Entries in economics (15)


Culture and behavior

Are some differences in individuals' behavior--in the workplace or in the consumer space--the result of echoes of cultural activities and trends going back thousands of years? One team of researchers at the University of British Columbia argues that they are.

The team, lead by Joseph Henrich, wrote a paper titled "Weird People" that makes the case that broad findings about human psychology and behaviour are most often based on extremely narrow samples from Western societies. Furthermore, these sample pools, drawn from highly educated elements of society, are in fact outliers that do not represent the majority of humanity. It goes on to caution making assertions about "human nature" based on data collected from narrow subject pool, and to recommend using broader subject pools in future research.

Members of Western, educated, industrialized, rich, and democratic societies, including young children, are among the least representative populations one could find for generalizing about humans."

Henrich employs tests based on game theory, and his results gathered from subject pools across the globe show startling differences in baseline behaviors. This Pacific Standard profile of his team's work notes that it is part of a "small but growing countertrend in the social sciences, one in which researchers look straight at the question of how deeply culture shapes human cognition," and cites some other interesting exploration in this area.

These questions have potentially profound implications for work related to organizational culture and consumer demand, and we may just be at the starting point in this type of research.

-- Jia Yan Toh


Book recommendation: Frugal Innovation

Navi Radjou, an innovation and leadership strategist and friend of Catalyst, has co-written a new book that we recommend wholeheartedly.

Frugal Innovation proposes a breakthrough approach to solving some of the most complex issues of our global economy as it empowers human beings to use their creativity to generate economic and social value while preserving the environment.

In this work, the authors set out to explain:

  • How to achieve mass customization, using low-cost robotics, inexpensive product design and virtual prototyping software.
  • How consumers and other external partners can help develop products

  • How to implement sustainable practices, such as the production of waste-free products

  • How to change the corporate culture to become more frugal

In my view, this is must read for thought leaders and practitioners worldwide.


-- Bruno Roche


The middle income trap

As the middle or consumer class in countries with developing economies grows, do these countries face newer, higher hurdles? An economic development concept that is increasingly used by economists and international financial institutions considers the possibility of a middle income trap.
According to an IMF working paper, the “middle-income trap” is the phenomenon of hitherto rapidly growing economies stagnating at middle-income levels and failing to graduate into the ranks of high-income countries. The chart below maps national economies' progress from 1960 to 2008, from low to high income.

“World Bank (2012) estimates that of 101 middle-income economies in 1960, only 13 became high income by 2008”

Zoning into South East Asia, the region with some of the fastest growing economies in the world, a report by the Heritage Foundation covers the risks facing Indonesia, the Philippines, Thailand and Vietnam, and explains how these countries can avoid, or escape, this trap. At the end of this report, the author shared his view on the middle-income-trap statuses of these four countries.

Applying this analysis to other middle-income countries could be an approach for us to flag out other middle-income countries that are already “trapped” with limited growth potential.

Image source: The Economist

-- Jia Yan Toh


The outlook for the African economy and food supply

David Leonhardt gives an interesting assessment of economics and the food supply value chain for Africa in a recent New York Times The Upshot column.

Observing that economic growth on the continent in the past decade has kept pace with growth in the rest of the world (see graphic, below), Leonhardt discusses how a healthy growing economy and a strengthening middle class might transform Africa's food production and value chain.

Image source: New York Times

African agriculture faces myriad challenges, including lack of access to agricultural technology, training, and market information, as well as an underdeveloped infrastructure. Numerous organizations, from the private sector to NGOs and government agencies, are seeking solutions to these challenges. Leonhardt seems optimistic, though he notes that "Progress isn’t inevitable just because it’s happened before."

-- Clara Shen


"Stars" of economics, shifting to the left?

In a recent opinion piece in Bloomberg, Noah Smith writes that economics--and the public stars of the field--are shifting leftwards. Overall, economics has moved away from unfettered advocacy of free markets to focus on inequality, human welfare and the ways that markets break down.

New tools and models have played a part: game theory, models of asymmetric information decision theory, learning theory and behavioral economics have poked holes in the old assumptions. But Smith sees the greatest transformation in the leading public personas of economics: Milton Friedman has been replaced by Paul Krugman, at least according to Smith and George Mason University economist Tyler Cowen.

We are interested in what economics can tell us, and therefore interested in how the field is evolving and why. Do you think economics as a whole has moved to the left? If so, what's driving the change?

Smith ends his piece suggesting that one reason for the shift could be the chief problems facing the economy. In Friedman's era the economy was beset by high taxes, inflation, heavy regulation, and powerful unions. Today the chief concerns are rising inequality and economic insecurity.

-- Jie Hu