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Archive for May 2018

The stories we do not tell

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One of my favourite scenes in Love, Actually is right at the beginning of the movie. The setting is an airport arrivals terminal. As travelers arrive through the gates, they are welcomed by family and friends, smiling, laughing, hugging and kissing. Whenever I have to pick someone up at the international terminal, I do my best to arrive early, and to witness the joy of family and friend reunions.

I would contest that there is another setting where you’re guaranteed to be uplifted. Graduation ceremonies. I was fortunate to attend one of these at the end of March where hundreds of students received their degrees, with thousands of friends and family watching on. Each applause and ululation tells a story, stories often coupled with hardship, sacrifice and perseverance but also with hope, faith and, ultimately, success. There are few things better to see than a father or mother, proud and captivated as their son or daughter walks across the stage, holding back the tears.

Several of my own Economics students graduated too, each with their own stories. Thokozire Gausi graduated with an Honours degree. She is from Malawi and part of a network of students that self-finance their studies in South Africa, often with very little institutional support. Masters-degree graduate Omphile Ramela, who grew up in Soweto, wrote his dissertation while playing professional cricket for the Cape Cobras and, now, the Highveld Lions, and while balancing the demands of a young family. Abel Gwaindepi received his PhD in Economics. He grew up in Zimbabwe, where his father worked in the sugarcane plantations of Anglo-American. Abel has 16 siblings, many of whom he had to support with his meagre scholarships through an undergrad at Fort Hare, a postgraduate at Rhodes and, ultimately, a PhD at Stellenbosch. It is difficult to imagine what that moment of graduation must have felt like for Abel and the Gwaindepi family.

At the same ceremony, both Patrice Motsepe and Jannie Mouton received honorary doctorates, and had the chance to say a few short words. Motsepe noted South Africa’s amazing people, and our duty to ensure that each has the opportunity to live a life of dignity and prosperity. We underestimate our own abilities, Motsepe said, to make a success of South Africa. Mouton highlighted the wealth of opportunities in the country. Focus, he said, on the opportunities instead of being an expert on the problems. ‘Build a business, employ people, pay taxes – contribute.’

Negativity pervades our society, and can be incredibly debilitating. A few minutes on Twitter and you’re bound to find discussions that turn into slurs and slanders which will only end in ignorance and intolerance. But – and this I repeat to myself and my students frequently – Twitter is not the real world. Despite all the negativity that surrounds us, there is one undeniable truth: there has never been a better time to be human than in 2018.

The story we do not tell often enough – and one that still surprises each new cohort of students I teach – is that life is getting better. Yes, we have tremendous challenges in South Africa, in Africa and globally, but we are making good progress to tackling these head-on. Six of the ten fastest growing economies in 2018 will be in Africa. But it is not only incomes that are improving. Steven Pinker, in the first few chapters of his new book, Enlightenment Now, provides a wonderful summary of the trends in health, happiness, and living standards, as well as inequality, the environment, safety and democracy. In each case, the evidence suggests that we live in a much better world than our parents and grandparents.

This good story did not just happen for no reason. It is humankind’s ability to use the resources of nature and transform them into food, clothing and shelter, through ever-increasing understanding of science, our complex technologies and sophisticated institutions, that have allowed us to build a more prosperous world. I really like the way Pinker explains this:

Poverty needs no explanation. In a world governed by entropy and evolution, it is the default state of humankind. Matter does not arrange itself into shelter or clothing, and living things do everything they can to avoid becoming our food. As Adam Smith pointed out, what needs to be explained is wealth. Yet even today, when few people believe that accidents or diseases have perpetrators, discussions of poverty consist mostly of arguments about whom to blame for it.

That our world is getting better should not mean that we can get complacent. As we’ve seen in several countries around the world, places like Syria, Venezuela and Zimbabwe, when things fall apart, living standards quickly revert back to poverty and chaos. As long as we understand that investment in better knowledge about how the world works lies at the heart of our story – in other words, investing in innovation, science and technology – such an outcome is unlikely for South Africa. The worrying thing about our recent budget is that the allocation towards this category will grow at less than the inflation rate. Our politicians seem to not understand that our wealth is dependent not on connections, mineral resources or land. Instead, it is the result of innovation-led improvements in productivity that explains the huge progress of the last two centuries.

