Quotes of the day

Earnings of persons with college education increased faster in recent decades not only in developed countries, but also in many rapidly developing countries, such as China and Brazil, that are supposedly specializing in goods that use less human capital. Developing countries imperil their continued economic advance if they fail to provide much greater opportunities for their young men and women to achieve a university education. To conclude, the main message of my comments is that in order for poorer countries to continue to grow at fast rates, they must move beyond specialization in goods produced with relatively unskilled labor. They need to upgrade the goods they produce by utilizing more advanced technologies, and more skilled workers and entrepreneurs. At first, most advanced technologies are imported from other countries, but eventually developing nations need to produce themselves many of the technologies required to upgrade and expand their production. To accomplish this last great stage of economic development, both public policy and private households and businesses must begin to emphasize higher education, and other ways to greatly improve the advanced human capital of working men and women.--Gary Becker

Economists generally think of self interest as maximizing the present value of one’s consumption, or wealth, independent of others. Wealth can be generalized to include not just their financial assets, but the present value of their labor income and even public goods. Adam Smith emphasized a self-interest that also recognized social position and regard for society as a whole, but this was well before anyone thought of writing down a utility function, which is a mathematically precise formulation of how people define their self interest. But what if self interest is primarily about status, and only incidentally correlated with wealth? A lot, it turns out. In a book titled Human Universals, professor of anthropology Donald Brown listed hundreds of human universals in an effort to emphasize the fundamental cognitive commonality between members of the human species. Some of these human universals include incest avoidance, child care, pretend play, and many more. A concern for relative status was a human universal, and relative status is a nice way of saying people have envy and desire power [status seeking, benchmarking, all fall under this more sensational description, envy]. The idea that ‘incentives matter’, and that people generally act in their material self interest, is a powerful assumption. Alternative conceptions of human action, such as that people care mainly about their community, country, or God, are considerably more convoluted in explaining, say, why stock prices are uncorrelated from one day to the next.--Eric Falkenstein

The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists.--Joan Robinson

1981-82 was a terrible recession, but it was a recession economists understood. ... The current recession has been fundamentally different from other postwar recessions.--Christina Romer

A bit of psychology is a useful antidote to an excess of classical economics. It reveals flaws in human rationality, including your own.--Greg Mankiw

The tension between good and plenty, God and mammon, became the central tension in American life, propelling ferocious energies and explaining why the U.S. is at once so religious and so materialist. Americans are moral materialists, spiritualists working on matter. [David] Platt is in the tradition of those who don’t believe these two spheres can be reconciled. The material world is too soul-destroying. “The American dream radically differs from the call of Jesus and the essence of the Gospel,” he argues. The American dream emphasizes self-development and personal growth. Our own abilities are our greatest assets. But the Gospel rejects the focus on self: “God actually delights in exalting our inability.” The American dream emphasizes upward mobility, but “success in the kingdom of God involves moving down, not up.”--David Brooks