tag:theconversation.com,2011:/us/topics/economics-488/articlesEconomics – The Conversation2024-03-14T12:42:30Ztag:theconversation.com,2011:article/2256102024-03-14T12:42:30Z2024-03-14T12:42:30ZWendy’s ‘surge pricing’ mess looks like a case study in stakeholder conflict<p>Just two words created a publicity nightmare for fast-food giant Wendy’s: <a href="https://theconversation.com/whats-dynamic-pricing-an-operations-management-scholar-explains-188265">dynamic pricing</a>.</p>
<p>In late February 2024, news broke that the chain was considering charging different prices at different times of day — a tactic usually associated with airlines and ride-hailing companies. As headlines like “<a href="https://www.foxbusiness.com/media/wendys-roll-uber-style-surge-pricing-menu-prices-fluctuating-based-demand">Wendy’s to roll out Uber-style surge-pricing</a>” flooded the news, #BoycottWendys trended on social media. Wendy’s rival Burger King quickly took advantage of the news with a “<a href="https://www.bk.com/terms">No urge to surge</a>” promotion.</p>
<p>The backlash put Wendy’s on the defensive.</p>
<p>Within days, Wendy’s said that <a href="https://www.wendys.com/blog/wendys-digital-news-update">it never intended to raise prices</a> at times of peak demand, Instead, it only intended to lower prices when store traffic was slow. It also announced a monthlong $1 burger deal that observers were <a href="https://www.foodandwine.com/wendys-march-madness-burger-deals-8604311">quick to connect</a> to the pricing fiasco. </p>
<p>It looked like a classic PR disaster – and as a <a href="https://scholar.google.com/citations?user=N1Fxik0AAAAJ&hl=en">professor of marketing</a>, I couldn’t turn away. How did this all go wrong?</p>
<h2>Divergent stakeholder interests, with a side of fries</h2>
<p>I suspect this burger brouhaha came down to a classic case of investors’ interests colliding with those of consumers.</p>
<p>The whole mess seems to have started on Feb. 15, 2024, when Wendy’s <a href="https://www.irwendys.com/news/news-details/2024/THE-WENDYS-COMPANY-REPORTS-FOURTH-QUARTER-AND-FULL-YEAR-2023-RESULTS/default.aspx">released its fourth-quarter earnings</a> and held a <a href="https://www.irwendys.com/events-and-presentations/event-details/2024/Preliminary-Date-Q4-2023-The-Wendys-Company-Earnings-2024-uusGd41PbC/default.aspx">conference call with investors</a>. </p>
<p>That day, Wendy’s announced a multimillion-dollar investment to roll out digital menu boards across all its U.S. stores. This investment would support “dynamic pricing and menu offerings,” according to a slide from the conference call. While presenting the slides, Wendy’s chief executive officer <a href="https://www.fool.com/earnings/call-transcripts/2024/02/15/wendys-wen-q4-2023-earnings-call-transcript/">said</a>, “Beginning as early as 2025, we will begin testing more enhanced features like dynamic pricing and day-part offerings along with AI-enabled dynamic pricing menu changes and suggestive selling.”</p>
<p>While some people argue that Wendy’s may have never meant to hike prices at all, I’m skeptical. Of course there’s nothing wrong with raising prices – companies would go out of business if they didn’t. The issue is how to frame the price hike. For example, Starbucks increased prices <a href="https://www.cbsnews.com/news/starbucks-prices-inflation/">three times</a> in just four months between October 2021 and February 2022. It blamed the hikes on inflation and didn’t face much of a backlash.</p>
<p>But no matter how you frame it, raising prices is a company action that benefits investors but not consumers. And while the dining public has been outraged by the whole affair, Wendy’s investors seem relatively unconcerned. Wendy’s stock price has remained <a href="https://finance.yahoo.com/quote/WEN/history">relatively stable</a> since Feb. 26, when the media picked up the story and boycott calls commenced.</p>
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<figcaption><span class="caption">It’s a bad sign when your company’s pricing controversy makes it onto “Good Morning America.”</span></figcaption>
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<p>This asymmetry makes sense and is well documented in <a href="https://doi.org/10.1016/j.ijresmar.2018.06.001">academic research</a>. On average, investors are motivated by a company’s profits. Moves to raise revenue, such as hiking prices, make them happy. That’s why companies often announce those increases well before they put them into effect – not for the customers’ sake, but <a href="https://doi.org/10.1016/j.ijresmar.2018.06.001">for the investors’</a>.</p>
<p>Of course, higher prices feel different if you’re the one paying them. And consumers tend to believe sellers aren’t being fair when they set prices: They think sale prices are set much <a href="https://doi.org/10.1086/346244">higher than fair prices</a>, underestimate <a href="https://doi.org/10.1177/0092070304269953">the impact of inflation</a>, overattribute the cause of price increase to profit-seeking, and fail to consider company costs. Their backlash is both <a href="https://doi.org/10.1086/346244">economically rational and predictable</a>.</p>
<p>What also makes sense is Burger King trying to act like a typical rival – aiming to benefit from the backlash Wendy’s received.</p>
<h2>A needless food fight</h2>
<p>In my opinion, Wendy’s early announcement of its dynamic pricing was a serious mistake. Remember that its CEO said that Wendy’s would introduce dynamic pricing “as early as 2025.” That means it announced the news at least nine months before customers needed to hear about it. I assume Wendy’s did this because it wanted to impress its shareholders and boost its stock price.</p>
<p>In fact, the cynic in me wonders whether this incident was “staged” – that is, Wendy’s was testing the waters to see whether they could preannounce the price hike to impress shareholders, and then not actually implement the changes. </p>
<p>Indeed, research has shown that <a href="https://doi.org/10.1016/j.ijresmar.2018.06.001">companies often preannounce price increases</a> a few days to several months in advance, and may withdraw some of these preannouncements if they realize that the price hike may cause more damage than increase in revenue.</p>
<p>But either way, announcing a decision nine months in advance seems premature. And I haven’t seen any evidence that Wendy’s planned for customers to hear the news along with investors.</p>
<p>My advice is for executives to be astute in communicating price increases so consumers take the company’s perspective and don’t <a href="https://doi.org/10.1177/0092070304269953">view the hike as unfair</a>. That may mean avoiding terms that elicit hostile reactions, or <a href="https://doi.org/10.1016/j.ijresmar.2018.06.001">providing explanations</a> for their decisions, such as an increase in the cost of ingredients or employee salaries. Consumers who understand the reasons for a price hike may be more accommodating.</p>
<p>Interestingly, even after the Wendy’s wobble, other restaurants are reportedly <a href="https://www.wsj.com/business/hospitality/surge-pricing-is-coming-to-more-menus-near-you-66a245f3">considering increasing menu prices</a> during hours of high demand. I hope they learn from Wendy’s error and frame their price increases strategically.</p>
<p>Otherwise, they shouldn’t be surprised when competitors eat their lunch.</p><img src="https://counter.theconversation.com/content/225610/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Vivek Astvansh does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Sometimes, good news for investors is bad for consumers.Vivek Astvansh, Associate Professor of Quantitative Marketing and Analytics, McGill UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2219392024-03-08T13:38:13Z2024-03-08T13:38:13ZTeenagers often know when their parents are having money problems − and that knowledge is linked to mental health challenges, new research finds<figure><img src="https://images.theconversation.com/files/576103/original/file-20240216-28-neuioj.jpg?ixlib=rb-1.1.0&rect=120%2C77%2C5609%2C3736&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Teens are more clued in to family finances than many people think.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/single-working-mother-and-her-teenage-girl-talking-royalty-free-image/1457103190">Olga Rolenko/Moment via Getty Images</a></span></figcaption></figure><p>When parents try to shield their kids from financial hardship, they may be doing them a favor: Teens’ views about their families’ economic challenges are <a href="https://doi.org/10.1017/S0954579423001451">connected to their mental health and behavior</a>.</p>
<p>That’s the main finding of a study into household income and child development that I recently conducted with my colleagues.</p>
<p>As a <a href="https://scholar.google.com/citations?hl=en&oi=ao&user=--zcHSQAAAAJ">professor of psychology</a>, I know there’s <a href="https://doi.org/10.1007/s10964-020-01210-4">a good deal of research</a> showing that young people who experience more household economic hardship <a href="https://doi.org/10.1007/s13524-019-00833-y">tend to have more behavioral problems</a>.</p>
<p>But most studies on this issue rely heavily on caregiver reports – that is, what adults say about their kids. Fewer researchers have asked young people themselves. </p>
<p>To fill this gap, my colleagues and I asked more than 100 Pittsburgh-area teenagers, as well as their parents, about their family income, their views about their financial challenges, and their mental health. We checked in with them multiple times over nine months. </p>
<p>Doing this, we found a few important things. First, we found that many families’ economic situations varied over time – they were doing fine with money in some months and struggling during others. And second, we found that when teenagers said they and their family were experiencing hardship, those teens had more behavioral problems.</p>
<p>For example, many teens said that they couldn’t afford school supplies or that their caregivers worried because they lacked money for necessities. In the months when teens reported experiencing these hardships, they were more likely to feel depressed and get in trouble at school.</p>
<h2>Why it matters</h2>
<p>Other researchers have found that economic hardship is related to <a href="https://doi.org/10.1111/j.1467-8624.2007.00986.x">differences in parenting</a>, <a href="https://doi.org/10.3390/children9070981">academic achievement</a> and many <a href="https://doi.org/10.1016/j.childyouth.2022.106400">other developmental outcomes</a> – but prior studies haven’t always captured the complexities and challenges that struggling families face. </p>
<p>For example, researchers studying links between economic hardship and youth behavioral development have historically looked at family income on a yearly basis. But bills come due weekly or monthly. Our work shows that looking at the annual data alone risks missing an important part of the story: Many families experience brief spells of financial instability.</p>
<p>Our work also shows that teens are acutely affected by economic conditions in their daily lives and understand their families’ circumstances. This has important implications for research. Given that adolescence is a time of major emotional and cognitive changes, our team believes that researchers should center on the perspectives of young people directly affected by economic challenges. For example, we have previously found that how young people view stress and support in their lives may have <a href="https://theconversation.com/positive-parenting-can-help-protect-against-the-effects-of-stress-in-childhood-and-adolescence-new-study-shows-208268">implications for their brain development</a>.</p>
<p>This work also has important implications for public policy. For example, lawmakers assume that economic hardship is fairly stable and set anti-poverty policies accordingly. Our research offers fresh evidence that many people see <a href="https://www.nytimes.com/interactive/2017/05/31/business/31-volatility.html">large income swings throughout the year</a>. This kind of economic instability has been found to <a href="https://doi.org/10.1007/s10802-016-0181-5">affect child development</a>, especially when families <a href="https://doi.org/10.1017/S0954579419001494">lose large amounts of income</a>. To lessen the impact of poverty, policymakers may need to think about economic hardship more dynamically.</p>
<h2>What’s next</h2>
<p>Our research team wants to continue putting young people’s voices front and center. We’re also interested in more complex ways to make sense of socioeconomic status. While we know that income matters for families, we’re increasingly focused on household wealth, which is a household’s assets minus its debts. Wealth may influence child development in ways that are different from income. We’re just starting to collect data for a new project examining how both of these factors <a href="https://sanford.duke.edu/story/nichd-awards-grant-sanford-partnership-focused-adolescent-wellness-factors/">affect teen mental health</a>.</p>
<p><em>The <a href="https://theconversation.com/us/topics/research-brief-83231">Research Brief</a> is a short take on interesting academic work.</em></p><img src="https://counter.theconversation.com/content/221939/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jamie Hanson and his colleagues receive funding from the National Institutes of Health. Hanson is also a board member of the Pittsburgh Non-Profit, Project Destiny.</span></em></p>A study of more than 100 teens and their caregivers showed a unique link between hardship and behavior problems.Jamie Hanson, Assistant Professor of Psychology, University of PittsburghLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2170552024-03-07T13:28:59Z2024-03-07T13:28:59ZHow Florida’s home insurance market became so dysfunctional, so fast<p>Imagine saving for years to buy your dream house, only to have <a href="https://www.insurancebusinessmag.com/us/news/property/homeowners-to-face-huge-premium-jump-as-insurers-seek-50-premium-hike-476805.aspx">surging property insurance costs</a> keep homeownership forever out of reach. </p>
<p>This is a common problem in Florida, where average insurance premiums cost homeowners an eye-watering <a href="https://www.newsnationnow.com/business/your-money/florida-home-insurance-prices">US$6,000 a year</a>. That’s <a href="https://www.npr.org/2023/10/26/1208590263/florida-homeowners-insurance-soaring-expensive">more than triple</a> the national average and about three times what Floridians paid on average for insurance premiums in 2018. </p>
<p>What’s more, several major insurance carriers have <a href="https://www.pnj.com/story/money/2023/07/12/florida-insurance-crisis-farmers-insurance-home-insurance-what-to-know/70407302007/">left the state</a> over the past year, leaving residents with <a href="https://www.bloomberg.com/news/articles/2023-08-10/hurricane-season-2023-florida-s-biggest-property-insurer-is-nonprofit-citizens?sref=Hjm5biAW">limited alternatives</a>.</p>
<p>As <a href="https://www.ju.edu/directory/latisha-nixon-jones.php">a law professor</a> who specializes in disaster preparedness and resilience, I think it’s important to understand what’s driving costs higher – not least because other states could soon face a similar predicament. </p>
<p>Three primary factors are driving the insurance challenge. First, natural disasters are becoming more common and costly. Second, <a href="https://www.investopedia.com/terms/r/reinsurance.asp">the price of reinsurance</a> is skyrocketing. And finally, Florida’s litigation-friendly environment compounds the issue by making it easy for customers to sue their insurers.</p>
<h2>Disasters, like sea levels, are on the rise</h2>
<p>With its location on the beautiful-yet-hurricane-prone Gulf of Mexico, Florida has long been vulnerable to the elements. Natural disasters cost the state <a href="https://edis.ifas.ufl.edu/publication/FE1075">$5 billion to $10 billion</a> every year, the federal government estimated in 2018, the last year for which data was available.</p>
<p>Yet that likely understates the case today, since disasters have only become bigger, more common and more expensive since then. For example, climate change has <a href="https://abcnews.go.com/US/climate-change-making-atlantic-hurricanes-strengthen-weak-major/story.">made oceans warmer</a>, which <a href="https://doi.org/10.1038/s41598-023-42669-y">research suggests</a> fuels stronger, more intense hurricanes. </p>
<p>As a result, Florida has experienced billion-dollar disasters an average of <a href="https://www.ncei.noaa.gov/access/billions/state-summary/FL">four times annually</a> over the past five years – up from about one each year in the 1980s.</p>
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<p>This surge in disasters doesn’t just put lives at risk; it also wreaks havoc with the insurance market, as carriers are inundated with claims from one catastrophe after another. This makes it harder for them to turn a profit or obtain reinsurance to protect their stakeholders.</p>
<h2>Why reinsurance matters</h2>
<p>Insurance companies, in essence, make money two ways. First, they <a href="https://doi.org/10.1038/s41562-021-01121-9">pool risk</a> among policyholders. Risk-pooling is the practice of taking similarly situated individuals or properties, grouping them together, and charging similar prices for insurance since they face the same risk.</p>
<p>Second, they reduce risk by acquiring reinsurance. Reinsurance acts as a safeguard for insurance companies – it’s essentially insurance for the insurers. Reinsurers pledge to cover a specified portion or type of insurance claim – for instance, catastrophic hurricanes – which provides a layer of financial protection.</p>
<p>The new era of climate disasters has thrown a wrench into the process. Reinsurance companies, grappling with a surge in claims due to more frequent and severe disasters, have found themselves forced to <a href="https://www.law.com/dailybusinessreview/2023/07/12/floridas-critical-reinsurance-market-improves-but-at-a-price/?slreturn=20231012224549">raise their premiums</a> for insurance carriers. Carriers, in turn, have passed the burden to policyholders.</p>
<p>To try to navigate these challenges, some companies have chosen to limit coverage for specific types of damage. For example, some insurance companies in Florida will no longer offer hurricane or flood coverage. And in extreme cases, insurance companies have withdrawn entirely from the state. </p>
<p>Understanding this complex relationship between insurers, reinsurers and policyholders is key to understanding the broader implications of the <a href="https://www.fox13news.com/news/florida-home-insurance-crisis-cost-price-premium-institute-rates">Florida insurance crisis</a>. It underscores the urgent need for comprehensive solutions and collaborative efforts to address evolving challenges in the insurance ecosystem.</p>
<h2>Learning from Florida … one way or another</h2>
<p>Florida isn’t taking all this sitting down. In December 2022, state lawmakers responded to growing property market instability by passing <a href="https://www.flsenate.gov/Session/Bill/2022A/2A">Senate Bill 2A</a>, a package of insurance reforms. </p>
<p>One major part was a rule change designed to discourage policyholders from suing their insurers. Previously, Florida law let insured individuals recover attorney fees if they secured any amount through litigation against their insurer. </p>
<p>The idea is that making this change will discourage needless lawsuits. However, my research as an <a href="https://engagedscholarship.csuohio.edu/clevstlrev/vol71/iss3/5/">environmental justice professor</a> shows that attempts to exclude attorneys from the negotiation process often lead to more expensive litigation and less access to justice.</p>
<p>The bill also restricts <a href="https://www.myfloridacfo.com/docs-sf/insurance-consumer-advocate-libraries/ica-documents/aob-consumer-protection-tips-brochure.pdf?sfvrsn=690bdde6_5">assignment of benefits</a>, a mechanism that permits third-party entities like roofing companies to negotiate with insurance companies on behalf of Florida residents. While assignment of benefits <a href="https://www.myfloridacfo.com/division/consumers/consumerprotections/assignmentofbenefits">increased advocacy</a>, it was also linked to skyrocketing claims costs.</p>
<p>The balancing act between providing ample opportunities and containing costs has <a href="https://floridaphoenix.com/2023/10/13/advocates-hailed-a-new-law-to-help-stabilize-fls-housing-crisis-but-implementation-has-been-rocky/">sparked debate</a> among justice advocates. Florida’s legislative response reflects an ongoing effort to strike an equilibrium, ensuring fairness and accessibility while addressing the challenges faced by both insurers and policyholders.</p>
<p>Florida’s actions to address the property insurance crisis raise a critical question: Will the state serve as a blueprint for disaster-prone regions, or act as a cautionary tale? After all, states such as California and Louisiana have also seen insurance companies withdrawing from their markets. Will their legislatures draw inspiration from Florida’s? </p>
<p>For now, it’s too early to tell: The policies have only been in place since the latest round of hurricanes. But in the meantime, the rest of the U.S. will be watching – especially policymakers who care about resilience, and those who want to make sure vulnerable populations don’t get the short end of the stick.</p><img src="https://counter.theconversation.com/content/217055/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Latisha Nixon-Jones does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Florida home insurance premiums have shot up threefold in just five years.Latisha Nixon-Jones, Associate Professor of Law, Jacksonville UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2219832024-03-06T19:14:31Z2024-03-06T19:14:31ZFrom micro to macro, Andrew Leigh’s accessible history covers the economic essentials<p>Andrew Leigh’s <a href="https://www.blackincbooks.com.au/books/shortest-history-economics">The Shortest History of Economics</a> is the latest in a series of such histories, mostly focused on particular countries. </p>
<p>It begins with a striking mini-history of household lighting, focusing on the amount of labour required to produce the light now given off by a standard lightbulb: 58 hours for a wood fire, five hours for a candle based on animal fat, a few minutes for an early electric lightbulb, and less than one second for a modern light-emitting diode.</p>
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<p><em>The Shortest History of Economics – Andrew Leigh (Black Inc.)</em></p>
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<p>Importantly, what is true of labour hours is also true of material inputs. Older technologies required felling a tree or killing an animal, but an LED uses the photoelectric properties of common crystals. It only needs tiny quantities. The input of electricity is similarly modest. </p>
<p>Meanwhile, because workers in all kinds of activities have become more productive, the purchasing power of their wages, expressed in terms of services like lighting, has risen. The result is that services like lighting have become exceptionally cheap.</p>
<p>As this example shows, The Shortest History of Economics is not, as might be supposed, a history of economic thought (a topic primarily suited to retired economists like the author of this review). Rather, it is primarily a history of economic life, from Paleolithic times to the COVID pandemic. </p>
<p>The history is, however, informed by modern economics, included in the narrative in palatable doses.</p>
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<h2>Standards of living</h2>
<p>The first half of the book, covering the period up to the Industrial Revolution, is mostly about technology. Leigh begins with the transition from hunter-gatherer societies – made up of relatively small groups of people, who followed their food sources around – to agriculture, which permitted and required larger settled populations. </p>
<p>The effect on living standards was ambiguous at best. Farmers were less likely than hunter-gatherers to suffer violent deaths or starve in winter, but they were almost permanently undernourished. They overworked to produce a surplus that enabled a small stratum of priests and warriors to live relatively luxurious lives.</p>
<p>The millennia following the agricultural revolution are covered pretty quickly, with a focus on developments in transport (mostly water transport) and trade. Leigh traces the gradual emergence of a global economy, culminating in the rise of European empires, whose reach depended on sail. </p>
<p>There are lots of interesting vignettes, covering topics such as social mobility. There wasn’t much, as can be seen by the persistence over centuries of the same surnames in high-status positions. More depressing is the discussion of the central role of the slave trade, which was a major source of labour in the Americas and income for European nations.</p>
<p>The second half of the book, covering the period after the Industrial Revolution, shifts the focus from technology to economic institutions and policy. The 19th century saw the rise of the corporation and the concentration of economic power. </p>
<p>This produced responses in the form of “anti-trust” legislation in the United States, usually referred to as “competition policy” in Australia. This remains an issue of central concern to Leigh in his day job, as assistant minister for Competition, Charities and Treasury. </p>
<p>The 19th century also saw the rise of the trade union movement and the beginning of an era of continuous struggle over the distribution of income between capital labour. The balance has ebbed and flowed. </p>
<p>As Leigh shows, labour has been losing ground since the 1970s in most countries, while those at the top of the income distribution have gained massively. The offsetting positive development is that the very poorest people in the world have generally improved their lot, thanks to the belated arrival of modern technology.</p>
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Read more:
<a href="https://theconversation.com/income-redistribution-or-social-insurance-a-federal-mp-considers-the-future-of-the-welfare-state-187603">Income redistribution or social insurance? A federal MP considers the future of the welfare state</a>
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<h2>Macroeconomics</h2>
<p>The issues I have discussed so far have mostly concerned markets and prices, the topics studied by economists under the label “microeconomics”. But the 20th century also saw the emergence of “macroeconomics”, the analysis of booms, depressions, inflation and mass unemployment. </p>
<p>The key figure here was English economist John Maynard Keynes, whose <a href="https://www.files.ethz.ch/isn/125515/1366_keynestheoryofemployment.pdf">General Theory of Employment, Interest and Money</a> (1935) provided the theoretical basis for the use of public expenditure and taxation (fiscal policy) to stabilise the economy. </p>
<p>As Leigh notes in his introduction, The Shortest History of Economics is unusual among recent popular works on economics in covering both microeconomics and macroeconomics.</p>
<p>Despite proceeding briskly through millennia of economic history, Leigh manages to convey the essential points in a way that does not leave the reader feeling rushed through an incomplete argument. While it makes sense to begin by reading the book from beginning to end, it is also enjoyable to dip into it, more or less at random.</p>
<p>Inevitably, I have some points of disagreement. At a couple of points, Leigh gives uncritical credence to beliefs widely held among economists, but not supported by the evidence. </p>
<p>He repeats Adam Smith’s creation story for money as a more efficient alternative to barter. But a hundred years of anthropological evidence, beginning with my namesake <a href="https://en.wikipedia.org/wiki/Alison_Hingston_Quiggin">Alison Hingston Quiggin</a> and continuing to the work of the late <a href="https://davidgraeber.org/about-david-graeber/">David Graeber</a>, suggests that money first emerged as a way of discharging debts (owed to the king whose face appeared on coins or as recompense for private injuries). It was only later adapted to use in commerce.</p>
<p>In his discussion of Keynesian macroeconomics, Leigh cites <a href="https://www.youtube.com/watch?v=d0nERTFo-Sk">a popular rap video presenting a dispute between Keynes and Friedrich von Hayek</a>, two of the great economists of the 20th century. </p>
<p>But in reality, although Hayek had criticised Keynes’ earlier <a href="https://www.gutenberg.org/ebooks/65278">Tract on Monetary Reform</a> (1923), he did not even review his General Theory of Employment, Interest and Money. Arguably the most effective critic was <a href="https://www.econlib.org/library/Enc/bios/Pigou.html">A.C. Pigou</a>, best known nowadays as the inventor of pollution taxes. </p>
<p>And Keynes was <a href="https://www.economist.com/free-exchange/2014/03/14/prophets-for-today">quite sympathetic</a> to the arguments against economic planning Hayek presented in <a href="https://press.uchicago.edu/ucp/books/book/chicago/R/bo4138549.html">The Road to Serfdom</a> (1944). </p>
<p>The idea of Hayek as Keynes’ primary antagonist is largely a piece of retroactive continuity (“retconning” in the jargon of genre fiction). The myth was created in the 1970s, following Hayek’s Nobel Prize in Economics in 1974 and his influence on political leaders, including Margaret Thatcher and Augusto Pinochet. </p>
<p>But these are quibbles, which will be of little concern to the general readership at which the book is aimed. As with all of the dozen or so books Leigh has produced since his election to Parliament (while also raising three children and maintaining a strenuous athletic regime – how does he do it?), The Shortest History of Economics is an engaging read, conveying economic insights to readers who would find a standard economics text both boring and impenetrable.</p><img src="https://counter.theconversation.com/content/221983/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Quiggin is a friendly professional colleague of Andrew Leigh, in his capacity as an academic economist</span></em></p>The Shortest History of Economics is not just a history of economic thought, but a history of economic life.John Quiggin, Professor, School of Economics, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2229122024-02-28T13:12:01Z2024-02-28T13:12:01ZWill Britons work until they’re 71? Expert examines proposed pension age rise<figure><img src="https://images.theconversation.com/files/574609/original/file-20240209-22-wo3zz4.jpg?ixlib=rb-1.1.0&rect=48%2C0%2C5385%2C3579&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The current pension age of 66 is set to rise to 67 by 2028.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/elderly-man-changing-light-bulbs-retired-2269968695">Andrew Angelov/Shutterstock</a></span></figcaption></figure><p>The retirement age will need to rise to 71 for UK workers in future, according to a recent <a href="https://ilcuk.org.uk/ageing-populations-forced-to-increase-state-pension-age-to-71-by-2050-to-maintain-dependency-ratio/">report</a> looking at the effect of increasing life expectancy and falling birthrates on the state pension. </p>
