Economics as Medicine

Over the past couple decades, the field of economics has grown enormously. It has invaded its neighboring fields (like political science, and psychology), taken over their journals, and converted their students. However, it's a pity that the transfer of knowledge has been mostly one way. Economics could stand to gain some insights from other disciplines.

I'm particularly struck by the similarity between economics and medicine. At first it seems like an odd connection, but after a minute it seems completely natural. After all, the economy, like individuals, has health. Turn on the TV at any point of the 24 hour news cycle these days and you'll see at least eight different people discussing it. Especially now that the economy is doing poorly, these commentators are like doctors huddled around a patient with a stubborn disease, debating the cause and various prescriptions. In the case of the economy, the names of the diseases are inflation, or high unemployment, and the prescriptions are called tax cuts, stimulus packages, or deficit reduction.

I got the idea to think of economics as medicine from Jeffrey Sachs. As Professor Sachs was making a career out of advising crisis-ridden developing countries, he noticed how many of the skills he needed in his work aligned with those that his wife Sonia needed in her medical practice. Based on these experiences, which he details in his book The End of Poverty, he calls for a new kind of economics, which he calls "clinical economics," that "underscores the similarities between good development economics and good clinical medicine." There are a number of ways, he says, that [development] economics can learn from medicine. Here's his list:

1. The economy is a complex system, and complex systems require differential diagnosis. Doctors don't treat all symptoms the same way; they try to find the underlying cause. Economists, says Sachs, should do the same.
2. All medicine is family medicine. A country's economic situation depends on its history, and its international context. As Sachs puts it, "it's not enough to tell Ghana to get its act together if Ghana faces trade barriers in international markets....if Ghana is burdened by an unpayable mountain of debt....if Ghana requires urgent investments in basic infrastructure as a precondition for attracting new investors...and if Ghana is burdened by refugee movements and disorders emanating from neighboring countries."
3. Monitoring and evaluation are essential. Here takes a stab at the (now outdated) IMF and World Bank practice of judging a country's progress by policy inputs and not outputs. If it's told to cut the deficit, then it's judged by whether it follows through, and not whether this results in any solutions to their problems.
4. Medicine is a profession, and as a profession requires strong norms, ethics, and codes of conduct. Development workers need to take their work as seriously as doctors take theirs.

Excited by the prospects of this idea, I wanted to see how far I could push the analogy. In addition to the parallels that Professor Sachs pointed out, I found these ones as well:

1. Both disciplines have to find a way to make decisions in the face of vast uncertainty and bewildering complexity. In the case of medicine, the root of uncertainty is that the scale of the action is too microscopic for doctors to directly observe; but in the case of economics, it's because the scale is too big. Hence the reason why doctors and economists rely heavily on (statistical) data to figure out what's going on; the sense data (seeing, hearing, etc.) are just not available.
   
2. Both disciplines are fundamentally concerned with the well-being of people. For people to be able to live their lives, they not only need to be physically healthy, but the economy which sustains them also has to be healthy.
   
3. Both disciplines carry high stakes. In medicine, the stakes are life and death. In economics as well, the stakes can be just as severe. Poor economic policy can result in severe depressions, mass poverty, famines (even when food is plenty), and political instability.
   

Sachs' conclusion, and mine as well, is that in all the important ways, the economist's job is essentially the society-level analogue to that of the doctor, or the medical researcher. That is, even though the content of the questions economists and doctors ask are different, and even though the techniques divergely widely, and despite the myriad other differences that mark the two professions as distinct, there's a fundamental common pursuit for well-being that binds them together.

To some extent, the transfer of knowledge from medicine to economics has already begun. Esther Duflo and Abhijit Banerjee have won a lot of fame for their work at using randomized control trials to assess the impact of various development policies. In talking about how they developed these techniques, Duflo and Banerjee cite medicine as their direct source of inspiration. The world of medicine before randomized trials gave us reliable information was dangerous. We hear tales of medieval doctors performing procedures (like leeching) or prescribing drugs without really knowing whether they worked; sometimes the patient's condition would improve, and sometimes not, and recovery seemed to depend more on random chance than anything else. This world seems so long past—but that's pretty much the state where we find modern economics. Economists prescribe policies based on their best guesses, but sometimes they work and sometimes they don't. Randomized field trials finally give us a chance of knowing what works.

