We finally found one

Economists had been looking for a long time

This week’s video is on some really interesting research relating to poverty traps. The poverty trap theory says there is a level of wealth below which poverty will be self-reinforcing: if you’re poor enough, you stay poor. In poverty traps, the key to escape is a big push, something that gets you past the threshold that creates self-reinforcing prosperity.

Interesting theory, hard to test.

Well some economists recently tested it and found some convincing evidence. The results are the kind where you rub your eyes to make sure you’re seeing correctly.

Not only should you watch it for the interesting economic insights, the editing is some of my best yet. I hope the video is good enough that you feel excited to share it with someone.

Nobel Prize

We are one week away from learning who the 2020 Nobel laureate is! Predicting the winner is incredibly hard since the prize is more indicative of a lifetime of work rather than any recent major developments. But! Last year I predicted the winner, so I feel pretty confident about my chances.

David Card and Joshua Angrist are my two favorites. They helped advance the empirical work that we see in economics today. Someone who would have naturally been considered for this award with them would be Alan Krueger, but he died in 2019. The Nobel prizes can only be awarded to people who are alive, but if Card and Angrist win, expect to hear Krueger’s name always mentioned as a co-winner.

My backup prediction is Thomas Piketty for his work on inequality. To be clear, I don’t think he’s the most deserving of this award, but I think there will be people who vote for him, especially with an American election where inequality is a major theme. I hope that if they do award it to Piketty that they also consider Claudia Goldin, who has done a lot of work on the male-female wage gap and whose work will stand the tests of time.

Like last year, I will be watching the announcement live at 4:00 am my time. Then I’ll put together a video and release it later in the day. So next week’s newsletter/video will be delayed!

By the way, anyone who says, “The economics prize isn’t actually a Nobel prize!” can read this comic from Dilbert.

Venezuelan Food Crisis

This last week I came across this WSJ article on Venezuela’s food crisis. Since WSJ has a paywall, let me summarize the interesting situation.

Venezuela, the world’s most oil-rich country, has run out of gasoline/petrol. Cars can’t drive around the country. There are some obvious consequences to supply chains when you can’t drive: food can’t get from farms to people. But there were two non-obvious consequences that I found fascinating.

First, because farmers can’t drive, they can’t get the supplies they need to grow their crops. For example, they can’t get the fertilizer. Well, without fertilizer, you have less food.

Second, some fields flood and rely on pumps to drain. But pumps run on gasoline. Farmers can’t run their pumps, the feeds are too wet, and thus there are lower yields.

So not only is food unable to travel the country, there is less food because crops are so much lower this year. This is heartbreaking for a country in need, but it’s also so interesting to see how simple changes ripple through the whole economy.

Complete vs Incomplete Contracts

I loved this comic about complete vs incomplete contracts. I did a video on that topic when I discussed how a company lost $125,000 to a bet on Harry Potter because of incomplete contracts.

Church Conference

I spent the weekend watching an online conference for my church, the Church of Jesus Christ of Latter-day Saints. I don’t often share these details in my newsletter, but it had some great comments on upholding democracy and respecting people of all races and nationalities. Here’s an example.