Wednesday, March 31, 2010

Where are you?

Here is where the last 500 visitors to this blog were:

Friday links

I'm away for a well-deserved break in Cape Town (although I do say it myself :) ) so here are some really interesting links for the week. It's a good'un this week I think :)

1/ Geek Venn

2/ Why corrupt governments may receive more foreign aid. An academic paper.

3/ Do animals commit suicide: A scientific debate. And HERE is a nice video lecture on what makes human beings different from other animals. "You and me baby ain't nothing but mammals..."

4/ If the top is sclerotic maybe entrepreneurs are dynamic enough to lead development. (Here, here.)

5/ HIV prevalence in South African universities

6/ An excellent example of price discrimination

"At first glance this seems weird, they are charging different prices for the same thing!!! However, as anyone with experience of vending machines and universities knows, these puppies provide a lot of service to students late at night. In fact, it is typical for sections of the machine to sell out before nightfall.

As we know that the first people to the machine will pay the lower price, we can also say that once the cheap chips sell people will have to pay more.

Now, given that the local tuck shop will be closed by night time we know that the number of substitutes to the vending machine falls at night. As a result, this pricing system ensures that the owner of the vending machine can charge more for the same chips at night time (assuming of course that the cheaper chips will sell out during the day time when substitutes are available) – when people value them more highly and are willing to pay more.

Excellent stuff."

7/ Optimal structures for ministries of finance.

8/ Is there a way to stop subway bombings?

9/ Someone's trying to stop Julius Malema acting like an unhelpful idiot... Good luck...

10/ Interesting and well-written essay on Delhi. (HT: AS)

Political beliefs from dating websites

THIS is an amazing and excellent summary of how social and economic beliefs change with age using evidence from dating websites (HT: Chartporn)

Sunday, March 28, 2010

Why would footballers drop down a league?

I am happy to report that my football team was in our first cup final since 2003 today, and won our first piece of silverware since 1976 (and therefore the first in my life).

Despite our GLORIOUS WIN, I started to question some of the commentators' comments. Firstly, we have been relegated twice in the last few seasons and we very nearly bankrupt just a year ago (we actually started the current season with negative 10 points for going into administration). Thankfully we were bought by a rather rich man, who has pumped a lot of money into the club.

We have been able to sign many of the division's best players and a good number of players from the division above. Our manager also came down a few divisions when he probably didn't have to. The commentators (Saints fans) talk about how amazing it is that players have come down a division or two to play for us (or not moved to a team in a higher league) and how much they must therefore love the club.

I'm not so sure. I think that several factors might influence a player who has the choice who to play for. One is, to be fair, a genuine loyalty (Kelvin Davis, our goalkeeper probably falls into this category - although the fact that he is settled in the town with children in school also presumably influences him). But other things matter too.

Firstly, the ambition of the club matters. Maybe a player will drop a division because he feels that in the future, he will be a part of a club with a vision, and will ultimately play in a higher division. These players will leave if success does not happen. These players must also feel that they are able to play at a higher level and that Southampton will propel them to play at an even higher level. I am worried because I suspect that this is important for a number of our very good new signings (who wouldn't want to do as best they can in their chosen career?) and I don't think we will get promoted this season. I hope that we can hold onto these players because I feel 99% confident that we will win promotion next year if we do.

Secondly the pay of the players matter. Despite all the wonderful words of the commentators, I think that many players were attracted to the club by a large pay rise - even compared to what they would have earned in the division above. I wonder how much this counts. What does it matter for these players if success doesn't come - so long as they can easily move away in a year or so, they would have earned a lot of money and can resume their careers with other clubs afterwards?

Of course, (2) and (3) probably count for all players, and I hope that as time goes on (2) and (1 - club loyalty) start to count more even if the money was most important to begin with. That way we will forge a highly successful club.


THIS is perhaps my favourite ever Economics paper. It has no equations, no econometrics, no mathematical models and not even any references. It was published in 1945.

Radford was a prisoner in a camp in the Second World War, and like every good economist who wants to learn economics from every-day life and then apply it back to the real world, he beautifully analyses camp life from the economic perspective.