But Duflo & Banjerjee's randomized control trials are just the tip of the economics-medicine-interaction iceberg. Just sitting in my chair right now I was able to come up with this intriguing list of research topics:

• The first dictum of medicine is "Do no harm." Should that not be the starting point for economic policy as well? (This seems particularly applicable to the IMF and the World Bank when they advise developing countries.)
• In medicine, a very related concept to randomized control trials is the placebo effect. What if something like that exists in economic policy—which is to say, what if some policies fix recessions, or solve prisoner's dilemmas, or promote cooperation (all classic economic problems) simply because enough people believe they will work. Will Wilkinson, my favorite blogger on the web, gives a scenario of how that's possible.
• Our health, and in particular our weight, depends not just on the amount of food we eat, but also the quality of the food. Two thousand calories of junk food is very different than two thousand calories of a balanced diet. In the same way, we can't measure the performance of the economies just in terms of quantities: it matters not just how much GDP grows, or how much investment increases, or how much consumption increases, but also the kind of GDP, investment, and consumption growth that we see. Knowing that GDP increased 3% tells us very little about whether people are actually better off. (What fraction of the U.S.'s GDP growth in 2002-2008 came from housing and easy credit?). Similarly, as I discussed in an earlier post, not all kinds of consumer confidence (which is generally considered a good thing) are made equal.

Thinking about this connection between economics and medicine is really exciting. Not only do I see society, politics, the other disciplines in the social sciences all in a new light, but I'm also reminded of why I got into economics in the first place.

River Plate's Loss as a Metaphor for the History of Argentina

On June 26th, the unthinkable happened: the Argentine football club River Plate got demoted to the B league. It's an event that provoked this kind of reaction throughout the country and the football-playing world:

For those of you who don't follow Argentine football, let me explain. The two strongest teams in Argentina have always been River Plate and Boca Juniors, and they have a rivalry that's practically unmatched anywhere else in the world. Every person in Argentina is a fan of either one or the other. When the two teams play, it's the sporting event of the year.

River (as it's known colloquially) has been one of the most successful Argentine clubs of all times. But lately they've been struggling, and losing, and losing. By June 26th it got to the point where River had to win the match in order to stay in the top ('A') league of Argentine football. It should have been a no contest; they were playing some no-name team from the interior.....and still they lost.

A dedicated River fan became so irate while watching that fateful game that this video of his tirade has made him the most well-known man in Argentina:



[As you'll soon tell, there aren't many different kinds of curses in Argentine Spanish. This man uses about three or four principal insults, with variations and combinations:

"la puta que te pario" = the whore that gave you birth
"pendejo / boludo / pelotudo" = stupid / asshole
"andate a la concha de tu madre / hermana / etc." = your mother / sister's /etc.'s pussy

At one point he cries out, in supplication, "¡No les pido que hagan 28 pases como el Barcelona, hagan dos seguidos, nada más!" ("I'm not asking you to make 28 passes like Barcelona, just two in a row, nothing more!")]

On the media circuit on which this poor man was later dragged, he sheepishly explained that he did go a little too far. But really, given the situation, who can blame him? Imagine being a fan, a devotee of River, learning from a young age to adore the River jersey, to be proud of a team with an international reputation and a long, glorious history; and to have that team that you so adore now be known as just "some other" team, with bygone glory days?! It's hard to comprehend how one copes with such a trauma.

But these kinds of falls from glory aren't new to Argentina. Rolando Hanglin, writing for the daily La Nacion, puts this story in its larger context, tapping into the essence of the Argentine psyche:

River ya no es la élite del fútbol mundial. Es sólo un equipo que fue próspero y señorial (de ahí el apodo de "Millonarios") con una escuela refinada, que se ha perdido. Además, está rodeado del entorno que corresponde a un país del Tercer Mundo. Un país que fue rico hace ciento veinte años, y que ya no lo es.

