June is conferences month and this year I attended three – two in Washington (the ICABR Ravello group conference at the World Bank and the IFPRI conference) and then the World Congress of Environmental and Resource Economists in Gothenburg, Sweden. I was most enlightened by a wonderful book, Factfulness, I read on the plane. Altogether, these experiences suggest that innovation and learning have led to progress; however, we tend to underestimate long-run progress, not recognizing that even where things are still bad that they are better than they were. At the same time, our planet and humanity are facing risks, and we are challenged to address and overcome them.
The two Washington conferences aimed to understand disruptive innovation and how people adapt to them. They emphasized that progress is occurring and sometimes faster than we realize. Tom Reardon figured prominently in both workshops – he argued that the developing world has gone through several technological revolutions that have changed people’s lives including diffusion of supermarkets, emergence of new and modern fishing and aquaculture sectors, and introduction of cold storage that enhance production of multiple crops. He refers to these changes as “silent revolutions” because both analysts and policymakers were not aware of them and frequently ignored them in policy design. I suggested that the static comparative models we use as the backbone of our economic analyses may have been appropriate to Adam Smith’s rural Scotland but not for our modern world. We need to adopt a more Schumpeterian approach to understand the importance of innovative activities in the educational-industrial complex, emergence of supply chains that implement innovation and create markets for new products, and diffusion of innovation across countries. With this model we can explain how innovations like supermarkets that evolved in Europe and the US over a long period of time have been adopted in developing countries once trade became freer, infrastructure improved, and incomes grew.
I am not a certified development economist but I became aware of this amazing transformation when I myself visited the Ivory Coast and realized that people in the middle of the jungle have bicycles and cell phones. Maximo Torero also spoke at both workshops and he emphasized the need to better understand value chains and also the mechanism by which all the traditional peasants are introduced to new technologies. In many cases, educating children about new practices is the best mechanism to transfer knowledge to their parents. So, good educational systems are not only improving the next generation but also improve practices in the present. Actually, I learned that this was true in the US in the 19th century and even today to some extent; despite my academic titles, I was introduced to social media through my children and they helped to upgrade our household media technology.
It was quite serendipitous that on my flight from Washington to Sweden I read an incredible book that was recommended by my son Shie (another child-to-parent transfer of knowledge) called Factfulness. The author is Hans Rosling of TED Talk fame, and his book tests people’s knowledge about the state of the world. He finds that people tend to underestimate the situation; for example, only a minority of respondents to his surveys recognize that 60 percent of girls in low-income countries across the world finish primary school, or that in the last 20 years, the proportion of world population living in poverty almost halved. This lack of knowledge of reality is prevalent across countries, among policymakers, business people, and scientists.
One issue that affects perception is the tendency to segment the world into developing and developed nations. He views this as four levels of progress. At the lowest level, which has below 1 billion people, are those with income less than $1 a day who walk barefoot and struggle. Level 2, with around 3 billion people, consists of those with income around $4 a day who drive bicycles. Level 3, with close to 2 billion people, are those who make roughly $16 a day and who have access to running water and may have a moped. Finally, at level 4, with around 1 billion people, we have those who make more than $32 a day and may own a car and live a modern life. Before 1800, 85 percent of humanity were at level 1; by 1996, this had decreased to 50 percent and now, only 10 percent are at this level. Average life expectancy in 1800 was 31 years and now it is 72 years. The key factors in this progress are the emergence of new innovations and technology that are spreading throughout the world. They provide new capabilities and make new and more product affordable so actual buying power increases. Reardon’s research documented and my work on adoption tried to explain the emergence of the technologies and their spread.
