Thursday, June 6, 2024

Lessons from the Burmese dystopia

We receive news every day about Gaza and Ukraine, and there are good reasons to keep our focus on them. But there are other tragedies about which we only hear from time to time that we should pay attention to as well.

Thant Myint-U, a diplomat and grandson of a former secretary general of the UN wrote a few years ago a very interesting book, “The Hidden History of Burma. A Crisis of Race and Capitalism.” The author, born in New York city, knows the country well, and participated in an advisory capacity in the attempts to complete the transition to democracy until a military coup in 2021 stopped the process.

Myanmar (as the country is now officially called) is a country sandwiched between India and China, of incredible ethnic, religious and linguistic diversity, for historical and geographic reasons. The book is the chronicle of a failed transition, the history of the years between colonialism and the current civil war. Inter-ethnic violence is an important ingredient of this history, culminating in the tragedy of the wave of the Rohingya refugees as a result of this violence.

The cascading mechanism of ethnic violence is well known, and reached tragic proportions in this case in the second decade of this century, just some years ago. A supposed crime is perpetrated, and someone publicizes that the perpetrators are members of some ethnic, religious or linguistic group. The entire group is blamed for it, which triggers a reaction by the most radical members of the targeted group, and so on and so forth. One has to be careful with the narrative, and that is why it is important that the precise details are delegated to those that know the case very well, as it happens with the autor of this book.

The episodes of ethnic violence took place in the middle of a failed transition to democracy, after years of military rule, first trying to follow a socialist system and later opening up the doors to markets and private interests without much regulation. The case has similarities to dystopian fiction: “In a world with no shortage of mass atrocities, the civil war in Myanmar is perhaps the most inescapably dystopian

The book finishes with the Covid-19 pandemic, just before the military rebellion that put an end to the transition. The current situation is one of civil war, with the army fighting against a coalition of the legitimate government and armed ethnic groups: “The resistance aims to overthrow the Military Junta, establish a genuine federal democracy, and remove the military permanently from the country’s politics."

The book is a warning about what happens to capitalism without a strong state: violence, warlords-business men, and drugs are together in a tragic cocktail. Climate change meanwhile devastates a country that is most vulnerable to it.

The mistake of ethnic federalism results from choosing to deal with fixed ethnic groups (a mistake to which the UN apparently contributed) instead of using a fluid interpretation of ethnicities, emphasizing diversity and a common purpose. Ethno-nationalism and unregulated capitalism feed each other, and Facebook contributes to it, as it did with the Rohingya catastrophe. 

The international celebrity business projects a simplified view of complex countries, and in this case it invested too much hope on a leader (Aung San Suu Kyi) that in the most dramatic moments failed to take a principled view on human rights.

I strongly recommend this book, both if you are interested in this specific case, and more generally if you are interested in the co-evolution of ethno-nationalism, capitalism and democracy.

Wednesday, June 5, 2024

Milei's neoliberal dogs

The recently elected President of Argentina, Javier Milei, who was trained as an economist, has several dogs that are cloned from a previous dog that died not long ago. Some of these new dogs have the names of economists favorable to a minimum role for government in the economy. One of the dogs, for example, is called Milton, after Milton Friedman.

Javier Milei has many of the attributes of right-wing populism. I read in The Guardian: “More than Milei’s ideas, what worries me is his state of mind and emotional stability, said Juan Luis González, the author of an unauthorized biography which takes Milei’s nickname as its title: El Loco (The Madman). The book portrays Milei as an unhinged loner who was bullied and beaten as a child and gets political advice from four cloned mastiff dogs named after libertarian thinkers.”

Milei defines himself as anarcho-capitalist. He was recently in Spain for an international meeting with other far right politicians, including the leaders of VOX, a Spanish nativist movement that denies the importance of climate change, and other parties that believe that the experiment of the European Union has gone too far. Milei not only has close links with the European far right, but also with Trump and Bolsonaro.

Milei illustrates that neoliberal ideas seem to be complementary of populist methods and far right objectives. In logic, it wouldn't need to be like that. The three dimensions could be separated. However, when one explores the similarities between, say Reagan and Trump, or Thatcher and Johnson, although the neoliberal leaders on the 1980's did not qualify as populists, many of their anti-government (except in law and order) policies where very similar, for example promoting a race to the bottom to lower taxes. Perhaps the modern right-wing populists are more protectionist, but that is not always the case. Now they are more populist, but they are equally neoliberal.

