If reducing greenhouse emissions had economic benefits then we would do it anyway without new policy.
The statement above is used by economists to argue against the introduction of policies to reduce greenhouse gas emissions on the basis that the costs would outweigh the benefits of reducing climate change. It is part of a wider narrative that regulatory policy can only lead to economic costs. However, the statement is perhaps one of the most perverse conclusions from neoclassical economics. It depends on a raft of assumptions that run contrary to real-world experience. Further, as discussed below, if just one assumption is taken out, the conclusion changes.
Sadly, economists and (in particular) economic modellers, have played a key role in turning this fallacy into accepted reality. They have done this by using simple optimisation-based approaches that make strong assumptions about human behaviour. Often the modellers do not critically question or even fully understand these assumptions. Read More »
Recent transformations in the global economy have sparked renewed interest in the role of the state in capital accumulation. Such transformations include a ‘return’ to various forms of state-led development across the global South since the early 2000s (in China, Russia, and other large emerging economies), extensive state intervention following the 2008 global financial crisis in the global North, and the multiplication of various forms of state-capital entanglements such as sovereign wealth funds (SWFs) and state-owned enterprises (SOEs). For instance, the number of SWFs increased from 50 to 92 between 2005 and 2017, while assets under management grew to over $7.5 trillion worth of assets, which is more than hedge funds and private equity firms combined. According to a recent study, ‘SOEs generate approximately one tenth of world gross domestic product and represent approximately 20% of global equity market value’. SOEs now dwarf even the largest privately-owned transnational corporations, with PetroChina currently leading the list with a market value of more than $1 trillion. Three of the top five companies in the 2018 Fortune Global 500 are Chinese SOEs (State Grid, Sinopec Group, and China National Petroleum Corp). Significantly, these state-capital hybrids have also become increasingly integrated into transnational circuits of capital, including global networks of production, trade, finance, infrastructure and corporate ownership. Does this renewed state activism – and its remarkably outward orientation – indicate a changing role of the state in capital accumulation and the emergence of new political geographies of capital?Read More »
A recent article on the “average impact of microcredit” by Dr. Rachel Meager (LSE) has received much praise over the past few weeks. Meager deploys Bayesian hierarchical modelling to provide a new take on the argument in favour of a reformed system of microcredit. Her work builds on the data provided by six randomized control trials (RCTs) conducted by Abhijit Banerjee and colleagues (see Banerjee, Karlan and Zinman, 2015). Meager makes an attempt to exculpate the microcredit model from the awkward fact that its impact on the poor has been very much less than originally envisaged. She also claims to show that the critics have overstated the negative impact of microcredit. Microcredit should therefore continue to be a policy intervention, she goes on to say, but there need to be changes in the operating methodology for a more meaningful development impact to be possible in the future.
While seemingly a well-meaning attempt to explore the impact of microcredit, we were struck by the way that her overall argument appears to seriously misunderstand, and it definitely misrepresents, the existing research onmicrocredit as a development instrument. Read More »
Over the past decade the expansion of digital-financial inclusion through innovations in financial technology (fin-tech) has been identified by the World Bank, the G20, USAID, the Bill & Melinda Gates Foundation, and other major international institutions, as a key way to promote development and alleviate poverty in the Global South (GPFI, 2016; Häring 2017; World Bank, 2014). Perhaps the most influential and widely reported publication pushing forward this narrative is an article examining M-Pesawritten by US-based economists TavneetSuri and William Jack—and published in the prestigious journal Science—entitled ‘The Long-run Poverty and Gender Impacts of Mobile Money’. M-Pesa isa mobile phone, agent-assisted platform for transferring money from one person to another. It was originally developed with funding from DFID and has quickly become a darling of the digital-financial inclusion movement. In this particular article,the authors make the far-reaching claim that ‘access to the Kenyan mobile money system M-PESA increased per capita consumption levels and lifted 194,000 households, or 2% of Kenyan households, out of poverty’ (Suri and Jack, 2016: 1288).
Suri and Jack’s article in Sciencehas sent ripples through the global development community and has served—as perhaps was intended—to solidify support for upping the promotion of digital-financial inclusion initiatives across the Global South. Importantly, the article’sclaims of unprecedented poverty reduction have been uncritically picked up by all of the international development agencies and microcredit advocacy organisations, as well as by many mainstream economists, so-called ‘social entrepreneurs’, tech investors, and media outlets. Much like microcredit in the 1980s, fin-tech and digital-financial inclusion is now very widely seen as a key—if not the key—to reducing global poverty and promoting local development.
In this post we summarise our recent article entitled ‘Is Fin-tech the New Panacea for Poverty Alleviation and Local Development?’ (Bateman, Duvendack, and Loubere, 2019), which challenges Suri and Jack’s findings, and urges the global development community to take a second, more critical look at their study. We argue that the article contains a worrying number of omissions, errors, inconsistencies, and that it also employs flawed methodologies. Unfortunately, their inevitably flawed conclusions have served to legitimise and strengthen a false narrative of the role that fin-tech can play in poverty alleviation and development, with potentially devastating consequences for the global poor.Read More »
“Economics is unique among the social sciences in having a single monolithic mainstream, which is either unaware of or actively hostile to alternative approaches.” (John King 2013: 17)
What does heterodox economics mean? Is the label helpful or harmful? Being outside of the mainstream of the Economics discipline, the way we position ourselves may be particularly important. For this reason, many around us shun the use of the term “heterodox” and advise against using it. However, we believe the reluctance to use the term stems in part from misunderstandings of (and sometimes disagreement over) what the term means and perhaps disagreements over strategies for how to change the discipline.
In other words, this is an important debate about both identification and strategy. In this blog, we wish to raise the issue in heterodox and mainstream circles, by busting a few common myths about Heterodox Economics – mostly stemming from the orthodoxy. This is a small part of a larger project on defining heterodox economics.
In a recent article in the New York Times, the development economist Seema Jayachandran discusses three studies that used Randomised Controlled Trials (or RCTs) to understand the benefits of enhancing the self-worth of poor people. Despite wide differences in context, all the cases explore the viability of ‘modest interventions’ to ‘instill hope’ in marginalised communities, concluding that ‘remarkable improvements’ in the quest for poverty reduction are possible.
One of the studies from Uganda, for example, argues that “a role model can have significant effects on students’ educational attainment,” so the suggestion for policy-makers might be “to place more emphasis on motivation and inspiration through example.”Another case study of sex workers in Kolkata Brothels argues that “psychological barriers impede such disadvantaged groups from breaking the vicious circle and achieving better outcomes in life,” so small but effective changes that address these psychological constraints can alleviate the effects of poverty and social exclusion.
The underlying theme of these studies is that individuals can surmount the structural challenges of poverty through their own efforts using tools like ‘effective role models,’ the generation of ‘more hope,’ and the ‘improvement of their mental health.’ Positive psychology of this kind and an emphasis on behavior change to meet the goals of individuals have been around at least since the 1950s, first in the popular literature of self-help books and now in academia, where they form part of an increasingly fashionable trend to ‘do poverty reduction differently.’Read More »