Questions for Kagan

George Will is in the house and Newmark's at the Door:

If Congress decides interstate commerce is substantially affected by the costs of obesity, may Congress require obese people to purchase participation in programs such as Weight Watchers? If not, why not? . . .
If Congress concludes that ignorance has a substantial impact on interstate commerce, can it constitutionally require students to do three hours of homework nightly? If not, why not?
Can you name a human endeavor that Congress cannot regulate on the pretense that the endeavor affects interstate commerce? If courts reflexively defer to that congressional pretense, in what sense do we have limited government?

Should proper respect for precedent prevent the court from reversing Kelo? If so, was the court wrong to undo Plessy v. Ferguson's 1896 ruling that segregating the races with "separate but equal" facilities is constitutional?

The Best Stuff

On the difficulty Americans have receiving or not giving
On Americans' right to give
On Americans' culture of using old stuff, and giving it to the poor
On the real cost of aid (it's hard), and
On lying about your job in development for your sanity.

This is some of the Best Stuff. I am thankful to a random commenter at another site who recommended Tales From the Hood to me.

Novogratz' Blue Sweater

I'm partially outsourcing this one. It's a good book for finding what you want to look for. It's a biography, but it's a good deal more, particularly once she gets to trying to understand the Rwandan genocide.

It's similarly a history of the social entrepreneurial approach to aid - that we help people more by giving them responsibility than handouts. There's some microfinance, but this is more a macro version of microfinance: patient capital that uses markets and is willing to wait for the returns so that products can get to the poor successfully.

Philanthropy 2173 sees it as a story of human-ness. Novogratz does a lot of work to show not only her thought process and character development, but spends time introducing the people she works with and for. The theme is on listening to other people and trying to approach problems from their perspective. The failing is that she doesn't present us many of recipients, but mostly the workers.

Easterly sees it as a story of entrepeneurial spirit that turns many failures into eventual success.

Marginal Revolution sees it as Aid Realism for the Idealist. She came with idealism, discovered things were not as she imagined, and managed to gradually become more and more realistic without becoming cynical - a needed perspective.

As one of those unfortunates who write about African food statistics and food policies that affect Africa without having so much as drunk the water, I appreciated the day to day living experiences and portraits of people rather than journalist caricatures. The blogs I read are pretty quick to point out what people should not be writing, but don't provide many examples of how to do it right. I think she's got at least one workable model. So I recommend it as a reality check.

Less important points: Novogratz is addicted to color and describing the colors of what everyone wears. She falls in love with (nearly) everyone she meets and every city she visits on first appearances. (I recognize that with people at least, there is selection bias involved. Who wants to write a book about passing acquaintances who were just part of the scenery?)

The Return of Keynesianism (may have been exaggerated)

In Germany, anyway:

As Angela Merkel puts it, “growth can’t come at the price of high state budget deficits.” 

Four Things That Probably Won't Kill You ... Maybe

Lit in review: President vs. Presidency

Hager and Sullivan (1994), “President-centered and Presidency-centered Explanations of Presidential Public Activity,” Am. J. of Poli. Sci., Vol. 38, No. 4, 1079-1103.

What is more important for understanding the public appearances of US Presidents: characteristics of the president or constraints of the office (the presidency)? They analyze three different models in each category. Presidents could be dummy variables (Reagan is Reagan is Reagan); they could be positive/negative about themselves and active/passive about their office duties; or they could be insiders or outsiders to the Washington processes. To the extent that the electorate expects presidents to be involved in more and more decisions, however, presidents have less free time to allocate to individually preferred activities. They focus on economic challenges, bureaucracy growth, bargaining with Congress, the election cycle, and international diplomacy (as the nation’s “chief diplomat”) as institutional constraints. Technological innovation may affect all of these models.

They find that President speeches to specific forums (minor speeches), press conferences, and appearances as head of state are explained at least as well by presidency-centered explanations as president-centered, and sometimes better. Technological progress is largely to blame for decreased press conferences because presidents have more available options for getting their message out and, even when the press is not overtly hostile, no president manages to spend more than 15% of a press conference discussing his targeted topics.

The best model was presidency-centered, but included interactions for being an outsider, which increases the costs of bargaining with Congress.  They conclude that, while individual factors are likely still relevant, contextual and institutional factors should not be ignored in understanding a president’s actions.

Four Food Aid Links

Birdsall wants the new US initiative "Feed the Future" to be put under the authority of Raj Shah, new head of USAID and argues why yet another coordinator would be a bad idea.

Aker on the upcoming famine in Niger. There are some positive signs that would make this a less serious famine than that in 2005.

Easterly outsources a definition of the G8 and G20:

…at which ministers from around the world gather to wring their hands impotently about the most fashionable issue of the day. The organisation has sought to justify its almost completely fruitless existence by joining its many fellow talking-shops in highlighting whatever crisis has recently gained most coverage in the global media.

Meanwhile, Freschi takes down US maritime propaganda to keep US food aid policies that favor it intact. Their argument? Inefficiency: it's good for the economy.

Four Africas ... Plus Botswana

From McKinsey. Hat tip: Blattman, who approves.

Lit in review: 3 and 4 of 4 on the Insider/Outsider Model

3) Rueda (2005), "Insider-Outsider Politics in Industrialized Democracies: The Challenge to Social Democratic Parties," Am. Poli. Sci. Review, Vol. 99, No. 1, 61-74.

4) Coen (2007), "Empirical and theoretical studies in EU lobbying," J. of Euro. Public Policy, Vol. 14, No. 3, 333-345

Lit in review: 2 of 4 on Insider/Outsider Model

2) Soule, McAdam, McCarthy, and Su (1999), "Protest Events: Cause or Consequence of State Action? The U.S. Women's Movement and Federal Congressional Activities, 1956-1979," Mobilization: An Interational J., Vol. 4, No. 2, 239-256

Lit in review: 1 of 4 on the Insider/Outsider Model

My upcoming research into the political economy of the recent food price crisis sends me delving into the political science and sociology literatures to better understand the political influences the teams of researchers and I will be investigating. I'm going through a number of models to identify factors our teams should examine in their country contexts. The first model: The Insider/Outsider Model. I greatly welcome any recommendations readers have for papers or models I should be considering. [Note: there is also an insider/outsider model that is largely about labor economics rather than political economy - this isn't that, though one paper draws on it.]

1) Maloney, Jordan, and McLaughlin (1994), "Interest Groups and Public Policy: The Insider/Outsider Model Revisited" J. of Public Policy, Vol. 14, No. 1, 17-38.

Here There Be ... Conservatives

Gallup reports: Twice as many Americans continue to self-identify as conservative (42%) as liberal (20%). Moderates (35%) are down a bit from their high point of 43% in 1992.

There are as many Democrats who label themselves moderate as liberal, with about 1/4 Democrats claiming to be conservatives. By comparison, a mere 3% of Republicans claim to be liberals and only 1/4 moderates. Both parties are becoming increasingly polarized, with more claiming their stereotype than moderate.

