Sunday, 31 May 2009

The Freedom of Choice

The field of economics has come under a lot of fire as of late, an understandable situation considering the great contributions macroeconomists have made to the global financial crisis. However, even in prosperous times economics faces a deal of undue discrimination (personally, I would like to see President Obama make a true progressive choice for the Supreme Court by nominating an economist); the fact that there is a surprisingly lengthy article on the "dismal science" on wikipedia only further affirms the point. Naturally as a potential economist, I am rather biased on the topic, but I must come to the defense of my beloved field. I have a number of well-practiced arguments, which I will undoubtedly mention in the future. However, first I wanted to submit a defense by a semi-layperson.

This summer I am working at a relatively small consultation firm that implements programs for sustainable economic growth in developing countries. While some contracts are granted directly by developing countries, most are awarded by organizations like USAID. The president and co-founder of this business certainly has a great deal of experience in implementing these programs and boasts two masters in business-related studies from Harvard, but he and most of the other employees are not economists. For their projects, they find outside experts to bring in as ad-hoc consults for particular tasks. During my interview with the president, he *attempted* to explain to me exactly how operations at the organization work. While that was initially lost to me, the explanation for his motivation behind founding this business was not. He said that his personal goal is to make sure that no one suffers from a lack of choice (there was a story about him living in a shantytown that preceded that claim, but it's irrelevant to my point here).

While there are people who would prefer to return to those simpler times of subsistence, I am going to respond to the majority that do appreciate the option of choosing between brussel sprouts and broccoli (we'll ignore the stand-up economist's interpretation of Mankiw's principles of economics that claim choices are bad). In the field of economics, the crusade to bring choice to people the world over is embodied in development economics. Min has already touched on some of the macro-level disagreements in this specific branch, but on the micro level, the merits of development economics are clear.

The organization I work with specifically specializes in competitiveness issues. Although the nice models of "perfect competition" are clearly far from the realities of the economic environment, the idea that a business, or country, needs to be "competitive" is still true. Organizations are dedicated to the study of specific country's competitiveness, measured by several indices from education to the possibility of a coup; the principal study is released by the World Economic Forum (WEF) every year. In an increasingly globalized world, the importance competitiveness is amplified (see China or India). However, unlike some perspectives on the issue of globalization, the trend is not necessarily a "race to the bottom" anymore (see Making Globalization Work by Joseph Stiglitz) rather it is about productivity and specialization.

My employers do work all over the developing world, but their longest-term projects are in Pakistan, and every year since Pakistan has been included in the WEF report, they have co-authored the country-specific competitiveness report for the country. While Pakistani leadership may be interested in improving index numbers (we will call that the macro side), the many, many companies on the ground developing and implementing programs are interested in small, incremental improvements in the conditions of the Pakistani countryside. What has their work produced? Nearly 15% of the population has escaped poverty over the last six years (withstanding the effects of the Global Financial Crisis). Of course, these and other improvements can be attributed to favorable treatment of foreign business during the Musharraf regime, but also to work on the ground that opened up once unheard of possibilities for impoverished Pakistanis--through loans by Islamic banks, through improved infrastructure, or through the simple construction of cooling locations along routes so farmers could sell more milk to farther locations. Create the opportunities. Fulfill the opportunities. Create more opportunities. It is a very simple formula that has pulled millions out of poverty (in Pakistan alone).

The practicality of microeconomics extends far beyond the Pakistani countryside or "making money" in general. That, however, is a topic for another chapter.


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