http://mitworld.mit.edu/ MIT World media in category 'Economics'. en-us Tue, 24 Nov 2009 21:20:49 GMT Wed, 18 Nov 2009 00:00:00 -0500 http://mitworld.mit.edu/video/724 http://mitworld.mit.edu/video/724 Rickshaw drivers in India are frequent victims of tuberculosis after just a few years inhaling traffic fumes. This near-epidemic went unacknowledged until
Kapil Sibal demanded a solution. The fix, now gaining traction across the country, is a solar-powered vehicle that eliminates pedaling. But what began as a project to assist his nation’s afflicted rickshaw drivers has broadened into a much grander scheme in Sibal’s hands. Project 800 is a government venture to apply science and technology to better the lives of India’s 800 million citizens facing a multitude of hardships.

Sibal’s mission at MIT is not merely to communicate his people’s great challenges, but to recruit. He is candid: “MIT should be a partner in Project 800,” helping to solve the “ordinary problems of ordinary men with ordinary lives.” Sibal wonders how the globalization of trade, manufacturing and services alone will solve the extraordinary problems of India in the 21st century: feeding a growing population with a limited amount of arable land just as the green revolution has gone “gray;” managing the impacts of global warming and greater energy demands; and the spread of health threats that respect no national borders. Solutions to these problems, Sibal believes, depend in large part on the globalization of education -- the dissemination of scientific and technical know-how from places like MIT to India.

But this flow of transformative ideas, warns Sibal, requires a “change in the mindset of educational institutions.” They must begin to perceive their community as global, and also be willing to move where they are needed. “They are not silos of knowledge living in one part of the world, protecting the national interest, saying as long as we’re OK, it doesn’t matter what else is happening in the world.” Academic institutions must find common cause with other communities, learn that problems thousands of miles away have the power to touch home. “There should be an element of self-interest. It should be win-win,” says Sibal.

To that end, Sibal invites MIT to partner with India on site in projects “to combat the challenges of tomorrow.” He sees natural affiliations that increase the odds for success in these collaborations: “freedom of speech, diversity of culture, the enormous ability to have dialog.” MIT also lends such ventures another advantage, says Sibal -- a woman president, “who has the vision to create, nurture and transform.” ]]> Mon, 05 Oct 2009 00:00:00 -0400 http://mitworld.mit.edu/video http://mitworld.mit.edu/video ]]> Mon, 05 Oct 2009 00:00:00 -0400 http://mitworld.mit.edu/video/711 http://mitworld.mit.edu/video/711 After centuries of insufferable oppression by colonial powers, bloody independence struggles, and corrupt home-grown regimes, “Africa today is quickly awakening, and determined to mainstream itself in the phenomenon of the globalization process,” says John Kufuor, who served as Ghana’s president for two terms starting in 2000. Kufuor recounts how Ghana transcended its dark history to attain astonishing political and economic progress, establishing the nation as an exemplar for fellow African states.

In a brisk history lesson, Kufuor accounts for the lag between Africa and other continents in socioeconomic development: geography kept Africa outside ancient trading routes, and when “marauding” Europeans eventually encountered Africa, it was “more or less a one-sided, institutional gang rape...” Denied citizenship and rights, for 600 years “the African ego and personality was assailed and trampled upon.”

Following World War 2, colonial powers relinquished their African holdings, but successor native governments were often little better, says Kufuor, spouting revolutionary rhetoric, and stifling “visionary individualism and creativity.” State control meant “private capital formation went underground.”

African rulers maintained attachments to their “former European overlords,” who imported Africa’s resources “raw on concessionary terms.” Kufuor blames the “stinginess” of foreign entrepreneurs, their unwillingness to “add value” to these products, for African nations’ current paucity of medium and large-scale business. But Ghana’s trick was to transform this disadvantage -- a large pool of small, agriculturally based businesses -- into the centerpiece of an economic revival. Kufuor cites in particular cocoa farmers, responsible for one of Ghana’s principal exports, who own on average no more than three acres. When he arrived in office, Kufuor determined to support the “self-reliant, risk-taking initiative” of such farmers and other small-scale businesses, recognizing that they were key to “unleashing the potential wealth of the nation.”

His government pursued debt forgiveness by the IMF; separating the central bank from the president’s office; and distributing more banking licenses and lowering lending rates. Aid to farmers with trading, modernization, irrigation, and other infrastructure led to unprecedented economic growth: the GDP quadrupled over an eight year period beginning in 2000, with growth at 7.3% last year. Government “had promised to usher the country into a golden age,” says Kufuor, and came through not just with economic policies, but with investment in education and a national health insurance plan for all citizens. Two years ago, oil was discovered offshore, and Kufuor, “proud of having laid a solid foundation” for Ghana, prays that this find will prove “a blessing and not a curse, for the good of all our sons and daughters.” ]]> Mon, 28 Sep 2009 00:00:00 -0400 http://mitworld.mit.edu/video/706 http://mitworld.mit.edu/video/706 In a lively discussion with Simon Johnson,
Lawrence Fish deconstructs the near collapse of the banking system and points out the multiple factors that have contributed to the financial crisis.

Topics in the discussion include the banks that did not fail, how Canadian and other countries' banking systems also did not fail, the political landscape of banking regulation, ethics, bonuses in the banking industry and the ethics oath signed by 50% of the students at the Harvard Business School. ]]> Thu, 24 Sep 2009 00:00:00 -0400 http://mitworld.mit.edu/video/705 http://mitworld.mit.edu/video/705 People sometimes ask Montek Singh Ahluwalia questions loaded with “aspirational objectives,” such as when India will “get rid of poverty.” Few are as well equipped to respond as Ahluwalia, one of the architects of India’s breathtaking economic transformation.

The current income of an average Indian citizen is about 1/15th that of a U.S. citizen. Ahluwalia envisions increasing India’s per capita income ten fold. He sees this as a matter of “simple arithmetic.” To achieve this advance, India must sustain GDP growth of 9% a year (which corresponds to a 7%/year growth in personal income) -- for 32 years. By 2040, India’s 1.5 billion people could be living more like Americans. “Regrettably, I won’t be around to see it,” says Ahluwalia.

By 2020, though, assuming such sustained economic growth, he would be around to witness “more modest results.” Indians would double their annual income to $6,600, and the nation would be able to “provide a basic level of services to the vast majority of its population,” essentially leaving behind its problems of poverty. This kind of growth, “an extremely worthwhile objective” for India, would also leave its mark on the rest of the world. It would inspire other emerging economies, for one thing. It would also shift the balance of power in global trade, with the combined economies of India and China taking on the U.S.

So can India really achieve this kind of relentless economic progress? Ahluwalia’s not sure, but invokes the successes of Japan, Korea and China, and sees reasons for optimism. Over the past eight years, India’s averaged a 7.2% GDP growth rate, and looks likely to land on its feet after the current worldwide recession. On the other hand, the nation’s vibrant democracy (420 million voted in the most recent elections) can make agreement on economic policy and its implementation difficult. Ahluwalia is “not complaining,” but acknowledges that this kind of participative society “means we’re taking longer to get done what needs to be done.”

He sees institutional strengths that will enable India to push its development agenda forward: a sense of confidence pervades Indian society; past reforms have “unleashed tremendous energy in the private sector;” the economy has opened up to greater domestic and foreign markets; and in spite of changes in government, the general economic policies continue to evolve. Ahluwalia acknowledges that defeating poverty may not address everyone’s goals for success. The true objective for India, he believes, is “inclusive growth,” an equitable and constructive distribution of economic gains via market forces, government and public means. ]]> Fri, 24 Jul 2009 00:00:00 -0400 http://mitworld.mit.edu/video/692 http://mitworld.mit.edu/video/692 Contrary to popular thinking, China owes its astonishing economic expansion not to far-sighted government policy but to hundreds of millions of entrepreneurial peasants. Yasheng Huang’s research reveals not only how small-scale rural businesses created China’s miracle but how that nation’s recovery from the global recession and righting the massive East-West trade imbalance depend on this same under-acknowledged sector.

