Jeffrey Sachs: recommendation

Transcript context

…You said that economics should, in a sense, be more humble about its knowledge and economists tend to think that there’s a certain knowledge of economics that they know, that they have a value-added. Do you see that as justified, that economists’ economic way of thinking has some value-added? I guess the question on Ex-Im Bank, I’ll just make it more general. The big returns to investment in the coming decades, in my view, are largely in the low- and middle-income countries, not surprisingly because their capital is scarce, because they have a big capacity to catch up. They have a big human need also. In an idealized world, a tremendous amount of finance would flow from the savings in high-income countries to capital stock in low- and middle-income countries. Of course, some of that happens, for instance, to China or to Mexico in the past. It’s relatively constrained because there are huge institutional barriers, not the least of which is getting repaid for these loans when they’re cross-border. Institutions which facilitate that kind of international capital flow can be very good at global improvement. In my view, we have too few of those. That’s why I’m constantly arguing for both more aid, which are grants, but also more financing through institutions because I think both of these can improve the human condition, make the world safer, help more countries get out of their crises, and so forth. Ex-Im Bank is not my favorite institution, but I think it’s fine. I think it should be improved. There are many specific issues of this financing which I’m not too keen on. I would like longer-term, 20- or 30-year loans for infrastructure mainly to low-income countries. Ex-Im Bank is a little bit of a model for that, but we could do better. In terms of what do economists know, “a lot” is the answer. There are really a lot of powerful insights into two kinds of issues that are core to economics. One is, managing scarce resources is a general problem. The second is how markets function. Both of those provide a wealth of useful knowledge for human betterment, but what economists tend not to do is to get into the details, as it were. We think that the general knowledge is sufficient. That, I think, is a mistake. As I’ve tried to describe in our conversation now, and as I’ve learned in 35 years of work in the field in more than 125 countries, the context is essential because we’re dealing with very complex phenomena. The complex phenomena do not lend themselves to slogans, to easy answers, or to single solutions. They’re more like engineering problems, agronomy problems, or health problems. You have to understand the context, the technologies you have at hand, the choice sets that you really have, in order to be constructive in this. There may be room for a few pure theorists in a field like this. In my life I’ve met a few brilliant geniuses, very few, who could sit in an office and think great thoughts and contribute to the world. It’s a very small number, by the way. Then I’ve met lots of people who generalize, which doesn’t move me because I don’t find it helpful. I find it distracting, confusing, misguided, or misplaced. For most of us mortals, I think the deep engagement in real problems is crucial. lize, which doesn’t move me because I don’t find it helpful. I find it distracting, confusing, misguided, or misplaced. For most of us mortals, I think the deep engagement in real problems is crucial. I wouldn’t want to train doctors without the medical students walking the wards with their mentors. I don’t like training economists without them grappling with real problems in real places and learning the complexity of the interacting physical, technological, political, economic, natural systems. It’s the complexity of these interacting systems that defines how we need to respond. We’re not training students that way. We’re training them in general principles or in very fancy statistical exercises that actually miss the point. Just a final word about that. We have so much statistical machinery to ask the question, “What can you learn from this dataset?” That’s the wrong question because the dataset is always a tiny, tiny fraction of what you can know about the problem that you’re studying. If you want to know about the problem, get out there and learn about it. Don’t think that you’re going to find it in your dataset. For that we need a different kind of epistemological approach and a different kind of teaching approach as well. I want our students out on the hospital wards, as it were, but that means being out in the world working and solving problems and dealing with people across many different fields and many different parts of social systems to be able to aggregate to and integrate into meaningful holistic solutions.…

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