What’s the News: Making loans to small business owners in developing countries has quite the positive reputation. It has given people in poverty, especially women, a chance to bootstrap themselves up the economic ladder despite having marginal or no credit history and little work experience, as people have used the tiny loans to start businesses, purchase herds of animals, or invest in improvements to their shops or inventory. The Nobel Peace Prize was awarded to the economists who developed the practice in the 1970s at Bangladesh’s Grameen Bank.
But does microcredit really pay off? In a study published today in Science, economists have taken a rigorous look at it and concluded that in many or its modern implementations, it’s not having the touted benefits.
(more…)
Not so helpful after all.
What’s the News: City lights are more than a pretty sight from the air—they’re also a good way to tell how a country’s economy is doing, some economists say. Over the past decade, deducing a country’s gross domestic product from how much it glows in nighttime satellite images, a factor called luminosity, has become quite the econ fad. But as clever as it sounds, luminosity isn’t as helpful as you’d think, a new study says. Only in countries that are such a disaster that gathering reliable statistics is impossible is the glow a better approximation of GDP than you’d get with traditional measures.
(more…)
“It’s a jungle out there,” you might hear a big shot Wall Street type say about the high-stakes world of high finance. Yet, the jungle-ecosystem metaphor may be most applicable not to the competitiveness of the world’s financial system, but to its vulnerability.
For an unusual study in this week’s edition of the journal Nature, an economist (Andrew Haldane of the Bank of England) and a zoologist (Robert May of Oxford University) team up to argue that the banking and financial system is much like a natural system in the way that a key hit to one area caused the cascading wave of doom, which wrecked the world economy in 2008.
One way to see the resemblance is to think of the world’s many banks as the bean plants in a vast industrial mega-farm, where the nearly identical plants are all vulnerable to the same pest.
When a biological or social system is full of uniform individuals—be they bean plants or banks—one shared weakness can spell disaster for the whole lot. Even when a new beneficial trait or tool enters the picture, if all organisms adopt it, as many financial institutions did with credit default swaps and other risky trades that led to the financial meltdown of 2007-08, a tenuous balance can be quickly upset. [Scientific American]
Before the collapse, Haldane and May say, the financial sector believed that the high level of connectivity between financial firms was a way to lessen risk. No one firm was at particularly high risk, it was thought, which made it unlikely that any firm would fail. Yet little thought was given to the failure of the system as a whole.
(more…)
A new study out this week has rekindled an old economics fight: When countries get richer, do they get happier?
For Richard Easterlin, the answer has always been “no.” He became famous in economics circles beginning in the 1970s for articulating his namesake idea, the “Easterlin paradox.” He found that when you compare rich countries to poor countries, the people in the wealthy nations were more satisfied. But when a country’s economic position improved over time, the people in that country didn’t get happier.
“If you look across countries and compare happiness and GDP [gross domestic product] per capita, you find that the higher the country’s income, the more likely it is to be happier,” Easterlin said. “So the expectation based on point-in-time data is if income goes up, then happiness will go up. The paradox is, when you look at change over time, that doesn’t happen.” [LiveScience]
Now Easterlin is back with a new study in the Proceedings of the National Academy of Sciences, one that extends his argument to even more countries.
The new study, Easterlin said, is the broadest finding about the paradox so far. The researchers gathered between 10 and 34 years of happiness data from 17 Latin American countries, 17 developed countries, 11 Eastern European countries transitioning from socialism to capitalism and nine-less developed countries. They found no relationship between economic growth and happiness in any case. Even in a country like China, the researchers wrote, where per capita income has doubled in 10 years, happiness levels haven’t budged. South Korea and Chile have shown similarly astronomical economic growth with no increase in satisfaction. [LiveScience]
(more…)
World carbon emissions fell by 1.3 percent in 2009, most likely due to the global recession, says a report from the Global Carbon Project published today in Nature Geoscience. Emissions were originally expected to drop further (about 3 percent, as estimated from the expected drop of world GDP), but China and India’s surging economies and increasing carbon output countered the decreases elsewhere.
The largest decreases occurred in Europe, Japan and North America: 6.9% in the United States, 8.6% in the U.K., 7% in Germany, 11.8% in Japan and 8.4% in Russia. The study notes that some emerging economies recorded substantial increases in their total emissions, including 8% in China and 6.2% in India. [USA Today]
There is some good news from the report. It seems the atmospheric CO2 concentrations didn’t jump as much as they were expected to, which means the world’s carbon sinks were performing better.
While emissions did not fall much, the amount of CO2 in the atmosphere increased by just 3.4 gigatonnes – one of the smallest rises in the last decade. Friedlingstein says the land and marine sinks performed better in 2009, because the La Niña conditions in the Pacific meant the tropics were wetter, allowing plants to grow more and store away more carbon. [New Scientist]
(more…)
Has climate skeptics’ favorite Danish statistician, Bjørn Lomborg, changed his stance? In the forthcoming book edited by Lomborg, Smart Solutions to Climate Change, he calls climate change one of the world’s “chief concerns” and suggests investing $100 billion annually on climate change solutions.
