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The power of economics to explain and shape the world

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Nobel Prize-winning economist Esther Duflo sympathizes with students who have no interest in her field. She was such a student herself — until an undergraduate research post gave her the chance to learn first-hand that economists address many of the major issues facing human and planetary well-being. “Most people have a wrong view of what economics is. They just see economists on television discussing what’s going to happen to the stock market,” says Duflo, the Abdul Latif Jameel Professor of Poverty Alleviation and Development Economics. “But what people do in the field is very broad. Economists grapple with the real world and with the complexity that goes with it.”

That’s why this year Duflo has teamed up with Professor Abhijit Banerjee to offer 14.009 (Economics and Society’s Greatest Problems), a first-year discovery subject — a class type designed to give undergraduates a low-pressure, high-impact way to explore a field. In this case, they are exploring the range of issues that economists engage with every day: the economic dimensions of climate change, international trade, racism, justice, education, poverty, health care, social preferences, and economic growth are just a few of the topics the class covers. “We think it’s pretty important that the first exposure to economics is via issues,” Duflo says. “If you first get exposed to economics via models, these models necessarily have to be very simplified, and then students get the idea that economics is a simplistic view of the world that can’t explain much.” Arguably, Duflo and Banerjee have been disproving that view throughout their careers. In 2003, the pair founded MIT’s Abdul Latif Jameel Poverty Action Lab, a leading antipoverty research network that provides scientific evidence on what methods actually work to alleviate poverty — which enables governments and nongovernmental organizations to implement truly effective programs and social policies. And, in 2019 they won the Nobel Prize in economics (together with Michael Kremer of the University of Chicago) for their innovative work applying laboratory-style randomized, controlled trials to research a wide range of topics implicated in global poverty. “Super cool”

First-year Jean Billa, one of the students in 14.009, says, “Economics isn’t just about how money flows, but about how people react to certain events. That was an interesting discovery for me.”

It’s also precisely the lesson Banerjee and Duflo hoped students would take away from 14.009, a class that centers on weekly in-person discussions of the professors’ recorded lectures — many of which align with chapters in Banerjee and Duflo’s book “Good Economics for Hard Times” (Public Affairs, 2019). Classes typically start with a poll in which the roughly 100 enrolled students can register their views on that week’s topic. Then, students get to discuss the issue, says senior Dina Atia, teaching assistant for the class. Noting that she finds it “super cool” that Nobelists are teaching MIT’s first-year students, Atia points out that both Duflo and Banerjee have also made themselves available to chat with students after class. “They’re definitely extending themselves,” she says. “We want the students to get excited about economics so they want to know more,” says Banerjee, the Ford Foundation International Professor of Economics, “because this is a field that can help us address some of the biggest problems society faces.”   Using natural experiments to test theories

Early in the term, for example, the topic was migration. In the lecture, Duflo points out that migration policies are often impacted by the fear that unskilled migrants will overwhelm a region, taking jobs from residents and demanding social services. Yet, migrant flows in normal years represent just 3 percent of the world population. “There is no flood. There is no vast movement of migrants,” she says. Duflo then explains that economists were able to learn a lot about migration thanks to a “natural experiment,” the Mariel boat lift. This 1980 event brought roughly 125,000 unskilled Cubans to Florida over a matter a months, enabling economists to study the impacts of a sudden wave of migration. Duflo says a look at real wages before and after the migration showed no significant impacts. “It was interesting to see that most theories about immigrants were not justified,” Billa says. “That was a real-life situation, and the results showed that even a massive wave of immigration didn’t change work in the city [Miami].”

Question assumptions, find the facts in data Since this is a broad survey course, there is always more to unpack. The goal, faculty say, is simply to help students understand the power of economics to explain and shape the world. “We are going so fast from topic to topic, I don’t expect them to retain all the information,” Duflo says. Instead, students are expected to gain an appreciation for a way of thinking. “Economics is about questioning everything — questioning assumptions you don’t even know are assumptions and being sophisticated about looking at data to uncover the facts.” To add impact, Duflo says she and Banerjee tie lessons to current events and dive more deeply into a few economic studies. One class, for example, focused on the unequal burden the Covid-19 pandemic has placed on different demographic groups and referenced research by Harvard University professor Marcella Alsan, who won a MacArthur Fellowship this fall for her work studying the impact of racism on health disparities.

Duflo also revealed that at the beginning of the pandemic, she suspected that mistrust of the health-care system could prevent Black Americans from taking certain measures to protect themselves from the virus. What she discovered when she researched the topic, however, was that political considerations outweighed racial influences as a predictor of behavior. “The lesson for you is, it’s good to question your assumptions,” she told the class. “Students should ideally understand, by the end of class, why it’s important to ask questions and what they can teach us about the effectiveness of policy and economic theory,” Banerjee says. “We want people to discover the range of economics and to understand how economists look at problems.”

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Prof. Esther Duflo will present her research on poverty reduction and her “proposal for a global minimum tax on billionaires and increased corporate levies to G-20 finance chiefs,” reports Andrew Rosati for Bloomberg. “The plan calls for redistributing the revenues to low- and middle-income nations to compensate for lives lost due to a warming planet,” writes Rosati. “It also adds to growing calls to raise taxes on the world’s wealthiest to help its most needy.”

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The Economic Problem

All societies face the economic problem , which is the problem of how to make the best use of limited, or scarce, resources. The economic problem exists because, although the needs and wants of people are endless, the resources available to satisfy needs and wants are limited.

Limited resources

Resources are limited in two essential ways:

• Limited in physical quantity , as in the case of land, which has a finite quantity.
• Limited in use , as in the case of labour and machinery, which can only be used for one purpose at any one time.

Choice and opportunity cost

Choice and opportunity cost are two fundamental concepts in economics. Given that resources are limited, producers and consumers have to make choices between competing alternatives. Individuals must choose how best to use their skill and effort, firms must choose how best to use their workers and machinery, and governments must choose how best to use taxpayer’s money.

Making an economic choice creates a sacrifice because alternatives must be given up. Making a choice results in the loss of benefit that an alternative would have provided. For example, if an individual has £10 to spend, and if books are £10 each and downloaded music tracks are £1 each, buying a book means the loss of the benefit that would have been gained from the 10 downloaded tracks.  Similarly, land and other resources, which have been used to build a school could have been used to build a factory. The loss of the next best option represents the real sacrifice and is referred to as opportunity cost .  The opportunity cost of choosing the school is the loss of the factory, and what could have been produced.

It is necessary to appreciate that opportunity cost relates to the loss of the next best alternative, and not just any alternative. The true cost of any decision is always the closest option not chosen.

Samuelson’s three questions

America’s first Nobel Prize winner for economics, the late Paul Samuelson , is often credited with providing the first clear and simple explanation of the economic problem – namely, that in order to solve the economic problem societies must endeavour to answer three basic questions – What to produce? How to produce? And, For whom to produce?

What to produce?

Societies have to decide the best combination of goods and services to meet their varied wants and needs. Societies must decide what quantities of different resources should be allocated to these goods and services.

How to produce?

Societies also have to decide the best combination of factors to create the desired output of goods and services. For example, precisely how much land, labour, and capital should be used to produce consumer goods such as computers and motor cars?

For whom to produce?

Finally, all societies need to decide who will benefit from the output from its economic activity, and how much they will get. This is often called the problem of distribution. Different societies may develop different ways to answer these questions.

A free good is one that is so abundant that its consumption does not deny anyone else the benefit of consuming the good. In this case, there is no opportunity cost associated with consumption or production, and the good does not command a price. Air is often cited as a free good, as breathing it does not reduce the amount available to someone else.

Production Possibility Frontiers

1.3 How Economists Use Theories and Models to Understand Economic Issues

Learning objectives.

By the end of this section, you will be able to:

• Interpret a circular flow diagram
• Explain the importance of economic theories and models
• Describe goods and services markets and labor markets

John Maynard Keynes (1883–1946), one of the greatest economists of the twentieth century, pointed out that economics is not just a subject area but also a way of thinking. Keynes ( Figure 1.6 ) famously wrote in the introduction to a fellow economist’s book: “[Economics] is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions.” In other words, economics teaches you how to think, not what to think.

Watch this video about John Maynard Keynes and his influence on economics.

Economists see the world through a different lens than anthropologists, biologists, classicists, or practitioners of any other discipline. They analyze issues and problems using economic theories that are based on particular assumptions about human behavior. These assumptions tend to be different than the assumptions an anthropologist or psychologist might use. A theory is a simplified representation of how two or more variables interact with each other. The purpose of a theory is to take a complex, real-world issue and simplify it down to its essentials. If done well, this enables the analyst to understand the issue and any problems around it. A good theory is simple enough to understand, while complex enough to capture the key features of the object or situation you are studying.

Sometimes economists use the term model instead of theory. Strictly speaking, a theory is a more abstract representation, while a model is a more applied or empirical representation. We use models to test theories, but for this course we will use the terms interchangeably.

For example, an architect who is planning a major office building will often build a physical model that sits on a tabletop to show how the entire city block will look after the new building is constructed. Companies often build models of their new products, which are more rough and unfinished than the final product, but can still demonstrate how the new product will work.

A good model to start with in economics is the circular flow diagram ( Figure 1.7 ). It pictures the economy as consisting of two groups—households and firms—that interact in two markets: the goods and services market in which firms sell and households buy and the labor market in which households sell labor to business firms or other employees.

Firms produce and sell goods and services to households in the market for goods and services (or product market). Arrow “A” indicates this. Households pay for goods and services, which becomes the revenues to firms. Arrow “B” indicates this. Arrows A and B represent the two sides of the product market. Where do households obtain the income to buy goods and services? They provide the labor and other resources (e.g., land, capital, raw materials) firms need to produce goods and services in the market for inputs (or factors of production). Arrow “C” indicates this. In return, firms pay for the inputs (or resources) they use in the form of wages and other factor payments. Arrow “D” indicates this. Arrows “C” and “D” represent the two sides of the factor market.

Of course, in the real world, there are many different markets for goods and services and markets for many different types of labor. The circular flow diagram simplifies this to make the picture easier to grasp. In the diagram, firms produce goods and services, which they sell to households in return for revenues. The outer circle shows this, and represents the two sides of the product market (for example, the market for goods and services) in which households demand and firms supply. Households sell their labor as workers to firms in return for wages, salaries, and benefits. The inner circle shows this and represents the two sides of the labor market in which households supply and firms demand.

This version of the circular flow model is stripped down to the essentials, but it has enough features to explain how the product and labor markets work in the economy. We could easily add details to this basic model if we wanted to introduce more real-world elements, like financial markets, governments, and interactions with the rest of the globe (imports and exports).

Economists carry a set of theories in their heads like a carpenter carries around a toolkit. When they see an economic issue or problem, they go through the theories they know to see if they can find one that fits. Then they use the theory to derive insights about the issue or problem. Economists express theories as diagrams, graphs, or even as mathematical equations. (Do not worry. In this course, we will mostly use graphs.) Economists do not figure out the answer to the problem first and then draw the graph to illustrate. Rather, they use the graph of the theory to help them figure out the answer. Although at the introductory level, you can sometimes figure out the right answer without applying a model, if you keep studying economics, before too long you will run into issues and problems that you will need to graph to solve. We explain both micro and macroeconomics in terms of theories and models. The most well-known theories are probably those of supply and demand, but you will learn a number of others.

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How to Manage the Top Five Global Economic Challenges

November 1, 2017 • 14 min read.

The world’s economic system faces five tough challenges. Multilateral institutions offer the best hope of managing them, notes this opinion piece by the secretary general of the European Stability Mechanism.

• Public Policy

The world’s economic system has been through a lot in recent years — from the challenge of the financial crisis to income inequality, the pressures of immigration, changing technologies and geographic shifts in production, to name a few. In this opinion piece, Kalin Anev Janse, secretary general and a member of the management board of the European Stability Mechanism (the eurozone’s lender of last resort), considers five major challenges and why international organizations offer the best hope for managing them.

A year ago, we were shaken by geopolitical shifts with unpredictable ripple effects. The situation looks no more stable today. The Brexit vote and the U.S. presidential election outcome signal dramatic changes in cooperation globally and a push for more protectionism. In practice, these votes called into question the multilateral institutions and international collaboration among countries that embody that cooperation. In autumn 2017, we gathered together a group of senior officials from the 13 largest international organizations to try to crack these problems.

What happened?

Exactly 10 years ago, in 2007, the first signs of the Great Recession emerged. By 2008, the U.S.-led subprime crisis evolved into a global financial crisis. By 2010, Europe had become engulfed in its own crisis, throwing financial markets into turmoil and several sovereigns into a downward spiral of debt and banking crises.

