Do economic sanctions ever work?

From: Blog

World leaders are considering how to respond to Russia’s annexation of Crimea from Ukraine, and there has been plenty of talk (but so far, little action) about placing economic sanctions on the newly expanded nation. Some have expressed concern that sanctions won’t have the intended effect, and that they furthermore will be imposed at the expense of the global economy.  

Do economic sanctions ever work? It’s a tricky question. After all, the decades-long US trade embargo against Cuba has not brought down that regime, while the US, European, and British Commonwealth sanctions against South Africa may have played a part in changing that country’s leadership.

Following the recent redrawing of borders, the IGM Economic Experts Panel considered whether past experience suggests that economic sanctions do little to deter target countries from their course of action. In a rare display of disunity, the panel was nearly equally divided over whether any such actions will be effective. Nearly a third disagree with the statement and believe that sanctions are useful. Another third are uncertain, while some others don’t have an opinion, and the remainder agree that sanctions are ineffective.

“I think a part of what made Iran come to the bargaining table has to do with sanctions, though I have no way to prove this,” said MIT’s Abhijit Banerjee with his disagree vote. Harvard’s Oliver Hart expressed a similar sentiment, saying, “My sense is that economic sanctions were important in ending apartheid in South Africa, and are leading Iran to negotiate with the West.”

The significant uncertain contingent on the panel was largely concerned with knowing more specifics before they could take a stand. “Depends on the country, its trade and its politics. Also, sanctions that are initially apparently ineffective can gradually undermine a regime,” said Stanford’s Caroline Hoxby.

“We have evidence both ways— sanctions of Myanmar and North Korea have accomplished little, while sanctions on Iran may be useful,” said Larry Samuelson of Yale.

Those who agreed that sanctions have largely proved futile expressed varying points of view. Daron Acemoglu of MIT noted differences among types of sanctions, saying, “This is true for limited sanctions being imposed on Russia. Much more comprehensive sanctions as in South Africa or Iran would be effective.”

Chicago’s Robert Shimer, meanwhile, pointed to the type of economy under sanction. “The effectiveness must depend on the openness of the target economy and the uniformity of the sanctions,” he said.

Right now, the US response to the annexation of Crimea has been to impose sanctions against Vladimir Putin and his cronies, but the UN is calling for wider restrictions. Will they be more effective? Will Ukraine regain its most valuable territory? We don’t know, and only time may tell. 

—Robin Mordfin

Cat: Policy,Sub: Economics,


Morning Guy vs. Night Guy

From: Blog

How to do right by your future self

Do you ever stay up late and then curse yourself the next morning when your alarm clock wakes you up? Jerry Seinfeld has the same problem. He’s got a pretty good idea of why it happens, too, he just doesn’t have a great solution yet. In the opening monologue to "The Glasses" in Season 5, Jerry complains:

“I never get enough sleep. I stay up late at night, because I'm Night Guy. Night Guy wants to stay up late. 'What about getting up after five hours sleep?' Oh, that's Morning Guy's problem. That's not my problem, I'm Night Guy. I stay up as late as I want. So you get up in the morning, the alarm [rings], you're exhausted, groggy… Oh, I hate that Night Guy! See, Night Guy always screws Morning Guy. There's nothing Morning Guy can do.”

The idea that there’s a cast of characters inhabiting your body at various times, getting in each other’s way, may not seem like a sound psychological theory, but it’s actually not too far off. Research shows that when people think about themselves in the future, it’s almost like they’re thinking about another person (see here and here). Recent findings by NYU’s Hal Hershfield and his colleagues even suggest that when we think of ourselves in the future, the neural circuits that we recruit can be the similar to the ones that we use to think about others, not about ourselves.

It’s not that Night Guy doesn’t care about Morning Guy at all, it’s just that he doesn’t think of him as a later version of himself, but as somebody else entirely. So Night Guy goes out drinking with his friends and Morning Guy gets stuck with the hangover. Worse still, Night Guy’s got friends. There’s Young Guy who doesn’t save enough money for Old Guy to retire, Hungry Guy who leaves Fat Guy with a beer gut, and Invincible Guy who has better things to spend his money on than health insurance for Sick Guy. They might sound kind of like superheroes, but despite their great power, they’re not so great about responsibility. So what is poor Morning Guy supposed to do?

Jerry does have one potential solution, but it’s a little impractical. He says that, “the only thing Morning Guy can do is try and oversleep often enough so that Day Guy loses his job, and Night Guy has no money to go out anymore.” Hershfield and his colleagues have a different approach—one that won’t cost you your job. They find that you can get Night Guy to be nicer to Morning Guy if you just introduce them to each another.

One clever way they have done this is to show people pictures of themselves that have been digitally aged. When people see older versions of themselves they become more likely to see their current and future selves as the same person. As Hershfield explained to me, “these types of interventions help people realize that their future selves are ultimately dependent on the choices that they make today.” He finds that this leads people to save more money for retirement than they would have otherwise and they also become less likely to engage in (short-sighted) delinquent behavior, like cheating. If you don’t have digital aging software on your computer, a low tech version that’s also effective is to write a letter to your future self. So if you have trouble going to sleep at a reasonable hour, or saving for retirement, or really doing anything today that won’t pay off until tomorrow, you should consider becoming better acquainted with Future Guy today—otherwise he’ll probably get screwed by Procrastinating Guy again.

—Dave Nussbaum, adjunct assistant professor of behavioral science

This article originally appeared on Nussbaum's Random Assignment blog on the Big Think network.
Cat:Business, Economics,