Key Messages
Rediscovering Faith In Economics: Learn How Nobel Prize-Winning Economists Solve Social Problems
When it feels like everything is going wrong in the world, it can be tempting to give up hope.
But economists have been coming up with solutions to solve some of the world’s biggest problems and create positive change.
In Good Economics for Hard Times, two Nobel Prize-winning economists reveal that a lot of the economic theories being presented by politicians are flawed, highlighting how economics can make a real difference when it comes to tackling the most seemingly insurmountable social problems.
The book digs into topics like why tariffs may cause American farmworkers to lose their jobs, if robots will really replace accounting workers, and how an influx of immigrants can actually improve job prospects for locals.
With this illuminating insight, you’ll discover both sides of the issues so that you can make informed decisions when it comes to understanding how economics can create positive changes in our world.
Economists Need To Earn Trust By Being Open, Honest And Fallible
It’s a sad fact that economists don’t always have the trust of the public.
In a poll of how reliable various professionals were perceived to be, nurses were the most trusted and politicians the least – and economists fell just barely ahead of them.
This lack of trust can be caused by economists sharing their opinions in an ideological way rather than basing them on data or evidence, or by not taking the time to explain their thought processes clearly.
But if we want to solve some of the extraterrestrial problems — from climate change to inequality — then having trusting relationships with economists is essential.
This can start by giving us access to the evidence they use and laying out exactly how they’ve reached their conclusions, as well as being willing to revise their opinions when needed or admitting when they get something wrong.
Trust between economists and public isn’t something that will happen overnight – but it needs to happen if we’re going to overcome today’s greatest challenges.
The Reality Of Immigration: Money Isn’t Always The Strongest Motivator
Politicians often use false information about immigration to mislead and manipulate their voters, claiming that more immigrants coming into a country will lead to fewer jobs for native workers and drastically reduce wages.
This simply isn’t the case – studies have shown that people are actually much more likely to stay in their home countries than migrate to wealthier countries even when presented with evidence that they would double their income from doing so.
This is because there are many factors other than money which influence the decision-making process, such as family ties, support networks, and a fear of change.
What’s more, studies have actually found that immigrants can improve economic outcomes for locals.
Immigrants can stimulate local economies by creating new businesses and new jobs through the exchange of ideas between cultures, leading to higher levels of innovation and creativity in an area.
By providing competition in the labour market, they also put downward pressure on wages making the economy more efficient – bringing growth and increased productivity in some sectors while at the same time allowing unskilled workers access to better paid positions as companies move upmarket in order to keep up with competition!
So don’t be fooled by politicians who try to mislead you about immigration – there are good economics for hard times all around!
How Immigration Benefits Local Low-Skilled Workers
Immigration can often be seen as something that negatively affects native workers, but the truth is often quite different.
In fact, immigration can actually boost the local economy and provide new opportunities for native workers in several ways.
To begin with, immigrants bring a wealth of demand for services with them which helps to fuel businesses like cafes and shops staffed by low-skilled workers.
Furthermore, some of the most successful and highly-earning companies in America were founded by immigrants or their descendants and this provides further evidence of how beneficial immigration can be.
Additionally, the need for employers to hire workers they know or who come with strong recommendations causes them to favor locals over newcomers who may offer their labor at a cheaper price.
This means that locals are more likely to remain employed even when faced with competition from immigrants.
On top of this, because there are certain jobs that many locals find unpleasant or too demanding to take on, these areas often become saturated with immigrant labor – which means that prices in those areas tend to go down.
This helps low-income local families access more affordable childcare and other basic services, thus allowing them access to better earning potential since it is easier for them shift into more skilled roles.
What’s more, the influx of immigrants who may not have full fluency in the language helps native speakers develop an even deeper understanding of their own language, providing further employment benefits should they decide to pursue a career involving communication skills down martin earned an advantage over those without such skillset.
All in all, it is clear that while many people express wariness when it comes to immigration influxes due to perceived job losses among native workers — such concerns are largely unfounded as immigrants tend not only stimulate the economy but provide fresh opportunities for natives as well
The Promise Of International Trade Fails To Match Reality: Companies Remain Inflexible And Workers Lack Mobility
It’s often believed that global trade agreements make it easier for goods to be freely exchanged between countries, but the truth is more complicated than that.
In a theoretical sense, goods may move easily between countries, but there are several impediments when it comes to people and money.
For starters, workers often find it difficult to move from country to country in search of better jobs or wages.
Though economic incentives may be present, many workers simply don’t have the financial resources or motivation to uproot their lives and resettle elsewhere.
This limits their ability to hop from one industry to another.
