28 December 2011 ~ 5 Comments

For those debating Sachs: Remember, it’s not REAL…. it’s economics.

“But that wouldn’t really happen in real life,” said one of the students in my economics class as our professor was reviewing game theory and the economics of auctions. “People wouldn’t act in that way, and it wouldn’t work like that.”

Our professor turned around and smiled and looked at us all like he’d just realized that we had come to the theatre to see Jaws and brought our bathing suits thinking we’d get to swim. “Don’t try this at home, people,” he said. “This is E-CON-OMICS. It’s not real life! Did you think I was going to tell you how to make day-to-day business decisions? You do have strategy class, right?” and he went back to eagerly scribbling away his mathematical proof about what might happen if there was perfect information, if all people were rational, and if we were interested in the average collective behavior of a bunch of unaverage people.*

That night, after memorizing a bit more about Nash equilibrium theories, I decided to try to go see Jeffrey Sachs speak as he was giving a “sold out” lecture at Oxford. I figured it would give me fuel for my economics fire and give me a further look into an economic perspective I have been turning over for the last few years.

It would be the third time I had seen him speak. The first was at Notre Dame a few years ago, just after I had started PEPY. I was on campus as part of a guest session on “alternative careers” and Sachs was speaking at the university’s biggest annual lecture series. I rushed out of my little workshop to see Sachs’ presentation and I didn’t understand the professor’s confusion about my excitement to see “the rockstar economist” speak.  “I’m not sure you agree with him,” the professor said, looking at me with that same confused expression.  “What, was this guy mad? Of course I agreed with him!” I thought.  “Sachs was calling for more people to work towards livelihood improvements in ‘developing’ countries. How could I not agree with him?”

It wasn’t until the second time I saw Sachs speak, at Conde Nast’s “World Saver Awards” ceremony in NYC, that I realized that the ND professor’s look was likely due to my level of ignorance about development economics. By that time, I had fortunately spent a little more time to educate myself and had read more of Sach’s work and those of “competing” economic thinkers. I had also come to some of my own conclusions about what might “work”, or not, in the development sector based on my own failures and experiences. That time, (along with being a bit shocked that Disney Cruise Lines was up for a “World Saver” award for having painted their cruise ships with a more environmentally friendly sealant?!), I noticed that his prescription for how we should move forward didn’t fully jive with my own.

So I went to the lecture at Oxford reminding myself on the whole bike ride there to be open to listening to his perspective and to seek to understand where he was coming from. I was so conscious of WHO was speaking that I hadn’t bothered to read WHAT it was he was speaking about. I arrived expecting a millennium development goals debate and was presented with a diagnosis of the American political and economic decline that I couldn’t help but agree with. Sachs’ talk focused on his new book, The Price of Civilization: Reawakening American Virtue and Prosperity with nearly the entirety of the talk, and the larger part of the book, focusing on defining the problem and its causes. To my surprise, here I was listening to Jeffrey Sachs and I was agreeing with so much of what he was saying. But then, at the very end, he touched on the “How to fix it” ideas which the second par of his book focuses on.

And then I heard it in my head: Sachs, this is E-CON-OMICS. Don’t try this at home!

I recognize that people would be very upset if they were presented with a book that analyzed the problems of the economy or the development sector and were not then presented with solutions for how to go about talking these problems, but my economics professor was right. This is economics, not strategy!

We can learn a lot from economic theory and, when looking at averages and analyzing trends, it is an essential tool. But when looking at exactly what to then do in a certain instance, especially instances that involve real human beings who are not all rational, who certainly don’t all have perfect information, and who don’t always act in alignment with their own best interests, simply applying economic theories of averages of what is supposed to happen when A and B meet can be more like hiring a professional conductor to generate beautiful music out of singing seals. It’s gonna take a lot more work than just giving them sheet music.

From this point in the lecture, my typical Sach-ian reactions kicked in. I didn’t agree with the global solution theories he touched on and see problems with taking any “proven” solution here and plopping it down there and there and there and scaling it as if one could mass produce solutions as easily as Band-aids. Sach’s model examples of economic role models were the northern European countries (notably, some of them oil-rich, like Norway), and when a few audience members from or referring to those countries noted that they too were having economic problems, Sachs practically put his fingers in his ears.

