What's the fundamental point of an economy?
By Amy Willis
Economics isn’t well known for dangerous fieldwork. That’s traditionally been thought of as the realm of anthropologists, archaeologists, etc. But this week’s guest, Richard Davies, goes to”places where humans have been put in a kind of extraordinary test, an extraordinary test of resilience.” In this week’s episode, Davies joins host Russ Roberts to talk about his latest book, Extreme Economies, and the two engage in a fascinating conversation about economics seemingly at the ends of the earth.
The conversation spans the globe, from a maximum security American prison, to the rain forest of Panama and the heart of Africa. We’ll post our questions below by location:
Angola Prison, the “pinnacle of US incarceration”
1- Why is an economy needed in such a “captive market”? What does Roberts mean when he says, “You could argue in a prison, transaction costs are kind of fun. It’s a feature, not a bug.”
2- How can such an extreme economy still be hit by shocks? How does trade in such commodities as “mojo”, “EMAK”, and “MMAK”, and the “dot economy” demonstrate this?
3- What role does the Angola economy play in forging prisoners’ individual identities? Is this a feature or a bug? (Hint: you might think about skills picked up in prison then found to be useless outside.)
Zaatari and Asraq, Syrian refugee camps
1- What are the biggest differences between the Zaatari and Azraq camps? Why wouldn’t Azraq develop like Zaatari? “Why aren’t there some other things circulating as cash that could allow people to be entrepreneurial?” (Roberts)
2- In describing life in the camp, Davies says, “Institutionally, they live within a constrained economy, which is designed to give them some choice. But I would say kind of not full agency.” What’s the difference between choice and agency in this context? Why does it matter
3- Why does Zaatari experience a problem of inequality not found in Azraq? What does Davies mean when he writes,”…markets are not just a means to an end, but ends in themselves that provide agency, vocation and life satisfaction.”
Darien Gap, deep in the Panamanian jungle
1- Davies describes Darien as a place that should be incredible but is not. Economists tend to laud the value of property rights in an economy, but they don’t seem to ave worked here. Why not? Why are more trees being cut in Darien since property rights have been formalized?
2- How can the work of Elinor Ostrom help explain the situation in Darien? What sort of solutions might her unique approach suggest?
Kinshasa, capital of the Democratic Republic of Congo
1- Davies describes Kinshasa by saying, “no economy more extreme…They have it all, and yet they have nothing.” He also stresses that the people of Kinshasa are very entrepreneurial. So why isn’t Congo’s GDP higher?
2- There are few if any public services in Kinshasa, yet Davies asserts that “everybody is taxed all the time,” sometimes three times a day. How can this be?
3- For what reasons does Davies regard inflation as the greatest evil in the Kinshasa economy? How does inflation contribute to the tremendous inequality there?