Young Economists Session on the broad welfare concept with the Dutch Minister of Finance, Minister of Economic Affairs and Climate and Minister of Social Affairs and Employment.

June 19th, 2023.

On the 19th of June, I was invited to the Catshuis, the official residence of the Prime Minister of the Netherlands, as one of six young economists to engage in a coversation with the Minister of Finance Sigrid Kaag, Minister of Economic Affairs and Climate Micky Adriaansens and Minister of Social Affairs and Employment Karien van Gennip. The meeting aimed to foster a discussion on the broad welfare concept. In a short pitch, we, young economists, explained how our research relates to this theme and discussed the insights that come forward from our work. Additionally, we explored ways for enhancing the integration of the broad welfare concept into economic policy and for bridging the gap between policy and the economic science in this regard.

My perspective on the broad welfare concept and its importance have to a large extent been influenced  by Associate Professor in Economics of Wellbeing Nicky Pouw. Dr. Pouw's work, which is grounded in development economics, puts human wellbeing and inclusive development at the center, rather than the classical measures of economic prosperity. Dr. Pouw bundled her insights, which she gained from extensive research  on these topics as well as from field experiments in a vast number of development countries, in a recently published book, Wellbeing Economics. In her book, Dr. Pouw offers a new framework to think about economics - or rather to rehink economics -, arguing that, amid the many limits to growth we have been encountering over the past years, it is time to redirect our economy towards more sustainable and socially just processes and outcomes. To serve this purpose, economic growth must be viewed as a means to an end, rather than a goal in itself.  In other words, economic growth should be used to promote the well-being of these individuals, who must be at the  center of our interest. Welfare in broad terms, then, includes all socio-economic aspects that influence their well-being.

Historically, many economists have given thought to what welfare entails in broad terms, what these socio-economic aspects are that influence well-being, and how welfare can be accurately measured. This includes - amongst others - Adam Smith (1723 - 1790), Vilfredo Pareto (1848 - 1923), Arthur Cecil Pigou (1877 - 1959), but also Dutch economist Pieter Hennipman (1911 - 1994) and Arnold Heertje (1934 - 2020) - in whose honor the annual lecture is delivered. Pieter Hennipman argued that welfare is something which is subjective. He viewed 'welfare' as a formal, empty, term -  meaning that it has no concrete definition but this  is rather given to it by each individual him- or herself, based on what provides utility to that individual. Arnold Heertje, who was a student of Hennipman, continued this line of thought and argued for a 'formal, subjective and broad concept of welfare within the public debate. Heertje already warned for limits to growth, arguing that welfare is much broader than just economic production, consumption and income, but also includes aspects  that affect our quality of living and well-being in general - for example the quality of public institutions and the environment.

Also in more recent times, large contributions have been made to the study of welfare in broad terms. Most notable is the work of Amartya Sen, laureate of the Nobel Prize in Economic Science in 1998, for his work on social welfare. Sen's has worked predominantly  questions such as how fundamental resources should be divided within a society, how welfare and poverty can be measured, and how individual values can be included in collective decision-making, paying special attention to the least well off within society. His work inspired many academics, but also received many attention from within policy circles. In 2008, the French Government asked Joseph Stiglitz, Amartya Sen and Jean-Paul Fitoussi, how the wealth and social progress of a nation should be measured.  The report, known as the Stiglitz-Sen-Fitoussi report, concludes that it is misleading to evaluate the performance of an economy by focusing solely on economic growth and advocates a shift in emphasis from measuring economic production to measuring people's well-being, with more prominence being given to the joint determination of income, consumption, wealth and their distribution. It is important to emphasize that this does not mean that economic growth is wrong or something we should not strive for - rather, the message is that there are many other aspects that - alongside to growth - should become part of  our performance indicators. In essence, the report underscores that the performance of an economy cannot be viewed as separate from the environment, distributional considerations or other aspects of welfare in broad terms. When these aspects are not properly accounted for, limits to growth may be encountered - as we have been encountering over the past couple of years. 

