To understand how humans react and adapt to economic change, we need to study how these people who live in harsh environments survived these conditions. From war zones to natural disasters and failed states, to aging societies and those who are challenged by technological advancement. In his book, Extreme Economies, economist, and journalist Richard Davies features stories of communities that experienced seismic shock or have been violently changed in some way. 

In this episode, he gives an account of how people living in these odd and marginal places are often ignored by number crunching economists and politicians alike. His timely and revealing insights shed light on how markets recover from catastrophic events. Listen as Greg and Richard talk about humans living in extreme situations, and of the financial infrastructure they create.

Episode Quotes:

What motivated you to study the places featured in your book Extreme Economies?

I started out at university, actually as a medical student, and I switched to philosophy and economics after a year of that. And one of the interesting things from the sciences is that there are these landmark cases. One that I mentioned is this English physician, William Patti, and his discovery of human circulation. One that will be more famous, I think, to listen to in the States —is the case of a patient called Phineas Gage, who was a Canadian railway man, who was shot through the head —this gruesome injury which separated his brain. And the point is that these one offs, this case allowed medics because the person survived. Because the person was resilient to find out something really important about how human anatomy works —the general human anatomy for the rest of us.

The first idea of looking at extremes I had been that one which is, ‘Can I find places where something radical has happened and yet, their economies survived?’

Is entrepreneurship a natural human tendency?

There is something innately human about entrepreneurialism. I’m convinced of that now. And why is that? Because if you take people, and you strip them of everything, so they're left with just the basic assets that they have— their time, some skills, some kind of natural source, they will start to trade. 

In what ways do the reconstruction of tenements in Glasgow provide insight into the social capital, which is not represented in public housing data?

There are hundreds of stories across Glasgow that become more or less popular in the social sciences. But I think we would call it social capital— the norms, traditions, non-market based ways of interacting and providing for one another. When the tenements were destroyed, they built these high-rise buildings with external developments. But they didn't build a single shop, pub or communal area because they just didn't think of that. And again, that’s my point about data. You need to look at all the data. They just looked at the other housing. Is the house bigger? Yes. Is it better? Is it cleaner? Yes. But they didn't look at all the other things that make a neighborhood. And that's one of the reasons, I think, talking to people, those places did so badly and made Glasgow sink from one of the best cities to the most troubled city in Europe by the mid-1960s to early '70s.

Time Code Guide:

00:06:04 Places with Extreme Economies

00:07:21 Entrepreneurship created from necessity

00:16:52 Beyond physical needs

00:17:41 The urban decline of Glasgow

00:21:07 Thriving economy through social capital

00:24:19 Social capital’s non-mainstream definition

00:26:35 Ineffective government intervention

00:28:01 The Network of Trust

00:31:48 Building back disrupted markets

00:38:56 The economic malfunction in Kinshasa

00:43:52 Informal privatization of a collapsing civil service

00:50:55 Inequality in Santiago

01:11:11 The Economic Observatory

Show Links:

Guest Profile

• Richard Davies at University of Bristol
• Richard Davies on Twitter
• Richard Davies Website
• Academic Profile at the London School of Economics

His Works

• Articles on Economic Observatory
• Articles, blogs, and videos at Chartwell Speakers
• Extreme Economies: What Life at the World's Margins Can Teach Us About Our Own Future

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