It’s Saturday afternoon, and I am sitting in a performance hall with my almost 8 year-old daughter. She takes piano lessons from our 15 year-old neighbor, and her teacher was giving a recital. My daughter only ever hears her teacher play pieces for a beginner, and this was a chance to hear her play her best stuff.
As soon as the teacher walked on stage, my daughter started giggling. But not because there was anything silly. Indeed, it was elegant: her teacher was wearing a beautiful dress and was playing on a $100,000 piano. No, I think my daughter started laughing because that was the only way she knew how to express her awe. Throughout the performance I could see that she maintained that sense of wonder.
It all made me think about development economics.
I’ll explain at the bottom. But first, the links you have been expecting.
Market Power vs Freakonomics, Round One
A few weeks ago I asked if you were interested in my review of Freakonomics 16 years later. I got some interest, so I started reviewing it. Well, in my review I realized that Levitt and Dubner had included a pretty bold prediction: the 24 most popular baby names in 2015, 10 years after the book’s publication. For girls, they had names like Emma and Grace, but they also had names like Philippa and Waverly.
Two ideas instantly came to mind: (1) were they right? (2) could I predict the names better than they could? Today’s video answers these questions. It was a fun challenge, and the results will definitely surprise you!
In a few weeks I’ll be posting my full review, but this one will definitely get you excited for what’s coming.
Economists in Tech Companies
One of the most exciting areas for young economists is what’s going on at tech companies. So many companies are directly applying economic principles to their business model. Uber is a platform that uses prices to regulate supply and demand. Google uses auction theory to sell ad space. Epic Games uses economic analysis to determine how to efficiently allocate resources in Fortnite (here’s my interview with an economist at Epic).
If you’re interested in working at a tech company, I recommend reading this paper by Susan Athey. It focuses on the PhD economists in the tech sector, but even if you aren’t planning on a PhD, you can see what skills and opportunities are available.
SpaceXonomics
Ever since reading Elon Musk’s biography, I’ve been a fan of our wacky billionaire. It’s enthralling to see his ambition, not just in what he has accomplished but in what he thinks is possible. In 2018 I watched a rocket land itself after take off and couldn’t believe what I had seen.
Well SpaceX has some important economic implications. Here’s an article by a rocket engineer trying to get us to realize what Musk is doing. My favorite line:
SpaceX, taking the last $135 million, put forward a radically different concept—Starship. It would be an entirely reusable, two-stage-to-orbit, heavy-lift launch system powered by methane-oxygen engines with a capacity about midway between the Space Launch System and the more powerful Saturn V Apollo moon rocket. Because of Starship’s reusability, it would incur less than 1 percent the cost of either.
Aspirations
So why did my daughter’s giggle remind me of development economics?
Poverty in developing countries is a result of producing within the production possibilities curve. That means poor countries are producing far, far below their potential.
Why are they far away from the frontier? Sometimes political and social institutions prevent resources from being allocated to their most efficient use. Sometimes property rights are too weak to enforce contracts. Sometimes civil war disrupts and destroys, deterring investment.
But sometimes it’s just because we don’t know where the frontier is. That’s why my daughter reminded me of development economics. For an 8 year-old girl, her piano skills are at the frontier. But looking forward to the future, I don’t think she knew what was possible. What does the frontier look like for a 15 year-old girl?
That recital gave her a glimpse. It gave her a vision of what is possible. Without that vision, she might not even try to approach the frontier.
A low-cost poverty intervention is to just give individuals in poverty a glimpse of what’s possible. One of my favorite examples is how showing girls a movie of a girl succeeding in chess helped them succeed on a math exam (I talk about the study in this video).
And it’s a good reminder to all of us. Look for those opportunities to show people what’s possible. Give them a vision. Be an example.