Guillermo Calvo is one of my favorite economists. But — you know there had to be a but — I just don’t buy his latest missive. Still, it’s important that we have this debate: something awesome is happening to oil and other commodities, and figuring out what it means is crucial
Sina, who runs Faith Freedom International - an Internet forum dedicated to debunking Islam - calls himself "probably the biggest anti-Islam person alive." The publication of his latest book, Understanding Muhammad: A Psychobiography of Allah's Prophet, will likely cement that position. In it, Sina suggests that Islam's central figure suffered from a series of mental disorders, including narcissistic personality disorder, temporal lobe epilepsy and obsessive compulsive disorder.
"These disorders," he says via telephone, "can explain the phenomenon known as Islam... which is nothing but one man's insanity."
Sina grew up a non-practicing Muslim. Raised in Iran, educated in Pakistan and Italy and now living in Canada, he began jousting with believers in the 1990s. What bothered him, he tells The Jerusalem Post, was not the penchant for jihad and intolerance that certain fanatical Muslims displayed, but the foundation for such ills in the Koran and core Islamic texts.
Pinker goes on to suggest that we'll probably never really know exactly what part genetics plays in the differences between races and genders - "it's a taboo field of academic research" - but he has been prepared to accept that the claim that men and women's talents - and, by extension, those of different races - overlap but are not identical is quantifiably defensible. "Those who argue this is nothing more than racism or sexism are guilty of statistical illiteracy," he says. "Besides which, just because someone may have a genetic predisposition towards doing a particular thing, it doesn't follow they will automatically do it." Pinker himself is a case in point. While most scientists would accept that humans are genetically programmed to reproduce, Pinker has steadfastly resisted the temptation.
This could well be just a reflection of the relatively low status he gives parents in child development. "The idea that children are passive repositories to be shaped by their parents has been massively overstated," he says. "A child's peer group is a far greater determinant of its development and achievements than parental aspiration." Large parts of government social policy, too, are governed by the principle that parents are central to child development. So what does he suggest government should do instead? "It's a tough one," he admits. "But I think it would be better off looking at how cultural change is effected within society."
His views on parenting don't make him an easy person to interview. The standard practice is to try and draw together various threads from childhood to present a coherent portrait of how a life and ideas have been shaped. Yet all that goes out of the window with Pinker if you want to play by his rules. So what sort of him would be talking to me now if he hadn't had Jewish parents and hadn't been born in Montreal in the 1950s? "You mean if I'd been kidnapped at birth and placed with a working-class family somewhere completely different?" he laughs. "There are a lot of variables, but there's a better than average probability I would have been doing something in much the same scientific and intellectual fields."
Like most kids, Pinker had no real idea of what he wanted to do. "I used to like reading," he offers. "We had a set of encyclopaedias and I must have got through about 90% of them." So he was a bit of a nerd? "Yes. Wait, I mean a bit. I did have friends and I did subscribe to Rolling Stone." He was also a bit of a hippy on the sly - still is, you suspect, as he keeps his hair unfashionably long - and when the time came to go to college, he signed up for the year-old Dawson's College in Montreal. "It promised interdisciplinary courses and alternative styles of learning. I'm glad I went, but I came to realise there was something to be said for more traditional learning.....
Pinker certainly shows no signs of abandoning his successful formula of mixing the counter-intuitive with good science. He had sleepless nights before the publication of The Blank Slate - "I knew I was going to get vilified for it in some quarters" - and he'd do well to get in a good supply of sleeping pills before his next book comes out - on how the world is now a far safer place, with fewer wars, genocides and homicides than at any time in its history. But is there a chance his controversy will become the norm and that he'll end up as a national institution just as his old sparring partner once was? "I like ice hockey," he laughs. "No one is ever going to ask me to write about that as a metaphor for life. It's just a bunch of people beating the shit out of each other chasing the puck." Sounds like as good a metaphor as any to me."
The key word is “consequences.” I learned this lesson many years ago from studying Blaise Pascal, a French mathematical genius in the 17th century who spelled out the laws of probability more clearly than anyone before him. This was a thunderclap of an insight that, for the first time, gave humanity a systematic way of thinking about the future.
Pascal was both a gambler and a religious zealot. One day he asked himself how he would handle a bet on whether “God is or God is not.” Reason could not answer. But, he said, we can choose between acting as though God is or acting as though God is not.
Suppose we bet that God is, and we lead a life of virtue and abstinence, and then the day of reckoning comes and we discover that there is no God. Well, life was still tolerable even if less fun than we might have liked. Here, the consequences of being wrong would be acceptable to most people.