Despite the current ongoing recovery, and the successful economic rebound both in North America and Europe, worrying trends became apparent in 2016. Some major players demonstrated a reduced commitment to multilateral cooperation, criticism of open and free trade, and fading interest in climate change. This new landscape increased uncertainty and poses a threat to more buoyant macroeconomic and financial fundamentals. It also puts a strain on relations between major players internationally, as well as between citizens domestically. In countries like the U.S. and the UK, it abruptly split societies in half and threatened a reverse of seven decades of international cooperation.

All these elements are putting pressure on international organizations as well. International organizations are increasingly called upon to redefine their role to ensure that their programs and activities are still relevant in this evolving political and macroeconomic landscape. They are also pushed to show how they add value to citizens’ lives. At the same time, they need to maintain lean structures to minimize the burden on taxpayers, and enhance efficiency and effectiveness of their activities. So, what has changed?

Five Major Shifts that Rocked Our World

There are five trend shifts globally that by their nature call for international cooperation, but they have been underestimated, undervalued and under-addressed both nationally and internationally. The results shook our world with an unforeseeable force.

1. Growing Income Inequality 

People have an age-old tendency to compare themselves to their neighbors, especially when it comes to wealth. We are less concerned about our absolute level of wealth, but look more at what we have and own in relative terms to the people around us. Global private wealth reached a record $166.5 trillion in 2016, an increase of 5.3% over the previous year, according to a report by the Boston Consulting Group (BCG). 1 In 2015, the increase was 4.4%. Faster economic growth and stock price performance mainly drove the rapid increase.

But this growth is not spread equally. Private wealth in Asia-Pacific is likely to surpass that of Western Europe by as early as the end of this year, BCG’s analysis shows. This could be an economic shock for many citizens of traditional western powerhouses. Such changes need to be watched and managed carefully as they tilt economic and political power. British geographer and politician Sir Halford Mackinder used to say: “Unequal growth among nations tends to produce a hegemonic world war about every 100 years.” We can only hope he is wrong.

 “Just eight men now own the same wealth as 3.6 billion people globally, more than half of humanity….”

Inequality is getting ever worse. A tipping point was reached in 2015, when the richest 1% in the world owned as much as the rest of humanity. This trend has continued and further accelerated. Just eight men now own the same wealth as 3.6 billion people globally, more than half of humanity, according to a January 2017 Oxfam report. Income inequality is on the rise as the affluent continue to accumulate wealth, often at the expense of the poorer.

Richard Reeves points out in his book Dream Hoarders , that we shouldn’t only be worried about the top 1% or 0.01%. More importantly, in some countries, like the U.S., there is a widening gap in society between the upper middle class and everyone else. (Reeves defines the upper middle class as those whose incomes are in the top 20% of U.S. society.) These growing disparities are reflected in family structure, neighborhoods, attitudes and lifestyle. The top income earners are becoming more effective at passing on their status to their children, thus reducing overall social mobility and increasing social divisions, along class as well as income lines.

And all this has an interesting twist: the inequality paradox. Despite the progress in reducing global poverty and reduction of inequality among countries since 1980s, income inequality within countries has been rising. These days, almost one-third of global inequality is attributable to in-country inequality (figure 1), making clear why many voters across the western world feel as they do.

2. Technology Driving Change in Jobs

How disruptive will the effect of globalization and technological advances be on labor markets? That is a key question today. Over the last three decades, advanced economies have seen labor-intensive sector jobs move to emerging markets. In other cases, new technologies have made certain occupations obsolete. UNCTAD (United Nations Conference on Trade and Development) released a policy brief last year that said robots could take away two-thirds of jobs in developing countries.

We see some of these shifts already. Today’s five largest global companies are: Apple, Alphabet (Google), Microsoft, Amazon, and Facebook. They employ around 720,000 people. A decade ago, the big five were completely different: Petrochina, Exxon Mobile, General Electric, China Mobile, and Bank of China. They employed around 1.3 million people. What a decade can do! Today’s five biggest companies are all technology companies. Their market capitalization is 30% higher than that of the top five a decade ago; they achieve that with a whopping 44% less staff (figure 2). This has a large impact on labor markets and jobs.

Does this alter work preferences? Yes, and this is best assessed by looking at the two most dynamic groups of (future) job seekers: millennials and today’s teenagers. They feel that they are receiving conflicting messages from employers and career advisors: On the one hand, they are told that robots are bound to replace future jobs; on the other, they need technical skills to compete in the job market.

Caught in this conundrum, they are trying to create new types of jobs, rather than going for traditional ones such as banking, finance, or accounting. They dream of becoming YouTube stars, famous videogame vloggers, or Instagram travel bloggers who are paid by sponsors to visit hotels and restaurants around the world and generate sufficient number of likes. New creative companies pop up even in professions that well-educated young people ignored for many decades. Old merchants’ jobs have been revived, from organic bakers to cool rural wine-makers and hipster butchers.

“Forty-five percent of the global working age population is underutilized, either unemployed or underemployed.”

I am less concerned about the imaginative young generation; they will find their way. It is the group of middle-to-older, middle-to-lower-skilled workers where issues might arise. A recent McKinsey estimate shows that 45% of the global working age population is underutilized, either unemployed or underemployed. Unless there is a redirection of investment into labor-intensive productive sectors and retraining, the desired job creation may not happen, fueling unhappiness, unrest and populism.

3. Rising Protectionism

G20 countries have become more protectionist. The total number of discriminatory protectionist measures implemented by G20 countries has increased over the past five years (figure 3). The main driver has been the U.S. According to the Global Trade Alert report, had the United States been excluded, the total number of protectionist policy instruments imposed by the G20 would have been lower in 2017 than in 2016. The U.S. has implemented the most protectionist and trade restrictive measures of its peer group, the European Union the least (figure 4). This sounds counter-intuitive for the country that prides itself as an open economy, but it seems that it is Europe that is championing trade barrier reductions and the avoidance of protectionist measures.

“The recent refugee crisis in Syria and the resulting arrival of more than one million migrants in 2015-2016 in Germany presented a formidable challenge to political and social stability.”

4. Increasing Migration

The recent refugee crisis in Syria and the resulting arrival of more than one million migrants in 2015-2016 in Germany presented a formidable challenge to political and social stability. In addition to tougher checks on the EU’s external borders, and a controversial refugee pact with Turkey, the EU is investing more in the migrants’ countries of origin. The refugees from Syria have been fleeing a brutal civil war. They are escaping violence, as many also are from Iraq and Afghanistan, and, in such cases, humanitarian reasons should always prevail over other considerations. Wars, climate change, and broader economic and social inequalities are the root causes of migration flows. While these increases in migration are all easy to understand, they nonetheless cause issues in the countries of arrival: integration problems, absorption limits and skills-mismatches.

5. Growing Influence of Social Media and the Post-truth World

Social media pose the final major challenge to international organizations. According to a recent analysis by the Reuters Institute for the Study of Journalism, 51% of people with online access use social media as a news source. Social media is the primary source for news for 44% of smartphone users in the U.S. and 38% in the U.K. (figure 7). Coupled with the proliferation of so-called fake news, which became so prominent in last year’s U.S. elections, as well as social media’s favoring of ever shorter and catchier messages, it is no wonder that many observers are saying we are living in a post-truth world.

“In the November 2016 U.S. elections … top fake election news stories generated more total engagement on Facebook than the top election stories from the 19 major news outlets combined.”

A recent BuzzFeed analysis of social media traffic in the run-up to the November 2016 U.S. elections found that top fake election news stories generated more total engagement on Facebook than the top election stories from the 19 major news outlets combined (figure 8). These trends represent serious tests on many fronts, including combating terrorism and securing the proper functioning of democratic institutions. Fear, anger and despair enlist recruits for terrorism. They also create a more polarized social climate and the rise of extremism, as we were recently reminded by the tragic events in Charlottesville in the U.S. or by some half a dozen car terror attacks in Europe this year.

Is Peaceful International Collaboration Ending?

Despite these daunting challenges, there are also reasons to be optimistic. At the European level, political leaders have regained faith in sticking together to address global and societal realities. At least two factors have been crucial to the recovery of confidence in the European project. First, the EU is delivering economically. The euro area and the broader EU recently recorded their highest ever employment levels. Investment is up, and growth is projected to be on a par with, if not higher than, growth in the U.S. this year.

Second, despite growing populism, Europe’s citizens have confidently stood for democracy, open borders, economic reforms, and more Europe. The results of the elections in the Netherlands and France bore witness to this positive trend among European societies. In spite of the recent electoral gains of an extreme right-wing party in Germany, the election outcome was again clearly pro-European. The continent appears in better shape today than it did after Brexit one year ago.

In my view, Europe can offer lessons in regional integration that are relevant for other parts of the world. Among others, my institution – the European Stability Mechanism (ESM) – is a product of European cooperation in response to the financial and economic crisis. As the largest and most active regional financing arrangement, the ESM works closely with its peers in other regions of the world.

Beyond Europe, the continued rise of Asian economies, as well as those in Latin America, present new opportunities for strengthening international cooperation in many of the areas I have mentioned, including finance, infrastructure, energy, education, climate change and others.

So what does this all mean for public international organizations? These organizations act as agents of their shareholders (i.e., member states) and are called upon to help address difficult challenges. Some international organizations that raise funds in the capital markets for their operations, like mine, also have to be attuned to the concerns of their investors. In general, international organizations also dispose of soft power, derived from funds and moral suasion based on extensive experience, as well as the values and norms that they adhere to and champion. Obviously, international organizations also need a broad-based buy-in from the public at large, in particular in times of change and uncertainty. All this needs to be done while maintaining lean organizational structures to keep the costs for taxpayers low.

In our autumn 2017 session of the group of senior officials from international organizations, we pushed ourselves to find modern ways to explain better what we do and what we can offer when it comes to tackling these challenges. Among other matters, we discussed using more social media and empowering our talented and hard-working staff to share their personal stories, because it can best demonstrate the tremendous impact of their work.

“Multilateral institutions and international organizations have proven to be the most effective way to solve complex global problems in a peaceful and constructive way.”

We also need to make our institutions less bureaucratic and truly “lean, clean and green,” not only because it is more efficient but also because it can help us attract more talent among the millennial generation. And finally, we need to work even harder to better cooperate with each other and to ensure the missions and activities of our institutions make a difference, because nothing can demonstrate the value of multilateralism better than international organizations delivering effective and sustainable solutions to the most pressing global challenges.

But at the end there is only one question that matters: Is there any alternative way to making our world with more than 7 billion people work? Not at this stage – multilateral institutions and international organizations have proven to be the most effective way to solve complex global problems in a peaceful and constructive way. All other alternatives involve far more violence, aggression and isolation. If we look through the eyes of our children, it is much wiser to collaborate and work together rather than fight (digitally) with our global neighbors, whether close by or far away.

(This article reflects the personal opinion of Kalin Anev Janse. It is adapted from a speech he gave to senior officials from the 13 largest international organizations, including the World Bank and the International Monetary Fund.)

[1] “Global Wealth 2017: Transforming the Client Experience,” published in June 2017.

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How to problem-solve through economic issues

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Identifying problems, especially economic issues, can seem obvious. What’s harder is figuring out the constraints that prevent them from being solved. But there are ways to arrive at solutions.

It’s the subject of a new book, “The Economic Superorganism” by Carey King, a research scientist and assistant director of the Energy Institute at the University of Texas at Austin. He recently spoke with Marketplace’s Andy Uhler.

The following is an edited transcript of Uhler and King’s conversation.

Andy Uhler: So when we think of the traditional economic model of the energy industry, what does that model or what do those models get wrong?

Carey King: Well, my narratives in my book are a little bit more about macroeconomic narratives, or how do people approach what the economy is and how does it grow in general? And so I simplify into the techno optimistic narrative of infinite growth and substitutability of technologies. On the opposite end of that spectrum is technorealism. Which is to say, well, there are constraints in the world, there are things like physical laws that we understand. And there are constraints of time. And we need to take these into account to actually understand what’s possible and how the economy evolves. So those are really the two narratives and they get applied to the energy industry. And by applying them, I would say, less accurate narratives to how the energy system interacts with the broader economy. I think we get answers from reports and analyses that are less accurate than we can do.

Uhler: Because you’re talking about using the data to then ask different questions and also sort of come up with different narratives and ultimately, different answers. Right?

