workers are consumers, too

As the Democratic primary enters its fourth year, it’s as good as time as any to pay heed to the potential pitfalls of government intervention. Sure, it’s easy to see the appeal of the small local grocer and pharmacy over the Wal-mart behemoth. In addition, frustration with the destruction of local jobs, which has accompanied the gale of globalization and technological development, is understandable. But let us not ignore the benefits – and no, I don’t mean benefits that disproportionately benefit the most well-endowed with money and/or brains. Quite the contrary, some benefits concentrate in the lower economic strata, especially lower prices.

A recent article in the Economist documents the increasingly high cost of living in France, even when compared to (21st century) ally Germany: “A basket of identical items costs 30% more in France [than in Germany], says a study by La Tribune, a daily.” Efforts to inject greater competition into the marketplace have been stymied as “voters see competition through the eyes of producers—as a menace to jobs and factories—rather than consumers.”

Would you rather have the ~30 million Americans below the poverty line paying 30%+ for groceries to preserve the inefficient employment of a small subset of that population? The (il)logical conclusion of ‘producer preservation’ can be found in a story (lifted from Bryan Caplan article) about an economist who visits China under Mao Zedong. He sees hundreds of workers building a dam with shovels. He asks: “Why don't they use a mechanical digger?” “That would put people out of work,” replies the foreman. “Oh,” says the economist, “I thought you were making a dam. If it's jobs you want, take away their shovels and give them spoons.”

One of my favorites. Read more!

great leap forward for biblical art

He Qi's paintings conflate the biblical scenes of Michalengelo with the stylings of Picasso and the experience of a child of the Cultural Revolution. Check out his web page here and "read more" if you want to see his take on Moses' flight into Egypt and Jonah and the Whale. (Who doesn't?) If anyone wants to make me happy they can pay Qi to make me a stained glass window...
Read more!

real chance for health care reform

Everyone wants to fix healthcare. McCain likes the market, but his plan for insuring those with pre-existing conditions is somewhat shoddy, and certainly doesn't put your mind at ease if you have a loved one with any sort of debilitating disease. The Dems offer two different flavors of the same lollipop, but won't offer a realistic plan for financing their operations (expiration of Bush tax cuts won't cut it). But did you know there was a reform proposal being debated in Congress that actually passed mustard as budget neutral by Congressional Budget Office? A bipartisan bill that seeks to finally move American health care beyond the employer-based model of the 20th century while upgrading the regulatory infrastructure and providing universal health care?

Sigh, if only we weren't in an election year (or had a ceaseless election cycle), the Wyden-Bennett plan would be getting more attention. Sens. Ron Wyden (D) and Bob Bennett (R) hail from Oregon and Utah, respectively, and yet found enough common ground to rehaul the American health care system:

"Under the Wyden-Bennett system, health dollars would be controlled by the individual (a long-time conservative goal) and used within a restructured, heavily regulated, totally universal, insurance marketplace."

The proposal has six Republicans and six Democrats on board, already making it "the largest bipartisan coalition ever assembled around a concrete piece of universal health-care legislation.
...
The Lewin Group, a highly respected health-care consulting firm, estimates that the plan would save $1.4 trillion over 10 years.

Unlike the proposals being bandied about now, this proposal will actually control cost to some degree -- which is *THE* problem of American health care, while still providing a "minimum standard for comprehensiveness (equivalent to the standard Blue Cross/Blue Shield plan currently offered to members of Congress), and they could not discriminate based on pre-existing conditions, occupation, genetic information, gender or age."

As you might imagine, a legitimate health care reform package is far too massive to relate in its entirety via blog post, so I will once again point you to this article on Health Care's Odd Couple. I have a few questions, but I would support its adoption tomorrow, especially if meant that none of the Presidential candidates' plans were implemented. One Health Affairs article I read directed readers to keep an eye on this proposal, as it has a better chance of being the grand plan for reform than the Presidential plans. I hope so. Read more!

living with cognitive bias

There are few things scarier to an individual than losing the capacity to think. Alzheimer's disease is heart-breaking, as individuals' capacity to mentally engage the world drowns in increasing levels of bewildering uncertainty.

Yet few are concerned with exploring how their own brain works, and how it can be made to work better in hope of inching a few steps closer to the shore of understanding.

I haven't been particularly interested. I knew the cliches about your brain being a muscle, and agreed that even if given all the information in the world, some people just lack in mental chops. I came to equate brainpower with natural ability and hard work. I paid no regard to form -- or working "smart"-- yet anyone who has swam in a pool knows you can have all the ability in the world and splash like crazy, but your achievement depends on your understanding of how you swim.