I have used this paper regularly in classes because it contains so much of what is important in economics:

From this paper, I can understand
- the importance and use of money (rather than bartering) and the characteristics money must have (cigarettes versus paper money)
- how money backed by something with value (real or imagined) works
- how a central bank might work
- how supply and demand change the price
- the effect of supply shocks (when UN parcels arrive each week)
- how different people have different time preference for consumption and therefore (who will save their red cross parcel food and sell it for a higher price towards the end of the week)
- how interest might work as the price of forfeiting current consumption in favour of future consumption
- how insider knowledge can impact on profit-making (e.g. speaking Urdu/Hindi allows for trade with Indian prisoners)
- how preferences of different groups effect the prices of different goods (coffee is expensive in the French sector of the camp but tea is in the British sector)
I can even re-create Keynes's IS-LM curves from the paper!

THIS YOUNG ECONOMIST is doing an amazing job of making economics more accessible with a series of really interesting talks on youtube on economics. JODI BEGG also regularly puts some excellent classes on the internet. I strongly recommend watching some of these for anyone interested in learning more about economics.

Friday, March 26, 2010

Friday links

1/ The spaghetti bowl of African regional integration

2/ Harnessing the power of business for development impact

3/ If economists ran the schools

4/ The economics of cheating

5/ Food in pictures of the last supper keeps on getting bigger.

The last thousand years have witnessed dramatic increases in the production, availability, safety, abundance and affordability of food. “We think that as art imitates life, these changes have been reflected in paintings of history’s most famous dinner.” The main meals grew 69% and plate size 66% between the oldest (carried out in 1000AD) and most recent (1700s) paintings. Bread size grew by about 23%. The sharpest increases were seen in paintings completed after 1500 and up to 1900AD.

6/ Where in America do bars outnumber grocery stores?

7/ Government spending and happiness. I really like this. There is an n-shaped relationship. It basically says that as Government (think of it as 'community') spending increases so does average happiness of a country. But after a certain point, happiness declines; people can better use their resources for themselves. I've not read the paper, and can think of a number of issues, but I like the idea.

8/ Are baseball umpires racist? (HT Neuroworld). Apparently, yes, a little bit. "[C]ontrolling for umpire, pitcher, batter and catcher fixed effects and many other factors, strikes are more likely to be called if the umpire and pitcher match race/ethnicity"

9/ Decline in life expectancy in Lesotho. I like and agree with this comment left when I posted this link on my Facebook wall:
"I don't get this article. Isn't HIV and TB necessarily connected. In countries with through the roof prevalence of HIV you will be default have high TB prevalence because that simply how you die of AIDS. You will not die because of AIDS but rather because your immune system is so weak that TB is easy to contract and impossible to defend. So there is no 'new lethal' combination but the normal for countries like Lesotho with HIV prevalence of 25"

Friday, March 19, 2010

Friday links

1/ Condoms for the World Cup and other ways to keep HIV at bay
2/ Dan Ariely on Placebos (I've reviewed Dan Ariely's book, Predictably Irrational: The Hidden Forces that Shape our Decision HERE).
3/ North Korean Finance Chief executed for botched currency reform. Don't worry - it's their culture!
4/ The Economics of Sainthood - Pope's seem to experience Saint-making fatigue!
5/ Two armies, one island; one fights, one retreats - or does it? Game theory and bridge burning.
6/ Randomness and God. O, how easy humans are to manipulate...

Randomised Controlled Trials

I am a big fan, and so, it seems, is Tim Hartford (aka The Undercover Economist).

Friday, March 12, 2010

State and private sector ownership of utilities

This week’s Lesotho Business reports that the Lesotho Water and Sewerage Authority (WASA) may soon change its parastatal status to become a company. It will be regulated by Government but the public will be able to buy shares “and thus fund the company”.

The Chair of the Natural Resources Committee is reported as saying that “water is a basic need and thus cannot be put into private hands that may increase prices if they want”.

I disagree on several counts.

1/ A “basic need” cannot be in private hands. This is entirely the wrong way to look at things. Food is a basic need but few people seem to feel that the public’s food needs would be better served if all production and manufacturing was placed in state hands. The correct question to ask is ‘what is the best way to provide the public with water?’ The answer is clearly subjective but there is no reason to rule out the private sector without any consideration.