Where does the complementarity between neo-liberalism and populism come from? One hypothesis is that the evolution of technology and institutions forces the right to manage themselves today in a hyper-democratic society, where citizens interact in the social media and finally they vote in unavoidable elections (although eroding democratic institutions is feasible in this context). The right has always had a very instrumental view of democracy (capitalism comes with democracy or without it, see Franco or Pinochet): if they cannot destroy it formally, they will use all the technologies available to make it work for its objectives. I interpret national populism as one of these technologies.

Thursday, May 30, 2024

What do people think?

In a typical interview or press conference with an athlete or a coach, he or she may be asked something like “do you plan to be in the same club next season?” He or she may find the question uncomfortable, but if in the answer she includes, hidden somewhere, the word “yes,” chances are that the headline in the media a few minutes later will be: “Athelete/coach X plans to continue in the same club next season.”

Smart people would use this as an example of the intellectual mediocrity or opportunism of the Sports media, because the athlete was not “planning” anything, or if he or she was planning anything, it was perhaps to avoid being asked about the topic, to even avoid having to decide. However, it is not very different from the kind of expert analyses that are derived from opinion polls and surveys.

This is important because how people truly form their opinions is a key input in the analysis of democratic societies and of particular aspects of them, such as politics or business. Economists such as Harvard’s Stéphanie Stantcheva have recently devoted significant efforts to learn, through online representative surveys, how people form their opinions on a variety of subjects, from taxation to international trade or inflation. I am also working on this with colleagues, especifically about how people think about public vs private ownership or about the importance of competition.

As Stantcheva and her co-authors have illustrated, it is important to complement closed questions with a few options, with open questions where subjects can openly express their views without limitation. It is interesting how people develop their thinking when they are less primed by the options given by the researchers.

The example of Catalan Independence and Catalan identity (or similar identity problems) illustrates my concern. Lots of political debate hang around surveys where, for example (taking the last one by an official sociological body of the Catalan government), around 40% of respondents say they are in favor of Catalan Independence when there is just another option (no to Independence), and the figure goes down than by more than 10 points when there are more than two options. This is an example of the well known fact that the framing of the questions determines the answers to a substantial degree in many areas. In both cases, it is not clear what independence means (in or out of the EU or the euro-zone, for example), or what the other options are (what is a state in a federal Spain as opposed to an autonomous community).

But pundits and experts use the results of these surveys to say things like “support for Independence” has declined (or increased), when they should just say that the answer to these questions in surveys has increased to decreased in some way or other. Similarly when they are asked whether they feel only Spanish, only Catalan, more Catalan than Spanish, etc. What if they don’t feel anything about this, or they care little. Surveys do not capture vague preferences or the intensity of them.

Saturday, May 18, 2024

Complex social sciences

Some weeks ago, I read a review of three books in the Week-end Financial Times on Complexity Economics. I bought the three of them, written by Brian Klaas, J.Doyne Farmer and Maja Göpel. They are a good complement of  “How China scaped the poverty trap”, by Yuen Yuen Ang who also uses complexity arguments to explain the historical evolution of China, with references to other societies.

Klaas book, “Fluke,” is perhaps the most interesting and ambitious of the three, in the intersection between philosophy, natural sciences and social sciences. The book reviews the properties of complex systems, such as emergence, self-organization, non-linearity, interconnection, randomness and difficulty to make predictions (the latter, as in Taleb’s books). Complex is different from complicated in that when a part fails in a complex system, the other units change and adapt. Feedback loops, tipping points, and reverse causality are also characteristics of complex systems. These can be analyzed using network analysis and evolutionary dynamics.

In a complex evolving system, small causes can have big consequences. Applied to the human world, we are all part of an interconnected reality, the result of multiple contingencies that result in our existence. When we are born, we do not come into this Planet, but we emerge from this Planet. Klaas urges us to downplay the importance that our Western culture allocates to the individual. Our brains are the result of the interaction of many neurons, and an anthill is the result of many ants. These social insects invented agriculture before humans. We have evolved to develop a sense of self-awareness to survive, not to seek truth, and other beings have developed other skills that we do not have (flying wings, radars). 

We control nothing but we can influence everything. The complexity of human societies suggests to the author that instead of using the expression that something is or is not “rocket science,” we should instead say that something is or is not “social science.” At our state of knowledge, economic systems are more difficult to predict than some physical systems (such as planetary orbits).

To facilitate the connection with social scientists trained in traditional methods and models, books for a general audience discussing complexity should emphasize some elements of continuity with the more advanced existing methodologies. For example, I see a continuity with game theory, just with more players and less (or different) rationality, as in Bowles 2004 book on microeconomics.