The natural reaction is panic, an instinct as ill-suited for water as quicksand. This predisposition -- evidence of a more broad cognitive bias -- sabotages one's efforts to swim, and indeed survive.

How these cognitive biases can submarine our thinking, specifically with regards to man's efforts to help others, is the subject of this post.

The story of how I came to focus on cognitive biases may very well be case study #1920812 in their effects. After years of study (in young-people time), I began to recognize a pattern in thinking and policy that failed to heed any liberal/conservative distinction. I tried to isolate the causal variables of this mischievous pattern on the macro level, but failed. The logical disconnects (to use a term I once hated, but alas...) were everywhere.

Not the usual kind either; it wasn't the deliberate misrepresentation of facts or outright lying. It was sincere, complex, intellectual, but also, irrational. In attempting to identify the disease, I managed only to flail wildly at the symptoms, confusing one of my few readers to the point of distraction.

My dad mentioned heuristics and on exploring the topic, I came across cognitive bias. I was aware of the term, but it didn't mean much to me. On reflection, I noted that Bryan Caplan's book, "The Myth of the Rational Voter," dealt with the notion of cognitive biases. Caplan identified four biases, "anti-market, anti-foreign, pessimism, and make-work," which he contended drove individuals to vote irrationally in a systematic (and thereby destructive) manner. Caplan is interested in cognitive bias as an independent and detrimental factor in public choice.

I won't explore these biases directly, as they aren't exactly what I'm interested in. I will explore the role of cognitive biases in "doing good" (I am open to suggestion for a change in scope, however).

Cognitive biases make a boring nemesis for the do-gooder (and by extension, have seen relatively little academic treatment.) It is far more exciting to perceive of the do-gooder as an clever underdog, held back by the selfish and greedy who will one day be undone and the the do-gooder will be free to do the good deed. I will look into how the do-gooder can be his own worst enemy, and how understanding revelant cognitive biases can empower the do-gooder to do "better." Read more!

NOLA -- cutting edge of education

Alex Tabarrok over at MR finds some supporting evidence for the advantage and viability of charter schools and school choice in an unexpected place - New Orleans. With little fanfare, Hurricane Katrina's destruction allowed for a “once-in-a-lifetime opportunity to reinvent public education.”

"Stripped of most of its domain and financing, the Orleans Parish School Board fired all 7,500 of its teachers and support staff, effectively breaking the teachers’ union. And the Bush administration stepped in with millions of dollars for the expansion of charter schools—publicly financed but independently run schools that answer to their own boards. The result was the fastest makeover of an urban school system in American history."

The transformation hasn't turned the kids into Einsteins, but there has been demonstrable improvement in what was an entirely stagnant school district.

"Classes are smaller, many of the teachers are youthful imports brought in by groups like Teach for America, principals have been reshuffled or removed, school-hours remedial programs have been intensified, and after-school programs to help students increased... Mr. Vallas attributed many of the improvements in testing to the new teachers. 'The biggest contributing factor was the quality of the instructors,' he said."

A commenter at MR gets at the crux of the issue:

"Smaller classes. Young, energetic teachers. More remedial programs. More after-school programs. Can't government do this? If the answer is no, why not? If the answer is yes, why hasn't it?"

Those are very fair questions for both sides of the private/public debate. I think the government cannot be relied on to do this because education, especially to low-income kids, is too dynamic for top-down management. No Child Left Behind has highlighted the difficulty in top-down accountability, and the low reported results demonstrate that we have not figured out how to relay even the basic concepts needed for success.

There's a lot of experimentation that needs to be done. Teachers and principals need the flexibility to try different programs, allocate resources differently -- in short, to innovate. There will be success and failure in this process.

I think government programs are ill-suited to support this process, as they are vertically-structured organizations that manage local institutions by ensuring they comply with certain processes, curricula, standards of practice, etc. They inherently stifle innovation and create incentives to stick to established practices, even when the established practice is not providing acceptable results to a large number of students.

I don't think it's necessarily impossible for any government managed school to be innovative or successful. The government (likely state level) might introduce market concepts (increase flexibility and accountability for principals, school choice, etc.) into the government-owned system; this artificial environment could certainly be better than what we have now.