It was the most disappointing part of a very interesting discussion when Sachs responded to a student who was questioning why we should model an economic improvement plan on situation’s like Iceland’s with a response that started with “Don’t tell me bad things about the economies of Northern Europe. I don’t want to hear that.” He might have been joking a little bit, but he didn’t really respond to the question nor did he seem interested in discussing an issue that might challenge some of his assumptions. Kenyan economist Bernadette Wanjala recently published what was deemed the first independent audit of the Millennium Villages Project, a project trying out Sach’s theories in African communities as a partnership between Columbia University and the UN. If Sachs and all those of us who have “theories” about how to improve the world aren’t seeking out and harnessing contradictions to these ideas, we’re not going to find viable remedies to the problems we continue to face. Instead, we’ll counter our cognitive dissonance by seeking out “proof” to fuel our egos rather than our world. I believe that we need to be asking people TO tell us where we are wrong and then seeking out ways to work with them to find solutions which are more viable through constantly iterating our ideas based on new information.

Sachs’ speech was followed by a panel of Oxonians who had been asked to provide comments and critiques of Sach’s talk and his book. Side note: I love panels like this one, which unfortunately are very rare, as they each dug right in and were not afraid to speak their minds about where they disagreed or had more questions. There was none of the usual chest puffing that comes with panelists each trying to put their business resume on the table by spending the majority of their allotted time talking themselves up – they got straight to the debate and academic questioning– gotta love the Brits! The American on the panel, Peter Turfano, Dean of Oxford’s Said Business School, also highlighted the areas he had questioned about the book touching on a need for more strategic thought in the “what” to do after the thorough economic analysis of the “why”. His comments made me realize that we should leave the economics to the economists and then use their findings to fuel strategy designed by those who are experts in implementing projects involving real human beings.

Another question worth noting was from an audience member who asked if Sachs had shared these ideas with the US government. “They wouldn’t take my calls,” jokes Sachs on two occasions. Funny, the US government doesn’t let Sachs or any one of with a good idea us experiment with the US economy and people’s lives. (Well, to fit in with what Sachs and I both think is wrong with the US, they MIGHT have let him try out his theories, if he had enough money to make it worth their time to listen to him.) Yet, when it comes to international development, the barriers to entry are much lower. Sachs, and many of us (myself included), are guilty of thinking it’s ok to experiment by taking the lives and economies of others in our own hands. We think we can all play strategist, politician, and hero. The US government wouldn’t take his calls, yet communities in Africa are living out his theories. Unfortunately for the world, there is no checks and balances systems set up in global development, no bi-partisan senate debates forcing Sachs to stop, change, or improve. It seems the system is so lacking that even when others take time to do monitoring and evaluation of our projects for us, we can write it off and ignore it. Hmm…. maybe it’s not so different than the current US government after all… but back to the lecture.

I got to meet Sachs afterwards and asked him a few questions related to how his books are written and with regards to the split between economic analysis and improvement strategies. He noted that the majority of his time and expertise is spent in the problem analysis and that I’d see when I read his new book that the “solutions” parts were incomplete and intended more as suggestions/shoves in the right direction. I forgot to ask if he felt the same way about his solution suggestions from the “End of Poverty”, but when standing in front of rockstars or rockstar economists, the right questions sometimes fail to formulate. (Sachs? You reading? Want to share some insights?)

I walked out of the lecture realizing that I had thought I didn’t agree with Sachs, but it turns out I do. I agree that there are big problems in how development work is being administered and how the impacts are not what they could/should be. I also agree that the political, economic, and corporate sector of the US is out of balance and that we are on a high-speed downward path. I just don’t want Sachs or any economist conducting our choir of seals.

The value I see is that Sachs has spent time detailing the WHAT, but we need to do a better job of figuring out the HOW. Sachs, and all those with theories of HOW should hopeful marry themselves to the goals rather than the solutions so that we can all freely debate and improve these imperfect solutions. Because they are ALL imperfect. That was my biking mantra on my way home to my economics studies where I had to go back to channeling the mind of an economist, pretending the world was full of rational ego-less creatures who care more about improving their lives and the world than their reputation. And now, economics makes a little more sense. Just don’ try it at home (or in Africa for that matter).


* Note: Those are not direct quotes, but my general summary. Also note that I LOVE our economics professor and his love for all things econ. It’s fabulous to be around people who are passionate about their subject and he often jumped with excitement when talking about economic theories he thought we should know, even if they were outside the scope of the course, which was either the most interesting part of the lecture, of the part where he totally lost me! I also loved that he was honest with us that this was NOT a representation of how things “would” work, but measures of averages and possibilities based within constraints. That recognition, that theory and reality are not directly interchangeable and require reworking of ideas to fit into the specifics of each new scenario should be a hallmark of formal education – from international development frameworks to MBA business planning. If it’s not, we’ll head out into the world and think we can apply these cookie cutter ideas to real human beings. And that would be just as silly as wearing a snorkel to Jaws.