For example, in the last part of the book I found useful thoughts that will help in my course on soccer and economics. When the context changes, randomizing strategies may be useful, as a tribe in Borneo does with the selection of the exact location of rice fields. Or as the animal species that follow mathematically perfect random rules in the ocean. It provides a new perspective on the use of mixed strategies, which so far I justified only in terms of being unpredictable in contexts such as penalty kicks or military strategy.

I also found useful the reference to Moneyball (the book and movie about how statistics revolutionized baseball) as a not necessarily desirable trend if brought to the extreme, because it makes the game more predictable. The notions of contingency, complexity and randomness may help explain why Moneyball techniques have been more successful in baseball (although there seems to be a backlash there as well according to Klaas) than in soccer, where the game, less dependent on set pieces, is more fluid and difficult to predict.

Sunday, May 5, 2024

Why sports clubs fail

Acemoglu and Robbinson wrote “Why nations fail,” an impressive and controversial book that concluded that nations fail when they do not find inclusive institutions to make growth and cohesion compatible. Garicano wrote “Why organizations fail,” an article summarizing the literature on the economics of organizations, concluding that organizations fail when they do not allocate talent well, and when they do not balance well the short run with the long run.

A subfield of organizations that deserves a specific treatment is Sports organizations and soccer clubs in particular. Admittedly, in the current institutional setting, these organizations are very difficult to manage, because of the pressure of promotion and relegation and the economics of superstars. But clearly some of them are better managed than others. 

Soccer clubs never totally fail, but they may decline significantly, when their officials do not follow a coherent line and only care about the very short run, like bad politicians or business managers. They are too big or too important in their communities to fail, and that’s part of the problem: the moral hazard that results from the impossibility of totally failing.

Until the reelection of Joan Laporta as president of FC Barcelona in 2021, the history of the rise and fall of what some called the greatest soccer club is explained in Simon Kuper’s book “Barça.” At the end of the book, he didn’t seem very optimistic about the president that had been eleted for a second time.

Since then, three years later things are even worse. Today, the men’s Barça team (the one that just 10 years ago was the world’s best) is out of the new Clubs World Cup of 25 teams, 12th in the ranking of teams in Europe, 3rd in the Spanish league and 2nd in Catalonia after Girona. The financial crisis of the club is even deeper than then, and the president has been unable to retain or assemble a professional economic team to address the problem.

Barça does not sign the players they need, but those that they can afford or that are offered to them by opportunistic agents. Young talent, something the club keeps producing in abundance, will receive offers from clubs that have better chances of winning big titles, more money and are better managed. The club should learn from the good and bad things of the past: look abroad to learn from the best, control populism in the transfer market and coach appointment decisions, and build on the good assets that the club still has: youth academy, women’s team, a popular brand (have a look at the new and good Barça One app)… The team that had the three best players of the world in 2010 (Messi, Iniesta and Xavi) has been allowed to decay. Since it will never disappear, it would be better to give it a more decent life.

Saturday, May 4, 2024

The federalist taboo

Wikipedia defines taboo as “a social group's ban, prohibition, or avoidance of something (usually an utterance or behavior) based on the group's sense that it is excessively repulsive, offensive, sacred, or allowed only for certain people. Such prohibitions are present in virtually all societies. Taboos may be prohibited explicitly, for example within a legal system or religion, or implicitly, for example by social norms or conventions followed by a particular culture or organization.”

People like me will be voting in the next few days in Catalan (May 12th) and European (June 9th) elections. The fact that the same citizens will be electing members of Parliament at two different levels, just above and below the state level (in our case, the Spanish level, on which we voted less than one year ago, a few weeks after we voted for our local representatives in the City Council), illustrates the federal character of our political reality. It is not that different from what happens in the USA, where voters have the right to participate in local, state and federal elections.

However, for some misterious reason, in Catalonia, Spain and Europe, we refuse to call this state of affairs “federal.” OK, perhaps there are historical reasons, or perhaps we are not a complete or a perfect federation, perhaps we lack some elements of that… but also do other realities that call themselves federal: for example, both Spain and Canada, two very decentralized countries, do not have a Senate as a powerful territorial chamber as in Germany, but Canada calls itself federal and Spain does not.

Spain today is Euro-Spain (in the EC since 1986), a member-state in the most integrated core of the EU: member of the euro-zone, and the Schengen area. It does not have an independent army, but it participates in NATO and in UN forces. The old nation state, in this very integrated region, is something of the past, but the sovereignists find this difficult to swallow.

