Sunday, May 5, 2013


I’m taking a course online about the economics of the poor. These two people share the lecturing. In this last week, Banerjee was discussing institutions. There are no sweeping conclusions, which is refreshing in this world of point-counterpoint where any one failure is taken as proof the entire system is about to collapse and everyone and everything related to it must be thrown out, burned and made to suffer. Instead he presents his case and sometimes presents the case of people he does not agree with and discusses the pros and cons of each.

Also, it comes out of MIT, so the students are expected to know things like when was South Africa colonized or be able to find Brazil on a map. Also refreshing. They are also expected to know a little bit of statistics and economics. I didn’t do so well in that area. It was a different experience than reading a book, even an informative non-fiction book. Usually, I, and I suppose most of us are consumers of knowledge. We hear it on the news, or maybe a documentary or book, and we either accept the conclusions or not. In this class, I was presented with relatively new information and participated in forming a conclusion.


He was discussing institutions. He was presenting the idea that much of the world we know was formed by the few colonizing nations from 400 years ago. The US was a colony then became a colonizer. Most of Africa was colonized at some time, mostly by the British. Some countries were difficult to live in for the Europeans, so instead of settling there and setting up institutions, they just expropriated the resources. For the most part, those that were settled are still doing well and the ones that had their riches exproprieated are still poor. Unfortunately, he didn’t have any good answers for how we can setup healthy institutions in those poor countries.

He did however have some interesting observations. He travels all over the world and notes that countries everywhere have very similar laws but differences in how they are enforced and implemented. Even with those differences, there are basic values of civility that are common to almost everywhere in the world. He told the story of how it is possible to go almost anywhere, at least anywhere that has some minimum of population, and you can hail a cab.

The story was not out of the ordinary, and that was the point. Think about it. Would you take a job that involved driving around a city, picking up strangers, taking them to remote destinations at all hours and completing a cash transaction with them? Most of us wouldn’t, but this happens all the time, everywhere. I wish I could say that no one ever got hurt or robbed while doing this, it does happen. But most of the time it doesn’t. It is not a high risk job with an excessive mortality rate.

 It is a safe and normal thing mainly because almost everyone wants it to be a safe and normal thing. Although many of us could easily take advantage of the system and get a free ride and maybe even a little extra change, we don’t. Most of us don’t even think about why, we just know it is wrong. If we think about it, we know that if we started doing that, others would too and then the system wouldn’t be there at all and there wouldn’t be anything to exploit.

He goes on to talk about how small changes will most likely continue to improve the plight of poor nations. Again, this is something everyone wants without having to think about why. There may not be an agreed upon way to do it, but we can make improvements here and there and improve situations for a few at a time. It may be that what we are doing today will have an impact for 400 years.


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