Thursday, January 28, 2010

Who should tell us what we can wear?

Tesco bans shoppers in pyjamas 'to avoid causing offense to other shoppers'.

There is a precendent: Hoodies are banned in some UK shopping centres.

How different is this from the proposed Burka ban in France? In all cases individual freedom of dress is being reduced because other people feel a negative externality (for different reasons).

Since it seems to be a good day for BBC links, here is something we can all be relieved about: Two enemies of God have been executed in Iran. Phew! I'm sure he can breath more easily now.

I've got a new article out!

It's entitled 'Do shocks have a persistent impact on consumption' and it is published in Progress in Development Studies.

The abstract is below:

This article uses rural Malawian data to study the long-run impact of two household shocks (sickness and death) and two community shocks (floods and drought) on household per capita consumption. Little work has been done in this area, but understanding these shocks and the extent to which households can insulate themselves against these shocks is important in understanding how households in developing countries remain in a poverty trap. Results indicate that drought and sickness have negative short-term effects on consumption level, but do not have significant long-run effects. This suggests that rural Malawian households are able to shield themselves from the persistent negative impacts ofthese shocks on consumption levels but are unable to self-insure against the short-run impact.

The full article is only about 5 pages long and can be accessed HERE. A working paper version is available HERE.

Hayek vs Keynes Rap

"Fear the boom and bust cycle". A great rap about two great economists and if you listen carefully it even summarises pretty accurately their work.

(Hat tip to JK)

Tuesday, January 19, 2010

Lesotho service quality (and poverty)

A couple of days ago, I got a phone call from Telecom Lesotho. They reminded me that I had come in and asked for a telephone line and broadband internet line to my house. It was good that they reminded me because I came to ask them first over one year ago! Over the following months, I repeatedly went to them to ask about the situation and always got told that it would happen soon. I abandoned and now use only a mobile and 3G internet from their rivals, Vodacom.

The link to poverty? Essentially you are poor if you don't consume very much. You don't consume very much if you don't produce much for yourself or you don't produce much to swap with other people. There might be lots of (good and bad) reasons (mostly due to incentives, if you are an economist) why you might not produce much, but the basic fact remains, you are poor because you are unproductive.

Why is so much of the world's wealth in northern America and Europe? Because that is where the wealth is produced.

Telecom Lesotho have made the country poorer by producing less than they should have - there is less to consume for everyone.

I continually have bad service in Lesotho. By that I mean people who don't produce very good service for other people. That bad service means they do less for other people. In return, they receive less from other people (in the form of lower wages) than they would have otherwise. You see the cycle. No one produces much for anyone else and receives less from everyone else in exchange. The country is poorer as a result (everyone consumes less because they produce less).

How to break this cycle is a key role of development economics. Some of it is cultural and some of it is due to incentives. In any case, it is hard to get people to be more productive.

Monday, January 11, 2010

Another example of Chavez's stupidity

"Venezuela's President, Hugo Chavez, has said troops will seize control of any business that raise prices in response to the devaluation of its currency. He said there was no reason for prices to go up, and speculators' businesses would be handed over to the workers"

Like Ahmadinejad in Iran, Hugo Chavez is a man on a mission to destroy a country and distract his citizens from the fact by blaming the US for anything and everything.

Here is why this new policy is stupid:

Venezuela's currency (the Bolivar) has been devalued. That means that you need more bolivars to purchase anything from abroad than you needed before. For example, if something cost $10 before, a Venezuelan would have had to pay around 21 bolivars. Now, for the same good, he will have to pay around 26 bolivars. But, in his wisdom, Chavez sees no reason why Venezuelan businesses should raise their prices in response.

If this in enforced, businesses which sell imported goods, or which use imported goods to make products will go bankrupt. This is not very good for the average Venezuelan who will have access to fewer goods produced in his own economy and, since there will be fewer jobs, will not be able to afford imports. It will also make the country even more reliant on oil exports.

This is perfectly reasonable - imports are the product of someone else's hard work and they expect something back from you in exchange - your exports. If you don't produce much for export any more, they won't want to give you their products.

I expect that this will be very good for some of Chavez's pals though who, no doubt, will be excluded in practice from the policy, and benefit from reduced competition.

Ignoring the fact that increasing prices when the price rises in your own currency is, in fact, not in any way 'speculation', what would happen if the evil 'speculators' have their businesses repossessed? If we are generous, we can assume that they really will be placed into the hands of 'the workers'. If we are less generous, we can expect some of Mugabe's - err, I mean Chavez's cronies to get their grubby hands on them. Great.

Now let's imagine Chavez is more stupid than corrupt and that 'the workers' really do start to run the businesses. Do we really expect firms in the hands of those who don't know how to run them to do well? I think not. If it were so easy to make so much money 'in business' many more of us would be running successful businesses. The rate of failure amongst start-ups is pretty high - and a lot of that is down to inexperience in running a business. Even amongst the large firms, very few survive at the top for a long time.