Huang begins with questions, including why China produces so much relative to its own consumption. He shows graphs dramatically illustrating the rise of China’s GDP with a concurrent drop in domestic consumption. A nation that doesn’t consume what it produces must export. Huang has pounded away at the question of this drop in consumption. He rejects explanations pointing at a Chinese bent for thrift, and believes instead that households have become impoverished in the midst of the nation’s decades-long boom.

Huang’s research analyzed previously unexamined data to resolve this paradox and produce a novel thesis, detailing the rise and fall of rural entrepreneurship in China. In the 1980s, enabled by government liberalization, tens of millions of peasants began home-grown private businesses, from small-scale manufacturing to service delivery. They supplemented meager agricultural incomes, generating profits that they used to better their standards of living. The Chinese economy boomed. But in the 1990s, a new regime took over, taxing the grass-roots entrepreneurs and pouring money into infrastructure and state-run enterprises. Politicians imposed steep fees on education and healthcare, soaking the newly minted rural capitalists. GDP rose, but household incomes dipped, as hundreds of millions pinched pennies instead of generating profits. The Chinese made lots of things that they couldn’t buy. A global trade imbalance ballooned.

The recession has struck the rural Chinese especially painfully (they make up 70% of the nation’s population). More than 100 million who had migrated to cities for work have lost their jobs with the shutdown of factories, and there has been a “virtual collapse in non-farm business income growth,” says Huang. New Chinese policies have begun to attend to rural issues, such as abolishing rural taxation, reducing fees, and spurring microfinance. This should help increase household income. But in key areas like land reform, there’s only been talk. Huang believes a Chinese stimulus package aimed at reinvigorating the building boom won’t do nearly as much good for the economy as liberalization of social policies and attempts to unleash once again the productive energies of the rural poor. ]]> Mon, 13 Apr 2009 00:00:00 -0400 http://mitworld.mit.edu/video/661 http://mitworld.mit.edu/video/661 The same institutional tenets guiding innovative management during good times needn’t waver during a downturn, even the present one, says Emmanuel Maceda. After two decades at Bain, one of the world’s premiere management consulting businesses, Maceda feels confident in his company’s practices and principles, which have guided both Bain and its clients through earlier economic booms and busts.

Bain constructs innovative leadership around three pillars: customers (clients), people and products, Maceda says. His company seeks a winning edge by establishing warm and lasting client relationships. At Bain, this means even top executives commit to working directly with clients, and assigning teams to the “client interface.” Clients are solicited for feedback through surveys and interviews, and come back to Bain for repeat business, finding satisfaction in its “collaborative culture,” says Maceda.

Bain’s organization has evolved around unique recruits, tapped from just seven elite business schools (including MIT Sloan). New staff are carefully trained and begin team building, which they continue throughout their careers, at all levels of the company. This costs Bain a great deal, but it’s necessary, says Maceda. The firm encourages activities that build “esprit de corps,” and touts a compensation model tied to the profitability of the firm. Bain also rewards the development of client products, whether in strategy, organization, M&A, which can be tested elsewhere then scaled up to produce new revenue.

This type of innovative leadership, says Maceda, could “apply broadly to most service-based organizations who want to make people the heart of a sustainable, competitive advantage, and to translate better products that meet clients needs better.” Such an organizational model holds true even or especially during times of crisis. “If you believe you have a strong competitive advantage, usually during times of crisis you can harness that and win.” Clients’ needs change “a bit” under economic duress. They may require help figuring out new strategies (such as cost reduction vs. aggressive growth), and seek new products in areas like cash management, and “quick hit revenue tools.”

Maceda points out significantly that in recent economic downswings Bain kept hiring, and its leadership took lower dividends, as the firm sought to retain key client and supplier partnerships. It’s not easy, but try to “nurture those relationships, even if you have to cut back in other places,” counsels Maceda. He concludes, “The fundamentals of being innovative leaders around client, people and products don’t change in a crisis.” ]]> Sun, 05 Apr 2009 00:00:00 -0400 http://mitworld.mit.edu/video/659 http://mitworld.mit.edu/video/659 There will be a time “beyond crisis,” asserts Robert C. Merton, who delves into the dense science of derivatives -- a field he has fundamentally shaped -- to explain how the vast global economic collapse has come about, and how financial innovations at the heart of the collapse could also be tools for reconstruction.

Merton uses deceptively simple graphs to show how risk propagated rapidly across financial networks, bringing down financial institutions. While he admits the crisis “is very big and complicated,” Merton boils a piece of it down to the use of put options, a derivative contract that’s been around since the 17th century. This asset-value insurance contract, a guarantee of debt, is the basis for the credit default swaps widely adopted by financial giants in the last few years -- now widely regarded as a primary cause of the meltdown. It turns out, says Merton, that the put “makes risky debt very complicated, and treacherous…”

In these puts, if the value of assets goes down, the guarantee value goes up, so the value of the written insurance is worth more. The value of this guarantee is very sensitive to the movement of the underlying asset. When dealing with puts on the local level, this movement can be tracked and managed more easily. But when financial institutions manipulate bundles of assets (for instance, mortgage-backed securities), the increase in risk proves non-linear. Add some volatility, like the jolts posed by widespread drops in housing prices, and the difference between the decline in asset value and the value of the guarantee becomes enormous -- leading to mountains of debt and felling behemoths like AIG (insurer to lenders).

Yet, Merton counsels not to blame the current crisis on put options, or too much complexity, but rather on incomplete understanding of the models of risk involved. It’s not “bad and incompetent people” who have brought this about (although he admits there are plenty of those) but “a structural issue between financial innovation and crisis.” We’ve essentially built a high speed train for which there’s not yet an appropriate track. We’ve created instruments for manipulating financial risk without a thorough understanding of the underlying engineering.

Derivatives are not going away, says Merton. We need regulators who understand these instruments, and perhaps a sovereign wealth fund intended to “maximize the expected return for risk for people of the U.S.” Merton concludes with “something positive” -- a model of how to “weaken the tradeoff between pursuing comparative advantage vs. efficient risk,” applied to the nation of Taiwan. ]]> Sun, 22 Mar 2009 00:00:00 -0400 http://mitworld.mit.edu/video/654 http://mitworld.mit.edu/video/654 “Paint it Black” is all about red -- the mountain of debt challenging the viability of all the nation’s institutions. James Poterba takes a scholarly approach to moderating this detailed discussion of the unfolding economic collapse, its ramifications on business and the possible impact of governmental remedies.

“From the standpoint of economic analysis,” says Poterba, “this appears to be a once-in-a -generation or perhaps longer global storm.” He expands on this statement throughout, with forays into macroeconomics, credit and equity markets, the tools historically and currently wielded by government to interfere with economic crises, and an occasional joke (at the expense of economists). He engages his speakers in their areas of expertise.

Alan Cohen discusses how the practice of “shadow banking” helped trigger the subprime mortgage crisis. Non-financial institutions invented ways to package mortgages, slicing and dicing them into securities that could be traded without oversight. These credit derivative instruments existed without adequate capital backing, and so were exceedingly risky. Cohen also blames rating agencies for becoming complicit in the game, talking to investment bankers “about what was necessary to get AAA.” There were warning signs, says Cohen, as early as 2006 of “deteriorating housing numbers, but … the rating agencies didn’t downgrade.” Suddenly, in 2007, these packaged, unregulated securities lost their value, and banks, faced with debt, ended up selling assets under pressure.

