My Life, Economics, and Finance

The ILO (International Labour organization) is determined to improve working conditions around the globe. This is a noble quest, but I am afraid ILO, like many other IO’s, will choose the path of leftist utopianism and the quest will end up in a disaster.

Let’s look specifically at the leftist utopianism on the case of Kenya. One of the goals in Kenya is increase in social protection. This means, that firms will have to pay social security (or other form of tax) per worker. This increases cost per worker firms face. This will get fired all low wage – low skilled – low productivity workers as employing them won’t be profitable anymore.

If the goal of ILO is to decrease the number of people who have “not decent” jobs by making them unemployed, then ILO is on the right track.

I have the feeling, that a lot the ILO and other International Organizations (IMF did it before the crisis) do in the Developing World is meant to persuade the Developed World that they are still useful and should get fat funding…

There was a nice opinion by Rober Lucas (University of Chicago) in the Economist (In defence of the dismal science, The Economist August 8th-14th 2009). He is criticizing The Economist’s Briefing on “The State of Economics” (The Economist July 18th-24th 2009) for being unjustly critical of the science.

I must say that I have heard way more critical opinion than the one published in The Economist. Ernesto Zedillo (Yale, President of Mexico 94-2000) have spent twenty minutes of his lecture at The Graduate Institute saying that he feels embarrassed to be an economist. It made the History Students cheer, but are economists and the economic theory really to be blamed for the crisis? Did not our knowledge significantly lessen the downturn? Not long ago, many argued that we will go through a crisis comparable to the Depression, but policy reaction based on economic research has prevented this. How were economists to see the fall of Lehman other than using a crystal ball or reading the tea leafs?

I think economics is far from perfect, it’s relatively young science and is still evolving. But, even the little we know has helped to lessen the crisis.