Archive for June, 2013

Bill Moyers has a great interview on the Colbert Report this week, regarding his new documentary that follows 2 middle class families since the 1990s. He quotes Jim Hightower:

The real question is not why do people fall through the cracks, the real question is why are there so many cracks?

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The Retirement Gamble

PBS Frontline has an excellent program “The Retirement Gamble” about how complicated financial instruments are used to confuse and take advantage of people who are trying to save for their retirement through 401(k)’s. It is also just another example of where the limitations of our brains to process information allows corporations to take advantage of unsuspecting consumers.

The episode features  interviews with Teresa Ghilarducci, a former faculty member in Notre Dame’s department of economics. She is now at the New School, and I enjoyed reading her bio and remembered what kind of economist Notre Dame used to attract:

Economist Teresa Ghilarducci sees The New School as “an enterprise to design systems that help people live and work better in society.” In her recent book When I’m Sixty-Four: The Plot against Pensions and the Plan to Save Them, Ghilarducci discusses developing systems to guarantee all working people a dignified and secure retirement. Perhaps because she grew up in a low-income family, Ghilarducci developed a desire to improve society through economic and social policy. As a 21-year-old, she consulted with unionized workers at Stanford University about their benefits and helped them choose pension plans. This experience started her on the path to a career in labor economics, which has now spanned more than two decades and a variety of roles in different organizations.

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In the Forward to Paul Farmer’s Pathologies of Power, Amartya Sen writes on the importance of  power in the developing world,

For example, if inequality of power, in different forms, is central to deprivation and destitution, then little sense can be made of the frequently aired and increasingly popular slogan, “I am against poverty, but I am really not bothered by inequality.”  xvi.

Recognizing that power determines who will struggle to find adequate health, education, and dignity requires realizing that inequality matters. Inequality is of utmost importance to issues of development. Yet astonishingly, development economists ignore inequality. The recent hit popular econ book Poor Economics by Esther Duflo and Banerjee contains no chapter on inequality, which is truly baffling. Some argue that the entire field of development economics is implicitly about inequality, but this is only falling prey to exactly the kind of ignorance that Sen warns about in the quotation above.

Worrying about increasing wages and educational and health outcomes for those in extreme poverty is necessary, of course; but it is NOT the same thing as inequality. Duflo and Banerjee’s  interventions could be successful, and meanwhile the income distribution in India could be increasing, decreasing, or staying the same – depending on whether the rest of the society gains at a faster or slower rate than those at the bottom. The analysis of success or failure of the intervention program is completely independent to changes inequality. And until economists heed Sen’s warning that fighting poverty while ignoring inequality does not make sense, the field of development economics will be vastly limited in its effectiveness.

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