Cohen says that TARP funds won’t necessarily free up credit for small business or the mortgage market, since banks and other institutions are still trying to pay off vast debt. In this over-leveraged environment, no financial institution trusts another, and companies seeking loans must demonstrate they represent extremely low risk. Some lenders worried about “getting hurt by entrepreneurial activity” may ask for rights, or participation, in the venture. “To attract the more disciplined lender, you must provide more bang for the buck,” says Cohen.

David Tabak reckons that volatility poses the premiere challenge for small business. At a time of great flux for all markets, firms must attempt to calculate what their patents and investments will be worth months and years down the road. He remains guarded about whether government intervention will calm the waters. For one thing, bank stress tests must decide how much value actually exists in different tiers of assets held by banks -- including loans to small business. Some banks may be partly nationalized if they fail to meet capital reserve requirements. This won’t fuel stability and growth in the private sector. Also, Tabak sees some businesses holding out for a second round of government funding, or for investment tax credits.

Tabak’s advice for the government: “Put in an option clearing corporation, and ban credit default swaps for speculators.” To businesses, Tabak says, “Get your financial statements right,” and “ask, ‘What do I need in the short and long run, what are the differences between the two, and plan out.’” There are strong opportunities for those who survive. ]]> Fri, 06 Mar 2009 00:00:00 -0500 http://mitworld.mit.edu/video/651 http://mitworld.mit.edu/video/651 MIT President Susan Hockfield hails a new era of collaboration between the Institute and China, and Zhou Wenzhong, Ambassador Extraordinary and Plenipotentiary of the People's Republic of China, discusses the larger relationship between his country and the U.S., particularly in light of the economic crisis enveloping the world.

Chinese students have been matriculating at MIT, says Susan Hockfield, since 1876 -- almost as long as the university has been around. But the 1990s saw the start of a broader and deeper institutional commitment, with Mandarin courses at MIT, and a program to send MIT students to intern with Chinese companies. Now, the relationship is deepening, with an MIT-China initiative to spark research ideas and collaborations, particularly around energy and sustainable development, robotics, and healthcare; and a China Forum Lecture series. Hockfield believes partnerships between MIT and the People’s Republic of China “are virtually unlimited.”

In the 30 years since China began economic reforms, Zhou Wenzhong recounts, its domestic economy has grown roughly twice as fast as the world economy. Its GDP has expanded from the equivalent of $216.5 billion to $3.28 trillion. The ambassador reminds his audience that in spite of such gains, China remains a developing country, with an enormous population whose per capita GDP is less than 1/17th of that of U.S. citizens’. It is “a long way from basic modernization and prosperity for all.”

Much of China’s growth stems from a quadrupling of international trade. But intense globalization, an “irresistible reality” for all nations, poses major challenges, especially now with the rapid onset of profound economic malaise. China is moving to respond to this crisis, and looking beyond it, to help “establish a new international financial order that is fair, just, inclusive and orderly, fostering an institutional environment conducive to sound global economic development.” The government has set out a comprehensive package of reforms to keep the country’s economy running in hard times. The remedy, loaded as it is with tax cuts, social investments, restructuring of major industries, and energy conservation measures, may ring a bell for the U.S. public.

China also looks to its global neighbors in facing the immediate economic challenge, says Zhou Wenzhong, and in responding to such other pressures as terrorism, proliferation of WMD, climate change, epidemic diseases and national disasters. He hopes for a strengthening of U.S.-China relations, predicated on an approach steeped in the “long-term and strategic perspective.” The U.S. and China should “shoulder greater shared responsibilities,” promote common interests in trade, counterterrorism, law enforcement, science, technology and young people. China asks that the U.S. treat it as an equal, and respect such core interests “as the Taiwan question and Tibet relation matters.” With mutual trust and dialog, he concludes, “A new era offers unprecedented opportunities…to build a better future.” ]]> Mon, 02 Mar 2009 00:00:00 -0500 http://mitworld.mit.edu/video/650 http://mitworld.mit.edu/video/650 If economic analyses earned ratings like movies, this event would receive an X for extremely disturbing. Two of the field’s most prominent voices spare any sugar coating in their unsettling accounts of the world’s unfolding economic crisis.

Martin Feldstein had a hard time choosing which of the innumerable problems to focus on, he admits, but ultimately settles on near-term challenges faced by the U.S. First off, this downturn is atypical; past recessions generally resulted from the Federal Reserve responding to inflation by nudging up interest rates and slowing the economy. This one involves two disparate but interacting problems: “the weakness of aggregate demand and the dysfunctional character of the financial markets.” In laymen’s terms, consumers are declining to spend money, the housing market’s hit the skids; and banks big and small have no clue the value of their balance sheets, so they won’t lend money to any but the best bets. There are some impressive numbers involved: The U.S. GDP is less than $15 trillion. A $12 trillion fall in household wealth (a combination of stock market and housing losses) has entailed a $750 billion decline in GDP.

The government’s attempts to pick up slack in the credit market haven’t to date brought private markets back to life, says Feldstein. “We’re in a very awkward situation, where the Fed is moving well beyond anything a central bank has ever done before to act as a credit provider.” The stimulus package doesn’t come close to addressing the $750 billion hole in our economy: it’s “a poorly designed program that delivers so little bang for the buck.” Turning from “the bleak picture of the U.S. to the rest of the world,” Feldstein sees a chain of events pulling all major financial centers down, leading to “a mutually reinforcing global recession.” The nations most likely to avoid “being dragged down” by this crisis: China and India.

Astonishingly, Simon Johnson promises “to be quite a bit more negative.” The U.S. banking situation “is much worse than what Marty said.” The system needs a complete recapitalization -- a simple solution -- but practically impossible due to “the power of the banking lobby.” Europe’s banking system is even worse off (poster child: Iceland). European bank losses are dragging down not just banks, but entire nations. Their governments can’t pull together fiscal stimulus packages, either. While “Europe is in denial,” emerging markets like Russia have seen their reserves plunge, and are making stark decisions about “which of their people get bailed out.” And don’t think the IMF can come to the rescue; it has a meager $250 billion to loan, and is trolling for additional money from Western pockets, which just now have very big holes in them. Johnson’s grim conclusion: Economists are reaching a consensus about the possibility of a very long period of slow or no growth: “There’s a danger we could lose a decade.” ]]> Fri, 09 Jan 2009 00:00:00 -0500 http://mitworld.mit.edu/video/633 http://mitworld.mit.edu/video/633 George Soros extends his “theory of reflexivity” from abstraction to application in the realm of investing. His book, The New Paradigm for Financial Markets, offers a timely look at the credit crisis that reached crescendo in 2008. His views fall between prescience and vindication. Nevertheless, he concedes fallibility: “With all my great, deep understanding, I don’t always get the markets right.”

In conversation with Ricardo Caballero, Soros recounts the formative experience of his life -- surviving the German occupation of Hungary -- “a far from equilibrium situation.” He credits his father for recognizing that “the normal rules don’t apply” and falsifying documents permitting the family’s escape from fascism. Soros attributes his intellectual development during college to the philosophy of Karl Popper. This led him eventually to question the economic postulate of “perfect knowledge and perfect competition.”

He concluded that markets do not exist in a vacuum nor spontaneously self-correct. Thinking participants introduce friction, inevitably influencing outcomes for better or worse. Soros characterizes this phenomenon as the cognitive function interfering with the manipulative function and vice versa, thus the reflexivity of his theory. “Path dependence is very much due to imperfect understanding,” he states and “actions have unintended consequences.”

