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Capital and inequality

Joseph Joyce, professor of economics at Wellesley College wrote and interesting piece to day on capital liberalization and inequality.

I’m glad to see that so much attention is being fawned on Piketty’s most excellent book, “Capital in the 21sr Century.” It’s sure to go down as a classic in the economics literature, but the debate and discussion surrounding the book couldn’t come at a better time.

I don’t think it’s an accident that Piketty’s book, would top the NYT best seller list just a week after appearing, that a sitting President of the US would mention that inequality is one of the most important issues of our time, or that Christine LaGarde, head of the IMF would make a case that we need to address inequality at a global level.

They (Florence Jaumotte, Subir Lall and Chris Papageorgiou) analyzed the effect of financial globalization and trade as well as technology on income inequality in 51 countries over the period of 1981 to 2003. They reported that technology played a larger role in increasing inequality than globalization. But while trade actually reduced inequality through increased exports of agricultural goods from developing countries, foreign direct investment played a different role. Inward FDI (like technology) favored workers with relatively higher skills and education, while outward FDI reduced employment in lower skill sectors. Consequently, the authors concluded, while financial deepening has been associated with higher growth, a disproportionate share of the gains may go to those who already have higher incomes.

This is a scenario we’re all mostly familiar with, though the broad effects are still debatable. Increasing investment by giants like the US in overseas manufacturing push down wages on domestic unskilled labor, but it’s hard to say whether this had a major effect on overall employment. Unemployment remained steady even after Clinton signed NAFTA, and continues to remain well under European levels today, though the lowest level of workers feel the worst pain. I’m not sure if I can really advocate for protectionist measures to keep capital at home or dissuade foreign investment on principle alone, but it is true that the worst effect of foreign competition has been the erosion of labor’s political power.

Jayati Ghosh of Jawaharlal Nehru University of New Delhi has examined the role of capital inflows in developing countries. She maintains that the inflows appreciate the real exchange rate and encourage investment in non-tradable sectors and domestic asset markets. The resulting rise in asset prices pulls funds away from the financing of agriculture and small firms, hurting farmers and workers in traditional sectors. Eventually, the asset bubbles break, and the poor are usually those most vulnerable to the ensuing crisis.

Well, this is somewhat more interesting. Foreign investment in developing countries appreciates the exchange rate, leading domestic investors to put their money into, say, real estate assets. This is certainly the case all over Africa. Land and building developments are occurring at a breakneck pace, with the hopes that expensive properties will be bought up by foreign companies and individuals. It’s certainly the case that no common African could ever afford some of these places (or would even want to buy them if they could). Nairobi, Dar es Salaam and Luanda, Angola are all in the middle of a real estate bubble. The problem, of course, is that domestic investors are hoping to make a quick buck, rather than attempting to create long term, profitable industries. No wonder Africa imports the lion’s share of it’s manufactured goods. No local will invest in the infrastructure to create it locally since urban real estate is so absurdly profitable right now. This, of course, means that money flows directly into the pockets of the urban elite and then sent back out to bank accounts and retailers in France and England, further entrenching the poorest of the poor.

Without the development of local industries, domestic economies can’t function and opportunities for revenue collections are missed. and countries like Tanzania and Kenya, for example, will continue to be beggar economies which depend on the good graces of the international community to support domestic social programs.

Articles I liked 4/12/2014

Here’s a few articles I’ve been reading this morning that I liked.

Intellectual Property Rights, the Pool of Knowledge, and Innovation by Joe Stiglitz (National Bureau of Economic Research)

We began by noting that some observers of innovation have claimed that a more important determinant of the levels of investment in R & D and the pace of
innovation than the intellectual property regime is the “opportunity set,” the knowledge pool from which applied researchers can draw. Knowledge, it is has long been recognized, is a public good—a
common resource from which all can draw (see, e.g., Stiglitz 1987).32 Intellectual property provides a way of appropriating the returns to investments in knowledge, but in doing so, effectively privatizes a public good. But every innovation draws upon prior knowledge, and the boundaries of “new” knowledge are inherently imprecise. Patents inevitably enclose what would otherwise have been in the
public domain. In doing so, not only do they impede the efficient use of knowledge, but because knowledge itself is the most important input into the production of further knowledge (innovations),
they may even impede the flow of innovations.

