Tag Archives: economist

Rogoff on BP oil spill and international regulation

An economist’s nuanced and well-balanced thoughts about technology, energy “consumption” and economic growth is found on Project Syndicate’s webpage. The author of the article is former IMF chief economist Kenneth Rogoff. One might not necessarily agree, but the article is still interesting to read:

If ever there were a wake-up call for Western society to rethink its dependence on ever-accelerating technological innovation for ever-expanding fuel consumption, surely the BP oil spill should be it. Even China, with its “boom now, deal with the environment later” strategy should be taking a hard look at the Gulf of Mexico.

Economics teaches us that when there is huge uncertainty about catastrophic risks, it is dangerous to rely too much on the price mechanism to get incentives right. Unfortunately, economists know much less about how to adapt regulation over time to complex systems with constantly evolving risks, much less how to design regulatory resilient institutions. Until these problems are better understood, we may be doomed to a world of regulation that perpetually overshoots or undershoots its goals.

The finance industry already is warning that new regulation may overshoot – that is, have the unintended effect of sharply impeding growth. Now, we may soon face the same concerns over energy policy, and not just for oil.

Given the huge financial stakes involved, achieving global consensus will be difficult, as the Copenhagen climate-change fiasco proved. The advanced countries, which can best afford to restrain long-term growth, must lead by example. The balance of technology, complexity, and regulation is without doubt one of the greatest challenges that the world must face in twenty-first century. We can ill afford to keep getting it wrong.

Planning equals success?

Sometimes people sound like they think success is much a result of effecient planning and time management. If one wants to become a professional football player or a software developer, one should really have planned it from early stages in one’s life. And to some extent, those who believe in this statement are correct; if a person focuses on something it has a better chance of improving and thus getting better than its competitors. However, more often than not, things in life do not turn out as planned. And one might still end up being successful. One example is the famous economist Robert M. Solow, who was cited in a previous blog post (in Swedish) about a month ago. In an anthology he writes:

The point is that I had no feeling that economic analysis could penetrate to the heart of what was going on in the world. I certainly hadn’t made up my mind to major in economics or to become an economist. What I did instead was to volunteer for the army. It seemed more constructive than what I was doing.

Three years later I came back, and almost without thinking about it, signed up to finish my undergraduate degree as an economics major. The timing was such that I had to make a decision in a hurry. No doubt I acted as if I were maximizing an infinite discounted sum of one-period utilitiles, but you couldn’t prove it by me. To me it felt as if I were saying to myself: “What the hell.” (William Breit and Barry T. Hirsch (2009), Lives of the Laureates, p. 156.)