Additionally, companies tend to be inflexible as well – even if certain product lines become unprofitable or obsolete, they’re reluctant to discontinue them due to fear of losing loyal customers and market share.
Even new companies entering the local market with innovative products struggle at times – since they lack an established reputation with buyers abroad, they found it hard to get credit from banks or establish trust in the foreign market.
Ultimately, while global trade agreements strive for free movement of goods across borders, they do not account for this lack of mobility when it comes to people and money.
The Trade War Will Protect Steel Workers But Ruins Prospects For Farmers And Factory Workers
Trade agreements can have significant consequences for local workers, and it’s not always a positive one.
We’ve seen this in places like Bruceton, Tennessee, where factories closed down because they were no longer profitable due to competition from cheap Chinese imports.
This resulted in 1,700 people being laid off and almost every business in the town closing down as well.
In response to situations like this, some people think we should impose heavy tariffs on imported goods – perhaps like Trump did when he imposed a tax on steel and aluminum imported from China.
While this will likely protect the jobs of steelworkers, it won’t stop other industries from being affected.
For example, in retaliation China put a tariff on US agricultural products which meant fewer exports and less jobs for farmworkers in the US.
Ultimately tariffs are a short-sighted approach as it doesn’t address the core issue – helping newly unemployed workers adjust to these changes in our economy.
In order to do that we need initiatives such as Trade Adjustment Assistance programs that provide training, support and financial assistance so that those affected by global trade can get back on their feet again quickly.
However, these initiatives are currently massively underfunded so more needs to be done if they’re going to truly benefit those who need it most.
Trade agreements can harm local workers, but protectionist tariffs alone won’t solve the problem; we must invest resources in helping them adjust so that they can find new opportunities again.
Wealthier Countries Must Be Willing To Pay The Price To Protect The Poor From Climate Change
The fight against climate change and the fight against economic inequality cannot be separated.
If we want to make an effective response to climate change, we have to tackle economic inequality too.
The protests in Paris over a proposed gas tax in 2018 are a good example of how environmental policies can disproportionately hurt the economically vulnerable.
Richer people in the city might be able to take public transport, but poorer people living on the outskirts often rely on cars for their livelihoods and would suffer if they were taxed out of existence.
Not only is it the poor who bear these costs disproportionately, but they often don’t have access to solutions that could help them address climate-related issues.
In India, 5 percent of households have air conditioning compared to 87 percent of households in the United States.
This makes it even harder for them to cope with rising temperatures due to climate change.
Cutting energy consumption is necessary for slowing climate change, but many people feel threatened by this idea as it could potentially damage their economic wellbeing.
We need greater redistribution of wealth from richer countries if developing countries are to cope with extreme climates and reduced energy consumption without suffering more hardship themselves.
Air conditioners powered by clean energy would be much less damaging than conventional ACs and would be relatively affordable if wealthy countries took on the bulk of the cost – showing just one way in which environmental protection and economic support go hand-in-hand.
We must remember that fighting climate change doesn’t mean sacrificing social justice; rather, both must go hand-in-hand if we want a truly sustainable future.
Robots Are Replacing Human Jobs – Here’S What We Can Do About It
AI is evolving in ways that threaten to take over more and more complex human tasks, negatively affecting the job market.
It’s not just manual labor jobs that are being taken over by robots – increasingly AI is capable of performing functions like book-keeping, sports journalism and paralegal work.
Researchers have found that for each one industrial robot introduced into a commuting zone, 6.2 jobs were lost and wages were depressed.
This means workers without a college degree are particularly negatively impacted by automation.
Additionally, it can be more financially attractive for US firms to invest in robots than people due to the potential savings from not having to pay for maternity leave or payroll taxes for robots.
To encourage companies to create robotic solutions which enhance instead of replace human workers, some suggest introducing a tax penalty which would make it financially beneficial to hire humans instead of robots.
The distinction between what constitutes a robot becomes increasingly blurred when they become embedded inside other machines with human operators as well.
As this subject continues to evolve, it’s important we remember that rising economic inequality is usually due as much to social policy decisions as technology.
It’S Not Robots That Are Behind Growing Inequality–It’S Policies Favouring The Wealthy
It was long before intelligent robots made their way into our lives that economic inequality began its steady increase.
The trend of declining share of income owned by the wealthiest 1% in the United States had been steadily decreasing from 1928 to around 1979, when suddenly this trend drastically shifted in 1980 and has since returned to the 1928 level.
This extreme spike in inequality can not simply be attributed to robots or other emerging technologies.
A much deeper look at the labor market and distribution of wealth throughout society is necessary to get an idea of what actually caused it.
Many economists point to changes in government policies from Reagan-Thatcher era which decreased taxes for the wealthy under the assumption that their financial gains would somehow benefit everyone else.