Time and again Soros has anticipated financial bubbles and capitalized on opportunities he foresaw. Caballero elicits his ideas on bubble formation and collapse. Soros’s metaphor is “people go on dancing even though they realize that the music is about to stop.” He says the most common bubble is real estate where the misconception is that value “is independent of the willingness to lend.” Soros asserts that a “superbubble has been growing for at least 25 years,” periodically manifested by the international banking crisis and Latin debt in the early ’80s; 1997’s emerging market crisis; the Internet technology explosion; overleveraging that created the housing bubble; and escalating oil and commodity prices. He also faults financial innovation and securitization of debt. “People became very loose in their lending habits” and increased risk “by separating agent from principal.”

Soros’s prescription for a sounder financial system begins with reducing troubled mortgages to 80% of current value, thereby minimizing foreclosures and preventing further decline of housing prices. He also recommends recapitalizing banks to encourage lending, and lowering the reserve requirement to 6%. His ultimate suggestion sounds simple enough: “Stabilize the global economy.”

Soros admits markets will always tend toward bubbles. He places responsibility on regulators to rein this in, adding “that would require the use of judgment and they’re bound to get it wrong … because they’re human.” ]]> Sun, 07 Dec 2008 00:00:00 -0500 http://mitworld.mit.edu/video/623 http://mitworld.mit.edu/video/623 In an energetic talk delivered prior to the U.S. presidential election, Jonathan Gruber provides a useful breakdown of the two candidates’ remedies for the nation’s troubled health care system. His detailed analysis of the key issues around health care may prove invaluable as the next president assumes office.

After decades of discussing health reform and watching national health costs balloon uncontrollably, says Gruber, we may finally be watching a consensus emerge to fix what’s broken: a crisis where more than 47 million Americans lack health insurance, and “are a car accident away from being bankrupted.” Gruber describes key areas that reform must tackle: pooling of health care markets, affordable plans, and mandates. The left and right differ on how to guarantee that sick, poor, young and old pay a fair price for medical care, the degree to which government must subsidize the poorest Americans, and whether the nation should or can achieve universal coverage. One side favors a single payer system, and the other tax credits, and both sides contain fatal flaws, says Gruber.

A new way is coalescing called incremental universalism, says Gruber, and its basic outlines emerge from Massachusetts’ 2006 health care system. There’s heavily subsidized insurance for folks below the poverty line, as well as insurance that works for those above poverty cutoffs. Every employer in the state with 10 or more employees must offer health insurance. There’s also an individual mandate (a source of contentious debate, as Gruber attests), so no one can skirt the issue of holding health insurance and hoping for the best. Gruber says after two years, the plan “is doing fantastically,” with a huge pickup (440 thousand) of previously uninsured people onto the health care rolls. The cost of people getting free care at hospitals fell almost by half in the first quarter of 2008.

But Gruber admits he’s not sure what to do about cost control. We currently spend 16% of GDP on health care. Obama’s plan, modeled after Massachusetts’ but with no mandate, will likely cost between $60-100 billion. McCain advocates ending the tax exclusion for employer sponsored insurance, and handing out tax credits. Says Gruber: “Obama’s got a terrific plan that needs money and McCain’s got money in need of plan so put them together.” Add a mandate to Obama’s plan, and then get rid of the tax exclusion. “You could have universal coverage in America more generous than in Massachusetts, and have 50 billion a year left over to spend on wars or whatever.” ]]> Mon, 17 Nov 2008 00:00:00 -0500 http://mitworld.mit.edu/video/614 http://mitworld.mit.edu/video/614 In what Dean Dave Schmittlein bills as a master class, Ronald A. Williams discusses how an emphasis on new technology and application of basic values helped turn around the health care giant Aetna.

Williams’ case study begins in 2001, when he arrived to find a corporation bleeding out -- having lost $280 million in the past year. He diagnosed key areas of failure and opportunity in Aetna’s vast enterprise: orchestrating medical, dental and other health and insurance benefits in a network of 843 thousand health care professionals with 37 million members. Williams shaped a path to recovery focusing on a better understanding of Aetna’s current customers, from small employers to the largest corporations, and the best way of expanding into new markets such as retailers, banks and law firms. To do this, Aetna needed to build products and services suited for those groups, and Williams’ strategy involved developing integrated information systems for both employers and consumers, to ensure cost-effective, and high quality health care delivery.

Williams repeatedly made the his case for this new strategy directly with Aetna’s staff. He pressed the issue of values: integrity, employee engagement, excellent service and high quality healthcare, and put in place employee surveys and biannual performance reviews. Employees were invited to answer whether they believed their supervisors held true to Aetna’s values and whether they were proud to be working with the company. Williams has noted a marked improvement in responses over just a few years. External benchmarks reflect positive growth as well: Aetna has reached the number one spot as Fortune Magazine’s most admired health care company, after occupying the rock bottom position.

Williams invested a great deal in technology he believes will “shape the future of health care.” He describes a Care Engine, containing an individual member’s personal health record and up-to–the-minute journal information and health guidelines that are “converted into computer algorithms.” This system can detect and fill gaps in care for patients -- conditions that go undetected, tests that should be administered, medicine that should not be prescribed. Williams has also given consumers the ability to find and compare the costs of tests and doctor visits. He believes we can check the trillions of dollars in health care spending through smart technology. For him, health care reform means we “get and keep everyone covered; maintain the employer-based system… reorient the system toward prevention, value, and quality of care; and use market incentives to improve coverage, drive down costs and make the system more consumer-oriented.” ]]> Fri, 07 Nov 2008 00:00:00 -0500 http://mitworld.mit.edu/video/611 http://mitworld.mit.edu/video/611 Imagine if thousands of Amy Smiths were unleashed on the world, providing simple, ingenious inventions to make life easier for those subsisting on less than $2 a day -- half of humanity. This MacArthur Award-winning inventor has been seeding such programs at MIT, and describes tangible results of efforts to inspire students to apply innovative thinking and technology to everyday problems in the developing world.

The Designs for Developing Countries Project, the MIT Program in Developmental Entrepreneurship and D (Development)-Lab have spawned a range of initiatives, spanning the fields of public health, labor, and agriculture. In Ghana and Ecuador, MIT students are helping provide safe drinking water, with low-cost water testing methods that can be applied in the field with no electricity.

In places like Haiti and Tibet, smoke from indoor cooking fires leads to high mortality rates among young children. Solar cookers have proven effective in some regions, but old models are very heavy and often slow to boil water in winter. So an MIT project came up with an inexpensive cooker made of canvas and Mylar, easily assembled by villagers, and highly portable – a major selling point with nomadic communities.

Smith recounts other ventures: a bicycle pedal-powered, corn-shelling machine in Tanzania, which entrepreneurs can rent out, and which saves hours of drudgery for women who traditionally remove kernels of corn by hand; a backpack for storing hundreds of doses of vaccine that can be delivered as an inhaled powder and therefore require no refrigeration; cell phone services that allow Brazilian day laborers and bosses to vet each other in advance, and permit Indian health workers to follow up on TB patients.

Concludes Smith, “Something like 90% of the world’s resources creates products and technologies that serve only the wealthiest 10% of the worlds’ population. There’s a revolution afoot to promote R&D to get designers to work on technologies for the other 90%.” ]]> Mon, 27 Oct 2008 00:00:00 -0400 http://mitworld.mit.edu/video/608 http://mitworld.mit.edu/video/608 When a global corporation implements sustainability standards, it pays to work closely with supply chains, as these panelists attest.

From his research, Richard M. Locke knows that the traditional methods of achieving decent labor conditions don’t work well. When Locke examined years of records gathered by Nike and other companies concerned with employee treatment in overseas factories, he found the conventional compliance route -- auditing, policing and enforcement -- just hadn’t brought about consistent improvements in child labor, or excess hours.

