish high school. After a few tough years … read morehe joined the Marine Corps and became a photographer in the Korean War. After leaving the service, Sowell entered Harvard University, worked a part-time job as a photographer and studied the science that would become his passion and profession: economics. Sowell received his bachelor’s degree in economics (magna cum laude) from Harvard in 1958. He went on to receive his master’s in economics from Columbia University in 1959, and a Ph.D. in economics from the University of Chicago in 1968. In the early ’60s, Sowell held jobs as an economist with the Department of Labor and AT&T. But his real interest was in teaching and scholarship. In 1965, at Cornell University, Sowell began the first of many professorships. His other teaching assignments have included Rutgers, Amherst, Brandeis and the UCLA. In addition, Sowell was project director at the Urban Institute, 1972-1974; a fellow at the Center for Advanced Study in the Behavioral Sciences at Stanford University, 1976–77; and was an adjunct scholar of the American Enterprise Institute, 1975-76. Dr. Sowell has published a large volume of writing, much of which is considered ground-breaking. His has written over 30 books and hundreds of articles and essays. His work covers a wide range of topics, Including: classic economic theory, judicial activism, social policy, ethnicity, civil rights, education, and the history of ideas to name only a few. Sowell has earned international acclaim for his unmatched reputation for academic integrity. His scholarship places him as one of the greatest thinkers of the second half of the twenty century. Thomas Sowell began contributing to newspapers in the late ’70s, and he became a nationally syndicated newspaper columnist 1984. Sowell has brought common sense economic thinking to the masses by his ability to write for the general public with a voice that get to the heart of issues in plain English. Today his columns appear in more than 150 newspapers. In 2003, Thomas Sowell received the Bradley Prize for intellectual achievement. Sowell was awarded the National Humanities Medal in 2002. In 1990, he won the prestigious Francis Boyer Award, presented by The American Enterprise Institute. Currently, Thomas Sowell is the Rose and Milton Friedman Senior Fellow on Public Policy at the Hoover Institution at Stanford University in Palo Alto, California. —Dean Kalahar

let’s turn to the formula, talking about accumulation: M C C’ M’. M, money, C, input commodities, one cycle; M prime, more money. What happens in this process to allow M to become M prime, which is the whole point? You wouldn’t go through all of this if you ended up at the end with the same money as you started out with at the beginning. M just came out as M. The whole point is to get from M to M prime. To understand this, we have to examine this peculiar commodity of labor power. As an analysis of how more money emerges from the production process than goes in, Marx first rules out any possibilities of cheating or unfairness. In his analysis of the capitalist system, Marx is in a conversation with, and often in argumentation with, the economists, and political economists who came before them, principally the classical political economists. People like David Ricardo, Adam Smith, and a number of others. He wanted to make his analysis within their frame of rules, which presents capital in its best light. So that if in fact he shows it not to produce the advantages that they claim, he will have done it on their terms. One of the things he does is to rule out things like cheating, like buying low and selling high, which is a sort of principal character of mercantilism. The reason he rules this out is, he says, that on balance in society, this doesn’t produce any additional surplus value or wealth. It simply redistributes what value or wealth already exists. That it all averages out; if you cheat somebody, you may have gotten something, but they lost something. It’s a kind of zero-sum thing. He rules that out. Everything in the process as Marx analyzes it trades at its true value. The means of production cannot be the source of the additional value. Remember, he’s trying to figure out in his process how we get from M to M prime. One of the things that capitalists do is buy means of production. He says, those cannot be the source of additional value. The reasons are this. They either transfer part of their value to the new products, or, for example, you depreciate machinery over time. You can calculate how much of the value goes into a production in each cycle of production. Or the means of production actually end up incorporated into the new product itself, but there is no new value there. So, if you make something, if you make bread out of wheat, it becomes incorporated in the bread, but there is no new value there. It’s necessary for the capitalists to find on the market the commodity that produces more value than it itself costs. That’s the trick. This unique commodity is labor power, and is the only element in the process that produces surplus value, which is the source of profit.

It is common for one party to a transaction to have better information than another party. In the parlance of economists, such a case is known as an information asymmetry. We accept as a verity of capitalism that someone (usually an expert) knows more than someone else (usually a consumer). But information asymmetries everywhere have in fact been gravely wounded by the Internet. Information is the currency of the Internet. As a medium, the Internet is brilliantly efficient at shifting information from the hands of those who have it into the hands of those who do not. Often, as in the case of term life insurance prices, the information existed but in a woefully scattered way. (In such instances, the Internet acts like a gigantic horseshoe magnet waved over an endless sea of haystacks, plucking the needle out of each one.) The Internet has accomplished what even the most fervent consumer advocates usually cannot: it has vastly shrunk the gap between the experts and the public. The Internet has proven particularly fruitful for situations in which a face-to-face encounter with an expert might actually exacerbate the problem of asymmetrical information—situations in which an expert uses his informational advantage to make us feel stupid or rushed or cheap or ignoble. Consider a scenario in which your loved one has just died and now the funeral director (who knows that you know next to nothing about his business and are under emotional duress to boot) steers you to the $8,000 mahogany casket. Or consider the automobile dealership: a salesman does his best to obscure the car’s base price under a mountain of add-ons and incentives. Later, however, in the cool-headed calm of your home, you can use the Internet to find out exactly how much the dealer paid the manufacturer for that car. Or you might just log on to TributeDirect.com and buy that mahogany casket yourself for only $3,595, delivered overnight.

Consider the parents of an eight-year-old girl named, say, Molly. Her two best friends, Amy and Imani, each live nearby. Molly’s parents know that Amy’s parents keep a gun in their house, so they have forbidden Molly to play there. Instead, Molly spends a lot of time at Imani’s house, which has a swimming pool in the backyard. Molly’s parents feel good about having made such a smart choice to protect their daughter. But according to the data, their choice isn’t smart at all. In a given year, there is one drowning of a child for every 11,000 residential pools in the United States. (In a country with 6 million pools, this means that roughly 550 children under the age of ten drown each year.) Meanwhile, there is 1 child killed by a gun for every 1 millionplus guns. (In a country with an estimated 200 million guns, this means that roughly 175 children under ten die each year from guns.) The likelihood of death by pool (1 in 11,000) versus death by gun (1 in 1 million-plus) isn’t even close: Molly is far more likely to die in a swimming accident at Imani’s house than in gunplay at Amy’s. But most of us are, like Molly’s parents, terrible risk assessors. Peter Sandman, a self-described “risk communications consultant” in Princeton, New Jersey, made this point in early 2004 after a single case of mad-cow disease in the United States prompted an antibeef frenzy. “The basic reality,” Sandman told the New York Times, “is that the risks that scare people and the risks that kill people are very different.