King: Right. So everybody’s kind of coming up with their own narratives. In my book, the narratives are in some sense, strawmen, but they’re set up so that I can then go into detail about well, here’s a coherent way to think about what the economy is. And one of those ways is to say that the economy is an organism, like living organisms that need energy and resources to grow. It needs energy and resource consumption to maintain itself. And it has to distribute these resources internally. So by taking these kinds of physical aspects into account, we have a better interpretation for the economic patterns that we see.

Andy Uhler: I’m curious sort of how your model fits with this new shift in renewable energy. And in sort of the way that we think about zero carbon as well, how does it fit?

King: So a lot of the shift of the energy system and other industries in general is to lower marginal cost in general. So you might have higher capital costs, which we take into account or when we think about things like solar and photovoltaic systems and batteries, they have a high upfront capital cost, lower marginal cost. And this is essentially the same kind of growth pattern we see in biology and ecosystems in the sense that the last bits of growth of an animal consume less energy than the previous set. So it’s a similar pattern that we might see in ecosystems.

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Solution to the Basic Economic Problems: Capitalistic, Socialistic and Mixed Economy

Solution to the Basic Economic Problems: Capitalistic, Socialistic and Mixed Economy!

Uneven distribution of natural resources, lack of human specialization and technological advancement etc., hinders the production of goods and services in an economy. Every economy has to face the problems of what to produce, how to produce and for whom to produce. More or less, all the economies use two important methods to solve these basic problems.

These methods are:

(a) Free price mechanism and

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(b) Controlled price system or State intervention.

Price mechanism is defined as a system of guiding and coordinating the decisions of every individual unit within an economy through the price determined with the help of the free play of market forces of demand and supply. Such system is free from state intervention.

Price of goods and services are determined when quantity demanded becomes equal to the quantity supplied. Price mechanism facilitates determination of resource allocation, determination of factor incomes, level of savings, consumption and production. Price mechanism basically takes place in a capitalistic economy.

On the other hand, Controlled price mechanism is defined as a system of state interventio n of administering or fixing the prices of the goods and services. In a socialist economy, the government plays a vital role in determining the price of the goods and services. The government may introduce ‘ceiling price’ or ‘floor price’ policy to regulate prices.

However, how a capitalist, a socialist and a mixed economic system solve their basic problems is given below:

1. Solution to Basic Problems in a Capitalistic Economy:

Under capitalistic economy, allocation of various resources takes place with the help of market mechanism. Price of various goods and services including the price of factors of production are determined with help of the forces of demand and supply. Free price mechanism helps producers to decide what to produce.

The goods which are more in demand and on which consumers can afford to spend more, are produced in larger quantity than those goods or services which have lower demand. The price of various factors of production including technology helps to decide production techniques or methods of production. Rational producer intends to use those factors or techniques which has relatively lower price in the market.

Factor earnings received by the employers of factors of production decides spending capacity of the people. This helps producers to identify the consumers for whom goods could be produced in larger or smaller quantities. Price mechanism works well only if competition exists and natural flow of demand and supply of goods is not disturbed artificially.

2. Solution to Basic Problems in a Socialistic Economy:

Under socialistic economy, the government plays an important role in decision making. The government undertakes to plan, control and regulate all the major economic activities to solve the basic economic problems. All the major economic policies are formulated and implemented by the Central Planning Authority.

In India, Planning Commission was entrusted with this task of planning. The Planning Commission of India has now been replaced by another central authority NITI Ayog (National Institution for Transforming India). Therefore, the central planning authority takes the decisions to overcome the economic problems of what to produce, how to produce and for whom to produce.

The central planning authority decides the nature of goods and services to be produced as per available resources and the priority of the country. The allocation of resources is made in greater volume for those goods which are essential for the nation. The state’s main objectives are growth, equality and price stability. The government implements fiscal policies such as taxation policy, expenditure policy, public debt policy or policy on deficit financing in order to achieve the above objectives.

The methods of production or production techniques are also determined or selected by the central planning authority. The central planning authority decides whether labor intensive technique or capital intensive technique is to be used for the production. While deciding the appropriate method, social and economic conditions of the economy are taken into consideration.

Under socialistic economy, every government aims to achieve social justice through its actions. All economic resources are owned by the government. People can work for wages which are regulated by the government as per work efficiency. The income earned determines the aggregate demand in an economy. This helps the government in assessing the demand of goods and services by different income groups.

3. Solution to Basic Problems in a Mixed Economy:

Practically, neither capitalistic economy nor socialistic economy exists in totality. Both the economic systems have limitations. Consequently, a new system of economy has emerged as a blend of the above two systems called mixed economy. Therefore, mixed economy is defined as a system of economy where private sectors and public sectors co-exist and work side by side for the welfare of the country.

Under such economies, all economic problems are solved with the help of free price mechanism and controlled price mechanism (economic planning).

Free price mechanism operates within the private sector; hence, prices are allowed to change as per demand and supply of goods. Therefore, private sector can produce goods as per their demand and their price in the market. The government may control and regulate production of the private sector through its monetary policy or fiscal policy.

On the other hand, controlled price mechanism (economic planning) is used for the public sector by the planning authority. The goods and services to be produced in the public sector, hence, are determined by the central planning authority.

Private sector determines the production technique or production method on the basis of factor prices, availability of technology etc. On the other hand, production technique or production method for the public sector is determined by the central planning authority. While determining the production technique for the public sector, national priority, national employment policy and social objectives are major considerations.

Private sector allocates its resources to produce those goods which are demanded by people who command high purchasing power. Although, production by the private sector is sometimes controlled and regulated by the government through various policies such as licensing policy, taxation policy, subsidy etc., the price determined by free price mechanism may go beyond the purchasing power of low or marginal income group.

Therefore, the government may undertake production of certain goods in its hands. The rationing policy is also introduced to provide essential goods at reasonable price to the poor people. The government, thus, ensures social justice by its actions in the mixed economy.

Related Articles:

• Basic Problems of an Economy and Price Mechanism (FAQs)
• Mixed Economy: Meaning, Features and Types of Mixed Economy
• Price Mechanism: in Free, Socialistic and Mixed Economy
• 5 Basic Problems of an Economy (With Diagram)

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1.1.3 The Economic Problem (Edexcel)

Last updated 19 Sept 2023

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This study note for Edexcel covers the economic problem.

A) The Problem of Scarcity - Unlimited Wants and Finite Resources

1. Introduction to Scarcity

• Scarcity is a fundamental concept in economics.
• It arises from the fact that human wants and needs are virtually limitless, while resources to satisfy them are limited.

2. Key Characteristics of Scarcity

• Limited Resources: Resources like land, labor, capital, and time are limited in supply.
• Unlimited Wants: People desire more goods and services than can be produced with available resources.

3. Implications of Scarcity

• Choices and Trade-offs: Scarcity necessitates making choices and trade-offs due to limited resources.
• Opportunity Cost: Every choice involves an opportunity cost, the value of the next best alternative forgone.

4. Real-World Example

• Example: A government's decision to allocate funds to healthcare may mean fewer resources available for education. The opportunity cost is the educational quality and access that could have been improved with those funds.

B) Distinction Between Renewable and Non-Renewable Resources

1. Renewable Resources

• Renewable resources can be replenished naturally over time.
• They include resources like solar energy, wind energy, forests, and fish stocks.

2. Non-Renewable Resources

• Non-renewable resources cannot be replaced naturally within a human timescale.
• Examples include fossil fuels (coal, oil, natural gas), minerals (e.g., iron, copper), and nuclear fuel.

3. Importance of the Distinction

• Sustainability: Understanding the difference is vital for sustainable resource management.
• Economic Implications: Depletion of non-renewable resources can lead to rising prices and economic challenges.
• Example: Fossil fuels (non-renewable) are finite resources. As they are depleted, the world is increasingly focusing on renewable energy sources like solar and wind power to combat climate change and ensure long-term energy security.

C) The Importance of Opportunity Costs to Economic Agents

1. Opportunity Cost Defined

• Opportunity cost is the value of the next best alternative foregone when a choice is made.
• It represents the true cost of a decision in terms of forgone opportunities.

2. Importance for Consumers

• Consumers make choices about spending money and time.
• Opportunity cost helps them make informed decisions, such as choosing between buying a new phone or saving for a vacation.

3. Importance for Producers

• Producers allocate resources to maximize profits.
• Opportunity cost influences production decisions, like choosing which products to manufacture.

4. Importance for Government

• Governments allocate budgets to various programmes and policies.
• Opportunity cost informs decisions on allocating resources between healthcare, education, defense, and more.

5. Real-World Example

• Example: If a consumer spends $500 on a new smartphone, the opportunity cost might be the vacation they could have taken with that money. For governments, investing in infrastructure instead of defense might mean an opportunity cost in terms of national security.

Understanding scarcity, the distinction between resource types, and the concept of opportunity cost is essential for making informed economic decisions and addressing resource allocation challenges in the real world.

• Economic Problem
• Water Scarcity
• Scarcity bias
• Resource Scarcity

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9 ways to strengthen the global economic response to COVID-19

Governments in developing economies lack the resources to do fiscal stimulus. Image:  REUTERS/Thomas Mukoya

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Erik berglof.

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Stay up to date:, long-term investing, infrastructure and development.

• We need to find new ways of funding the IMF and World Bank.
• The G20 could make a “whatever-it-takes” statement, promising additional capital if the situation further deteriorates.
• We need to bring together the global financial safety net, the development finance architecture and the private sector to tackle the crisis.

The IMF and the World Bank – the two organizations at the centre of development finance – are organizing their (virtual) Spring Meetings this week. They are doing so at a time when the COVID-19 pandemic is exposing the global financial safety net and the development finance architecture to the most serious shock since both organizations emerged out of the ruins of two world wars and the Great Depression.

Have you read?

This is the effect coronavirus has had on air pollution all across the world, coronavirus has exposed the digital divide like never before.

We urgently need to find new ways of securing funding for these multilateral institutions, including from the private sector, and, in the process, bring them closer together. This will require the same kind of leadership and innovative thinking and institution-building that marked their founding.

The two sides of the COVID-19 crisis – the medical emergency and economic impact – are closely intertwined. Many emerging and developing economies are actually hit first by the economic impact. Falling commodity prices, drops in tourism revenues, reduced remittances from citizens abroad and the rapid outflows of capital are ravaging their economies, even before the virus has taken hold. The economic devastation, in turn, will undermine their capacity to respond to the virus and threatens social and political stability in the medium term

The first responses from the IMF and the World Bank, and the regional development banks, have been powerful and welcome, but the demands on them will only increase as the crisis accelerates in the emerging and developing world. To effectively fight the virus and mitigate its broader impact, these institutions must be allowed to use their existing resources more effectively and ultimately they will need additional resources.

We suggest three reforms each to the global financial safety net, the development architecture and the capacity of the core institutions to crowd in the private and institutional capital.

The global financial safety net, with the IMF at the core, but complemented by a patchy and incomplete system of regional arrangements, mainly in Europe and Asia, is critical in providing liquidity and maintaining financial stability. Yet the current firepower of the IMF is insufficient to deal with the magnitude of this crisis. The IMF is already processing more than 90 requests from countries for emergency financing, and another 50 or so are in the wings. Countries need liquidity to address the medical emergency, but most of all to deal with the economic impact. There have been many ideas proposed for how to strengthen the global financial safety net, several of them discussed in the final report from the G20 Eminent Persons Group on Global Financial Governance (EPG) presented a couple of years ago.

1. Establish liquidity support lines

One such proposal was to establish a liquidity facility to which prequalified countries in need could turn. Prequalification could avoid the stigma associated with applying for support.

2. Give the IMF a role in a network of central bank swap lines

Such liquidity lines could be supplemented by the IMF intermediating support lines from systemic central banks to central banks in well-run emerging economies with liquidity problems.

3. Issue Special Drawing Rights

Proposals 1 and 2 would rely on the IMF’s existing resources and would still not meet the enormous liquidity requirements that will eventually lead to solvency threats in many countries. The most direct way to provide additional capital to the IMF would be to issue additional Special Drawing Rights (SDR), the special currency through which the member states support the IMF. The EPG carefully avoided this proposal, due to the limitations to its mandate, but an SDR issue would both increase firepower and offer a valuable stimulus to the global economy.

The World Bank has responded with a massive effort to help address both the medical and economic emergencies. It has strong expertise in the health and well-functioning cash transfer programmes and local community schemes in a very large number of countries that can be used to reach the most vulnerable, but its resources are also insufficient. As the economic impact from lockdowns and supply disruptions starts to bite, the World Bank’s financing needs will increase dramatically. Most governments in emerging and developing economies lack the resources to do meaningful monetary and fiscal stimulus.

