“Sunk costs” is a useful concept. Its definition in economic theory has many expressions in popular speech. The favorites seem to be “don't spend good money after bad” and “let bygones be bygones.” In less colloquial language, decisions should be taken on the basis of future benefits related to future costs and not on the basis of past costs. One should not let a poor prior decision color the decision to be taken now. Nevertheless, they do and that is why “sunk costs” is such a useful concept. The seemingly endless American wars in Afghanistan and Iraq are a good example. Politics explains why presidents and prime ministers do not apply the concept of sunk costs. In matters as grave as war, reversal of course is an admission of a monstrous error. So, to avoid paying the political price, the powers-that-be will “kick the can down the road” and ignore the concept of sunk costs. In the case of the simultaneous American wars, the price tag is already estimated in the trillions of dollars.

Economic theory is not much different. Its conceptual framework now exhibits sunk costs and nowhere is this more evident than in climate change and the intertwined mass extinction crisis. I italicize the adverb “now” to emphasize that at one time the benefits of the framework were greater than the costs, but that time has long since past. When did it pass? Why did it pass? And what exactly do I mean by economic theory?

Henry Jenkins, Director of the Program of Comparative Media Studies at the Massachusetts Institute of Technology, imagines a new form of academic unit where Departments “operat[e] more like YouTube or Wikipedia, allowing for the rapid deployment of scattered expertise and the dynamic reconfiguration of fields.” He calls it the “YouNiversity” where “we don't so much need a faculty as we need an intellectual network.” The methodology lies in an analogy. “Much as engineering students learn by taking apart machines and putting them back together, many of these teens learned how media work by taking their culture apart and remixing it.” The filmography of The Economics of the Yasuní Initiative adopts the spirit of the YouNiversity.

As an assistant to Professor Vogel since 2005 – the year that YouTube went online – I have seen first-hand how video-sharing has reconfigured learning. YouTube economizes the most precious of all resources: time. One can quickly gain familiarity with a diversity of topics through clips, some less than a minute long, and then lever those clips into classroom discussion. Nevertheless, the rich reservoir of the YouTube site raises the most mundane of questions: which clips?

Like so many questions in economics, the answer depends on the purpose. The purpose of The Economics of the Yasuní Initiative is to persuade the public that the carbon-rich-but-economically-poor countries must be compensated to get them through the bottleneck of a cowboy economy. Entertainment is key to persuasion.

As soon as the Nobel Prize in Economics of 2001 for George Akerlof (Berkeley), Michael Spence (Stanford), and Joseph Stiglitz (Columbia) was announced, I got a flurry of emails from students and friends. The reason they were congratulating me is that these were among the five or six names I had for the last several years been predicting and hoping would get the prize. And I must admit feeling mighty chuffed by the announcement. The work of Akerlof, Spence, and Stiglitz is among the most creative research that my profession has seen. Their papers involve a blend of logic and social observation which is very rare and hard.

The paper that gets the first mention in the Nobel citation is, rightly, George Akerlof's classic, ‘The Market for Lemons: Quality Uncertainty and the Market Mechanism’. Much of this paper was written during the year 1967–8 that Akerlof spent at the Indian Statistical Institute in New Delhi; and it suffered the fate common to a lot of truly original research—it was initially rejected by leading journals as being sub-par. It was eventually published in the Quarterly Journal of Economics in 1970.

The ‘lemons’ in the title refer to second-hand cars or duds that usedcar sellers often try to pass off as if they were of superior quality. This paper, written mainly in the form of examples, illustrates a point of immense importance. Much conventional economics used to be done under the assumption that buyers and sellers are fully informed and rational.

Introduction

Recently, several writers have argued that globalisation erodes national specificity and leads to long term convergence of structure, institutional set up, culture and, as a consequence, economic performance of countries. This does not correspond to observable facts nor has it been the message of this book. One of the most interesting developments of the 1980's is that despite globalisation, the distinctive features of national environments, have attracted much greater analytical attention than previously (Porter, 1990, Butry, 1991) and are seen by many authors as explaining differences among countries in competitiveness, growth and income.