<p>The current pension age of 66 is set to <a href="https://www.gov.uk/government/publications/state-pension-age-review-2023-government-report/state-pension-age-review-2023#:%7E:text=The%20Pensions%20Act%202014%20brought,68%20between%202044%20and%202046.">rise</a> to 67 by 2028, and to 68 from 2044. But research by the International Longevity Centre (ILC), a thinktank focusing on ageing, says that doesn’t go far enough. </p>
<p>It suggests that anyone born after April 1970 may have to work until they are 71 years old in future. And there’s a possibility that the age limit may need to go even higher than that. The underpinning reason is the rising cost of pension provision because the number of pensioners and the value of payments are growing. </p>
<p>The government’s Office for Budget Responsibility <a href="https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/welfare-spending-pensioner-benefits/#:%7E:text=Pensioner%20benefit%20spending%20in%202023,5.3%20per%20cent%20of%20GDP">estimates</a> the state pension will cost around £124 billion this financial year. The pension level is safeguarded by the <a href="https://commonslibrary.parliament.uk/the-triple-lock-how-will-state-pensions-be-uprated-in-future/">triple lock</a>, which was first introduced in 2010. It means annual increases in payments are made in line with earnings growth, price inflation (currently 4%) or 2.5%, whichever is highest. </p>
<p>The Institute for Fiscal Studies has <a href="https://ifs.org.uk/publications/triple-lock-uncertainty-pension-incomes-and-public-finances">estimated</a> that continuing the triple lock will lead to an extra £45 billion of annual cost by 2050.</p>
<h2>It’s not just the UK</h2>
<p>The issue of rising pension costs isn’t merely a UK problem. Countries across Europe are currently grappling with the conundrum of how to look after their ageing populations in retirement. </p>
<p>Protests erupted across <a href="https://www.lemonde.fr/en/france/article/2023/06/06/in-france-a-14th-day-of-protest-to-derail-macron-s-pension-reform_6029218_7.html">France in 2023</a> in response to pension reforms which would increase the retirement age from 62 to 64. There have also been ongoing <a href="https://www.reuters.com/article/idUSL8N12F3RN/">protests in Greece</a>, which has been struggling with pension reforms since 2010. </p>
<p>Pension age increases are also <a href="https://www.etk.fi/en/work-and-pensions-abroad/international-comparisons/retirement-ages/">planned</a> in numerous other countries such as Denmark, the Czech Republic, Spain and the Netherlands.</p>
<h2>How the state pension works</h2>
<p>Unlike company-sponsored pensions, which invest money in individual accounts for future payouts, the UK state pension operates on a different principle. Instead of accumulating a personal “pot” of money, the idea is that current workers essentially fund the pensions of retirees. So, the state pension is financed from national insurance contributions and general taxation.</p>
<p>For this model to sustain itself, each new retiree entering the “pensioner pool” needs to be matched by a new worker entering the “worker pool.” As long as this balance persists, and pension claim periods remain reasonable, the system maintains its solvency.</p>
<p>Less than five years after the introduction of the state pension in 1946, the <a href="https://hansard.parliament.uk/commons/1954-11-15/debates/ed3805b1-dbb6-4f54-970e-58a43094a094/Old-AgeAndRetirementPensioners">pressures on the system</a> were already beginning to show. And the central issues are the same now as they were then – we are living longer and having fewer children. </p>
<p>In 1951, the <a href="https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/lifeexpectancies/articles/howhaslifeexpectancychangedovertime/2015-09-09">UK life expectancy</a> was 66 for men and 71 for women. By 2011, it had increased to 79 for men and almost 83 for women.</p>
<p>This means that a 66-year-old in 2024 will receive a pension for an average of nearly 16 years. But since <a href="https://www.statista.com/statistics/281416/birth-rate-in-the-united-kingdom-uk/">birth rates have fallen</a> from 15 per 1000 in 1951 to 10 per 1000 in 2021, those retirees aren’t being replaced with fresh workers.</p>
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Read more:
<a href="https://theconversation.com/matching-state-pension-to-the-national-living-wage-would-help-pensioners-maintain-their-dignity-217473">Matching state pension to the national living wage would help pensioners maintain their dignity</a>
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<p><a href="https://www.ons.gov.uk/economy/nationalaccounts/uksectoraccounts/compendium/economicreview/april2019/longtermtrendsinukemployment1861to2018#:%7E:text=Image%20.csv%20.xls-,The%20highest%20employment%20rates%20recorded%20were%20in%20the%20years%201872,average%20employment%20rate%20was%2073%25.">In 1951</a>, the UK population was 50 million with an employment rate of 70.4%. There were 35.2 million workers who were supporting 4.5 million pensioners, or 7.8 workers for every pensioner. </p>
<p>Today, the UK’s population is more than 67 million, which includes 33.17 million <a href="https://commonslibrary.parliament.uk/research-briefings/cbp-9366/">workers</a> and 12.8 million <a href="https://www.gov.uk/government/statistics/dwp-benefits-statistics-august-2023/dwp-benefits-statistics-august-2023#:%7E:text=The%20main%20headline%20figures%20for,5.6%25%20to%201.6%20million%20claimants">pensioners</a>. This means that every pensioner is being “supported” by just 2.6 workers. </p>
<p>Both central planks of the state pension system appear to be broken. And, to further complicate matters, we are seeing increasing levels of people <a href="https://commonslibrary.parliament.uk/how-is-health-affecting-economic-inactivity/">leaving the workforce</a> before they reach pension age, largely due to ill-health.</p>
<p>The state (in other words, the taxpayer) cannot afford the current pension provision for an ageing population for longer periods, let alone improve it. So, tough decisions have to be made, and soon. </p>
<h2>Generation X and millennials</h2>
<p>The implications of a rising retirement age won’t be felt by baby boomers like me. Generally speaking, we have benefited from jobs for life, free education, affordable housing and good company pensions. </p>
<p>The first cohort to shoulder the changes to the pension age will be generation X, born between 1965 and 1980. And they do not possess the wealth and assets of previous generations. </p>
<p>In fact, recent government <a href="https://www.gov.uk/government/statistics/analysis-of-future-pension-incomes/analysis-of-future-pension-incomes">figures</a> show that a third of the UK’s 14 million gen Xers won’t have enough savings to comfortably cover their retirement. <a href="https://www.justgroupplc.co.uk/%7E/media/Files/J/Just-Retirement-Corp/news-doc/2023/majority-of-gen-x-worried-they-wont-save-enough-for-good-standard-of-living-in-retirement.pdf">More than half</a> are not confident about achieving a good standard of living in retirement.</p>
<p>This generation, sometimes described as the “<a href="https://www.pensionsage.com/pa/Gen-X-face-huge-pension-black-hole-with-two-thirds-not-saving-enough.php">forgotten generation</a>” by finance experts, stands at a disadvantage due to their lack of early access to defined benefit pensions, which were largely closed to new employees by the time they entered the workforce. They also missed out on the financial benefits of automatic enrolment in workplace pension schemes, which was introduced only after many members of this generation had already established their careers.</p>
<p>The situation doesn’t look any rosier for the millennials, who have <a href="https://www.ons.gov.uk/peoplepopulationandcommunity/populationandmigration/populationestimates/articles/moreadultslivingwiththeirparents/2023-05-10">struggled</a> to get onto the housing ladder and are paying back student loans. <a href="https://www.theguardian.com/money/2023/sep/04/britons-cut-pension-contributions-hargreaves-lansdown-abrdn">Research</a> last year showed that almost a third of 18 to 34-year-olds had either stopped or cut back on pension contributions to save money. </p>
<p>Perhaps it comes as no surprise that more than two thirds of this age group <a href="https://www.pensionsage.com/pa/one-fifth-unsure-over-future-certainty-of-state-pension.php">don’t believe</a> the state pension will even exist when they enter retirement. </p>
<p>While the future of the state pension in its current form remains uncertain, one thing is clear – ignoring the problem is no longer an option.</p><img src="https://counter.theconversation.com/content/222912/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Chris Parry does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Increasing life expectancy and falling birthrates means many of us may have to keep working until beyond 71 years of age.Chris Parry, Principal Lecturer in Finance, Cardiff Metropolitan UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2178832024-02-28T12:33:55Z2024-02-28T12:33:55ZThe true cost of food is far higher than what you spend at the checkout counter<figure><img src="https://images.theconversation.com/files/577158/original/file-20240221-22-p0v0vh.jpg?ixlib=rb-1.1.0&rect=8%2C0%2C5822%2C3872&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Stickers don't tell the whole story.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/customer-shops-at-a-grocery-store-on-february-13-2024-in-news-photo/2008637358">Scott Olson/Getty Images</a></span></figcaption></figure><p>After several years of pandemic-driven <a href="https://www.gao.gov/products/gao-23-105846">price spikes at the grocery store</a>, retail food price inflation is <a href="https://www.nytimes.com/2024/02/20/business/economy/food-price-inflation-cools.html">slowing down</a>. That’s good news for consumers, especially those in low-income households, who spend a <a href="https://theconversation.com/swelling-grocery-bills-are-pummeling-the-poorest-who-spend-over-a-quarter-of-their-incomes-on-food-186980">proportionally larger share of their income on food</a>.</p>
<p>But there’s more to the cost of food than what we pay at the store. Producing, processing, transporting and marketing food creates costs all along the value chain. Many are borne by society as a whole or by communities and regions. </p>
<p>For example, farm runoff is a <a href="https://theconversation.com/to-reduce-harmful-algal-blooms-and-dead-zones-the-us-needs-a-national-strategy-for-regulating-farm-pollution-186286">top cause of algae blooms and dead zones</a> in rivers, lakes and bays. And <a href="https://refed.org/food-waste/the-problem?gad_source=1&gclid=Cj0KCQiA5rGuBhCnARIsAN11vgSiHk7wAwmYKS-jz9eGPkOcGbEmBtbSUvPCULQTHcrDZ39d5AlQA28aAvHzEALw_wcB">food waste</a> takes up one-fourth of the space in U.S. landfills, where it rots, generating methane that <a href="https://theconversation.com/about-one-third-of-the-food-americans-buy-is-wasted-hurting-the-climate-and-consumers-wallets-194956">warms Earth’s climate</a>. </p>
<p>Exploring these lesser-known costs is the first step toward reducing them. The key is a method called <a href="https://www.taylorfrancis.com/books/oa-edit/10.4324/9781003050803/true-cost-accounting-food-barbara-gemmill-herren-lauren-baker-paula-daniels">true cost accounting</a>, which examines the economic, environmental, social and health impacts of food production and consumption to produce a broader picture of its costs and benefits. </p>
<h2>Trillions of dollars in uncounted costs</h2>
<p>Every year since 1947, the United Nations Food and Agriculture Organization has released an important and widely read report called <a href="https://www.fao.org/publications/home/fao-flagship-publications/the-state-of-food-and-agriculture/en">The State of Food and Agriculture</a>, known in the food sector as SOFA. <a href="https://www.fao.org/publications/home/fao-flagship-publications/the-state-of-food-and-agriculture/en">SOFA 2023</a> examines how much more our food costs beyond what consumers pay at the grocery store. </p>
<p>Using true cost accounting, the report calculates that the global cost of the agrifood system in 2020 was up to US$12.7 trillion more than consumers paid at retail. That’s equivalent to about 10% of global gross domestic product, or $5 per person per day worldwide. </p>
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<iframe width="440" height="260" src="https://www.youtube.com/embed/u1mV5S2QvlA?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">True cost accounting is designed to measure the full impacts of producing, transporting and consuming food.</span></figcaption>
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<p>In traditional economics-speak, hidden costs are <a href="https://www.investopedia.com/terms/e/externality.asp">known as externalities</a> – spillover effects from production that are caused by one party but paid for by another. Some externalities are positive. For example, birds, butterflies and insects pollinate crops at no charge, and everyone who eats those crops benefits. Others, such as pollution, are negative. Delivery trucks emit pollution, and everyone nearby breathes dirtier air. </p>
<p>True cost accounting seeks to make those externalities visible. To do this, scholars analyze data related to environmental, health, social and other costs and benefits, add them together and calculate a price tag that represents what food really costs. </p>
<p>The <a href="https://globalfutures.asu.edu/food/">Swette Center for Sustainable Food Systems</a> at Arizona State University, which I direct, recently conducted a <a href="https://cdn.globalfutures.asu.edu/food/wp-content/uploads/sites/14/2023/07/04252023-Unveiling-Hidden-Capitals_web.pdf">true cost accounting study</a> of <a href="https://www.ers.usda.gov/amber-waves/2011/june/beef-cow-calf-production/">cow-calf operations</a> in the Western U.S., in partnership with Colorado State University. It found that the climate costs of these operations are very high – but that solving for climate change alone could threaten the livelihoods of 70,000 ranchers and the rural communities in which they live. A true cost accounting approach can illuminate the need for multidimensional solutions. </p>
<p>I study <a href="https://scholar.google.com/citations?user=GRi_wHAAAAAJ&hl=en">sustainable food systems</a> and am one of 150 scholars across 33 countries who worked together over several years to <a href="https://teebweb.org/publications/teebagrifood/">design and test this new methodology</a>. Our work was led by the U.N. Environment Program and partially funded by the <a href="https://futureoffood.org/">Global Alliance for the Future of Food</a>, a coalition of philanthropic foundations. </p>
<p>In many ways, true cost accounting is a modern and <a href="https://www.taylorfrancis.com/chapters/oa-edit/10.4324/9781003050803-12/embedding-tca-within-us-regulatory-decision-making-kathleen-merrigan">improved version of cost-benefit analysis</a>, a method embedded in governmental decision-making in most advanced economies around the world. This approach <a href="https://www.investopedia.com/terms/c/cost-benefitanalysis.asp">quantifies expected rewards and costs</a> associated with taking a particular action and then compares them to see whether the action is likely to produce a net gain or loss for the public.</p>
<p>Advocates of true cost accounting assert that its <a href="https://www.fao.org/3/cc7724en/online/state-of-food-and-agriculture-2023/true-cost-accounting-assessment.html">more nuanced approach</a> will address shortcomings in traditional cost-benefit analysis – particularly, failing to consider social and health externalities in depth. The hope is that because these two methods have many similarities, it should be relatively easy for governments to upgrade to true cost accounting as it becomes more widely adopted. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/577165/original/file-20240221-24-uqywqy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Dozens of young pigs feed in pens inside a large modern barn." src="https://images.theconversation.com/files/577165/original/file-20240221-24-uqywqy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/577165/original/file-20240221-24-uqywqy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=377&fit=crop&dpr=1 600w, https://images.theconversation.com/files/577165/original/file-20240221-24-uqywqy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=377&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/577165/original/file-20240221-24-uqywqy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=377&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/577165/original/file-20240221-24-uqywqy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=474&fit=crop&dpr=1 754w, https://images.theconversation.com/files/577165/original/file-20240221-24-uqywqy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=474&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/577165/original/file-20240221-24-uqywqy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=474&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Large-scale livestock farms produce food efficiently at a low cost, but they generate odors and huge quantities of animal waste that can affect adjoining communities.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/FactoryFarmFuror/7e9ceabcae514e9e8111ee867ed05244/photo">AP Photo/Charlie Neibergall</a></span>
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<h2>True costs of food vary across countries</h2>
<p>The 2023 State of Food and Agriculture report <a href="https://www.fao.org/interactive/state-of-food-agriculture/en/">reveals some clear patterns</a>. Of the $12.7 trillion in worldwide hidden costs that it tallies, 39% are generated by upper-middle-income countries and 36% by high-income countries. </p>
<p>For wealthy countries, 84% of hidden costs derive from unhealthy dietary patterns, such as eating large quantities of red meat and heavily processed foods, which is associated with <a href="https://www.health.harvard.edu/staying-healthy/whats-the-beef-with-red-meat">elevated risk of heart disease, cancer and other illnesses</a>. Getting sick takes people away from work, so these health effects also reduce productivity, which affects the economy.</p>
<p>In contrast, 50% of the hidden costs of food in low-income countries are social costs that stem from poverty and undernourishment. SOFA 2023 estimates that incomes of poor people who produce food in low-income countries would need to increase by 57% for these workers to obtain sufficient revenue and calories for productive lives. </p>
<p>Food insecurity on farms is also an issue in the U.S., where the people who produce our food <a href="https://doi.org/10.1007/s10460-023-10448-0">sometimes go hungry themselves</a>. The food system’s reliance on <a href="https://www.ers.usda.gov/topics/farm-economy/farm-labor/#size">undocumented and low-paid workers</a> yields <a href="https://youthtoday.org/2022/10/youth-agricultural-workers-arent-protected-equally-under-u-s-labor-law/">undernourished children who often are unable to learn</a>. </p>
<p>The fact that many U.S. farmworkers lack access to health insurance also generates costs, since hospitals <a href="https://www.ppic.org/publication/health-care-access-among-californias-farmworkers/">treat them at public expense</a> when these workers fall sick or are injured. </p>
<p>Food production also has environmental costs. <a href="https://theconversation.com/a-few-heavy-storms-cause-a-big-chunk-of-nitrogen-pollution-from-midwest-farms-146980">Nitrogen runoff</a>, <a href="https://theconversation.com/epa-has-tightened-its-target-for-deadly-particle-pollution-states-need-more-tools-to-reach-it-223610">ammonia emissions</a>, <a href="https://theconversation.com/the-great-amazon-land-grab-how-brazils-government-is-clearing-the-way-for-deforestation-173416">deforestation</a>, <a href="https://theconversation.com/to-reduce-harmful-algal-blooms-and-dead-zones-the-us-needs-a-national-strategy-for-regulating-farm-pollution-186286">water pollution</a> and <a href="https://theconversation.com/food-production-generates-more-than-a-third-of-manmade-greenhouse-gas-emissions-a-new-framework-tells-us-how-much-comes-from-crops-countries-and-regions-167623">greenhouse gas emissions</a> combined represent about 20% of the global hidden costs of food production. Other environmental costs, such as those associated with species loss and pesticide exposure, are not included in the SOFA analysis. </p>
<h2>Should food cost more?</h2>
<p>The first question people ask me about true cost accounting is whether using it will make food more expensive. Some advocates do argue for pricing food at a level that internalizes its hidden costs. </p>
<p>For example, a Dutch organization called <a href="https://trueprice.org/">True Price</a> works with food companies to help them <a href="https://tonyschocolonely.com/us/en/our-mission/news/why-we-wont-stop-paying-a-higher-price-for-cocoa">charge more accurate prices</a>. The group operates a <a href="https://trueprice.org/supermarket-de-aanzet/">grocery store in Amsterdam</a> that charges conventional prices but provides receipts that also <a href="https://www.newyorker.com/business/currency/how-much-do-things-really-cost">display “true” prices</a>, reflecting the goods’ hidden costs. </p>
<p><div data-react-class="InstagramEmbed" data-react-props="{"url":"https://www.instagram.com/p/ChH0pHdMbic/?utm_source=ig_web_copy_link","accessToken":"127105130696839|b4b75090c9688d81dfd245afe6052f20"}"></div></p>
<p>Consumers are encouraged to pay these higher prices. When they do, the store shares the proceeds with two nonprofit organizations that promote <a href="https://landandlife.foundation/">land and wildlife conservation</a> and <a href="https://www.givedirectly.org/">poverty reduction</a> in Africa. </p>
<p>Rather than raising prices, I believe the most effective way to address the hidden costs of food would be to change government policies that provide <a href="https://www.fao.org/3/cb6562en/cb6562en.pdf">$540 billion in agricultural subsidies</a> worldwide every year. Of this amount, 87% goes to support production systems that produce cheap food, fiber and biofuels but also generate social and environmental harms. Examples include subsides that promote chemical fertilizer and pesticide use, overuse of natural resources and cultivation of emission-intensive products such as rice. </p>
<p>U.N. agencies have urged world leaders to redirect these subsidies to reduce negative impacts – a strategy they call “<a href="https://www.unep.org/news-and-stories/press-release/un-report-calls-repurposing-usd-470-billion-agricultural-support">a multibillion-dollar opportunity to transform food systems</a>.” While it may seem that eliminating subsidies would raise retail prices, that’s not necessarily true – especially if they are repurposed to support sustainable, equitable and efficient production.</p>
<p>Using true cost accounting as a guide, policymakers could reallocate some of these vast sums of money toward production methods that deliver net-positive benefits, such as expanding <a href="https://theconversation.com/organic-food-has-become-mainstream-but-still-has-room-to-grow-164220">organic agriculture</a>, <a href="https://theconversation.com/trees-can-make-farms-more-sustainable-heres-how-to-help-farmers-plant-more-222030">agroforestry</a> and <a href="https://theconversation.com/the-information-age-is-starting-to-transform-fishing-worldwide-179352">sustainable fisheries</a>. They also could invest in training and supporting next-generation food and agriculture leaders.</p>
<p>By creating transparency, true cost accounting can help shift money away from harmful food production systems and toward alternatives that protect resources and rural communities. Doing so could reduce the hidden costs of feeding the world.</p><img src="https://counter.theconversation.com/content/217883/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kathleen Merrigan served as a reviewer for the SOFA 2023 report described in this article. She has received funding from the Global Alliance for the Future of Food.</span></em></p>A new UN report finds that the true global cost of producing food is $12.7 trillion more than consumers pay at the checkout counter. We pay those uncounted costs in other ways.Kathleen Merrigan, Executive Director, Swette Center for Sustainable Food Systems, Arizona State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2186822024-02-21T13:19:25Z2024-02-21T13:19:25ZMarriage is not as effective an anti-poverty strategy as you’ve been led to believe<figure><img src="https://images.theconversation.com/files/575664/original/file-20240214-26-6cr98q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Despite the popular guidance, marriage can be an economic risk for single parents with unstable partners.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/divorce-process-royalty-free-image/1329914655">simarik/iStock/Getty Images Plus</a></span></figcaption></figure><p>Brides.com predicts that 2024 will be the “<a href="https://www.brides.com/marriage-proposal-boom-2024-8358024">year of the proposal</a>” as engagements tick back up after a pandemic-driven slowdown.</p>
<p>Meanwhile, support for marriage has found new grist in recent books, including <a href="https://sociology.as.virginia.edu/people/w-bradford-wilcox">sociologist</a> Brad Wilcox’s “<a href="https://www.amazon.com/Get-Married-Americans-Families-Civilization/dp/0063210851">Get Married: Why Americans Must Defy the Elites, Forge Strong Families and Save Civilization</a>” and economist Melissa Kearney’s “<a href="https://press.uchicago.edu/ucp/books/book/chicago/T/bo205550079.html">The Two-Parent Privilege</a>.”</p>
<p>Kearney’s book was <a href="https://www.city-journal.org/article/review-of-the-two-parent-privilege-by-melissa-kearney">hailed by economist Tyler Cowen</a> as possibly “the most important economics and policy book of this year.” This is not because it treads new ground but because, as author <a href="https://www.city-journal.org/article/review-of-the-two-parent-privilege-by-melissa-kearney">Kay Hymowitz writes</a>, it breaks the supposed “taboo about an honest accounting of family decline.” </p>
<p>These developments are good news for the marriage promotion movement, which <a href="https://www.dol.gov/general/aboutdol/history/webid-moynihan">for decades</a> has claimed that marriage supports children’s well-being and combats poverty. The movement dates back at least to the U.S. Department of Labor’s <a href="https://www.dol.gov/general/aboutdol/history/webid-moynihan">Moynihan Report of 1965</a>, which argued that <a href="https://www.theatlantic.com/politics/archive/2015/09/the-moynihan-report-an-annotated-edition/404632/">family structure aggravated Black poverty</a>.</p>
<p>Forty years after the Moynihan Report, George W. Bush-era programs such as the <a href="https://www.acf.hhs.gov/ocs/policy-guidance/csbg-im-no-89-healthy-marriage-initiative">Healthy Marriage Initiative</a> sought to <a href="https://www.jstor.org/stable/4624797">enlist churches</a> and other community groups in an effort to channel childbearing back into marriage. These initiatives continue today, with the federally subsidized <a href="https://www.acf.hhs.gov/ofa/programs/healthy-marriage-responsible-fatherhood">Healthy Marriage and Responsible Fatherhood programs</a>.</p>
<p>Still, nearly <a href="https://www.census.gov/newsroom/stories/single-parent-day.html">30% of U.S. children</a> live in single-parent homes today, compared with 10% in 1965.</p>
<p>We are <a href="https://scholar.google.com/citations?user=gCJEShUAAAAJ&hl=en&oi=ao">law professors</a> who have written extensively about <a href="https://scholar.google.com/citations?user=0BBCYNAAAAAJ&hl=en&oi=ao">family structure</a> and <a href="https://www.fordham.edu/school-of-law/faculty/directory/full-time/eleanor-brown/">poverty</a>. We, and others, have found that there is almost no evidence that federal programs that promote marriage <a href="https://www.bgsu.edu/content/dam/BGSU/college-of-arts-and-sciences/NCFMR/documents/FP/FP-14-02_HMIInitiative.pdf">have made a difference</a> in encouraging two-parent households. That’s in large part because they forgo effective solutions that directly address poverty for measures that embrace the culture wars. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/575989/original/file-20240215-28-q3xgpp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Child hangs upside down on playground equipment" src="https://images.theconversation.com/files/575989/original/file-20240215-28-q3xgpp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/575989/original/file-20240215-28-q3xgpp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/575989/original/file-20240215-28-q3xgpp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/575989/original/file-20240215-28-q3xgpp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/575989/original/file-20240215-28-q3xgpp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/575989/original/file-20240215-28-q3xgpp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/575989/original/file-20240215-28-q3xgpp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Having a parent who has a college degree makes kids less likely to live in poverty than having parents who are married.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/girl-upside-down-on-the-jungle-gym-royalty-free-image/1127705002">Mayur Kakade/Moment Collection via Getty Images</a></span>
</figcaption>
</figure>
<h2>Marriage and social class</h2>
<p>Today’s marriage promoters claim that <a href="https://ifstudies.org/blog/the-benefits-of-marriage-shouldnt-only-be-for-elites">marriage should not be just for elites</a>. The emergence of marriage as a marker of class, they believe, is a sign of societal dysfunction.</p>
<p>According to census data released in 2021, 9.5% of children living with two parents – and 7.5% with married parents – <a href="https://ojjdp.ojp.gov/statistical-briefing-book/population/faqs/qa01203#:%7E:text=In%202021%2C%209.5%25%20of%20children,17.4%25">lived below the poverty level</a>, compared with 31.7% of children living with a single parent.</p>