Among Independents, 20% claim liberal status, a decreasing percent (46 down to 41) claim moderate status, and an increasing percent (30 up to 36) claim conservative status.

Jeopardy and my dear Watson

Watson will be on the game show Jeopardy. The IBM computer named Watson, that is.

What makes language so hard for computers, Ferrucci explained, is that it’s full of “intended meaning.” When people decode what someone else is saying, we can easily unpack the many nuanced allusions and connotations in every sentence. He gave me an example in the form of a “Jeopardy!” clue: “The name of this hat is elementary, my dear contestant.” People readily detect the wordplay here — the echo of “elementary, my dear Watson,” the famous phrase associated with Sherlock Holmes — and immediately recall that the Hollywood version of Holmes sports a deerstalker hat. But for a computer, there is no simple way to identify “elementary, my dear contestant” as wordplay. Cleverly matching different keywords, and even different fragments of the sentence — which in part is how most search engines work these days — isn’t enough, either. (Type that clue into Google, and you’ll get first-page referrals to “elementary, my dear watson” but none to deerstalker hats.)

What’s more, even if a computer determines that the actual underlying question is “What sort of hat does Sherlock Holmes wear?” its data may not be stored in such a way that enables it to extract a precise answer.

The answer is to teach the computer to find words and phrases that correlate and use tons of speed and memory to try out hundreds of different algorithms. If many of them give the same answer, Watson is more confident in the answer.

In essence, Watson thinks in probabilities. It produces not one single “right” answer, but an enormous number of possibilities, then ranks them by assessing how likely each one is to answer the question. ...

Ultimately, Watson’s greatest edge at “Jeopardy!” probably isn’t its perfect memory or lightning speed. It is the computer’s lack of emotion.

IBM's ultimate hope: "Computers need to go from just being back-office calculating machines to improving the intelligence of people making decisions." The article discusses uses in medicine and making governments run better, particularly helping people sort through tax codes or other paperwork to find out if they qualify or what they need to do.

During one game, the category was, coincidentally, “I.B.M.” The questions seemed like no-brainers for the computer (for example, “Though it’s gone beyond the corporate world, I.B.M. stands for this” — “International Business Machines”). But for some reason, Watson performed poorly. It came up with answers that were wrong or in which it had little confidence. The audience, composed mostly of I.B.M. employees who had come to watch the action, seemed mesmerized by the spectacle.

Then came the final, $2,000 clue in the category: “It’s the last name of father and son Thomas Sr. and Jr., who led I.B.M. for more than 50 years.” This time the computer pounced. “Who is Watson?” it declared in its synthesized voice, and the crowd erupted in cheers. At least it knew its own name.

Hat tip: MR

A token to the World Cup

The Fellowship of the Vuvuzela: the World Cup comes to Middle Earth

Nutrition: Taxes and Subsidies

Another new study (Jensen and Miller, 2010, ungated) finds that food subsidies don't improve the nutrition of poor people and may hurt some (HT: Blattman):

NBER Working Paper No. 16102 Many developing countries use food-price subsidies or price controls to improve the nutrition of the poor. However, subsidizing goods on which households spend a high proportion of their budget can create large wealth effects. Consumers may then substitute towards foods with higher non-nutritional attributes (e.g., taste), but lower nutritional content per unit of currency, weakening or perhaps even reversing the intended impact of the subsidy. We analyze data from a randomized program of large price subsidies for poor households in two provinces of China and find no evidence that the subsidies improved nutrition. In fact, it may have had a negative impact for some households

Five Second ... Romer Takedown

"You too can have this city, if you just purchase a simple, easily applied set of rules. Retails at $49.99"


Dissanayake is deeply troubled by Romer's arguments for Charter Cities. Well worth reading in entirety, here is the Five Second version:

So, in other words, the only kind of places where a Charter City might actually work are where the Government is strong, has a legitimate leader, and able to resist opposition. Sounds like the kind of Government that least needs a foreign power to come in and govern a city for them. ...

Romer’s approach is wrong not because he thinks rules are important or that countries should invite rich Governments to enforce them, but because Romer thinks he already knows the rules, and that they can be imported anywhere. That’s not how it works.

Research: The Undiscovered Continent

Hat tip: Thought du Jour:

Research is an activity similar to exploring unknown lands. You know generally where you want to go. You don’t quite know what you are looking for and certainly not what you will find and how long it will take and cost, but you are motivated by knowing that you might make a discovery that will be valuable to yourself , your country and perhaps even humanity – in that order. Research is an ill-defined process and the most valuable results occur more by chance than good planning. There are opportunities for private and social gain and many chances to misappropriate funds because research is difficult to monitor. ... Administering these policies requires public servants to act more like venture capitalists by administering the use of public funds in activities where there is a less than 5% chance of success. Their training in managing the prudent use of public funds does not promote such actions. Reporting annually that 95% of approved expenditures failed is not something a bureaucrat would relish doing, especially year after year.

Christopher Maule, “Reinventing CIDA – Some thoughts”, 15 May 2010.

Fat and Fit

Most interesting fact (to me): physically active, obese men live longer than less-active, thin men.

What is candy? What is food?

Only the taxman knoweth:

In Washington, a new candy tax will apply to Butterfinger candy bars, yet Kit-Kat wafers remain excise free (this because the law exempts foods with flour in them). There is also confusion in Colorado, where Kit-Kats are also untaxed, but Twix bars face levies. And after Illinois passed a candy tax last year, retailers in Chicago were unsure if Twix Bars — some of which contain flour and peanut butter — were food or candy.

More than a dozen states have passed or proposed some sort of candy or soda tax in the 2010 legislative session, and most of them are bound to face some sort of confusion.

Hat tip: The .Plan

Hedging and Betting

A few weeks ago, Yglesias made a very insightful post about the difference between "betting," hedging," and other similar words. Betting has some negative connotations. Investment is a bet that something will go well. Hedging is a bet that something will go poorly. But investment and hedging aren't really gambling in the pejorative sense. In fact, their investments do something active to help make it reality.

Yglesias compares Norway and an airline. The former, by a fluke of geography, is heavily invested in oil. It is smart investing for it to hedge by investing in concerns that will go up if the price of oil goes down. That hedge could be called "betting against Norwegian oil" but it's more accurate to call it insurance (another form of betting). An airline has the opposite problem: it's profits go down when the price of oil goes up, so it makes sense for a prudent airline to invest in oil. In both cases, even if things go wrong, they won't be as bad as they might be.

I had wanted to blog this one back when I read it but forgot. Now I'm reminded as Sumner reposts a discussion Republican investments:

This is from the WSJ (via a recent post by Niklas Blanchard):

Putting his money where his mouth is? Eric Cantor, the Republican Whip in the House of Representatives, bought up to $15,000 in shares of ProShares Trust Ultrashort 20+ Year Treasury ETF last December, according to his 2009 financial disclosure statement. The exchange-traded fund takes a short position in long-dated government bonds. In effect, it is a bet against U.S. government bonds—and perhaps on inflation in the future.