"River is no longer in the elite of world football. It's just another team that used to be successful and noble (from there came the nickname of "The Millionaires") with a refined school that has lost its way. In addition, it's surrouned by an environment that corresponds to a country in the Third World. A country that used to be rich one hundred twenty years ago, but no longer is."

What Mr. Hanglin is referring to is how Argentina (believe it or not) was contending with the United States as a world power in the New World around the end of the 19th century. Why not? Argentina had a vast resource endowment, skilled European immigrants, industry and trade. All signals pointed to success. But now all the books written on the history of Argentina have the subtitle, "What went wrong?" (how Argentine ended up "failing" is a subject that has so interested researchers that it has its own name: the so-called "Argentine Riddle").

For decades now, economists and sociologists from Latin America's dependencia school have been arguing that poorer countries have an inherent disadvantage when competing in the world economy. Something analogous seems to be true for football in the case of River: as D.S. over at The Economist notes,

The cruelest consequence of relegation, of course, is that the demotion itself makes it much harder for a club to work its way back up to the top:" River’s annual television revenues will fall from $6.8m to about $4m, and it will have to cut ticket prices. It will probably lose transfer income as well, since few European clubs search for talent in the second division.

For Argentines with pride in their people and their country, all this must be terribly frustrating. How do you prove you don't suck? If you're a batter in a slump, every hit you make seems fleeting; every strikeout just confirms and reemphasizes your worst fears. Similarly, every time the newspapers in Argentina report rising inflation, or the lack of respect their dignataries receive abroad, the more and more Argentines confirm their fears that they're stuck in the "Third World" (a category that they care a lot about, critical theory be damned) forever.

Argentines respond to this frustration in different ways. There are some (especially the rich) who stopped caring, and have simply shifted allegiances to America or Europe. They openly put down their country and go on and on about how glorious it is abroad. Then there are those who care about their country, but resigned at its fate. Many still harbor resentment against the world superpowers, especially Britain and America, for having cheated them out of a better position in the world pecking order. Throughout Latin America, Argentines are derided for their arrogance, and they have it, it's true; but when we see that arrogance through the lens of their history, it's much easier to sympathize and understand how they're feeling.

Like Argentina, which has been struggling to find its identity for the past century, River too will have to reorient itself in the world of football. Most Argentines haven't handled their country's fall from grace well, and remain bitter at the world. Let's hope River fares better.

Musharraf's Talking Points

Yesterday I attended a talk by the former President of Pakistan, General Musharraf, who spoke at the Baker Institute at Rice University. Here are the talking points that I imagine he would have outlined for himself, had he been perfectly objective about the content of his talk. You can view his full talk here.

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[Stylized] Talking Points for His Excellency General Pervez Musharraf

• Intro: The deterioration in relations between the US and Pakistan is unfortunate. In my time, I had great relations with President Bush [...mostly because he was glad I was cooperating and I was glad he wasn't invading us.]
• Thesis: Pakistan is the sufferer, the victim, and not the perpretrator, of terrorism. [Any actual violence supported by the state—say, in Kashmir—is actually freedom fighting, stemming from overwhelming public support for the cause].
• Pakistan faces four main challenges: terrorism, extremism, terrorism, and extremism
• Some FAQs:
• What accounts for the "antipathy" of Pakistanis towards America?
• America betrayed Pakistan in 1989. With the Cold War over, America left an anarchical Afghanistan that Pakistan wasn't able to handle; this in spite of Pakistan helping during the war effort against the Soviets.
• What accounts for the current extremist problem in Pakistan?
• The Betrayal of 1989
• What accounts for the strength of the Taliban and Al-Qaeda?
• The Betrayal of 1989
• US failure in Afghanistan
• Let's not get too distracted by Afghanistan, though. The real threat to regional stability is India. India is the clear enemy.
• India is setting up an anti-Pakistan Afghanistan. For instance, Afghanistan sends its forces to train in India, but not once have they come to Pakistan.
• India is not resolving the Kashmir dispute, which spurs attacks [not that we discourage that].
• It's not fair that India gets special treatment and we don't. The world is, for some reason, hostile to our nuclear weapons. But our nuclear weapons are the pride of our people, even down to the most illiterate man, a symbol of our acheievement [even if they had to 'eat dust' for it, right?].
• The stump speech: There is currently no strong candidate for election next year, so I'm "offering myself as a third alternative."
• Be selfless: "I'm not doing this for myself. I'm comfortable already, I make good money, I could live anywhere in the world. But the people of Pakistan need a leader like me."
• (Since I have to): We did not, did not, did not know about Osama bin Laden. We did not. [Delivered somewhat like this].