Still, the artificial dynamism will never reproduce the dynamism of the actual market. Just as I would rather hire a consultant to teach me how to improve my business, I would rather have a professional, than a bureaucrat, in charge of teaching my kid how to write complete thoughts. If you don't like how they're doing, you can always hire a different one. Read more!

value of military intervention

Paul Collier is back again with cost-benefit analysis of foreign aid and military invention in conflict areas. The short story is that foreign aid and military intervention can and indeed usually do reduce bloodshed around the world. The invasion of a centrally-controlled and ordered Iraq, Collier notes, is not representative of the usual efficiency and effectiveness of such engagements; "the far more typical scenario is political violence within a small, low-income, low-growth nation burdened with strong ethnic divisions."

Collier begins by arguing that conditions prohibiting military spending of aid packages by host countries is important, as "about 11% of all aid is currently diverted into military spending, which significantly increases the likelihood of violence." The reduction in risk and increase in discretionary cash would allow benefits from aid to more than quadruple costs.

Even still, aid is less cost effective than the use of peacekeeping forces:

“Compared with no deployment, spending $100 million on a peacekeeping initiative reduces the ten-year risk of conflict from around 38% to 16.5%. At $200 million per year, the risk falls further, to around 12.8%. At $500 million, it goes down to 9%, and at $850 million drops to 7.3%.”

This does not include the conflict abatement that occurs because the belligerents know that well-armed, well-trained troops will be dispatched if they are to act violently. To that end, Collier recommends “an “over the horizon” security guarantee: a reliable commitment to dispatch troops if they are needed. A guarantee could be offered by the UN or a regional power like the African Union to protect governments that came to power through certified democratic elections.”

Collier believes that such “a guarantee could credibly help the world avoid three of the four new civil wars expected in low-income countries in each decade.”

What would the cost be for a capable security force? Around $2 billion annually. And the benefits? Collier argues that the returns on the “significant reduction in the risk of conflict and faster economic growth are between 11.5 and 39 times higher.”

Not a bad investment.

Collier concludes by providing an overview of a general strategy for helping nations escape the conflict trap, which I would endorse without question: “Combine aid, limits on military spending, peacekeeping forces, and “over the horizon” security guarantees in a way that ensures that the developed world deals with hot spots consistently. The UN Peace-Building Commission has the potential to coordinate this. The annual cost of the full package would be $10.8 billion, but the benefits to the world would be at least five times higher.”

The problem is no one, but the US (for all its problems), has shown much of a commitment to aid with this public good.

Read more!

what to do in myanmar?

I remember speaking with some German friends a few years back about just war and objecting to their characterization of ALL military engagements as inherently unjust. The context was the war in Iraq, but we weren't discussing the wisdom of the invasion or the objective virtue of that particular engagement, but the potential for war to be just.

My stock scenario is the genocidal regime, which most people I talk to seem to agree justify the consideration of military intervention (the decision to actually intervene should also take into account the likelihood of success and potential fallout).

Romesh Ratnesar, over at Time, raises another scenario that might pass mustard with the peacenik crowd, or at the very least, make them acknowledge the terrific human loss that their international consensus politics and soft power allow to occur quite regularly. Ratnesar poses the question, "Is It Time to Invade Burma?"

I would rephrase the question; does the crisis in Burma warrant the consideration of military force to alleviate the crisis if need be? A less-appealing headline to be sure, but a bit more useful for our purposes.

Here are some relevant snippets from the article:

• "By most reliable estimates, close to 100,000 people are dead.
• "With as many as 1 million people still at risk, it is conceivable that the death toll will, within days, approach that of the entire number of civilians killed in the genocide in Darfur."
• "The military regime that runs Burma initially signaled it would accept outside relief, but has imposed so many conditions on those who would actually deliver it that barely a trickle has made it through."
• "The Burmese haven't shown the ability or willingness to deploy the kind of assets needed to deal with a calamity of this scale — and the longer Burma resists offers of help, the more likely it is that the disaster will devolve beyond anyone's control."
• "A lot is at stake here. If we let them get away with murder we may set a very dangerous precedent," says Jan Egeland, the former U.N. emergency relief coordinator.
  