Here’s Matt Yglesias’s take:

Given his investment positions, Cantor should be joining me in calling for more short-term fiscal stimulus and urging the Federal Reserve to act more aggressively to raise the price level. But either Cantor doesn’t understand his economic self-interest properly, or else he’s more committed to his principled opposition to sound macroeconomic stabilization than he is to the performance of his portfolio. One doesn’t normally urge members of congress to be more greedy and venal, but in this case it might do a lot of good.

Please, no more greed, more enlightenment. Here are three forms of government:

The Good: Enlightened and civic-minded

The Bad: Unenlightened and civic-minded

The Ugly: Greedy

We’ve got enough problems without encouraging Cantor to move from unenlightened to greedy. (Yes, I know that Yglesias was kidding.)

I mentioned to him that it may just be that Cantor is hedging. It’s thoroughly possible that Canter is saying “I don’t want inflation, but if it comes, I want to be ready. I will hedge against the inflation I fear is coming while doing all I can to prevent it.”

Five Second ... Sumner

Mixed Messages

The way monetary policy works at the zero bound is by changing inflation expectations. If the expected amount of inflation over the next 5 years doesn’t change after fiscal stimulus is announced, then the fiscal stimulus is expected to fail. ...

The left likes to claim the fiscal stimulus “worked.” The right likes to point out that growth was less than predicted by Obama. The left responds that “other bad things” happened in late 2008 and early 2009, which explain the disappointing growth. My view is that the “other bad things” were mostly an excessively tight monetary policy in late 2008 and early 2009, which was due to Fed passivity in the face of expectations that fiscal stimulus would carry the load.

Comparing Britain and Sweden

Britain looks like a country where both the public and private sector spend too much and save too little. That means they first need monetary expansion to get out of the recession, and then fiscal retrenchment to shrink government (as Canada did in the 1990s.) And more Singapore-style incentives to save.

Inflation vs. Socialism

In the 1930s the right had to choose between a modest amount of inflation (returning prices to the pre-Depression levels) or more socialism. They weren’t thrilled with big government, but their strongest opposition was reserved toward policies of inflation. So we ended up with deflationary policies between 1929 and 1933. Of course the voters wouldn’t accept 25% unemployment, so we got big government instead of the inflation.

As this video shows, we are essentially facing the same choice today. We could pump up the economy through monetary policy, or we can have Fannie and Freddie continue to throw $100s of billions down the drain, socialize the auto industry, extend unemployment benefits to 99 weeks, etc. And if that isn’t enough there are also calls to move away from free trade policies. And then there’s the higher taxes we’ll pay in the future to cover the costs of debts run up in a futile attempt to stimulate the economy.

Friedman supporting Sumner

Here is Friedman in 1998:

Low interest rates are generally a sign that money has been tight, as in Japan; high interest rates, that money has been easy.

. . .

After the U.S. experience during the Great Depression, and after inflation and rising interest rates in the 1970s and disinflation and falling interest rates in the 1980s, I thought the fallacy of identifying tight money with high interest rates and easy money with low interest rates was dead. Apparently, old fallacies never die.

On China

BTW, I just read that China is building a 350kph train line from Chongqing to Chengdu. That’s kind of mind-boggling when you consider the rough terrain. The track will be 66% tunnels and bridges. Does this make sense? My heart says yes but my brain says no. ... I suppose if you wanted to defend these projects you’d make the following argument:

When China becomes rich these project will pass a cost/benefit analysis. But they will be too expensive to build. NYC now wishes it had built a better subway system. But it is too late. Construction costs are now too high. China is building rail lines, subways and airports that are totally inappropriate for a country that is much poorer than Mexico. But they are highly appropriate for a country twice as rich as Mexico, which is where China will be in 30 years. I still lean toward the Huang perspective, because the argument I just made ignores the opportunity cost of capital invested in these projects, but I think the alternative view is also defensible. ...

You can understand why obesity is a bigger problem in China than Japan. A country with many people who went through the Great Leap Forward is inclined to encourage their children to eat as much as they want (when they can finally afford fattening foods.) ...

When I read Suetonius’s Twelve Caesars, my first reaction was; “Those Romans were crazy.” Then I recalled that life expectancies were really low back then, and I realized that Roman society wasn’t nuts, it’s exactly what you’d expect of a country where typical person is a teenager [okay, 26, but it was young and there were few wizened people around]. Sometimes when reading about China or visiting China you find yourself thinking; ”Those Chinese are crazy.” No, they aren’t crazy; it’s what you’d expect if you thrust nearly a billion peasants from primitive farms into sophisticated cities almost overnight. Think of things that way and many bizarre sights suddenly make more sense.

Who Wants to Live Near a Millionaire?

Culled from Sumner's reading, the top seven countries in terms of millionaire household density:

Singapore - 11%
Hong Kong - 8.8%
Switzerland - 8.4%
Kuwait, Qatar, and the United Arab Emirates - ?
US - 4.1%

In terms of number of millionaires (here):
The United States had by far the most millionaire households (4.7 million) followed by Japan, China, the United Kingdom, and Germany.

Singapore saw the highest growth in millionaire households, up 35 percent, followed by 33 percent for Malaysia, 32 percent for Slovakia, and 31 percent for China.

Five Second ... Expeditionary Economics

"Postconflict economic reconstruction... must become a core competence of the U.S. military. Call this 'expeditionary economics'" opines Carl Shramm in the latest Foreign Affairs.

"It is not enough merely to restore the ... pre-crisis status quo. The economy is often part of hte original problem.... Stabilizing a troubled country requires economic growth [and job security] more than economic stability. ... The U.S. military is well placed to play a leading role in bringing economic growth to devastated areas. It may have little resident economic expertise, but it has both an active presence and an active interest...."

He encourages policies to install US-style, entrepreneurial capitalism in ... areas where military personnel happen to be. While recognizing that India and China are "following a different model" from the US, "in both cases, entrepreneurs are playing an important role...."

He refers to the Washington Consensus as "grand central planning," that in practice helped internationals rather than local firms. "Successful development requires a strategy, not a plan." "The U.S. Army Stability Operations field manual, published in 2009, ...epitomizes the central-planning mindset that prevails in the international development community." The strategy appears to include "direct investment from the US military or other US government agencies" in start ups.

"Growth is not simply a mechanistic composite of statistical indicators. It is in a very real sense an expansion of the imagination. ... Strictly speaking, economies do not grow. It is individual firms within these economies that grow -- or shrink."

Hat tip: Marron

First Ammendment and Baby Food

M. Nestle discusses her concerns with an Enfagrow toddler supplement that, in the company's words, has minimal added sugar - most of the sugar is lactose from the milk - and to which they added some nummy nutrients in the hopes of getting better nutrition to picky eaters. Getting more nutrients into a picky eater is pretty high on my agenda, certainly, as Econolad gets sick just looking at most foods.