To ensure that we don't keep running up against these limits, the broader aspects of welfare should receive a sufficienty large weight when evaluating the performance of our economies. What that the trade-offs or when determining those is something  the economic science can inform us about. This requires researchers to go beyond the classic models and strive to obtain an understanding of how distinct aspects of the broad welfare concept relate to each other and interact with each other. When it comes to policy-making, the successful integration of these aspects does not only call for a shift in focus from economic production to people's well-being, but  inherently calls for shift in focus towards  the long-term. When it comes to the determination of effective climate policies, which has a large intergenerational dimension, such a shift is of first-order importance. The current costs of action might be large, but delay in the implementation of effective policies introduce much larger costs on future generations. Costs of mitigation grow as climate risk intensifies, and so do economic losses due to physical impacts. Importantly, there is also a large, non-monetary component to these costs, as climate change threatens the livability of the planet and therefore directly affects well-being. The non-linearly growth of the costs of delay over time highlight the need for action today. 

While a shift from the short- to the long-term is crucial from an environmental perspective, it is relevant when thinking about the broad welfare concept in general. People's well-being depends to a large extent on their future prospects, and uncertainty or the lack of security regarding this can have substantial, negative effects on one's perceived well-being. It therefore is crucial to consider what the effect is of current policies on people's opportunities in the long run. 

The other young economists that participated in the event are Charan van Kervel (Radboud University), Simon Toussaint (University of Utrecht),  Wouter Leenders (UC Berkley), Emilie Rademakers (University of Utrecht) and Elisa de Weerd (Erasmus University Rotterdam).  Based on our research interests, we were allocated to different sub-themes related to broad propserity, i.e. 'sustainability' (Charan, Yasmine), 'distribution of wealth' (Simon, Wouter) and 'labour market' (Emilie, Elisa). 

To conclude, I would like to thank the Ministers for devoting their attention to this important topic, and for taking the time to listen with great interest to the insights of young economists. You can read more about the event and the views brought forward by all young economists in the ESB article 'Promovendi vragen meer aandacht voor de verdeling van welvaart' (in Dutch).

Interview with Professor Hunt Allcott (Stanford University) on uncertainty, inequality, and mitigation in times of a warming globe.

June 27th, 2023, joint with A. Kurz.

The Tinbergen Institute annually organizes a three-day lecture series, which is dedicated to upcoming field within economics. This year, the lecture series were dedicated to Empirical Environmental and Energy Economics, and were delivered by Hunt Allcott, Professor of Global Environmental Policy and Economics at Stanford University. During the lectures, Professor Allcott explored with the students the latest empirical evidence on climate impacts, addressing critical aspects such as the social costs of carbon, and policy design challenges faced by governments in their pursuit of emissions reduction and climate change adaptation. 

Together with Antonia Kurz, I had the opportunity to interview Professor Allcott, who is widely recognized as a leading expert in the field of environmental policy, energy systems, and behavioral economics. We asked for his insights on climate change, the effectiveness and distributional consequences of environmental policies, and the importance of interdisciplinary research within this rapidly expanding field. Below, I post some of the questions and answers we asked and which, from my own point of view, are most relevant in the debat on the effectiveness and fairness of climate policies.  

To sustain a livable planet for future generations, we need a long-term perspective. However, short-termism is inherent to politics, and this much affects the implementation of effective climate policies. A discussion at the heart of climate change economics is how to evaluate the welfare of future generations, and which social discount rate to use. How do you view the trade-off between current and future generations?

"There are a couple of considerations. The first is that there are many different investments we need to make as a society, such as in education, public transport, roads, bridges, poverty reduction, and new businesses. We thus need to make sure that we allocate funds to each of these investments in a way that makes sense in concert with all the other investments that we are making. One way to answer this question then, is by asking what the rate of return is we get on other investments and ensure we apply a similar rate to climate mitigation investments, considering the time horizon and the risk profile of the investments. An alternative is to start from first principles and think about how much we would want to invest in our futures. As we will be richer in the future, and hence the value of additional consumption will be less than when we are poorer, we might want to forecast how much richer we will be in the future when climate investments pay off. That calculation can then be used to determine the interest rate one would accept when saving money from our current state to this future, richer state." 

What do you think is currently the biggest challenge for effective climate policies? Do you think that distributional considerations are sufficiently considered in policy design?