• "Some observers, including former USAID director Andrew Natsios, have called on the US to unilaterally begin air drops to the Burmese people regardless of what the junta says. The Bush Administration has so far rejected the idea — "I can't imagine us going in without the permission of the Myanmar government," Defense Secretary Robert Gates said Thursday — but it's not without precedent: as Natsios pointed out to the Wall Street Journal, the US has facilitated the delivery of humanitarian aid without the host government's consent in places like Bosnia and Sudan.
• "If there were, say, the threat of a cholera epidemic that could claim hundreds of thousands of lives and the government was incapable of preventing it, then maybe yes — you would intervene unilaterally." But by then, it could be too late."
• "The world has yet to reach a consensus about when, and under what circumstances, coercive interventions in the name of averting humanitarian disasters are permissible."

Is there a difference in allowing hundreds of thousands to die from disease and hunger and outright execution? In some ways, yes, just as first degree murder differs from second and third. What is consistent in both cases is the preventable loss of human life.

Members of the international community have stated multiple times that state sovereignty extends only as far as the state's willingness (and I would add ability) to protect its people from preventable death.

The issue is that these pronouncements carry little weight. Soft power (which usually ends up meaning economic bullying) works very well for certain types of regimes, but incentives have their limits.

I'm not advocating military intervention in Myanmar. I am suggesting that you don't have to be a neocon to believe that the international community's ability to act through existing international institutions to alleviate large-scale human suffering and death is basically non existent, and it is unacceptable to allow these preventable real human tragedies to occur because of abstract notions of state sovereignty (I'd love to hear someone, anyone, argue that the Burmese junta represent the people) or international consensus (couldn't avoid a security council veto short of an alien invasion). We should reinforce the processes of international cooperation when possible and respect the people's right to self-determination, but we mustn't join our European friends in sacrificing the lives of others at the altars of multilateralism and state sovereignty.
Read more!

what jane jacobs can teach us: borders

Jane Jacobs wrote the book on city planning for the latter half of the 21st century, and it's yours for a little more than $10 at Amazon -- The Death and Life of Great American Cities. Need more convincing?

Jacobs has a little something for everyone, whether you're interested in learning about why a neighborhood is hip or dull, slums improve or decline, your university's neighborhood was so boring, border towns are wastelands, automobiles are so problematic yet important, visual perception affects city life, city planning and public spending failed miserably, different processes of scientific thought shape city policy, the role of economic development in city formation, and/or the role of city formation on economic development. (Exhale)

I'll have a series of posts bringing out some of her broader points that I think are applicable to not only cities, but economic development at home and abroad. First up, is Jacobs' treatment of borders, which for the most part refers to borders between towns, but I find quite applicable to most borders.

Dead End or Hub?

Border areas suffer from a lack of land use and circulation of people, which stimulate local growth and safety. Intensity is low because border areas are the last stops on the line, dead ends that inhibit individuals from traversing across the border area. These border areas suffer from "fewer users, with fewer different purposes and destinations at hand," creating vacuums that are typically unproductive and unsafe. Some borders allow traffic one-way (Arizona/Mexico), others see traffic, but only at certain times, but the effect is the same. Border areas are best served by making the border a "seam rather than a barrier, a line of exchange along which two areas are sewn together." It's not that border areas, or frontiers, are prone to blight and disuse. To the contrary, frontier areas are positioned to be uniquely original and creative thanks to cross-border exchange and ability to escape potentially crippling central oversight. Jacobs' insight is that the border areas have their fate in their own hands, at least to some degree. They can fade into disuse and disrepair as the last building in the dead end, or they can serve as a hub for interaction between both sides of the border. The potential for these areas cannot be overstated -- frontier cities are often the centers of the next empires. Historically, commerce, exchange, and the free flow of ideas and goods have been the keys.

Claustrophobic borders

Some areas are large enough and diverse enough to be productive and vibrant despite being cutoff by a border (though the smaller area specifically near the border won't be vibrant), but it becomes increasingly problematic when the neighborhood is too small to support itself as a district. This merries well with the literature I've seen with regards to small nation-states -- too small to support the diverse commerce needed -- damned to exist as fragments by borders which inhibit the pooling of human and financial resources needed to grow. What if Rhode Island had its own currency, tariffs and regulated employment visas for other states in 1960? Well, if you add in a bunch of poor, violent neighbors and make our little state a land-locked country with no history of effective governance and scarce resources you'd have Burundi, with a GNP per capita of about $90. Would the dissolution of borders make Burundi the center of an African superpower? Likely not, but it does serve as a barrier to the the accumulation of capital -- financial and human -- needed to escape the poverty trap.