But the company makes a number of other claims beyond "your picky toddler will eat and get some nummy nutrients." They claim (in those bright bubbles on the left) it's brain food, stimulating growth and immune system development.

Claims that are largely unsubstantiated.

And the FDA does nothing.

The main reason for FDA inaction is because companies defend their ... decorative choice of words as Protected Free Speech, and so:

a D.C. District Court judge ruled that the FDA cannot deny health claims that link selenium supplements to reduced risk of several diseases, or require those claims to be qualified, just because the claims lack adequate scientific substantiation. In other words, supplement makers can say anything they want to about the benefits of their products—on the grounds of free commercial speech—whether or not science backs up the claim.

She then argues:

I am not a lawyer but I thought that intent mattered in legal cases. Surely, the intent of the founding fathers in creating the First Amendment was to protect the right of individual citizens to speak freely about their political and religious beliefs. Surely, their intent had nothing to do with protecting the rights of supplement, food, and drug corporations to claim benefits for unproven remedies, or to promote sales of sugary foods to babies.

I think it is time to give these First Amendment issues some serious thought

One commenter added:

I think the First Amendment protection of claims not scientifically backed is correct. Having the government decide whether the conclusions of scientific studies are correct, or whether the study was properly executed or relevant to authorize a manufacturer’s claim is not what I want bureaucrats doing for me. If producers make a false and fraudulent claim, you and a bunch of attorneys general can sue the retailer and the manufacturer. Fair enough. Having the government decide what should be protected speech and what should not be is a slippery slope that will eviscerate the First Amendment.

Some Thoughts from The Economist

Between 30k and 75k tons of food were stolen or wasted in Venezuela as Chavez aims to make Venezuela more food self-sufficient while simultaneously attacking the private enterprises - farmers and retailers - who make the system work. Food price inflation is up 21% in the first five months of the year, goods are becoming scarcer, food imports are up as productivity is declining, and nationalized businesses are suffering heavily.

Scientists are combining DNA from the Belgian blue cow (extra muscle, low fat) into trout to make them either much meatier with low fat or grow to marketable size at double speed. After ten years' petitioning, the FDA has finally given a clue how they will regulate the new transgenic fish, which The Economist unhelpfully labels Frankenfish.

11% of Kenya's GDP is transferred annually over cell phones. This is made possible by networks of agents that exchange currency for e-float and who then head to the bank as needed to exchange them and restore their balances.

Britain is looking to reduce aid to China and Russia while increasing flows to poorer countries. Mitchell, the new aid minister, is also looking to take on the "cash on delivery" model from the Centre for Global Development.

Buttonwood channels Hayek in explaining the 1997 Asian financial crisis to argue that "Without the boom, there would have been no need for a bust." "If governments keep punishing short-sellers during busts ... there will be fewer shorts around to temper the next boom."

And a fascinating comment from Charlemagne who compares Belgian politics to EU politics. In both cases there is a serious North/South split in attitudes about fiscal restraint and wealth transfer policies. But "this is not just a fight about money... For voters to consent to transfers of wealth, they must feel that the recipients are democratically accountable to them. ... Germany's focus on discipline is arguably an attempt to fix a democratic deficit." Intriguing.

All from last week's copy, subscription required.

The Awesome Powers of ... Duct Tape

In 1912, a thought experiment tried to show that a bunch of randomly bouncing balls could be capable of turning a windmill in one direction. There was some back and forth about whether this was possible or not over the last century. This is important for understanding how molecules bounce around and make things work.

Well, they finally managed it at the University of Twente using the Awesome Powers of ... Duct Tape:

With duct tape covering one side of each vane, the vanes spun in one direction only. Since the beads lost more energy when they hit the soft duct-taped side than the non-taped side of the vanes, the machine generated a positive net movement.

Van der Meer noted that the machine doesn’t come close to violating the second law of thermodynamics, since the system is extremely inefficient. Most of the beads’ energy is lost through heat and sound.

Not forgetting Haiti

Better than it could have been, but it's still not looking good:

Haitians now have 50 percent more potable water than before the earthquake; the spread of disease – which many feared could cause a second wave of disaster – has been largely contained and the Haitian government is regaining its footing....

And the largest obstacle is the 20-25 million cubic yards of debris – 20-25 times the rubble created by the destruction of New York’s twin towers – that give testament to the worse earthquake Haiti has seen in 200 years....

“To build these transitional shelters, land has to become available,” she added. “[But] every spare patch of land is covered. It’s hard to go one block without seeing damaged buildings and people in shelters.”

“The worldwide experience is people will go and stay where there are jobs or services so ultimately supporting people is going to rely on reactivating the economy and helping the government provide the basic services – health care, education, water – that people need to prosper,” Weisenfeld said.

Building that infrastructure in the short term – and sustaining the gains made in the country’s recovery – will likely be severely thwarted by the approaching hurricane season, however.

With hundreds of thousands of people huddled together in tent villages perched precariously on hillsides and other unstable land likely to turn to mud when it rains, the potential for catastrophe is exponential.

Ideal Regulation

Newmark posts two conclusions drawn from the same, agreed-on set of facts.

James Surowiecki points to the fact that each of the recent major collapses and SNAFUs in the market were aided and abetted by lax regulators. He concludes that the problem is the laxness of regulation of market failures brought about by overzealous deregulation:

pushing the message that most regulation is unnecessary at best and downright harmful at worst. The result is that agencies have often been led by people skeptical of their own duties. This gave us the worst of both worlds: too little supervision encouraged corporate recklessness, while the existence of these agencies encouraged public complacency.

The Wall Street Journal's editorial followed up by coming to the other conclusion:

The liberals' fury at the President is almost as astounding as their outrage over the discovery that oil companies and their regulators might have grown too cozy. In economic literature, this behavior is known as "regulatory capture," and the current political irony is that this is a long-time conservative critique of the regulatory state....
In the better economic textbooks, regulatory capture is described as a "government failure," as opposed to a market failure. It refers to the fact that individuals or companies with the highest interest or stake in a policy outcome will be able to focus their energies on politicians and bureaucracies to get the outcome they prefer.
Perhaps if liberals read more conservative economists, they might understand that this is a common consequence of the regulatory state that they have so diligently constructed over the decades. It is also a main reason that many of us are skeptical of the regulatory solutions routinely offered in response to every accident or business failure.

One of the commenters asks a legitimate question:

so, do you believe that without regulation, Massey Energy would have spent more on safety, A.I.G. written less credit-default protection, Enron and WorldCom and Bernie Madoff would have been honest (or caught sooner?) and investment banks would have been less leveraged? ...

[Would] all these bad things that transpired under regulation ... have somehow been avoided with less regulation? Whether less regulation would make us better off with regard to the frequency and severity of bad things. It's not obvious to me that the observation that regulation has been ineffective (and has tendencies to always be always be ineffective to some extent) necessarily leads to that conclusion. ... For me, it's a case-by-case thing.