Democracy does cause growth (National Bureau of Economic Research)

Our baseline results use a linear model for GDP dynamics estimated using either a standard within estimator or various different Generalized Method of Moments estimators, and show that democratizations increase GDP per capita by about 20% in the long run. These results are confirmed when we use a semiparametric propensity score matching estimator to control for GDP dynamics. We also obtain similar results using regional waves of democratizations and reversals to instrument for country democracy. Our results suggest that democracy increases future GDP by encouraging investment, increasing schooling, inducing economic reforms, improving public good provision, and reducing social unrest. We find little support for the view that democracy is a constraint on economic growth for less developed economies.

Abe’s Law: Domestic Dimensions of Japan’s Collective Self-Defense Debate (HERE)

The Edutainment Industrial Complex (Africa is a country)

So this is their strategy? Ask a bunch of relatively wealthy, globally-mobile pop superstars to tell rural youth to not participate in the flashy urban lifestyle they (the artists) usually promote–to stay in the countryside and participate in the resource extraction side of global capitalism? As Sean pointed out to me over email, the video isn’t unlike the type campaign some dictatorship (South Africa’s racist regime was fond of it) might use as a tool of “national development” or to fight crime or build national morale.

Is this a surprise? Western liberals have long romanticized rural poverty and encouraged Africans to simply do nothing about their developmental problems. Sorry, I had to put on my curmudgeon hat for a while.

I really don’t want the US to go back to 19th century monetary policy

But Ron Paul did.

I’m checking out the graphic below, and, first, wondering why anyone ever thought that gold was the only investment to make given it’s bubblish nature, and second, wondering what it must have been like to have investments in the 19th century. Granted, most people didn’t, and some people were even the targets of investment themselves. The wide volatility in the inflation rate must have driven people nuts.

If you owed money, one year, you’d make out like gangbusters, watching inflation obliterate your debt obligations, the next year, you’d watch your world crumble as the currency became worthless. If people owed you money, you’d be in the opposite pinch. Either way, you were screwed and had little ability to plan for the future. By the time you rode out the constant rough spots, though, you’d end up with the same amount of money you started with decades earlier. I’ll take steady inflation and reasonable economic certainty over crazyland, but Ron Paul might be into it, I guess.

Interview with a warrior: Greg Pratt, homeless advocate

Pratt with the MISSION crew. Pratt is third from the right.

Pratt with the MISSION crew. Pratt is third from the right.

Today’s interview is with my friend, advocate for the poor and downtrodden and purveyor of loudness, Greg Pratt. Greg’s a great guy in just about a billion ways. This interview should tell you why. You can learn more about the group he works with MISSION A2, here.

Who are you and what do you do?

Greg Pratt. I am a social worker by training, an organizer and movement worker by necessity. The two primary foci of my work are material and political support.

I help people with resources for living outside, so propane, water, socks, tents, sleeping bags, batteries etc. I also help them organize politically [internal and external]. Sometimes, that manifests in a camp community [internal] other times that manifests in local ordinances like the Good Neighbor Amendment to the Ann Arbor Parks Ordinance [external]. This amendment waives the fee for organizations handing out free material goods to folks in A2 public parks.

The Camp Take Notice Good Neighbor Subcommittee worked on this from April 2013 until the ordinance passed its 2nd reading on November 18, 2013. The Subcommittee was comprised of 7-8 individuals and I believe everyone but myself was homeless or recently emerging from homelessness.

You have done a lot of work with homeless people in the Ann Arbor area. How did you get started doing that work?

I am an alcoholic. On December 31, 2001, I had my last blackout and was charged with my third DUI.

On July 3, 2001, I was sentenced to six months in Oakland County Jail. The first five days were spent in the middle section of a three-section holding tank area of the Oakland County Jail. Each section was 10’ X 15’, separated by plexiglass, and had anywhere from 10-15 individuals in each section at any given time. There was one toilet per section. We were let out once per day to eat.

After I got out of there I was transferred to the County Barracks across the street for the work release program. This was basically an army style, bunk bed living quarters. We paid weekly rent [I think mine was something like 160-70 per week] and were allowed out of the barracks, at most, 5 days/week. I was only fortunate enough to get out 4 days/week.

After getting out of jail, I spent six months on tether [house arrest]. At the same time, I began my probation which included many hours of community service.

I chose to do my service hours at SOS Community Services at the River St. Location in Ypsilanti, MI. I did their “empathy training” to become a volunteer crisis counselor. At the time, the River Street SOS location served as a place for people to get referrals to other services in the area, food distribution, and a 24-hour crisis hotline which people used for information or just to talk when things were getting a bit to much to handle. I only had one suicide call [fortunately] while we still had the phone lines in place. I continued on in my volunteer capacity at SOS for a year after I got my hours for probation completed. I really enjoyed the work and the community I was a part of as a result of being there two to three times per week.