What does work, Locke discovered, are collaborative approaches -- when the corporate buyer offers to show the way, sharing know-how and resources with its suppliers. For instance, when one of Nike’s Vietnamese apparel factories -- an under-performer in productivity and labor standards -- inquired about adopting Lean manufacturing, Nike helped retrain its workforce. After a few months, says Locke, the plant’s quality and output improved, and it boosted workers’ wages, lowering the turnover rate. Says Locke, “Good things can go together.”

When Wal-mart acquired a majority share in his family’s Central American business, Fernando Paiz admits he worried about Wal-Mart’s reputation in the U.S. Instead, he was delighted when Wal-mart actually raised the bar on environmental and labor standards. Says Paiz, “Wal-mart has pushed us beyond expectations of what compliance really means.”

Paiz describes how the corporation is pressing vendors and customers to reduce waste (the CEO wants none produced by 2011) and to become energy efficient. Among the innovations: Big box stores capture the frozen slush from thousands of refrigerator units to cool store interiors during the day; solar panels on Wal-mart rooftops produce electricity not just for stores but for neighbors. Wal-mart has challenged suppliers to come up with the least bulky products and sleekest packaging possible for everything from detergent to electronics. Consumers go for these big-time, says Paiz. The question is, “How can we do the same with other industries?”

Hewlett-Packard recently doubled in size with a major acquisition, adding 175 thousand more employees, which makes Bonnie Nixon-Gardiner’s job even more challenging. She’s now charged with establishing “global citizenship” standards within a sprawling network of staff and suppliers spanning nearly every continent. This means communicating H-P’s way of handling ethics, environmental sustainability, human rights and labor, privacy and social investment to managers and partners in nations not known for a keen concern in these areas.

In Mexico, a CEO of a factory told her that he doesn’t hire homosexuals, people with tattoos, pregnant women, people with lawyers in their families or people associated with unions. Says Nixon-Gardiner, “I said we need a conversation on hiring practices…We’re your partner; this is a risk for us.” Enforcing codes of conduct makes perfect business sense, she says. “Having been a manufacturer so long, it’s obvious to us, we treat people as our greatest asset. …It’s just a matter of helping partners in developing nations to understand…” ]]> Tue, 14 Oct 2008 00:00:00 -0400 http://mitworld.mit.edu/video/604 http://mitworld.mit.edu/video/604 The news these days from Africa isn’t all bad. In fact, in some places, it’s downright hopeful, as Rwandan President Paul Kagame attests. “Our continent is no longer all about violence and disease and human disasters that scarred many African countries in recent decades,” says Kagame. “We are now becoming a continent of opportunities.”

There are those who doubted Rwanda could “constitute a viable state,” says Kagame, but 14 years after bloody genocide and civil war, his country has managed an astonishing revival -- enough “stability and resilience to allow the economy to grow at an average 7% annually in the past several years.” Other African nations have been expanding at the same pace; oil producers are zooming along at even faster clips. Kagame attributes this recovery to such factors as the “leapfrogging power of mobile technology,” where hundreds of millions of new cell phone users, even in remote areas without electricity, drive the growth of new business. And the number of internet subscribers in Africa is growing more than three times as fast as the rest of the world, says Kagame.

Cell phones and the internet allow Rwandan and other micro entrepreneurs to develop business networks. Kagame describes how technology helped a Kigali bakery expand beyond its neighborhood to reach more customers and suppliers, enabling workers to move into larger homes. In Kenya, Kagame recounts, a new agricultural commodity exchange “has reduced barriers between farmers, traders and consumers,” with the internet and cell phone text messages providing timely market information. This network has improved the incomes of farm families by 25%, leading to better healthcare and education. Rwanda’s power utility is also reaping the benefits of technology, keeping track of customers and accounts more efficiently, and no longer relying on government handouts.

But while technology has enabled Africans “to leapfrog some features of underdevelopment,” Kagame says it is not enough. “Our vision of becoming a middle income country by 2020 … requires thinking and acting inventively, boldly and creatively.” Kagame wants to build a foundation not just in technology but in science. Doing this requires a heavy investment in all levels of education. “Without a knowledge base,” he says, “Africa’s imperative for agricultural and industrial development to create wealth will remain unrealized.” He calls for members of the MIT community to join “in overcoming our challenges and turning them into rewarding opportunities.” ]]> Tue, 16 Sep 2008 00:00:00 -0400 http://mitworld.mit.edu/video/598 http://mitworld.mit.edu/video/598 A pioneer in a “dangerously hot research area,” Drazen Prelec peers into the human brain while it makes decisions. In his corner of the new field of neuroeconomics, Prelec uses a functional magnetic resonance imaging (fMRI) machine to scan minds pondering the pros and cons of purchasing and selling products like Godiva chocolate and flash drives.

Prelec first provides a brief background on the emergence of his discipline, made possible by technological advances in measuring brain activity, and the recent introduction of psychology into economics. The convergence (or perhaps collision) of behavioral approaches and economics has led to a “sustained criticism of the rationality assumption in economics,” says Prelec, most prevalent in game theory. So much current research, he says, “is a series of responses to the incorrect predictions of the rational normative model.”

Some Nobel Prize-winning work has emerged in the past few decades from studying the differences between the way human beings actually behave and the way classic economics suggests. Prelec describes prospect theory, which captures in a formula how there is “something about the way our mind deals with numbers (so that) if you look at positive things, you have one way of looking, and at negative, it’s a different way.”

Using three case studies, Prelec illustrates how “neuroeconomics picks up some of these violations of rationality, trying to understand where in the brain we can get a deep understanding of what’s going on.” In a notable instance, subjects sipped different wines (through a straw) in the fMRI, and were asked to rate them. They were told they were drinking wine that ranged in price from $5 to $90. The “dirty trick was the $5 and $45 wines were the same, as were the $10 and $90 wines.” Not surprisingly, “ratings were massively influenced by price,” so the $90 wine was considered exceptional.

What was surprising, says Prelec, was that “the brain lies also.” An area behind the forehead, the medial prefrontal cortex, which is associated with the perception of value, burst into more activity when the subject experienced the “$90” wine than with the exact same “$10” wine. It seems as if the very idea of quality, or value -- often a marketing ploy -- makes a product like wine more enjoyable. ]]> Sat, 13 Sep 2008 00:00:00 -0400 http://mitworld.mit.edu/video/595 http://mitworld.mit.edu/video/595 Roberto Rigobon somehow makes his audience laugh while summarizing preliminary research on worldwide inflation and recession, data that bring some grim tidings about our global economic state of health. (NB: Argentina and France get knocked about a bit in this talk.)

By pulling favors with friends at central banks, Rigobon has gathered data on the prices of every conceivable product from dozens of nations over many years, from the clothes we wear to the cars we drive. He searches for correlations between the changes in price of major commodities, such as wheat and rice, and price changes in domestic retail items associated with them, such as bread, pasta and cookies (the latter he admits are of special concern to him). He calculates both how much the increases are and how long it takes for the price increases to occur. In a similar fashion, Rigobon has charted the international price of oil over time, and the domestic prices of oil products.

Some of Rigobon’s findings: In Chile, when the price of wheat goes up by 10%, the price of bread goes up by 5% 18 months later. In Colombia and Peru, it takes three years for this same percentage increase to occur, with these countries taking longer “to digest the international shock of commodity prices.” Not only do the prices of bread, cookies, meat, chicken, move in lockstep with wheat, but in some cases, so do housing, health and education. But Rigobon found that when the international price of oil increases, there is an immediate impact on all products related to oil. What’s worse, when the price of oil increases, the price of gas at the pump or for a rental car goes up disproportionately.

