The problem with politicians: they’re only human
Talking of becoming better citizens, Nobel Laureate James M. Buchanan pioneered a new field of economics called 'Public Choice'. He was the first to realize that, unfortunately, politicians are only human, with flaws that can muddle their decision-making. But economic models had never taken this into account, which explains why politics sometimes didn’t work out as predicted.
How can governments work more effectively?
With these imperfect humans at the helm, Nobel Laureate Finn E. Kydland explored ways in which governments can make better decisions. He realized that policies with long-term commitment are key. The problem? It’s almost never in the interests of politicians to make them.
Policy often forgets the poor
Politicians in governments have to cater for a wide range of people with vastly differing needs. So is it ever possible to help everyone? Governments generally want ‘just enough’ growth - not so much that inflation gets out of control, and not so little that the economy grinds to a halt. They can raise or lower interest rates to control it, but when rates get too low, central banks often pump cash directly into the economy to compensate. This is known as quantitative easing. But who really benefits from these efforts? According to Nobel Laureate Joseph E. Stiglitz, it’s always the rich, and almost never the poor.
So what can governments do to help the poor?
There are promising long-term solutions out there. Nobel Laureate Edmund S. Phelps is a fan of subsidies to low-wage jobs.
The basic income debate
But wait, there’s more. What if there was a way to guarantee a basic income for the less fortunate? Nobel Laureate Paul R. Krugman supports the idea. He believes people shouldn’t just be able to merely survive on their income - but live. With redistribution and taxes, governments could give a salary to the less fortunate, paid for by taxes of the more fortunate.
How can governments create a better future?
According to Nobel Laureate Robert F. Engle, debt and government go hand in hand. And when the government borrows money, it’s not just investing in buildings and land, it’s investing in the future. But when interest rates are so low, should the global economy be spending its resources trying to repay debt? Engle doesn’t think so.
Should we worry about an international debt crisis?
With this issue never far from our collective worries, should we expect a repeat of the economic problems of the past? According to Nobel Laureate Sir Arthur Lewis: Yes. But we shouldn’t necessarily be afraid.
Is austerity the answer to market failure?
Let’s take Southern Europe, which has had a complete market failure, accompanied by a spike in unemployment. Nobel Laureate Sir Christopher A. Pissarides believes the policy that tipped the region into crisis is similar to the one that led to the Great Depression.