Fortunately, many of the multilateral development banks (MDBs) were recently recapitalized or have free capacity, and can respond in the short term. But on the current trajectory, they will run out of “headroom”, impeding their ability to respond. Added to this, the quality of their portfolios will deteriorate as the economic impact from the pandemic works its way through the system. There are already signs that the costs of borrowing are going up for some of the weaker institutions. At some point, the rating agencies will look at their portfolios and the creditworthiness of their shareholders.

4. Establish liquidity backstop for MDBs

One innovation that could help the MDBs increase their lending capacity would be to provide them with a so-called liquidity backstop. Unlike commercial banks most multilateral development banks lack automatic access to support from governments in the case of a liquidity shortfall. Rating agencies would upgrade them if a group of central banks came together, possibly intermediated through the IMF, and provided a liquidity facility. The European Investment Bank has access to such support from the ECB.

5. Introduce new form of equity capital

A related proposal would be to provide the development banks with a new form of capital. Today they have two types of capital – paid-in capital which counts as equity on the banks’ balance sheets; and callable capital which can only be used when a development bank is closed down to pay off bondholders. It would be useful to have an intermediate form of capital that could be called in when banks are exposed to a shock like the current one. Again rating agencies would recognise such support in their ratings. The European Stability Mechanism has this type of contingent capital.

6. Make a G20 “whatever-it-takes” statement

Even if these two ideas could not be realized at the moment, the G20 could, with support from other key shareholders, make a “whatever-it-takes” statement, promising that additional capital would be forthcoming if the situation further deteriorated. While such a statement might not immediately impress rating agencies, it could inspire innovation and big ideas inside and outside the MDBs. It would also reassure governments in the worst-hit emerging and developing economies that resources will be forthcoming.

Responding to the COVID-19 pandemic requires global cooperation among governments, international organizations and the business community , which is at the centre of the World Economic Forum’s mission as the International Organization for Public-Private Cooperation.

Since its launch on 11 March, the Forum’s COVID Action Platform has brought together 1,667 stakeholders from 1,106 businesses and organizations to mitigate the risk and impact of the unprecedented global health emergency that is COVID-19.

The platform is created with the support of the World Health Organization and is open to all businesses and industry groups, as well as other stakeholders, aiming to integrate and inform joint action.

As an organization, the Forum has a track record of supporting efforts to contain epidemics. In 2017, at our Annual Meeting, the Coalition for Epidemic Preparedness Innovations (CEPI) was launched – bringing together experts from government, business, health, academia and civil society to accelerate the development of vaccines. CEPI is currently supporting the race to develop a vaccine against this strand of the coronavirus.

Yet, the governments behind both the IMF and the development banks are also weakened by the crisis and domestic needs will be gigantic. New ways must be found to crowd in private and institutional capital. The EPG Report pointed to a number of steps which could be taken, all on a much greater scale than today.

7. Allow the IMF to borrow from markets

The IMF could be allowed to borrow in the capital markets, potentially using currently unused SDRs as collateral. Such lending would have to be associated with important safeguards to prevent private sector bias in lending, but it could significantly increase IMF firepower.

8. Pool balance sheets to increase MDB borrowing capacity

On the side of the development finance institutions, there should be scope for more pooling of balance sheets, after all they have more or less the same shareholders, if in somewhat different constellations. There are limits to what can be achieved through such efforts, but particularly for the smaller institutions with concentrated portfolios this could prove very important. As a by-product, the participating institutions would be encouraged to standardize loan agreements and generally become more coherent as a system.

9. Crowd in private and institutional capital on country platforms

A core EPG proposal is the establishment of country platforms where governments can coordinate their collaboration with international financial institutions, including bilateral donors and the entire UN system. These platforms, now being piloted in a large number of countries, should be opened up to the private sector and be used to crowd in private and institutional capital by mitigating risk for investors, but also to ensure that agreed governance standards are enforced and debt sustainability requirements respected.

When the EPG was first set up there were questions as to why the group should deal with both the development finance architecture and the global financial safety net in the same report. The COVID-19 crisis has proven how intimately linked these are. The nine ideas we have put forward here would bring together the global financial safety net, the development finance architecture and the private sector to enable the powerful global response that the current crisis requires.

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World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

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Can economics solve climate change.

Global leaders and a myriad of economic policies are working on tackling climate change, but is it enough? Nobel Laureates discuss the role economics can play, the impact of globalization, and the structures that are helping, and hurting, our ability to achieve real progress.

In 2018, the winners of the Nobel Prize in Economic Sciences were awarded for papers and models integrating technological innovations into long-run macroeconomic analysis. It was seen by many as a significant choice made by the Nobel Committee to blend nature and knowledge, to highlight work that examines not just climate change but how it is affecting the economy and the importance of this knowledge. Economist and Nobel Laureate Paul Romer represents one half of the winning prize, but many of his fellow economists agree: economics may just be one of the most important tools when it comes to solving climate change.

Clever Solutions Without the Harm

“I don't think solving global warming is going to be that hard of a problem to solve,” says Romer. “The reason that the problem keeps getting worse is that we're not trying to solve it. All we have to do is create some incentives to solve the problem. And everybody's going to be astonished at all the clever, clever ways that the market comes up with to produce and distribute energy that doesn't rely on the side effect of emitting carbon dioxide and other greenhouse gases.”

He points to a time in recent history, the 1970s, when the United States started producing and emitting a particular chemical, chlorofluorocarbon, that was damaging the ozone layer. A big, global approach was needed to address the damage being done and to protect the ozone layer. In the 1980s, the Reagan administration encouraged a ban on the production of chlorofluorocarbons and then negotiated treaties with countries around the world to join the ban.

Once you stop the harm, people are going to find incredibly clever ways to make money without doing the harm.

What does the future of humans look like?

Learn more from CIO’s report on the Future of Humans

“Before the ban went into effect, the leaders in the industry who were producing all these chemicals were saying, ‘The economy won’t survive. Our way of life will be threatened.’ It was just all nonsense,” says Romer. “Nobody even noticed the small changes we had to make to find something else other than chlorofluorocarbons to use. I think that a lot of this ‘Oh it’s going to be so hard [to address climate change]’ is from people who are making money harming everybody else. Once you stop the harm, people are going to find incredibly clever ways to make money without doing the harm.”

Environmental Models

There are many different perspectives and tools that economists have at their disposal that could be used to fight climate change, according to fellow Nobel Laureate Joseph Stiglitz. Further integration of environmental models into the overall economic framework is a powerful start, but certainly not where it ends.

“For a long time, people have been working on integrating economic models with environmental models,” says Stiglitz. “One of the things that economists forgot for a long time is that we have to live within our planetary boundaries. That's a constraint. We talk about budget constraints, various other kinds of constraints. But the constraint to living within our planetary boundaries, of getting the energy balances right, is a constraint to which we didn't pay enough attention. Economists have also played an important role in trying to highlight how we think about the issue of how much risk we're willing to take.”

Economists have also played an important role in trying to highlight how we think about the issue of how much risk we're willing to take.

Stiglitz points out that while we don’t know what the full effects of the concentration of greenhouse gases will ultimately be, we do have enough knowledge to know that it could be catastrophic. The awareness of the magnitude of this risk is part of the argument for urgency. Economics can help provide a framework when trying to answer questions like what is the best way of accomplishing our goals, or do we use regulation, a price or public investment?

“One needs to have a rich panoply of instruments,” says Stiglitz. “One cannot simply rely on a price intervention or regulatory interventions on their own. Public investments are going to be absolutely crucial.”

Economics’ Crucial Role

For Esther Duflo, the second woman ever to be awarded the Nobel Prize in Economic Sciences in 2019, it is not a matter of if economics can help address the issue, it’s simply a matter of how. Duflo and her co-laureates were awarded the prize for their experimental approach to alleviating global poverty, fueled largely by randomized controlled trials. A willingness to experiment, and iterate, has been the key to success for Duflo, and may be crucial in this case as well.

“I think economics has to help fight climate change. We can't do it without economics,” says Duflo. “There will be no progress unless we find ways that people change their behavior and economics in a way is about how human behavior responds to the set of incentives and the social environment that is around us.”

Duflo says that it isn’t as simple as economists previously thought, that putting a price a carbon means that the price of carbon goes up and people consume less. She says that energy consumption, like many things in our lives, is a matter of habit.

“There’s the industrial organization of it, there’s the behavioral economics of it, there’s a political economy of it, and all of these really need to focus on how we get people to change their behavior,” says Duflo. “We understand that something needs to be done. Carbon emissions have to go down.”

I think economics has to help fight climate change. We can't do it without economics.

Global Accountability

Nobel Laureate Michael Spence, an expert on economic growth and sustainable growth, says there is still work to do on how we assess and measure environmental activity and changes. Spence also sees technology playing a crucial role to help minimize any negative side effects that could arise during transitions. It’s also a matter of global leadership and accountability.

“People ask the question, ‘Well, in tackling climate change, are we going to reduce economic performance?’,” says Spence. “Well, there's disagreement about this. Maybe yes, maybe no. But the whole point of the exercise is not the short run. The whole point of the exercise is not to have a catastrophic collapse somewhere down the road. And so, I think the way in which we assess economic performance today makes it more difficult to address these long-term challenges.”

The shift to greener energy sources is not something that will happen overnight. According to Spence, we are looking at a multi-decade transition in which the energy efficiency increases, and the fossil fuel component of the energy mix declines, particularly in electricity generation, but not exclusively. For this, we need a plan and technology.

“You need a plan that’s sensible for the evolution of the fossil fuel side,” says Spence. “The politics of this has caused us to seriously underinvest in having a balanced plan for the greening of the economies of the world and, at the same time, phasing out the fossil fuel. We need balanced approaches to this over time.”

How we assess economic performance today makes it more difficult to address these long-run challenges.

He adds that in order to enact any sort of meaningful change, major players measured by emissions must come to some sort of understanding amongst each other.

“It's China, India, Europe, the UK, North America, Mexico and Japan,” he says. “If you add up their total CO2 emissions, this isn't the whole story, but it's an important part of it. That's over 70 percent of global emissions. At the core, we really need an understanding between the US, China, and Europe that makes sense and increases the ambition.”

An Optimistic Outlook

For all of their scientific viewpoints, theoretical frameworks, and economic theories, many economists are still left with a very human, relatable emotion: hope.

“There are reasons to be pessimistic right now. There are reasons to be optimistic,” says Romer. “The reason for optimism is what's possible, given the physics of the world and the things that we can produce and do with it. The technological physical opportunities are just enormous. But the reason we're facing difficulty right now is how to take advantage of those possibilities.”

“If we solve that problem of just making the hard decisions, making the right decisions, then the opportunities will be just as bright as they've been throughout human history. Progress will continue. Standards of living will improve. We'll live lives that are richer, more fulfilling.”

And Stiglitz agrees.

“As we've thought more about climate change, the price of renewable energy has come down,” he says. “People are changing the patterns of living, what they eat and so it may in fact turn out that our ability to make the goals of one and a half degrees net neutral by 2050 may actually be not only easier than we thought but be the basis of a real burst of creative energy that is going to be something that will actually make our society better off.”

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Learn more about these Laureates

How can we fight global poverty?

Esther duflo.

Nobel Laureate, 2019

How can developing countries stimulate their growth?

Michael spence.

Nobel Laureate, 2001

Urbanization Economics: The Macroeconomics of Smart Cities

Paul M. Romer

Nobel Laureate, 2018

Can economics solve financial injustice?

Joseph e. stiglitz.

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Basic Economic Problem

• The fundamental economic problem is the issue of scarcity and how best to produce and distribute these scare resources .
• Scarcity means there is a finite supply of goods and raw materials.
• Finite resources mean they are limited and can run out.
• Unlimited wants mean that there is no end to the quantity of goods and services people would like to consume.
• Because of unlimited wants – People would like to consume more than it is possible to produce (scarcity)

Fundamental economic question

Therefore because of scarcity, economics is concerned with:

• What to produce?
• How to produce?

Examples of the economic problem

Households have limited income and they need to decide how to spend their finite income. For example, with an annual income of £20,000, a household may need to spend £10,000 a year on rent, council tax and utility bills. This leaves £10,000 for deciding which other food, clothes, transport and other goods to purchase.