It’s been true for years, notes Rigobon, that “oil is unconditionally negatively correlated with cereals.” If oil is up, maize, sorghum and wheat prices are down. But this has recently changed, a sign “of the unique times we’re in, the policy challenges we’re facing.” We are simultaneously facing recession (due in large part to the sub-prime mortgage crisis), and inflation, in both food and oil prices. Central banks, he notes with scorn and wonderment, don’t include food and energy in their calculations of “core inflation.” If the job of these banks and government is to take care of their citizens, they must respond to this crisis along the lines of the response to 9/11 or Enron. Rigobon endorses well-communicated, transparent policies, and some tough measures like interest rate increases. ]]> Sat, 13 Sep 2008 00:00:00 -0400 http://mitworld.mit.edu/video/593 http://mitworld.mit.edu/video/593 Using game theory, and with some help from the Bible, Steven Brams argues that voting can resolve certain kinds of conflicts.

He explores in detail the classic game Prisoner’s Dilemma. In his version, players must choose whether or not to contribute to the renovation of a public park. In a two-person variation of the game, in which Brams posits a rich person as one player, and the public as the other, “each person has an incentive to a free ride.” The dominant strategy for each, he says, is not to contribute, and let the other pay for the public good. Then Brams reframes this game, with the addition of voting. With two persons, a majority means both must vote to finance the park for the renovation to happen. One vote for financing the park won’t cut it. “You go from non-cooperative to cooperative as a dominant strategy, by allowing voting to determine the outcome,” says Brams.

To illustrate a multiple, or N-person version of Prisoner’s Dilemma, Brams turns to the Old Testament story of Moses after Mount Sinai. Upon Moses’ return with the Ten Commandments, the Israelites are worshiping idols, and God threatens to destroy them. Moses asks the Israelites to choose between idolatry and the one God. Those who do not commit to the God of Israel are killed. In Brams’ view, Moses took a gamble in a kind of referendum that the majority would vote his way, and “to prevent defections from the outcome, Moses deemed it necessary that those who chose (idolatry) be decimated.” Says Brams, “This is a gruesome way to achieve consensus but hardly unknown in recent times.”

When games become voting games, cooperative outcomes take on a new status, says Brams. “The idea is, if you don’t have a sufficient number, nobody pays, and everybody suffers. If you have a sufficient number, everybody pays…and you get the cooperative outcome. There aren’t in-between outcomes where some pay and some don’t, and the ones that don’t pay make out like bandits. That’s what voting does -- it prevents that banditry.”

In countries like the U.S., when a government can “credibly commit to providing a public good that a majority supports, the solution that democracy provides is compelling.” But in situations where crime or corruption is the rule -- say, in some developing nations -- there must be assurances that the cooperative outcome the majority supports will really be implemented, says Brams. ]]> Mon, 05 May 2008 00:00:00 -0400 http://mitworld.mit.edu/video/553 http://mitworld.mit.edu/video/553 John Sterman pokes holes through some popular proposals for addressing climate change, with sobering case studies that demonstrate why “technological solutions are not enough to address the problem of creating a sustainable world.”

We are staking too much hope for a climate change fix on “the better mousetrap theory of innovation,” says Sterman. It goes like this: New technology from places like MIT will drive down the cost of renewable energy, increase demand for carbon-free renewables and displace fossil fuels. New energy markets emerge, after a regulatory nudge or two from the government, or some incentives and emissions fees.

To demonstrate how completely wrong this theory is, Sterman first discusses great products never adopted by consumers, such as the Sony Betamax video recorder. More to the point, he notes current opportunities that would significantly reduce our carbon footprint yet have been ignored by society at large, such as improving fuel efficiency, and insulating buildings. Our rejection of these opportunities suggests we can’t comprehend “the complexity of systems in which we are embedded and into which we deploy technologies,” particularly the concept of feedback.

Sterman runs through a ‘thought experiment’ involving the introduction of a hydrogen-based, zero tailpipe emission alternative fuel vehicle (AFV) into California – a conceivable leap toward creating an ecologically and economically sustainable transportation system. The government kick-starts the AFV market, rolling out fuel stations in urban centers, and essentially subsidizing the transition for a decade. You’d expect this AFV eventually to command at least 50% of the market share. But when Sterman runs his simulations, the AFV stagnates at around 25%.

It turns out that if fuel stations are not distributed through even the remotest parts of the state, people worry about where they’ll find fuel, leading to weak demand for AFVs. This is “only one of the many reinforcing feedbacks which create strong barriers to the entry of technologies which are as good or better than incumbent technologies,” says Sterman. Even an AFV with higher fuel efficiency can’t win market share, Sterman’s California simulations show.

The models offer some faint promise. When Sterman puts more fuel stations in rural areas, the AFV market succeeds -- after an extraordinarily long time. Sterman believes there’s a tipping point in the adoption of new technologies. Dethroning gasoline will be difficult, he says, so we need to create multiple reinforcing feedbacks to change the behaviors of all the players. “We must push that ball, which represents where the market is, up a steep mountain, and only after crossing the peak will the market become self-sustaining.” ]]> Wed, 12 Mar 2008 00:00:00 -0400 http://mitworld.mit.edu/video/536 http://mitworld.mit.edu/video/536 From Nicholas Stern’s market perspective, climate change constitutes an “externality” that, like traffic grid lock in a city center, arises when some people’s actions affect the welfare of others, at no cost to the perpetrators. Simple price mechanisms can fix congestion, says Stern, but climate change, which he views as “the greatest market failure the world has ever seen,” requires unprecedented measures to contend with its potentially cataclysmic, long-term global impacts.

Stern is the author of an influential and provocative review prepared for the British government describing the economics of climate change and development. Here he outlines, in non-technical jargon, the key issues, choices and potential responses of a world facing warming.

Scientific modeling suggests that if nations continue on their present course, the Earth will move from CO₂ levels of around 450 parts per million (ppm) today to over 800 ppm a century from now. That could bring a 5^o C change, says Stern, accompanied by storms, droughts, and sea level rise, which would trigger massive human migration and “severe conflict.” While totting up the costs of such a scenario is nearly unimaginable, Stern has more of a handle on the “scale of damage” -- disruptions to economic and social activity -- a 3^o C increase might inflict. This is the kind of increase that many climate models suggest will come if we manage to stabilize CO₂levels at 550 ppm.

Stern argues that if we don’t act to rein in greenhouse gases to such a target, the costs to the global GDP will exceed 5% each year, forever. (If the impacts of a 3^o C increase have been underestimated, the costs might rise to 20% GDP, or more.) If nations think of this as “an insurance problem,” says Stern, they ought to be willing to invest 1%-2% of their current GDP in reducing emissions and achieving stabilization in the next 10-20 years. This is the timeframe societies have to put into play appropriate policies for carbon pricing, new technologies for conservation and non-carbon based energies. What’s needed, says Stern, is a global deal, a framework of understanding that guides all nations of the world. His six-point plan relies on rich nations acknowledging their obligation to reduce carbon emissions by greater amounts than developing nations; funding efforts to develop and share technologies, and to tackle deforestation; and monies to help needier nations adapt to change. Stern sees some evidence that the international community -- perhaps even the U.S. – is positively inclined toward cutting a global deal. ]]> Sun, 03 Feb 2008 00:00:00 -0500 http://mitworld.mit.edu/video/521 http://mitworld.mit.edu/video/521 If you live in a developing country, chances are you spend a good part of your day engaged in backbreaking, repetitive labor to put food on the table. The MIT students in this Soap Box session have rolled up their sleeves to find simple solutions for the half of the world without access to safe drinking water, electricity, and all the conveniences many take for granted.

At Amy Smith’s MIT D-Lab (for design, development, dissemination), the goal is inventing “the simplest, cheapest thing you possibly can” for the citizens of impoverished nations. For instance, she tells us, D-Lab has come up with an electricity-free incubator that allows people to test their water for nasty microbes, and a turbine-less wind generator, among other inventions. Her students elaborate on some of their current projects, which hold the potential to help millions.

