Economists love to poke their noses into subject matters they know nothing about. But in defence of economists, there’s usually an economic angle to the debate. So in the time-honoured spirit of intrusion, it’s necessary to weigh in on two news items this week that have enormous implications for the labour market – and the economy – of the future.
The first is the Organization for Economic Co-operation and Development’s Program for International Student Assessment, which showed Canada’s 15-year-olds have slipped in the global rankings in math competency. Falling behind countries such as Singapore, Hong Kong, South Korea, Switzerland, Estonia and Finland, Canadian scores have dropped 14 points in nine years. Math students in Shanghai performed at the highest level. (Although as Jeff Johnson, chair of the Council of Ministers of Education Canada, correctly pointed out, there is a social equity issue as well. Canada may fall behind Shanghai, but our students still have a better chance of success regardless of socioeconomic background.)
“I’m going for dinner,” my friend said when I asked about her trip to Montreal. She’s the owner of one of Calgary’s finest restaurants and it seemed like a long way to go for something to eat. “There’s a restaurant there that I love and I’ve got to go back,” she explained. She also had a good friend to visit and spent a few days there, but the trip was really motivated by that one particular restaurant.
Fine dining isn’t a new concept, of course; the Michelin Guide started awarding stars to restaurants back in 1926. And the wealthy have always prized a delicious meal in what used to be called “fancy” restaurants. Thirty years ago, many Canadians would dine out only when they travelled or for a special event such as a birthday or anniversary. By the 1990s, dining out had become a common way to socialize. It was recreational.
Most of us remember as children learning the Bible’s Golden Rule: “Do to others what you would have them do to you.” It’s too bad that so many of our politicians and trade negotiators seem to have forgotten this, especially around free trade and procurement.
The pitfall with trade liberalization is that governments want only the parts that work in their favour. They would love it if their domestic or provincial businesses were to have broader access to bid on contracts or sell product into other jurisdictions with no tariff barriers or obstacles. But when it comes to outside companies gaining access on their home turf, suddenly they believe the free-trade agreement needs some tweaking.
This column originally appeared in The Globe and Mail on October 25, 2013.
Why is it that people with good intentions so often suffer from terrible logic?
A good example is the so-called “divestment” movement, popular these days with academics and environmentalists concerned about global warming. The idea is to urge everyone to sell their shares in petroleum companies as a way to punish them for digging up and selling hydrocarbons. The website for one particular movement, gofossilfree.org, smacks the reader in the face, saying:
“It’s wrong to profit from wrecking the climate. It’s time to divest from fossil fuels.”
As with a lot of well-intended causes, the divestment movement tugs on emotional heartstrings but lacks any intellectual basis. There are two non-financial reasons why investors could be persuaded to sell their stocks in an oil company, neither of which makes any sense if carried to their logical conclusion. Worse, both could exacerbate the environmental problems.
This column originally appeared in The Globe and Mail on October 11, 2013.
“Don’t tell me you believe those numbers!” she said, practically laughing. “The government is lying to us!”
I was a bit taken aback, but I shouldn’t have been. The woman in the audience was reacting to my statement that Canadian inflation is currently below the Bank of Canada’s 2-per-cent target. But increasingly, I find that people I meet are losing faith in Statistics Canada’s official figures. And that’s a problem.
The skeptics have a point. Since August, 2008, prices in the all-items basket of consumer goods and services have risen 6.5 per cent. But if you break it down into its components, you quickly sympathize with the disbelievers: Prices for discretionary items have been stable or falling, but prices for many non-discretionary items have taken off.
This column originally appeared in The Globe and Mail on September 27, 2013.
Dear Applicant: Thank you for your letter inquiring about positions in our economics department. At this time, we have no openings. However, I will keep your letter on file should an appropriate job become available
At least, that’s what I am required to tell you. But here’s what I’d really like to say to you – and to every recent economics graduate who sends me the same letter.
First, I know it’s lousy for bachelor of arts grads looking for a job “in their field.” Twenty years ago, it was lousy for me too. It’s almost always lousy. In a way, it’s kind of supposed to be – a small rite of passage to welcome you into the working world. It’s sort of like being froshed.
But if I may, I would like to offer some advice.
This column originally appeared in The Globe and Mail on September 12, 2013.
Students of classical economics all learn about the three factors of production: Land, labour and capital. Over the years, though, we’ve come to learn that land, labour and capital are actually not quite sufficient. They never spontaneously combine on their own to create anything new and useful. What’s missing is a fourth factor: Innovation. Sometimes, it’s called creativity or entrepreneurialism. But by any name we give it, innovation is what drives wealth creation.
On this front, Canada was dealt some sobering news last week. In the most recent global competitiveness rankings by the World Economic Forum (WEF), Canada placed a disappointing 14th. The report considers a variety of criteria, and Canada scores reasonably well in financial markets, stable institutions, and infrastructure. But where we stumble badly is innovation.