<p>Kearney’s argument comes down to: 1 + 1 = 2. Two parents have more resources, including money and time to spend with children, than one. She marshals extensive research designed to show that children from married couple families are <a href="https://doi.org/10.1146/annurev-economics-063016-103749">more likely to graduate</a> from high school, complete college and earn <a href="https://doi.org/10.1146/annurev-economics-063016-103749">higher incomes as adults</a> than the children of single parents.</p>
<p>It is undoubtedly true that two parents – that is, two nonviolent parents with reliable incomes and cooperative behavior – have <a href="https://www.brookings.edu/articles/cohabiting-parents-differ-from-married-ones-in-three-big-ways/">more resources for their children</a> than one parent who has to work two jobs to pay the rent. However, this equation <a href="https://doi.org/10.31235/osf.io/pmyhj">does not address causation</a>. In other words, parents who have stable incomes and behaviors are more likely to stay together than parents who don’t.</p>
<p>Ethnographic studies indicate, for example, that the most common reasons unmarried women are no longer with the fathers of their children are the men’s <a href="https://ssrn.com/abstract=3841832">violent behavior, infidelity</a> and <a href="https://www.ucpress.edu/book/9780520335233/essential-dads">substance abuse</a>.</p>
<p>Moreover, income volatility disproportionately affects parents who don’t go to college. So while they may have more money to invest in children together than apart, when one of these parents experiences a substantial drop in income, the other parent may have to decide whether to <a href="https://elibrary.law.psu.edu/cgi/viewcontent.cgi?article=1455&context=fac_works">support the partner or the children</a> on what is often a meager income.</p>
<p>The <a href="https://theconversation.com/having-a-single-parent-doesnt-determine-your-life-chances-the-data-shows-poverty-is-far-more-important-217841">impact of having single parents</a> also plays out differently by race and class. As sociologist and researcher <a href="https://www.nytimes.com/2019/12/09/opinion/two-parent-family.html">Christina Cross explains</a>, “Living apart from a biological parent does not carry the same cost for Black youths as for their white peers, and being raised in a two-parent family is not equally beneficial.” </p>
<p>For example, Cross found that living in a single-mother family is less likely to affect high school completion rates for Black children than for white children. Also, Black families tend to be more embedded in extended family than white families, and this additional support system may help protect children from negative outcomes associated with single-parent households.</p>
<p><iframe id="A2rK0" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/A2rK0/1/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<h2>Making men more ‘marriageable’</h2>
<p>Kearney, to her credit, does note that economic insecurity largely explains what is happening to working-class families, and that no parent should have to tolerate violence or substance abuse. But she doubles down on the need to restore a norm of two-parent families.</p>
<p>Many of her policy prescriptions are sensible. She advocates for better opportunities for low-income men – to make them, in the words of <a href="https://press.uchicago.edu/ucp/books/book/chicago/T/bo13375722.html">sociologist William Julius Wilson</a>, “marriageable.” Such policies would include wage subsidies to improve their job opportunities, investment in community colleges that provide skills training, and the <a href="https://theconversation.com/banning-the-box-would-help-people-released-from-prison-rebuild-their-lives-45539">removal of questions about criminal histories</a> from job applications, so that candidates who have previously been incarcerated are not immediately disqualified.</p>
<h2>A new marriage model</h2>
<p>What marriage promotion efforts overlook, however, are the underlying changes in what marriage has become – both legally and practically. </p>
<p>The new marriage model rests on three premises.</p>
<p>The first is a moral command: Have sex if you want to, but don’t have children until you are ready. While the shotgun marriage once served as the primary response to unplanned pregnancy, such marriages today often derail education and careers and are <a href="https://today.duke.edu/2016/11/shotgun-marriage-dead#:%7E:text=After%20a%20decade%2C%2030%20percent,prior%20to%20a%20child's%20conception.">more likely to result in divorce</a> than other marriages. Research shows that lower-income women’s pregnancies are much <a href="https://www.guttmacher.org/sites/default/files/factsheet/fb-unintended-pregnancy-us_0_4.pdf">more likely to be unplanned</a>. </p>
<p>The second is the ability to pick a partner who will support you and assume joint responsibility for parenting. As women have attained more economic independence, they are less in need of men to raise children, particularly if their partners are insensitive or abusive. With healthy relationships, couples pick partners based on trust, commitment and equal respect. This is more difficult to do in communities with high rates of incarceration and few opportunities for stable employment. </p>
<p>And the third is economic and behavioral stability. Instability undermines even committed unions. Parents who wait until they find the right partner and have stable lives bring a lot more to parenting, whether they marry or not.</p>
<p>We believe that creating opportunities for low-income parents to reach this middle-class model is likely to be the most effective marriage promotion policy.</p>
<h2>Economic support is key</h2>
<p>In relationships that fall outside of these premises, 1 + 1 often becomes 1 + -1, which equals 0.</p>
<p>Being committed to a partner who can’t pay speeding tickets, runs up credit card bills, comes home drunk or can’t be relied on to pick up the children after school is not a recipe for success. </p>
<p>Economic principles suggest that businesses with more volatile income streams need a stronger capital base to withstand the downturns. Working-class couples who face economic insecurity see commitment as similarly misguided; without a capital base, a downturn for one partner can wipe out the other.</p>
<p>The Biden administration’s child tax credit expansion included in the <a href="https://www.bloomberg.com/news/newsletters/2024-02-08/the-child-tax-credit-bill-seems-destined-for-defeat-in-the-senate?embedded-checkout=true">American Rescue Plan Act of 2021</a> helped cut the child poverty rate – after accounting for government assistance – <a href="https://www.cbpp.org/research/poverty-and-inequality/governments-pandemic-response-turned-a-would-be-poverty-surge-into">to a record low</a> that year. It did more to address child poverty than <a href="https://www.sciencedaily.com/releases/2014/01/140106094155.htm">marriage promotion efforts have ever done</a>.</p>
<p>Researchers have described such income-support policies as the “<a href="https://doi.org/10.1007/s12187-020-09782-0">ultimate multipurpose policy instrument</a>.” They improve the economic circumstances of single-parent families and, in doing so, may also provide greater support for two-parent relationships. </p>
<p>Policymakers know how to solve child poverty – and these measures are far more effective than efforts to put two married parents in every household.</p><img src="https://counter.theconversation.com/content/218682/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Marriage on its own won’t do away with child poverty, and in fact it can create even more instability for low-income families.Eleanor Brown, Professor of Law, Fordham UniversityJune Carbone, Professor of Law, University of MinnesotaNaomi Cahn, Professor of Law, University of VirginiaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2231282024-02-13T15:07:43Z2024-02-13T15:07:43ZIs Valentine’s Day worth the romantic investment? Here’s what we can learn from economics<figure><img src="https://images.theconversation.com/files/575288/original/file-20240213-24-m13x4p.jpg?ixlib=rb-1.1.0&rect=92%2C58%2C5515%2C3665&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">shutterstock</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/rose-flowers-heart-shape-chocolate-valentines-2090452246">Evgeny Karandaev/Shutterstock</a></span></figcaption></figure><p>Expressing affection can be expensive. Spending on heart-shaped gifts, romantic cards, chocolates and flowers (other gifts are available) to celebrate Valentine’s Day has reached <a href="https://www.statista.com/statistics/510981/valentines-day-total-spending-great-britain/#:%7E:text=In%20the%20United%20Kingdom%20%28UK%29%20alone%2C%20Valentine%E2%80%99s%20Day,increased%20by%20just%20over%20300%20million%20British%20pounds.">close to £1 billion</a> in the UK.</p>
<p>So the value of Valentine’s to retailers seems clear enough. But just how valuable is the annual ritual to consumers? What return can you expect for the money you invest in that bouquet of roses or candle lit meal? </p>
<p>Broadly speaking, and depending on your relationship status, buying into Valentine’s Day traditions suggests two possible scenarios. You might be sending a card or gift to a potential partner to inform them of your interest; or you might be giving something to your current partner to remind them of your continuing love. </p>
<p>Research suggests that both options have intrinsic economic value.</p>
<p>For those seeking to express interest, sending a card is like dipping your toe into what economists might refer to as the “marriage market” – the search for someone you like, who likes what you have to offer in return. </p>
<p>This search can happen smoothly, with plenty of information about your potential match, or it can be paved with obstacles, where you may not know much about who is available, and <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1703310">learning about potential partners</a> takes time. </p>
<p>So suppose you are searching for a partner, and comprehensive information about potential matches is not freely available. What do you do? </p>
<p>One option might be to put all your hopes into meeting someone on your daily journey to work. You pray that one day, just like in the movies, you will simply bump into “the one”. </p>
<p>A second option might be to focus your search on single work colleagues, or people you know socially, and send Valentine’s Day cards to those you are attracted to. </p>
<p>The option with the highest chance of success is the second one. You are using reliable information – knowledge of who is single. And sending a card to them can provide them with important information about you – that you’re also single, and that you’re interested. This is why research suggests that sending a Valentine’s Day card can be a <a href="https://www.jstor.org/stable/2938374?origin=crossref">logical investment</a> of time and money.</p>
<h2>‘Match quality’</h2>
<p>Fast forward five years or so and imagine you are happily married to the recipient of one of those cards. Is it worth repeating the gesture now that you’re settled down together? </p>
<p>Economists think of marriages or partnerships as having an inherent “<a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1468-2354.2006.00385.x">match quality</a>”, which reflects how good (or bad) your relationship is – and the likelihood of you breaking up. </p>
<p>If match quality falls below the level of happiness you might expect to have if you were to leave, a <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2759255">separation may well follow</a>. But many studies also show that <a href="https://www.jstor.org/stable/2535409">match quality is malleable</a> – that it can change, for better and indeed for worse, over time.</p>
<p>You can invest in trying to improve match quality in various ways. It might be starting a family, sharing hobbies and interests, or gestures such as cooking a special meal or exchanging gifts on the 14th day of February. Improving your match quality <a href="https://www.researchgate.net/publication/228431914_How_Does_the_Change_of_Marriage_Quality_Affect_Divorce_Decisions">directly reduces the probability</a> of a separation.</p>
<figure class="align-center ">
<img alt="Couple reading a menu at a restaurant table." src="https://images.theconversation.com/files/575299/original/file-20240213-18-4hioc0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/575299/original/file-20240213-18-4hioc0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/575299/original/file-20240213-18-4hioc0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/575299/original/file-20240213-18-4hioc0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/575299/original/file-20240213-18-4hioc0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/575299/original/file-20240213-18-4hioc0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/575299/original/file-20240213-18-4hioc0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">‘And it says here that this meal is a logical investment.’</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/smiling-couple-reading-menu-choosing-meal-120856582">Lucky Business/Shutterstock</a></span>
</figcaption>
</figure>
<p>Then there’s the question of commitment – the willingness to stay in a relationship rather than walking away. And again, gestures can make a difference.</p>
<p>Imagine you have just started a new job, and your employer asks you to complete an intensive training session in your free time, for a skill that would only be useful for that particular role. If you expect to hold the job for a long period, you might happily invest your time. But if your employer is struggling financially and redundancy is on the cards, you are much less likely to agree to perform the task.</p>
<p>Relationships work in a similar way. People are more prepared to invest in things like having children or buying a house together if they expect the relationship to last. Given that commitment is not guaranteed by a marriage certificate, people <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=950688">need to find other ways</a> to signal their continued devotion. </p>
<p>Celebrating Valentine’s Day is one way of making such a signal. It can show faith in your shared commitment, signify that you wish to continue investing in the relationship and improve match quality, further stabilising the partnership. </p>
<p>So even if deep down you think that Valentine’s Day has become over commercialised and meaningless, research suggests it makes good economic sense to send that card.</p><img src="https://counter.theconversation.com/content/223128/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Selma Walther is affiliated with the Institute for Fiscal Studies.</span></em></p>Working on ‘match quality’ is an important part of relationships.Selma Walther, Senior Lecturer in Economics, University of Sussex Business School, University of SussexLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2210782024-02-08T13:40:56Z2024-02-08T13:40:56ZThe myth of men’s full-time employment<figure><img src="https://images.theconversation.com/files/572004/original/file-20240129-25-80mw1z.jpg?ixlib=rb-1.1.0&rect=7%2C46%2C5114%2C3478&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">He's not alone.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/businessman-made-redundant-royalty-free-image/643678742">Image Bank/Getty Images</a></span></figcaption></figure><p>Men’s employment in the U.S. reached a 20-year high in 2023, with <a href="https://www.frbsf.org/economic-research/publications/economic-letter/2023/october/mens-falling-labor-force-participation-across-generations/">nearly 90%</a> of men ages 25 to 54 in the workforce, according to <a href="https://www.bls.gov/opub/ted/2023/labor-force-participation-rate-for-people-ages-25-to-54-in-may-2023-highest-since-january-2007.htm#:%7E:text=Among%20men%20ages%2025%20to,pandemic%20level%20in%20April%202023.">the Bureau of Labor Statistics</a>. This supports the <a href="https://doi.org/10.1177/0891243216649946">broad expectation</a> – some might say stereotype – that full-time employment is the norm for American men. </p>
<p>Yet examining employment at a single point in time leaves out important information about whether people are able to maintain stable work. <a href="https://doi.org/10.1177/23780231231197031">Our recent study</a> of male baby boomers’ working lives – spanning more than two decades – tells a very different story. </p>
<p>In fact, men’s labor force participation has been <a href="https://fred.stlouisfed.org/series/LNS11300001">steadily declining</a> since the 1970s, and workers are experiencing greater labor market precarity – that is, shorter job spells, greater job insecurity and more long-term unemployment. </p>
<p>In our research <a href="https://scholar.google.com/citations?user=VoDOQ44AAAAJ&hl=en&oi=ao">as experts</a> in the study of <a href="https://scholar.google.com/citations?user=zTqwiBYAAAAJ&hl=en">people’s employment</a> over time, we have <a href="http://doi.org/10.1007/s13524-016-0464-z">previously challenged the myth</a> that most women “opt out” of the workforce, establishing that the majority of women work steadily and full time. That led us to suspect that the picture of men’s employment could also be incomplete.</p>
<p>To understand these long-term trends, we studied data from about 4,500 men collected over more than 25 years. We were looking for patterns in the amount of time these men spent employed, unemployed and looking for work, and out of the workforce and not looking for work. </p>
<p>We were surprised to find that <a href="https://doi.org/10.1177/23780231231197031">only 41%</a> of late baby boomer men – those who were between 14 and 21 years old in 1979 – worked steadily and continuously, which we defined as working almost every week of the year between ages 27 and 49. This is a cohort of men who were widely thought to have taken a “<a href="https://www.google.com/books/edition/The_Career_Mystique/dIDgkBiqMO8C?hl=en&gbpv=1&dq=phyllis+moen+roehling&pg=PP13&printsec=frontcover">lockstep</a>” approach to work: entering the labor market when they finished their schooling and remaining employed until retirement.</p>
<p>We found most men didn’t fit this stereotype. About a quarter didn’t reach steady employment until they were nearly 50. Another quarter either found themselves increasingly unemployed and out of work as they aged or able to find only intermittent work. Finally, a smaller group of men left the labor market entirely – some leaving paid work at relatively young ages, while others leaving as they reached middle age.</p>
<p><iframe id="fh9kX" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/fh9kX/5/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<h2>Problems with precarity</h2>
<p>We don’t know exactly why these men followed such a wide range of work patterns during what economists call their “prime earning years.” But we think increasing labor market precarity – which researchers say is driven in large part by <a href="https://www.google.com/books/edition/The_State_of_Working_America/WdM77z0HUcAC?hl=en&gbpv=0">increases in layoffs</a> and <a href="https://doi.org/10.1093/qje/qjab012">decreases in unionization</a> – played a big role. </p>
<p>For example, we found that men who worked as “<a href="https://usa.ipums.org/usa/volii/occ1980.shtml#operator">operators, fabricators and laborers</a>” or in “<a href="https://usa.ipums.org/usa/volii/occ1980.shtml#precision">precision production, craft and repairs</a>” were at greater risk of unemployment. These are jobs that provided our own grandfathers with good, well-paying work, but they are also jobs that have become <a href="https://arnekalleberg.web.unc.edu/books/good-jobs-bad-jobs/">increasingly rare</a> since the 1970s.</p>
<p>We also found that men were at greater risk if they lived in counties with a higher unemployment rate or in states with more unionized jobs when they first entered the labor market. That latter point likely put them at greater risk of job loss <a href="https://doi.org/10.1177/2378023116656847">when those jobs went overseas</a> in the 1980s and 1990s.</p>
<p>Men who experienced unemployment, more job turnover before the age of 25 or transportation barriers to finding a good job also followed less steady work patterns, suggesting that they may have been forced to take “bad jobs” that provided fewer opportunities to move up the ladder or to earn a living wage.</p>
<p>Our findings paint a troubling portrait of employment in America. If this kind of unsteady employment characterizes the work patterns of the baby-boom generation, what awaits those of us who follow them? Is there anything we can do about it?</p>
<h2>Ideas for improvement</h2>
<p>The good news is there are solutions for workers, employers and the federal government. Our <a href="https://doi.org/10.1177/23780231231197031">research</a> <a href="https://doi.org/10.1177/07308884231162949">shows</a> that a college degree could protect men from the risk of unemployment or time out of work. The government can support this goal by <a href="https://www.amacad.org/sites/default/files/academy/multimedia/pdfs/publications/researchpapersmonographs/CFUE_Economic-Impact/CFUE_Economic-Impact.pdf">making college more affordable for workers</a>, as the current administration has <a href="https://www.whitehouse.gov/briefing-room/presidential-actions/2021/10/29/a-proclamation-on-national-college-application-month-2021/">proposed doing</a>. </p>
<p>For employers, our findings suggest that making work less precarious – in other words, making it more stable, with better pay and more schedule control – would be a win-win proposition. Research suggests that employers consistently <a href="https://hbr.org/2019/06/the-financial-case-for-good-retail-jobs">underestimate the costs</a> of losing employees. Given how hard it’s been for employers to stay fully staffed – especially in retail and service work – making jobs more appealing to workers could pay off in terms of retention. </p>
<p>Walmart, for instance, has <a href="https://hbr.org/2017/12/the-right-thing-to-do">increased pay and schedule control</a> for its workers. Such moves have been shown to benefit both the employers, through the <a href="https://equitablegrowth.org/improving-u-s-labor-standards-and-the-quality-of-jobs-to-reduce-the-costs-of-employee-turnover-to-u-s-companies/">reduction in employee turnover costs</a>, and the employees, through improved work conditions and work benefits.</p>
<p>The government could also implement policy changes, such as the <a href="https://www.congress.gov/bill/118th-congress/house-bill/20">Protecting the Right to Organize Act</a>, to promote workers’ right to unionization, since unionization is consistently linked to <a href="https://doi.org/10.1016/j.eeh.2017.08.003">higher wages</a> and <a href="https://doi.org/10.1177/0003122411414817">lower levels of inequality</a>. </p>
<p>We don’t think the U.S. needs the jobs that our grandfathers held to return; instead, it needs to turn today’s available jobs into good jobs. The recent National Labor Relations Board “<a href="https://www.nlrb.gov/sites/default/files/attachments/pages/node-9558/joint-employer-fact-sheet-2023.pdf">joint employer</a>” ruling, for example, should do this by making it easier for workers at national chains to unionize across franchises, which could improve the working conditions of millions of people in the service industry.</p>
<p>Finally, government can take action to make unemployment a less miserable experience. Our findings, both here and elsewhere, suggest that unemployment does considerable harm to <a href="https://doi.org/10.1177/07308884231162949">workers’ careers</a> <a href="https://doi.org/10.1177/08982643221091775">and health</a>. <a href="https://www.epi.org/publication/section-5-benefit-levels-increase-ui-benefits-to-levels-working-families-can-survive-on/">Reforming the current unemployment insurance</a> system by expanding eligibility and creating progressive wage replacement rates may make it easier for workers to <a href="http://www.nber.org/papers/w27574">find jobs that better fit their skill set</a>, which <a href="https://www.google.com/books/edition/The_Tolls_of_Uncertainty/DkgHEAAAQBAJ?hl=en">our research</a> suggests could help them return to stable employment.</p>
<p>Our findings are the canary in a coal mine. They suggest that for future generations, steady employment may be a thing of the past. But the good news is that we can heed the warning and take steps to give everyone access to better jobs and more stable employment.</p><img src="https://counter.theconversation.com/content/221078/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sarah Damaske receives/has received funding from the Eunice Kennedy Shriver National Institute of Child Health and Human Development, the National Science Foundation, the Woodrow Wilson National Fellowship Foundation, the American Sociological Association, and the Pennsylvania State University and its Population Research Institute.</span></em></p><p class="fine-print"><em><span>Adrianne Frech has received funding from the National Institutes of Health.</span></em></p>Think the norm is to join the workforce straight after school, work for five decades and then retire? Think again.Sarah Damaske, Professor of Sociology and Labor and Employment Relations, Penn StateAdrianne Frech, Associate Professor of Population Health, Ohio UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2224602024-02-01T00:24:27Z2024-02-01T00:24:27ZWith the economy looking bright enough, the Federal Reserve seems content to play the waiting game<figure><img src="https://images.theconversation.com/files/572543/original/file-20240131-29-ugwtym.jpg?ixlib=rb-1.1.0&rect=43%2C410%2C5783%2C3468&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">When will Fed Chair Jerome Powell lower the curtains on the inflation battle?</span> <span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/FederalReservePowell/90516627fabd4f71b1122b964a78a211/photo?Query=jerome%20powell&mediaType=photo&sortBy=creationdatetime:desc&dateRange=Anytime&totalCount=2461&currentItemNo=1">AP Photo/Alex Brandon</a></span></figcaption></figure><p>If there’s one thing you can say about Fed policymakers, it’s that they don’t make decisions on a whim. When the Federal Open Market Committee met on Jan. 31, 2024, it <a href="https://www.nbcnews.com/business/economy/federal-reserve-interest-rate-decision-january-2024-increase-decrease-rcna136429">held interest rates steady</a> – <a href="https://finance.yahoo.com/news/federal-reserve-leaves-interest-rates-unchanged-tempers-expectations-on-rate-cuts-ahead-190255912.html">as most</a> observers expected. That marks six months since the Fed last changed the base rate.</p>
<p>And people should expect to wait a little while more: Fed Chair Jerome Powell <a href="https://www.cnbc.com/2024/01/31/fed-chief-jerome-powell-says-a-march-rate-cut-is-not-likely.html">said a rate cut was “not likely</a>” to come at the next meeting in March. But over the course of his news conference after the meeting, he emphasized that nothing is set in stone.</p>
<p>The Federal Reserve has what is called a <a href="https://www.stlouisfed.org/in-plain-english/the-fed-and-the-dual-mandate">dual mandate</a>: Its job is to achieve maximum employment and keep prices stable. Often there’s a trade-off between these goals: Cutting rates often helps with the former, while lowering them helps with the latter. </p>
<p>And in recent months, controlling inflation has been the focus of Fed policy. In his remarks on Jan. 31, Powell made it clear that Americans shouldn’t expect the Fed to do anything to rates until the U.S. gets <a href="https://sites.lsa.umich.edu/mje/2023/09/04/why-the-2-inflation-target/#:%7E:text=This%20meant%20that%20costs%20only,and%20an%20increase%20in%20prices.">closer to its target of 2% inflation</a>. And that could take some time.</p>
<p>There’s a reason Powell and his fellow policymakers are focused on the 2% inflation target. So long as <a href="https://www.bls.gov/cpi/">consumer price index inflation</a> is above 2%, the concern is that any lowering of interest rates could stimulate the economy too much and reignite inflation. </p>
<p>Still, the <a href="https://www.federalreserve.gov/monetarypolicy/fomc.htm">federal funds rate</a>, which helps determine mortgage and loan rates and quite a bit more, remains at 5.5%, higher than it’s been in 16 years. The Fed has raised rates 11 times since early 2022. </p>
<p>That aggressive rate-hiking has had the desired effect of putting the brakes on the economy. But it comes with some pain for borrowers – and some are now eager to bring rates back down. </p>
<p>Cutting rates usually makes sense when the economy is getting significantly worse, and there’s not much reason to think that’s happening now. Fourth-quarter gross domestic product grew <a href="https://www.bea.gov/news/2024/gross-domestic-product-fourth-quarter-and-year-2023-advance-estimate">3.3% on an annualized basis</a>, ending 2023 on a strong note. The economy added <a href="https://www.bls.gov/news.release/pdf/empsit.pdf">more than 2 million jobs</a> over the course of 2023. And consumer price index inflation is running at <a href="https://www.bls.gov/news.release/pdf/cpi.pdf">about 3.3% in December 2023</a>.</p>
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<figcaption><span class="caption">The chair of the Federal Reserve addresses reporters on Jan. 31, 2024.</span></figcaption>
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<p>“This is a good situation,” Powell said during his news conference. “Let’s be honest: This is a good economy.”</p>
<p>So what comes next? The Fed recently indicated that it expects to cut rates <a href="https://www.bloomberg.com/news/articles/2024-01-11/us-inflation-accelerates-tempering-case-for-fed-to-cut-rates?sref=Hjm5biAW">three times in 2024</a>. But as Powell was at pains to make clear, if the data changes, the Fed’s decision-making will, too.</p>
<p>The labor market data looks relatively sunny. There’s greater balance between the number of people who want jobs and the number of open positions than there was last year. Wage growth looks likely to continue at current rates. So unless there’s a sharp increase in unemployment, which <a href="https://apnews.com/article/retail-sales-december-economy-consumer-spending-800f78ae0a4428be3be7733238d16f40">doesn’t seem likely at the moment</a>, there seems to be little reason to cut interest rates.</p>
<p>There’s always a concern that keeping rates too high for too long may tip the economy into a recession. But recent history doesn’t suggest that will happen. </p>
<h2>Taking the long view</h2>
<p>Taking a historical perspective can be revealing. The 30-year fixed mortgage rate is about 6.6% – high by recent standards. However, back in 1998, the year I bought my first home, the rate was 6.9%. At that time, it was a real deal! </p>