Anyhow, that is how I became involved. My first social work mentor, from SOS, was Christina Oliver. She still works in the area as a disabled-persons’ advocate.

I haven’t had a drink of alcohol since February 19, 2001. My higher power is the collective consciousness of all living beings. I am not anonymous, but I practice the principles in my daily life.

Do you find that the situation for homeless people in Ann Arbor is getting worse or better? Is Ann Arbor becoming increasingly closed?

I think you may be asking the wrong person on this one.

I am going to give an answer that is the best I can with the information I have from the friends [I don’t use the word client or consumer] with whom I work.

Assessment
On the one hand Ann Arbor is great because of its manifold set of resources for low-income people struggling with mental/physical health, addiction, and unemployment. On the other, it has very little in the way of low-income housing that is near places of low-income employment. The bus system is ok, but has limited evening hours during the week [M-F] and pretty much zero hours on weekend nights. So, if you live in Ypsilanti and work in Ann Arbor and have no car, your options for hours to work are limited as a result of these limited transportation options. If you talked to the current VP of MISSION, Jimmy Hill, you may get a more comprehensive version of what it is like trying to navigate one’s way out of homelessness in Ann Arbor.

Is is getting better? I hope that in the wake of the forum hosted by the Ann Arbor District Library last week it will. Camp Misfit A2 [one of the groups interdependent with MISSION] has, through their activism and public actions, put the issue of lack of affordable, low-income housing on the radar of local politicos as well as the local human services industry. I am cautiously optimistic right now.

Ann Arbor, as a small and somewhat well to do area, likely does not have the social space or will to accommodate an underclass, but at the same time, would not like to be seen as exclusionary. Do you think that Ann Arbor will ever be able to rectify these competing problems?

Good question. For me, change will have arrived when “our” kids can play with “their” kids.

I don’t think that we will ever correct the problem given the current system of resource distribution in our society, Capitalism.

Capitalism is a system that is framed to encourage economic growth. In this system, there are winners and losers. It is not “survival of the fittest” that determines winners. It is more like a complex gambling system that is weighted toward those with more wealth.

So, I think for Ann Arbor to rectify these problems, we would have to end capitalism as it is practiced now.

Here is another point I want to make. This one is predicated on our capitalist system of resource distribution. Homelessness is not a pond we can drain, but rather a river that flows on beyond our time here on this earth. We can dam up the river and provide bridges at certain sections of the flow, but regardless of our actions to “stop the flow” it continues on just like the wind.

There are people who are “chronically” homeless. But, most folks struggle with this for a matter of months. At our camp out on Wagner Rd [RIP], the average stay was just under three months. The Delonis Center has a similar statistic, although I think stays have been increasing over the last couple of years there.

I’m finding it interesting that Ann Arbor is having discussions about whether to create and improve public spaces, based on a perception that homeless people will use them (like this is a bad thing). How much of these concerns is based on alarmism, and how much is justified?

I think that we need to plan those spaces in an inclusive way, all stakeholders at the table. If we were to take that tack as a community I think we might reduce some of the alarmism. But ultimately, I think the folks with capital to invest in this area would rather see sunshine and lollipops and yellow brick roads, than help people who are struggling to make it in our community.

What do you see ultimately happening?

For the time being, more sunshine and lollipops and yellow-brick roads to nowhere for the poor and to increased wealth for Rick Snyder and his Carpet Bagger Finance Capitalists.

You’ve also done work with the unions, specifically during the push to bring GSRA’s into GEO. What’s your history working with labor?

Ugh. What a nightmare campaign that was. Before that disaster, I helped nontenure track faculty at MSU and EMU build their unions.

Yes, I worked for AFT Michigan [American Federation of Teachers]. I was a member of GEO as a grad student at the UM School of Social Work and was interested in learning labor/political organizing. I became a member of the GEO Organizing Committee just as our 2008 contract campaign was ramping up in December 2007. This was the contract campaign wherein we shut down both the UM Stadium and Business school renovation projects. I was picket captain for the business school site.

That summer, I was hired by AFT to work on a campaign with non tenure track faculty at MSU. After we won that campaign, I was sent to EMU to help bring the part time lecturers into the existing full time lecturer union. EMU has about 120 full time lecturers and about 500-600 [depending upon the semester] part time lecturers. In order to accomplish this, we conducted a few well-attended sit-ins at President Martin’s office. Paul Horvath [Math Lecturer at EMU] was one of the key lecturers involved in that effort. Good times.