While the post war, ‘golden age’ growth period from the early 1950's to the early 1970's was characterised by convergence between the OECD countries (Gomulka, 1971, Cornwall, 1977, Maddison, 1982 and Abramovitz, 1989), as well as by a trend towards an increase in economic and social integration and reduction in inequalities inside nations (cf. the small but real closing of the gab between the Mezzogiornio and Northern Italy and a lowering of income distribution inequality in many OECD countries), the diverging features have been significantly more important in the two following decades.

National specificity remains important and appears quite definitely to bear a relation to the capacity to produce, acquire, adopt and use technology. The erosion of the autonomy of national systems through globalisation is not synonymous with convergence and improved integration.

Has India Taken Off?

In recent times India has been getting a better international press than ever before.

When it comes to crafting national economic policy, few political leaders in the world have had the success of Singapore's Lee Kuan Yew. Whatever reservations one may have about his politics, it is remarkable how he steered Singapore from a poor nation to a fully industrialized one in three decades. He has also written on the economic problems of different nations with remarkable prescience. During his term as Prime Minister of Singapore he routinely expressed pessimism on India. ‘It was sad to see the gradual rundown of the country’, he wrote in his book, From Third World to First, and added in his inimitably undiplomatic style that the crockery at a formal government dinner was very bad and ‘one knife literally snapped in my hand and nearly bounced into my face.’

It therefore caused a stir when, in early April, on the occasion of the founding of the Lee Kuan Yew School of Public Policy in Singapore, he predicted that India will be propelled into the ‘front ranks’. In this speech, crammed with information and analysis, he argued that, over the next decades, ‘China and India will shake the world. … In some industries, [these countries] have already leapfrogged the rest of Asia.’

The European Union is on track towards a common currency for eleven of its fifteen member nations. The culmination of this currency merger will occur on 1 July 2002, when national currencies cease to be legal tender and all citizens of the participating nations switch over to the use of euro notes and coins. The main motivation behind the euro is, arguably, to boost European trade and challenge the US dollar's primacy as world currency.

Whatever the motivation, this is a more momentous event for the world than most people realize. The reason is that it points to the future. The current international monetary system is increasingly showing up as unviable for the emerging world economy. And my guess is that the euro is the start of a long process that will take us to a single-currency world. This was in fact a recommendation made in 1878 by the English economist Stanley Jevons. In outlining the advantage of an ‘international money’ he had to, it must be admitted, scrape the barrel's bottom. By the time a similar case was made again in 1984 by Harvard's Richard Cooper (who argued for one currency to be shared by all the industrialized nations of the world), the idea did not seem quite as far-fetched. Since then the structure of the world economy has changed even further; and the repeated crises of the 1990s—Sweden 1992; Mexico 1994; Thailand, Indonesia, Korea 1997; and Japan currently teetering on the brink-is evidence of this.

Introduction

Social marketing is becoming increasingly relevant to the developing world. The success of social programmes has significantly contributed to the process of development in the countries of the Third World and the failure of such programmes has resulted in tardy development. Their success has been attributed to the adoption of marketing approach to the social/development programmes. In promoting any social idea or issue, it is not enough to prepare the communication programme. Everything associated with the delivery system has to be taken care of. Let us take the example of the immunization programme. One cannot expect the success to come only through catchy advertising campaigns. The network of primary health centres, with proper staff, adequate stock of vaccines kept under prescribed conditions, quality of vaccines and the price one has to pay for immunization are significantly important. It is the marketing approach which helps in gaining an insight into these finer aspects.

Social marketing, as the concept evolved, acquired two different dimensions (Luck 1974). One dimension of it related to social responsibilities of marketers, mainly in response to consumer advocacy movement and also the pressures of government regulations. In this case, the focus is on economic benefits to business and social benefits to society that emerge from the adoption of socially responsible business policies by business organizations (Lazer and Kelley 1973).

One of the first signs that greets arriving passengers at Kathmandu's Tribhuvan Airport instructs them to ‘first clear immigration before you pass out’. On a recent trip to Nepal I fully appreciated the airport authority's concern. Thanks to the bumpy flight over the Himalayas, one does feel somewhat light in the head as one conducts oneself through the rites of entering the country.