The question is whether the government failure is ineptness or corruption. If the former, adding regulations by itself won't solve the problem, but improving bureaucratic capacity may help. Though that may be termed "strengthening" government, it is not in the sense of making government more intrusive, only more effective at the jobs we the people have asked it to accomplish. If the latter - if government agencies deliberately turned blind eyes, set regulations to favor the powerful, etc, etc - then giving government more ability to regulate will likely lead to worse solutions, attacking corruption directly may help (but it tends to be just putting out fires), and deregulation may indeed be useful in increasing competition along lines that consumers care about, like environmental protection, and reducing the outbreak of fires. I tend to think of those as empirical questions, answered on a case-by-base basis also.

For a follow-up, Leonhardt's recent article on environmental regulation is interesting, comparing command-and-control regulation, cap-and-trade marketesque regulation, and none.(HT: MR)

Questions of a Young Pup: Incumbency

When was the last time the electorate was in an officially PRO-incumbent mood? We re-elect the "bum" far more often than we throw him or her out, but we seldom admit we like incumbents. Was there ever a time when we did?

I think it may have been John Adams who first said that he should be elected President to "send Washington a message."

WB on Africa's successes

The World Bank's Kenyan report is out. It cheers that Kenya's economy is recovering from the global recession. They expect growth of about 4 percent this year and nearly 5 percent next year. However, they are concerned that growth is not more widespread throughout economic sectors (mostly non-tradable services) and they really want investments to be made to improve Mombasa's port which slows trade.

The Bank also cheers successes from government getting out of the way:

The best example is Ghana’s cocoa sector, which was destroyed by the hyperinflation and overvalued exchange rate in the early 1980s. When the exchange rate regime was liberalized and the economy stabilized, cocoa exports boomed (and continue to grow). Similar examples include Rwanda’s coffee sector and Kenya’s fertilizer use. Africa’s mobile phone revolution, too, is an example of the government’s stepping out of the way—in this case by deregulating the telecommunications sector—and letting the private sector jump in.

Getting involved where it needed to:

The example of Mali’s mangoes is a beautiful illustration of how, when governments intervene to provide genuine public goods—and only those goods—the private sector can spur growth and poverty reduction. In Lesotho’s textile industry and Rwanda’s gorilla tourism case, too, the government stepped in to provide just the enabling factors for take off.

And giving "smart" subsidies:

In the case of NERICA (New Rice for Africa) or the KickStart pump, the government went beyond providing an initial subsidy. They continuously consulted with farmers about the design of the new technology (in the case of NERICA) and how to market it (in the case of KickStart). They were able to avoid the fate of other subsidy programs that simply provided the subsidy without paying any attention to the beneficiaries’ knowledge or preferences.

I find it interesting that both the market and the government are cheered throughout while also discussing the failures of each. "In fact, what distinguishes these successes from similar efforts that didn't succeed is that they emerged from a domestic consensus or idea within the countries."

The Lighter Side: Adventures in Nutrition

Find out why science research is something to be dreaded, what it means to be mallnourished, and how to celebrate American cuisine.

You Might Be an Economist if...

You think a game is an analytical tool popularised by John Nash.
You see finding a job as just another matchmaking exercise.

Your grocery list is seasonally adjusted for relative prices.

You try to calculate your kid's discount factor by promising different amounts of candy after dinner to see how much of it is worth one chocolate bar before dinner.

You carpool, but not because of environmental concerns. There are economies of scale involved.

These and other economist jokes at Elliephant, hat tip Newmark.

Looking in the mirror

Rachel in Goma ponders who takes whose picture:

several foreign army men (Indians? Bangladeshis?) come up to us and ask to take a photo with us. Us in our beach gear. As if we are all three of us Britney Spears? ... “Creepy,” says S. "Yeah, creepy," I say.
*
Also today: A white man I know is swimming in Lake Kivu with his two little boys, two and four years old. Several foreign army men call and wave and ask him to get out. Ask him to bring the boys out. So that they, the army men, can take photos of themselves next to his little children.

The man does not move from the four feet of lake that he is standing in. The boys, with their blond hair and tiny white baby teeth, giggle & cling to him. They are oblivious, splashing in the water.

Creepy, right?

Or.
*
Because then, there’s also this: So many acquaintances of mine travel to so many villages and play with the dusty little lovely mischievous “African” children, pose with the children, take photos of the children, snap snap snap the children. They show the children the photos on their camera and the children scream with laughter and clap and the acquaintances take more photos of the children laughing. And then they post the photos on Facebook. New profile pictures! Cute big deep “African” child eyes! Curly soft brown “African” hair! Breastfeeding “African” mama cuddling her tiny “African” baby!

That’s not thought of as creepy. Those new profile pictures make my acquaintances look adventurous! exciting! mysterious! international! multicultural! COOL!

But how are those photos of “Africans in the village” any different from the photos of “white women and children on the beach”?

They’re so not.
*
And me? I have taken photos of the foreign army men, their olive colored hands gripping their guns, their brown waves of hair crammed under blue helmets. I've done that, a little in love with the guns and the helmets and the idea of protection and danger and adrenaline and life life life. That's a little creepy.

So maybe none of us is creepy. Or maybe we all are.

Maybe we are all just curious about each other, one another.

Malaria and Organic Production

In one of the most malarial infected areas of Uganda:

Signboards erected by the side of the road announced the presence of two foreign-assistance programs. One was a European-funded child-protection group, which had no malaria component to its program. The other was the National Wetlands Program (NWP), funded by Belgium. Partly because of NWP's influence, the draining of malarial swamps is banned — which amounts to preserving wetlands at the price of human life. Spraying houses with insecticide — which in 2008 cut malaria infections in half — is also forbidden. Why? Because of objections from Uganda's organic-cotton farmers, who supply Nike, H&M and Walmart's Baby George line. Chemical-free farming sounds like a great idea in the West, but the reality is that Baby Omara is dying so Baby George can wear organic.

Some successes have been seen:

malaria has been at least halved in nine African countries since 2000. Ethiopia and southern Sudan should reach universal protection this year;

HT: Poverty News Blog

The Lighter Side: Macro

Today we'll be giving an overview of the logic of Keynesianism and the Guns vs. Butter debate. Following that we'll explore why people think economists are socially backward and trying to understand how joblessness is the backbone of capitalism.

Global Food Security Act

The US Senate is expected to introduce the world to a new "food czar."

The good parts: new funding for agricultural research, for buying food locally and regionally when there's a problem (currently not allowed in other US programs), and for other nonfood assistance. It's nice to see them paying attention to both short-term, emergency work and longer-term, agricultural productivity.

The controversial part is the officially mandated support for genetically modified foods.

If Congress "singles out one technology and attaches it to a pool of foreign aid money, the pressure on developing countries to ignore local priorities and other scientifically valid options – and to open their markets to that one technology – will be substantial", the letter noted. ...