  • Kristen Ball

    Hi Daniela! You sure do bring out passion in me…even in your blogs! I made notes while I was reading…
    You mentioned a few times relying on all human beings being rational and I know you laugh at the notion of it, too, but if we wait for a day when all human beings are rational to make a move to end global poverty, then shame on us. The reality is, we don’t know – we don’t even collectively know – what it is going to take to end global poverty, but why keep questioning rather than trying, doing, believing, continuing to work together toward this common goal? How can we know where we’re wrong when contemplating theories without first putting plans into action and constantly observing, making adjustments, adapting theories, and then doing this all over again and again and again? That is my experience in terms of what Jeff’s work is all about. When I meet him in 2004, he talked about me being in touch with teachers living in poverty in Africa sharing lesson plans, collaborating on behalf of our students, exploring our commonalities as educators. I wondered, after living in Sauri, Kenya summer of 2005 how this would be possible when they have no electricity, running water, basic medical supplies…and last spring my class video Skyped with kids in Mbola, Tanzania in honor of World Read Aloud Day (despite a horrific wind storm they had the weekend prior to our call) and this year, I am working with the teachers in that community, albeit inconsistently because of electricity and connectivity challenges, and we’re doing projects TOGETHER, including science experiments and shared writing pieces. These are ideas that come from the kids in our communities. Jeff said seven years ago that this would be possible and now it is. He works so hard and truly believes poverty will end. I have learned from him that it’s about economics, strategy, and belief in humanity.

  • Anonymous

    Kristen – I love you!  Thanks for your passion and enthusiasm and all you are doing with your huge heart.  I 100% agree on the trying and changing – I am sure we all do. What level of trying, with whom, with what risks, and what speed and quality of change is where people sometimes disagree on what is acceptable and what is required to move forward.

    In terms of “ending poverty” – that can’t happen unless we end wealth. Poverty is a counter to wealth. There will be no “end” to poverty if wealth continues to be created through exploiting resources (“Your cell phone, Congo’s misery: http://edition.cnn.com/2011/11/28/opinion/wright-congo/index.html ), playing financial monopoly with other people’s money and creating value through financial engineering rather than creating value for global customers (The Dumbest Idea In The World: Maximizing Shareholder Value
    http://www.forbes.com/sites/stevedenning/2011/11/28/maximizing-shareholder-value-the-dumbest-idea-in-the-world/ ), and if governments continue to keep others in poverty to create their own wealth (both countries like North Korea http://www.bbc.co.uk/news/world-asia-16361378 doing so to their own citizens and and those like the United States through keeping other countries in poverty through creating unjust trade & aid ties http://www.betterworldbooks.com/confessions-of-an-economic-hit-man-id-0452287081.aspx as well as through dumping – from agricultural goods to underwear http://goodintents.org/?s=dumping to toxic waste http://www.earthtimes.org/business/uk-firms-illegally-dumping-waste-africa/895/ )

    The end to “poverty” will not be found in helping an African village learn how to better live off the land. It will only come from forcing an American village (funny how we never call them that, huh?) to start to live off of it. And who has the will to do that?

    So, no end to poverty in site unless we end wealth, in my book. And if we are going to “help the poor” I don’t think we can start by calling them “the poor”. We also shouldn’t rely on giving things away, or band-aids, or feel-good projects…. they feel good, and can add some value (can), but long term change will come by investing time in people, being open to discussing and adjusting from failures, treating people with dignity http://goodintents.org/in-kind-donations/a-day-without-dignity and projects rooted in local knowledge. The MV’s do tick some of those boxes but I think the areas I highlight around openness to discuss failures and areas for improvement, less “global scalable solutions” approach, and less focus on things-based solutions are more appealing to me in my view of wealth creation. As that is what is is about – creating wealth. Not “pulling out of poverty”. We have to focus on how people create wealth – as the countries who have created wealth in the last generation didn’t do so through aid in the way it is being sold today.

    But I agree with you, that pointing fingers and poking holes in something for the sake of doing so isn’t productive. I sent this piece to Jeff as well, as I wanted to make sure he had a chance to see it and correct anything if I got it wrong. He wrote back a very generous and understanding email, which I appreciate. And through that, and debates/discussions we have here, maybe we can shift where/how people give their time and money – as that is what I hope this blog and my work will do. And I appreciate you and people like you who add to it and debate these ideas and call me out when I need it!  Hugs and thanks for that!