Not only we do not call our federal features by the f word, but many of those in favor of better or more complete federal structures also refuse to call themselves federalists, or cautiously avoid the word. Just recently, two former Italian Prime Ministers, Letta and Draghi, and the French President, Emmannuel Macron, have made proposals (through reports, speeches or interviews) for a more integrated Europe, with stronger federal institutions, but in no part of their arguments does the f word show up.

It is a mistery to me why “federal” and its derivatives are almost taboo words, but sovereign and its derivatives are not. Part of it is the confusion around the term, although many other social or political concepts are also confusing and vague. If political scientists do not agree on a definition of federalism, or on whether Spain is a federation or not (certainly, it is not a unitary state or a confederation), it may be asking too much for people to have a clear idea of it.

But we live in an increasingly interconnected world, we live in a complex adaptive system that must be managed as such. Distributed but connected structures provide more stability and adaptabiblity than centralized or unconnected structures. And it is difficult to think of a better tradition and set of principles, other than federalism, to manage this complex reality.

Rodrik’s trilemma shows that in a hyperglobalized world, we may have to choose between national sovereignty and democracy. Federalism already provides stability to many regions of the world. But it is not a panacea, and there have also been failures and federal roads not taken. The nation-state remains a blueprint to solve conflicts, but it is rarely succeeding, as we see in former Yugoslavia or Israel-Palestine.

In Europe, we need to federate to defend ourselves (a typical motive for federations in history, from classical Greece to American native groups) but also to cooperate internally and externally, to harmonize taxes and fight against tax havens.

The defeat of national sovereignty is slow, as it is the victory of federalism. But there should be no doubt about the necessary winner.

Sunday, April 21, 2024

Markets usually efficient and governments sometimes effective?

The latest issue of Advances in Economics Education features a set of papers evaluating different aspects of the CORE Project to introduce new methods, materials and contents in economics teaching.

Sam Bowles and Wendy Carlin, two of the leaders of CORE, write about the importance of showing in textbooks the economic reality and contemporary economics research in dialogue with other disciplines, as a response to criticism following the Global Financial Crisis. The need for reform has been exacerbated in the midst of making sense of a pandemic, climate change, disruptive politics and wars. It was not enough since the mid 2010s with changing 15% of textbook  contents (as it was common until then), as it was not enough to Samuelson with his famous textbook after the Great Depression and the Second World War. As a result, CORE presents a new benchmark model of economics, founded in social interactions and in dialogue with the real world, where the perfect competition supply and demand cross is just a special case of secondary importance.

The other three articles in the issue reflect an external evaluation of CORE and in particular its free e-textbook The Economy. Carlos Coutinhas argues that regardless of one’s stance as a supporter or sceptic, CORE’s approach has had a profound impact, “leaving a lasting mark on the publishing and economics education landscape”. He also reports that these reform efforts may be insufficient for those in favor of more radical approaches such as feminist economics or ecological economics.

Paul Crosby and David Orsmond, acknowledging the strengths of CORE in speaking to the big problems of our time, provide the closest call in the collection to defending the traditional approaches. In particular, they claim that there is still value to keeping the basic supply and demand graphical model as a benchmark to explain most interesting things in economics. They praise the list of Mankiw’s “10 principles of economics” contained in the most successful of the traditional textbooks. These principles do not mention problems such as inequality or climate change, and include “markets are usually a good way of organizing economic activity” and “government can sometimes improve market outcomes.”

Jo Michell’s article is in my view the most interesting of the external evaluations. He focuses on some of the details of the theoretical benchmark that accompanies the textbook The Economy, in particular on the transition from micro to macroeconomics. He finds some weaknesses in how this transition is represented in CORE’s benchmark model. He has some other interesting remarks, such as a call to define a discipline like economics by its domain, not by its specific models. Still, he believes that CORE responds to a real need for reform, and that any remaining shortcomings are more problems of the discipline in general than problems of pedagogy or teaching.

CORE is the result of an effort to present economics as a set of tools to facilitate a dialogue between theory and the real world using the scientific method. At the same time, in the selection of topics and variables of interest (such as real wages and employment), it represents an economics for the working class, which happens to be the majority of the population. The old is gone, and the new is in construction and will probably always be. As the authors of these articles explain, CORE’s contents are not easy (the way to respond to students’ criticism was not to make economics “easier”, because that would have been to mislead them), and there is a role for instructors in making them digestible. But they are more interesting, and importantly students (in my modest experience) find them more interesting than traditional approaches.

After the (not universal) success of CORE, reliance on the old textbooks is difficult to justify. CORE’s materials are not the final word, but they are useful and of high quality, and they should be taken as a motivation to keep moving in ways to make economics as a discipline a more relevant set of tools for students, researchers and citizens.