I took to Nepal quickly. It is beautiful; the people lack intrigue; the artwork on building façades and thangkas is exquisite. Besides, there is much to occupy an economist's attention—the haggling in the bazaars, the attitude to money and work among auto-drivers and roadside entrepreneurs, the stratagems and irrationalities in gambling parlours, and, most remarkably, the economy's ability to effortlessly switch between two currencies. Buy a yak-bone sculpture, have a meal at Rum Doodles (highly recommended), or take a taxi. Everywhere you have the choice of paying in Nepalese or Indian rupees.

This is a textbook case of ‘currency substitution’ or ‘dollarization’, where one economy accepts another's currency for its day-to-day transactions. This need have nothing to do with the dollar—though it often does. For instance, Panama has no national currency of significance. It runs on American money. It is true that it saves on running a central monetary authority, but the policy makes Panama vulnerable to the actions of the American Fed.

Introduction

When promoting his newly invented roller spinning machine in Britain's textile industry, John Wyatt wrote in 1741: ‘Adopting the machine, a Clothier formerly employing a hundred spinners might turn off thirty of the best of them but employ an additional ten infirm people or children …’ The attorney general was won over and, in granting a patent to the invention, noted with awe how ‘even Children of five or six Years of age’ could operate the machine.

Commending an invention for its ability to facilitate child labour or upholding children's work as an instrument to out-compete other nations in global trade are now matters of distant history. In fact, quite soon after Mr Wyatt's invention began replacing adults with children, Britain started to discuss policy for curbing child labour, which culminated in Robert Peel's Factories Act, 1802. By the end of the nineteenth century child labour was on the decline in most industrialized nations. However, the global child labour problem did not come to an end. As data began to emerge from developing countries, it was evident that child labour, especially some of the worst forms found mainly in factories and the manufacturing sector, had simply shifted to the Third World.

Over the last ten years, thanks to serious effort at collecting data, we have come to acquire a fairly good picture of the global map of child labour.

Introduction

This paper begins with two main assumptions. The first assumption is that the United Nations Environmental Programme (UNEP) is the key institution of global environmental governance. Developing countries and their individual concerns play a crucial role within the discussion surrounding the reform of the global environmental governance system. UNEP's current ability to perform its functions properly needs to be developed. The second assumption is that developing countries have to promote the process of development as well as environmental protection. Therefore, they need to participate better in global environmental governance.

Following from the main assumptions, several guiding questions are of crucial importance. First, is institutional reform of UNEP necessary and what are the main challenges? Second, what is the impact of UNEP institutional reform on developing countries? What are developing countries' political positions on UNEP and its possible reform? Third, what will UNEP look like in the future and how can developing countries better utilize and strengthen the institutional frameworks that currently exist?

To answer the research questions, a multiple methodology design was adopted. The first method involved documentary research such as: collecting, analyzing, and summarizing related documents and achievements. Three sets of interviews were conducted with scholars and organizations relating to UNEP reform including IISD (International Institute for Sustainable Development), IGSD (Institute for Governance & Sustainable Development), Department of Geography and Environment at King's College and others.

Traditional economics downplayed the role of culture and social norms in the progress of nations, and was dismissive of anybody who evinced an interest in these topics. A joke that did the rounds among mainstream economists was the one about an expert on culture and economics who said, ‘There are three kinds of economists, those who can do mathematics and those who cannot.’

The same is true in other disciplines. The anthropologist Clifford Geertz observed that ‘The term “culture” has by now acquired a certain aura of ill-repute in social anthropological circles.’

Fortunately, this is changing. A whole lot of serious economists and anthropologists are now interested in the role of culture in economic and social life. This is partly because of the rise in the study of evolutionary game theory, which has given us a handle for modelling and understanding culture; and partly for the practical reason that with globalization, different cultures—once far apart—are today rubbing shoulders. At times this gives rise to new bursts of creativity, at times to friction and occasionally to amusement.