Householders will also face decisions on how much to work. For example, working overtime at the weekend will give them extra income to spend, but less leisure time to enjoy it. A worker may also wish to spend more time in learning new skills and qualifications. This may limit their earning power in the short-term, but enable a greater earning power in the long-term.  For example, at 18 a student could go straight into work or they could go to university where they will hope to gain a degree and more earning power in the long-term.

A producer needs to remain profitable (revenue higher than costs). So it will need to produce the goods which are in high demand and respond to changing demands and buying habits of consumers – for example, switching to online sales as the high street declines. Producers will need to constantly ask the best way of producing goods. For example, purchasing new machines can increase productivity and enable the firms to produce goods at a lower cost. This is important for fast-changing industries where new technology is frequently reducing costs of production. Without firms adapting to how they produce, they can become unprofitable.

Firms may also need to make long-term investment decisions to invest in new products and new means of production.

The government has finite resources and its spending power is limited by the amount of tax that they can collect. The government needs to decide how they collect tax and then they need to decide whom they spend money on. For example, the government may wish to cut benefits to those on low income to increase incentives to work. However, cutting benefits will increase inequality and relative poverty.

Opportunity cost and the economic problem

The economic problem can be illustrated with the concept of opportunity cost.

Opportunity cost is the next best alternative foregone. A consumer with a limited income of £20,000 year continually faces choices, if they spend £3,000 on a new car, then that is £3,000 they cannot spend on food and drink

If a student spends three years in education, the opportunity cost is the lost potential of earning from a full-time job.

A government may have choices on how to spend limited resources. In this simple model, they have a choice between health care and military spending. If they increase spending on the military, the opportunity cost is less spending on health care.

Can Economic Growth Help Solve Our Debt Problem?

The U.S. is among the most indebted countries in the world—and the problem is only getting worse.

The federal government’s debt is currently $33 trillion and annual deficits just reached the highest in U.S. history outside of the pandemic years (at nearly $2 trillion ). Not only are we spending more than we’re taking in, but the long-run growth in our spending is outpacing the growth in our revenue.

If the lessons from other countries dealing with similar problems are any indication, fixing this problem is going to require a combination of spending cuts and tax hikes. But there’s a third factor that could help alleviate some of the pain involved: economic growth .

Economic Growth, Deficits, and Debt

The faster the economy grows, the less pressure there is to raise taxes and cut spending.

With more businesses and workers, the tax base The tax base is the total amount of income, property, assets, consumption, transactions, or other economic activity subject to taxation by a tax authority. A narrow tax base is non-neutral and inefficient. A broad tax base reduces tax administration costs and allows more revenue to be raised at lower rates. expands, meaning the government can collect more tax revenue without raising rates.

To illustrate, suppose we have an economy with a GDP of $1 trillion and an average tax rate The average tax rate is the total tax paid divided by taxable income . While marginal tax rates show the amount of tax paid on the next dollar earned, average tax rates show the overall share of income paid in taxes. of 20 percent. Total tax revenue would be $200 billion. Let’s say the economy grows by 5 percent, bringing the new GDP to $1.05 trillion. With the tax rate unchanged at 20 percent, the new tax revenue would be $210 billion—a $10 billion increase without touching the tax rate.

A growing economy brings in more tax revenue, which reduces the relative debt burden. This gives lawmakers some breathing room to address fiscal imbalances (think gradual tweaks, not drastic measures).

What Is the Debt-to-GDP Ratio and Why Does It Matter?

The debt-to-GDP ratio is a measure of how much debt the federal government holds compared to how much it produces (i.e., the size of its economy) in a year. For example, say you borrowed $10,000 to start a business and you sold $50,000 worth of products. Your personal “debt-to-GDP” ratio would be 20 percent.

But what would happen if your debt-to-GDP ratio was 115 percent (like the U.S. in 2021)? You’d owe more than you produced in a year.

This ratio gives valuable insight into the sustainability of a country’s economy. If it gets too high, a country might struggle to pay back its debts, leading to a host of undesirable consequences. For example, interest costs to service the debt would become a bigger part of the budget, taking resources away from other priorities. And sometimes governments are tempted to print money to deal with the problem, which causes inflation Inflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “ hidden tax ,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power. . While there’s disagreement about how high is too high, a debt-to-GDP ratio of 100 percent is a common milestone economists look out for.

How Taxes Affect Economic Growth

One way policymakers can promote economic growth is through tax policies that encourage people to work, save , and invest .

For example, allowing businesses to write off investments in the year they occur rather than over time (which decreases their value) makes investments more profitable. This, in turn, encourages more investments, which boosts productivity and can lead to more jobs and higher wages.

To be sure, some of these tax policies would decrease revenue, but the growing economy could help partially offset the reduction.

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INTERVIEW: Developing countries risk missing out on net-zero benefits, but fairer future is possible

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Inflation fears are subsiding, the “net-zero transition” to a clean economy could spell good news with the right policies in place and we are still dealing with a “COVID hangover”, according to the UN Department for Economic and Social Affairs (DESA).

The lead author of  the World Economic Situations and Prospects mid-year update , the flagship report from DESA released on 16 May, outlined the main findings in an interview with UN News .

This interview has been edited and condensed for clarity and length.

Hamid Rashid:  Inflation has come down significantly from the 2022 peak, but not to the extent that central banks can say that they have won the war. There's still room for improvement. 

At the launch of the report, we mentioned that the US Federal Reserve targets “personal consumption expenditure inflation”, which is not about what you buy, but what you consume and includes rent, including “imputed rent” [what homeowners would pay if they were still renting and how much it would have gone up]. 

Those numbers are pretty slow moving, and that really makes it difficult for the number to come down very quickly. 

Some developing countries still have very high inflation, but, overall, the trend is very positive. 

UN News: And the reason we care about this is because there’s very often a lag between the cost of things and how much wages go up?

Hamid Rashid:  Exactly. It boils down to standard of living. If prices are going up higher than your wage growth rates, you are basically worse off in real terms. 

When inflation is very high, people feel very nervous because they are not able to spend as much, and that becomes a self-fulfilling prophecy. They spend less, so the economy slows down even more, and that’s the challenge. 

UN News: The Ukraine war has been going on for over two years, and now we have a catastrophic war in Gaza. What effect does conflict have on the global economy?

Hamid Rashid:  When the war in Ukraine started, we saw a huge spike in commodity prices. Oil prices shot up. Grain prices shot up. But, they have normalised. Similarly, when the Gaza war began last October, we saw some increases in oil prices and some commodity prices but, again, they stabilised.

The global market is responding to this crisis more efficiently, and alternative sources are emerging, so we haven’t seen a severe effect on prices from the Gaza war. However, we are seeing other effects; freight prices have gone up because the Red Sea route is restricted.

UN News:   Because ships can’t travel through that area? 

Hamid Rashid:  Yes. And when you’re diverted around the Cape of Good Hope, you’re adding another 15 days of travel time, which really adds up a lot of costs. 

In general, the biggest headwind right now is geopolitical risk, which is why we have adjusted downward the growth forecast for the majority of the countries in Africa. 

UN News: Turning to the impact of COVID-19, your report graph shows that when the coronavirus hit, the global economy almost came to a standstill. But, then there’s quite a sharp rebound after that. Are we getting back to where we would have been if there hadn’t been a pandemic? Or is it still going to be several years before we fully recover? 

Hamid Rashid:  There’s an illusion there in terms of a huge spike in 2021. It’s what we call the base effect. For example, if you have a massive drop, to minus 10 per cent growth, and the next year you have three per cent growth, it looks amazing. 

We absolutely have not gone back to the pre-COVID trajectory of global growth. Indeed, 2023 was a very slow year. Trade is a major driver of economic growth, especially for developing countries that are very dependent on exporting their commodities or manufactured goods, and trade is not back to normal.

UN News: And many countries ended up cutting back on public spending and basic services?

Hamid Rashid:  Yes, and we have always been very critical of austerity measures, especially when an economy is on a recovery path, because then you slow down the recovery. That goes for developed and developing countries. We saw this in Greece, Argentina and many other countries.

Governments have to spend to keep the economic momentum going because it brings in private investment. For example, when you build a new road, a company can build a factory. If there’s no road, no one can get to the factory. So, public investment is often a critical catalyst for private investment and economic activities. 

UN News: The UN   is urging the international community to speed up the transition to an economy that is no longer based on burning the fossil fuels that are driving the climate crisis. One of the consequences is a massive ramping up of the mining of the rare earth minerals that are needed to, for example, power an electric car. In the report, you say this could create a new version of the so-called resource curse, meaning that those who mine these minerals we will need to power this cleaner economy, won’t necessarily benefit from the wealth they create. Can you explain?

Hamid Rashid:  Yes, but this is not inevitable, and we suggest that if countries have the right policies in place, they can avoid this consequence. Many are actually moving in the right direction because they’ve learned from past mistakes. 

For example, in many African and Latin American countries, the goal was to get as many minerals out of the earth and export it as raw ore and minerals. But, this model is not very sustainable because you don’t get much value.

A tonne of copper ore doesn’t give you much money, but if you can turn it into copper wires and other materials, you can add a lot more value. And that’s what countries are trying to do with innovation and industrial policies. 

You have to bring the technology and the right investment. We are more optimistic about the strategic decisions that governments can make. 

Find out more about the state of the global economy on UN Weekly , an engaging and entertaining guide to the fascinating, little-known and often misunderstood world of the United Nations.

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A Better Framework for Solving Tough Problems

Start with trust and end with speed.

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When it comes to solving complicated problems, the default for many organizational leaders is to take their time to work through the issues at hand. Unfortunately, that often leads to patchwork solutions or problems not truly getting resolved.

But Anne Morriss offers a different framework. In this episode, she outlines a five-step process for solving any problem and explains why starting with trust and ending with speed is so important for effective change leadership. As she says, “Let’s get into dialogue with the people who are also impacted by the problem before we start running down the path of solving it.”

Morriss is an entrepreneur and leadership coach. She’s also the coauthor of the book, Move Fast and Fix Things: The Trusted Leader’s Guide to Solving Hard Problems .

Key episode topics include: strategy, decision making and problem solving, strategy execution, managing people, collaboration and teams, trustworthiness, organizational culture, change leadership, problem solving, leadership.

HBR On Strategy curates the best case studies and conversations with the world’s top business and management experts, to help you unlock new ways of doing business. New episodes every week.

• Listen to the full HBR IdeaCast episode: How to Solve Tough Problems Better and Faster (2023)
• Find more episodes of HBR IdeaCast
• Discover 100 years of Harvard Business Review articles, case studies, podcasts, and more at HBR.org .

HANNAH BATES: Welcome to HBR On Strategy , case studies and conversations with the world’s top business and management experts, hand-selected to help you unlock new ways of doing business.

When it comes to solving complicated problems, many leaders only focus on the most apparent issues. Unfortunately that often leads to patchwork or partial solutions. But Anne Morriss offers a different framework that aims to truly tackle big problems by first leaning into trust and then focusing on speed.

Morriss is an entrepreneur and leadership coach. She’s also the co-author of the book, Move Fast and Fix Things: The Trusted Leader’s Guide to Solving Hard Problems . In this episode, she outlines a five-step process for solving any problem. Some, she says, can be solved in a week, while others take much longer. She also explains why starting with trust and ending with speed is so important for effective change leadership.

This episode originally aired on HBR IdeaCast in October 2023. Here it is.

CURT NICKISCH: Welcome to the HBR IdeaCast from Harvard Business Review. I’m Curt Nickisch.

Problems can be intimidating. Sure, some problems are fun to dig into. You roll up your sleeves, you just take care of them; but others, well, they’re complicated. Sometimes it’s hard to wrap your brain around a problem, much less fix it.

And that’s especially true for leaders in organizations where problems are often layered and complex. They sometimes demand technical, financial, or interpersonal knowledge to fix. And whether it’s avoidance on the leaders’ part or just the perception that a problem is systemic or even intractable, problems find a way to endure, to keep going, to keep being a problem that everyone tries to work around or just puts up with.

But today’s guest says that just compounds it and makes the problem harder to fix. Instead, she says, speed and momentum are key to overcoming a problem.

Anne Morriss is an entrepreneur, leadership coach and founder of the Leadership Consortium and with Harvard Business School Professor Francis Frei, she wrote the new book, Move Fast and Fix Things: The Trusted Leaders Guide to Solving Hard Problems . Anne, welcome back to the show.

ANNE MORRISS: Curt, thank you so much for having me.

CURT NICKISCH: So, to generate momentum at an organization, you say that you really need speed and trust. We’ll get into those essential ingredients some more, but why are those two essential?