  • Jason

    This was a great recap with some nuggets of thought provoking questions.  Keep doing the outstanding things you do. 

  • Ben Dyer

    Hey Daniela,

    Some points I agree with you and some I’m not sure I’m following you, maybe you can clear up a few points so I can be certain I disagree. 😉

    You claim there will be no end to poverty until there is an end to wealth. However, your examples are: Congo:  war is bad, and exploitation of war is bad (agree to both points, but this is not evidence of your assertion); Wall street; the incentives in the financial markets are skewed, leading to wealth destruction rather than wealth creation (Again, I agree to the point, but fail to see its relevance you assertion); North Korea: Despots(not to mention democratically elected govt’s) steal their peoples wealth and in that environment wealth creation ceases and so people starve. (Again, agree to the point, but it’s not evidence that there poverty will not end until wealth ends); US et.al.; Trade policy destroys 3rd world markets. (Again, I agree but that doesn’t go to your point.)

    Now if you had said poverty can be caused/exacerbated by the war, the violence, and the corruption which comes when greed meets the power of the state, then I would agree with you 100%, however that’s not what you’ve said.

    And I would argue that these are examples of abuses of power to move the wealth of the people into the wealth of the powerful. “Greedy appropriation” is a totally different topic than “Wealth”, and “Wealth creation”.

    Then you say that we can’t stop poverty in Africa, (which you define as living off the land), until Americans are also in poverty (living off the land). How Americans being poverty stricken will possibly help Africans you don’t explain, and I can’t fathom an explanation. Surely we want everyone to be wealthy, not the other way around.

    Then in your second last paragraph you contradict yourself saying we SHOULD focus wealth creation, but you’ve just been arguing that Wealth is the problem!

    My view is that fixing the politics, so that the powerful can’t steal peoples wealth or dump their excess and thus destroy markets, is the first step. The next step, (ready for some mungo-nomics) is ensuring people have enough skills and capital to create surplus, which will probably for starters be consumer surplus due to a bit of perfect competition, and then as they differentiate their products and get a few competitive advantages, they will be able to capture some producer surplus for themselves.

    Please correct me if I’ve got your views wrong, be good to talk to you about this in Hilary Term, You’ll probably wipe the floor with me as I’m just a casual observer of development issues.


    Ben Dyer

  • Anonymous

    Hey Ben –

    Thanks so much for writing – I appreciate it and the amount of time/thought you put into this!  I don’t think I have a ton of time now to write a proper response, but I wanted to get something out to you to clarify at least two things.

    1) My main issue with “ending poverty” is that I believe that it is like saying ending “tallness”. Tall only exists with short. If everyone was the same height, there would be no tall or short people. The word poverty implies there must be wealth elsewhere. Hence, any campaign aimed at “ending poverty” to me seems a futile effort if those doing it are not also in the business of ending wealth….

    2) … and I by no means think we should have Americans “live off of the land” and make everyone the same! Hence, if we shouldn’t/aren’t able to/wont ever be aiming for “ending wealth”, then we can’t “end poverty”. I believe there is a fundamental difference in the way organizations work which state things like “pulling people out of poverty” versus “helping people generate wealth”. When one is “pulling” another out of poverty, it implies the “puller” is already out of poverty and is doing the heavy lifting, so to speak. But wealth, if not inherited, is generally created by the person themselves. You don’t hear about the millionaire who raised up through charity just as nations that have significantly raised the average standards of living in their countries in the last 10 years haven’t done so through aid.

    Your paragraph about your views are very much in line with mine, so clearly I didn’t articulate mine well! I agree that in order for “poor” nations to thrive, “wealthy” nations need to stop dumping goods, deliberately keeping other countries in debt, etc. And your second sentence starts with is pretty much my entire theme song: invest time in people. People don’t just need access to capital – they need access to the skills, networks, ideas, and inspiration to achieve the changes THEY want to make in their own lives. We can’t do it for them because it takes people “climbing out of poverty” shall we say, for people to be able to keep on climbing into wealth.

    Ended up being longer than I had planned anyway….. but I hope I clarified my points a bit more – though happy to of course discuss/debate this stuff ANY time. In the meantime, let’s not go trying to all give up our wealth and live off the land but instead get back to school so we can learn the skills, gain the networks, and be inspired by the ideas which will help US to generate wealth in the future, and then, rather than giving that money away in the form of things or donations, let’s invest it in others so that they can get the skills they need to do the same thing in the future :-)  Looking forward to connecting about this again!