by Ignacio Mas, CEME Senior Fellow & Academic Director for the Certificate in Digital Money
Our brains are imperfect calculating machines: who could argue otherwise? There are cognitive biases galore: I get that. So psychology matters: sure.
But I have always had a hard time with run-of-the-mill behavioral economics, which portrays these cognitive biases as deviations from the straight path, as disturbances from some kind of ideal rationality that people need to be somehow brought back (or nudged) towards. Through trickery, if necessary: framing, setting defaults, etc. Your psychology is your problem; we can save you from yourself. If only one could find the mental switch that finally makes you want to care appropriately about the future and save…
The behavioral economics industry is having a field day with financial inclusion, and development more broadly. It comes down to this: how can we help poor people be and act more like us, or at least more like the person we wish we were? This smacks of the kind of paternalism that development economists have always had a hard time escaping. But before rejecting this approach, we need to understand two things: whether it is the case that poor informally employed people are often less rational, and if so, whether this makes them more vulnerable to their own psychology.
by James Kochien (MIB 2017)
“Disneyland is presented as imaginary in order to make us believe that the rest is real.”
Quick, what’s the world’s largest media company? If you guessed The Walt Disney Company, you’re wrong – Disney is No. 2, after Google, which hardly seems like a fair comparison. After all, over the past decade Disney has absorbed the Marvel superhero franchises, rebooted Star Wars, and put a new generation of princesses on the toy shelves of the world. All of the global top-5 grossing films in 2016 were Disney properties, totaling over $5 billion in sales. Disney parks saw 140 million visitors in 2015, over two times its nearest competitor. And after a string of expansions that left shareholders unsatisfied, Disney parks opened a new Disneyland in Shanghai, China, to great fanfare. No. 1 or not, Disney dominates the spaces in which it plays.
It is also a company with historical and cultural significance that makes its success somewhat surprising in the globalizing economy. It is founded in an “American” version of family values and prosperity.[i] Its films and parks traffic in a sort of watered-down multiculturalism with America firmly at the center, the proverbial passengers on the ship winding through the plucky, costumed children of “It’s a Small World.” Successful films drive attendance at themed park attractions, and successful attractions nurture new film franchises. It’s a tight synergy that allows Disney to charge a premium for its parks and merchandise.
What Can India Teach Us About Abolishing High-Value Currency?
by Julie McCarthy
Bhaskar Chakravorti of The Fletcher School at Tufts University says most Europeans don’t rely on the 500 euro bill to conduct legitimate business any more than Singaporeans depend on their country’s S$10,000 bill, which has also been phased out.
“Those denominations are so high that generally, anybody who would have to deal with that value of a transaction would probably use a digital transfer for it,” says Chakravorti.
The Less Cash Budget
After the drama of demonetisation, the 2017-18 Union budget has been a decidedly sober affair. The budget speech, one of the longest in history, was short on game-changing ideas. The finance minister didn’t seem terribly perturbed by the gathering storm clouds worldwide: Populist surges in the US and Europe; a strengthening dollar and oil price uncertainties; prospects of trade or religious wars, maybe both. That the IMF has shaved off a full percentage point of India’s anticipated growth rate as the economic penalty for the November cash carnage did not seem to provoke much worry either.