During my 70 years on earth, many countries have moved up one or two levels, but though people are aware about themselves, they don’t realize this progress. I realized that Tom Reardon’s perception is consistent with Rosling’s general finding; actually, Rosling used the terms “quiet progress” to describe this evolution. Unless we make an effort to go to the field like Tom did and study what’s going on, we tend to underestimate change. Both Tom and I really appreciate this progress because we went through these changes ourselves. When I was a kid in Israel my father was using chopped wood to heat water so we could have our weekly wash. We used a rickety kerosene stove for cooking and heating water for laundry, which was of course hang-dried. I used to help my father carry huge ice blocks to our ice box. We lived in what can today be described as a level 2 country but I was quite happy. When I was 10 we got a gas stove and a refrigerator. When I was 20, we got our first telephone and at 23, I was the first in my family to ever own a car. This background makes me appreciate modern technology and the change they make in our lives even though I realize the potential risks. Sometimes I think that some of my friends that grew up in affluence are less aware of the power of the progress and are not able to distinguish between different degrees of development. In this regard, I am thankful to this poverty experience. I believe that my perspective is quite similar to Rosling’s, who recently passed away. He was a realist who recognized that in many cases things are bad but they become better and indeed we have seen an incredible trend of improvement throughout the last 150 years.
Despite all this positive trend, history is full of negative shocks and we continue to face negative threats like climate change, wars, sustained poverty, pandemics, etc. The silent revolutions that improve productive capacity also generate greenhouse gases and may generate pollution unless appropriate policies are introduced. I went to Sweden to the World Congress for Environmental Economics which addresses research and policies that aim to avert some of these negatives. I really like Sweden. It’s obvious that it has one of the highest qualities of life in the world. Sweden’s capital, Stockholm, combines a beautiful old city with an impressive royal palace, many picturesque rivers and bridges, and modern architecture. Everything seems to work in Sweden, the people are friendly, and the lifestyle is comfortable and elegant. Add to this perfect weather (around 72°F with minimal humidity) during the longest days of the year and you realize that it was enjoyable but left me very tired at the end. Several bodies of water surround Gothenburg, where the conference was held, and the finale to the conference was a wonderful tour and dinner on Marstrand Island where we witnessed a beautiful sunset at 11pm. The conference was extremely well run and the organizers bravely provided us with cauliflower-rich vegetarian food so we environmentalists could walk the talk. Fortunately, my wife has taught me to like cauliflower but some of my colleagues snuck out to sample Sweden’s high-quality fish and meats.
I enjoyed two excellent plenary sessions. Nava Ashraf from LSE gave a fantastic talk on the use of randomized control trials (RCT) to understand behavior and design policies. Her work is based on sophisticated conceptual perspectives that recognize heterogeneity among people and incorporate behavioral economic ideas. She found that when one recruits individuals for careers in rehabilitation and nursing, they may attract much better candidates and performers when the job description emphasizes both the satisfaction and job impact as well as the income rather than just the career opportunities. In another experiment, she found that distributing birth control discreetly to the wife is more effective than when it is given to the family, but that the most effective of all is to educate both husband and wife on the merits of having a small family.
My ARE colleague Meredith Fowlie made us proud explaining the reality of carbon prices. Economists tend to believe that pricing carbon is essential to addressing climate change. But as Meredith said, only a few countries actually implement this and the outcomes are modest. People simply shift carbon-emitting activities to areas where carbon is not taxed. This combined with the complex political economy within and between countries makes the assessment of impact and design of a policy challenging to the profession. It seems that we will end up with policies that will vary among regions and will mix carbon pricing with various types of regulations.
I also enjoyed our session on climate change policies. It’s clear that some countries like Russia may actually benefit from warmer weathers (at least in the short run) while others will suffer and this suggests differences in incentives which creates an obstacle for collaboration. Furthermore, the overall agricultural productivity may not be affected much in the long run because some areas in Canada and Russia may become more productive. But, there is evidence of severe losses already and a difficulty to adapt, especially in developing countries. Some strategies for adaptation including insurance and changes in crop allocation patterns may help. I also suggested that greater access to advanced biotechnologies will allow better adaptation. Yet many of the people affected are likely to migrate. Our societies already are challenged in dealing with migration so one reason to collaborate in mitigating climate change is to reduce future climate migration.
My summer workshop suggested that we need to continue to learn what’s happening on the ground. We cannot rely only on past knowledge on the state of humanity but rather need to continually update our knowledge. This may make us realize that there are many changes for the better but at the same time, we have to be ready to address challenges like climate change or poverty. The design of policies needs to combine theory with experimentation, rely on multiple tools, and engage people’s altruism as well as materialistic tendencies. Finally, while conferences are enlightening and fun, reading on the plane can expand your knowledge.