After that campaign, I went to work with GEO leaders on bring the GSRAs into the union. In the wake of that Rick Snyder signed a law that prohibited GSRAs from joining a union. I believe this law has since been found unconstitutional and is in some sort of legal limbo on appeal.

That battle was eventually lost. It seemed like a really not so controversial idea. What do you think was going on to make it blow up as big as it did?

I think that conservative anti-union folks in Michigan watched AFT organizing at many of the colleges and some community colleges across the state. Grad Students, Lectures and even some faculty were joining unions in large numbers through the dedicated work of organizers like Jon Curtiss and Lynn Marie Smith between the years 2003-2010. When Rick Snyder was elected, the republicans had every lever of our state’s government under their control. I think they saw an opportunity and put a lot of resources toward blocking this campaign.

That describes what happened on their side. I think it is more telling, what happened on our side [labor]. Our leaders, when planning this campaign, did not listen to the suggestion of leaders on the ground in GEO and in general on campus. We were internally divided. That made it easier for the Mackinac Center to pick us apart and stop the momentum we had while out talking to hundreds of researchers like yourself.

You eventually left. What happened?

Unions are great at the local level. But, as they get bigger, the organizational structure mirrors the organizations they are meant to regulate or keep in check. I didn’t want to compromise my organizing style in order to get a paycheck. I decided that the work needed to be done was the work for which there is no paycheck.

I had been teaching at UM School of Social Work in Winter 2012. I continued on as a lecturer there and at EMU until December 2013.

I am currently unemployed, but doing the work for which there is no paycheck.
[MISSION]

What’s up with your radio career? How does radio figure in to your worldview as champion of the poor and marginalized?

You are very kind to call it a career :)
How does it figure in? Well, I grew tired of complaining about the media and decided to become a part of it instead. Viva Jello!

What’s up for the future?

1) Kicking ass for the working class!
2) Getting a job with a paycheck.

What I’m reading now March 23, 2014

Well, it should really be, what I was reading two weeks ago, but… details, details….

TOEThe Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor Generally speaking, I like Bill Easterly’s views on aid and development. Easterly questions traditional models of development, arguing that top down strategies which rely on purely technical solutions rarely work, and often do more harm than good. Here, Easterly again makes the argument that the development world is full of bumbling technocrats, who fail to see the simplicity of the real problem of African development.

Note, however, that I do not share the views of uninformed cynics, which laugh at the “folly of development” and the evils of foreign aid indiscriminately. Easterly is often propped up by cynical opponents of foreign aid as a spokesperson for why we shouldn’t be given money to poor people, or by Ron Paul style non-interventionists who are quick to dismiss anything the United States does outside it’s borders, not to suggest at all that the United States alone is responsible for development. To me, and call me stupid, the issue is far too complex to boil down to a black and white view of a few self satisfied cynics. Debates over what works and what doesn’t work in development are far more interesting to me than debates of whether development is “good” or “bad.” But… I digress…

Easterly argues that what’s missing from the picture is the guarantee of true democratic rights, that is, legal restrictions on the powers of government. The reason democracy is faulty in Africa, is that most African governments equate democracy with merely having elections, when, in fact, democracy is a function of checks on the ability of government to stifle opposition and the guarantee that citizens are fully protected under the law. He is absolutely right. The structures of African governments (in general) were initially constructed to support a colonial model, which guaranteed that power would be held by a privileged (white) few. However, post-independence, few governments have made substantive changes to the ways in which they govern, despite having had, in most cases, nearly 50 years to do so. Easterly lays blame with development organizations, which offer highly technical solutions to basic problems, but are weak-kneed in demanding that governments work to guarantee basic rights to their citizens.

While I agree that democracy is about more than just having elections, and agree that basic rights must be guaranteed in order to have a free state, I wonder if he gets so caught up in the grand academic thought process, and misses some of the details. His treatment of Asia is quite limited, for example. There, most governments achieved their developmental goals without guaranteeing the rights of citizens and sometime achieved them under incredibly authoritarian and sometimes brutal one party systems. While I don’t think that the end of development is worth the means of authoritarian brutality, it must be pointed out that many governments (for example, South Korea and Taiwan) only loosened their grip after they had an educated middle class which demanded increased freedoms and rights (see the work of Ha-Joong Chang and Joe Stiglitz for a reasonable treatment of the subject). While Africa and Asia are two very different places, any discussion of development has to include both.

