Monthly Archives: September 2005

Becker and Posner on resource scarcity and sustainable development

Becker and Posner reflect on resource scarcity and sustainable development. Becker embraces the optimistic view that scarcity is relative and mitigated by market mechanisms. Posner, instead, is more pessimistic about the possibilities for sustainable growth. Read the original comments by Becker and Posner on sustainable development

Households' eco-efficiency and creative communities

At the households’ eco-efficiency seminar held September 19 at the Finnish Environment Institute in Helsinki, Ezio Manzini discussed creative communities :

Looking at society carefully and selectively in this way, what we can see are people and communities who act outside the dominant thought and behaviour pattern. Creative communities that when faced with a result to achieve, organise themselves in such a way as to achieve what they want directly themselves. Groups of people who re-organise the way they live their home (as in the co-housing movement) and their neighbourhood (bringing it to life, creating the conditions for children to go to school on foot; fostering mobility on foot or by bike). Communities that set up new participatory social services for the elderly and for parents (the young and the elderly living together and micro-nurseries set up and managed by enterprising mothers) and that set up new food networks fostering producers of organic items, and the quality and typical characteristics of their products (as in the experience of Slow Food, solidarity purchasing and fair trade groups). The list of promising cases could continue“. [Manzini, E. 2005. Enabling Platforms for Creative Communities]

Creative communities are still minority phenomena, weak signals of sustainability, nevertheless they are important as

They tell us that, already today, it is possible to do things differently and consider one’s own work, one’s own time and one’s own system of social relationships in a different light. They tell us that the learning process towards environmental and social sustainability is beginning to build up a body of experience and knowledge. They tell us that there is an inversion of tendency from the disabling processes of the past (and sadly still dominant today): the cases we are talking about here are the result of the enterprise and ability of certain people – creative communities – who have known how to think in a new way and put different forms of organisation into action. ” [Manzini, E. 2005. Enabling Platforms for Creative Communities]

What could policy maker do to facilitate the emergence and development of creative communities? Make sure that we design appropriate enabling platforms, that is, “the set of material and immaterial elements (products, services, infrastructures, knowledge an rules) that, implemented in a given context, enhance its possibility to be a fertile ground for creative, bottom-up initiatives. i.e. it is able to support creative communities and enable a larger number of innovative citizens to move in the same direction.

Practically, what enabling platform have to do is: to facilitate the access to appropriate technologies; to promote the diffusion of know-how, skills and abilities; to define new, flexible norms and rules; to enhance the social and political tolerance.“[Manzini, E. 2005. Enabling Platforms for Creative Communities]

Opportunity cost

What should be one of the most important goals of teaching introductory economics courses?
Robert H. Frank in a NY Times column suggests it should be to “teach how to weigh costs and benefits intelligently”. Weighting costs and benefits intelligently requires, among other things, a thorough understanding of the concept of opportunity cost.

A recent study by Ferraro and Taylor of Georgia State University suggests that most professional economists may not really understand what opportunity cost means.

The authors asked about 200 professional economists the following question:
You won a free ticket to see an Eric Clapton concert (which has no resale value). Bob Dylan is performing on the same night and is your next-best alternative activity. Tickets to see Dylan cost $40. On any given day, you would be willing to pay up to $50 to see Dylan. Assume there are no other costs of seeing either performer. Based on this information, what is the opportunity cost of seeing Eric Clapton? (a) $0, (b) $10, (c) $40, or (d) $50.

[Test your understanding – find the answer here]

Only 21.6% of the professional economists picked the right answer, “a smaller percentage than if they had chosen randomly.” Frank observes.
The same question was posed to college students and, to the authors’ surprise, students who had never taken a course in economics outperformed those who had, the former group having 17.2 % right answers and the latter only 7.4 %.

What do we learn from these results?

Frank suggests that professional economists’ poor performance is related to the fact that during their training as economists they were exposed to encyclopedic introductory economics courses, with focus on mathematical models that “prove daunting for many students and leave them little time and energy to focus on how basic economic principles help explain everyday behavior” . The same encyclopedic courses are taught today, time for a change? Frank thinks so and suggests how in The Economist Naturalist: Teaching Introductory Students How to Speak Economics American Economic Review, May 2002 , v. 92, iss. 2, pp. 459-62.

References

Ferraro, Paul J. & Taylor, Laura O. 2005.Do Economists Recognize Opportunity Cost When They See One? A Dismal Performance from the Dismal Science, Georgia State University.

Frank, Robert H. 2002. The Economist Naturalist: Teaching Introductory Students How to Speak Economics American Economic Review, v. 92, iss. 2, pp. 459-62.