“Until now we have not tried to help the third world to the best of our abilities. So far there has only been a lot of cynicism,” says Jeffrey Sachs, director of the Earth Institute at Columbia University in New York, special adviser to the Secretary-General of the UN, and one of the most influential economists of today.
Throughout the 1990s, you advised on how to transform centrally-run economies into market-based ones. today, you have taken up the fight against extreme poverty. Your goals are not exactly simple.
Extreme poverty is an anachronism that does not belong in the 21st century, where we have the means and technologies to farm crops, fight infectious diseases, and provide electricity and clean water.
There has been talk about a solution to the poverty faced by third world countries for decades now, but still without success.
Thee elimination of poverty necessitates a few steps of action. First, the world must feel a global responsibility to find a solution to this problem. There are those among us who still ask, “Why should we care?” We need to create effective investment systems in health care and agricultural sectors for places like sub-Saharan Africa or Afghanistan. We must ensure that the given help is not squandered. At the same time though, it is important to note that the requested sums need not be excessive. For if you examine these monetary requests in light of their potential results, you will find a potential to not only save millions of lives, but to also prevent the types of conflicts which build during times of crisis – such are the possible benefits of these investments. But alas, there is still a lot of cynicism in the world.
Does mainstream and modern approach to economics even provide the tools that could solve problems of this scope?
I think that the methodology of economic research does not really, in its cur- rent form, reflect reality. In the last five to ten years, I have read a lot of scientific literature mostly in the areas of biology, environmentalism, health care, and climatology. e way in which economists research is quite different from how it is done in these other fields.
In what way?
Economics is much less empirical and much more theoretical. Ultimately, we wind up going in circles, fighting for our different theories instead of finding systematic empirical relationships. When a biologist examines an ecosystem, he will log what types of organisms he sees, what the food chain is, etc. But when you ask an economist to study the same ecosystem, he will come up with a formula link- ing the assumed presence of N amount of organisms and M types of food. If he were to study genetics, I assume that he would take N genes and try to create a mathematical model to explain their existence. A true geneticist, however, will dedicate his life to studying a single protein. He will do so in a very descriptive and empirical way, and he will not try to formalize hypotheses so much as try to unearth a web of systematic relationships. The economist views economic relationships as if they were the laws of gravity, and he characterizes them as if they were gravitational constants – he believes that it is only then that he can manage to explain an entire economic system. is doesn’t work.
Is it even possible to unearth empirical regularities within economics, which is in its character subject to human individuality? One can experiment in physics and also in biology, but not so in human society.
Yes, that is true, but economists could at- tempt to expand their understanding of technological modernization and of the relationships between different economic branches. For example, we should certainly be able to determine the degree to which production will increase if electricity is introduced into a certain region. We need this form of empirical knowledge in order to make decisions. We should investigate how the “sub-system of electrical networks” affects the performance of the superordinate “system of heavy industry.”
Why doesn’t economics address this?
We don’t study this because it is not, in truth, viewed as part of academic re- search. But this is exactly the type of thing that we must know in order to make effective decisions and find solutions to problems. is is because many stances within modern economics are currently vulnerable and easily falsified. Even if they are not true, these [stances] are then used as the core basis for our re ned theoretical models. But they are too far away from practical measurements and savings.
Furthermore, theoretical economics is fractionalized into many different schools of thought.
There are many, many theories that are face to face with valuable experiments and are thereby based on empirical regularities. But even these empirical methods are often simplified; the economists will measure values and then apply them to a statistical test. Real work in the field – which makes use of all sorts of research tools and techniques and not just the ones written down in textbooks – is still very rare. We economists don’t work in the eld; we don’t work like microbiologists who are constantly hunched over a microscope or like environmentalists who take direct measurements of the ecosystem.
Listening to you, I have the feeling that despite being an economist, you are turning your back on the field more and more, and that you are beginning to prefer fields such as biology or environmentalism.
Economics evolved in the shadow of classic Newtonian physics. is is where it draws its key hypothesis on balance and equilibrium. is kind of approach is very limited. The model for the economy should be, looking back on it, environmentalism. Environmentalism is about open systems, value flows, divisions in work, and the interaction between different components (companies, individuals, firms) in a complex system – it mirrors the way that individual organisms interact with each other within the food chain.
Biologists don’t even try to make large generalizations. They do not say, “Let’s assume N number of organisms.” Instead, they study and focus on individual cases, which are then used to develop explanations or classifications. Of course, they do try to summarize a higher, general framework, but such generalizations are always based on the accumulation of detailed specifics. I do not currently see any economists trying to do the same.
Are you familiar with the work of Fritjof Capr? It seems to me that your arguments are very similar. He suggests that the current paradigm within the sciences, which bases itself off of physics, should look to and follow a new one – environmentalism.
Yes. Our approaches are related in two ways, but even so they di er a little. The first is in methodology. e second is derived from really understanding [the truth behind] sustained advancement. Combining economic research with education about the ecosystem creates a good jumping board from which to take o and swim in the problem- filled waters of today. From there we can find answers to questions – whether we have enough energy and food, and whether we can, at the same time, continue to sustain global advancement. These are the conclusions that I have arrived at and what I am striving to achieve here at the Earth Institute – I am cooperating with climatologists, biologists, and hydrologists.
