"Intelligent evolution of humanity"

First of all, I'm sorry for the long hiatus in posts: midterms, a bout of the flu, and starting a new work project have all taken away from the time that I normally spend on this blog.

Given that the project that I've started working on focuses on the gender gap in agricultural productivity levels in sub-Saharan Africa, I visited a number of seminal papers in agricultural economics and in the study of firm and individual-level productivity and efficiency. In this survey of the literature, I stumbled on Theodore Schultz's Nobel Prize lecture, "The Economics of Being Poor", after having read his work on smallholder farmer efficiency ("poor-but-efficient" hypothesis which states that farmers are calculating economic agents who are highly efficient in a traditional agricultural environment (Schultz, 1964)) and his consequent focus on human capital and the gains to labor productivity and entrepreneurial ability as the key to improving the well-being of the agricultural population.

In his lecture he discussed the entrepreneurship inherent in agriculture and criticized the government price distortions in developing countries: "experts fail to recognize how efficient they [small farmers] are... This allocative ability is supplied by millions of men and women on smallscale producing units; agriculture is in general a highly decentralized sector of the economy.... The allocative roles of farmers and of farm women are important and their economic opportunities really matter (Schultz, 1978b)." Yet he maintained that despite their efficiency in a traditional agricultural setting, small farmers needed further investments in human capital and skills to be just as entrepreneurial and efficient in a dynamic setting (i.e. one with constant technological and economic change made more dynamic by increased globalization in past decades).

He also gave the following hopeful exposition on humanity addressing natural resource constraints (economic growth models to come such as Nordhaus (1992) viewed natural resources including land and energy as lags on economic growth): "It is ironic that economics, long labelled the dismal science, is capable of showing that the bleak natural earth view for food is not compatible with economic history; that history demonstrates that we can augment resources by advances in knowledge. I agree with Margaret Mead: 'The future of mankind is open ended.' Mankind's future is not foreordained by space, energy, and cropland. It will be determined by the intelligent evolution of humanity."

In other words, that land is a fixed resource and that traditional sources of energy are a depleting resource do not preclude the fact that investments in human capital can modify the production function and the relationship between the traditional inputs and output.

Look no further than the growth and takeoff of alternative, renewable energy sources and the expansive yields from sustainable farming as examples. As much as Schultz critiqued government for distorting agricultural systems that he viewed as otherwise efficient, he may not have appropriately appreciated government's unique role in incentivizing the resource allocation decisions of firms towards that "intelligent evolution of humanity" that he spoke of. For example, we've seen in the last decade the role of government in incentivizing alternative, renewable energy sources through large-scale investments and subsidies for the research and development and market viability of those energy sources.

The interesting and challenging piece of the lecture is connecting those two goals: improving the human capital and skills of much of the population (key to improving well-being) and moving towards a more sustainable future that is not tied to traditional, fixed or depleting natural resources. While positing these ideas, he also provided advice to economists that is still relevant today:

"We all know that most of the world's people are poor, that they earn a pittance for their labor, that half and more of their meager income is spent on food, that they reside predominantly in low income countries and that most of them are earning their livelihood in agriculture. What many economists fail to understand is that poor people are no less concerned about improving their lot and that of their children than rich people are."

If you want a more humorous speech, try this one that he gave at the Nobel banquet. 

Women in economics: Elinor Ostrom's work and its lasting impact on fishing communities in the Gulf of California

Researcher Erin Hengel's recent paper "Publishing while female" (2017) was chronicled in a brief article in the Economist last week profiling the differences in readability standards posed to publications authored by male versus female academics in economics. I don't do a thorough review of that piece here, but Hengel's results indicate that: (i) female-authored articles are better written in terms of readability than similar papers by men, controlling for year, journal, editor, topic, institution, and English language ability; (ii) the gap widens during peer review; (iii) female economists' readability improves over the course of their careers whereas male economists' does not presumably due to the higher standards they face. These findings, if true, add to an existing body of evidence that suggests that female academics are held to higher standards than their male counterparts and often receive less credit than their male counterparts for their accomplishments.

Yet, despite the biases that persist, progress is being made in that we have the data to identify and analyze them now more than ever. The New York Times reported on a panel at the American Economic Association's annual meeting of the minds held this week which presented the research of several academics on systemic gender bias within the field.

My reading on the gender bias in economics led me to write on the first and to-date only woman to win the Nobel Prize in Economic Sciences, Dr. Elinor Ostrom, and on the contributions that she made to the fields of economics and governance through her writings on collective action. While the lack of female prize winners reflects a gender bias in economics in the 1960s, 1970s, and 1980s more so than biases that exist today (the prize rewards contributions that were made more than several decades ago) it is still striking that economics only has one winner where other fields do better on this dimension.

Existence of collective action outside of the public and private sectors

The prevailing notion of collective action during Ostrom's time was posited by Mancur Olson (1965) in the Logic of Collective Action. To provide a brief summary of Olson's thesis: 

• Olson posited that individuals in groups would choose to free-ride to reap the communal benefits from public goods without incurring any individual costs to procure or maintain said goods. After all, public goods are non-excludable and individuals would obtain the benefits whether or not they incurred the costs (so long as others paid the price). 
• He argued that individuals would not act collectively in their common interest unless selective incentives were provided or force used to induce them to participate. 
• Furthermore, large groups faced greater costs of collective action than smaller ones: not only larger selective incentive costs but larger monitoring costs, and the total benefits from participation would be spread more thinly across the members of the group. Which leads to, as he put it, "surprising tendency for the exploitation of the great by the small" (smaller groups with more concentrated incentives are more effective at organizing than larger ones). 

Ostrom's work was designed to bridge the gap between the predictions made in the theory of collective action and the empirical evidence that often evidenced widespread, voluntary cooperative behavior. She theorized the existence of norm-using players in addition to the rational egoist actors traditionally employed in game theory: the norm-using players value social norms including reciprocity, fairness, and being trustworthy. Certain norm-using players are willing to initiate cooperate action when they believe others will reciprocate and will continue to do so as long as a significant number of others reciprocate; others are willing to punish free-riders either verbally or through sanctions. The existence of these actors, and equally or even more importantly, the existence of strong social norms within a community, makes voluntary collective action feasible in a way that Olson did not theorize. 

She posited that cooperative behavior especially where communication is involved "can work as well or nearly as well as externally imposed set of rules and monitoring and sanctioning in order to generate cooperative behavior" and furthermore claimed it is more effective in settings where external authorities impose rules but can only achieve weak monitoring or sanctioning (Ostrom, 2000). She proposed eight design principles critical to the survival of voluntary cooperative behavior, including local rules that restrict the amount, timing, and technology of harvesting the resource in question and access to rapid and low-cost methods to resolve conflict among users.

Local resource governance

Ostrom's work was directly relevant to the governance of common-pool resources, or "natural or humanly created systems that generate a finite flow of benefits where it is costly to exclude beneficiaries and one person's consumption detracts from the amount of benefits available to others" (Ostrom, 2000). Common-pool resources are distinct from public goods: in the case of public goods one person's consumption does not subtract from the pool of resources available to others but in the case of common-pool resources it does. Examples of common-pool resources are fisheries, irrigation systems, and water. 

Indeed the implications of her work are even more relevant today, as these and other environmental resources continue to be depleted at high rates and long-term benefits of sustainable use of said resources are foregone in favor of short-term gains. Not to mention her theoretical and empirical evidence for the viable existence of self-organized resource regimes, distinct from any government or private entities, is hopeful especially in environments where there is a lack of political will, public sector leadership, or public sector capability in the realm of environmental conservation.