An Incredible Force For Good
by Fazeer Sheik Rahim
Nobel economist, Gérard Debreu once said that value is nothing but an element of the set of real numbers. Illustration: the ’suite princière’ at the ‘Prince Maurice’, an exclusive resort on the East coast of Mauritius costs around $10 000 a night, enough to run a small hospital in Afghanistan for a month, to keep 3000 Kenyan children an extra year in school by freeing them from intestinal worm or to feed and shelter one of the two billion least-fortunate inhabitants of this planet for 27 years. Depressing perhaps? Well, yes. But economists have never been so close, as they now are, to answering the fundamental question posed by Adam Smith in 1776. What makes the wealth of nations? And the consequences for humanity are simply staggering.
We are currently witnessing first-hand the contribution of Economics to the world. On a global scale, the very existence of the World Trade Organisation (WTO) is the product of a century-long consensus among economists on the virtues of free trade. The WTO can be credited for pointing the finger at problems that no one dared to raise before: European agricultural subsidies, trade protectionism in the textile and apparels sector, in the American steel industry. Thanks to the process of globalisation that free trade has unleashed, millions are being lifted out of poverty in Bangladesh, China and India. Freer and fairer trade in agriculture is needed for globalisation to work for Africa.
But the intellectual battle on free trade is, more than ever, frustratingly hard to win. After all, for much of our evolutionary process, we, humans, have been hunters and have had to envisage our relationship with fellow humans as a zero-sum game in our quest for food, for a mate or for new territories. It is only recently that, with the complexity of modern economies, we have had to develop trust towards strangers in our economic relationships. In ‘The Company of Strangers,’ Paul Seabright (Toulouse) provides a brilliant exposé on the evolution of economic institutions.
The recent debt cancellation for some third-world countries is as much the product of intense lobbying by influential persons like Bono of U2, as the background contribution of economists, among whom Jeffrey Sachs is perhaps the most well-known. They have diligently quantified the costs and benefits of this exercise, shown its feasibility and the extent to which it will lift countries out of poverty and be of benefit to everyone.
At a micro level, data is also the most powerful of arguments and politicians do take them seriously. Harvard economist, Michael Kremer is one of the many to have left his Ivory Tower to study real-life problems. Together with Edward Miguel (Berkeley), he has conducted field experiments in Kenyan schools and found out that, by spending a one-off $3.50 per pupil on medication against intestinal worms, average schooling per pupil can be increased by one year. This is clearly more effective than traditional programmes such as free uniform and food, which can cost in excess of $100 per pupil. Consequently, the government of Uganda has already put in place a systematic deworming campaign and that of Kenya is likely to follow suit. Kremer has also proposed novel incentive mechanisms to fund drug development for developing countries, to prevent elephant poaching in Africa, amongst others. Esther Duflo (MIT) and Rema Hanna (NYU) have recently conducted experiments in India to identify the factors that could motivate teacher presence. Indeed, India boasts more teacher truancy than pupil, with absenteeism among primary school teachers in excess of 25% (on a good day!). They have found that some well-designed pecuniary benefits can halve teacher absence and have impact that lasts well after the benefits are removed.