Travelling by train and bus in the West and in India can give one fascinating glimpses of cultural differences. In the West, it is impolite to ask the stranger who happens to be sitting next to you personal questions. So you make inane conversation about the weather. In India it is in fact impolite not to ask personal questions: it shows you're being standoffish.

Abstract

This chapter examines the contributions that the original Basel Accord took and that Basel II might make toward changing the banking regulation framework in Brazil. It will be argued that risk weighted capital requirements imposed by the Original Accord, which took effect in 1994, meant not just an important change, but almost the creation of a bank regulation framework in Brazil. It will be argued that the adoption of Basel II may increase not only the concentration level, which is already very high, but also the participation of the foreign capital in Brazilian banking system.

Introduction

Financial markets are submitted to more well-developed regulatory and supervisory mechanisms than those found in other sectors of the economy, a fact that is explainable due to the features that are inherent to the nature of the transactions conducted within these markets. Among such features, one may point out those which would explain the sensitivity of financial institutions, and specially banks, to crises, and the possibility that contagious movements will irradiate from such institutions, causing a systemic risk. Bank institutions, jointly with the Monetary Authority, are members of the monetary system, they receive and create cash deposits, fully liquid instruments. They operate by leverage, i.e., their assets and liabilities are higher than their capital and, generally speaking, they act as term changers: the terms of the liability transactions are shorter than the terms of the asset transactions.

Theory does not happen in a vacuum. Economists will think of John Maynard Keynes and the Great Depression. Keynes observed that markets do not always clear as economics had long taught. For example, one third of US labor force was effectively without work in the 1930s. Rather than prices, quantities adjusted and the economy settled into an unemployment equilibrium. By incorporating that observation into theory, macroeconomics emerged. Today, more reason exists than ever to believe that theory cannot happen in a vacuum. According to Stern, climate fluctuations may wreak havoc on the scale of the Great Depression and the wars of the first half of the twentieth century combined. Will a new macro-macroeconomics emerge? The crux of my argument is that it has already emerged. By the mid-1970s, a new macromacroeconomics could be gleaned in the economics of Boulding, Georegescu-Roegen, Schumacher, and Daly, and the science of Carson, Ehrlich, Hardin, and Prigogine. Ten years is a reasonable lag for putting into practice the synthesis. Had the political establishment acted by the mid-1980s, Stern's example of “climate change” as “market failure… on the greatest scale the world has seen” would have been largely mitigated or even averted.

Incorporation of the second law of thermodynamics into economics is the necessary condition to address climate fluctuations but it is not sufficient. One must also understand how institutions work and collective decisions are taken. In the language of thermodynamics, institutions define the boundary conditions while the decisions taken become points of bifurcation in pathways of success or failure.

The country of Nelson Mandela, of Nadine Gordimer, of Steve Biko, of Desmond Tutu, and also of Gandhi. It was impossible not to feel excited as the aeroplane did a broad sweeping turn and lowered itself gently on to the tarmac. The airport at Johannesburg, or Joburg—as the locals call it, presumably to save breath—could have been anywhere in Europe. Men and women of European descent and clothing hurry along to catch flights or taxis, the boutiques overflow with expensive fashion products, and the aroma of good coffee wafts out of stylish cafes.

Upon arrival, another guest and I are driven to Glenburn Lodge, and the address sounds pleasingly exotic to my ears—Kromdraai Road, Muldersdrift. The drive takes nearly an hour. The roads, lined with the most magnificent jacaranda trees in bloom, are wide and smooth. One sees very few people on the streets and the houses, with red begonia, are well spaced with plenty of land surrounding each cluster. It is evident that, with 35 people per km (India has 350), one shortage that South Africa does not have to contend with is land.

Glenburn Lodge is far removed from the bustle of Joburg. Its lodgings and conference rooms are interspersed with brooks and wilderness; and from one's window on a quiet afternoon one can see springboks grazing, and, on lucky days giraffes silhouetted against a clear blue sky.

