I am currently reading Robert J. Barro's latest book: Nothing is Sacred: Economic Ideas for the New Millenium (2002) (French translation: Rien n'est sacré!, Economica). Robert J. Barro is the Robert C. Waggoner Professor of Economics at Harvard University. He is one of the most famous living economists.
To make a long story short he is best known for his works on economic growth and on the budget deficits. On the economic growth side, he came up with the idea of convergence which was afterwards publicized under the "iron law of convergence" (more on this here). Simply described, convergence is a catch-up phenomenon. Under certain circumstances (remember how cautious economists are; they know all too well that the devil lies in the details!!!), backward countries tend to grow faster than rich countries, thus closing gradually the gap between them.
On the budget deficit side, he extended the notion of "Ricardian equivalence". Ricardian equivalence is an intuitive, though controversial theory, which suggests that government budget deficits do not affect the total level of demand in an economy. Indeed, there is no such thing as a free lunch: Either the goverment finances its extra spending either by raising new taxes or by increasing its budget deficit (namely borrowing). What Ricardo and Barro say is that people, you and me, are not fooled by the governmental choice and realize that the government choice boils down to "Tax now or tax later". If borrowing (tax later) is chosen, we, citizen, know that we are going to have to pay taxes later and, hence, save now the present value of these taxes. The outcome is that we won't increase our spending. This equivalence is reminiscent somehow of the Modigliani-Miller theorem on corporate financing that says (again under certain assumptions!) the way a corporation finances its operations (equity or debt) has no impact on its value.
The reason why I got attracted by "Nothing is Sacred" is a rather "incidental" one. Indeed, in many lunches or dinners I may have with relatives and friends, the discussion quite often drifts towards the "dismal science", namely economics. Whether we talk about environment, sustainable growth, inequality, poverty, publishing, health etc... I usually argue that a lot of insights can be gained by using economic tools to re-interpret the issues at hand. They help clarify the topic and help understand the underlying metrics people are using making choices (even if they are unwilling to confess or to admit that they use such metrics). What happens then is that I am under a heavy fire of criticisms: How dare you put a number on everything? How dare you measure things in terms of costs and benefits? IS NOTHING SACRED TO YOU?
Here we are! So, now you understand why Barro's book is appealing to me, the same way the works of University of Chicago Professor of Economics and Nobel Prize winner Gary S. Becker and of Milton Friedman's son, David D. Friedman, were to me (read The Economics of Life and Hidden Order, this is first-class!).
One chapter in Barro's book summarizes it all: The economic analysis of beauty. Barro says that the only true measure of productivity is the additional satisfaction that a worker brings to the client (that is what the client is willing to pay for) and to the welfare of his or her fellow workers. Hence, the physical appearance (if it matches the productivity litmus test) is as legitimate a qualification as shrewdness, dexterity etc... I know, I know I can already hear you screaming: politically incorrect, nasty, discriminatory and so on and so forth...
You know what: I am still puzzled that people keep screaming at the dismal science. They simply refuse giving it a try. That's sad because economists think this way precisely because they care about the details. That may be a strange way of showing "compassion" but, believe me, that's what it is!
By the way do not believe that I buy Barro 100%. In many occasions I find him candid!
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