<p>Mortgage rates have been as high as 18% if you go back to 1981. That’s not to say either I or the Fed believe there’s room to increase rates any time soon – just that rates are nowhere near record highs.</p>
<p>Powell did say there’s no reason for any rate increases, so the current Federal funds rate of 5.5% is likely the current cyclical peak. </p>
<p>The next meeting will start March 19. The odds are that the U.S. economy will continue to grow, and inflation will continue to moderate – however slowly. So I would expect the Fed to follow through on Powell’s noncommittal prediction and hold off on cutting rates until later in the year.</p>
<p>So there’s no soft landing yet – Powell said as much. But we look surprisingly close.</p><img src="https://counter.theconversation.com/content/222460/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Christopher Decker does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The central bank is ‘really in risk management mode,’ its chairman said.Christopher Decker, Professor of Economics, University of Nebraska OmahaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2211052024-01-18T20:22:40Z2024-01-18T20:22:40ZHow economics can shed light on the motivations of extremist groups like Hamas<iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/how-economics-can-shed-light-on-the-motivations-of-extremist-groups-like-hamas" width="100%" height="400"></iframe>
<p>A lot of political analysis is available on Israel’s indiscriminate bombing of Gaza. But economic analysis based on supply and demand also helps shed light on why conflict should be viewed systematically and structurally. </p>
<p>Such an analysis is at odds with the Israeli stance that ties its ongoing war in Gaza solely to the Oct. 7, 2023, attacks by Hamas, rationalizing the deaths of <a href="https://www.washingtonpost.com/national-security/2024/01/14/israel-gaza-low-intensity/#:%7E:text=According%20to%20the%20Gaza%20Health,of%20them%20women%20and%20children.">almost 24,000 Gazan civilians.</a></p>
<p>Research from the <a href="https://j-etr.org/2021/08/30/teaching-the-economics-of-religion-to-undergraduate-economics-students/">economics of religion</a> allows us to cut through rationalizations and rhetoric to look at the issue systemically and structurally. </p>
<p>It helps us recognize the <a href="https://carnegieendowment.org/chinafinancialmarkets/51677">positive feedback loop</a> that exists when state-sanctioned discrimination and persecution leads to perceived grievances and violence/terrorism, which in turn elicits more state repression, causing the vicious circle to continue unabated. </p>
<p>This seems to have been the case through the years of Israeli military campaigns against Gaza through <a href="https://www.rand.org/pubs/research_briefs/RB9975.html">various operations</a> like Cast Lead, Protective Edge, Pillar of Defence and so on. These operations are interlinked with Hamas firing indiscriminate rockets in a seemingly endless cycle of violence. </p>
<h2>Economics, not religion, fuels terrorism</h2>
<p>American economist Laurence Iannaccone has written several papers on the <a href="https://www.jstor.org/stable/40752990">economic theory of fundamentalism</a>, <a href="https://doi.org/10.1111/j.1475-4932.2012.00803.x">religious extremism</a> and what he calls the <a href="https://www.religjournal.com/pdf/ijrr02004.pdf">market for martyrs</a>. </p>
<p>According to Iannaccone, the market for martyrs is an economic model that helps us understand the origin of violent extremism based on economic principles like rational choice. </p>
<p>In this market, the killers are suppliers and those who recruit them are demanders. </p>
<p>Based on his work, a typical terrorist, suicide bomber or extremist is neither poor, ignorant nor mentally unstable. This is because poor, ignorant or enraged people can be incompetent and risky; well-educated and mentally composed terrorists are required to carry out successful terrorist missions. </p>
<p>This is consistent with <a href="https://www.aeaweb.org/articles?id=10.1257/089533003772034925">economic literature</a> that shows there’s little direct connection between poverty or poor education and terrorism. In fact, Palestinian suicide bombers have had <a href="https://dx.doi.org/10.2139/ssrn.487467">higher education and economic status</a> than the average Palestinian. </p>
<p>According to Iannaccone, militancy is a consequence of the social and political environment, not religion. Fundamentalism becomes more appealing when people have been displaced or ill-served by secular governments. </p>
<h2>Filling the void</h2>
<p>That void is filled by groups like <a href="https://www.aljazeera.com/news/2023/10/8/what-is-the-group-hamas-a-simple-guide-tothe-palestinian-group">Hamas that offer public services and welfare programs</a>. These violent groups also arise when basic civil liberties are undermined and economic opportunities are stifled. </p>
<p>According to another American economist, <a href="https://doi.org/10.1111/j.1465-7295.2009.00287.x">Michael Intriligator</a>, terrorism is used by the weaker party in asymmetric warfare. That party usually has real or perceived grievances, and its motivation is not rooted in poverty or ignorance but in humiliation and retribution for past actions. </p>
<p>This resonates given the observation that <a href="https://doi.org/10.3389/fpsyt.2020.00004">Hamas perpetrators of Oct. 7 may have been children or minors</a> throughout various Israeli operations in Gaza over the last two decades. The current bombing will likely instigate the same cycle, creating future militants.</p>
<h2>Rational extremists</h2>
<p>Israel’s far-right government has made its sentiments clear. Prime Minister Benjamin Netanyahu has <a href="https://www.motherjones.com/politics/2023/11/benjamin-netanyahu-amalek-israel-palestine-gaza-saul-samuel-old-testament/">evoked Amalek</a>, described in the Hebrew Bible as an avid persecutor of Israelites. A former Israel envoy to the United Nations referred to Palestinians as “<a href="https://www.youtube.com/watch?v=Fr24GcCDgyM">inhuman animals</a>” and a right-wing Israeli lawmaker once called Palestinian children “<a href="https://mondoweiss.net/2015/10/refreshing-bluntness-shaked/">little snakes</a>.” </p>
<p>However, it’s important to note that the economic approach views extremists as rational, not psychopathic or animalistic. It also rejects the flawed argument that suicide bombers cannot be deterred because they have nothing to lose and nothing to live for. </p>
<p>It acknowledges that terrorists do have something to lose — and that they can be deterred. </p>
<p>An example amid the current conflict is the <a href="https://www.nbcnews.com/news/investigations/five-extremely-excruciating-weeks-talks-led-hamas-hostage-deal-rcna126422">successful negotiations with Hamas that allowed the release of some Israeli hostages.</a></p>
<p>A pathologically nihilist, psychopathic organization would have perpetuated random mayhem amid the negotiations and subsequent hostage releases, but instead Hamas had political objectives. This suggests the group can be reasoned with — and deterred. </p>
<p>Further negotiations and addressing economic disparities and grievances would therefore be a much more fruitful strategy for Israel than indiscriminate bombing that will simply perpetuate the cycle of violence and shift the violence to the next generation. </p>
<p>In short, the economic approach would call for a ceasefire.</p>
<h2>Supply and demand</h2>
<p>Iannaccone argues that the market for martyrs is undermined not by inhibiting the supply of martyrs, but by checking demand.</p>
<p>This is because there are many sources of supply; kill some terrorists and others can be recruited. Imprisonment and execution have minimal impact. </p>
<p>What is needed to choke off the market for martyrs is to check demand by changing the political and economic environment through civil liberties, social services, political representation and economic freedom, all of which would inhibit religious radicals from embracing violence. </p>
<p>Look at Christian extremists in the United States for evidence. Social, legal, economic and political reasons would make religiously sponsored violence unprofitable for American Christian radicals, who would suffer loss to reputation, influence, membership and funding. </p>
<p>In short, the best way to tackle terrorism is not through military might but by ensuring that political grievances are heard and addressed. </p>
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Read more:
<a href="https://theconversation.com/history-repeats-itself-from-the-new-testament-to-qanon-156915">History repeats itself: From the New Testament to QAnon</a>
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<h2>Market for drugs and arms</h2>
<p>The market for martyrs can be tackled the same way as the market for illicit drugs by focusing on demand rather than supply — in other words, by addressing human needs, which is much cheaper than the costly spending on police and judiciary in the case of the war against drugs. </p>
<p>However, <a href="https://ideas.repec.org/p/cpr/ceprdp/5360.html">economic research</a> indicates that focusing on supply is lucrative, since it has a significantly positive impact on defence and security industries in Israel.</p>
<p>In fact, <a href="https://aoav.org.uk/2023/stock-prices-of-major-defence-companies-surge-in-wake-of-october-7th-attacks-in-israel/">weapons manufacturers have gained in share prices in the aftermath of the Hamas attack of Oct. 7</a>. In short, the indiscriminate bombing of Gaza is profitable for war corporations even if the economic approach views it as counter-productive. </p>
<p>Tackling terrorism therefore requires not military aggression but providing public goods, respecting civil liberties and addressing political grievances, <a href="https://www.amnesty.org/en/location/middle-east-and-north-africa/israel-and-occupied-palestinian-territories/report-israel-and-occupied-palestinian-territories/">which for Palestinians is the long-festering Israeli occupation of their territory.</a></p>
<p>A ceasefire and eventually an end to the structural and systemic occupation will end the conflict. It’s not the supply of extremists, but demands, that must be addressed.</p><img src="https://counter.theconversation.com/content/221105/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Junaid B. Jahangir does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Real and perceived economic grievances often fuel extremist groups like Hamas. Here’s how the economic basics of supply provide a way to tackle terrorism.Junaid B. Jahangir, Associate Professor, Economics, MacEwan UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2212632024-01-18T13:29:47Z2024-01-18T13:29:47ZWhy did Alaska Airlines Flight 1282 have a sealed-off emergency exit in the first place? The answer comes down to money<figure><img src="https://images.theconversation.com/files/569625/original/file-20240116-29-1acz42.jpg?ixlib=rb-1.1.0&rect=90%2C38%2C8536%2C5703&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The door plug area of an Alaska Airlines Boeing 737 MAX 9 aircraft awaits inspection on Jan. 10, 2024. </span> <span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/BoeingEmergencyLanding/f0eebc33866f4efd9f75429155b4d229/photo">Lindsey Wasson/AP Photo</a></span></figcaption></figure><p>The aviation industry is still in shock from a <a href="https://www.nytimes.com/2024/01/07/us/alaska-airlines-boeing-passengers.html">near disaster</a> on Jan. 5, 2024, in which a 60-pound “door plug” blew out from a nearly new Boeing 737 MAX 9 in flight at 16,000 feet, leaving a gaping hole in the fuselage. </p>
<p>In response, <a href="https://apnews.com/article/alaska-airlines-portland-oregon-emergency-landing-b522e36ff228b5ea9a89ea13ee24f597">the Federal Aviation Administration grounded</a> all 737 MAX 9 planes with such plugs, and aviation authorities in other countries have <a href="https://www.reuters.com/world/asia-pacific/indonesia-temporarily-grounds-three-boeing-737-max-9-planes-transport-ministry-2024-01-08/">followed suit</a>. </p>
<p>The industry is watching closely. </p>
<p>A lot of news coverage has emphasized the <a href="https://www.nytimes.com/2024/01/09/opinion/alaska-airlines-safety.html">impressive safety record</a> of the global airline industry, particularly since an Alaska Airlines crew managed to land the plane with no fatalities. I commend the outstanding performance of airline employees, air traffic controllers and emergency responders who achieved this impressive feat.</p>
<p>However, as a former United Airlines pilot <a href="https://som.yale.edu/faculty-research/faculty-directory/amy-fraher">now lecturing in Yale University’s School of Management</a>, I believe the wrong questions are being asked about what happened on Alaska Airlines Flight 1282. As the <a href="https://www.ntsb.gov/investigations/Pages/DCA24MA063.aspx">National Transportation Safety Board</a> and numerous <a href="https://www.kgw.com/article/news/local/airplane-plug-door-door-plugs-explainer/283-2f5d3371-fec8-409c-86e4-88658d0acd02">news outlets</a> have explained, door plugs are commonly used to seal unused exits on commercial airliners. The question we need to ask is: Why wouldn’t an airline use all of an aircraft’s emergency exits? Wouldn’t that make passengers safer?</p>
<p>It’s all about money.</p>
<h2>Safety isn’t free</h2>
<p>Airlines have lots of expenses. Some, such as <a href="https://www.iata.org/en/publications/economics/fuel-monitor">jet fuel</a>, are easier to calculate. Others, such as emergency exits, are more opaque to travelers. </p>
<p>Believe it or not, every functioning emergency exit comes at a price for an airline. Each requires routine maintenance and frequent inspections – for example, to make sure that emergency evacuation slides work properly – and flight attendants must staff emergency exits during takeoff and landing for safety reasons.</p>
<p>In other words, every working exit comes with associated costs in salaries, health benefits, pension plans, training and related expenses. Sealing off an emergency exit cuts costs.</p>
<p>But is every one of those emergency exits crucial? From the U.S. government’s perspective, not necessarily.</p>
<h2>Why you get more emergency exits in Indonesia</h2>
<p>In the U.S., airlines must comply with federal aviation regulations, which dictate aircraft maintenance procedures and in-flight personnel assignments – and minimum standards for emergency exits.</p>
<p>The issue is that Boeing sells the same airplane to different airlines with different needs.</p>
<p>Boeing notes that its 737 MAX 9 can carry up to 220 passengers, which, under U.S. regulations, requires it be built with a specific number of emergency exits. This <a href="https://www.reuters.com/graphics/ALASKAAIR-BOEING/klvydkrlopg/">dense seating configuration</a> is common among lower-cost global airlines such as Jakarta-based Lion Air.</p>
<p>However, given Americans’ desire for legroom, most U.S. carriers are equipped with considerably fewer than 220 seats – and when there are <a href="https://www.reuters.com/graphics/ALASKAAIR-BOEING/klvydkrlopg/">fewer than 190</a> seats, the rules allow fewer emergency exits to be in service. The Alaska Airlines Max 9 had just <a href="https://www.reuters.com/graphics/ALASKAAIR-BOEING/klvydkrlopg/">178 seats</a>.</p>
<p>Under these conditions, the federal rules allow air carriers to disable these exits and plug the openings. That’s precisely what happened with Alaska Airlines Flight 1282 – and how “door plug” suddenly entered the American vernacular.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/ZqVCDpF-k_0?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">A Portland-area science teacher found the missing door plug in his backyard.</span></figcaption>
</figure>
<p>Although this sort of workaround is authorized, it’s unclear to me that this is in the best interest of air safety. Wouldn’t it be better for the FAA to require that all exits are available for use in an emergency, regardless of aircraft seating capacity, even if it required some additional expense for airlines?</p>
<h2>A worrying safety record</h2>
<p>The 737 MAX is a plane of many firsts – not all of them positive.</p>
<p>The MAX is the latest addition to Boeing’s 737 family of aircraft. The 737 family has far eclipsed all rivals as the <a href="https://www.businessinsider.com/boeing-737-max-timeline-history-full-details-2019-9">most popular commercial airliner ever built</a>, with over 10,000 sold worldwide since its introduction in 1967.</p>
<p>Some carriers, such as Southwest Airlines in the United States and Ryanair in Ireland, fly only 737s; it’s a critical element of their low-cost business strategy. By flying just one type of aircraft, these airlines significantly improve scheduling flexibility while cutting maintenance and training costs.</p>
<p>That’s all to say that demand for the latest 737 was high. In 2017, when the FAA certified the 737 MAX safe for flight, Boeing <a href="https://boeing.mediaroom.com/2017-03-09-Boeing-737-MAX-8-Earns-FAA-Certification">had already received</a> more than 3,600 new orders from 83 customers. </p>
<p>But very shortly afterward, <a href="https://www.theguardian.com/business/2021/nov/11/boeing-full-responsibility-737-max-plane-crash-ethiopia-compensation">two crashes</a> that <a href="https://www.nbcnews.com/news/world/indonesia-report-finds-fatal-lion-air-jet-crash-due-boeing-n1071796">together killed 346 people</a> grounded the 737 MAX for nearly two years – another first as <a href="https://democrats-transportation.house.gov/committee-activity/boeing-737-max-investigation">the longest airline grounding in aviation history</a>. Destined to profit US$12 million on the sale of each $121 million MAX, there was <a href="https://www.businessinsider.in/heres-how-much-boeing-is-estimated-to-make-on-each-737-max-8-plane/articleshow/68399220.cms">significant incentive</a> for Boeing to press on with MAX development even though it had already proved to be a dangerously problematic aircraft design.</p>
<p>In 2020, <a href="https://www.oig.dot.gov/sites/default/files/FAA%20Boeing%20737%20MAX%20Return%20to%20Service%20Final%20Report%5E4.26.2023_revised.pdf">the FAA recertified the MAX as “safe for flight”</a>; by 2023, Boeing had logged more than 7,000 total orders for the MAX, <a href="https://www.boeing.com/commercial/orders-deliveries">far eclipsing</a> the sale of any other type of airliner. This fact alone ought to raise safety concerns. It may soon prove impossible to avoid flying on a 737 MAX, particularly in the U.S. domestic market. United, American, Southwest and Alaska airlines <a href="https://simpleflying.com/boeing-737-max-airlines/">all currently fly the MAX</a>. </p>
<p>When airplane parts and passengers’ cellphones are <a href="https://www.cbsnews.com/news/iphone-sucked-out-alaska-airlines-plane-fell-16000-feet-found-still-works/">raining from the sky</a>, it could be a sign that the industry needs to think harder about unintended costs – and consequences.</p><img src="https://counter.theconversation.com/content/221263/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Amy Fraher does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A commercial pilot turned management expert and author of ‘The Next Crash: How Short-Term Profit Seeking Trumps Airline Safety,’ explains the economics behind the near-deadly disaster.Amy Fraher, Lecturer in Management, Yale UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2194892024-01-15T20:13:26Z2024-01-15T20:13:26ZIs economic growth good for our health?<figure><img src="https://images.theconversation.com/files/569373/original/file-20240115-45156-73jxzx.jpg?ixlib=rb-1.1.0&rect=281%2C140%2C6428%2C4255&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Given how wealth contributes to health on the personal, individual level, the case for economic growth being good for us might seem intuitive.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/is-economic-growth-good-for-our-health" width="100%" height="400"></iframe>
<p>Is <a href="https://www.investopedia.com/terms/e/economicgrowth.asp">economic growth</a> good for us? Put another way, we know that growing the economy is good for business and for creating jobs. But does it help everyone in society? One way to answer this question is to explore what it does for population health. </p>
<p>Our health is one of the most important aspects of our lives, considering how it affects our everyday comfort and ability to survive. Given how wealth contributes to health <a href="https://doi.org/10.1177/0022146510383498">on the personal, individual level</a>, the case for economic growth might seem intuitive. </p>
<p>However the picture gets murkier when looking at income <em>per capita</em>, where people both rich and poor depend upon a fluctuating economy. </p>
<p>There are also problems of interpretation. Most financial advice includes the disclaimer that the past does not predict the future. The <a href="https://doi.org/10.1093/jhmas/jrr076">same may be true</a> of the relationship between growth and population health. </p>
<h2>Economics and life expectancy</h2>
<p>There is a reliable <a href="https://doi.org/10.1111/ssqu.12638"><em>historical</em> correlation</a> between economic prosperity and trends in life expectancy, which is enough for many scholars to suggest that growth is generally a good thing. However, this is not to say that we can expect continued improvements in health whenever we see economic growth. </p>
<figure class="align-center ">
<img alt="Miniature human figures walking on a bar graph" src="https://images.theconversation.com/files/569376/original/file-20240115-25-4ycpot.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/569376/original/file-20240115-25-4ycpot.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=422&fit=crop&dpr=1 600w, https://images.theconversation.com/files/569376/original/file-20240115-25-4ycpot.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=422&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/569376/original/file-20240115-25-4ycpot.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=422&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/569376/original/file-20240115-25-4ycpot.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=531&fit=crop&dpr=1 754w, https://images.theconversation.com/files/569376/original/file-20240115-25-4ycpot.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=531&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/569376/original/file-20240115-25-4ycpot.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=531&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Long-term historical trends show a very strong correlation between economic growth and increasing life expectancy.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<p><a href="https://doi.org/10.1007/s42650-023-00072-y">As I argue in a recent paper</a>, a lot of this has to do with how governments understand growth: its purpose, how to get it, what to do with it once it happens.</p>
<p>As a political sociologist and epidemiologist, I understand health as a fundamentally political problem. I am not alone in this; scholars have connected politics to population health <a href="https://doi.org/10.1093/epirev/mxp002">since ancient times</a>. Nor is this an outmoded idea. Far from it. As of the time of this writing, after searching for the terms “politics” and “health” it seems Google has stopped counting at two billion hits.</p>
<h2>Politics and economics</h2>
<p>Economic growth is also a political subject — the inevitable talking point for candidates on the campaign trail. The problem is that too many scholars have come forward with concerns that growth can be <em>bad</em> for our health. </p>
<p>A <a href="https://doi.org/10.4324/9780203994320">classic sociological study published in 1897</a> found that suicide rates spike after sudden improvements in a society’s economic prosperity. <a href="https://doi.org/10.1016/S0167-6296(03)00041-9">Similar observations</a> come a century later, linking growth with an increase in poor health outcomes. There is also evidence that economic growth <a href="https://doi.org/10.1093/bmb/ldh005">harms public health</a> when governments do not plan for it carefully. </p>
<p>And then there is the story as economists tell it. A prevailing economic theory has supported <a href="https://www.investopedia.com/ask/answers/032415/what-are-some-ways-economic-growth-can-be-achieved.asp">tax cuts, trimming budgets, deregulation and other business-friendly policies</a>, but more and more economists are <a href="https://www.nytimes.com/2009/09/06/magazine/06Economic-t.html">recognizing that these tactics</a> can harm societies and <a href="https://www.imf.org/external/pubs/ft/fandd/2016/06/ostry.htm">even pose obstacles to growth</a>. </p>
<p>How, then, can these misgivings be harmonized with the long-term historical trends, which show a very strong correlation between economic growth and increasing life expectancy? This was the question I set out to answer in my recent research.</p>
<p>The answer to whether or not economic growth improves population health seems to be, “It depends.” More precisely, it’s a <em>qualified</em> yes: economic growth promotes health in <em>some</em> respects, for <em>some</em> countries, and <em>only in conjunction with other life-saving priorities</em>. </p>
<h2>Priorities and population health</h2>
<p>Arguably, many growing societies happen to be the same ones that <a href="https://doi.org/10.1111/padr.12141">invested in education</a> and other beneficial infrastructures, which explains the correlation with health. </p>
<figure class="align-center ">
<img alt="Group of graduates standing in a row wearing caps and gowns holding diplomas" src="https://images.theconversation.com/files/569377/original/file-20240115-230384-62z6aj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/569377/original/file-20240115-230384-62z6aj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/569377/original/file-20240115-230384-62z6aj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/569377/original/file-20240115-230384-62z6aj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/569377/original/file-20240115-230384-62z6aj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/569377/original/file-20240115-230384-62z6aj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/569377/original/file-20240115-230384-62z6aj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Arguably, many growing societies happen to be the same ones that invested in education and other beneficial infrastructures, which explains the correlation with health.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<p>By the same token we cannot expect better health to come from economic growth if the pursuit of growth ends up <a href="https://doi.org/10.1016/j.socscimed.2010.04.002">increasing income inequality</a>. Nor can we expect better health after slashing budgets allocated to key priorities such as education or health care. </p>
<p>Greece, for example, learned a hard lesson about austerity when its cuts to health-care programs for drug users resulted in a <a href="https://doi.org/10.1016/S0140-6736(13)62291-6">steep increase in HIV infections</a>.</p>
<p>And then there is the issue of how health is defined. When looking beyond life expectancy, other patterns emerge. </p>
<p>Medical research has found that economic development worsens cancer rates for example. <a href="https://doi.org/10.1016/j.ecolecon.2017.11.031">One recent study</a> links economic prosperity to higher incidence of most major cancer types. The authors suspect this may be an issue of industrialization, and they have a point. The rise of modern industry came with the innovation of <a href="https://doi.org/10.1016/j.biopha.2007.10.006">innumerable toxic substances</a>, many of which are suspected carcinogens. </p>
<h2>A better way to grow</h2>
<p>Such findings prompt the question of whether there is a better way to grow. For many researchers, the answer is obvious and the case for it clear: Yes. Absolutely.</p>
<p>The takeaway here would seem to be that growth <em>can</em> be good for health. However, it should by design benefit the ordinary citizens it presumes to serve. I and other researchers (including prominent economists like <a href="https://doi.org/10.1016/S0140-6736(99)90363-X">Amartya Sen</a>) agree that systems for education, health care and welfare, which support the everyday Jane, are the very <a href="http://dx.doi.org/10.1080/1464988032000051487">engines of growth</a>. This is because they enhance workforce capability and local purchasing power. They also promote health. </p>
<p>Investing in the systems that support populations — their earnings capability, their quality of life — appear to result in both growth and health. However, neglecting these priorities may well result in neither outcome.</p><img src="https://counter.theconversation.com/content/219489/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew C. Patterson does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The historical correlation between economic prosperity and increased life expectancy might suggest that growth is generally a good thing. However, other evidence points to the downside of growth.Andrew C. Patterson, Assistant Professor of Sociology, MacEwan UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2192712023-12-20T15:23:52Z2023-12-20T15:23:52ZThis Christmas, avoid slipping cash into your children’s stockings<figure><img src="https://images.theconversation.com/files/563670/original/file-20211213-19-1sx1oes.jpg?ixlib=rb-1.1.0&rect=47%2C51%2C1443%2C884&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A gift's value goes beyond its price tag.</span> <span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Fake_one_dollar_with_Santa_Claus.jpg">Lloydoramcdowell / Wikimedia Commons</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>What toy should I buy my niece for Christmas? No easy task, since I was never an eight-year-old girl. For my brother, a bottle of whisky. But hasn’t he stopped drinking it lately? And my aunt? The Prix Goncourt of the year, as always. But I’m not sure he’s interested in the story this time.</p>
<p>For my partner, it’s easier, I know her tastes and everything she already owns. In any case, no money for either of them - possibly a gift voucher if I don’t have time to scour the shops and websites. The economics of gift-giving never cease to fascinate me.</p>
<p>In the early 1990s, they baffled a young assistant professor at Yale University, Joel Waldfogel. Intrigued by the economic theory of rational consumer choice, Waldfogel took issue with the Christmas tradition of giving something to someone else <a href="https://www.amherst.edu/media/view/104699/original/christmas.pdf">without fully knowing their preferences</a>. Had he spent 50 dollars on a present for a loved-one, he reasoned, the recipient would have likely been better qualified to direct that money toward something more suited to their taste.</p>