The author of the WEF report, Klaus Schwab, writes: “Although substantial gains can be obtained by improving institutions, building infrastructure, reducing macroeconomic instability, or improving human capital, all these factors eventually run into diminishing returns. … In the long run, standards of living can be largely enhanced by technological innovation.”
It’s almost as if he’s pointing directly at Canada.
This column originally appeared in The Globe and Mail on August 29, 2013.
John Kenneth Galbraith once said, “The only function of economic forecasting is to make astrology look respectable.” It’s a harsh critique, but he was right. Making economic predictions is notoriously difficult. And the late Prof. Galbraith would not have been surprised to discover astrologers looking even better compared with economists today.
The level of uncertainty in the global economy has experienced an upward shift in the past several months; economic uncertainty is now so pervasive, it feels normal. That may explain why that even as the economy is improving, the mood isn’t the same as it was a decade ago.
Economists have never convincingly outperformed astrologers when it comes to predicting the future because the future is unknowable. However, the confluence of three major shifts in 2013 has cranked up the volume on the “unknowable” dial.
The first shift is the slowing of the BRIC countries (Brazil, Russia, India, China) and the flow of capital from emerging markets. For a decade, they were the assumed engines of the global economy. But for a variety of reasons, growth in the BRICs has slowed and they can no longer be expected to do all the heavy lifting.
This column originally appeared in The Globe and Mail on August 15, 2013.
“Hold down the little red button,” I told my mother who, in her late 60s at this point, was learning to use her first cellphone. “But that button says ‘End,’” she said. “I want to turn the thing on, not turn it off.”
She had a point. But the way the phone was designed, that is how you turned it on – hold down a button labelled “End.” For the engineer who designed the keyboard, this made sense. For my mom, it was madness.
The world is full of such products – wonderfully engineered, but poorly designed with no eye for how the average person might use it. This highlights a certain quality that isn’t taught in business schools but can make a huge difference for companies developing new products: empathy.
Empathy is the ability to see the world through someone else’s eyes. It’s far more than just being a nice person. If properly developed, empathy can give you and your company a distinct competitive edge. Negotiating a contract, dealing with workplace conflicts, coming up with a marketing campaign, or dreaming up the next must-have consumer gadget all require the ability to see the world through eyes that aren’t your own.
Sadly, managers and human resource departments too often neglect the interpersonal skills that are so essential to achieving results. Along with other aptitudes such as story-telling and creativity, empathy is underappreciated by many in the corporate board room. The fact that we even call them “soft” skills implies that they’re less important.
To be fair to business schools, it’s difficult to teach empathy. There is no formula to follow, no textbook that explains how it works. While some people may possess empathy more naturally than others, it’s still a trait that can be developed by those willing to put in the effort.
In the design of consumer products, for example, the most important questions to ask are, “How would someone else use this product? How would they look at it? Would they be able to figure it out easily?” Purposely asking these questions puts you on the path to developing empathy.
My job requires a good deal of travel and staying in hotels, and I’m always amazed by the lack of care taken to see the world through the eyes of the traveller. Why are the bottles of shampoo, conditioner, and body wash in the shower labelled with such tiny letters, when they’re meant to be used where people aren’t wearing glasses and lighting is dim? Why is there no easily accessible plug-in near the bed, where people want to charge their phones and use their laptops? Why are the clock radios almost always cheap pieces of garbage with alarms too complicated to set?
The reason is that not enough hotel room designers bother to empathize with the guests, especially on the small but important details to make a person feel really comfortable.
The economic benefits of empathy go beyond good product design. Think about negotiating with a company from which you purchase supplies or services. Has care been taken to research the financial constraints that may be pressing on the supplier? Maybe costs for the supplier have risen – or maybe they’ve fallen. How might the supplier perceive your company? Purposely and actively empathizing with the person on the other side of the negotiating table will give you an advantage.
Think, too, about conflict resolution in the workplace. The most common problems arise when workers don’t see eye-to-eye – that is, they cannot (or will not) empathize with the other. Empathy doesn’t require one to agree with the viewpoint of another, but it does require the effort to consider how someone else sees the problem.
The ability to see the world through the eyes of others is an economic imperative. If empathy were given the attention it deserves, companies would find new ways to please their customers. Innovators would dream up systems that save time and money. Conflicts would be resolved more easily. And maybe – just maybe – engineers would design products that are simple to use. Even by my mom.
Todd Hirsch is the Calgary-based chief economist of ATB Financial, and author of The Boiling Frog Dilemma: Saving Canada from Economic Decline.
This column originally appeared in The Globe and Mail on July 31, 2013.
Last week’s Economist magazine carried a headline reading, “The Curious Case of the Fall in Crime.” It seems that all around the industrialized world – including in Canada – all kinds of criminal activity is on the decline. Contrary to the belief that evil thugs lurk around every corner, we are actually safer than we have been in decades.