Good luck Venezuela.

Friday, January 8, 2010

Friday links

See all Friday links.

1/ The plan for how to ‘sort out’ Afghanistan. Below is a taster:

(Hat tip: Aidwatch)

2/ You know you’re South African if… but You know you’re pleased you’re NOT South African if… . (I think it’s a little harsh – Zuma looks fantastic and is meant to be an excellent dancer – I love his shoes best.)

3/ What is the value of your time?

4/ Is college worth the money? Some amazing facts about students.

5/ Google blocks negative searches on Islam but not on Christianity. I tried it and it worked for me. Quite scary….

6/ Ethical trading brings advantages to developing country workers. Nice, because this isn’t automatically obvious to me – at least not in the long run.

7/ Eye Movement May Be Key to Retrieve Unconscious Memories

8/ Hospital staff make better decisions using textual information rather than medical charts

9/ A new (old) development idea for the Conservative Party

Tuesday, January 5, 2010

Lesotho farmers pledge to increase productivity in 2010

HERE is an interesting article in which Lesotho farmers state that they will increase production during 2010 because a new milling company has promised them "prices set to influence highest production and sustainable supply".

A farmer said that they "would be inspired to produce more food, adding that their efforts have always been thwarted by lack of market for their produce".

I am sceptical. It seems that the South Africans have never had a problem finding a market here, so why would Basotho farmers?

The only reason I can think of is that South Africans produce food more cheaply than Basotho farmers; it is perfectly reasonable that, given tight budgets, people and firms prefer to purchase cheaper food.

This new milling company, Nala Milling, is presumably prepared to pay above the odds for grain produced in Lesotho (like Hovis in the UK). They might feel that the supply is more reliable, and, if this is true, it would be a reasonable policy. I suspect though, that South African grain supply is both cheaper and more reliable.

I also imagine that Nala Milling will have to pass on the costs to their consumers. Unfortunately, the quote by the farmer above suggests Basotho have already shown that they prefer cheaper South African produce to more expensive stuff produced in Lesotho.

The farmer is correct from his perspective though; higher prices will encourage more production. I am concerned though that unnaturally high prices (i.e. those not determined by the market) are not viable in the long run and, when supported through other mechanisms (e.g. Government intervention, or, in this case, firm policy), resources are put to use when they could be better used elsewhere, dampening economic growth and development in the long run. Eventually unnaturally high prices have to crash, sometimes in spectacular style and at great pain to those in the industry.

In the short run, farmers in Leribe Disrict (where Nala is operating) can benefit, but I hope that for their own sake, it is good business practice that is causing Nala to offer high prices and not even more agricultural nationalism to add to the world's woes.

Goalposts in Urinals

Economists do it with models and Nudge write about how flies in urinals in Amsterdam airport (and now adopted all over the world) help guys to improve their aim.

Here is an alternative I spotted in a German pub in Swakopmund in Namibia. Yes, you do see that correctly - it is a soccer goalpost*! I wonder if goalposts can be a better incentive to aim straight than flies for men who like soccer. I wonder if it would work so well for those that prefer other sports? An idea for an empirical paper anyone?

* The owners were fans of Hansa Rostock, if you are interested.

Monday, January 4, 2010

The exact height of the world's tallest building...

... is a secret. Why?

See this BBC News story.

Mixed Race Dating in Namibia

Namibia has a fairly large white and 'coloured' (mixed race) minority and has gone through similar (if to a lesser extent) situation as South Africa with regards to white political dominance.

Many of the guest houses/lodges are owned by whites (of German or Afrikaaner origin) and in one of them, we sat and had a few drinks with the owner's 21 year old son. I asked him whether it would be okay for him to date a black girl. He said no, not at all. The reason he could not, he said, is that he would face a lot of taunts and disapproval from his (white and coloured*) friends and his (white) family**.

I asked if he could date a coloured girl. Sure, he said, no problem. Although when I questioned him more, he thought that 10 years ago, it would have been difficult. It would be easy to take a negative from this but for me, I see progress (albeit from a bad situation). I hope that in the future, things get even better.

* Interestingly, he said that mixed race and Indians were the same to him and actually went as far as claiming not to be able to distinguish between them (which surprised me somewhat).

** It would make no difference, apparently, if she were 'really hot' (economists have to cover all the angles:)).

Sunday, January 3, 2010

The Wonderful Namibian Police

I've blogged about South African police before (here and here). Overall, I am highly impressed with them; I find them professional and courteous and, considering the pretty high crime rate and the risks they may face, amazingly friendly and civilised.

I have now become a fan of the Namibian police too. We were driving without a front licence plate because it looked like it could fall off at any moment. The traffic police stopped us and informed us that we should "make a plan" to fit it back on, or else "the traffic police will stop you".

The immediate response is, of course, "but you are..." before you trail off and thank the officer very much for their help and drive away.