The private sector may provide additional investment which would actually allow more people to access water. If it is motivated by profit rather than petty bureaucracy, it can have an incentive to prevent wastage of water through, for example, leaks. This might actually allow the price to decrease or, again, more water to be provided to more people.

2/ That may increase prices if they want. The private sector can raise prices. But so can the Government. Firstly, a private sector firm can be regulated by a Government authority. Price increases can therefore be approved by Government. Thus, a private utility firm can be limited in its price rises, as happens in much of the world. In a competitive environment, the private sector is limited in its price rises by demand from consumers and competition. Note that food prices are not unlimited despite this being a ‘basic need’.

Even acknowledging that the private sector might raise prices more than a state owned firm, higher prices can be desirable. For example, they might hurt in the short run, but allow more investment into the sector and actually allow more people to access clean drinking water in the longer run. Higher prices can actually therefore be seen as more humane.

Secondly, prices which are set too low can encourage wasted water. It hardly seems fair that poor tax payers money are subsidising the wastage of water by rich consumers (and firms). I, at least, have no problem in increasing water prices under the right circumstances.

Thursday, March 11, 2010

Friday links (on Thursday)


1/ Google have a new Public Data Explorer. Looks like it might be great for academics, students, NGOs or as an alternative to surfing Wikipedia at work. (HT: Social Science Statistics Blog)

2/ The US state department apologises because some crazy guy there criticised Gadaffi's call for jihad against Swizerland. WTF? The State Dept's response was more than merited and I would have gone even further - perhaps even sending a 'strongly worded letter' to the Libyan dictator. Unless, that is, I wanted to drill for oil there...

3/ Cheese from human breast milk. Um, no comment...

4/ Should Africa ban second-hand goods? Have your say.

5/ Religion in the brain. I am fascinated by religion - it is crazy and amazing. All of them. I love the incredible beliefs (yes, that's 'incredible beliefs' - think about it) and I find the social and political consequences amazing. I *love* research on religion from a scientific stand-point.

5/ They can't read, write, keep time, or be tidy. Tesco's verdict on school leavers in the UK.

6/ Argentina's claim to the Falkland Islands are neither logical nor valid. I agree. The Argentine Government is bullying the small Falkland Islands.

The Lesotho Government...

... as a whole, does not want me to work for them. I know that because despite working my arse off for a year and a half, I have yet to be dignified with a contract. It feels a little like they are sticking two fingers up at me.

It makes my life just that little bit more difficult that it has to be. The major draw-back is that I cannot have my pay paid directly into my bank account so every month I have to collect a cheque and queue to put it in my bank account. I, of course, try to do this at lunch time, since I don't want to cost the same Government that obliges me to do this any work time.

That is probably stupid of me in the same way as paying someone to get my car tax may be a little stupid. But at least the queues at the bank seem to be shorter at lunch time*.

Thankfully, I know that some parts of the Government do really, really, really want me to work for them. I know that because I had my leave cancelled this week in order to be available in case I am required for the IMF (who are currently in town). I also know this because I have to work this afternoon (a public holiday) and also because nobody seemed to object to the significant** number of weekends and evenings I gave up prior to the Budget in February.

(What does it matter anyway, providing this machine keeps on churning things out?)

* What kind of a crazy person would use their own time to queue at the bank when it is perfectly acceptable to use work time?
** i.e. most of them during the couple of months before.

Tuesday, March 9, 2010

Mercedes is to build buses in Africa

Mercedes is to move production of some buses to South Africa to serve the right-hand drive African market.

I am wondering if it wouldn't be a better idea to move production of the c-class here to serve better the demand from Governments...

Marbles and economics

Back when I was a wee bitty boy I used to play marbles at school. I noticed pretty quickly that the rarest marbles were also worth the most in terms of other marbles.

Of course, like in the real world** scarcity isn't the only thing that determined value. Size did too - probably related to the cost of the marble in the shop, and how beautiful the marble was. (Just as in the real world some things have value because for whatever evolutionary reason, humans are attracted to spangly things.)

I realised one day I could take advantage of the scarcity influence on price and managed to procure from a friend at another school a certain number of a type of marble that had not yet made it to my school***.