<p>He then asked the students on his microeconomics course to estimate the price of the gifts they recently received for Christmas, and what they would be prepared to fork out for their gifts had they not received them. One person answered that the sweatshirt they found under the tree cost €50 in the shops, but that they would have only been willing to pay €43 had they had to buy it.</p>
<h2>Gift-giving: a deadweight loss?</h2>
<p>The young teaching assistant observes a systematic difference of around 20% between the two estimates of the students interviewed. Applying this ratio to the sales figure for Christmas 1992, he deduced that the exchange of gifts resulted in a deadweight loss to society of several billion dollars. To correct this inefficient allocation of resources, he recommended giving money rather than wrapped presents - i.e. a 50 euro note rather than 7 euros wasted on a surprise sweatshirt.</p>
<p>But his economic reasoning is flawed and absurd.</p>
<p>But before I explain why, let’s note that had his reasoning been correct, the loss of wealth would be even greater today. Spending on Christmas presents has risen considerably since the early 1990s. China and its low-cost production have been there.</p>
<p>Take toys, for example. The Middle Kingdom accounts for <a href="https://www.economist.com/graphic-detail/2017/12/25/china-is-still-a-toy-manufacturing-powerhouse">around three quarters of global production</a>.</p>
<p>All the companies in the rest of the world source their supplies or manufacture there. Even <a href="https://theconversation.com/economie-du-jouet-le-jeu-de-lego-52608">Lego ended up building a factory there</a>. European consumers appreciate this, having seen the price of toys steeply fall over the past decades. </p>
<p><iframe id="REZaV" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/REZaV/1/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>At the same time as this unit decline, the budget allocated to Christmas presents is steadily increasing. In the United States, spending per household has increased by almost <a href="https://think.ing.com/reports/special-report-presents-of-mind-christmas-2016/">40% over the last 30 years</a>. Some people have a problem with this spending spree. Two out of ten Americans say they went into debt for Christmas. And just over one in two say it’s the time of year when they don’t have to worry about spending money. The same may be true for you. In any case, marketing experts and salespeople know this, and they’re having a field day trying to get us to spend money at this time of the year.</p>
<p>Had Waldfogel been right when he calculated that one-fifth of Christmas gift spending goes up in smoke, the bill - or rather the subtraction - would be even higher today. But there’s no need to worry because, as announced above, he’s wrong.</p>
<h2>Reciprocity</h2>
<p>Intuitively, this won’t surprise you. Imagine giving your partner money under the Christmas tree rather than a present. They’re unlikely to react any more positively than they would to a beautifully wrapped present. The same goes for the friend who has invited you to New Year’s Eve dinner, when you hand them a 10 or 20 euro note on the doorstep instead of a bottle of wine or a bouquet of flowers!</p>
<p>And Christmas presents are usually reciprocal. Imagine an exchange of envelopes between spouses, each containing 50 euros. Great, the two gifts cancel each other out! Note that the situation would undoubtedly be even trickier if one put far fewer notes in one’s envelope than the other.</p>
<p>Modern-day economists make no mistake. In 2013, nearly fifty of them, most of them teaching at Chicago, Harvard, MIT, Stanford and Berkeley, had been asked to respond to the following <a href="https://www.igmchicago.org/surveys/bah-humbug/">proposal</a>:</p>
<blockquote>
<p>“Giving specific gifts as party favours is inefficient because recipients could satisfy their preferences much better with cash.</p>
</blockquote>
<p>Only a small minority agreed. As for the seven winners of the "Nobel” prize for economics questioned in the group, they were unanimously against.</p>
<p>Anthropologists would surely have been even more unanimous. As keen <a href="https://journals.openedition.org/lectures/520">observers of giving</a> in traditional and modern societies, they know more about this complex subject than anyone else. They can only denounce the reductionism of Joel Waldfogel. But by looking to economics for a rebuttal, we can brush up our knowledge of consumer theory.</p>
<p>The loss between the gift of a wrapped present and the gift of money has its origins in the now outmoded model of a consumer who chooses what they buy in a perfectly rational way: they know their own preferences intimately and calculate, for all goods and on the basis of their means, what would maximise their pleasure, or utility, as the economists would say. Like <em>Homo œconomicus</em>, they are therefore unbeatable in their choice of purchases.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/437177/original/file-20211213-21-1twe7l5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/437177/original/file-20211213-21-1twe7l5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=391&fit=crop&dpr=1 600w, https://images.theconversation.com/files/437177/original/file-20211213-21-1twe7l5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=391&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/437177/original/file-20211213-21-1twe7l5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=391&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/437177/original/file-20211213-21-1twe7l5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=491&fit=crop&dpr=1 754w, https://images.theconversation.com/files/437177/original/file-20211213-21-1twe7l5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=491&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/437177/original/file-20211213-21-1twe7l5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=491&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Christmas presents are usually reciprocated.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/vintagehalloweencollector/2084765580/">Dave/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>Joel Waldfogel’s merit would then have lay in being the first to measure to what extent the person who chooses instead of the consumer is beaten. Except that his approach isn’t strictly orthodox. In the eyes of a purist, he is committing a sin: he is capturing utility through a monetary measure and comparing utility between people. In a way, this amounts to making money the universal instrument for measuring pleasure, and a dollar for the giver is worth as much as a dollar for the receiver, even though the former may be richer than the latter, or vice versa; something that is contested by theorists.</p>
<h2>The pleasure of giving</h2>
<p>Moreover, the <a href="https://www.nber.org/system/files/working_papers/w18687/w18687.pdf">theoretical model of the consumer</a> has shifted away from perfect rationality and is currently seeking to integrate the affects (feelings and emotions) and motivations (family devotion, altruism, socialisation, etc.) that guide its choices. The wrapped gift can therefore be appreciated as a signal of the giver’s attachment, because they have thought about it and <a href="https://sites.duke.edu/djepapers/files/2016/10/Yao.pdf">spent time choosing it</a>, or even because it simply provides a few minutes spent discovering a surprise, the time it takes to remove the ribbon and open the package.</p>
<p>In short, there’s more to a gift than its monetary value. What’s more, as soon as the question put to the students is no longer to estimate the price of the gift received, telling them to leave out the sentimental value, but to ask about its total value, understood as its material value plus its sentimental value, a <a href="https://www.jstor.org/stable/pdf/116876.pdf">gain rather than a loss</a> appears.</p>
<p>Strictly speaking, the donor’s satisfaction should also be taken into account. Isn’t it said that the pleasure of giving is often greater than the pleasure of receiving? The consumption of the gift received can also give rise to a <a href="https://www.jstor.org/stable/pdf/116876.pdf">positive feedback effect</a>, such as the smile and thanks of the recipient. </p>
<h2>Our relationship to gifts in practice</h2>
<p>After these considerations on how we should and could behave with our Christmas presents, it might be time to take a look at what happens in practice. What do the polls and surveys say?</p>
<p>Firstly, the vast majority of gift-givers are satisfied with the presents they receive. In Europe, only one <a href="https://think.ing.com/reports/special-report-presents-of-mind-christmas-2016/">in seven has received a gift they don’t appreciate</a>, with France having the highest proportion. Donors are therefore quite right. Some may have been helped by suggestions from the friends and family of the person they wanted to give a present to. Or even by asking them directly what they want for Christmas!</p>
<p>Secondly, the gift of money is very much in the minority – one person in 10 receives one among all their gifts. The gift card still far outstrips it. It avoids giving a soulless cheque or notes and reduces the chances of a specific gift being disliked. But it shifts the burden of going to the shop, whether brick and mortar or online, onto the recipient. According to one consumer association, an American spends about <a href="https://www.consumerreports.org/cro/news/2010/11/americans-spend-42-hours-each-on-holiday-shopping-and-partying/index.htm">fifteen hours shopping plus three hours wrapping</a> gifts.</p>
<p>Lastly, gifts that don’t appeal have all sorts of fates. They usually end up at the bottom of a cupboard or drawer, but are sometimes thrown away with the wrapping paper. </p>
<p>To avoid waste, gifts can be passed on, exchanged in a shop, or donated to charity.
Given the commercial scale of the Christmas season and the avalanche of gifts it triggers, we may also be tempted to return to a more sober tradition of giving to others. Many charities accept gifts for redistribution.</p>
<p>You can donate any of the gifts you have received that you don’t like or that you already have. You can also donate a gift that you like, but that would be more pleasing or even more useful to others: this would be no more an economic heresy than sending a cheque or transferring money to a charity.</p><img src="https://counter.theconversation.com/content/219271/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>François Lévêque ne travaille pas, ne conseille pas, ne possède pas de parts, ne reçoit pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'a déclaré aucune autre affiliation que son organisme de recherche.</span></em></p>From an economic viewpoint, the idea may initially appeal by appearing to maximise the economic utility of the receiver. But it suffers from fundamental flaws.François Lévêque, Professeur d’économie, Mines ParisLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2197762023-12-14T13:11:05Z2023-12-14T13:11:05Z4 business lessons from the Boston Tea Party<p>December 2023 marks the <a href="https://www.history.com/topics/american-revolution/boston-tea-party">250th anniversary of the Boston Tea Party</a>, one of the most famous events leading up to the Revolutionary War. On the night of Dec. 16, 1773, Colonists marched aboard <a href="https://nha.org/research/nantucket-history/history-topics/ships-of-the-boston-tea-party-eleanor-beaver-and-dartmouth/">three ships</a> and threw <a href="https://boston1775.blogspot.com/2009/12/how-much-tea-was-destroyed-in-boston.html">more than 90,000 pounds</a> of tea into Boston Harbor. No one died, and the only things injured were the tea leaves, but <a href="https://www.nps.gov/articles/000/boston-tea-party-in-real-time.htm">this event</a> helped precipitate a <a href="https://www.nps.gov/subjects/americanrevolution/index.htm">major war</a>.</p>
<p><a href="https://www.linkedin.com/in/jay-zagorsky-58a90825a/">I am</a> a <a href="https://www.bu.edu/questrom/">business school</a> professor who often drives by the <a href="https://www.bostonteapartyship.com/">Tea Party site</a> while taking his wife to work. Each time, I ponder the lessons this “party” has for people in business. Many aren’t obvious. Here are four that come to mind.</p>
<h2>1) Publicity is important</h2>
<p>There were <a href="https://www.csmonitor.com/Books/2012/0125/Beyond-Boston-9-tea-parties-you-probably-haven-t-heard-about/The-Philadelphia-Tea-Party">actually 10</a> “tea party” protests across the 13 Colonies in the late 1770s. However, only one ended up in the history books. The others, including a <a href="http://www.boston-tea-party.org/parties-summary.html">second one in Boston</a> just four months afterward, were largely forgotten. Getting the word out fast, which in those days was <a href="https://www.masshist.org/database/viewer.php?pid=2&old=1&mode=nav&ft=Coming%20of%20the%20American%20Revolution&item_id=442">done by newspaper</a>, is key. Otherwise, you can do a lot of work that will be ignored.</p>
<h2>2) Dramatic changes in the market can cause problems</h2>
<p>The volume of tea imports into the Colonies rose at a very fast rate in the four years leading up to the Boston Tea Party. They went from <a href="https://www2.census.gov/library/publications/1975/compendia/hist_stats_colonial-1970/hist_stats_colonial-1970p2-chZ.pdf">55 tons in 1770</a>, which was close to the amount dumped in the harbor, to 370 tons the year the tea was dumped. This was an increase of almost seven times. The population of the Colonies was about <a href="https://web.viu.ca/davies/H320/population.colonies.htm">2 million people in 1770</a> and didn’t expand much in that four-year period. <a href="http://businessmacroeconomics.com/">Basic economics tells us</a> this dramatic increase in supply without more customers meant the price of tea had to fall a lot.</p>
<p>We don’t know for sure the <a href="https://boston1775.blogspot.com/2006/12/who-threw-tea-into-boston-harbor.html">identities of the ringleaders</a> who convinced people to dump the tea. As a business school professor, I believe it’s clear that some protesters were <a href="https://www.history.com/news/10-things-you-may-not-know-about-the-boston-tea-party">protecting their commercial interests</a>. Shopkeepers, merchants and <a href="http://doi.org/10.1353/eam.2012.0014">smugglers who had stocks of tea</a> on hand didn’t want to see 90,000 more pounds of tea flooding the market. It would make them lose money. Dumping the tea in the harbor was a way of protecting their investment.</p>
<h2>3) Even relatively small dollar amounts make big impressions</h2>
<p>For all the fuss about the tea that was dumped, the damages weren’t huge. The British East India Company reported <a href="https://www.bostonteapartyship.com/boston-tea-party-damage">9,659 English pounds in damages</a>. That would be about 1.2 million pounds in today’s money, according to the <a href="https://www.bankofengland.co.uk/monetary-policy/inflation/inflation-calculator">Bank of England’s inflation calculator</a>. Using the current exchange rate of $1.26 to a British pound means the tea dumped cost about US$1.5 million.</p>
<p>To give you a rough idea of how small this is, last year the <a href="https://dataweb.usitc.gov/">U.S. imported</a> half a billion dollars’ worth of tea. In terms of my favorite British import, the destroyed tea was worth about the same price as three <a href="https://www.holmanmotorcars.com/rolls-royce-price-list/">Rolls-Royce Phantoms</a>.</p>
<h2>4) Timing matters … but it isn’t everything</h2>
<p>The Tea Party happened on a night when the <a href="https://allthingsliberty.com/2015/03/tides-and-tonnage-a-different-take-on-the-boston-tea-party/">tide was especially low</a>, with only 2 feet of water under the ships. Because the tide was so low, much of the tea didn’t get wet. Instead, it ended up in a giant pile, mostly dry, beside the boats. This meant the partygoers had to climb out of the boats and spend hours sloshing in the mud moving the tea into the water. </p>
<p>Given that the <a href="https://historyofmassachusetts.org/boston-tea-party-timeline/">tea arrived at the end of November</a>, they could have picked a time that would have made the job less difficult. Nonetheless, the revolutionaries weren’t deterred, since hard work can often overcome the worst timing.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/VF5DWOCZ7HY?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">The Tea Act of 1773 helped set the stage for the Revolutionary War.</span></figcaption>
</figure>
<p>When it comes down to it, history is more than just stories we tell children. The past contains many lessons for adults, including businesspeople. This incident, which played a key role in inciting the Revolutionary War that freed the American Colonies from British rule, is so much more than a <a href="https://www.cartoonstock.com/cartoon?searchID=CS202967">cartoon image of men dumping</a> chests of tea into Boston Harbor.</p><img src="https://counter.theconversation.com/content/219776/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jay L. Zagorsky does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Two and a half centuries later, some things haven’t changed.Jay L. Zagorsky, Clinical Associate Professor of Markets, Public Policy and Law, Boston UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2191062023-12-06T19:41:29Z2023-12-06T19:41:29ZOh, Christmas tree: The economics of the US holiday tree industry<figure><img src="https://images.theconversation.com/files/563205/original/file-20231204-25-2rftik.jpg?ixlib=rb-1.1.0&rect=114%2C131%2C5316%2C3473&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Peace, joy and profit margins: Retailers sell Christmas trees at a markup of up to 500%.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/christmas-trees-in-a-market-royalty-free-image/1793034096?phrase=christmas+tree+lot&searchscope=image%2Cfilm&adppopup=true">Iuliia Bondar/Getty Images Plus</a></span></figcaption></figure><p>Christmas today is a big business, and one part of that is the multibillion-dollar business of selling Christmas trees. The U.S. Christmas tree industry is so large, it even has two dueling trade groups: <a href="https://realchristmastrees.org/">one that supports natural trees</a> and <a href="https://www.christmastreeassociation.org/">the other, artificial</a>.</p>
<p><a href="https://www.bu.edu/questrom/profile/patrick-abouchalache/">We are</a> two <a href="https://www.bu.edu/questrom/">business school</a> professors whose students asked us to explain the <a href="http://businessmacroeconomics.com/">economic impact</a> of the winter holidays. In the holiday spirit of sharing, we’re giving you some facts to discuss while trimming your tree.</p>
<h2>Where to buy a natural Christmas tree – or chop one down yourself</h2>
<p>There are three different ways to get a natural Christmas tree.</p>
<p>First, you can go into a national forest and chop down your own. Relatively few Americans do this, even though a permit costs <a href="https://6abc.com/how-to-buy-christmas-tree-for-cheap-national-forest/14089613/">$10 or less</a>, because <a href="https://www.recreation.gov/tree-permits">government rules</a> require that the tree you chop must be <a href="https://www.fs.usda.gov/visit/know-before-you-go/tree-cutting">more than 200 feet from</a> any road, campground or recreation area. Since dragging a tree destroys its branches and needles, the 200-foot rule means that large, heavy trees have to be carried a fair distance through often snowy woods. </p>
<p>Your second option is to buy or chop down a tree at a local Christmas tree farm. Christmas tree farms got a big promotional boost when <a href="https://www.billboard.com/music/pop/christmas-tree-farm-taylor-swift-quotes-growing-up-8545619/">Taylor Swift revealed she grew up on one</a>, but she’s hardly alone: There are <a href="https://www.nass.usda.gov/Publications/AgCensus/2017/Online_Resources/Census_of_Horticulture_Specialties/hortic_1_0015_0017.pdf">nearly 3,000 Christmas tree farms</a> across the U.S., according to the Department of Agriculture’s most recent figures. These farms sell around 12 million trees a year.</p>
<p>While being a Christmas tree farmer sounds idyllic, <a href="https://ambrook.com/research/farm-finance/christmas-tree-grower-profits">it isn’t very profitable</a>, since Christmas trees take <a href="https://www.vox.com/the-goods/22159808/christmas-trees-farm-farmer-how-long-grow">over a decade to grow</a> large enough to sell. Long lead times combined with <a href="https://climate.nasa.gov/what-is-climate-change/">changing and unpredictable weather</a> have pushed many of these farms out of business. <a href="https://agcensus.library.cornell.edu/wp-content/uploads/2012-Census-of-Horticultural-Specialties-hortic_1_016_018.pdf">Almost 500 U.S. Christmas tree farms shuttered</a> between 2014 and 2019, the USDA found.</p>
<p>The third way to buy a tree is from a local retailer that imports trees. In 2022, the <a href="https://dataweb.usitc.gov/">U.S. imported</a> almost 3 million natural Christmas trees, <a href="https://canadianchristmastrees.ca/">primarily from Canada</a>. Imports have been growing steadily: In 2014, the U.S. imported only half as many trees.</p>
<p>Together, this means that in 2022, roughly 15 million locally grown or imported natural trees were sold in the country. </p>
<p>Some people like to buy their trees from a nonprofit, like <a href="https://boyscouttreesale.com/">the Boy Scouts</a>. <a href="https://startchristmastreefundraising.com/">These fundraisers</a> are also supplied from local Christmas tree farms or imports.</p>
<h2>An artificial tree’s journey from China to your living room</h2>
<p><a href="https://www.businessinsider.com/how-fake-christmas-trees-made-artificial-science-channel-2018-12">Artificial trees are popular</a> with people who don’t like the <a href="https://www.sfgate.com/homeandgarden/article/Artificial-trees-growing-more-lifelike-No-muss-2588489.php">mess and fuss of natural trees</a>. Replica trees <a href="https://www.vice.com/en/article/n7jjvd/yiwu-industrial-city-china-makes-most-fake-christmas-trees">primarily come from China</a>, and most are made in the Chinese <a href="https://www.chinadaily.com.cn/a/201712/13/WS5a306a7da3108bc8c672b104.html">city of Yiwu</a>. The <a href="https://www.wita.org/blogs/christmas-tariffed-imports/">U.S. imported</a> over 20 million artificial trees in 2022 alone.</p>
<p>And they’re becoming increasingly common. In 2014, the U.S. imported 11 million artificial trees and sold almost 22 million natural trees. This means that back in 2014, almost two real trees were purchased for every artificial one. A decade later, natural tree sales had fallen to around 15 million, but over 20 million artificial trees were imported.</p>
<p>One result of the shift to replica trees is a reduction in house fires. Natural trees that <a href="https://www.homedepot.com/c/ah/how-to-water-a-christmas-tree/9ba683603be9fa5395fab9023ce855f">aren’t watered dry out</a> and sometimes catch on fire. In 1980, the U.S. saw <a href="https://content.nfpa.org/-/media/Project/Storefront/Catalog/Files/Research/NFPA-Research/US-Fire-Problem/Fire-causes/osChristmasTreeTables.pdf">about 850 Christmas tree fires that caused 80 people</a> to be injured. Four decades later, the number of annual fires fell to 180, with only eight injuries.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/563178/original/file-20231204-19-ufc72g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="In a store, a sign in the shape of a Christmas tree ornament reads 'All trees on sale.'" src="https://images.theconversation.com/files/563178/original/file-20231204-19-ufc72g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/563178/original/file-20231204-19-ufc72g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/563178/original/file-20231204-19-ufc72g.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/563178/original/file-20231204-19-ufc72g.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/563178/original/file-20231204-19-ufc72g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/563178/original/file-20231204-19-ufc72g.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/563178/original/file-20231204-19-ufc72g.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Welcome news for shoppers.</span>
<span class="attribution"><span class="source">Patrick Abouchalache</span></span>
</figcaption>
</figure>
<h2>Why Christmas trees are so expensive</h2>
<p>Some people get sticker shock when they see how much Christmas trees cost. Those shocking prices don’t come from the wholesale level. Last year, wholesalers importing entire shipping containers paid $22 for each artificial tree, on average, <a href="https://www.usitc.gov/">according to U.S. government statistics</a>. Importers of natural trees paid roughly the same price. Together, artificial and natural importers paid over a half billion dollars for trees to sell in 2022.</p>
<p>Unfortunately, there are no official statistics on how much Americans pay for Christmas trees at the retail level. There’s a general consensus that <a href="https://www.nbcbayarea.com/entertainment/holidays/real-or-fake-heres-what-to-consider-when-buying-a-christmas-tree-this-year-2/3088823/">artificial trees cost more than natural trees</a>, but the extra money may be worth it because they last more than one season. </p>
<p>Consumer surveys by the two competing trade groups suggest that people paid <a href="https://realchristmastrees.org/2023/11/02/what-ncta-wants-everyone-to-know-about-the-farm-grown-christmas-tree-supply-for-2023/">in the range of $80</a> <a href="https://www.newsweek.com/christmas-tree-costs-rising-2023-1846851">to $100</a> for their trees in 2022. This means <a href="https://www.uschamber.com/co/start/strategy/what-are-pricing-markups">the markup</a> on Christmas trees is around 400% to 500%. That’s about the same as <a href="https://dailyinfographic.com/highest-markup-products">a pair of designer jeans or a drink from a hotel minibar</a>.</p>
<p>Multiplying the $80 to $100 price by the 15 million natural trees and 20 million artificial trees sold in 2022 means Christmas trees are roughly a $3 billion business annually — without including any extra money spent on the decorations.</p>
<p>So, with so many options, how do you settle on which sort of tree to buy? Price, <a href="https://theconversation.com/real-or-artificial-a-forestry-scientist-explains-how-to-choose-the-most-sustainable-christmas-tree-no-matter-what-its-made-of-219082">environmental factors</a>, convenience and even allergies are all important factors to consider. There’s no easy answer. One of us can’t decide and has multiple trees, ranging from a 12-inch artificial tree handed down from his grandmother to a 7-foot-tall natural Fraser fir purchased at his local Christmas tree farm.</p>
<p>Whatever you decide – natural, artificial, both or no tree at all – just remember to add a dash of cheer to your winter celebration. After all, the best things about the season are free.</p><img src="https://counter.theconversation.com/content/219106/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The spirit of the season is free, but that tree is going to cost you.Jay L. Zagorsky, Clinical Associate Professor of Markets, Public Policy and Law, Boston UniversityPatrick Abouchalache, Lecturer in Strategy and Innovation, Boston UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2184142023-12-02T09:16:18Z2023-12-02T09:16:18Z7 food and agriculture innovations needed to protect the climate and feed a rapidly growing world<figure><img src="https://images.theconversation.com/files/562358/original/file-20231129-21-s1jmd4.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C2048%2C1364&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Managing methane from belching cattle is a top innovation priority.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/usdagov/48685288911">Lance Cheung/USDA</a></span></figcaption></figure><p>For the first time ever, food and agriculture took center stage at the annual United Nations climate conference in 2023. <a href="https://www.cop28.com/en/food-and-agriculture">More than 150 countries</a> signed <a href="https://data.consilium.europa.eu/doc/document/ST-15436-2023-INIT/en/pdf">a declaration, committing</a> to make their food systems – everything from production to consumption – a focal point in national strategies to address climate change.</p>
<p>While the declaration is thin on concrete actions to adapt to climate change and reduce emissions, it draws attention to a crucial issue.</p>
<p>The global food supply is increasingly facing disruptions from extreme heat and storms. It is also a major contributor to climate change, responsible for <a href="https://doi.org/10.1038/s43016-021-00225-9">one-third of all greenhouse gas emissions</a> from human activities. This tension is why agriculture innovation is increasingly being elevated in international climate discussions.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/562368/original/file-20231129-17-5px7h6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Women farmers work as rain falls from a storm cloud." src="https://images.theconversation.com/files/562368/original/file-20231129-17-5px7h6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/562368/original/file-20231129-17-5px7h6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=339&fit=crop&dpr=1 600w, https://images.theconversation.com/files/562368/original/file-20231129-17-5px7h6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=339&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/562368/original/file-20231129-17-5px7h6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=339&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/562368/original/file-20231129-17-5px7h6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=426&fit=crop&dpr=1 754w, https://images.theconversation.com/files/562368/original/file-20231129-17-5px7h6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=426&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/562368/original/file-20231129-17-5px7h6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=426&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Farmers work in a field during monsoon rains in Madhya Pradesh, India.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/tataimitra/9421742217">Rajarshi Mitra via Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
</figcaption>
</figure>