Jules Walter had the idea of putting his native Haiti’s millions of pounds of sugar cane waste to good use. They developed a low cost process to transform cane discards into charcoal, which is then carbonized, mixed with a binder (locally available cassava), and pressed. This system creates an inexpensive cane briquet for indoor cooking that offers a much preferable alternative to chopping down a tree (Haiti is already 90% deforested). In addition, it should help lower that country’s high rate of respiratory infections due to wood charcoal inhalation. Walter hopes to market this invention for large-scale distribution in Haiti.

Kendra Johnson has come up with a bicycle-powered grain mill that can make masa, wet corn ground into fine dough for tortillas. This is a dietary staple for many Central and South American people. Normally, a woman would spend hours with a hand mortar or pestle, or visit a diesel-powered mill to buy masa for the nightly meal. Now, the bike design makes it possible to achieve the end result in a fraction of the time.

Graduate student Amos Winter wants to bring mobility technology to developing countries, where it can be difficult to find a clear sidewalk or smooth road surface. Western wheelchairs are much too expensive, and quickly break down in third-world conditions. Consequently in places like Tanzania, where Winter has worked, only 4% of those who need a wheelchair have one. He has been designing a hand-powered tricycle with two gears, which can stay upright on rutted roads and go uphill. Working with local groups, he has developed workshops in nine countries to start developing and marketing prototypes. ]]> Tue, 18 Dec 2007 00:00:00 -0500 http://mitworld.mit.edu/video/509 http://mitworld.mit.edu/video/509 If you’d asked Ronald Prinn a decade ago whether human activity played a significant part in global warming, he would have given you an “equivocal” answer. Today, he is no longer straddling the line, and indeed, has amassed forceful evidence that post-industrial society has brought about enormous change in earth systems, and may cause irreparable damage as this century progresses.

Prinn provides a short lesson on radiative forcing -- the process by which the earth absorbs solar radiation and gives off energy by emitting infrared radiation. These processes, which should be in balance, increasingly are not, due to manmade activities that trap the heat from the sun, and drive up the earth’s temperature. Prinn comes armed with MIT’s Integrated Global System Model, which helps show how human industry, agriculture and consumption feed into the delicate, interconnected physical and biological workings of atmosphere, ocean and earth. Forecasting the climate into the future, says Prinn, “is no longer a job for the natural sciences, but for a combination of natural and social sciences.”

Prinn’s illustrations depicting how human activity and earth systems interact are almost comically complex, and he acknowledges that his models must take into account major uncertainties. Clouds, ocean mixing and aerosols act as wild cards in terms of radiative forcing. However, observation of earth’s climate over millennia, and the running of computer simulations hundreds of times, have yielded some probabilities that Prinn believes policy makers must contend with.

Even assuming that civilization can limit its carbon dioxide emissions to twice preindustrial levels (550 parts per million), some very dramatic shifts will happen (or have already begun): the poles will heat up much faster than other parts of the world, melting ice and raising sea levels. Arctic tundra and soil will thaw and release methane, a much more potent greenhouse gas even than carbon dioxide. Another possibility: The ocean will reach its limit in absorbing atmospheric CO2, and, to put it bluntly, begin to die.

There are things we can and should do, says Prinn, if we want to avoid playing roulette with life on earth, and these actions are not priced beyond our means. We can make our transportation and building energy costs more efficient. We can continue to use coal if we figure out how to capture and store carbon underground. We’ll need to develop biofuels. Bills in Congress seeking to achieve 50-80% reductions in carbon emissions below 1990 levels won’t cripple our economy, Prinn’s models show. “Bottom line, we can afford this.”

]]> Mon, 10 Dec 2007 00:00:00 -0500 http://mitworld.mit.edu/video/504 http://mitworld.mit.edu/video/504 If, as Paul Levy says, “medicine for the most part remains a cottage industry,” then how can you impose system-wide improvements -- especially if you’re presiding over an academic hospital, where the culture rewards brilliant, independent, free-thinking doctors?

This has been Levy’s challenge since 2002, when he took over an ailing Beth Israel Deaconess Medical Center. The result of a merger between two hospitals in the late ‘90s , BIDMC immediately fell into a “downward spiral,” recounts Levy. Doctors and nurses left, and losses grew to nearly $70 million a year. The hospital burned up $200 million of a $500 million endowment.

When he arrived, Levy recognized that the hospital’s problems had less to do with medicine than with management and organization. For instance, it took 100 days for a bill to go out after the actual service was performed, and bills were often inaccurate, based on a doctor’s hand-scribbled note.

Levy set to work enhancing the hospital’s routines, such as providing an electronic billing system with pull-down menus. He met with demoralized nurses to address their concerns, and succeeded in reversing the 15% turnover rate. Then, says Levy, “we started focusing on what really matters: how well we’re taking care of people, how often are we hurting and killing people and what to do to stop.”

Hospitals, he notes, “are very dangerous places,” with “bugs floating around and mistakes being made.” One common problem at BIDMC, ventilator associated pneumonia, had a 30% mortality rate. The fixes were simple --raising beds, better oral hygiene, hand-washing --but accomplishing them required systemic compliance.

Levy identified doctors who could lead colleagues in the new practices. He attached protractors to beds so nurses could raise them by precisely 45 degrees. “Lots of low-tech solutions must be institutionalized,” says Levy. Mortality due to this pneumonia dropped, and Levy figures the hospital saves 96 lives per year, or $12 million in expenses.

By shadowing nurses and other staff, Levy’s discovered that individuals often find workarounds to problems, but aren’t aware that others might benefit from their solutions. Levy set up a blog to post these solutions and focus the organization as a whole on areas of concern. Supporting good performance, sharing clinical results such as “how many people we hurt and kill” stimulates people in a hospital to do better, he believes. Public exposure goes a long way in helping academic medical staff to understand they must be “held accountable for their actions particularly when it comes to harm.”

]]> Fri, 02 Nov 2007 00:00:00 -0400 http://mitworld.mit.edu/video/493 http://mitworld.mit.edu/video/493 This duet of talks by two Nobelists, while cheering the consolidation of MIT’s Physics groups within the new Green Center for Physics, sees primarily gloomy prospects for science in coming decades.

There are “dark clouds on the horizon,” believes Robert Laughlin, as the post-World War 2 public funding of basic research dwindles. In its wake, commercial interests are gaining control over the production of knowledge, favoring chemistry, materials sciences and engineering disciplines. In a technical milieu, some of the people “have to have a wild childlike curiosity where they demand to understand everything,” and this “omnivorous” person is typically a physicist, says Laughlin. Omnivorous scientists are not valuable to industry, and often dangerous, since they make knowledge public rather than hiding (or patenting) it. But university students and their parents need such teachers, who provide an invaluable balance to the relentless forces in the world driving technical knowledge into corporate realms. The “era we’re in right now is an era of darkness in which the entire idea of public domain knowledge is being rejected by people very high up in society, and implemented in laws,” says Laughlin. So the young physicist must regard himself “as a revolutionary person… a troublemaker when it comes to the sequestration of knowledge.” Concludes Laughlin, “Our job is “to make sure the concept of reason, the science of reason, does not perish from the earth.”]]> Sat, 27 Oct 2007 00:00:00 -0400 http://mitworld.mit.edu/video/487 http://mitworld.mit.edu/video/487 Peter Singer walks listeners through one of his most provocative philosophical arguments -- that affluent individuals must acknowledge their moral obligation to relieve the unnecessary death and suffering of the poor. His sinuous reasoning starts with the simple case of a bystander coming upon a child drowning in a pond with no one else around. Should the bystander leave the child to drown, or must he stay and save the child? Most people intuitively recognize a duty to rescue the child. Singer argues from analogy that there is “no morally relevant difference between the drowning child situation and the situation of the affluent with regard to children dying of avoidable poverty related causes.”