Easterly makes me feel good, though, in his preface. Mentioning anywhere that markets are good things in a discussion of development will have one branded as a rabid right winger, which is just a pathetically myopic view (or merely a by-product of total ignorance). The tired argument of market vs state which dominates political discussions in the US (and elsewhere) is merely a distraction from the real argument we should be having, which is over rights vs. non-rights. Are rights being protected or not? Is there proper representation or not? You can have any type of free market system you like or even a heavy welfare state, but if the guarantee of basic rights to free speech, assembly, expression and representation aren’t there, you don’t have a democracy and you probably don’t have continued development of the type that matters most.

But, I’m not a political scientist, and could easily rant on aimlessly for hours to no end whatsoever.

Politics in West Africa – Sir Arthur Lewis (1965) - Sir Arthur Lewis was a Nobel Prize winning economist from St. Lucia. He wrote this fantastic little book on the state of West African politics following independence in 1965. It’s just as relevant now as it was back then. His scathing criticism of authoritarian African governments and the multitude of missed opportunities for development for African countries were both timely and eerily prophetic. I’m particularly drawn to his criticism of viewing Africa through a Marxist lens, pointing out that, outside of a few foreign corporations, there are few true capitalists and that the plentiful nature of land compromises efforts to commodify it, and thus create a European style, class based system. He also points out the problems with the one party state, pointing out that the one party state was often created by force following independence, rather than consensus. In fact, the nature of the independence movements themselves compromised the creation of true constitutional democracies, which guarantee the rights of the minority. Independence movements were created to topple minority rule. Great book.

ATSAgainst the State: Politics and Social Protest in Japans I can’t put this book down. An excellent account of the fight to stop the building of Narita airport in the 1960′s, the implications of which were more than merely a struggle of some farmers unwilling to part with land. The struggle for Sanrizuka was a culmination of the coalescence of a wide variety of actors, many of which had little in common ideologically, reacting to an ever disconnected state. Apter rightly points out that despite strict rules on social behavior and self-control, Japan’s history is filled with examples of social change brought about not through discussion, but incredible and coordinated violence.

VOFCThe Violence of Financial Capitalism (Semiotext(e) / Intervention Series) I bought this book thinking it might be an interesting perspective on the financial crash and the events which followed it. I was somehow let down to find that the book didn’t really live up to it’s striking title. Marazzi views the crash as not an aberration, but rather another aspect of capital accumulation by financial elites, a tool of undermining labor and a method of creating conditions of social change which benefits a minority of privileged individuals. While I don’t really argue that these things didn’t (aren’t) occurring, the treatment of the subject was far too academic and disconnected for me to get behind. It is possible that I’m just not well informed on the particular academic perspective of this author. I will have to read it again.

Branko Milanovic weighs in on global inequality

Which isn’t suprising, given that’s what he does for a living. The NYT this morning had an interesting interview with Milanovic this morning, where he discussed issues of inequality both within and between countries, globalization, national policy and the simultaneous rise of a global economic elite and growing populism around the world.

The context here is that while inequality is rising in wealthy countries like the United States, on a global level, inequality in incomes and lifestyles is shrinking quickly, most due to the rise of China and India.

Inequality calculated among all individuals in the world, as if they were part of one single nation, has been edging slightly downward over the past 10 to 15 years, mostly thanks to very high growth rates in China and India. These relatively poor giants (particularly India) have pulled quite a lot of people out of poverty and into something that can be called “the global middle class.”

That is the key factor behind the decline of global inequality: The distance between their incomes and the rather stagnant incomes of the middle class in rich countries has diminished. Yet global inequality is still extremely high by the standards of any single country. It is, for example, significantly higher than inequality in South Africa, which is the most unequal country in the world.

Obviously, we still have work to do. Many African countries, due to an unfortunate poor hand of geography, internal ethnic struggles and an unforgivable failure of government still sit in the same mess they sat in around the time of independence. For these countries, the future continues to look bleak.

The contrast is between a globalized economy that largely determines our employment and income level, and political systems that remain national. This contrast was not nearly as strong before the 1980s, when national economies were not as interdependent and capital could not flow easily across the borders. Then, countries could more or less design the economic policies that suited them. Today this is no longer the case.

The danger is that these dynamics could lead to populism — a sort of a Luddite reaction against globalization — or to plutocratic rule. We can already see some hints of the latter. Rule of the rich would ensure the continuation of globalization, but it would deprive political democracy of any meaning. If I wanted to be somewhat melodramatic, I would have said that the challenge is to navigate between the Scylla of populism, which would do away with globalization, and the Charybdis of plutocracy. Our defining challenge is how to maintain both globalization and meaningful national democratic systems.