Robert Paarlberg, author of Starved for Science: How Biotechnology is Being Kept out of Africa, told IRIN: "This is a deeper matter than GM crop research, since most of the organizations that oppose the Lugar-Casey bill on these grounds also oppose its emphasis on spreading more traditional science-based 'green revolution' farming technologies."

He pointed out that "There is not yet an example of any society lifting its farming populations out of hunger and poverty without introducing green revolution methods, such as the use of improved seeds and nitrogen fertilizers," and that using only organic and agro-ecological approaches had not yet worked anywhere.

"It simply makes sense to keep all our arrows available in the quiver in the battle to reduce hunger and poverty," said Christopher Barrett. "It would make no more sense to exclude research based on genetic modification than to focus on it exclusively."

Source: Poverty News Blogs

What IFPRI has been doing

They've been very busy at IFPRI recently....

The Regional Strategic Analysis and Knowledge Support System (ReSAKSS) is a new data base with some two dozen indicators regarding African agriculture, designed at the request of NEPAD. Immediately from the home page you can generate many comparative maps on GDP, poverty, hunger like the one below showing that they now estimate 90% of the adult population of the Democratic Republic of Congo are hungry.

Ghana has a goal: "In the past five years, Ghana has experienced fairly high levels of poverty-reducing growth, and the country has set 2015 as a target date to achieve middle-income status." They are already classified as lower-middle and are about half-way to upper-middle status.


IFPRI has a useful report out on Gender and Governance in Rural Services in India, Ethiopia, and Ghana. It looks at women's access to agricultural extension and water supplies. Each country has a very different system in place, with different pros, cons, and different recommendations for what to do next. Available for free online, but you can only print 1-2 pages at a time.

A number of PowerPoints on mitigatingclimate change through agriculture came from a meeting last week in Bonn. Includes a proposed study on Payment for Environmental Services to reduce livestock-land degradation cycles. Another paper finds that rural people living near national parks in Costa Rica and Thailand are doing better financially than rural people who are further away from them, largely as a result of new jobs in conservation and ecotourism.

They are releasing a new dataset on chronic poverty in Bangladesh using both qualitative and quantitative panel data on 2000 households. Other papers on Bangladeshi poverty and food security that came out quite recently include:
Agricultural marketing, price stabilization, value chains, and global/regional trade
Cross-cutting issues: Governance and gender
Food utilization and nutrition security
Growth and development potential of livestock and fisheries in Bangladesh
Income growth, safety nets, and public food distribution
Investing in crop agriculture in Bangladesh for higher growth and productivity, and adaptation to climate change

Lawful Good Vampires

While getting ready for bed, I thought about the poor, cliched 'good' vampire. There is exactly one way to identify a good vampire: he or she struggles to control the urge for human blood. Good vampires eat animals. Cutesy vampires eat chocolate or are vegans.

Blekh.

Can't we come up with any arrangement for a vampire to be good and still get a daily dose of vitamin A-postive? Oh sure, vampires can also rob blood banks, but that isn't lawful. With all the nice, decent people being turned into vampires by the chaotic and lawful evil vampires out there, how about a Lawful Good abomination for a change?

Well, Derrill, says I, how could it work? I came up with a half-dozen good ideas before drifting off. If you would like to use any of these vampires which I have never seen in print, please stick in an acknowledgment and send me a free copy of the book. My five best ideas in my order of preference:

1 -  Drac Locke (named after this guy, not this one) arrives in a poverty-stricken community with severe social tensions where the national government is completely ineffective. Transylvania, Somalia, California, take your pick. He offers protection, social order, and prosperity in exchange for feeding rights with the rotating "host" family. He keeps away predators, establishes justice, secures property rights, sets up local councils, teaches them new technologies and production methods, serves as international intermediary, and with his hypnotic powers prevents corporations' use of market power against them. The town prospers and they protect him against would-be vampire hunters.

2 - Dracscalante (this guy) becomes the local sorcerer/alchemist/scholar. He takes in children of willing parents and gives them an education compiled over his thousands of years of life, enabling them to escape from poverty. The price of tuition: a pint a day.

3 - Drac Grandin (this gal) domesticated a group of humans centuries ago for feeding stock. The conditions are as humane as possible, but c'mon, they're livestock. That's what they were born and raised for. The hero's debates on what constitutes "humane" treatment of livestock probably occupies a central part of the book. [By the by, I chose Ms. Grandin only in respect: "I think using animals for food is an ethical thing to do, but we've got to do it right. We've got to give those animals a decent life and we've got to give them a painless death. We owe the animal respect." Now just think of a vampire with that attitude.]

4 - DracMan, caped crusader, makes criminals pay for their crimes in blood. [Granted, the lawful part is in question here.]
4b - Drac Norris fights the Taliban against the evil vampire bin Dracula.

5 - Dracenerny (this guy) is a grad student who lives in the basement of his university so he never sees the light of day whether he works or not. His hypnotic powers would explain how he's gotten funding for research for so long without ever producing a paper and why grad students feel like all the life has been sucked out of them. It's not grad school: it's Dracenerny!  [This is the least lawful good one of the group, but probably the easiest to turn into a comedy. Dracbert, anyone?]

Brought to you by the letter M

MDGs, MVs, Migrants, and Monsters

How to make the inevitable next round of development goals more realistic, achievable, and productive.- Todd Moss of CGD says:

1. Bottom up, not global down.
2. Based on ambitious yet reasonably achievable expectations.
3. Aimed, where possible, on intermediate outcomes.
4. Considered warning markers rather than operational goals.
5. Able to identify success. 

Speaking of the MDGs, the one where we have made the least progress worldwide is reducing maternal mortality. Canada and the US are trying to raise more money to focus on them maternal mortality rates at the G8 and G20 meetings in two weeks.

Of course, we all know that Africa is failing most of the MDGs. Easterly points out, however, that that is partly an artifact of the way the goals were set up: some in levels, some in percentage change, other using other criteria. The thing is, a percentage increase of something good of which you have little is much easier than rising to a set limit the farther you are from it. Similarly, reducing something bad by a given percentage is harder than reducing it by a specific amount if you have a lot of that bad thing. Nearly every goal, however, was chosen in the hardest possible way:

Had the goals been chosen at the + signs instead - reducing poverty and increasing school enrollment by a fixed percent, for instance, Africa would look like it's doing much better.

I think the MDG design was unintentional after some conversation with the original creators of the goals, who did not intend the MDGs to be applied at the regional or country levels. What is less forgivable is the aquiescence in making Africa look like a failure after the bias was clear to anyone who would bother to check. Of course, there are areas and time periods where Africa has done badly, but is that any reason to take the successes and make them look like failures?

How have the Millennium Villages been doing? The first report is in, but not many people have been commenting on it, according to Aid Watch:

The new data give a picture of encouraging results across all sectors compared to the baseline. In Mwandama, Malawi, for example, bednet use for children under five increased from 14 percent to 60 percent and malaria prevalence for all age groups fell from 19 percent to 15 percent. Maize yields increased dramatically from .8 tons per hectare to 4.5 tons per hectare. 