I decided that one dark speckled little marble was worth as much as a cyclops (that is what we called the very large marbles, if my memory serves me correctly). From then it was a matter of getting the price socially accepted. It didn't go down very well, but I talked about how rare the marble was and deliberately rationed supply. Some people seemed to accept it and I made as much as I could (as it were) from those people.

I then slowly started to introduce more and more marbles into the 'market', and 'sold' these marbles for less and less. It was both (almost) perfect price discrimination (amongst those who had a different opinion of the 'value'****) and (almost) perfect control of supply which impacted on the price*****.

In the end, the marbles worked their way into the general mix of marbles and the market determined their long-run value. But for that short while I had a monopoly, I made a killing.

I was about 10 years old at the time. A natural economist :)

* This blog entry is inspired by a recent facebook comment by my sister which reminded me of this story.

** And who says my school days were not the real world?

*** I went to a village school as did my friend and with the distance of our schools at a full 4 miles and intra-village communication being discouraged, new technologies took time to travel :)

**** Limited by the non-divisibility of marbles.

*****I could control only the sales of new marbles and not the 'second-hand' market.

Friday, March 5, 2010

Friday links

See all Friday links.

1/ Ten films about love from ten southern African countries. Love - Stories in a time of HIV & AIDS, will tug at your heart strings and stir up your emotions.

2/ Pizza, Guns or Strip Clubs?

3/ The Philosophical Cow Suppose that you are a cow philosopher contemplating the welfare of cows. In the world today there are about 1.3 billion of your compatriots. It would be a fine thing for cows if all cows were well treated and if none were slaughtered for food. Nevertheless, being a clever cow, you understand that it's the demand for beef that brings cows to life. How do you regard such a trade off?

4/Darkness encourages unethical behaviour even when it makes no difference to anonymity

5/ The FT takes a look at
investment in South Africa

Mugabe's 30 years: Have your say.

7/ Do blogs affect African opinion? Have your say.

Tuesday, March 2, 2010

Friday links (in Tuesday)

There are so many interesting links this week, I've made a special Tuesday addition.

See all Friday links.

1/ Zero currency. 5th Pillar, an Indian anti-corruption organisation makes notes worth zero, say, rupees. The idea is that you give them to people who request bribes to indicate that you refuse to participate in corruption. Seems like a nice idea, but I wonder if it is sustainable. (HT: MM)

2/ Why not ban pornography instead (of the burka)? I can see where the viewpoint is coming from and have some sympathy for it. The proposal to ban the burka in France (or, hoodies in UK shopping centres) comes from the fact that some people's clothing can make other people feel uncomfortable for whatever reason. In this case, society feels that it can impose the will of the majority on the minority. It is always a difficult one to call and my opinions lead me both ways on this one. One could argue for a ban on pornography for the same reasons. However, I can't help feeling that this might be the case of each individual society making its own choices...

3/ The economics of placebos for self-remitting diseases.

4/ Agricultural subsidies and food aid can harm at times.

5/ I agree with the Roving Bandit. I am also an advocate of cash transfers and migration.

6/ Crime and mangos in South Africa. Takes a genius to put these two together!

7/ Scholarships for African students.

8/ Economist videographics.

9/ Islamic radicals infiltrate the Labour Party.

African poverty is falling and other interesting new papers

A new paper by Xavier Sala-i-Martin and Maxim Pinkovskiy show that African Poverty is Falling. The paper is also discussed by Tyler Cowen and Brian Caplan.

The conventional wisdom that Africa is not reducing poverty is wrong. Using the methodology of Pinkovskiy and Sala-i-Martin (2009), we estimate income distributions, poverty rates, and inequality and welfare indices for African countries for the period 1970-2006. We show that: (1) African poverty is falling and is falling rapidly; (2) if present trends continue, the poverty Millennium Development Goal of halving the proportion of people with incomes less than one dollar a day will be achieved on time; (3) the growth spurt that began in 1995 decreased African income inequality instead of increasing it; (4) African poverty reduction is remarkably general: it cannot be explained by a large country, or even by a single set of countries possessing some beneficial geographical or historical characteristic. All classes of countries, including those with disadvantageous geography and history, experience reductions in poverty. In particular, poverty fell for both landlocked as well as coastal countries; for mineral-rich as well as mineral-poor countries; for countries with favorable or with unfavorable agriculture; for countries regardless of colonial origin; and for countries with below- or above-median slave exports per capita during the African slave trade.