<p>At present, agriculture provides enough food for the world’s 8 billion people, although many do not have adequate access. But to feed a global population of 10 billion in 2050, croplands would need to expand by <a href="https://research.wri.org/sites/default/files/2019-07/D_REP_Food_Course2_web.pdf">660,000 to 1.2 million square miles</a> (171 million to 301 million hectare) relative to 2010. That would <a href="https://theconversation.com/the-great-amazon-land-grab-how-brazils-government-is-clearing-the-way-for-deforestation-173416">lead to more deforestation</a>, which contributes to climate change. Further, some practices widely relied on to produce sufficient food, such as using <a href="https://doi.org/10.1007/s12518-023-00511-0">synthetic fertilizers</a>, also contribute to climate change.</p>
<p>Simply eliminating deforestation and these practices without alternative solutions would decrease the world’s food supply and farmers’ incomes. Fortunately, innovations are emerging that can help.</p>
<p>In a <a href="http://innovationcommission.uchicago.edu/">report released Dec. 2</a>, the <a href="https://innovationcommission.uchicago.edu/">Innovation Commission for Climate Change, Food Security and Agriculture</a>, founded by Nobel-winning economist <a href="https://innovationcommission.uchicago.edu/team/">Michael Kremer</a>, identifies seven priority areas for innovation that can help ensure sufficient food production, minimize greenhouse gas emissions and be scaled up to reach hundreds of millions of people.</p>
<p>I’m an <a href="https://keough.nd.edu/people/paul-winters/">agriculture economist</a> and executive director for the commission. Three innovations in particular stand out for their ability to scale up quickly and pay off economically.</p>
<h2>Accurate, accessible weather forecasts</h2>
<p>With extreme weather leaving crops increasingly vulnerable and farmers struggling to adapt, accurate weather forecasts are crucial. Farmers need to know what to expect, both in the days ahead and farther out, to <a href="https://doi.org/10.1093/rfs/hhw080">make strategic decisions</a> about planting, irrigating, fertilizing and harvesting.</p>
<p>Yet access to accurate, detailed forecasts is <a href="https://doi.org/10.3386/w25894">rare for farmers</a> in many low- and middle-income countries.</p>
<p>Our assessment shows that investing in technology to collect data and make forecasts widely available – such as by radio, text message or WhatsApp – can pay off many times over for economies.</p>
<figure class="align-center ">
<img alt="A man stands in a rice field in Mozambique after a storm." src="https://images.theconversation.com/files/562475/original/file-20231129-23-p7hdej.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/562475/original/file-20231129-23-p7hdej.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/562475/original/file-20231129-23-p7hdej.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/562475/original/file-20231129-23-p7hdej.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/562475/original/file-20231129-23-p7hdej.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/562475/original/file-20231129-23-p7hdej.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/562475/original/file-20231129-23-p7hdej.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Forecasts by text message can help farmers prepare for extreme weather and time their planting and harvesting.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/xavier-paulino-tapera-a-subsistence-farmer-surveys-his-rice-news-photo/1132140855?adppopup=true">Wikus de Wet/AFP via Getty Images</a></span>
</figcaption>
</figure>
<p>For example, accurate state-level forecasts of seasonal monsoon rainfall totals would help Indian farmers optimize sowing and planting times, providing an estimated <a href="https://doi.org/10.3386/w25894">US$3 billion in benefits</a> over five years – at a cost of around $5 million.</p>
<p>If farmers in Benin received accurate <a href="https://doi.org/10.1016/j.worlddev.2022.106178">forecasts by text message</a>, we estimate that they could save each farmer $110 to $356 per year, a large amount in that country.</p>
<p>More sharing of information among neighboring countries, using platforms like the World Meteorological Organization’s <a href="https://wmo.int/site/global-framework-climate-services-gfcs">Climate Services Information System</a>, could also improve forecasts.</p>
<h2>Microbial fertilizers</h2>
<p>Another innovation priority involves expanding the use of <a href="https://theconversation.com/to-restore-our-soils-feed-the-microbes-79616">microbial fertilizers</a>.</p>
<p><a href="https://theconversation.com/fertilizer-prices-are-soaring-and-thats-an-opportunity-to-promote-more-sustainable-ways-of-growing-crops-183418">Nitrogen fertilizer</a> is widely used to increase crop yields, but it is typically made from natural gas and is a <a href="https://doi.org/10.1038/s41598-022-18773-w">major source of greenhouse gas emissions</a>. Microbial fertilizers use bacteria to help plants and soil absorb the nutrients they need, thereby <a href="https://www.reuters.com/business/environment/farmers-test-microbes-nourish-crops-climate-pressure-grows-costs-rise-2022-02-03/">reducing the amount of nitrogen fertilizer needed</a>.</p>
<p>Studies have <a href="https://doi.org/10.3389/fpls.2017.02204">found that microbial fertilizers could increase legume yields</a> by 10% to 30% in healthy soil and generate billions of dollars in benefits. Other microbial fertilizers work with corn, and scientists are working on more advancements.</p>
<p>Soybean farmers in Brazil have been <a href="https://doi.org/10.1007/s42770-021-00618-9">using a rhizobia-based microbial fertilizer</a> for decades to improve their yields and cut synthetic fertilizer costs. But this technique is not as widely known elsewhere. Scaling it up will require funding to expand testing to more countries, but it has great potential payoff for farmers, soil health and the climate.</p>
<h2>Reducing methane from livestock</h2>
<p>A third innovation priority is livestock, the source of <a href="https://www.fao.org/3/cb1922en/cb1922en.pdf">roughly two-thirds</a> of agriculture’s greenhouse gas emissions. With demand for beef projected to <a href="https://doi.org/10.1016/C2014-0-03542-3">rise 80% by 2050</a> as low- and middle-income countries grow wealthier, reducing those emissions is essential.</p>
<p>Several innovative methods for reducing livestock methane emissions target enteric fermentation, which leads to methane belches.</p>
<p>Adding algae, <a href="https://theconversation.com/feeding-cows-a-few-ounces-of-seaweed-daily-could-sharply-reduce-their-contribution-to-climate-change-157192">seaweed</a>, lipids, tannins or certain synthetic compounds to cattle feed can <a href="https://doi.org/10.1071/AN20295">change the chemical reactions</a> that generate methane during digestion. Studies have found some techniques have the potential to reduce methane emissions by a quarter to nearly 100 percent. When cattle produce less methane, they also waste less energy, which can <a href="https://doi.org/10.3389/fanim.2021.641590">go into growth</a> and <a href="https://doi.org/10.3168/jds.2020-18908">milk production</a>, providing a boost for farmers.</p>
<p>The method is still expensive, but further development and private investment could help scale it up and lower the cost. </p>
<p>Gene editing, either of livestock or the <a href="https://doi.org/10.1038/s41564-021-01014-7">microorganisms in their stomachs</a>, could also someday hold potential.</p>
<h2>Scaling up agriculture innovation</h2>
<p>The Innovation Commission also identified <a href="http://innovationcommission.uchicago.edu/">four other priorities for innovation</a>:</p>
<ul>
<li><p>Helping farmers and communities implement better rainwater harvesting.</p></li>
<li><p>Lowering the cost of <a href="https://theconversation.com/3-ways-ai-can-help-farmers-tackle-the-challenges-of-modern-agriculture-213210">digital agriculture</a> that can help farmers use irrigation, fertilizer and pesticides most efficiently.</p></li>
<li><p>Encouraging production of alternative proteins to reduce demand for livestock.</p></li>
<li><p>Providing insurance and other social protections to help farmers recover from extreme weather events.</p></li>
</ul>
<p>While promising agricultural innovations exist, commercial incentives to develop and scale them up have fallen short, leading to underinvestment, particularly in low- and middle-income countries.</p>
<figure class="align-center ">
<img alt="A man flies drones to spread fertilizer on a field in Kenya." src="https://images.theconversation.com/files/562476/original/file-20231129-28-dk66ce.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/562476/original/file-20231129-28-dk66ce.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/562476/original/file-20231129-28-dk66ce.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/562476/original/file-20231129-28-dk66ce.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/562476/original/file-20231129-28-dk66ce.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/562476/original/file-20231129-28-dk66ce.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/562476/original/file-20231129-28-dk66ce.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Providing farmers with information and technology that can increase their resource efficiency are common themes in agriculture innovation.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/kenya-airways-employee-controls-an-unmanned-aerial-vehicle-news-photo/1244138316">Patrick Meinhardt/AFP via Getty Images</a></span>
</figcaption>
</figure>
<p>However, innovation funding <a href="https://fastercapital.com/content/Investing-in-the-Future--Why-Social-Innovation-Startups-Are-Attracting-Funding.html">has a track record</a> of generating very high social rates of return. This creates an opportunity for public and philanthropic investment in developing and deploying innovations at a scale to reach hundreds of millions of people. Of course, to be effective, any potential innovation must be consistent with – and driven by – national strategies and planned in conjunction with the government, the private sector and civil society.</p>
<p>Two decades ago, global leaders, frustrated that lifesaving vaccines were not reaching hundreds of millions of people who needed them, <a href="https://www.who.int/europe/about-us/partnerships/partners/global-health-partnerships/gavi-alliance">created Gavi, The Vaccine Alliance</a>. They invested billions of dollars to scale up these innovations, helped to immunize over 1 billion children and halved child mortality in 78 lower-income countries.</p>
<p>This year, officials at COP28 are aiming for a similar global response to climate change, food security and agriculture.</p>
<p><em>This article, originally published Dec. 2, has been updated with the declaration’s signatory count as of Dec. 12.</em></p><img src="https://counter.theconversation.com/content/218414/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul Winters receives funding from the Bill and Melinda Gates Foundation for the work on the Innovation Commission for Climate Change, Food Security and Agriculture. He is Executive Director of the Innovation Commission for Climate Change, Food Security and Agriculture based out of the Development Innovation Lab at the University of Chicago. He also is providing unpaid technical support to the COP28 Presidency Food System Initiative around the Innovation Pillar.</span></em></p>Food systems are increasingly disrupted by climate disasters, while also being a major contributor to climate change. World leaders at COP28 vowed to do something about it.Paul Winters, Professor of Global Affairs, University of Notre DameLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2130502023-11-29T13:40:27Z2023-11-29T13:40:27ZThere’s a financial literacy gender gap − and older women are eager for education that meets their needs<figure><img src="https://images.theconversation.com/files/557150/original/file-20231101-21-xv252p.jpg?ixlib=rb-1.1.0&rect=18%2C9%2C6211%2C4128&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Knowledge is power − especially where money is concerned.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/senior-woman-using-calculator-while-going-through-royalty-free-image/1672859584">Rockaa/E+/Getty Images</a></span></figcaption></figure><p>Every day, families across the U.S. have to make difficult decisions about budgeting, spending, insurance, investments, savings, retirement and on and on. When faced with these choices, financial literacy – that is, knowing how to make informed decisions about money – is key.</p>
<p>Yet, Americans in general <a href="https://gflec.org/wp-content/uploads/2021/10/TIAA-Institute_GFLEC_P-Fin-Index-Finacial-literacy-and-wellbeing-in-a-five-generation-America_TI_Yakoboski_October-2021.pdf">aren’t very financially literate</a>. And recent research suggests <a href="https://helpageusa.org/wp-content/uploads/2023/06/Report-V3-updated.pdf">women are less financially literate than men</a>, regardless of their schooling, income or marital status.</p>
<p>As a <a href="https://cesr.usc.edu/people/staff/lilarabi">social scientist</a> who studies aging and the social safety net, I recently took part in a large analysis of older women’s financial literacy. My team and I found that men’s financial literacy scores were 25% higher than women’s on average, even though the two groups showed no difference in math skills or overall cognitive ability. </p>
<p>Black and Hispanic women saw an even greater financial literacy gender gap, with scores that were, on average, 40% to 45% lower than those of white, non-Hispanic men.</p>
<h2>Why financial literacy matters later in life</h2>
<p>This gap is a big problem, especially as women approach older age. Because they tend to live longer – almost <a href="https://doi.org/10.1001/jamainternmed.2023.6041">six years</a> more than men, according to the latest figures – and <a href="https://www.nber.org/system/files/working_papers/w24429/w24429.pdf">leave the workforce earlier</a>, women face longer retirements. </p>
<p>And when they reach retirement age, women often have <a href="https://www.gao.gov/blog/growing-disparities-retirement-account-savings">inadequate savings</a>, in part because they face more <a href="https://eric.ed.gov/?id=EJ1232354">family-related career interruptions</a> and are concentrated in <a href="https://www.bls.gov/opub/mlr/2000/09/art3full.pdf">lower-paying jobs</a>.</p>
<p>Consider that in 2020, women who worked full time earned a median of <a href="https://www.bls.gov/opub/reports/womens-earnings/2020/home.htm">US$891 a week</a>, versus men’s $1,082. Their career interruptions, lower earnings and earlier retirements mean that female Social Security recipients get <a href="https://www.ssa.gov/news/press/factsheets/women-alt.pdf">only 80%</a> of the benefits that men do.</p>
<p>Financial education can’t erase the effects of decades of structural inequality, of course. But the evidence shows that it can <a href="http://dx.doi.org/10.2139/ssrn.2753510">make a difference</a> by helping women make more informed decisions for their future.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/swXHv0khiWY?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">A brief introduction to financial literacy concepts from New York University.</span></figcaption>
</figure>
<h2>Demand for financial education is high</h2>
<p>Only 16% of women ages 40 to 65 have ever received any financial education, according to <a href="https://helpageusa.org/wp-content/uploads/2023/06/Report-V3-updated.pdf">a survey of women my colleagues and I fielded in 2022</a>. Among African American, Native American and Asian American women, this figure falls to 8% to 10%.</p>
<p>Our survey also showed that behaviors that can help with financial security are patchy among respondents. Close to 30% never put money into an emergency fund or savings account, nearly 40% never put money into an investment or retirement account, and 60% have never talked to a financial professional. Tellingly, only 20% said they felt relaxed about their financial future.</p>
<p>But not all is doom and gloom: More than 70% of women in our survey said they were interested in receiving financial education. Demand was especially high among Hispanic/Latina (93%), Black (85%) and Asian American (80%) women.</p>
<p>Our survey respondents said they wanted to learn about long-term planning and other issues specific to their life stage, not just general money management principles. They also said they would prefer flexible programs that make it easy for busy people to participate, as well as those delivered by trusted agents in their communities, such as schools or community centers.</p>
<p>Right now, there aren’t many financial literacy programs specifically designed to address the needs of older women. But this research gives us a blueprint for future programs. Employers, financial service providers, community groups and national organizations all have an important role to play in empowering older women with the financial literacy skills they want and need.</p><img src="https://counter.theconversation.com/content/213050/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Lila Rabinovich has received funding from the Robert Wood Johnson Foundation, the Michigan Retirement and Disability Research Center, and other foundations and agencies.</span></em></p>Only a small fraction of women have received any financial education at all.Lila Rabinovich, Social scientist, USC Dornsife College of Letters, Arts and SciencesLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2177982023-11-27T02:08:28Z2023-11-27T02:08:28ZWhat is the ‘sunk cost fallacy’? Is it ever a good thing?<figure><img src="https://images.theconversation.com/files/560987/original/file-20231122-24-d8qfce.jpg?ixlib=rb-1.1.0&rect=98%2C151%2C4746%2C3280&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.pexels.com/photo/person-holding-burning-paper-in-dark-room-33930/">Eugene Shelestov/Pexels</a></span></figcaption></figure><p>Have you ever encountered a subpar hotel breakfast while on holiday? You don’t really like the food choices on offer, but since you already paid for the meal as part of your booking, you force yourself to eat something anyway rather than go down the road to a cafe.</p>
<p><a href="https://www.sciencedirect.com/science/article/pii/0167268180900517">Economists</a> and <a href="https://www.sciencedirect.com/science/article/pii/0749597885900494">social scientists</a> argue that such behaviour can happen due to the “sunk cost fallacy” – an inability to ignore costs that have already been spent and can’t be recovered. In the hotel breakfast example, the sunk cost is the price you paid for the hotel package: at the time of deciding where to eat breakfast, such costs are unrecoverable and should therefore be ignored.</p>
<p>Similar examples range from justifying finishing a banal, half-read book (or half-watched TV series) based on prior time already “invested” in the activity, to being less likely to quit exclusive groups such as sororities and sporting clubs the more <a href="https://psycnet.apa.org/record/1960-02853-001">effort it took to complete the initiation ritual</a>.</p>
<p>While these behaviours are not rational, they’re all too common, so it helps to be aware of this tendency. In some circumstances, you might even use it for your benefit.</p>
<h2>Sunk costs can affect high-stakes decisions</h2>
<p>While the examples above may seem relatively trivial, they show how common the sunk cost fallacy is. And it can affect decisions with much higher stakes in our lives. </p>
<p>Imagine that Bob previously bought a house for $1 million. Subsequently, there’s a nationwide housing market crash. All houses are now cheaper by 20% and Bob can only sell his house for $800,000. Bob’s been thinking of upgrading to a bigger house (and they are now cheaper!), but will need to sell his existing house to have funds for a downpayment.</p>
<p>However, he refuses to upgrade because he perceives a loss of $200,000 relative to the original price he paid of $1 million. Bob is committing the sunk cost fallacy by letting the original price influence his decision making – only the house’s current and projected price should matter.</p>
<p>Bob might be acting irrationally, but he’s only human. Part of the reason we may find it difficult to ignore such losses is because losses are psychologically more salient relative to gains – this is known as <a href="https://psycnet.apa.org/record/1985-05780-001">loss aversion</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/560984/original/file-20231122-25-fx4vfh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Person attempting to build a crooked bird house with tools strewn across a table" src="https://images.theconversation.com/files/560984/original/file-20231122-25-fx4vfh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/560984/original/file-20231122-25-fx4vfh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/560984/original/file-20231122-25-fx4vfh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/560984/original/file-20231122-25-fx4vfh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/560984/original/file-20231122-25-fx4vfh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/560984/original/file-20231122-25-fx4vfh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/560984/original/file-20231122-25-fx4vfh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">It’s okay to quit a crafting project if it’s not looking salvageable any more.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/man-frustrated-angry-building-bad-birdhouse-151033373">Tim Masters/Shutterstock</a></span>
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<p>While most of the evidence for the sunk cost fallacy comes from <a href="https://link.springer.com/article/10.1007/s40685-014-0014-8">individual decisions</a>, it may also influence the decisions of groups. In fact, it is sometimes referred to as the <a href="https://www.nature.com/articles/262131a0">Concord fallacy</a>, because the French and British governments continued funding the doomed supersonic airliner long after it was likely it would not be commercially viable.</p>
<p>Another example is drawn-out armed conflict that involves a large loss of lives for the losing side. Some may think it impossible to capitulate because the casualties will have “died in vain”.</p>
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Read more:
<a href="https://theconversation.com/supersonic-flights-are-set-to-return-heres-how-they-can-succeed-where-concorde-failed-162268">Supersonic flights are set to return – here's how they can succeed where Concorde failed</a>
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<h2>Knowing about sunk costs can help you</h2>
<p>If you find yourself justifying behaviour due to costs you’ve paid in the past rather than circumstances of the present, or predictions of the future, it’s worth checking yourself.</p>
<p>Identifying sunk costs allows you to cut your losses early and move on, rather than perpetuating larger losses. This is apparent in the housing example: the larger the crash, the cheaper the bigger house; and yet the larger the crash, the greater the perceived loss from selling the existing house. Hence, the greater the loss in opportunity inflicted by the sunk cost fallacy.</p>
<p>If you find it difficult to overcome the sunk cost fallacy, it may help to delegate such decisions to others. This may include the decision of whether to <a href="https://direct.mit.edu/rest/article-abstract/93/1/193/57894/The-Flat-Rate-Pricing-Paradox-Conflicting-Effects">go to a buffet</a> or subscribe to Netflix, with the latter potentially being a double whammy: one may feel compelled to binge-watch due to the flat fee structure and, as mentioned earlier, to finish mediocre series once halfway through.</p>
<h2>Use sunk costs to your advantage</h2>
<p>A second, less obvious benefit is actively using the fallacy to your advantage. For example, many gym memberships require upfront payments regardless of how much you use the facilities. If you find it hard to ignore sunk costs, choosing gym memberships that have large upfront fees and minimal pay-per-usage fees may be a way to <a href="https://pubsonline.informs.org/doi/abs/10.1287/mnsc.2018.3032">commit yourself</a> to a regular gym habit.</p>
<p>This can also apply to other activities that involve short-term pain for long-term gain – for example, paying for an online course will make you more likely to stick with it than if you found a free course.</p>
<p>But be warned, this doesn’t work for everything: it seems that spending wildly on a <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/ecin.12206">wedding ceremony or engagement ring</a> doesn’t have a “sunk cost” effect – it fails to increase the likelihood of staying married.</p>
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Read more:
<a href="https://theconversation.com/gym-membership-how-to-get-the-most-out-of-it-according-to-a-sports-scientist-107551">Gym membership: how to get the most out of it, according to a sports scientist</a>
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<img src="https://counter.theconversation.com/content/217798/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Aaron Nicholas does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>When we invest money, time or another resource we can’t get back, factoring that sunk cost into our future decisions can be a trap.Aaron Nicholas, Senior Lecturer in Economics, Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2174732023-11-23T17:24:27Z2023-11-23T17:24:27ZMatching state pension to the national living wage would help pensioners maintain their dignity<figure><img src="https://images.theconversation.com/files/558813/original/file-20231110-27-e08yw2.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C3461%2C2305&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The UK is currently 16th out of 50 European countries in terms of the best pension offering.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/hands-elderly-woman-british-money-palm-596706170">Linda Bestwick/Shutterstock</a></span></figcaption></figure><p>A question that is perennially <a href="https://www.if.org.uk/research-posts/can-the-uk-afford-to-pay-pensions/">asked</a> by financial experts is: “can the government (in other words, the taxpayer) afford to keep increasing pensions?” But in my view, the real question should be: “what is the purpose of the state pension?” </p>
<p>This isn’t an economics question, it’s a moral question. And, as a society, we are poor at discussing moral questions. </p>
<p>A <a href="https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/welfare-spending-pensioner-benefits/#:%7E:text=Pensioner%20benefit%20spending%20in%202023,5.3%20per%20cent%20of%20GDP">report</a> from the Office for Budget Responsibility earlier this year stated that in the current financial year, the state pension will cost around £124 billion. This is more than the £105 billion education <a href="https://www.statista.com/statistics/298910/united-kingdom-uk-public-sector-expenditure-education/#:%7E:text=Government%20spending%20on%20education%20in%20the%20UK%202023%2C%20by%20function&text=The%20United%20Kingdom%20spent%20approximately,primary%20and%20pre%2Dprimary%20education">budget</a> and more than double the £52 billion <a href="https://commonslibrary.parliament.uk/research-briefings/cbp-8175">defence</a> budget.</p>
<p>The level of the UK pension is safeguarded by the <a href="https://commonslibrary.parliament.uk/the-triple-lock-how-will-state-pensions-be-uprated-in-future/">triple lock</a>, which was first introduced in the June 2010 budget. It means annual increases in payments are made in line with earnings growth, price inflation (currently 4.6%) or 2.5% – whichever is highest. </p>
<p>With another triple lock <a href="https://commonslibrary.parliament.uk/the-triple-lock-how-will-state-pensions-be-uprated-in-future/">increase</a> of 8.5% in pensions due in April 2024, the state pension will rise to £221.75 per week (£11,531 per annum). This is only £20 per week less than the <a href="https://www.gov.uk/government/publications/the-personal-allowance-and-basic-rate-limit-for-income-tax-and-certain-national-insurance-contributions-nics-thresholds-from-6-april-2026-to-5-apr/income-tax-personal-allowance-and-the-basic-rate-limit-and-certain-national-insurance-contributions-thresholds-from-6-april-2026-to-5-april-2028">personal allowance</a> everyone can earn before having to pay tax or national insurance. </p>
<p>Assuming wages exceed inflation and 2.5% in line with the last five year <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/averageweeklyearningsingreatbritain/october2023">averages</a>, then the pension up-ratings could be in the region of 5% in 2025 and 2026. This will see pensioners, who have no other income, having to pay tax – in some cases, a decade after they last paid income tax.</p>
<p>So, how do we ensure that retired people are able to have a comfortable standard of living once they stop working? As a starting point, we can consider <a href="https://ec.europa.eu/social/main.jsp?catId=1606&langId=en">principle 15</a> of the European pillar of social rights, which was set out in 2017 by the European Union and maintains: “The right of workers and the self-employed to a pension commensurate with contributions and ensuring an adequate income. The right to equal opportunities to acquire pension rights for both women and men. The right to resources that ensure living in dignity in old age.”</p>
<h2>Comparing incomes</h2>
<p>The <a href="https://www.gov.uk/national-minimum-wage-rates">national living wage</a> is two thirds of UK average earnings and should be the minimum to cover “adequate income” and “dignity in old age”. The salary obtained by an adult working 37 hours per week at the national living wage is currently £10.42 per hour. This will <a href="https://www.bbc.co.uk/news/business-67484102">increase</a> to £11.44 per hour from April 2024.</p>
<figure class="align-center ">
<img alt="A table comparing incomes in 2023 from the state pension, national living wage and average earnings." src="https://images.theconversation.com/files/560698/original/file-20231121-4461-ybavll.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/560698/original/file-20231121-4461-ybavll.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/560698/original/file-20231121-4461-ybavll.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/560698/original/file-20231121-4461-ybavll.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/560698/original/file-20231121-4461-ybavll.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/560698/original/file-20231121-4461-ybavll.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/560698/original/file-20231121-4461-ybavll.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">A comparison of the state pension, national living wage and average earnings in the UK in 2023.</span>