Note: crop increases do not necessarily imply profit increases, but given the high subsidies they're receiving, I think that's a safe bet. The question is whether incomes increase by more than the subsidies and how long lasting the increases are after the donors leave: ie - is this enough to get the farmers out of the assumed poverty trap?

Unfortunately the results are also not that useful: Three years is too short a period to know how to interpret this dramatic increase in maize yields, for example. Is this consistent with normal variation in crop yields? Was 2006 an unusually good or bad year for maize? We don’t know.
The results also don’t help us determine whether current and future resources should be shifted away from other existing or even yet-to-be invented approaches, towards the MVP template. Will those short-term gains last beyond the timeline of the project? Can the project become self-sustaining?
Again, we don’t know, in part because not enough time has passed.

Investing in migration, Michael Clemens does some quick and dirty calculations for Bangladesh:

Hussain reports that the average Bangladeshi pays about $3,150 to migrate—mostly to the Middle East—covering costs of travel, intermediaries, and so on.  A stint abroad earns the average migrant $3,690 per year, or about $11,050 total for a typical three-year spell.  Of that, about $6,850 is either remitted home or brought home as savings. ...
That’s a stunningly profitable investment.  The large, up-front cost of emigration is yielding these migrants a 117% annual return. Most of that is spent in Bangladesh. For comparison, Mark Pitt and Shahidur Khandker estimate the returns to much-vaunted microcredit for Bangladeshi men at just 11%... .

Does Bill Easterly want to eliminate aid? Vote in the comments section.

Five Second ... Sociology of Economics

I'm thankful to Blattman who linked to this Mankiw post in his comment section last week on "The Sociology of Economics." The five second version between Mankiw, his questioner, and his questioner's economist friend:

Why is that

1. The economists are the most aggressive people in the room. 

2. The economists are the only social-scientists in the room that are willing to argue with the statisticians.

3. There seems to no love lost between the economists and other social-sciences.

The friend's answers

1. "In general, economists are smarter (we may be better looking too). ... Smart people don't have the time waiting for the less-smart to catch up. If we can finish up the seminar in 10 minutes, then why not do it?"

2. Economics graduate school is not for slackers. It's like boot-camp in the Army.

Third, the set of advocates who are economists is quite small (I don't know if this reflects treatment or selection). In general, economists are more likely to make up their minds about whether a particular policy works based on theory or data. They may have priors, but not the the sort of "do-gooder"priors that advocates have. One of the reasons that economists are so aggressive with the non-economists is that we want to expose all the priors immediately. In my view, a lot of non-economics social science is straight advocacy. There is an important role for advocacy. It may influence policy more than science. But the nature of advocacy is to simplify and ignore nuance and confounding. But our (economists) beef with advocacy isn't its lack of nuance. We just get really upset when advocacy masquerades as science.

Fourth, the economics job-market is just that -- a market.

Mankiw's additional answer: "Perhaps the skills that make a good economist are, for some reason, negatively correlated with the attributes associated with being an agreeable human being. That is, economics may attract people with a particular set of personality attributes, and perhaps these attributes are not the same set of attributes you might choose for your next dinner party."  ISTJ's seem prone to be economists in particular.

Your correspondent is usually scored as INTJ.

Lit in review: Credit and Export Crops

Ashraf, Gine, and Karlan, "Finding Missing Markets (and a Disturbing Epilogue): Evidence from an Export Crop Adoption and Marketing Intervention in Kenya," Amer. J. Agr. Econ, Vol. 91, (4), 973-990, ungated.

A Kenyan NGO helped farmers move into export crops [French beans, baby corn, or passion fruit] and lowered their marketing costs. This increased adopter income by 32% ... until EU production requirements changed a year later adding $581 costs per farmer and shut them out of the market. Ouch. Methods: clustered randomized control trial to determine the difference adding agricultural credit to their package of extension and marketing services.

"Other similar interventions include the use of mobile phones to obtain real-time prices for fish in markets along the shore by boat owners returning with their catches (Jensen 2007) and an intervention in India to provide internet kiosks in small villages in order to better inform villagers of market opportunities (Upton and Fuller, 2005; Goyal, 2008)."

Adding agricultural credit makes a farmer 19% more likely to grow an export crop and more of their land is used for export crops; and increases production (kg) for baby corn, but not for French beans (all extra-marginal).

How many want to come here?

Gallup reports that of the 700 some-odd million people who want to permanently emigrate, 165 million of them want to come to the US. That would be a group of people roughly equivalent to 53% of the current US population. Though far fewer people want to move to Singapore, they would see an even larger population increase by percent.

The top ten countries whose people want to move here are:

China - 23 million - 2% of them
India - 17 million - 1.5% of them
Nigeria - 17 million - 11% of them
Ethiopia - 10 million - 13% of them
Bangladesh - 8 million - 5% of them
Brazil - 8 million - 4% of them
Mexico - 6 million - 5.5% of them
Philippines - 6 million - 6.5% of them
Vietnam - 5 million - 6% of them
Japan - 3 million - 2% of them

We let in less than 0.6% that many.

Out of that 165 million, Wiki tells me that a record 1 million became naturalized US citizens in 2008, mostly from Mexico, India, and the Philippines. In 1890, 15 percent of the people living here were foreign-born. "By 1970 immigrants accounted for 4.7 percent of the US population, rising to 6.2 percent in 1980 and to an estimated 12.5 percent today."

What matters to Americans

Top concerns: "Terrorism and federal government debt tie as the issues Americans say are most threatening to the future wellbeing of the U.S., of 10 issues tested. Americans are more likely to choose the Republican Party than the Democrats as better able to deal with both. Read more at GALLUP.com."

and divisive politics:  "Americans hold similar moral judgments on 12 of 16 cultural matters that sometimes fuel debate in the country. By contrast, doctor-assisted suicide is highly controversial, as are gay relations, abortion, and having children out of wedlock. Read more at GALLUP.com."

Sentences to Ponder

Aid Thoughts: What is Development? Contrasting England and Hong Kong, he concludes:

There are many different paths that can be taken to the same aims of better incomes, life expectancy, health and education. These paths will lead to a different kind of economy and society, with different advantages and drawbacks. Yet, it doesn’t appear that development policy, certainly not from the donor side, takes into account the myriad approaches to development. From the developing country side, the mania for strategies, visions and plans, while well intentioned, seeks to hit specific targets rather than laying out a conception of what kind of society and economy is desired.

Owen Barder on what's wrong with aid (and I'll remind you that Barder thinks aid works):

In many ways we have the worst of all worlds: with some notable exceptions, foundations do not in practice take enough advantage of the opportunities that their lack of accountability give them (for example, taking bigger risks, or supporting unpopular causes) but they do suffer from the weaknesses that lack of accountability imposes on them.

Land of Lions

On occasion, lions actually do matter when discussing Africa.