The suggestion certainly comes as a surprise. In his previous books, like The Skeptical Environmentalist and Cool It, Lomborg argues that anthropogenic climate change is real but that it isn’t a “catastrophe”–that the associated “hysteria” was causing us to spend money trying to curb the globe’s warming where it would have been better spent, say, feeding the hungry or curing HIV.
Understandably, that stance has made his work appealing to climate skeptics who don’t want to spend money on curbing emissions–and unpopular among those who see Lomborg as a distraction who misrepresents the science and confuses the issue. In his new book, the statistician apparently reorders his priorities, now arguing that climate change solutions should get more cash.
What’s not a surprise: opinions vary as to the merits of this new book and as to whether it’s a shift, a drastic shift, not a shift, or a publicity stunt. Here, we share some.
(more…)
For years, scientists have debated where humanity’s sense of fairness came from. Some proposed it was a glitch in the brain’s wiring that causes people to be kind and fair to strangers, while others said it was a remnant of Stone Age thinking--that deep in our brains we see everyone we meet as part of our tiny family, and can’t imagine encountering someone who won’t ever be seen again [Wired]. But now, in a new study published in Science, scientists studying groups of people from different societies have suggested that our sense of fairness may depend on the type of society we live in.
The researchers found evidence that the more complex the society, the more developed those people’s sense of fairness. You can’t get the effects we’re seeing from genes,” said Joe Henrich, a University of British Columbia evolutionary psychologist and co-author of the study.” These are things you learn as a consequence of growing up in a particular place” [Wired].
For this study, scientists observed 2,100 people from different societies–from African herders, Colombian fishermen, and Missouri wage workers. The groups varied in size, and researchers also evaluated the people’s involvement in organized social activities like markets and religion–a common marker, scientists say, of the presence of a moral code that extends beyond kin. They then administered a series of games to study how group members viewed selfish behavior and how willing they were to punish it.
(more…)
Contagiousness: It’s contagious! Happiness was contagious in 2008, then loneliness last year, and don’t forget being fat. Now it’s generosity that spreads like the flu across social networks, according to James Fowler and Nicholas Christakis (who were both behind the happiness study). Their new study appears in the Proceedings of the National Academy of Sciences.
To test out whether generosity spreads, the scientists devised a game. In groups of four, each person had 20 “credits,” some of which they could decide to toss into a common fund for all the players. The scoring was set up so that giving to the fund was costly unless the other players did it too: If everyone kept their money, they’d have the 20 credits, but if everyone put all they could into the fund, each player would end up with 32. However, the players had no way to know how generous the others were being. The best payoff would come if everyone gave all their money — but without knowing what others were doing, it always made sense to keep one’s money and skim from the generosity of others [Wired.com].
(more…)
Yawning is contagious. So too, it seems, are being fat, being sad, and a host of other things that we social creatures tend to pick up from each other. In a study published this week in the Journal of Experimental Social Psychology, scientists picked out one more trait that could be contagious among connected people: making bad business decisions.
Researchers had already confirmed that people have a hard time letting go of their own bad investments. For example, someone who buys a lemon of a car or a dilapidated house will, instead of owning up that it was a mistake and cutting their losses, continue to commit to the project and pour more money, effort and emotions into it [Los Angeles Times]. The key finding in this study, however, was that this bad business psychology can spread to others.
(more…)
Historians believe they’re settled a long-running debate over ancient Rome’s population at the turn of the 1st century B.C.E. thanks to stashes of ancient Roman coins. This was the period marked by Julius Caesar’s assassination and the Roman empire’s collapse, but surprisingly, historical records during the war-torn era show a population explosion in Rome. Census data, thought to only account for males, gives a population increase from 400,000 in 2nd century B.C.E. to between 4 and 5 million at the 1st century B.C.E.
But some historians argue that the population didn’t really increase, and that in fact it declined during this period because of the wars. To back up their idea they are turning to buried treasure. In times of instability in the ancient world, people stashed their cash and if they got killed or displaced, they didn’t come back for their Geld. Thus, large numbers of coin hoards are a good quantitative indicator of population decline, two researchers argue in in the Proceedings of the National Academy of Sciences Monday [Wired.com].
(more…)
One thing we might have to look forward to should we fall deeper into a recession—a boost in public health. Americans were healthier during the Great Depression than the stronger economic periods surrounding the slump, according to a surprising new study.