"The biggest challenge for effective climate policies is that many current policies are less effective at reducing CO2 emissions than alternatives such as carbon pricing. Mandating renewable energy sounds great. Subsidizing electric cars sounds great. Energy efficiency subsidies and standards sound great. All those policies are widely implemented due to popularity among the public but, as far as we can tell, they do not achieve as much CO2 reduction per dollar of social cost as a carbon tax would. The popularity of these policies might be attributed to distributional consequences, where subsidies benefit current consumers and companies while passing the negative consequences, including increased government debt, to future generations. As a result, the current policies lead to less greenhouse gas reduction than could be achieved."

The full interview can be read on the Tinbergen Times

International Women's Day Initiative 2022 of the Faculty of Economics and Business, University of Amsterdam. 

March 8th, 2022.

On the occassion of international women's day on the 8th of March, 2022, the UvA EB Career Center and UvA EB Diversity & Inclusion Office worked together to create the 'EB Female Leaders' - webpage. The webpage shows a collection of inspiring female  employees, faculty, researchers, students and alumni of UvA Economics and Business, and has the purpose to enhance their visibility within the faculty and share their wisdoms to inspire the community.

The role of women within acedemia has received increasing attention in the past years, as women remain underrepresented in fields such as tech, natural sciences and economics. In the field of economics in particular, the gender gap is (and remains) one of the largest, especially when it comes to tenured positions. This is result of an increasing drop out rate of females along the pipeline: the percentage of females students is much larger than is the percentage of female PhD students. Likewise, the percentage of female assistant professors is much lower than the percentage of female PhD students, yet higher than the percentage of female full professors.

The WiE index, which is calculated by the Women in Economics (WiE) Initiative, can be used to illustrate the gender imbalances and underrepresentation of female economists in leading positions within academia. The WiE index is calculated based on three indicators: the share of women among i) the top-authors within the economics literature (as ranked by RePEc), ii) the leaders of the highest-ranking think tanks, and iii) the faculty of the top-25 economics departments (based on QS World University Rankings 2020).  The results for 2022 (compared to 2021) indicated that only 7 (6)  percent of top-authors within the economics literature are female. The percentage of female leaders among the highest-ranking think tanks is 19.5 (20) percent, and the percentage of facultuy among the top-25 that is female is 22.5 (21) percent. On a scale of 0 to 100, where 0 indicates gender disparity and 100 full gender parity, these outcomes lead to a score of 33 (compared to 31 in 2021). 

While awareness on gender imbalances is increasing and progress is (slowly) being made, there still is a need to actively enhance diversity within the field of economics. By encouraging equal opportunities, a drop out of  women along the pipeline can be prevented, encouraging more women become part of (or stay in) the field. To achieve, it is - amongst others - important to  increase the visibility of women, as well as to create awareness of the contributions they make to the field and their importance.  The 'EB Female Leaders' - initative is an exampe of an effort made in support of this goal and I am happy to be part it. 

For the initiative, two questions were put to all female leaders, who their role model are and what advice they would give to their 17-year-old self. My answers to these questions were as follows:

Who was/is your Role Model and why?

I admire any woman that intrinsically motivates me to become a better, more complete version of myself. Fortunately, not everybody possesses the same qualities, but different people possess distinct qualities that are each worth embracing. As such, there is not just one single woman I regard as role model. Depending on the qualities one seeks in a role model, different women come to mind. When it comes to academic qualities, for example, I would name Ester Duflo, Nobel Prize laureate of 2019. This is because of her commitment to supporting scientifically informed policy making to mitigate world poverty, the great achievements she has made to serve that purpose, along with her ability to inspire students with the same enthusiasm she has when speaking about her research. When it comes to leadership qualities, I view Jacinda Ardern, New Zealand’s prime minister, as a role model because of the great effort she makes to address problems that really matter, such as combating climate change as well as gender inequality. What makes her truly stand out to me is her ability to combine an effective and empathetic leadership style, being able to show a large degree of empathy as well as solidarity with the country’s population throughout crises. 

What advice would you give your 17-year-old self, reflecting on your personal or professional  challenges, experiences or successes?

Don’t worry too much about the opinion of other people. There will always be someone who doesn't like what you’re doing or the way you're doing it. You should not allow that to hold you back in the development of your own, unique personality neither let it influence any choice you make. Let yourself be guided by your own curiosity and find what it is you have a true passion for, what motivates you to keep going and what truly makes you happy. At the end of the day, that is all that matters. And, as long as you are happy, people that genuinely care about you will be as well.

Skyline of Rotterdam. Photographed from the Euromast. August, 2021.