I fear the erosion of political rights of low and middle class citizens that has occurred in the context of rising inequality. I believe that I fear populism and it’s myopic focus on short term solutions to complex problems even more. A response to rising inequality in the US or Europe is not to close the borders or embark on destructive protectionist policies which benefit only a small minority of people.

My feeling is that domestic (US) inequality is best handled through re-distributional policies such as income subsidies, the provision of health care and investments in education and infrastructure. International inequality should be attacked through a combined effort to increase opportunities of movement of people to areas which present economic opportunities, through the encouragement of policies of good governance which reduce onerous and bureaucratic restrictions on economic development within developing countries, an increase in access to capital by individuals and policies which encourage the granting of true democratic rights and protection for citizens, something we don’t see a whole lot of in African countries. Looking at this, I’m realizing the solutions to inequality in in wealthy countries seem much easier to implement.

Development as a faith-based activity: the role of the RCT in alleviating poverty

DSC_0060The essence of epidemiologic field trials is the RCT (randomized control trial). A random set of people get some sort of treatment (like a new drug), another random set of people don’t and we compare the results. It’s pretty simple stuff.

The trouble with RCTs is that they don’t necessarily work well when people from the two groups are able to influence each other’s outcomes. As a simple example, a trial of a vaccine which prevents people from getting infected with some pathogen might have impacts on people who don’t get the vaccine, since the number of opportunities for transmission are reduced. This is a welcome outcome (and may even be the point of the study), but it doesn’t help us to understand exactly how effective the vaccine is in the individuals who actually receive the vaccine.

Many RCTs make the (flawed) assumption that individuals are independent entities, following a long tradition of statistical analysis. This is a reasonable assumption to make in some cases, but entirely wrong in others (i.e. most public health outcomes).

Development economists have recently adopted the RCT as a means of evaluating the effectiveness of programs intended to relieve poverty or improve human well-being. On the surface, there’s nothing wrong with adopted public health methods to deal with economic problems, as most public health problems have their roots in economics. Jeff Sachs, or course, would argue that many economic problems have their roots in public health problems.

The major problem with RCTs is that while we do our best to control for all of the possible other factors that might impact outcomes given a particular treatment, without a trove of detailed data and prior knowledge of context and contingencies, we really have no idea at all whether and how some public health intervention works. Epidemiology tends to fall back on the “reasonable suspicion” argument, backing up claims of effectiveness with potentially reasonable assumptions of causal pathways. This is clearly quite easy when doing drug trials, where animals models and a century-plus of medical research has given us a reasonably clear pictures of the pathophysiological pathways that might lie between drug and outcome.

But with issues of human behavior and economics (which is essentially a science which seeks to uncover mysteries of human behavior), the causal pathways are much more difficult to assess and the factors which lie between intervention and outcome are for more difficult to measure. For example, assessing the outcome of an education program on reproductive behavior is really, really difficult without monitoring all of the possible things that happened between the time that a woman attended an NGO sponsored event at a clinic and the time when she chose to use or not use a condom. In fact, we can’t even really verify that she used the condom, since we weren’t around to observe it.

But we assume, and assume to the point of falling back to faith that our efforts did what we intended them to do.

Lant Pritchett, a Harvard economist that I’m a great fan of for his work on economic measurement in developing countries, penned an interesting article on the website of the Center for Global Development seemingly questioning the merit of the RCT as an rigorous and necessary evaluation tool for poverty alleviation development programs.

First of all, the argument that RCTs had, until recently, been used sparingly, if at all, and yet are important in achieving good outcomes sits in kind of embarrassing counterpoint with the obvious fact that lots of countries have really good outcomes. That is whether one uses the Human Development Index or the OECD Better Life Index or any social indicator—from poverty to education to health to life satisfaction—there is a similar set of countries near the top. (In the HDI the top five are Norway, Australia, USA, Netherlands, and Germany. In the OECD Better Life Index they are Australia, Sweden, Canada, Norway, and Switzerland.) No one has ever made the arguments that these countries are developed and prosperous because they used rigorous evidence—much less RCTs—in formulating policy and programs. While one might have faith that RCTs can help along the path to development, RCTs didn’t help for those that are there now.