Researchers studied life expectancies, mortality rates, GDP, and unemployment rates from 1920 to 1940. The team found an inverse association between economic health and population health: Life expectancy fell during economic upturns and increased during recessions. Mortality, meanwhile, tended to rise during economic upturns and fall during recessions. Deaths related to flu and pneumonia, for example, fell from about 150 per 100,000 people in 1929 to roughly 100 per 100,000 people in 1930, the researchers report online today in the Proceedings of the National Academy of Sciences [ScienceNOW Daily News].
The researchers won’t say for sure why this is, but they offer several theories. When the economy is growing, people tend to sleep less and smoke and drink more. They also engage in more strenuous labor, endure more work stress and breathe more polluted air. Traffic and industrial accidents rise [Los Angeles Times]. The one exception, of course, is suicides. As times get harder suicides go up, but during the time period studied they accounted for less than 2 percent of all deaths.
Related Content:
80beats: Stats Suggest Recession Prevented Over 70K Babies From Being Born
80beats: Pop Music & Blogs as Indicators of Gross National Happiness
80beats: What Does the Economic Crisis Mean for the Green Tech Sector?
Image: flickr / Tony the Misfit
Rats in laboratory tests learned to gamble based on a system of punishments and rewards, strategizing like human gamblers. And when researchers tweaked the animals’ brain chemistry to mimic that of humans with a gambling addiction, the mice began taking risks like pathological gamblers, according to a study published in the journal Neuropsychopharmacology.
To create this animal model of gambling addiction, researchers created a system in which options that could bring greater rewards also could yield stronger punishment. In this case, however, instead of gambling for money, the rats aimed to get as many sugar pellets as possible. The rodents were placed in specially built boxes whose walls incorporated four “response holes.” Each opening was associated with a possibility of earning treats – from one up to four, depending on the aperture chosen. When an animal poked its snout into a hole, the movement would break an infra-red light across the opening, signaling a computer with a “probabilistic” reward-punishment schedule to assign a pellet win or a “timeout” loss. Playing against the clock, the rats had only 30 minutes to accumulate as many sugar pellets as they could [The Canadian Press].
The rats quickly caught on that by choosing the openings that offered the greatest number of pellets, they also risked the longest time-outs during which they could not play the game. The test was based on an evaluation for decision-making in humans called the Iowa Gambling Test. In that game, there are some “bad” decks of cards that offer high rewards and punishments, and other “good” decks that offer lesser rewards and punishments.
(more…)
Leaving the rainforest of the Amazon standing has obvious benefits to the environment, as the living forests absorb and store carbon dioxide that would otherwise contribute to global warming. But cutting down the forests has been assumed to be the only route to economic development for the local people, as it provides work in the timber industry and then clears the way for farming and cattle raising. Now, a new study has found that deforestation brings only short-term and temporary economic benefits, in what researchers call a boom-and-bust cycle.
The researchers say the boom is probably due to a number of factors, including better roads and therefore better access to healthcare and schools. For a short while, the community benefits from the natural resources of the forest, and makes money off the timber and the farms that are set up in the cleared lands. But the soil is rapidly degraded making farming and cattle ranching unsustainable. “A lot of that land ends up being abandoned” [New Scientist], says study coauthor Robert Ewers.
(more…)
When people are given “expert” financial advice, the decision-making parts of the brain shut down, a small new study has found. Brain scans of 24 volunteers showed that claims of expertise were found to suppress activity in the neural circuit linked to decision-making [Telegraph]. “It’s almost as if the brain stops trying to make a decision on its own” [CNN], said lead researcher Gregory Berns.
In the study, college students connected to MRI scanners were asked to choose between taking a guaranteed payment and gambling for a higher payoff. Some made the decision on their own, while others were given written advice that they were told came from an economist who counsels the U.S. Federal Reserve. The advice was intentionally poor, and urged students to accept the guaranteed small payments rather than gamble with good odds for a much higher return. When thinking for themselves, students showed activity in their anterior cingulate cortex and dorsolateral prefrontal cortex — brain regions associated with making decisions and calculating probabilities. When given advice from [the economist], activity in those regions flat lined [Wired]. The students who received the advice tended to follow it.
(more…)
To a gambler’s brain, a near miss provides almost the same high as a win, according to a new study that helps explain the allure of slot machines and the difficulty that some gamblers have in walking away. “The near-miss is quite a paradoxical event,” [researcher Luke] Clark says. Gamblers who almost win put “their head down in their hands — they can’t believe it. And then the next thing they do is place another bet” [Science News].
In the small study, published in Neuron [subscription required], researchers had 15 volunteers play a slot machine while their brain activity was recorded with fMRI scans. When the researchers compared the scans, they found that near misses drew more blood to reward regions such as the insula and the ventral striatum than full misses did [ScienceNOW Daily News]. These areas are also activated by rewards like chocolate and cocaine; when the near misses partially activated the so-called reward pathway, it released pleasant doses of the brain chemical dopamine.
(more…)