ANNE MORRISS: Yeah. Well, the essential pattern that we observed was that the most effective change leaders out there were building trust and speed, and it didn’t seem to be a well-known observation. We all know the phrase, “Move fast and break things,” but the people who were really getting it right were moving fast and fixing things, and that was really our jumping off point. So when we dug into the pattern, what we observed was they were building trust first and then speed. This foundation of trust was what allowed them to fix more things and break fewer.

CURT NICKISCH: Trust sounds like a slow thing, right? If you talk about building trust, that is something that takes interactions, it takes communication, it takes experiences. Does that run counter to the speed idea?

ANNE MORRISS: Yeah. Well, this issue of trust is something we’ve been looking at for over a decade. One of the headlines in our research is it’s actually something we’re building and rebuilding and breaking all the time. And so instead of being this precious, almost farbege egg, it’s this thing that is constantly in motion and this thing that we can really impact when we’re deliberate about our choices and have some self-awareness around where it’s breaking down and how it’s breaking down.

CURT NICKISCH: You said break trust in there, which is intriguing, right? That you may have to break trust to build trust. Can you explain that a little?

ANNE MORRISS:  Yeah, well, I’ll clarify. It’s not that you have to break it in order to build it. It’s just that we all do it some of the time. Most of us are trusted most of the time. Most of your listeners I imagine are trusted most of the time, but all of us have a pattern where we break trust or where we don’t build as much as could be possible.

CURT NICKISCH: I want to talk about speed, this other essential ingredient that’s so intriguing, right? Because you think about solving hard problems as something that just takes a lot of time and thinking and coordination and planning and designing. Explain what you mean by it? And also, just  how we maybe approach problems wrong by taking them on too slowly?

ANNE MORRISS: Well, Curt, no one has ever said to us, “I wish I had taken longer and done less.” We hear the opposite all the time, by the way. So what we really set out to do was to create a playbook that anyone can use to take less time to do more of the things that are going to make your teams and organizations stronger.

And the way we set up the book is okay, it’s really a five step process. Speed is the last step. It’s the payoff for the hard work you’re going to do to figure out your problem, build or rebuild trust, expand the team in thoughtful and strategic ways, and then tell a real and compelling story about the change you’re leading.

Only then do you get to go fast, but that’s an essential part of the process, and we find that either people under emphasize it or speed has gotten a bad name in this world of moving fast and breaking things. And part of our mission for sure was to rehabilitate speed’s reputation because it is an essential part of the change leader’s equation. It can be the difference between good intentions and getting anything done at all.

CURT NICKISCH: You know, the fact that nobody ever tells you, “I wish we had done less and taken more time.” I think we all feel that, right? Sometimes we do something and then realize, “Oh, that wasn’t that hard and why did it take me so long to do it? And I wish I’d done this a long time ago.” Is it ever possible to solve a problem too quickly?

ANNE MORRISS: Absolutely. And we see that all the time too. What we push people to do in those scenarios is really take a look at the underlying issue because in most cases, the solution is not to take your foot off the accelerator per se and slow down. The solution is to get into the underlying problem. So if it’s burnout or a strategic disconnect between what you’re building and the marketplace you’re serving, what we find is the anxiety that people attach to speed or the frustration people attach to speed is often misplaced.

CURT NICKISCH: What is a good timeline to think about solving a problem then? Because if we by default take too long or else jump ahead and we don’t fix it right, what’s a good target time to have in your mind for how long solving a problem should take?

ANNE MORRISS: Yeah. Well, we’re playful in the book and talking about the idea that many problems can be solved in a week. We set the book up five chapters. They’re titled Monday, Tuesday, Wednesday, Thursday, Friday, and we’re definitely having fun with that. And yet, if you count the hours in a week, there are a lot of them. Many of our problems, if you were to spend a focused 40 hours of effort on a problem, you’re going to get pretty far.

But our main message is, listen, of course it’s going to depend on the nature of the problem, and you’re going to take weeks and maybe even some cases months to get to the other side. What we don’t want you to do is take years, which tends to be our default timeline for solving hard problems.

CURT NICKISCH: So you say to start with identifying the problem that’s holding you back, seems kind of obvious. But where do companies go right and wrong with this first step of just identifying the problem that’s holding you back?

ANNE MORRISS: And our goal is that all of these are going to feel obvious in retrospect. The problem is we skip over a lot of these steps and this is why we wanted to underline them. So this one is really rooted in our observation and I think the pattern of our species that we tend to be overconfident in the quality of our thoughts, particularly when it comes to diagnosing problems.

And so we want to invite you to start in a very humble and curious place, which tends not to be our default mode when we’re showing up for work. We convince ourselves that we’re being paid for our judgment. That’s exactly what gets reinforced everywhere. And so we tend to counterintuitively, given what we just talked about, we tend to move too quickly through the diagnostic phase.

CURT NICKISCH: “I know what to do, that’s why you hired me.”

ANNE MORRISS: Exactly. “I know what to do. That’s why you hired me. I’ve seen this before. I have a plan. Follow me.” We get rewarded for the expression of confidence and clarity. And so what we’re inviting people to do here is actually pause and really lean into what are the root causes of the problem you’re seeing? What are some alternative explanations? Let’s get into dialogue with the people who are also impacted by the problem before we start running down the path of solving it.

CURT NICKISCH: So what do you recommend for this step, for getting to the root of the problem? What are questions you should ask? What’s the right thought process? What do you do on Monday of the week?

ANNE MORRISS: In our experience of doing this work, people tend to undervalue the power of conversation, particularly with other people in the organization. So we will often advocate putting together a team of problem solvers, make it a temporary team, really pull in people who have a particular perspective on the problem and create the space, make it as psychologically safe as you can for people to really, as Chris Argyris so beautifully articulated, discuss the undiscussable.

And so the conditions for that are going to look different in every organization depending on the problem, but if you can get a space where smart people who have direct experience of a problem are in a room and talking honestly with each other, you can make an extraordinary amount of progress, certainly in a day.

CURT NICKISCH: Yeah, that gets back to the trust piece.

ANNE MORRISS: Definitely.

CURT NICKISCH: How do you like to start that meeting, or how do you like to talk about it? I’m just curious what somebody on that team might hear in that meeting, just to get the sense that it’s psychologically safe, you can discuss the undiscussable and you’re also focusing on the identification part. What’s key to communicate there?

ANNE MORRISS: Yeah. Well, we sometimes encourage people to do a little bit of data gathering before those conversations. So the power of a quick anonymous survey around whatever problem you’re solving, but also be really thoughtful about the questions you’re going to ask in the moment. So a little bit of preparation can go a long way and a little bit of thoughtfulness about the power dynamic. So who’s going to walk in there with license to speak and who’s going to hold back? So being thoughtful about the agenda, about the questions you’re asking about the room, about the facilitation, and then courage is a very infectious emotion.

So if you can early on create the conditions for people to show up bravely in that conversation, then the chance that you’re going to get good information and that you’re going to walk out of that room with new insight in the problem that you didn’t have when you walked in is extraordinarily high.

CURT NICKISCH: Now, in those discussions, you may have people who have different perspectives on what the problem really is. They also bear different costs of addressing the problem or solving it. You talked about the power dynamic, but there’s also an unfairness dynamic of who’s going to actually have to do the work to take care of it, and I wonder how you create a culture in that meeting where it’s the most productive?

ANNE MORRISS: For sure, the burden of work is not going to be equitably distributed around the room. But I would say, Curt, the dynamic that we see most often is that people are deeply relieved that hard problems are being addressed. So it really can create, and more often than not in our experience, it does create this beautiful flywheel of action, creativity, optimism. Often when problems haven’t been addressed, there is a fair amount of anxiety in the organization, frustration, stagnation. And so credible movement towards action and progress is often the best antidote. So even if the plan isn’t super clear yet, if it’s credible, given who’s in the room and their decision rights and mandate, if there’s real momentum coming out of that to make progress, then that tends to be deeply energizing to people.

CURT NICKISCH: I wonder if there’s an organization that you’ve worked with that you could talk about how this rolled out and how this took shape?

ANNE MORRISS: When we started working with Uber, that was wrestling with some very public issues of culture and trust with a range of stakeholders internally, the organization, also external, that work really started with a campaign of listening and really trying to understand where trust was breaking down from the perspective of these stakeholders?

So whether it was female employees or regulators or riders who had safety concerns getting into the car with a stranger. This work, it starts with an honest internal dialogue, but often the problem has threads that go external. And so bringing that same commitment to curiosity and humility and dialogue to anyone who’s impacted by the problem is the fastest way to surface what’s really going on.

CURT NICKISCH: There’s a step in this process that you lay out and that’s communicating powerfully as a leader. So we’ve heard about listening and trust building, but now you’re talking about powerful communication. How do you do this and why is it maybe this step in the process rather than the first thing you do or the last thing you do?

ANNE MORRISS: So in our process, again, it’s the days of the week. On Monday you figured out the problem. Tuesday you really got into the sandbox in figuring out what a good enough plan is for building trust. Wednesday, step three, you made it better. You created an even better plan, bringing in new perspectives. Thursday, this fourth step is the day we’re saying you got to go get buy-in. You got to bring other people along. And again, this is a step where we see people often underinvest in the power and payoff of really executing it well.

CURT NICKISCH: How does that go wrong?

ANNE MORRISS: Yeah, people don’t know the why. Human behavior and the change in human behavior really depends on a strong why. It’s not just a selfish, “What’s in it for me?” Although that’s helpful, but where are we going? I may be invested in a status quo and I need to understand, okay, if you’re going to ask me to change, if you’re going to invite me into this uncomfortable place of doing things differently, why am I here? Help me understand it and articulate the way forward and language that not only I can understand, but also that’s going to be motivating to me.

CURT NICKISCH: And who on my team was part of this process and all that kind of stuff?

ANNE MORRISS: Oh, yeah. I may have some really important questions that may be in the way of my buy-in and commitment to this plan. So certainly creating a space where those questions can be addressed is essential. But what we found is that there is an architecture of a great change story, and it starts with honoring the past, honoring the starting place. Sometimes we’re so excited about the change and animated about the change that what has happened before or what is even happening in the present tense is low on our list of priorities.

Or we want to label it bad, because that’s the way we’ve thought about the change, but really pausing and honoring what came before you and all the reasonable decisions that led up to it, I think can be really helpful to getting people emotionally where you want them to be willing to be guided by you. Going back to Uber, when Dara Khosrowshahi came in.

CURT NICKISCH: This is the new CEO.

ANNE MORRISS: The new CEO.

CURT NICKISCH: Replaced Travis Kalanick, the founder and first CEO, yeah.

ANNE MORRISS: Yeah, and had his first all-hands meeting. One of his key messages, and this is a quote, was that he was going to retain the edge that had made Uber, “A force of nature.” And in that meeting, the crowd went wild because this is also a company that had been beaten up publicly for months and months and months, and it was a really powerful choice. And his predecessor, Travis was in the room, and he also honored Travis’ incredible work and investment in bringing the company to the place where it was.

And I would use words like grace to also describe those choices, but there’s also an incredible strategic value to naming the starting place for everybody in the room because in most cases, most people in that room played a role in getting to that starting place, and you’re acknowledging that.

CURT NICKISCH: You can call it grace. Somebody else might call it diplomatic or strategic. But yeah, I guess like it or not, it’s helpful to call out and honor the complexity of the way things have been done and also the change that’s happening.

ANNE MORRISS: Yeah, and the value. Sometimes honoring the past is also owning what didn’t work or what wasn’t working for stakeholders or segments of the employee team, and we see that around culture change. Sometimes you’ve got to acknowledge that it was not an equitable environment, but whatever the worker, everyone in that room is bringing that pass with them. So again, making it discussable and using it as the jumping off place is where we advise people to start.

Then you’ve earned the right to talk about the change mandate, which we suggest using clear and compelling language about the why. “This is what happened, this is where we are, this is the good and the bad of it, and here’s the case for change.”

And then the last part, which is to describe a rigorous and optimistic way forward. It’s a simple past, present, future arc, which will be familiar to human beings. We love stories as human beings. It’s among the most powerful currency we have to make sense of the world.

CURT NICKISCH: Yeah. Chronological is a pretty powerful order.

ANNE MORRISS: Right. But again, the change leaders we see really get it right, are investing an incredible amount of time into the storytelling part of their job. Ursula Burns, the Head of Xerox is famous for the months and years she spent on the road just telling the story of Xerox’s change, its pivot into services to everyone who would listen, and that was a huge part of her success.

CURT NICKISCH: So Friday or your fifth step, you end with empowering teams and removing roadblocks. That seems obvious, but it’s critical. Can you dig into that a little bit?