The introduction to this volume was first written in August 2008 with this opening paragraph: ‘The global economy is reeling under one of the severest crises since the Great Depression of the 1930s, with record high oil prices, the global food crisis and a financial crisis, reverberating across the globe. As the US economy slides deeper towards a full-fledged recession, precipitated by the sub-prime mortgage crisis, the ability of financial markets to play havoc with the “real” economy could not have been more apparent. While some commentators, especially those associated with the mainstream media, are still debating the extent of the downturn in the US economy and defending the innovative aspects of financial markets, inside the US, the grim reality seems to have hit home. The implications of the collapse of the housing boom, the associated collapse of major banks with high exposure in the housing markets, coupled with the financial burden of the Iraq war has meant rising unemployment, cut back in consumer spending and overall economic downturn, with no signs of reversal in sight. These events bring to the fore the myriad connections between the “real” and the “financial” – and point to the urgency of understanding these connections, especially in the present era of globalization and financial deregulation.’

Exactly a year later, with a series of bank collapses, as the developed economies grapple with stimulus/rescue packages and bail-out measures to counter the cascading impact of lay-offs and closures, the debate is not whether this is a recession but on how bad it will get before it starts to get better.

There is an old story of Stalin visiting a school in Moscow and asking the clever kid, Boris: ‘Who killed Julius Caesar?’ Boris burst out crying, ‘Not me sir.’ A furious Stalin met the teacher and asked him to explain. The teacher, trembling, said, ‘Sir, I have looked into the matter and can confirm that, incredible though it may seem, Boris did not kill Julius Caesar.’ An exasperated Stalin called on the headmaster. But the headmaster's response was the same. Boris had not done it. And this continued—the same question being asked of different authorities, and the same answer. Finally, Stalin sent for the KGB chief and asked him to look into the matter. The following day, the chief returned to say, ‘Sir, the KGB has solved the problem. The boy has confessed.’

Has India's poverty, as measured by the percentage of people living below the poverty line, gone down during the 1990s? The same answer, no, for many years and then a sudden dramatic change, caused by a different method of calculation by India's National Sample Survey (NSS), seemed to have a strange parallel with the Stalin story.

Few economic debates have been as charged and murky as the one that tries to answer the question concerning India's poverty. For a lot of people (foolishly, in my opinion) the answer to this question is tantamount to an evaluation of the success or failure of the economic reforms that were started in 1991.

A major concern for all Indians today is the repeat appearance of hung parliaments. If after an election no party manages to establish a majority in parliament, the standard recourse has been to call another election. However, with around 600 million voters, elections are expensive, and there is no guarantee that the new parliament will yield a majority. So I suggest a new voting system which, without sacrificing the basic principles of democracy, will almost always guarantee that one party will come out with a majority.

In suggesting this scheme a few criteria are worth bearing in mind. First, the new system must be simple, so that even the illiterate voter can understand it. Second, it must not be so different from the present system that it gets rejected out of hand as too alien to Indian democracy. Indeed, I believe India would be better served by a presidential system, and we could then use the system of run-offs that many countries use to ensure that the elected president has majority support. But this would involve too major a change for it to be immediately implementable. Finally, it must not be too expensive.

What I am about to suggest meets all these criteria and can be adopted in the very next election, which, given the current prognosis, may not be too far away.

I would like to offer some reflections on imagining a violent history of nation-making in India's cinematic ‘present.’ How do structures of feeling, belief and conflict affect graphing and ‘remembering’ history in Indian cinema? What is the status of the legal, civic or violent ‘event’ – such as the Indian partition of 1947 or the communal riots of increasing frequency since the eighties – in films? What is Indian cinema's imaginary relationship with historiography, and what does it mean to represent an ‘event’ within available ‘structures’ of historic narrative in this cinema frequently described as ‘national’? In discussing the ‘vexed problem of the relation between structure and event,’ and in calling ‘‘structure’ – the symbolic relations of cultural order…an historical object,’ Marshall Sahlins invokes the essential structural backdrop of historical ‘events,’ wherein ‘an event is not simply a phenomenal happening… An event becomes such as it is interpreted. Only as it is appropriated in and through the cultural scheme does it acquire an historical significance… The event is a relation between a happening and a structure (or structures)….’