Category Archives: Economics

Energy subsidies – online course

Energy subsidies are a complex and enormously important issue, having a major impact on climate change (and thus on the fate of our world, and how livable it remains), on health (via air pollution, especially in developing world cities), as well as distorting our economies. And the level of public debate around energy subsidies and taxes is very poor, with conflicting claims made by the fossil fuel industry, advocates of renewable energy, and advocates of nuclear.

Energy Subsidy Reform, a free, 2-week, online MOOC style course run by the IMF on edX, sounds like a much-needed corrective.

“Whether you are a civil servant working on economic issues for your country or simply interested in better understanding issues related to energy subsidies, this course will provide hands-on training on the design of successful reforms of energy subsidies.”

Communication only succeeds when people hear you

Of communication and cultural blank slates…

Paul Romer is a prominent economist with a vision for “reform zones” in developing countries, with charter cities that operate independently of the rules and institutions that have failed to create wealth in the country as a whole. The idea was to invite foreign countries to help set up new rules and institutions and build the cities, experimenting with new ways of doing things, to find what would work to create wealth and end poverty.

But for years the idea had no traction. Part of the problem was an accusation of colonialism – which seems to make no sense if the country is inviting them in and asking for help. However, Romer is not a people person, and he couldn’t sell the idea, until he had help packaging it into a clear, emotionally appealing 18 minute presentation – i.e. a TED talk.

This led to him connecting with two Honduran government officials with a similar vision who had also had trouble selling their idea, Octavio Sánchez and Javier Hernandez. With the help of the TED talk, the Honduran government was convinced. In a matter of months from Romer standing in front of an audience at TED, a constitutional amendment had been passed to allow charter cities (ciudades modelos) and work had begun preparing for this grand experiment. (See the follow-up TED talk.)

But all was not well. Romer was perceived to be bossy – Hondurans expected him to work with them, but he was apparently dictating terms. International media consistently reported it as Romer’s vision, rather than recognizing the work and vision of Hondurans. Local opposition increased, Romer was isolated, and a dubious-sounding deal was made with powerful interests. The project failed entirely when courts ruled it unconstitutional, but not before an outspoken opponent of the project, human rights lawyer Antonio Trejo, was assassinated.

Romer plans to keep trying, and says he’ll do things the same way next time. He has little patience for emotion and sensitivity about who gets credit and such matters, and believes that such things should be put aside in the interests of an important project.

TED helped Romer package his message, but it apparently didn’t solve his fundamental communication problems, nor lead him to take a participatory approach to the project. Running a large project in a country with corrupt and dysfunctional institutions takes more than communication, of course, but with the team divided and national opinion shifting away from them, they had little hope of facing down major challenges.

A bonus lesson: A charter city can never be a completely blank slate – corruption, paternalistic attitudes, non-participatory approaches and other institutional and cultural problems are part of the institutions working to set up the new city, and they won’t disappear by passing a constitutional amendment.

Further listening: Self-Improvement KickThis American Life, January 4, 2013.

Milton Friedman: women should offer to work for less

Milton Friedman got a few things right – I imagine that’s how he got the Nobel prize in economics, for starters. This post is about a couple of the things he got wrong.

For one, he said that the unions are to blame for apartheid and women should respond to sexism by offering to work for less.

Wow.

Another memorable moment was his statement in December 2005 that “the stability of the economy is greater than it has ever been in our history, we really are in remarkably good shape. It’s amazing that people go around and write stories about how bad the economy is, how it’s in trouble…”