ANNE MORRISS: Yeah. Friday is the fun day. Friday’s the release of energy into the system. Again, you’ve now earned the right to go fast. You have a plan, you’re pretty confident it’s going to work. You’ve told the story of change the organization, and now you get to sprint. So this is about really executing with urgency, and it’s about a lot of the tactics of speed is where we focus in the book. So the tactics of empowerment, making tough strategic trade-offs so that your priorities are clear and clearly communicated, creating mechanisms to fast-track progress. At Etsy, CEO Josh Silverman, he labeled these projects ambulances. It’s an unfortunate metaphor, but it’s super memorable. These are the products that get to speed out in front of the other ones because the stakes are high and the clock is sticking.

CURT NICKISCH: You pull over and let it go by.

ANNE MORRISS: Yeah, exactly. And so we have to agree as an organization on how to do something like that. And so we see lots of great examples both in young organizations and big complex biotech companies with lots of regulatory guardrails have still found ways to do this gracefully.

And I think we end with this idea of conflict debt, which is a term we really love. Leanne Davey, who’s a team scholar and researcher, and anyone in a tech company will recognize the idea of tech debt, which is this weight the organization drags around until they resolve it. Conflict debt is a beautiful metaphor because it is this weight that we drag around and slows us down until we decide to clean it up and fix it. The organizations that are really getting speed right have figured out either formally or informally, how to create an environment where conflict and disagreements can be gracefully resolved.

CURT NICKISCH: Well, let’s talk about this speed more, right? Because I think this is one of those places that maybe people go wrong or take too long, and then you lose the awareness of the problem, you lose that urgency. And then that also just makes it less effective, right? It’s not just about getting the problem solved as quickly as possible. It’s also just speed in some ways helps solve the problem.

ANNE MORRISS: Oh, yeah. It really is the difference between imagining the change you want to lead and really being able to bring it to life. Speed is the thing that unlocks your ability to lead change. It needs a foundation, and that’s what Monday through Thursday is all about, steps one through four, but the finish line is executing with urgency, and it’s that urgency that releases the system’s energy, that communicates your priorities, that creates the conditions for your team to make progress.

CURT NICKISCH: Moving fast is something that entrepreneurs and tech companies certainly understand, but there’s also this awareness that with big companies, the bigger the organization, the harder it is to turn the aircraft carrier around, right? Is speed relative when you get at those levels, or do you think this is something that any company should be able to apply equally?

ANNE MORRISS: We think this applies to any company. The culture really lives at the level of team. So we believe you can make a tremendous amount of progress even within your circle of control as a team leader. I want to bring some humility to this and careful of words like universal, but we do think there’s some universal truths here around the value of speed, and then some of the byproducts like keeping fantastic people. Your best people want to solve problems, they want to execute, they want to make progress and speed, and the ability to do that is going to be a variable in their own equation of whether they stay or they go somewhere else where they can have an impact.

CURT NICKISCH: Right. They want to accomplish something before they go or before they retire or finish something out. And if you’re able to just bring more things on the horizon and have it not feel like it’s going to be another two years to do something meaningful.

ANNE MORRISS: People – I mean, they want to make stuff happen and they want to be around the energy and the vitality of making things happen, which again, is also a super infectious phenomenon. One of the most important jobs of a leader, we believe, is to set the metabolic pace of their teams and organizations. And so what we really dig into on Friday is, well, what does that look like to speed something up? What are the tactics of that?

CURT NICKISCH: I wonder if that universal truth, that a body in motion stays in motion applies to organizations, right? If an organization in motion stays in motion, there is something to that.

ANNE MORRISS: Absolutely.

CURT NICKISCH: Do you have a favorite client story to share, just where you saw speed just become a bit of a flywheel or just a positive reinforcement loop for more positive change at the organization?

ANNE MORRISS: Yeah. We work with a fair number of organizations that are on fire. We do a fair amount of firefighting, but we also less dramatically do a lot of fire prevention. So we’re brought into organizations that are working well and want to get better, looking out on the horizon. That work is super gratifying, and there is always a component of, well, how do we speed this up?

What I love about that work is there’s often already a high foundation of trust, and so it’s, well, how do we maintain that foundation but move this flywheel, as you said, even faster? And it’s really energizing because often there’s a lot of pent-up energy that… There’s a lot of loyalty to the organization, but often it’s also frustration and pent-up energy. And so when that gets released, when good people get the opportunity to sprint for the first time in a little while, it’s incredibly energizing, not just for us, but for the whole organization.

CURT NICKISCH: Anne, this is great. I think finding a way to solve problems better but also faster is going to be really helpful. So thanks for coming on the show to talk about it.

ANNE MORRISS:  Oh, Curt, it was such a pleasure. This is my favorite conversation. I’m delighted to have it anytime.

HANNAH BATES: That was entrepreneur, leadership coach, and author Anne Morriss – in conversation with Curt Nickisch on HBR IdeaCast.

We’ll be back next Wednesday with another hand-picked conversation about business strategy from Harvard Business Review. If you found this episode helpful, share it with your friends and colleagues, and follow our show on Apple Podcasts, Spotify, or wherever you get your podcasts. While you’re there, be sure to leave us a review.

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This episode was produced by Mary Dooe, Anne Saini, and me, Hannah Bates. Ian Fox is our editor. Special thanks to Rob Eckhardt, Maureen Hoch, Erica Truxler, Ramsey Khabbaz, Nicole Smith, Anne Bartholomew, and you – our listener. See you next week.

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The Possible Collapse of the U.S. Home Insurance System

A times investigation found climate change may now be a concern for every homeowner in the country..

This transcript was created using speech recognition software. While it has been reviewed by human transcribers, it may contain errors. Please review the episode audio before quoting from this transcript and email [email protected] with any questions.

From “The New York Times,” I’m Sabrina Tavernise. And this is “The Daily.”

[MUSIC PLAYING]

Today, my colleague, Christopher Flavelle, on a “Times” investigation into one of the least known and most consequential effects of climate change — insurance — and why it may now be a concern for every homeowner in the country.

It’s Wednesday, May 15.

So, Chris, you and I talked a while ago about how climate change was really wreaking havoc in the insurance market in Florida. You’ve just done an investigation that takes a look into the insurance markets more broadly and more deeply. Tell us about it.

Yeah, so I cover climate change, in particular the way climate shocks affect different parts of American life. And insurance has become a really big part of that coverage. And Florida is a great example. As hurricanes have gotten worse and more frequent, insurers are paying out more and more money to rebuild people’s homes. And that’s driving up insurance costs and ultimately driving up the cost of owning a home in Florida.

So we’re already seeing that climate impact on the housing market in Florida. My colleagues and I started to think, well, could it be that that kind of disruption is also happening in other states, not just in the obvious coastal states but maybe even through the middle of the US? So we set out to find out just how much it is happening, how much that Florida turmoil has, in fact, become really a contagion that is spreading across the country.

So how did you go about reporting this? I mean, where did you start?

All we knew at the start of this was that there was reason to think this might be a problem. If you just look at how the federal government tracks disasters around the country, there’s been a big increase almost every year in the number and severity of all kinds of disasters around the country. So we thought, OK, it’s worth trying to find out, what does that mean for insurers?

The problem is getting data on the insurance industry is actually really hard. There’s no federal regulation. There’s no government agency you can go to that holds this data. If you talk to the insurers directly, they tend to be a little reluctant to share information about what they’re going through. So we weren’t sure where to go until, finally, we realized the best people to ask are the people whose job it is to gauge the financial health of insurance companies.

Those are rating agencies. In particular, there’s one rating company called AM Best, whose whole purpose is to tell investors how healthy an insurance company is.

Whoa. So this is way down in the nuts and bolts of the US insurance industry.

Right. This is a part of the broader economy that most people would never experience. But we asked them to do something special for us. We said, hey, can you help us find the one number that would tell us reporters just how healthy or unhealthy this insurance market is state by state over time? And it turns out, there is just such a number. It’s called a combined ratio.

OK, plain English?

Plain English, it is the ratio of revenue to costs, how much money these guys take in for homeowner’s insurance and how much they pay out in costs and losses. You want your revenue to be higher than your costs. If not, you’re in trouble.

So what did you find out?

Well, we got that number for every state, going back more than a decade. And what it showed us was our suspicions were right. This market turmoil that we were seeing in Florida and California has indeed been spreading across the country. And in fact, it turns out that in 18 states, last year, the homeowner’s insurance market lost money. And that’s a big jump from 5 or 10 years ago and spells real trouble for insurance and for homeowners and for almost every part of the economy.

So the contagion was real.

Right. This is our first window showing us just how far that contagion had spread. And one of the really striking things about this data was it showed the contagion had spread to places that I wouldn’t have thought of as especially prone to climate shocks — for example, a lot of the Midwest, a lot of the Southeast. In fact, if you think of a map of the country, there was no state between Pennsylvania and the Dakotas that didn’t lose money on homeowner’s insurance last year.

So just huge parts of the middle of the US have become unprofitable for homeowner’s insurance. This market is starting to buckle under the cost of climate change.

And this is all happening really fast. When we did the Florida episode two years ago, it was a completely new phenomenon and really only in Florida. And now it’s everywhere.

Yeah. And that’s exactly what’s so striking here. The rate at which this is becoming, again, a contagion and spreading across the country is just demolishing the expectations of anyone I’ve spoken to. No one thought that this problem would affect so much of the US so quickly.

So in these states, these new places that the contagion has spread to, what exactly is happening that’s causing the insurance companies to fold up shop?

Yeah. Something really particular is happening in a lot of these states. And it’s worth noting how it’s surprised everyone. And what that is, is formally unimportant weather events, like hailstorms or windstorms, those didn’t used to be the kind of thing that would scare insurance companies. Obviously, a big problem if it destroys your home or damages your home. But for insurers, it wasn’t going to wipe them out financially.

Right. It wasn’t just a complete and utter wipeout that the company would then have to pony up a lot of money for.

Exactly. And insurers call them secondary perils, sort of a belittling term, something other than a big deal, like a hurricane.

These minor league weather events.

Right. But those are becoming so frequent and so much more intense that they can cause existential threats for insurance companies. And insurers are now fleeing states not because of hurricanes but because those former things that were small are now big. Hailstorms, wildfires in some places, previous annoyances are becoming real threats to insurers.

Chris, what’s the big picture on what insurers are actually facing? What’s happening out there numbers-wise?

This is a huge threat. In terms of the number of states where this industry is losing money, it’s more than doubled from 10 years ago to basically a third of the country. The amount they’re losing is enormous. In some states, insurers are paying out $1.25 or even $1.50 for every dollar they bring in, in revenue, which is totally unsustainable.

And the result is insurers are making changes. They are pulling back from these markets. They’re hiking premiums. And often, they’re just dropping customers. And that’s where this becomes real, not just for people who surf balance sheets and trade in the stock market. This is becoming real for homeowners around the country, who all of a sudden increasingly can’t get insurance.

So, Chris, what’s the actual implication? I mean, what happens when people in a state can’t get insurance for their homes?

Getting insurance for a home is crucial if you want to sell or buy a home. Most people can’t buy a home without a mortgage. And banks won’t issue a mortgage without home insurance. So if you’ve got a home that insurance company doesn’t want to cover, you got a real problem. You need to find insurance, or that home becomes very close to unsellable.

And as you get fewer buyers, the price goes down. So this doesn’t just hurt people who are paying for these insurance premiums. It hurts people who want to sell their homes. It even could hurt, at some point, whole local economies. If home values fall, governments take in less tax revenue. That means less money for schools and police. It also means people who get hit by disasters and have to rebuild their homes all of a sudden can’t, because their insurance isn’t available anymore. It’s hard to overstate just how big a deal this is.

And is that actually happening, Chris? I mean, are housing markets being dragged down because of this problem with the insurance markets right now?

Anecdotally, we’ve got reports that in places like Florida and Louisiana and maybe in parts of California, the difficulty of getting insurance, the crazy high cost of insurance is starting to depress demand because not everyone can afford to pay these really high costs, even if they have insurance. But what we wanted to focus on with this story was also, OK, we know where this goes eventually. But where is it beginning? What are the places that are just starting to feel these shocks from the insurance market?

And so I called around and asked insurance agents, who are the front lines of this. They’re the ones who are struggling to find insurance for homeowners. And I said, hey, is there one place that I should go if I want to understand what it looks like to homeowners when all of a sudden insurance becomes really expensive or you can’t even find it? And those insurance agents told me, if you want to see what this looks like in real life, go to a little town called Marshalltown in the middle of Iowa.