The impact of AIDS on intergenerational support in South Africa: Evidence from the Cape Area Panel Study

We use panel data collected in metropolitan Cape Town to document the role played by aging parents in caring for the children of children who die. In addition, we quantify the probabilities that older adults and the older adults' children provide financial support to orphaned grandchildren. We find significant transfers of public and private funds to older adults in households with orphans. Perhaps for this reason, we see no difference in expenditure patterns between households with orphans and other older adult households. With respect to older adults' quality of life, we find no effect of reporting that a child died, or of co-residence with orphaned grandchildren, on the older adults' reports of depression, or on their self-assessed health.

Who Should be Interviewed in Surveys of Household Income?

This study tests the null hypothesis that it is sufficient to interview only the household head to obtain accurate information on household income. The results show that using a husband’s estimate of his wife’s income does not produce statistically reliable results for poverty analysis. Estimates of the wife’s income separately provided by the husband and wife agree in only 6 percent of the studied households. This indicates that although limiting interviews to one person can reduce the time and expense of household surveys, this appears to be detrimental to accuracy, and may lead to incorrect conclusions on the determinants of poverty.

The Blessing of Natural Resources

I've written about the natural resource curse before, and also have what I think is quite a nice working paper looking at the impact of natural resources on firms in other sectors.

A new paper talks about the positive side of natural resources. The summary of The Blessing of Natural Resources: A Summary from a Peruvian Goldmine is below:

This paper studies the impact of Yanacocha, a large gold mine in Peru, on the local population. Using annual household data from 1997 to 2006, we nd robust evidence of a positive effect of the mine's demand of local inputs on real income. The effect, an average income increase of 1.7% per 10% additional mine's purchases, is only present in the mine's supply market and surrounding areas. We also nd evidence of improvements on measures of welfare and reduction of poverty. We examine and rule out that our results are driven by increased public expenditure associated to the mining revenue windfall. Using a spatial general equilibrium model, we interpret these results as evidence of net welfare gains generated by the mine's backward linkages and its multiplier effect.

Monday, March 1, 2010

More on the economics of prostitution

I've written about this before in the economics of prostitution and prostitutes as great economists!

HERE is a wonderful little insight into prostitution in Sierra Leone.

(HT: MM)

A great way to stay poor - Or 'Mugabonomics 1001'

You are poor if you are not able to consume many things. You know, things like clean water or food or a roof on your house or basic medication or basic education like learning to read. Life's little luxuries.

If you want to consume these nice things, you have two choices: you can either make them for yourself, or you can make something else and swap.

Either way, to consume, you must produce. Countries that are rich are rich because they produce a lot. That means they are able to consume more.

Mugabe has found another great way to keep his people poor. First, he did his best to take farms away from people who know how to produce food for everybody, and gave them to his friends and family who (shock horror) didn't seem to be able to produce as much food as, say, actual farmers. There was less food for everyone (and obviously, the poor suffer most).

Now, after ensuring that food production lies with people who are not very good at producing food, he wants to ensure that Zim produces even fewer things that they could swap with food. How will he do that? By making sure that every large firm is out of those evil foreign hands. You know, those evil foreign hands that ensure your country produces things - things you can consume or swap with other countries for (say) food (since you can no longer produce enough to feed your people).

I'm sure this time it will be a great success.

Two interesting BBC stories on South Africa

1/ Cape Town Gangs

"Dan McDougall spent four months delving into Cape Town's violent gang culture. He witnessed young men - gangsters and drug addicts - turn to football to try to keep their heads above water. But ultimately, he explains, his journey left him despairing of a broken society, a place where those growing up in the streets and townships of the rainbow nation are prisoners not of apartheid's legacy and race, but of the true blights of modern South Africa - gangs, murder and drugs."

2/Julius Malema: Genius, clown or fat cat?

"He is 28, a little overweight, impeccably dressed, and rather fond of referring to himself with the royal "we". He is also, without doubt, the most divisive, the most ridiculed, and for some, the most alarming public figure in South Africa today."