Let’s discuss a topic rarely covered in economics. Feelings!
People across the world have been drenched in emotions as of late. The collective energy resonating through recent GOP debates could have brought Regan back from his grave.
Underemployed college graduates took to the (Wall) Streets of New York City with fervor better spent on their senior theses pleading for the US Government to impose higher taxes on the rich.
much easier than the real world
Although the connection I’m making will take a bit of maneuvering, David Brooks’s recent Op-Ed piece entitled, “The Limits of Empathy,” can explain much of how people can convolute themselves to such petty, close-minded opinions. Of more importance, however, I believe expanding upon his insights on the limits of empathy allows us to move beyond our limitations that keep us from progression.
I’m a fervent believer that without the necessary tools and experiences, people are lacking in the foresight needed to best utilize their time and resources. In a perfect world, game theory could perfectly explain human interactions; people could make decisions based on perfect information and impeccable foresight, giving them the ability to capture all the benefits and internalize all of the externalities of their actions. Unfortunately, that isn’t the case. Although I know the tenth beer will surely put me over the edge (and at $6 a pint, put a dent in my pocketbook), I’ll nevertheless succumb to the tempting whispers of Dionysus.
Ramblings aside, empathy is just one tool at our disposal to keep us from remaining in our comfortable bubbles, ignorant of the interconnectedness of the world we live in today. Having empathy for a friend, a cause, or even a stranger is a necessary step to immersing yourself in their shoes, but self-interest (come on, I’m an economist) always seems to rear its head to prevent action. As Brooks points out, “you may feel the pang for the homeless guy on the other side of the street, but the odds are you are not going to cross the street to give him a dollar.”
If empathy isn’t enough, then what is? I think everyone needs a little shove to reveal that putting ourselves in new, uncomfortable experiences is the only way to grasp the extravagance of issues we face today. For example, an Economist briefing cautions against the unintended consequences of taxing the rich, an externality worth considering when blindly protesting for higher taxes on the rich.
One way in which people and corporations are moving towards a higher understanding is through what many today call “impact investing”. Essentially, impact investing is a form of investment which seeks social returns in addition (or in lieu of) financial returns. For some investors, this is the nudge needed to a better understanding of the world. Although excessive usage of buzzwords is one of my pet peeves, the ideas behind impact investing are nothing to scoff over.
There are many forms of impact investing today. Some of my favorite examples include:
- Acumen Fund – A non-profit venture capital (sounds ironic, doesn’t it?) which employs its talented team and vast amounts of capital to invest in global initiatives which not only seeks financially-accountable but also socially-responsible results. In addition, the stories that the organization recounts inspire thousands of people to take the time to reflect on the world we live in today.
- Grameen Danone – An initiative initially developed to produce cheap yet nutritious yogurt to fight malnutrition. In order to fund the initiative, the Danone Communities Fund was developed so investors to Danone could opt to invest in the cause, knowing they would not receive a financial return on their investments.
what's cheaper than cheap labor? free intern labor!
As for myself, a mixture of an urge to go abroad, an interest in finance, and of course, empathy helped motivate me to immerse myself in Atorkor a Summer ago. While my journey only lasted two months, I believe I took away just as much (if not more) than I contributed to the people I interacted with. Pulling fish nets all day helped me discover how people in developing areas get trapped into their poorly-paying jobs. Interviewing clients showed me that finance wasn’t all about credit-default swaps and derivatives.
I’m by no means advocating for everyone to spend time in a far-away country as a way to gain insight into global issues. I do believe, however, that having empathy is just one step in developing a holistic understanding. Everyone needs a nudge to break through their bubble. What will yours be?
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