We’ll be right back.

So, Chris, you went to Marshalltown, Iowa. What did you find?

Even before I got to Marshalltown, I had some idea I was in the right spot. When I landed in Des Moines and went to rent a car, the nice woman at the desk who rented me a car, she said, what are you doing here? I said, I’m here to write a story about people in Iowa who can’t get insurance because of storms. She said, oh, yeah, I know all about that. That’s a big problem here.

Even the rental car lady.

Even the rental car lady knew something was going on. And so I got into my rental car and drove about an hour northeast of Des Moines, through some rolling hills, to this lovely little town of Marshalltown. Marshalltown is a really cute, little Midwestern town with old homes and a beautiful courthouse in the town square. And when I drove through, I couldn’t help noticing all the roofs looked new.

What does that tell you?

Turns out Marshalltown, despite being a pastoral image of Midwestern easy living, was hit by two really bad disasters in recent years — first, a devastating tornado in 2018 and then, in 2020, what’s called a derecho, a straight-line wind event that’s also just enormously damaging. And the result was lots of homes in this small town got severely damaged in a short period of time. And so when you drive down, you see all these new roofs that give you the sense that something’s going on.

So climate had come to Marshalltown?

Exactly. A place that had previously seemed maybe safe from climate change, if there is such a thing, all of a sudden was not. So I found an insurance agent in Marshalltown —

We talked to other agents but haven’t talked to many homeowners.

— named Bobby Shomo. And he invited me to his office early one morning and said, come meet some people. And so I parked on a quiet street outside of his office, across the street from the courthouse, which also had a new roof, and went into his conference room and met a procession of clients who all had versions of the same horror story.

It was more — well more of double.

A huge reduction in coverage with a huge price increase.

Some people had faced big premium hikes.

I’m just a little, small business owner. So every little bit I do feel.

They had so much trouble with their insurance company.

I was with IMT Insurance forever. And then when I moved in 2020, Bobby said they won’t insure a pool.

Some people had gotten dropped.

Where we used to see carriers canceling someone for frequency of three or four or five claims, it’s one or two now.

Some people couldn’t get the coverage they needed. But it was versions of the same tale, which is all of a sudden, having homeowner’s insurance in Marshalltown was really difficult. But I wanted to see if it was bigger than just Marshalltown. So the next day, I got back in my car and drove east to Cedar Rapids, where I met another person having a version of the same problem, a guy named Dave Langston.

Tell me about Dave.

Dave lives in a handsome, modest, little townhouse on a quiet cul-de-sac on a hill at the edge of Cedar Rapids. He’s the president of his homeowners association. There’s 17 homes on this little street. And this is just as far as you could get from a danger zone. It looks as safe as could be. But in January, they got a letter from the company that insures him and his neighbors, saying his policy was being canceled, even though it wasn’t as though they’d just been hit by some giant storm.

So then what was the reason they gave?

They didn’t give a reason. And I think people might not realize, insurers don’t have to give a reason. Insurance policies are year to year. And if your insurance company decides that you’re too much of a risk or your neighborhood is too much of a risk or your state is too much of a risk, they can just leave. They can send you a letter saying, forget it. We’re canceling your insurance. There’s almost no protection people have.

And in this case, the reason was that this insurance company was losing too much money in Iowa and didn’t want to keep on writing homeowner’s insurance in the state. That was the situation that Dave shared with tens of thousands of people across the state that were all getting similar letters.

What made Dave’s situation a little more challenging was that he couldn’t get new insurance. He tried for months through agent after agent after agent. And every company told him the same thing. We won’t cover you. Even though these homes are perfectly safe in a safe part of the state, nobody would say yes. And it took them until basically two days before their insurance policy was going to run out until they finally found new coverage that was far more expensive and far more bare-bones than what they’d had.

But at least it was something.

It was something. But the problem was it wasn’t that good. Under this new policy, if Dave’s street got hit by another big windstorm, the damage from that storm and fixing that damage would wipe out all the savings set aside by these homeowners. The deductible would be crushingly high — $120,000 — to replace those roofs if the worst happened because the insurance money just wouldn’t cover anywhere close to the cost of rebuilding.

He said to me, we didn’t do anything wrong. This is just what insurance looks like today. And today, it’s us in Cedar Rapids. Everyone, though, is going to face a situation like this eventually. And Dave is right. I talked to insurance agents around the country. And they confirmed for me that this kind of a shift towards a new type of insurance, insurance that’s more expensive and doesn’t cover as much and makes it harder to rebuild after a big disaster, it’s becoming more and more common around the country.

So, Chris, if Dave and the people you spoke to in Iowa were really evidence that your hunch was right, that the problem is spreading and rapidly, what are the possible fixes here?

The fix that people seem most hopeful about is this idea that, what if you could reduce the risk and cause there to be less damage in the first place? So what some states are doing is they’re trying to encourage homeowners to spend more money on hardening their home or adding a new roof or, if it’s a wildfire zone, cut back the vegetation, things that can reduce your risk of having really serious losses. And to help pay for that, they’re telling insurers, you’ve got to offer a discount to people who do that.

And everyone who works in this field says, in theory, that’s the right approach. The problem is, number one, hardening a home costs a fantastic amount of money. So doing this at scale is hugely expensive. Number two, it takes a long time to actually get enough homes hardened in this way that you can make a real dent for insurance companies. We’re talking about years or probably decades before that has a real effect, if it ever works.

OK. So that sounds not particularly realistic, given the urgency and the timeline we’re on here. So what else are people looking at?

Option number two is the government gets involved. And instead of most Americans buying home insurance from a private company, they start buying it from government programs that are designed to make sure that people, even in risky places, can still buy insurance. That would be just a gargantuan undertaking. The idea of the government providing homeowner’s insurance because private companies can’t or won’t would lead to one of the biggest government programs that exists, if we could even do it.

So huge change, like the federal government actually trying to write these markets by itself by providing homeowner’s insurance. But is that really feasible?

Well, in some areas, we’re actually already doing it. The government already provides flood insurance because for decades, most private insurers have not wanted to cover flood. It’s too risky. It’s too expensive. But that change, with governments taking over that role, creates a new problem of its own because the government providing flood insurance that you otherwise couldn’t get means people have been building and building in flood-prone areas because they know they can get that guaranteed flood insurance.

Interesting. So that’s a huge new downside. The government would be incentivizing people to move to places that they shouldn’t be.

That’s right. But there’s even one more problem with that approach of using the government to try to solve this problem, which is these costs keep growing. The number of billion-dollar disasters the US experiences every year keeps going up. And at some point, even if the government pays the cost through some sort of subsidized insurance, what happens when that cost is so great that we can no longer afford to pay it? That’s the really hard question that no official can answer.

So that’s pretty doomsday, Chris. Are we looking at the end of insurance?

I think it’s fair to say that we’re looking at the end of insurance as we know it, the end of insurance that means most Americans can rest assured that if they get hit by a disaster, their insurance company will provide enough money they can rebuild. That idea might be going away. And what it shows is maybe the threat of climate change isn’t quite what we thought.

Maybe instead of climate change wrecking communities in the form of a big storm or a wildfire or a flood, maybe even before those things happen, climate change can wreck communities by something as seemingly mundane and even boring as insurance. Maybe the harbinger of doom is not a giant storm but an anodyne letter from your insurance company, saying, we’re sorry to inform you we can no longer cover your home.

Maybe the future of climate change is best seen not by poring over weather data from NOAA but by poring over spreadsheets from rating firms, showing the profitability from insurance companies, and how bit by bit, that money that they’re losing around the country tells its own story. And the story is these shocks are actually already here.

Chris, as always, terrifying to talk to you.

Always a pleasure, Sabrina.

Here’s what else you should know today. On Tuesday, the United Nations has reclassified the number of women and children killed in Gaza, saying that it does not have enough identifying information to know exactly how many of the total dead are women and children. The UN now estimates that about 5,000 women and about 8,000 children have been killed, figures that are about half of what it was previously citing. The UN says the numbers dropped because it is using a more conservative estimate while waiting for information on about 10,000 other dead Gazans who have not yet been identified.

And Mike Johnson, the Speaker of the House, gave a press conference outside the court in Lower Manhattan, where Michael Cohen, the former fixer for Donald Trump, was testifying for a second day, answering questions from Trump’s lawyers. Trump is bound by a gag order. So Johnson joined other stand-ins for the former president to discredit the proceedings. Johnson, one of the most important Republicans in the country, attacked Cohen but also the trial itself, calling it a sham and political theater.

Today’s episode was produced by Nina Feldman, Shannon Lin, and Jessica Cheung. It was edited by MJ Davis Lin, with help from Michael Benoist, contains original music by Dan Powell, Marion Lozano, and Rowan Niemisto, and was engineered by Alyssa Moxley. Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly.

That’s it for “The Daily.” I’m Sabrina Tavernise. See you tomorrow.

• May 21, 2024   •   24:14 The Crypto Comeback
• May 20, 2024   •   31:51 Was the 401(k) a Mistake?
• May 19, 2024   •   33:23 The Sunday Read: ‘Why Did This Guy Put a Song About Me on Spotify?’
• May 17, 2024   •   51:10 The Campus Protesters Explain Themselves
• May 16, 2024   •   30:47 The Make-or-Break Testimony of Michael Cohen
• May 15, 2024   •   27:03 The Possible Collapse of the U.S. Home Insurance System
• May 14, 2024   •   35:20 Voters Want Change. In Our Poll, They See It in Trump.
• May 13, 2024   •   27:46 How Biden Adopted Trump’s Trade War With China
• May 10, 2024   •   27:42 Stormy Daniels Takes the Stand
• May 9, 2024   •   34:42 One Strongman, One Billion Voters, and the Future of India
• May 8, 2024   •   28:28 A Plan to Remake the Middle East
• May 7, 2024   •   27:43 How Changing Ocean Temperatures Could Upend Life on Earth

Hosted by Sabrina Tavernise

Featuring Christopher Flavelle

Produced by Nina Feldman ,  Shannon M. Lin and Jessica Cheung

Edited by MJ Davis Lin

With Michael Benoist

Original music by Dan Powell ,  Marion Lozano and Rowan Niemisto

Engineered by Alyssa Moxley

Listen and follow The Daily Apple Podcasts | Spotify | Amazon Music | YouTube

Across the United States, more frequent extreme weather is starting to cause the home insurance market to buckle, even for those who have paid their premiums dutifully year after year.

Christopher Flavelle, a climate reporter, discusses a Times investigation into one of the most consequential effects of the changes.

On today’s episode

Christopher Flavelle , a climate change reporter for The New York Times.

Background reading

As American insurers bleed cash from climate shocks , homeowners lose.

See how the home insurance crunch affects the market in each state .

Here are four takeaways from The Times’s investigation.

There are a lot of ways to listen to The Daily. Here’s how.

We aim to make transcripts available the next workday after an episode’s publication. You can find them at the top of the page.

Christopher Flavelle contributed reporting.

The Daily is made by Rachel Quester, Lynsea Garrison, Clare Toeniskoetter, Paige Cowett, Michael Simon Johnson, Brad Fisher, Chris Wood, Jessica Cheung, Stella Tan, Alexandra Leigh Young, Lisa Chow, Eric Krupke, Marc Georges, Luke Vander Ploeg, M.J. Davis Lin, Dan Powell, Sydney Harper, Mike Benoist, Liz O. Baylen, Asthaa Chaturvedi, Rachelle Bonja, Diana Nguyen, Marion Lozano, Corey Schreppel, Rob Szypko, Elisheba Ittoop, Mooj Zadie, Patricia Willens, Rowan Niemisto, Jody Becker, Rikki Novetsky, John Ketchum, Nina Feldman, Will Reid, Carlos Prieto, Ben Calhoun, Susan Lee, Lexie Diao, Mary Wilson, Alex Stern, Dan Farrell, Sophia Lanman, Shannon Lin, Diane Wong, Devon Taylor, Alyssa Moxley, Summer Thomad, Olivia Natt, Daniel Ramirez and Brendan Klinkenberg.

Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly. Special thanks to Sam Dolnick, Paula Szuchman, Lisa Tobin, Larissa Anderson, Julia Simon, Sofia Milan, Mahima Chablani, Elizabeth Davis-Moorer, Jeffrey Miranda, Renan Borelli, Maddy Masiello, Isabella Anderson and Nina Lassam.

Christopher Flavelle is a Times reporter who writes about how the United States is trying to adapt to the effects of climate change. More about Christopher Flavelle

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