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<p>Were the UK pension matched with the national living wage, it would be set at a figure of £22,308 per year, and pensioners’ income would be vastly different as of April 6 2024. </p>
<p>Even after paying more than £1,900 in tax, the poorest pensioner would be still be £225.15 per week better off than they are today. And the extra disposable income could be recycled into the economy through increased expenditure, with knock-on impacts in indirect taxes such as VAT. </p>
<h2>A European comparison</h2>
<p>A <a href="https://www.almondfinancial.co.uk/pension-breakeven-index-how-does-the-uk-state-pension-compare-to-the-rest-of-europe/">recent survey</a> by pension advice firm Almond Finance UK shows the UK is currently 16th out of 50 countries in terms of the best pension offering across Europe. Spain tops the survey, with Belgium in second place and Luxembourg third. </p>
<p>Bringing the state pension in line with the national living wage would move the UK up to fourth position, ahead of Bosnia and Herzegovina, Cyprus, Lichenstein, France, Denmark and Switzerland.</p>
<p>Such an increase would raise the annual cost to the Treasury from the current <a href="https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/welfare-spending-pensioner-benefits/#:%7E:text=Pensioner%20benefit%20spending%20in%202023,5.3%20per%20cent%20of%20GDP">£124 billion</a> to £236 billion. And such a large increase in expenditure would require more taxes or more borrowing, which would accrue more debt interest in turn. But this sum could be reduced by £13 billion by charging pensioners national insurance. </p>
<p>In a response to an <a href="https://www.dailyrecord.co.uk/lifestyle/money/calls-living-state-pension-payments-30501193">online petition</a> in August, which called for the state pension to be matched to the national living wage, the government <a href="https://petition.parliament.uk/petitions/636088">said</a> it had “no plans to increase the state pension to equal 35 hours a week at the national living wage”. It went on to describe the state pension and national living wage as having “different purposes” and said that a direct comparison could not be drawn between the two. </p>
<p>With the <a href="https://theconversation.com/autumn-statement-live-experts-respond-to-chancellors-tax-and-benefit-cuts-218211">focus</a> on cutting both business rates and national insurance in the autumn statement, it’s worth considering how those measures will help to ensure that pensioners live in dignity in old age.</p><img src="https://counter.theconversation.com/content/217473/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Chris Parry does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>How does the UK ensure a decent standard of living for its elderly population?Chris Parry, Principal Lecturer in Finance, Cardiff Metropolitan UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2172312023-11-20T14:37:27Z2023-11-20T14:37:27ZAirlines are frustrating travelers by changing frequent flyer program rules – here’s why they keep doing it<figure><img src="https://images.theconversation.com/files/558086/original/file-20231107-267500-6jwx0k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A boom time for airlines can a bust for loyal passengers.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/friends-at-the-international-airport-in-barcelona-royalty-free-image/1009031554">Martin-dm/E+/Getty Images</a></span></figcaption></figure><p>As the U.S. <a href="https://theconversation.com/us/topics/holiday-travel-47493">holiday travel season</a> picks up, many people are noticing that their frequent flyer benefits aren’t going as far as they used to. </p>
<p>In September 2023, <a href="https://www.wsj.com/business/airlines/delta-loyalty-program-changes-reward-biggest-spenders-most-dcefa85e">Delta Air Lines revamped its frequent flyer program</a> to make it tougher to earn status — a tiered system offering travel privileges based on the reward points earned — only to partially <a href="https://www.wsj.com/business/airlines/delta-air-lines-makes-changes-to-its-skymiles-loyalty-programagain-b66519e6">reverse course</a> a month later and make it easier. American Airlines also made <a href="https://news.aa.com/news/news-details/2022/American-Airlines-to-Offer-AAdvantage-Members-More-Rewards-More-Often-Before-and-Beyond-Reaching-Status-AADV-12/default.aspx">big changes to its loyalty scheme in 2022</a> and <a href="https://www.foxbusiness.com/lifestyle/american-airlines-adjusts-loyalty-program-switches-to-dynamic-pricing">minor changes in spring 2023</a>. And British Airways recently announced that it is <a href="https://www.britishairways.com/en-us/executive-club/faqs/collecting-avios-changes">adjusting the way it awards points for travel</a>.</p>
<p><a href="https://www.bu.edu/questrom/profile/huseyin-karaca/">We are</a> <a href="https://www.bu.edu/questrom/">business school</a> <a href="https://www.bu.edu/questrom/profile/jay-zagorsky/">professors</a> who study <a href="https://theconversation.com/whens-the-best-time-to-use-frequent-flyer-miles-to-book-flights-two-economists-crunched-the-numbers-on-maximizing-their-dollar-value-194893">rewards</a> <a href="https://theconversation.com/starbucks-fans-are-steamed-the-psychology-behind-why-changes-to-a-rewards-program-are-stirring-up-anger-even-though-many-will-get-grande-benefits-198361">programs</a>. Many people think <a href="https://www.theguardian.com/us-news/2023/jun/12/us-air-travel-workers-passengers">flying is a miserable experience</a>, and having status sometimes makes flights better. So it’s only fair that frequent flyers are asking why it’s seemingly harder to obtain such status.</p>
<h2>Why miles are a multibillion-dollar business</h2>
<p>One big idea to understand is that <a href="https://www.mckinsey.com/industries/travel-logistics-and-infrastructure/our-insights/the-six-secrets-of-profitable-airlines">airlines don’t earn very much money</a>, if any at all, from ticket sales. This is mainly due to the highly competitive and capital-intensive structure of the airline industry, which often leads to reduced profit margins. Instead, they make their profits from <a href="https://www.bts.gov/topics/airlines-and-airports/baggage-fees-airline-2022">bag fees</a>, <a href="https://www.bts.gov/cancellation-change-fees">ticket change fees</a> and — importantly — <a href="https://www.transportation.gov/individuals/aviation-consumer-protection/frequent-flyer-programs">frequent flyer</a> programs. </p>
<p>On many airlines, there are two ways to earn status. <a href="https://www.washingtonpost.com/opinions/2023/06/23/united-airlines-very-frequent-flyer">One is to fly a lot</a>. But that means spending time in crowded airports. The other way is to <a href="https://www.delta.com/us/en/skymiles/medallion-program/2024-program-updates">spend a lot of money using a rewards credit card</a>.</p>
<p>Frequent flyer programs, coupled with rewards credit cards, are very profitable for airlines. For example, Delta’s <a href="https://s2.q4cdn.com/181345880/files/doc_downloads/2023/02/DAL-12.31.2022-10K-2.10.23.pdf">latest annual report</a> shows last year that the company earned US$5.7 billion from selling credit card miles. Given Delta only made $3.6 billion in profits, this frequent flyer program clearly boosts the bottom line.</p>
<h2>Designing the optimal rewards program</h2>
<p>Many types of businesses, not just airlines, offer <a href="https://www.starbucks.com/rewards">rewards programs</a>. From a company’s perspective, a <a href="https://knowledge.insead.edu/operations/optimal-design-loyalty-programmes">well-designed loyalty program</a> should cost little or nothing, give customers great value and prevent them from using a competitor. </p>
<p>Frequent flyer programs fit this bill: Giving some passengers the ability to board early or access to a lounge costs airlines almost nothing, but many customers desire it. Plus, the chase for status or free flights <a href="https://hbr.org/1995/05/do-rewards-really-create-loyalty">locks people</a> into using only one airline.</p>
<p>Much of the appeal of status programs comes from their exclusivity. This leaves airlines with a problem: where to set the bar. A low bar means nearly everyone gains status. But customers <a href="https://nymag.com/intelligencer/2019/05/heres-why-airplane-boarding-got-so-ridiculous.html">get no value</a> being allowed to board first if almost everyone on the plane can also do it, and <a href="https://www.marketwatch.com/story/why-are-clubs-so-crowded-these-days-airport-lounges-have-lost-their-peaceful-privilege-are-they-worth-it-anymore-54572642">airport lounges aren’t a haven</a> when travelers can’t find empty seats. At the same time, setting the bar too high results in empty lounges and unhappy customers.</p>
<p>Striking the right balance is tough, since the number of flyers is constantly changing due to <a href="http://businessmacroeconomics.com/">economic conditions</a>. When the economy is doing well, <a href="https://www.trade.gov/national-travel-and-tourism-office">people want to travel</a>. This gives airlines an incentive to tighten frequent flyer rules. When the economy is doing poorly, people stay home and airlines relax their rules.</p>
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<figcaption><span class="caption">Delta’s CEO discusses the backlash to recent loyalty program changes on Bloomberg Television on Oct. 25, 2023.</span></figcaption>
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<p>For example, at the height of the COVID-19 pandemic, <a href="https://www.mckinsey.com/industries/travel-logistics-and-infrastructure/our-insights/taking-stock-of-the-pandemics-impact-on-global-aviation">few people flew</a>, so <a href="https://www.nytimes.com/2021/11/05/travel/airline-loyalty-programs.html">airlines made it easy to earn</a> or keep status. Today, with the economy doing better and flying back to pre-pandemic levels, airlines are making it much tougher.</p>
<p>Many airlines are switching from a frequent flyer status model based on miles traveled to one based on dollars spent. This move aligns with the main design principle of these programs: The benefits a company gives to customers must mirror the value it gets from them.</p>
<h2>Who pays for all those rewards, anyway?</h2>
<p>Rewards programs are very profitable for airlines and their credit card partners. But for cardholders, the value proposition is less clear. These cards promise “free” rewards, but don’t actually deliver anything for free.</p>
<p>First, rewards cards often come with an annual fee. <a href="https://www.forbes.com/advisor/credit-cards/best/airline/">Fees typically range</a> from around $100 per year for a simple airlines reward card to $600 for a card that gives lounge access. Second, since many people don’t pay off their credit card balance each month, these card companies <a href="https://www.consumerfinance.gov/about-us/blog/americans-pay-120-billion-in-credit-card-interest-and-fees-each-year/">make billions of dollars charging</a> people interest.</p>
<p>Credit card companies also charge merchants roughly 2.5% every time a customer swipes a reward card — what’s known as <a href="https://www.usatoday.com/money/blueprint/business/credit-card-processing/interchange-fee/">the interchange fee</a>. The more generous the card, the higher the fee merchants have to pay. In general, when sellers encounter many consumers using reward cards, they <a href="https://luluywang.github.io/PaperRepository/payment_jmp.pdf">raise prices to offset the additional cost</a>.</p>
<p>What do all these fees mean for the typical flyer? People who pay off their reward card balances in full every month get roughly back the extra amount they pay in fees and charges. People who don’t pay off their balances, or who use debit cards or cash, pay more so that reward card holders get “free” travel. The result is that poorer and less financially savvy people <a href="https://www.cnbc.com/2023/05/27/lower-income-americans-pay-for-wealthys-credit-card-rewards-some-economists-say.html">end up subsidizing</a> the flights of richer people.</p>
<h2>A boom time for airlines, less so for passengers</h2>
<p>Since the deregulation of air travel in the 1970s, airlines have <a href="https://www.faa.gov/sites/faa.gov/files/2022-06/Forecast_Highlights.pdf">gone through boom and bust cycles</a>. Right now, it’s a boom for airlines and a bust for people looking for frequent flyer status. There’s no reason for airlines to be as rewarding today as they were in the past. <a href="https://theconversation.com/passport-bottleneck-is-holding-up-international-travel-by-americans-eager-to-see-the-world-as-covid-19-eases-205271">Planes are full</a> of people willing to pay with money. Sometime in the future, however, it will reverse, and it will be a boom time for flyers looking for status when planes begin having empty capacity.</p>
<p>In the meantime, what should you do? Our general advice is that if you are going to use a reward card, choose a card that gives cash back, not one that gives airplane miles. Good old cash is far more useful than miles. <a href="https://www.forbes.com/advisor/credit-cards/travel-rewards/how-to-protect-points/">Miles can be devalued</a> by an airline at any moment. Plus, even the most elite status doesn’t help much when <a href="https://public.tableau.com/app/profile/flightaware/viz/AirlineCancellationDelayUpdate/USAirlineCancellationsDelays">your plane is delayed</a> — and that’s happening more and more these days.</p><img src="https://counter.theconversation.com/content/217231/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Loyalty schemes tend to be the most generous when the economy has hit a patch of turbulence.Jay L. Zagorsky, Clinical Associate Professor of Markets, Public Policy and Law, Boston UniversityH. Sami Karaca, Professor of Business Analytics, Boston UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2138202023-11-15T13:23:03Z2023-11-15T13:23:03ZPoor men south of Richmond? Why much of the rural South is in economic crisis<p>For a brief moment in the summer of 2023, the <a href="https://www.billboard.com/artist/oliver-anthony-music/chart-history/hsi/">surprise No. 1 song</a> “Rich Men North of Richmond” focused the country’s attention on a region that often gets overlooked in discussions of the U.S. economy. Although the U.S. media sometimes pays attention to the rural South — often concentrating on guns, religion and opioid overdoses — it has too often neglected the broad scope and root causes of the region’s current problems.</p>
<p>As economic historians <a href="https://history.unc.edu/faculty-members/peter-a-coclanis/">based in North Carolina</a> <a href="https://www.mtsu.edu/faculty/louis-m-kyriakoudes">and Tennessee</a>, we want a fuller version of the story to be told. Various parts of the rural South are struggling, but here we want to focus on the forlorn areas that the U.S. Department of Agriculture refers to as “<a href="https://www.ers.usda.gov/amber-waves/2017/october/rural-manufacturing-survival-and-its-role-in-the-rural-economy/">rural manufacturing counties”</a> — places where manufacturing is, or traditionally was, the main economic activity.</p>
<p>You can find such counties in every Southern state, although they were historically clustered in Alabama, Georgia, North and South Carolina, and Tennessee. And they are suffering terribly.</p>
<h2>Yes, the South is actually in crisis</h2>
<p>First, let’s back up. One might be tempted to ask: Are things really that bad? Hasn’t the Sun Belt <a href="https://theconversation.com/the-us-has-become-a-nation-of-suburbs-101501">been booming</a>? But in fact, by a range of economic indicators — <a href="https://www.bea.gov/sites/default/files/2023-03/stgdppi4q22-a2022.pdf">personal income per capita</a> and the proportion of the population <a href="https://www.ers.usda.gov/topics/rural-economy-population/rural-poverty-well-being/">living in poverty</a>, for starters – large parts of the South, and particularly the rural South, are struggling.</p>
<p>Gross domestic product per capita in the region has been <a href="https://uncpress.org/book/9780807873359/a-way-forward">stuck at about 90%</a> of the national average for decades, with average income even lower in rural areas. About 1 in 5 counties in the South is marked by “<a href="https://www.census.gov/content/dam/Census/library/visualizations/2023/comm/persistent-poverty.pdf">persistent poverty</a>” — a poverty rate that has stayed above 20% for three decades running. Indeed, <a href="https://www.census.gov/content/dam/Census/library/publications/2023/acs/acs-51%20persistent%20poverty.pdf">fully 80%</a> of all persistently poor counties in the U.S. are in the South.</p>
<p>Persistent poverty is, of course, linked to a host of other problems. The South’s rural counties are marked by <a href="https://fred.stlouisfed.org/release/tables?eid=391444&rid=330">low levels of educational attainment</a>, measured both by high school and college graduation rates. Meanwhile, labor-force participation rates in the South are <a href="https://fred.stlouisfed.org/release/tables?eid=784070&rid=446">far lower</a> than in the nation as a whole.</p>
<p>Unsurprisingly, these issues stifle economic growth.</p>
<p>Meanwhile, financial institutions have fled the region: The South as a whole <a href="https://banks.data.fdic.gov/explore/historical/">lost 62% of its banks</a> between 1980 and 2020, with the decline sharpest in rural areas. At the same time, local hospitals and medical facilities <a href="https://doi.org/10.1111/1468-0009.12655">have been shuttering</a>, while funding for everything from emergency services to wellness programs has been cut. </p>
<h2>Less wealth, less health</h2>
<p>Relatedly, the rural South is ground zero for poor health in the U.S., with <a href="https://americaninequality.substack.com/p/life-expectancy-and-inequality">life expectancy far lower</a> than the national average. So-called “<a href="http://deathsofdespair.princeton.edu">deaths of despair</a>” such as suicides and accidental overdoses are common, and rates of obesity, diabetes, hypertension, heart disease and stroke are high – much higher than in rural areas in other parts of the U.S. and <a href="https://www.countyhealthrankings.org">in the U.S. as a whole</a>.</p>
<p>Manufacturing counties in the rural South are particularly unhealthy. Residents there die about <a href="https://www.cdc.gov/nchs/nvss/deaths.htm">two and a half years younger</a> than the average American, which to demographers is a staggeringly high differential.</p>
<p>These things, of course, didn’t happen in a vacuum. The Obama-era Affordable Care Act encouraged states to expand Medicaid coverage, but Southern states largely refused to do so. That left <a href="https://aspe.hhs.gov/sites/default/files/2021-07/rural-health-rr.pdf">large portions</a> of the low- and lower-middle-income population in the rural South uninsured. This has pushed many medical facilities in the region into a death spiral, as their business models — predicated on governmental insurance of one kind or another — became untenable.</p>
<p>Given all this, is it any wonder that rates of upward mobility in the rural South are among <a href="https://www.americanprogress.org/article/path-rural-resilience-america/">the lowest in the country</a>? Alas, probably not — certainly not to residents of rural North Carolina, a state where more than half of its counties <a href="https://www.newsobserver.com/news/databases/article253546964.html">lost population</a> between 2010 and 2020. </p>
<h2>It wasn’t always this way</h2>
<p>Although some people think that these areas have <a href="https://www.facingsouth.org/2015/11/what-went-wrong-with-the-south.html">forever been in crisis</a>, this isn’t the case. While the South’s agricultural sector had fallen into long-term decline in the decades following the Civil War — essentially collapsing by the Great Depression — the onset of World War II led to <a href="https://lsupress.org/9780807121221/the-new-south-1945-1980/">an impressive economic growth spurt</a>.</p>
<p>War-related jobs opening up in urban areas pulled labor out of rural areas, leading to a long-delayed push to mechanize agriculture. Workers rendered redundant by such technology came to constitute a large pool of cheap labor that industrialists seized upon to deploy in low-wage processing and assembly operations, <a href="https://doi.org/10.1080/05775132.2018.1543070">generally in rural areas and small towns</a>. </p>
<p>Such operations surged between 1945 and the early 1980s, playing a huge role in the region’s economic rise. However humble they may have been, in the South — as in China since the late 1970s — the shift out of a backward agricultural sector into low-wage, low-skill manufacturing was an opportunity for significant productivity and efficiency gains.</p>
<p>This helped the South steadily <a href="https://doi.org/10.5149/9780807872895_gitterman.6">catch up to national norms</a> in terms of per-capita income: to 75% by 1950, 80% by the mid-1960s, over 85% by 1970, and to almost 90% by the early 1980s.</p>
<p>Although today the <a href="https://doi.org/10.1002/j.2325-8012.2008.tb00856.x">rise of the Sun Belt</a> is often associated with, if not attributed to, climate, low housing costs and the growth of the South’s booming metropolitan areas, all those rural sweatshops and humble-looking processing sheds opening up in the early postwar era mattered a lot. They elevated the living standards of countless once-desperate and impoverished farmers.</p>
<h2>The origins of the rural crisis</h2>
<p>By the early 1980s, however, the gains made possible by the shift out of agriculture began to play themselves out. The growth of the rural manufacturing sector slowed, and the South’s convergence upon national per capita income norms stopped, remaining <a href="https://www.bea.gov/sites/default/files/2023-03/stgdppi4q22-a2022.pdf">stuck at about 90%</a> from then on. </p>
<p>Two factors were <a href="https://doi.org/10.1080/05775132.2018.1543070">largely responsible</a>: new technologies, which reduced the number of workers needed in manufacturing, and globalization, which greatly increased competition. This latter point became increasingly important, since the South, a low-cost manufacturing region in the U.S., is a high-cost manufacturing region when compared to, say, Mexico.</p>
<p>Like Mike Campbell’s bankruptcy in Hemingway’s “The Sun Also Rises,” the rural South’s collapse came gradually, then suddenly: gradually during the 1980s and 1990s, <a href="https://doi.org/10.1080/05775132.2018.1543070">and suddenly</a> after China’s entry into the World Trade Organization in December 2001.</p>
<p>Between 2000 and 2010, for example, manufacturing employment in North Carolina, one of the South’s leading manufacturing states, fell by about 44%. Starting a bit earlier — in 1998, when the Asian currency crisis squeezed Southern manufacturers — we find that the Tar Heel State <a href="https://doi.org/10.1080/05775132.2018.1543070">lost 70% of its manufacturing jobs</a> in textiles and 60% in furniture between then and 2010.</p>
<p>Other states in the South’s “manufacturing belt,” such as South Carolina and Tennessee, <a href="https://doi.org/10.1080/05775132.2018.1543070">lost about 40% of their manufacturing jobs</a> between 2000 and 2010. Although they have recouped some jobs since then, not one Southern state has as many manufacturing jobs as it did a generation ago. And most of the job growth in the southern manufacturing sector in recent decades has taken place in or near big cities. </p>
<p>The proportion of craftsmen and factory workers in the rural Southern labor force fell from <a href="https://doi.org/10.18128/D010.V10.0">38% in 1980 to a little over 25% by 2020</a> — a trend that was particularly striking in rural manufacturing counties.</p>
<p>Factory jobs there increasingly gave way to low-level service-sector gigs, which generally paid less. As a result, median income per capita in rural manufacturing counties in the South has stagnated and is much lower than in rural manufacturing counties elsewhere in the U.S. </p>
<h2>The first step is recognizing there’s a problem</h2>
<p>Those parts of the rural and small-town South that were once heavily involved in manufacturing are in economic crisis today.</p>
<p>One might argue that the current mess is a legacy effect of the South’s historical dependence on a low-skill, low-cost growth “strategy” — beginning with slavery — that privileged short-term economic gains over patient investment in human capital and long-term development. That’s a big claim about a larger, more complex story. </p>
<p>For now, our aim is simply to call attention to the problem. One must first acknowledge it before there can be any hope of a remedy. Until then, the inhabitants of such areas will remain feeling, as the Southern writer Linda Flowers vividly put it, “<a href="https://utpress.org/title/throwed-away/">throwed away</a>.”</p><img src="https://counter.theconversation.com/content/213820/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>After a 20th-century manufacturing boom, the region has been in a decadeslong decline. Rural factory towns can blame technology and globalization for their woes.Peter A. Coclanis, Professor of History; Director of the Global Research Institute, University of North Carolina at Chapel HillLouis M. Kyriakoudes, Director, Albert Gore Research Center and Professor of History, Middle Tennessee State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2139922023-11-08T19:10:37Z2023-11-08T19:10:37ZIs capitalism dead? Yanis Varoufakis thinks it is – and he knows who killed it<p><a href="https://www.yanisvaroufakis.eu/">Yanis Varoufakis</a> grew up during the Greek dictatorship of 1967-1974. He later became an economics professor and was briefly Greek finance minister in 2015.</p>
<p>His late father, a chemical engineer in a steel plant, instilled in his son a critical appreciation of how technology drives social change. He also instilled him with a belief that capitalism and genuine freedom were antithetical – a leftist politics that made his father a political prisoner for several years during the “junta”, as they called it.</p>
<p>In 1993, when he first got the internet, Varoufakis’s father posed a “killer question” to his son: “now computers speak to each other, will this network make capitalism impossible to overthrow? Or might it finally reveal its Achilles heel?” </p>
<p>Varoufakis has been mulling it over ever since. </p>
<p>Though, sadly, it is now too late to explain to his father in person, Varoufakis’s new book <a href="https://www.penguin.com.au/books/technofeudalism-9781847927286">Technofeudalism: What Killed Capitalism</a> answers the question in the form of an extended reflection addressed to his father.</p>
<p>“Achilles heel” was on the right track. In his striking response, Varoufakis argues that we no longer live in a capitalist society; capitalism has morphed into a “technologically advanced form of feudalism”.</p>
<hr>
<p><em>Review: Technofeudalism: What Killed Capitalism – Yanis Varoufakis (Bodley Head)</em></p>
<hr>
<h2>Rent over profit</h2>
<p>Traditional capitalists are people who can use capital – defined as “anything that can be used to produce saleable goods” (such as factories, machinery, raw materials, money) – to coerce workers and generate income in the form of profits. Such capitalists are clearly still flourishing, but Varoufakis argues they are not driving the economy in the way they used to. </p>
<p>“In the early 19th century,” <a href="https://www.project-syndicate.org/commentary/techno-feudalism-replacing-market-capitalism-by-yanis-varoufakis-2021-06">he writes</a>, </p>
<blockquote>
<p>many feudal relations remained intact, but capitalist relations had begun to dominate. Today, capitalist relations remain intact, but techno-feudalist relations have begun to overtake them.</p>
</blockquote>
<p>Traditional capitalists, he proposes, have become “vassal capitalists”. They are subordinate and dependent on a new breed of “lords” – the Big Tech companies – who generate enormous wealth via new digital platforms. A new form of algorithmic capital has evolved – what Varoufakis calls “cloud capital” – and it has displaced “capitalism’s two pillars: markets and profits”. </p>
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<a href="https://images.theconversation.com/files/553923/original/file-20231016-22-yg3ynp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/553923/original/file-20231016-22-yg3ynp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/553923/original/file-20231016-22-yg3ynp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=923&fit=crop&dpr=1 600w, https://images.theconversation.com/files/553923/original/file-20231016-22-yg3ynp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=923&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/553923/original/file-20231016-22-yg3ynp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=923&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/553923/original/file-20231016-22-yg3ynp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1160&fit=crop&dpr=1 754w, https://images.theconversation.com/files/553923/original/file-20231016-22-yg3ynp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1160&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/553923/original/file-20231016-22-yg3ynp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1160&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>Markets have been “replaced by digital trading platforms which look like, but are not, markets”. The moment you enter amazon.com “you exit capitalism” and enter something that resembles a “feudal fief”: a digital world belonging to one man and his algorithm, which determines what products you will see and what products you won’t see. </p>
<p>If you are a seller, the platform will determine how you can sell and which customers you can approach. The terms in which you interact, share information and trade are dictated by an “algo” that “works for [Jeff Bezos’] bottom line”. </p>
<p>The capitalists who rely on this mode of selling are granted access to the digital estate by its virtual landowners, the Big Tech companies. And if “vassal capitalists” don’t abide by the laws of the estate, they are kicked out – removed from Apple’s App Store or Google’s search index – with disastrous consequences for their business. </p>
<p>Access to the “digital fief” comes at the cost of exorbitant rents. Varoufakis notes that many third-party developers on the Apple store, for example, pay 30% “on all their revenues”, while Amazon charges its sellers “35% of revenues”. This, he argues, is like a medieval feudal lord sending round the sheriff to collect a large chunk of his serfs’ produce because he owns the estate and everything within it.</p>
<p>This is not extracting profit through the production or provision of goods and services, as these platforms are not a “service” in the sense in which the term is used in economics. They are extracting rents in the form of the huge cuts they take from the capitalists on their platforms.</p>