Note to self: Be respectful. Make sure to address audience as "ladies and gentlemen." The more, the better.

A Princess's Plea

Last Wednesday, I saw a real, live princess. Her Royal Highness Princess Haya Al Hussein of Dubai came to the Baker Institute here at Rice University to speak on "The Politics of Hunger," as part of her larger efforts, through her non-profit Tkiyet Um Ali, to end world hunger.

The talk began at 6pm. As I approached the Institute I saw a number of black sedans parked in front, and men in impeccable suits. In the lobby sat a pretty, smiling receptionist, checking the roster for names (the day before I had to fill out a detailed online RSVP form and register as a Rice student to get in). A police officer was watching from the corner as she checked me in.

I walked inside, with my jeans and T-shirt (covered in chalk from class), and immediately felt out of place. Most of the attendees were clearly important people; donors, public officials, distinguished members of the community. They were dressed up, had white hair, and clearly knew each other. It was a group as close to aristocracy as we get in America.

We were kept waiting a little bit. In the meantime I flipped through the program, and people-watched the aristocrats, who were greeting each other with the familiarity and affection of fellow parishioners. Every now and then I would hear the loud tak-tak of high heels as someone from the Institute went in the back to check on something. After a while, people started trickling from the back; at first a couple men in suits, then some women, who would later walk back to check on something; they would return; some more important-looking people; and then finally, the princess herself, surrounded by a whole delegation of people, including the former Secretary of State James Baker, with whom she was finishing up a conversation. As I watched this scene, it struck me how the extended wait and the scurrying back and forth of the Baker Institute staff represented an integral part of the very spectacle of power and status that we were there to see. By the time the princess did come out, I already felt distant from her, blocked by layers upon layers of guards, staffers, and officials who guarded her access; a common man, glimpsing a world to which I wasn't privy. An aura befitting a princess, I guess.

Her Royal Highness shook hands with some people sitting in the front row, and then took her seat.

Mr. Baker introduced the princess. He spoke fondly of the work he did with her father, the King of Jordan, and the honor of having her to visit. He gave the air of a man proud to see his friend's daughter all grown up.

Then Princess Haya took the podium. She was just as I imagined a princess should be. She had a British accent (being educated at Oxford), and spoke only as loud as she needed to be heard, lending her voice an ethereal and other-wordly quality. If it weren't for the Bose speakers, I would have to strain my ears to hear her:



The main theme of her talk was that America needed to take moral leadership in the fight against world hunger. Global hunger "has to become a priority," she said. Without food security, "there can be no political security, and no peace."

What most struck me about her talk was the latent frustration that bubbled behind her serene front. She admitted to feeling powerless at times, despite her high station; and she explained her annoyance for endless rounds of policy debates, which she saw as an excuse for not meeting our responsibilities. Most of all, she couldn't understand why policymakers weren't sincere about fighting global hunger. Why do countries spend so much on weapons and so little on aid? Why do we permit hunger to continue? Where is the outrage?

This plea was so earnest and sincere that I felt guilty for also thinking it was futile. There is, I think, a natural progression of thought when one works for moral causes like this: first comes outrage, and zeal, and disbelief; but eventually, sometimes soon but often much later, there settles in a kind of serenity that comes with wisdom and understanding. Yes, fight on for the causes that are important, but there are reasons for why things happen. (In this particular case, I would say, Princess, that it is possible for all the people in the world to have good intentions and still find ourselves in miserable situations.)

But I know well enough not to become cynical. Exhorting important people to spend more money on food aid may not be the most effective way of ending world hunger, but God knows the world could always use more of the princess's sincerity.