Do you support these kinds of interdisciplinary approaches that combine economics and biology, or economics and psychology?
Definitely, yes. at is more or less the reason behind the creation of the Earth Institute. An interdisciplinary approach is o en taken, for example, for research on the frontiers of economics and sociology, or history and sociology, etc. is is good, but I think that the interdisciplinary approach should have an even broader meaning, and include the Earth’s physical systems – water, climate, biodiversity, energy, and “human systems,” i.e. populations. Sustained advancement is the number one challenge for the whole planet. Integrating physical planetary systems with human economics and social systems is a way to combat this challenge.
Do you sometimes feel as if you are starting a whole new scientific discipline? Such that would, in essence, encompass “everything” – in a similar vane as August Comte attempted for sociology.
I am a great admirer of Professor E. O. Wilson of Harvard, under whom I, much as the whole world, became educated regarding the questions of ecology and biodiversity. Approximately ten years ago, he wrote an influential book called Conscilience: The Unity of Knowledge. In it he proposes the uni cation of all knowledge across the whole spectrum of natural and social systems. is idea is very attractive to me. Yes, specialization is very beneficial, but so is the integration of biology and economics. We need enough food to survive, and in the biological world, we need to understand what drives us as human beings. I think that what Wilson said a quarter of a century ago is true – that evolutionary psychology would be a key discipline in the quest to under- stand human beings as such. While this is surely not certain, I think that this kind of integration will lead to new findings. is isn’t a metatheory for another metatheory: the question is whether we will be able to gain more insight and answers through this kind of integration. I think the answer is yes.
Lets come back to pure economics. which economists have had the biggest influence on you, and which ones do you admire the most?
Definitely Adam Smith – his book, The Wealth of the Nations, is really an amazing piece of work. It still applies, even 200 years a er it was first released. The book is much richer than people think. e only thing that people usually know abut Smith is that he is “the father of the free market.” That is because they did not read The Wealth of the Nations. I kindly recommend that everyone should read this book. Second is John Maynard Keynes– he was the greatest political economist of the 20th century. He brilliantly managed to combine political know-how with economics. His “discovery” of macroeconomics along with his understand- ing of the European ecopolitical situation a er the First World War are priceless.
And if I should name economists that have had a major influence on me, then I have to mention Paul Samuelson, Kenneth Arrow and James Tobin – three influential researchers who view economics as a means to improve human life. They manage to brilliantly combine theory with scientific and practical research, to move forward and really stipulate clear ideas.
What about economists who support the free market, such as Friedrich August von Hayek, the leading representative of the Austrian school, or Milton Friedman?
Hayek began in the right direction, but went too far astray. I agree with him that an economy with too much government regulation is harmful and risky. But then he sort of became a guru for liberalism in a style of laissez-faire.
He stated that a welfare state would lead to the same suppression of democracy and freedom as a state under socialistic ownership. is was a very bad answer. It was not confirmed. I feel similarly towards Friedman. He held strong beliefs that could have lead to a breakthrough – he helped people understand the big financial crisis as a monetary phenomenon, but I think that he “overdid it” as well.
Did he put too much emphasis on monetarism?
His idea to literally place the growth of monetary offers on autopilot (preset automatic growth of monetary offers in x percentage) and to end the central bank’s role as a “pilot,” was never really taken seriously in scientific circles. I do think, however, that his theory of inflation as a monetary phenomenon does have its foundations.
But I know that Friedman did not support a directly laissez-faire economy, but rather a very free and minimally regulated market – I think that this hypothesis is wrong, both empirically and analytically. Samuelson, on the other hand, arrived at one of the most important realizations within economics. According to his theory of public estates, under certain conditions a free market provides insufficient fundamental services. Markets work under certain conditions and under other [conditions] they do not. Friedman and others, who are in my view ideologists of the free market, ignore this basic fact.
Jeffrey David Sachs (1954)
Author of the book, The End of Poverty (2005), Sachs is the director of the interdisciplinary organization, the Earth Institute, at Columbia University in New York City. He is also currently the adviser to the secretary-general of the UN. In the past few years, the Times has included him as the only academic in the list of 100 most influential people in the world. Sachs received his reputation in the mid-1980s when, as a young Harvard professor, he came up with a recipe to solve the Bolivian problem of hyperinflation.
After the fall of the Iron Curtain, he advised Poland and Russia on how to transform their economies. Opinions on the level of his success, especially in Russia, di er. For example, Joseph Stiglitz, holder of a Nobel Prize in Economics and a colleague at Columbia University, alleges that Sachs’ shock therapy ultimately resulted in Vladimir Putin’s accession and to all current problems, including the conflict in Georgia. Sachs is married to his wife Sonia, a pediatrician who was born in Prague in 1954. They have three children.
Published in The New Presence (The New Presence), issue: 4 Autumn / 2008, pages: 3740, on www.ceeol.com.