<p>There is “no disinterested invisible hand of the market” here. The Big Tech platforms are exempted from free-market competition. Their owners – “cloudalists” – increase their wealth and power at a dizzying pace with each click, exploiting a new form of rent-seeking made possible by the new algorithmically structured digital platforms. Parasitic on capitalist production, they are now dominating it. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/yanis-varoufakis-from-accidental-economist-to-finance-minister-36827">Yanis Varoufakis: from accidental economist to finance minister</a>
</strong>
</em>
</p>
<hr>
<h2>Cloud serfs</h2>
<p>But something even more transformative has happened, Varoufakis argues.</p>
<p>Even though most of us are regularly interacting with capitalists and earning wages via our labour, now, for the first time in history, all of us contribute to “the wealth and power of the new ruling class” through our “unpaid labour”. </p>
<p>Every time we use our cloud-linked devices – smartphones, laptops, Alexa, Google Assistant, Siri – we replenish the capital of the Big Tech cloudalists. This in turn increases their capacity to generate more wealth. How? We train their algorithms, which train us, to train them, and so on, in a feedback loop whose goal is to shape our desires and behaviour. They are “selling things to us while selling our attention to others”. </p>
<p>This interaction, Varoufakis insists, is not taking place as any kind of market exchange, such as wages being paid by a capitalist to a group of workers. In this interaction, we are all high-tech “cloud serfs”. </p>
<p>The new advertising men of the postwar world, portrayed in the series Mad Men (Yanis is clearly a fan), thought television was amazing because of its power to deliver audiences to advertisers. They could innovate “attention-grabbing” ways of “manufacturing” consumer desires – and it was delivered free-to-air! </p>
<p>But, Varoufakis emphasises, the ad men of the previous century could never have imagined the development of something like Amazon’s Alexa: a digital network learning “at lightning speed”, via the input of millions of people, how to train us. It is shaping our desires and behaviours in a process of perpetual reinforcement. Our experience and reality are increasingly algorithmically curated. And due to the incredible ease and utility, the information is all freely given. </p>
<p>So the “cloud capital” we are generating for them all the time increases their capacity to generate yet more wealth, and thus increases their power – something we have only begun to realise. Approximately 80% of the income of traditional capitalist conglomerates go to salaries and wages, according to Varoufakis, while Big Tech’s workers, in contrast, collect “less than 1% of their firms’ revenues”.</p>
<h2>Quantitative easing</h2>
<p>So how did this dystopian turn happen without us really noticing the change? Varoufakis’s story is detailed, but he emphasises two main drivers.</p>
<p>First, the “internet commons” of Web 1.0 transformed into Web 2.0, privatised by American and Chinese Big Tech.</p>
<p>Second, the colossal sums of central bank money that were supposed to refloat our economies in the aftermath of the 2008 Global Financial Crisis (GFC) – a process known as “<a href="https://theconversation.com/more-money-more-problems-the-quantitative-easing-quandary-9758">quantitative easing</a>” – were lent out to big business. Coupled with “austerity” economics for the many, this “murder[ed] investment” and led to what Varoufakis calls “gilded stagnation”. </p>
<p>Much of the central bank money, particularly following another round of quantitative easing during the COVID pandemic, made its way to the Big Tech companies. Their share prices soared to astronomical levels. </p>
<p>The “world of money” was decoupled from the “real economy” where most of us live and work. In an environment where profit became “optional”, loss-making Big Tech companies run by “intrepid and talented entrepreneurs” chose to build up their cloud capital. </p>
<p>So along with markets being steadily replaced by digital platforms, central bank money displaced private profits as the fuel that “fire[s] the global economy’s engine”. Intended by G7 central bankers and their presidents and prime ministers to “save capitalism”, it has unintentionally helped finance the emergence of a new form of capital (cloud capital) and a “new ruling class”. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/554466/original/file-20231018-23-rnfwr0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/554466/original/file-20231018-23-rnfwr0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/554466/original/file-20231018-23-rnfwr0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/554466/original/file-20231018-23-rnfwr0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/554466/original/file-20231018-23-rnfwr0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/554466/original/file-20231018-23-rnfwr0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/554466/original/file-20231018-23-rnfwr0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/554466/original/file-20231018-23-rnfwr0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The ‘world of finance’, argues Yanis Varoufakis, has decoupled from the ‘real economy’</span>
<span class="attribution"><span class="source">Markus Spiske/Unsplash</span></span>
</figcaption>
</figure>
<h2>GFC: the turning point</h2>
<p>So why was the GFC such a pivotal point? Varoufakis has a lot to say. Here’s a brief sketch. (Bear with me!)</p>
<p>Crucial changes had taken place in our economies since the rise of large corporations in industry and banking, which grew ever bigger over the course of the 20th century, eventually becoming global in scale. </p>
<p>The Bretton Woods international financial system – designed to prevent the “greed-fuelled recklessness” that led to the 1929 crash, the Great Depression and a world war – was abolished in 1971. From the 1970s, economies were progressively deregulated and free-market policies were increasingly enthusiastically practised, leading to a new “financialised” version of capitalism.</p>
<p>This was facilitated by the suppression of workers’ wages and bargaining power. The weakened state was progressively captured by lobbyists for the interests of big business. And the hegemony of the US dollar in the global system led to a “tsunami” of dollars pouring back into US markets from Europe, Japan, and later China, “[enriching] America’s ruling class, despite its [large trade] deficit”. </p>
<p>By the new millennium, this had led to an orgy of speculation and, by 2007, the financiers, using “computer-generated complexity” to obscure the “gargantuan risks”, had “placed bets worth ten times more than humanity’s total income”.</p>
<p>The new version of capitalism was failing. But it had grown to such scale and in such a complex, integrated “globalised” way that the banks and insurance companies were “too big to fail”. Their collapse in 2008 would have taken down the US banking system, and the rest of the world with it. Their hubris was thus “rewarded with massive state bailouts”.</p>
<p>What <em>could</em> have happened, as in <a href="https://www.rferl.org/a/Explainer_How_Sweden_Rescued_Banks_1990s/1379859.html">Sweden in the 1990s</a>, was to “kick out” the bankers, nationalise the banks, appoint new directors and, years later, sell them to new owners – thus saving the banks, but not the bankers.</p>
<p>What happened instead was that bankers, handed large bailouts, did not direct the money to where it was most needed. Neither punished nor chastened, they sent it straight to Wall Street. And there it stayed. Combined with the profits sent to Wall Street from the rest of the world, it eventually caused an “everything rally” that went on for over a decade. </p>
<p>This ultimately helped fuel the development of the cloud capital that has overtaken capitalism. And every time we use our devices, we contribute to its value. The more we transact via platforms, the further we move away from an economic system primarily driven by markets and profits, and the more power concentrates “in the hands of even fewer individuals” – a “tiny band of multi-billionaires residing mostly in California or Shanghai”.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/greed-is-amoral-how-wall-street-supermen-cashed-in-on-pandemic-misery-and-chaos-207311">'Greed is amoral': how Wall Street supermen cashed in on pandemic misery and chaos</a>
</strong>
</em>
</p>
<hr>
<h2>A tech-driven economic revolution</h2>
<p>Varoufakis suggests his theory helps us better understand extreme wealth inequalities, the “atrophied democracies” and “poisoned politics” of the West, geopolitics (he interprets the United States and China as two rival “super cloud fiefs”), the stalling of the green energy revolution, and more.</p>
<p>For Varoufakis, we are not just living through a tech revolution, but a tech-driven economic revolution. He challenges us to come to terms with just what has happened to our economies – and our societies – in the era of Big Tech and Big Finance.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/558188/original/file-20231107-19-nr1728.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/558188/original/file-20231107-19-nr1728.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/558188/original/file-20231107-19-nr1728.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=935&fit=crop&dpr=1 600w, https://images.theconversation.com/files/558188/original/file-20231107-19-nr1728.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=935&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/558188/original/file-20231107-19-nr1728.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=935&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/558188/original/file-20231107-19-nr1728.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1175&fit=crop&dpr=1 754w, https://images.theconversation.com/files/558188/original/file-20231107-19-nr1728.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1175&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/558188/original/file-20231107-19-nr1728.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1175&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>The first decades of the 21st century have brought challenges that we are still struggling to come to grips with. One thing is for sure – we have no hope of improving things without properly understanding our predicament. </p>
<p>This book is a welcome contribution towards that task. A technofeudalist age, Varoufakis argues, is not inevitable. Despite the difficulties we face, we have the agency to reject “techno dystopia” and structure our institutions in ways that more meaningfully embody freedom and democracy.</p>
<p>Towards the end of Technofeudalism, Varoufakis canvasses some proposals, drawn from his earlier book <a href="https://www.penguin.com.au/books/another-now-9781529110630">Another Now</a> (2020), for how to address these issues. These include ending the cloudalists faux “free service” model and replacing it with a universal micro-payment model, instituting a Bill of Digital Rights, and using digital technology to “democratise companies” (with decisions being taken collectively by “employee-shareholders”).</p>
<p>Varoufakis also proposes to “democratise money”. This plan would involve central banks issuing digital wallets, a universal basic income, reconfiguring “the central bank’s ledger” in the direction of a “common payment and savings system”, and abolishing the current capacity of private banks to “create money”.</p>
<p>The proposals are pretty radical, but I think Varoukais would say they are as radical as the times require them to be.</p><img src="https://counter.theconversation.com/content/213992/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Christopher Pollard does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Traditional capitalists are still flourishing, but according to Yanis Varoufakis they are not driving the economy like they used to.Christopher Pollard, Tutor in Sociology and Philosophy, Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2159852023-10-19T03:33:23Z2023-10-19T03:33:23ZIt’s good the High Court overturned Victoria’s questionable EV tax. But there’s a sting in the tail<figure><img src="https://images.theconversation.com/files/554655/original/file-20231019-27-68bc4l.jpg?ixlib=rb-1.1.0&rect=8%2C0%2C5483%2C3663&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>For anyone concerned with the need to decarbonise transport – or with sound economic policy – <a href="https://www.hcourt.gov.au/assets/publications/judgment-summaries/2023/hca-30-2023-10-18.pdf">yesterday’s High Court ruling</a> might seem like good news. </p>
<p>The court ruled Victoria’s tax on road use for zero- and low-emissions vehicles was unconstitutional, after two electric car drivers challenged the state’s ability to impose excise-type levies. </p>
<p>But given the High Court’s previous track record on constitutional interpretation, there’s a grave danger this decision will be extended to rule out any kind of road user charge. It threatens <a href="https://www.afr.com/policy/tax-and-super/high-court-rejects-victoria-tax-on-evs-20231017-p5ecze">many other state levies</a> too, from luxury cars to mining royalties. </p>
<h2>Why was Victoria’s tax so bad?</h2>
<p>EV drivers don’t buy petrol or diesel, which means they avoid the fuel excise that other drivers pay – and which pays for road maintenance. That’s why Victoria introduced its <a href="https://www.vicroads.vic.gov.au/registration/registration-fees/zlev-road-user-charge">EV road user charge</a>, which cost owners about two cents per kilometre driven.</p>
<p>Despite this plausible-sounding rationale, the road user charge was terrible policy, both environmentally and economically. A tax specific to electric vehicles could only slow their adoption, at a time when early adopters need to be encouraged.</p>
<p>And in economic terms, the policy rested on a misunderstanding of economics. The tax was supposed to address a “distortion” in the incentives generated when electric vehicle drivers paid less to use the roads than internal combustion engine vehicle drivers.</p>
<p>But the government’s reasoning didn’t take into account a central principle of economic policy – the <a href="https://www.cambridge.org/core/books/abs/course-in-public-economics/theory-of-the-second-best/FDB9BEB1C6F95B9C715EE98CE18C791A">theory of the second-best</a>. </p>
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<a href="https://theconversation.com/victorias-electric-vehicle-tax-and-the-theory-of-the-second-best-150936">Victoria's electric vehicle tax and the theory of the second-best</a>
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<p>Drivers who fill up with petrol, gas or diesel don’t bear the social and environmental costs of their choices in the form of carbon dioxide and other pollutants emitted, or the cost of the damage done to our lungs. </p>
<p>So by taxing EVs, you make traditional car drivers better off – and that leads to worse social outcomes overall.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/554683/original/file-20231019-15-5uy8w4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="a red and blue car in a showroom" src="https://images.theconversation.com/files/554683/original/file-20231019-15-5uy8w4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/554683/original/file-20231019-15-5uy8w4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=391&fit=crop&dpr=1 600w, https://images.theconversation.com/files/554683/original/file-20231019-15-5uy8w4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=391&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/554683/original/file-20231019-15-5uy8w4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=391&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/554683/original/file-20231019-15-5uy8w4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=492&fit=crop&dpr=1 754w, https://images.theconversation.com/files/554683/original/file-20231019-15-5uy8w4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=492&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/554683/original/file-20231019-15-5uy8w4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=492&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Taxes can change what we buy – another petrol car, or your first electric one?</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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<p>Three years ago, I finished a critique of the policy <a href="https://theconversation.com/victorias-electric-vehicle-tax-and-the-theory-of-the-second-best-150936">on a positive note</a>, suggesting it opened the door to broader road user charges based on kilometres travelled. </p>
<p>Sadly, it seems my assessment was premature. </p>
<p>In recent decades, the High Court has been taking ever more expansive interpretations of <a href="http://classic.austlii.edu.au/au/legis/cth/consol_act/coaca430/s90.html">Section 90 of the Constitution</a>, which prevents state governments from “imposing duties of customs or of excise”.</p>
<p>In the first decades after federation, “excise” was interpreted to refer to taxes levied on goods manufactured in Australia, just as customs duties are levied on imported goods. </p>
<p>Over many years and many High Court decisions, the concept was broadened to include any tax or fee that increases the costs of goods for consumers. </p>
<p>The last remaining obstacle was the <a href="https://www8.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/HCA/1974/9.html">“Tobacco Tax” decision</a> in 1974, which excluded consumption taxes from Section 90’s scope. </p>
<p>But that, too, is now gone. Despite some <a href="https://www.hcourt.gov.au/assets/publications/judgment-summaries/2023/hca-30-2023-10-18.pdf">scathing dissenting opinions</a>, a 4-3 majority overturned the 1974 precedent and expanded the scope of Section 90 even further. </p>
<p>In doing so, they have created large headaches for state and territory leaders, who have propped up state finances with an assortment of taxes, excise schemes and other charges that could now be subject to legal challenge. </p>
<h2>Did the High Court just kill road user charges entirely?</h2>
<p>Victoria’s law was a bad one. But other road user charges can be very useful, as a way to discourage overuse of private vehicles, charge heavy drivers more, or speed up the shift to clean, quiet EVs. </p>
<p>The reasoning of the High Court majority – which held that the Victorian charge wasn’t related to the cost of providing roads – leaves some hope that a broader road user charge might pass muster. </p>
<p>But to the extent that different kinds of vehicles were charged differently, it seems entirely possible the court might rule that road user charges are an unconstitutional excise. And the recent tendency of the court has been to push logical consistency up to, and beyond, the limits of reason. </p>
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<a href="https://images.theconversation.com/files/554679/original/file-20231019-17-qcoxum.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="a busy melbourne freeway seen from above" src="https://images.theconversation.com/files/554679/original/file-20231019-17-qcoxum.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/554679/original/file-20231019-17-qcoxum.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/554679/original/file-20231019-17-qcoxum.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/554679/original/file-20231019-17-qcoxum.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/554679/original/file-20231019-17-qcoxum.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/554679/original/file-20231019-17-qcoxum.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/554679/original/file-20231019-17-qcoxum.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">A tax on electric vehicles could act to keep internal combustion cars on the roads longer.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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<p>We saw this with the <a href="https://theconversation.com/the-section-44-soap-opera-why-more-mps-could-be-in-danger-of-being-forced-out-116955">saga over Section 44</a>. Early decisions ruled dual citizens were not eligible to stand for parliament. Later, the court’s interpretation expanded to cover people who had lived their entire lives in Australia but who could theoretically be eligible for another citizenship. The end result was that as many as half of all Australians were ineligible to serve in parliament. </p>
<p>We can hope the current decision will not be stretched in the same way. But nothing is guaranteed. </p>
<p>It may be that the only way to replace our current fuel taxes with road user charges will be through a uniform charge imposed by the Commonwealth. </p>
<p>There may be some creative alternatives. One way to resolve the problem might be to turn all roads into “virtual” toll roads, charging drivers based on use and converting state transport departments into government business enterprises. </p>
<p>For the moment, we can be grateful the Victorian government’s misguided and muddled tax policy has been scrapped – and a barrier to EV uptake is gone. But the High Court’s decision has flagged the need for urgent action at the national level to work out a consistent policy.</p>
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Read more:
<a href="https://theconversation.com/distance-based-road-charges-will-improve-traffic-and-if-done-right-wont-slow-australias-switch-to-electric-cars-150290">Distance-based road charges will improve traffic — and if done right won't slow Australia's switch to electric cars</a>
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<img src="https://counter.theconversation.com/content/215985/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Quiggin is a former Member of the Climate Change Authority.</span></em></p>Taxing electric vehicles was always a bad idea. But the High Court’s ruling against Victoria’s law could make state-based road user charges impossible.John Quiggin, Professor, School of Economics, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2153302023-10-10T12:36:46Z2023-10-10T12:36:46ZClaudia Goldin’s Nobel Prize win is a victory for women in economics − and the field as a whole<figure><img src="https://images.theconversation.com/files/552868/original/file-20231009-15-dk22qh.jpg?ixlib=rb-1.1.0&rect=48%2C0%2C7982%2C5345&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The world's newest Nobel laureate takes a bow.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/claudia-goldin-the-henry-lee-professor-of-economics-at-news-photo/1715805293">Carlin Stiehl/Getty Images</a></span></figcaption></figure><p>Economic history has long been chronicled through a male lens, emphasizing the contributions of men and their viewpoints. For proof, just look to the Nobel Memorial Prize in Economic Sciences. It’s been awarded to 90 men since 1969 – and <a href="https://apnews.com/article/nobel-prize-economy-224c204c0cc20843636e5525d6a61673">just three women</a>.</p>
<p>The third woman to win the prize, <a href="https://www.reuters.com/world/claudia-goldin-wins-2023-nobel-economics-prize-2023-10-09/">distinguished Harvard labor economist Claudia Goldin</a>, was honored on Oct. 9, 2023, for her <a href="https://www.nobelprize.org/prizes/economic-sciences/2023/goldin/facts/">decades of work studying the gender pay gap</a>. It wasn’t a victory just for her but for women in the field. </p>
<p><a href="https://scholar.google.com/citations?user=GyTN5PYAAAAJ&hl=en">As an economist</a>, I take this issue personally. My field has <a href="https://theconversation.com/the-gender-gap-in-economics-is-huge-its-even-worse-than-tech-156275">a huge gender gap</a>. Only 24% of tenure-track faculty in economics are women. In contrast, women make up 43% of tenure-track faculty across academia as a whole.</p>
<h2>More than just stocks and bonds</h2>
<p>Part of the problem is that economics is often stereotypically associated with finance, money and banking. This narrow perception might not appeal to everyone. Women in particular tend to be drawn to areas that have <a href="https://cepr.org/voxeu/columns/why-having-more-womendiverse-economists-benefits-us-all">direct bearing on social challenges</a>. </p>
<p>But economics is about much more than just the stock market. In fact, vast areas of the discipline deal with social issues – <a href="https://theconversation.com/health-insurance-coverage-for-kids-through-medicaid-and-chip-helps-their-moms-too-178249">health</a>, <a href="https://theconversation.com/what-drives-chinese-migrants-to-ghana-its-not-just-an-economic-decision-177580">development</a>, <a href="https://theconversation.com/teach-all-young-people-universal-basic-skills-by-2030-it-will-give-huge-boost-to-gdp-41792">education</a> and, yes, <a href="https://theconversation.com/5-tips-for-women-to-negotiate-a-higher-salary-200415">gender inequality</a>. </p>
<p>For instance, labor economists study issues like <a href="https://www.nber.org/system/files/working_papers/w26617/w26617.pdf">family leave policies</a> and the <a href="https://www.econlib.org/library/Enc/GenderGap.html">gender pay gap</a> – areas that directly affect women’s lives. </p>
<p>It shouldn’t come as a surprise, then, that women have had a greater presence in labor economics than in other subfields. </p>
<p>Women have also historically been drawn to <a href="https://www.nber.org/papers/w23953">health economics, development economics and education economics</a>. But those fields don’t get as much attention, and the public sometimes doesn’t even recognize them as being part of economics at all.</p>
<p>They may even get the short shrift in Econ 101. A study of introductory economics textbooks found that <a href="https://www.insidehighered.com/news/2018/01/19/women-are-underrepresented-economics-textbooks-says-new-analysis-implications-fields">75% of people named</a> in them were men. Women weren’t even equally represented in hypothetical examples.</p>
<h2>Where are the women?</h2>
<p>Not only are women underrepresented as economists, economics as a field has historically ignored the role women play in the economy. Even as the study of family economics gained traction in the 1970s, the pivotal roles of women <a href="https://www.imf.org/en/News/Podcasts/All-Podcasts/2023/06/09/claudia-goldin-on-family-economics">were often sidelined</a>. </p>
<p>Traditional models often oversimplified households’ decision-making processes and overlooked women’s contributions. This led economists to undervalue the unpaid labor women provided in households and perpetuate <a href="https://www.nber.org/system/files/chapters/c2970/c2970.pdf">stereotypical gender roles in their analyses</a>.</p>
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<a href="https://images.theconversation.com/files/552869/original/file-20231009-23-jkaxfq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A young reporter in a suit is shown speaking to economist Claudia Goldin, who stands with her hands clasped." src="https://images.theconversation.com/files/552869/original/file-20231009-23-jkaxfq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/552869/original/file-20231009-23-jkaxfq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/552869/original/file-20231009-23-jkaxfq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/552869/original/file-20231009-23-jkaxfq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/552869/original/file-20231009-23-jkaxfq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/552869/original/file-20231009-23-jkaxfq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/552869/original/file-20231009-23-jkaxfq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Nobel Prize winner Claudia Goldin takes a reporter’s question after a press conference on Oct. 9, 2023.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/claudia-goldin-the-henry-lee-professor-of-economics-at-news-photo/1715805733">Carlin Stiehl/Getty Images</a></span>
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<p>Goldin has challenged these traditional male-centric narratives. Through her groundbreaking research – particularly on wage inequalities and the “<a href="https://www.nber.org/papers/w30323">motherhood penalty</a>” – Goldin has turned the spotlight on women’s economic roles and challenges.</p>
<p>Her findings reveal the complexities of wage disparities, emphasizing issues like the challenges women face after childbirth. For instance, <a href="https://scholar.harvard.edu/files/goldin/files/dynamics_of_the_gender_gap_for_young_professionals_in_the_financial_and_corporate_sectors.pdf">career interruptions such as maternity leave</a> or reduced work hours to care for children and other relatives can reduce women’s earnings and job prospects in the long term. </p>
<p>It’s vital to note that Goldin’s research doesn’t attribute the gender pay gap to employer discrimination. Instead, her insights advocate for the establishment of robust support systems. </p>
<p>Strengthening child care facilities, improving parental leave policies, offering workplace flexibility and otherwise bolstering policies that support families with kids can play a pivotal role in addressing the wage gap, her findings suggest. In the absence of such supports, women are bound to keep earning less than men after they become parents.</p>
<h2>A win for one, a victory for many</h2>
<p>Goldin’s Nobel recognition isn’t merely an honor for her individual achievements. It serves as a beacon for women in economics and academia as a whole. </p>
<p>First, her win challenges the historical gender imbalance in such prominent awards, signaling a long-overdue recognition for women’s contributions to economics. It provides hope for young female economists that their work can also achieve such renown.</p>
<p>Beyond this, her Nobel nod underscores a crucial point: Economics is a rich and complex discipline that goes beyond traditional monetary and financial issues. It’s about parenthood. It’s about child care. It’s about people’s struggles. It’s about social change.</p>
<p>In essence, Goldin’s win shows the world just how expansive, inclusive, diverse and interconnected the field really is. Economics isn’t just <a href="https://en.wikipedia.org/wiki/The_dismal_science">the dismal science</a>. It’s a human science.</p><img src="https://counter.theconversation.com/content/215330/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Veronika Dolar does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Goldin is showing the world that economics is about more than just finance.Veronika Dolar, Associate Professor of Economics, SUNY Old WestburyLicensed as Creative Commons – attribution, no derivatives.