Editor’s Note

From our vantage point in the closing days of summer, we have no insight to offer in this bewildering election season. But we do have meaty analysis to offer on everything from drug innovation to aircraft pollution to the economics of religion.

Sebastian Edwards at UCLA’s Anderson School of Management takes a cool look at Javier Milei’s Hail Mary effort to turn around the Argentine economy after decades of wheel-spinning. “If economists produced reality TV shows, Argentina’s excellent adventures in economic chaos would top the ratings charts,” he writes. “Though richly endowed with natural resources and an educated population, the economy has long been hobbled by class warfare, fringe ideologies and opportunistic politicians.”

“Milei fits that tradition in the sense that he is promising miracles. But he does have the advantage of being an outsider who is not trapped by the interest-group dynamics that have dug Argentina ever deeper into a populist dead end.”

Teresa Ghilarducci at the New School in New York City warns that aging Americans are ill-prepared for retirement and need a helping hand from Uncle Sam to make up for lost time. “It would be nice to believe forewarned is forearmed – that once informed of what lies ahead, individuals manage to prepare adequately for retirement,” Ghilarducci notes. “In fact, while there have certainly been efforts to raise public awareness, the impact has been modest. … I favor a hybrid between traditional pensions and defined contribution plans that would ensure that the path of least resistance for everyone to save more for retirement, even as they continue earning Social Security credits.”

Advocates for pandemic preparation James Rosen (READDI), Andrew Friedson ( Milken Institute), Logan Ward (READDI), Sung Hee Choe (the Institute’s Faster Cures) and James Golden (Heimdall Bio) outline a plan to harness market forces in preparing an immediate pharmaceutical response to the next outbreak and the next. “Contrary to conventional wisdom,” they write, “building an antiviral pipeline isn’t a daunting science challenge. The real challenge is financial: Without a clear and present viral threat, there is currently little incentive to invest in R&D.”

“We propose a novel futures market designed to bridge the time gulf between pandemic neglect and panic, between no market and clamoring market demand. By more evenly spreading risks and potential returns, this market would incentivize investment in antiviral drug development even when there is no imminent viral threat.”

Nick Eberstadt of the American Enterprise Institute takes a closer look at the seemingly impossible dream of reunifying the Koreas after 80 years of division. “Polls suggest that the overwhelming majority of young South Koreans would like to remove reunification from the national agenda altogether,” Eberstadt acknowledges. “They worry about the costs of integrating tens of millions of Northerners now managing on a living standard much closer to countries like Haiti or Afghanistan than to their compatriots in the South.”

“But I submit that a motivated South Korea could make reunification work. In fact, the numbers suggest the potential for a decidedly manageable – and affordable – transition.”

Ed Dolan, a senior fellow at the Niskanen Center, explores the complexities of measuring poverty when you need to be more precise than “I know it when I see it.” He writes, “Just assembling the data is tough enough. To know whether someone is poor, you need to measure both their resources and their needs.”

To further complicate matters, we use poverty measures both for tracking and for treatment. Dolan outlines principles that would redefine poverty. “The result would be a social safety net that is simpler, less prone to error, and less administratively burdensome, both for state and federal agencies and for poor households themselves.”

Jan Brueckner (UC Irvine), Matt Kahn (USC) and Jerry Nickelsburg (UCLA) wonder whether the immensely popular cash-for-clunkers program in 2009 that scrapped gas-guzzling cars could work with a very different mode of carbon-fueled transportation – commercial aircraft.

“Unlike in the cases of automobiles and electricity generation, federal intervention designed to reduce aviation emissions is mostly absent. And this lack of current regulation suggests there may be low-hanging fruit to be harvested from modest efforts. A quick-and-dirty calculation: using average fuel burn from airline filings, we estimate that replacing the 737-300 aircraft with 737-700s that perform roughly equally would reduce carbon emissions by 14 percent.”

David McLean at Georgetown University’s McDonough School of Business takes issue with the increasingly strident critiques of shareholder capitalism as inconsistent with a just and equitable society. “The straw-person argument against capitalism is that it does not work as perfectly in the real world as in textbooks,” McLean explains. But “real-world choices require choosing among flawed alternatives.”

“In shareholder capitalism, imperfect firms compete in imperfect markets regulated by an imperfect government. The critics want to introduce an additional imperfect mechanism, which consists of giving themselves an outsized role in how corporate resources are used and how society is regulated.”

We couldn’t decide which of two terrific new books that stray far from familiar paths in economics should be excerpted in this issue. So we decided to excerpt both.

In Making Sense of Chaos, the physicist J. Doyne Farmer argues that economics needs to be reinvented to take advantage of the immense power of digital technology. Consider it an introduction to complexity theory for
the uninitiated. In The Divine Economy, Paul Seabright of the Toulouse School of Economics explores the analogies between organized religion and contemporary digital platform businesses, such as Microsoft and Google, that massively increase their impact though networking.

Happy perusing. — Peter Passell