Two paradoxes – that of value and choice – in the weekly article followed by notes on the book – What Would Great Economist Do? and thinking about policy paralysis.
Choosing Out of a Paradox
Two paradoxes – that of value and choice – in economic and psychological decision-making are quite different yet similar. At the intersection of economics and psychology - called behavioral economics - lie these paradoxes.
To read the article in full, click on the link below.
What Would the Great Economists Do? by Linda Yueh
"Will Americans really contemplate going back to work on the factory floor? A common concern of companies is the shortage of skilled workers. I conducted an informal survey of students at the University of Tennessee and found that most didn't see their future in manufacturing. Some wanted to finance those plants, while others said that they weren't good enough at mathematics to work in advanced industries. But they all agreed that manufacturing has an image problem: it might have provided suitable employment for their parents' generation, but it was not for them."
This except throws light on how we fall prey to norms and subconscious biases, even when it comes to the kind of job we want to take on.
'Manufacturing has an image problem' could be one reason behind the boom in services in middle-income and developed economies. Working in the industrial sector doesn't seem lucrative with the increase in international financial flows towards the Global North and the rise in managerial roles within the financial service sector.
The word 'industry' paints a picture of men and women working long shifts, surrounded by large pieces of equipment and machinery in a dark and dingy factory in the outskirts of a city.
But for the less developed and developing economies, a large share of the population depends on industries for jobs due to their low level of skills and formal education. Theory and evidence suggest that the development trajectory of an economy starts from the agricultural sector to industries. Industries form a quintessential part of the flow of goods and services in an economy. It plays an indispensable role, as it provides a forward linkage to agriculture and a backward link to services in an economy. Further, as industries flourish, people start migrating from rural areas to create semi-urban settlements around them. Thus, industries sustain the rural economy in less developed countries.
What are we Thinking?
Is Policy paralysis an apt example of choice paralysis in action?
Policy paralysis is the inability to reform existing policies due to barriers such as regulations, coalition governments, etc. It also occurs due to the lack of constructive debates between opposition parties.
However, to begin with, it might have occurred due to a lot of policy choices in hand, making our chosen interventions and policies less effective as no side is ever satisfied. If options are bad, why do we need constant innovation and technology to create better versions of the products and services we already have?
Having one solution to a policy dilemma could solve the paralysis as the stakeholders could reach a consensus about future actions. Similarly, having one or a few products could help researchers design experiments to reduce poverty or change the world, only if it were that easy!
Correction: Twenty-Two / The Missing Middle and Introducing Book Notes (April 02, 2021)
In the section, Book Notes: The concept introduced is 'Paradox of Value' instead of 'Paradox of Choice.' I have corrected this error in the website version of the newsletter.
To read my previous blogs, visit my website, What-if Economics.
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