Kenya's lion population has declined from 20,000 to less than 2,000 in 50 years and there are very few places in the country where the animals are not under threat.

To understand why the Maasai are killing lions in Kenya, you have to realize that there is a big difference between the way Africans who live among predators think about them, and the way westerners do. Tourists will spend thousands of dollars on safari vacations for the chance to see a lion in the wild. Some Maasai pastoralists will risk jail time to kill lions because they sometimes prey on cattle. For the Maasai, there is nothing on earth more important than cattle. ...

The situation became more dire after a punishing multi-year drought that killed cattle and, in some areas, most of the wildlife. Cattle became much more valuable for the Maasai — who wanted to keep more animals than the grazing land could sustain — and for desperate predators that had little else to eat. ...

If the West wants to save the lions for their Africa stereotyping efforts, what should the West do to help resolve these conflicts?

One way is to build a tourist lodge and give the locals jobs, training and some of the profits from the tourists who stay there. Another is to rent their land and set it aside for wildlife. Another way is to pay them some form of compensation when a predator kills their animals. ... "We've had some setbacks, certainly, but one thing is very, very clear. If we hadn't had that compensation project on-line, I'd doubt very much there would be one lion left in the whole ecosystem," says Bonham. "That's what's been putting the brakes on the killing."

Part of the article discusses the problem of making this sustainable in the sense of ongoing once the donors leave and largely involve either making convservation a good business opportunity or convincing the Maasai to value lions the same way Western conservationists do. I tend to think this is, partly, the wrong way to think about it. If we want them to provide us a service - conserving lions - we should pay them for it. Why should they continue doing it if we stop paying them to do what we want them to? It's asking for free services. If what we want is to save lions, we can afford it. And if we don't care enough to pay for it ... do we really care?

All you need is ... political will

The simple story: the newly elected Malawian president said "Hey, I didn’t get elected to be a beggar nation, and right now we’re begging for about 45 percent of our food. Do you have any suggestions?" They enacted fertilizer and seed subsidies

Within two years, Malawi went from famine to food exportation. Now the fertilizer subsidies have caught on among neighboring countries—10 are testing similar policies, including Tanzania, Nigeria and Zambia. Faced with the evidence of success, USAID, the World Bank, and many European donors are putting their support behind subsidy programs.

“The dogma was that you don’t subsidize African farmers, even though we subsidize American, European and Japanese farmers to the tune of 1 billion U.S. dollars a day,” Professor Sánchez says. “Things have changed. It was basically the political will from one president.”

One man saved the day. A similar story is being told in Zambia. But now let's talk about the seeds:

A major criticism of the Malawi model is that it encourages farmers to turn to a single staple crop (and yes, it's corn, in case you were wondering...). Horticulturist Linda Larish notes that the traditional Malawian staple, a taro-like plant called manioc, has largely been abandoned by farmers switching to imported hybrid corn.

“Even though they are self-sufficient and can grow their own food, they are at the mercy of the seed and fertilizer companies,” Larish says.

Not by coincidence, Malawi’s policies gave Monsanto a foothold for its hybrid maize in sub-Saharan Africa. Is it philanthropy, PR, or simply shrewd business?

Meanwhile, other scientists are finding ways to improve native rice varieties themselves, rather than merely splicing genes from African varieties into the more popular, commercialized Asian varieties.

Five Second ... Rodrik: One Economics, Many Recipes

Though it's largely a reprinting of a group of previously published essays that fit well together, One Economics, Many Recipes: Globalization, Institutions, and Economic Growth by Dani Rodrik helped me understand how he would apply his principles of "diagnostic development." The first section (3 chapters) lays out the case that successful countries develop using different strategies that may or may not follow standard prescriptions, with the emphasis on NOT. This sets up the second section (2 lengthy chapters plus a very short summary) on what industrial policy and governance institutions look like in the context of diagnostic development. The final section - a little less-well integrated with the other two - expounds on the lessons of different policies for the case of globalization.

I find myself in large agreement with the overall diagnostic principle, which says that we as economists should identify the most binding constraints on an economy's growth and develop context-appropriate policies to deal with that particular constraint. He argues that one of three basic problems likely to lead to low investment: low social returns, low private appropriability of those returns, or high costs of finance. Each of these might have several causes. You go through the country's (or sector's) statistics to determine where the constraint is likely to be. If interest rates, capital account deficits, and the returns to investment are very high, like Brazil, it's probably the high cost of finance. He narrows it down further to the low availability of domestic savings. In El Salvador, on the other hand, interest rates and returns to human capital are low, taxes and corruption are low, there's macro stability and good property right protection ... leaving by a process of elimination that there is a lack of entrepreneurship and new ideas that is inhibiting growth there.

I'm more reticent to accept his push for industrial policy, however. While he can cite a number of successful cases where direct government support of a sector paid large developmental dividends, it seems as a practice to have as many failures as the Washington Consensus. In part he calls this a virtue: a government that has only successes probably hasn't been doing enough, he claims. I'm less convinced.

Among the things I liked from his discussion were the institutions that need to be in place in order for good outcomes to be more likely: "Effective industrial policy is predicated less on the ability to pick winners than on the ability to cut losses short once mistakes have been made," addressing bureaucratic capacity as a scarce resource (which is just as scarce a resource for employing Wash. Cons. reforms too), and an acknowledgement that this is not a story of "omniscient planners ..., but of an interactive process of strategic cooperation between the private and public sectors that ... elicits information on business opportunities and constraints and ... generates policy initiatives in response." He puts a large premium on transparent, accountable, participatory governance, another point in his favor. Since he argues throughout that higher-level economic principles do not translate obviously one-to-one into particular institutional frameworks -- multiple institutional arrangements can generate substantively similar results -- he focuses on those higher level principles ... and then oddly enough spends a large chunk of the chapter on cross-country large-n regressions, which are nice and supportive but perilous, particularly when he criticizes similar work by other high-caliber economists (Jeff Sachs and Daron Acemoglu and their co-authors, for instance).

His discussion of globalization largely focuses on preserving policy space for countries that want to use industrial policy or other heterodox methods, and the difficulties (he says impossibilities) of simultaneously preserving national sovereignty, mass politics, and global economic integration. There's a brief plug for expanded migration as part of a multilateral framework.

The globalization section shines in discussing the international governance architecture. 1) Instead of trying to maximize trade, put the emphasis back on maximizing economic growth and poverty reduction; 2) Instead of trying to harmonize (i.e. make uniform) trade, finance, etc. policies, the global institutions should preserve nations' policy space while reducing the transaction costs between them.

Things I thought were missing: aid institutions, more discussion of when Washington Consensus reforms are likely to be the binding constraints, doing more to answer why import substitution industrialization largely failed (he just asserts it worked and is done). He lists 83 episodes of sustained growth spurts, and I would have liked more information about more of them, particularly in Africa.

The Lighter Side

Even the political cartoonists are comparing California and Greece.





The classics are classics for a reason.