Singer plays this scenario out in a variety of ways, and responds to counter-arguments that have been deployed against it over the years. Is there a stronger moral obligation to a child encountered in the flesh than to a faceless child in a distant place? There’s psychological evidence that people tend to donate more money when they can match their aid to a face, but the fact that we have “an evolved response to an individual in need” doesn’t justify this as normative moral theory, says Singer. And while it is true that we give weight to unique responsibility, such as that of a parent to a child, we should not allow this to limit our actions. Singer promulgates the idea that “if we (relatively affluent individuals) can prevent something bad without sacrificing anything of comparable moral significance, we ought to do it.” Since absolute poverty is bad, we ought to act against such poverty.

Singer responds to critics who claim that individuals need do no more than their fair share, and to those who try to restrict what people reasonably owe others. Singer labels arguments laying out the right to pursue individual goals and protect life-enhancing goods as “all ways of trying to find a principle that squares with the intuition that morality shouldn’t be too demanding and allow us to continue to live a comfortable life.” He admits that “some say I’m preaching a demanding ethic that will make life miserable.” He cites some alternative public standards, such as tithing 10% of income. Singer himself now gives close to 1/3rd of what he earns. With a little reflection, people might find that improving the situation of others constitutes a satisfying alternative to feathering their own nests. Singer concludes, “Living the ethical life is what is going to make life better.” ]]> Tue, 11 Sep 2007 00:00:00 -0400 http://mitworld.mit.edu/video/477 http://mitworld.mit.edu/video/477 Neither philosophers nor economists can satisfactorily explain some quirky aspects of decision-making, such as why most people elect to receive a 30-minute massage in the next two weeks, as opposed to a 45-minute massage a few months down the road. Shane Frederick teases apart preferences like these, coming at them from different perspectives, and raises questions about the degree to which rational thinking drives human choices.

Frederick’s talk looks at how people weigh the future when making choices. Some studies have shown that “people give less weight to the future – they discount future utility the way bankers discount future streams of income,” says Frederick. But other research Frederick cites demonstrates that people like to save the best for last. In ordering a sequence, study participants chose to eat strawberries, then liquorice, and then jelly beans -- holding out for “the better thing later,” in this case, the sweetest treat. In another example of people preferring “improving sequences,” subjects chose to dine at a quotidian Greek grill first, followed by a fancy French restaurant. But in a “weird preference reversal,” people chose to pay more for a “declining sequence,” where they would eat first at the expensive French restaurant, and then at the Greek grill. There is incoherence in people’s preferences, which has long puzzled thinkers from different disciplines.

According to Frederick, economists say there’s no arguing with tastes, while philosophers prefer to think that rationality requires some concern for the future. We all have a stake in such debates, points out Frederick. In the real world, individuals make decisions about current behaviors that have future impacts, such as drinking, exercising, and tanning. Societies make decisions about vaccinations and tapping energy resources that impact the climate. Do humans value or discount future life? Frederick notes a study that asked people to choose between Program A, which saves 300 lives in your generation, but no lives in your children’s and grandchildren’s time; or Program B, which saves 100 lives in your generation, and in each of the succeeding generations. 80% of participants preferred Program B, because it seemed fairer. But Frederick cautioned that whether people clearly place a value on their future selves, or the future of others remains a continuing controversy, with much depending on how researchers frame their studies and questions.

]]> Tue, 24 Apr 2007 00:00:00 -0400 http://mitworld.mit.edu/video/440 http://mitworld.mit.edu/video/440 There’s a lot of money to be made in the coming year, say these practitioners from different areas of finance, offering just a few notes of caution. They offer a grab bag of investment tips for average consumers and entrepreneurs in this annual Enterprise Forum event.

Frederick Lane sees the baby boomer generation accumulating capital, lugging around hefty pension plans and generally looking for good homes for their money. He says, “The greatest way to not make money is to go in the market and get out.... The truth is, the best thing is to stay in.” Investors “need to be cautious about when the top is the top.” He sees a healthy economy in general: “I don’t think we have a big problem in this country, because guess what, our standard of living keeps going up and up and up. Most of us could lose a few pounds, tighten our belts a bit, make do with fewer cars, fewer boats and vacation homes.”

Deborah Kuenstner doesn’t see “unbridled optimism, like the 1999 environment,” where everyone jumped into investing. This is a good thing, because it means “a broader and healthier market.” Indeed, she says, “For the economy to slow down this year, it’s not a bad thing.” She points to difficulties with actively managing a portfolio: “I don’t think the dynamic in marketplaces will change and active stock picking become easier until we have a clearer idea which way the Fed is going, and not living data point to data point.” She also notes that average “Americans have lots of challenges,” including a slowing housing market and slow wage growth.

“The party continues, and it looks good on most fronts,” says Benjamin Howe. He points out that index funds are “outperforming smart money managers across all metrics.” He’s worried by the fact that “consumers are pushing credit cards above historical levels,” and that “competition from certain countries will continue to accelerate.” The U.S. has lost on the manufacturing front, and India and other nations are moving into finance and technology in a big way. Valuations of overseas companies are growing fast. In the U.S., alternative energy is “where we’re seeing far more funds going -- explosive companies doing advanced battery technology for cars, or energy management. There are massive amounts of dollars going into that.”

“There are many next big things,” says Axel Bichara, whose VC company “takes the long view.” While the “amount of capital being deployed is quite high,” Bichara doesn’t see this turning into “another bubble.” He views the whole digital media world, “the monumental changes in how content is produced and consumed,” offering “at least another five to 10 years of investment opportunity.” He perceives a strong entrepreneurial surge coming from India and China, which is a factor for the companies he invests in and who they partner with. “The conclusion we came to, our kids need to learn Mandarin, and not French.” ]]> Tue, 27 Mar 2007 00:00:00 -0400 http://mitworld.mit.edu/video/433 http://mitworld.mit.edu/video/433 While globalization poses critical challenges for the U.S. economy, Charles Vest believes that knowledge-sharing may serve as the best response to increasingly competitive times.

Vest sketches the increasingly dire situation of U.S. manufacturing, R&D and innovation, which are “migrating and morphing.” Between 2000 and 2002, the U.S. lost 400 thousand jobs in IT manufacturing, and during roughly the same period, foreign firms built 60 thousand manufacturing plants in China, Vest notes. In the U.S., agriculture and industry have given way to the service sector. This means, says Vest, that “a huge part of the population today is employed, and in the future, more, in providing services largely but not exclusively driven by information technology.”

But the U.S. science and engineering infrastructure, in contrast to other nations, is not keeping pace with these changes. Warns Vest, “People everywhere are smart and capable, and give them a chance and the education,” they’ll do at least as well as Americans have. China is already churning out far greater numbers of engineers than the U.S., and making them available to a global market at a far lower cost. The solution is to “strengthen the quality and nature of science and engineering education,” with a focus on technological proficiency, leadership, and international vision.

In practice, this means to Vest a new phase for the research university: creating a physical and/or virtual presence in other countries, alliances with overseas partners, and freely shared, digitally housed content -- what Vest calls “the emerging meta university.” With MIT’s own web-based Open Course Ware as a model, Vest prescribes increasingly accessible resources for scholarship and education, which will prove “strategically and fundamentally important to us, in the true spirit of education, democratization and empowerment.” Sharing underpins “innovation, cooperation and competition worldwide.” Vest envisions a “dynamically constructed framework of open materials and platforms on which much of higher education worldwide can be constructed or enhanced.” ]]>