At the same time, wages for those in the lower echelon suddenly stopped growing, with many earning 10-20% less than they did during this period in inflation adjusted money.
This demonstrated a disconnect between how much CEOs could command versus their employees despite no incentive for paying people more.
It is clear that economic inequality long preceded the entrance of robots and AI into our lives, and requires careful evaluation of existing policies if it wishes to stem growing unrest stemming from substantial income gap between top earners and everyone else.
Everyone Needs To Chip In For Robust Tax Systems To Combat Rising Inequality
Proper tax policy can be a powerful tool in combating economic inequality.
Studies have shown that when top earners are taxed at rates of 70 percent or more, wages become more equal.
Countries such as Germany, Spain and Denmark, which still maintain higher taxes for wealthy individuals, tend to show less disparity between the salaries of the highest and lowest wage earners compared to countries like the United States, Canada and the UK, where taxes for high earners were drastically cut during the 1970s.
In addition to taxing salaries, governments need resources in order to implement effective programs intended to reduce poverty and inequality.
One potential way of generating funds is through a wealth tax on assets held by ultra-wealthy individuals – with a 2 percent levy assessed on those with more than $50 million and 3 percent on those with over $ 1 billion.
That money could then be used towards creating jobs for people affected by global trade, or put into programs such as housing assistance or education funding.
To really have an impact though, economizing will not only have to come from high earners but also from average citizens.
Countries like Denmark and France have achieved successful anti-poverty initiatives made possible by their raising 46 percent of GDP through taxes – with most of that money coming from middle-income workers.
Though understandable due to low faith in government’s management of public resources, large-scale aversion to paying taxes is counterproductive if sustainable funding is ever going to be achieved for tackling poverty and inequality.
With robust accountability systems in place for governmental programs and increased transparency about how revenue will be profitably used , public confidence can be regained in the value of taxation – allowing it help create a much fairer society capable of meeting all its people’s needs .
The Way Out Of Poverty Is Through Respect For The Dignity And Agency Of The Poor
When it comes to poverty alleviation, there is no one-size-fits-all solution.
It’s important for policymakers to take into account the social context of each situation; what works in Ghana may not be applicable to the US.
However, whatever support is offered must prioritize the agency and dignity of those who need it.
This was shown in a study by one of the authors which took place in Ghana.
The experiment encouraged participants to make bags that would be purchased for a decent sum and some of them were also given goats – a further potential source of income.
Those with goats not only produced more bags than those without, but they also made better quality items as well!
This shows that providing people with survival needs such as money or livestock does not necessarily disincentivize them from working hard.
Instead, it offers them the possibility of financial stability and reduces stress as well as allowing them to explore new work opportunities.
In short, there may not be an all encompassing approach to tackling poverty, but recognizing its complexity and respecting the dignity of its victims are essential steps towards creating a framework for meaningful progress.
Understanding The Widening Divide: How Social Situations Affect Prejudice And Hate Crimes In The Us
Political polarization, along with the accompanying prejudice, are huge issues that are eroding our democracy.
It’s not enough to rely on a few politicians to make good decisions – we need to come together as citizens and have meaningful conversations about the issues of our times.
The FBI reports that hate crimes in the United States have risen by 17 percent in 2017 – an alarming sign of growing divisions among people.
But why does this happen? Is it innate racism and prejudice that drives people apart? Or is it from what we see in the media, or leaders like Donald Trump who spread anti-immigrant messages?
The answer is more complex than simply blaming either one of these factors.
Instead, economists and other social scientists recognize that individual preferences tend to be shaped largely by their particular social group or context.
People often gravitate towards those with similar beliefs, creating echo chambers which reinforce their existing biases without any access to diverse opinions.
Things become further exacerbated when you consider social media platforms like Facebook that feed off of this kind of user behaviour.
It’s time for us to stop shouting past each other and start listening instead – if we want to heal the fractures within our society and create a more united democracy.
We can do this through interacting with people unlike ourselves whether it’s meeting new people at school or university, living in mixed neighborhoods where different income levels exist side by side, or starting open dialogue with others who may have different opinions.
Only then can we bring down barriers built up by bias and polarization over time.
Wrap Up
The bottom line of Good Economics for Hard Times is clear: Economists can help shed light on some of the most pressing issues that people are facing today, such as economic inequality and employment losses due to trade; grappling with climate change; and providing support for those affected by advancements in AI.
To address these challenges, it will take robust intervention from governments.
Capital needs to be fairly redistributed through raising taxes and creating new social programs which offer financial assistance and job opportunities to the poor.
Above all else, we have to re-examine our assumption that economic growth automatically benefits everyone, and instead look at the true costs it has on the planet and human well-being.