Motsepe and Mouton are both correct: we have amazing people and amazing opportunities. But we will only be able to tell a good story if we invest in those amazing people – like Thoko, Omphile and Abel – to use their knowledge and skills to take advantage of those opportunities.

*An edited version of this article originally appeared in the 12 April edition of finweek.

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The unintended consequences of good intentions

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We all hope to live long, healthy lives. And we want that for other people too. So when we have medical breakthroughs that allow us to alleviate the suffering of others, almost all of us would agree that it should be rolled out to those needing it most.

Opioid abuse kills 42000 Americans annually. Opioids are a class of drugs usually prescribed to treat pain, but many patients develop addictions that result in the illegal use of prescription drugs or even cheaper alternatives, like herion. Opioid abuse has increased steadily over the last decade to now constitute more than two-thirds of all drug overdose deaths. How to stop and reverse this rising trend has been the subject of debate amongst public health officials and policymakers for some time.

One option, preferred by most US health experts, is Naloxone. Naloxone is a drug that can reverse the effects of an opioid overdose if administered quickly. In short: it can save many lives if it is easily accessible. With this knowledge, many US states began to pass laws that facilitated the widespread distribution and use of Naloxone. Surely this policy would save thousands of American lives?

Unfortunately and surprisingly, it had the opposite effect. This is the astounding conclusions of a new study by Jennifer Doleac of the University of Virginia and Anita Mukherjee of the University of Wisconsin-Madison. The two economists find that broadening Naloxone access had ‘no reduction in opioid-related mortality’.  Why? Because the availability of Naloxone encouraged riskier behaviour; access to Naloxone increased the use and abuse of opioids. Doleac and Mukherjee show, for example, that where Naloxone became available, it was followed by a clear increase in opioid-related emergency room visits and more opioid-related theft. In some places, like the Midwest, there was even an increase in opioid-related deaths, as abuse increased because people were comforted by the knowledge that there is a way out. A policy with fundamentally good intentions had perverse outcomes.

This is a classic example of the dilemma that policymakers face on a daily basis. Good intentions do not equate to good policy. Differently put, the road to hell is paved with good intentions. What is needed is an understanding that humans react to incentives, and that if the incentives change, so will their behaviour.

Sport is a great example of how policies can have undesired consequences. Increase the points awarded for a try to encourage more running rugby? Maybe it works, but it is more likely that it will encourage foul play because a penalty is now a relatively less expensive mistake. Design cricket helmets to make batsmen safe from bouncers? Possibly, but it is equally likely that fewer batsmen now learn to play the bouncer well, and are thus hit on the head more often (obviously with less severe consequences). Give three log points for a win in a soccer championship instead of two to encourage more attacking play? Expect more defensive home games and draws as teams want to avoid ‘losing three points at home’. These examples may be somewhat facetious, but they show just how difficult it is to regulate human behaviour.

One policy that is likely to have serious ramifications for South Africans is the proposed Liquor Amendment Bill, which will increase the minimum drinking age from 18 to 21 years. The goal, ostensibly, is to reduce the number of alcohol-related deaths of teenagers, both from overconsumption and from the associated violence and car accidents. There is no doubt of the good intentions here. Alcohol abuse can have deadly consequences. Limiting the drinking age to 21 seems like a rational way to reduce consumption amongst a group of young people that is most at risk. What could go wrong?

The answer is: we don’t really know. Would young adults be happy teetotallers for three years, or would they find alternative means of enjoying the products of Bacchus? Are the alternatives – hiding consumption from adult supervision, or consuming unregulated drinks bought on the black market – not potentially worse?

Perhaps we can find examples elsewhere. Empirical evidence in the US seems to suggest that increasing the minimum drinking age reduced car accidents by around five percent. That would be great, of course, although those results rely on strict enforcement capabilities and supporting institutions. Would violence, particularly against woman, cease? Perhaps it would, but the new bill might also shift drinking away from bars and public places and into the home, with even worse outcomes.

Any policy, regardless of its intentions, has consequences. Some are obvious to see, but often our good intentions have undesired or even perverse outcomes that nullify or even contradict the initial aims. We can avoid the worst of these by carefully considering the alternatives, through modelling behaviour and empirical testing (of similar policy experiments). But often the bad news is that, despite our best intentions, humans are best left to their own devices.

*An edited version of this article originally first appeared in the 29 March edition of finweek

Written by Johan Fourie

May 7, 2018 at 10:00