Suppose, however, we bet that God is not, and lead a life of lust and sin, and then it turns out that God is. Now being wrong has put us into big trouble.
RISK management, then, should be a process of dealing with the consequences of being wrong. Sometimes, these consequences are minimal — encountering rain after leaving home without an umbrella, for example. But betting the ranch on the assumption that home prices can only go up should tell you the consequences would be much more than minimal if home prices started to fall.
Region: You've developed a significant body of work on asymmetric information in insurance markets, much of it with Amy Finklestein. In a recent paper with Amy and Casey Rothschild, “Redistribution by Insurance Market Regulation,” you estimate the efficiency costs and distributive impact of regulations that prohibit insurers from looking at buyer characteristics in determining prices. Are the cost and impact quantitatively significant? In an age when genetic testing is growing ever more sophisticated, what is the policy import of such findings?
Poterba: I am fascinated by insurance markets and the contracts that are available to individuals. This strikes me as an important and somewhat understudied area. My work with Amy and Casey tries to understand what happens when regulations preclude insurance companies from using some information to set insurance prices.
There are many examples of such regulations. Many states limit the data that firms can use to price automobile insurance. We consider the market for retirement annuities. In the United States, a firm cannot offer different pension payouts to men and women with the same salary history and years of service, retiring at the same age, even though life expectancy for women is several years longer than that for men at typical retirement ages.
In most settings, a ban on using some information to price insurance transfers resources toward those whom this information would show to be high-risk insurance buyers. In the market for annuities, someone who is expected to live a long time is more expensive to insure than someone who is unhealthy and has a high mortality risk. An insurance company could offer to pay higher monthly benefits to those who are ill or infirm if it could identify them. Sometimes insurance regulations make this difficult or impossible and therefore represent a transfer from one mortality risk group to another.
One of the intriguing questions is the extent to which insurance companies can induce policy buyers to reveal something about their underlying mortality type through the creative design of insurance policies. In Britain, insurers offer both inflation-indexed and nominal annuities. The households who buy the inflation-indexed products, which deliver more of their value at advanced ages than nominal products, tend to live longer than those who buy nominal annuities. This enables insurers to partly distinguish their client base. The extent to which such distinctions can be made is likely to vary across markets and settings.
The clutter industry feeds the addiction. Self-storage has been the fastest-growing part of America's commercial-property business in the past 30 years. There are now almost seven square feet of self-storage for every American. Paying more to store something than it is worth may seem doubly irrational. But it enables people to reconcile caveman clutter with modern minimalism, and allows companies to benefit from a huge business opportunity that includes inflatable salad bars, over-door baseball cap organisers and motion-activated paper-towel dispensers. Since the urge to accumulate stuff is limitless, so is the scope for selling people stuff to keep it in.
The endowment effect was controversial for years. The idea that a squishy, irrational bit of human behaviour could affect the cold, clean and rational world of markets was a challenge to neoclassical economists. Their assumption had always been that individuals act to maximise their welfare (the defining characteristic of economic man, or Homo economicus). The value someone puts on something should not, therefore, depend on whether he actually owns it. But the endowment effect has been seen in hundreds of experiments, the most famous of which found that students were surprisingly reluctant to trade a coffee mug they had been given for a bar of chocolate, even though they did not prefer coffee mugs to chocolate when given a straight choice between the two.
This paper conceptualizes governance and provides a framework for assessing governance quality in comparative perspective based upon governance outcomes. It surveys the composite indexes on quality of governance and provides an in depth review of the widely used Worldwide Governance Indicators (WGIs). This review concludes that WGIs use state of the art aggregation techniques but fail on most fundamental considerations. They lack a conceptual framework of governance and use flawed and biased primary indicators that mostly capture Western business perspectives on governance processes using one-size-fits-all norms about such processes. They almost completely neglect citizens’ evaluations of governance outcomes reflecting any impacts on the quality of life. These primary deficiencies and changing weights, respondents and criteria lead us to conclude that the use of such indicators in cross-country and time series comparisons could not be justified. Such use is already complicating the development policy dialogue and creating much controversy and acrimony. These findings, however, should not be a cause for despair as assessing governance quality is an important task and must be undertaken with care. To this end, this paper lays out a conceptual framework which stresses that governance quality for comparative purposes is most usefully assessed by focusing on key governance outcomes capturing the impact of governments on the quality of life enjoyed by its citizens. These assessments should preferably be based on citizens’ evaluations. Such evaluations are not only feasible but also would be more credible and conducive for meaningful and productive development policy dialogues on improving governance quality.
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