It is very true that development in the United States occurred without the help of RCTs. In fact, malaria elimination in the United States occurred without any of the complex set of interventions that we’re so desperately selling to malaria-endemic countries. It’s even true that, despite more than a decade of research on ITNs, that we aren’t really sure whether the declines in malaria that we’ve seen all over Sub-Saharan Africa are due to ITNs or just simply due to processes associated with urbanization and development (as in the US). Actually, a lot of research is telling us that the declines in malaria might be false and that we are simply suffering from a paucity of accurate measurement in malaria endemic countries.

And this is where Pritchett comes in. He’s right. Research in developing countries is inherently challenging to the point where the conclusions we draw from research are somewhat contentious at best, and the result of blind faith at worst.

But coarse and incomplete data and loose assumptions shouldn’t discourage public health (or even economic) professionals from doing research in developing countries. While I have issues with the condescending, neo-classical nature of RCTs in economics (another discussion, but can a peasant lady’s behavior in Western Kenya be reduced to that of Homo economicus? ), the truth is that policy makers don’t care about data. They care that people are making the case for action in an impassioned and convincing way. While academics should strive to be as rigorous as possible, the sell won’t happen based on our complex data collection strategies and statistical methodologies. They (and the public) are convinced through impassioned calls for action.

Financial woes fuel Brucella outbreak in Northern Cyprus

Brucellosis hotspot?

Brucellosis hotspot?

Cyprus made the news a while ago because of its crushing debt crisis requiring a 10 billion Euro bailout.

Less known is that Cyprus is actually two countries, one of which is Northern Cyprus, which is only recognized by Turkey. It’s safe to say, though, that Northern Cyprus’ financial health is deeply connected to that of Cyprus’.

Northern Cyprus apparently doesn’t have enough money in it’s budget to adequately monitor, test and deal with an rapidly spreading outbreak of Brucellosis among its livestock because of the Cypriot financial collapse.

Brucella is a nasty bacterial disease which I’ve written on before which includes outcomes such as fever, malaise, miscarriage, chronic arthritis and heart disease, depression, mania and death. It can infect all mammals and is highly transmissible; any contact with a bacterium will result in infection. Though only one case of human to human transmission has ever been recorded (sexual transmission), Brucella is well known as a public health threat to people who work with livestock.

Brucella is ranked among the most economically important zoonotic diseases globally, and presents threats to humans, animals and wildlife.

The chairman of the union of livestock producers, Mustafa Naimoglulari, confirmed that the brucellosis microbe has been discovered at 60 farms and criticized the authorities for not launching a fight against the disease.

He said that blood should have been taken from the animals for analysis in order to establish which of them are contaminated.

In statements to Kibris, the official responsible for agriculture in TRNC, Onder Sennaroglu said that they have taken money from UNOPS to deal with the issue, but they could not eliminate brucellosis.

He noted that he knows that money should not be an excuse, but the cost of this issue is very high. “I have to say that resources are needed, and we have no resources at the moment,” he admitted, adding that they have applied to the EU for money.

The Cypriot financial crisis has its roots in the US subprime mortgage crisis. In fact, the pattern of the precentage of debt to GDP of Cyprus follows that of the Eurozone, but rapidly increases after 2012, where the EU flattened out. Cyprus previously relied heavily on a tourism fueled real estate bubble in addition to revenues from tourism itself. As debt went bad in the US and the Eurozone, debt went bad in Cyprus. Having no other sectors to depend on, the Cypriot economy collapsed.

Now, we are seeing that the financial collapse and the loss of government revenues to support public health efforts and having deleterious effects on animal and, likely, human health.

Why can’t Africa grow?

I’m reading an article on African firms and why they don’t seem to grow.

There is an urgent need for job creation in Africa yet something seems to be stunting firm growth. This column shows that African firms are about 20% smaller than their counterparts in other locations. It suggests small firms put the brake on growth as the burden of dealing with government and labour costs may increase with size, or perhaps as they start facing trust issues between managers and workers.

Wow. This pretty much sums it up. African business can’t grow because of onerous regulation, corruption and a general problem of too many people wanting too much of the pie.

I wondered for a while why ladies selling bags of rice, for example, might choose to sell the same rice right next to one another for the exact same price to the exact same market. All of them would make much more money and market prices would be much lower and more competitive if a few of them would band together and form multi-lady shops. I thought it might be because the ladies don’t trust one another to enter such a relationship, but I’m thinking that raising the profile of an enterprise might invite all kinds of new and expensive problems. It still might be true that the ladies don’t trust one another, however.

The overall price level in Africa could also be a factor in determining the size of firms (Gelb et al. 2013). Relative to low-income comparators like Bangladesh, Vietnam and also India, African countries are considerably more costly. In absolute terms, and excluding South Africa as a middle-income country, the average purchasing power parity for a sample of African countries is about 20% higher than the average for the four poorest comparators (Bangladesh, Indonesia, Philippines and Vietnam). Africa’s higher costs may result in a lower level of competitiveness and consequently, in a distribution of firms that is different (smaller) than distributions in other countries. African firms may also face a steeper labour cost curve; as firms become larger and more productive, their labour costs increase more in other regions of the world.

Africa is just about one of the most expensive places to do just about anything, simply because you have to do and provide so much on your own. Our research activities come at incredible expense despite the fact that labor is far, far cheaper. If you need power, you have to figure a way to deliver it yourself. If you need skills, you have to pay to train up people to perform the duties you need. If you need supplies, you have to order them from overseas since very little of what you need is manufactured on the continent.

Next, I’m looking at the graphic below and seeing that Africa only spends about .8% of all worldwide R&D dollars, despite housing a sixth of the world’s population and even including South and North Africa.

RD

What I’m Reading Now

GodwinThe Fear: Robert Mugabe and the Martyrdom of Zimbabwe It will be a great day for the world when Robert Mugabe dies. His reign over Zimbabwe has been disastrous for the country. Once known as the “breadbasket of Africa,” it is now known as a governmental basket case of seemingly inconceivable proportions.

Godwin travelled to his home country of Zimbabwe at great risk during the 2008 Presidential elections. He documents, in a literary style a pattern of voter intimidation and unfathomed violence by Mugabe and his ZANU-PF party. The profiles of torture victims, some of whom are Parliament members and high profile party members of the opposition MDC party, are gut wrenching. While it’s hard to doubt the lengths that Mugabe would go to to maintain power, the zeal with which his supporters violate basic standards of morality is mind-boggling.

Most interesting is Roy Bennett, a white Zimbabwean former Parliament member who once justifiably physically assaulted another MP during session. Despite being beaten, tortured, humiliated, having his farm ripped violently from him during Mugabe’s land redistribution scheme and despite even having his wife beaten so badly that she lost the child, Bennett fights on for Zimbabwe’s freedom and maintain an amazingly high level of public support. Bennett eventually becomes pegged to be the Minister of Agriculture under a power sharing scheme, directly undercutting Mugabe’s racist narrative which helps keep him in power.

Godwin pulls no punches in “the Fear,” but at times the violence and inhumanity are so extreme as to be somewhat implausible. I don’t doubt the accounts of torture and targeted beatings he lists here. There are so many episodes and the nature of the violence so extreme, that even if the book were 90% lies, the situation would be one of the worst on the planet.

The book, however, is more saddening than revolting. How an educated and well endowed country like Zimbabwe, which was so full of potential following independence could sink to such low depths is not only perplexing, but thoroughly depressing. An excellent read. (BUY HERE)

JunkyardPlanetJunkyard Planet: Travels in the Billion-Dollar Trash Trade A son of a junkyard owner grows up and decides to be a journalist, then goes back to the family scrap business, then writes a fantastic book about the history and current state of the worldwide junk trade.

I remember when recycling became a part of American life, but it was sold as a new phenomenon. Americans were portrayed as living a wasteful existence before recycling campaigns, throwing otherwise useful items into landfills to be buried and forgotten. Minter digs deep into the history of scrap in the US, noting that during the Depression, many people made good livings pulling and sorting trash and selling whatever was useful to whoever was willing to buy it.

The problem, apparently, isn’t in recycling or the willingness of business to reuse goods, but the costs of sorting and resorting, a problem which requires innovation. Minter points out that many innovations in recycling come from the bottom. Those willing to brave the junk heap to find gold are the most motivated to find new and efficient methods of extracting it. Even more challenging is the volatility of commoditiy prices and the sudden changes in demand for specific substances or components. The trade requires a speedy willingness to adapt, a quick sense of what buyers want and a collection of connections to link them to supply. It’s a cutthroat, though exciting business.

Though the domestic recycling and scrapping industry is a multi-billion dollar business. Now, the economics of junk span the entire glove. China, with its large supply of cheap and efficient labor has taken on a good portion of the scrap world. Minter addresses the potential hazards of scrap, much of which is sorted by hand under minimal regulation, but notes that the work is consistent and offers a way out for a lot of rural Chinese already living under squalid conditions. His easy to read assessment of the global junk trade is as much a story of the potential hazards of globalization and first world consumption as it is a celebration of the ingenuity of the bottom to offer market based solutions to the problems of potentially increasing scarcity of certain commodities. (BUY HERE).

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