Minor internal borders as wasteful barriers

Jacobs has additional insights into man-made barriers that lead to dullness and blight, which I think are worth noting. She focuses on single elements with low intensity land use, such as civic centers, large medical centers, large parks, and universities. She reserves special criticism for universities, which orient inwards, completely disengaged from their surroundings, producing a deadness to all that borders them. She looks at Central Park and notes that the area goes nearly unused at night; it features many attractions like carousels buried deep inside, which should be pushed to the border with the city, to allow for greater utility. The challenge is to minimize these large single-use areas, or at least pack them near multi-use, high-concentration areas that can overcome the single-use area's deadening externalities. City planning misconceptions have even taken some positive city features, like waterfronts and parks, and made them dull, by insisting on single uses that serve only small segments of the populations at specific times -- making the areas dull and even unsafe at other times.

Next to you are walking around a city, pay attention to the buildings around you and how they are used; do they serve multiple uses, populations? Do the buildings use throughout the day, or only at specific times? Are there large single-use facilities? Are the blocks small or large (I'll have to return to this later)? By what visual cues do you segment the city? Jacobs packs a lot of insight to both shape how you understand the world around you and how the city around you is shaping your perception, habits, and opportunities.

Read more!

maximize your ROI on social investment

One of the concepts I often explore is how one most positively impacts the world given their scarce amount of personal resources. If you've read any past posts, you've noted that I've downplayed domestic policies' importance, and stressed more abject suffering abroad.

The death toll in Myanmar numbers in the tens of thousands, and will likely take many more lives in the future due to famine and disease. If you have no problem supporting relatively-well off Americans, I'd ask you to consider donating to disaster relief. Outside the incredible need in the devastated area, disaster relief is also more likely to make a positive impact than money spent in social programs, because it's much easier and cheaper to solve the problem of not having a roof with short-term assistance, than it is to fix behavioral problems through long-term subsidization of sub-standard living. Assistance following a disaster should be considered preventative care, to ward off the harbingers of disease and famine that accompany such destruction. Workable land and drinkable water are worthy, doable aims.

Bottom line, your dollar goes a lot farther to people who need it a lot more. Of course, this immense amount of suffering only underscores the despicable depth to which Myanmar's military regime has sunk. Even France wants to trample on their sovereignty... but alas, we wait on the UN for the OK. I wish we could see statistics for death by red tape.

You can do a small part, by donating to the Buddhist Relief Mission, which works in the area. The question with these organizations is always whether the money is actually being directed to the intended cause. I suggest the Buddhist Relief Mission based on the recommendation of Yale economic development professor Chris Blattman.

Blattman has ties to the area, namely friends who run a community program for Burmese refugees in Thailand, and they recommend the Buddhist Relief Mission. Blattman also points to a list of international aid agencies in the NY Times, if you want to play it safe.
Read more!

hillary makes play for stupid, selfish vote

Hillary Clinton's campaign has clearly segmented the voters and focused on the population who likes to whine about energy prices and will embrace any plan, no matter how inane.

UPDATE: Hoping for that last-second push in Indiana, Hillary busted out this gem at a minor-league baseball stadium, “We're going to knock balls out of the country's park, for the home team, which is America."

There are no typos in that sentence.

Credit must go to John McCain for getting the ball rolling on this stinker, but Hillary gets big points for not only supporting a stupid idea, but digging in against the entire economics profession when asked why her proposal could not find one_single_economist to endorse it: "I'm not going to put my lot in with economists. ... We've got to get out of this mind-set where somehow elite opinion is always on the side of doing things that really disadvantage the vast majority of Americans."

Apparently, Hillary is going with her gut on this own instead of listening to high-minded, so-called experts, with their "facts" and "years of study." Remind you of anyone?

As Arnold Kling wrote, "Soon I expect to hear the Senator from New York promise to jump out of a tenth-story window and fly, to demonstrate defiance of "elite" physicists who doubt the feasibility of the project. "
Read more!

the rise of the rest

Fareed Zakaria is back on Newsweek with a feature-length version of his upcoming book, "The Post-American World." Zakaria's piece is largely optimistic about the world at-large, but that doesn't mean he overlooks its problems -- he simply places these concerns in their proper context -- and advises the world's actors -- namely the US -- on how to best advance their interests.

Americans aren't quite sold on Zakaria's story of shared prosperity, as Zakaria quotes a figure of 81% of Americans believing the country is on the "wrong track." He argues that while the financial panic, war in Iraq, and terrorism are the hot topics of the day, Americans are actually disoriented by the greater changes at work -- the tallest building is in Taipei, biggest refinery is in India, largest passenger airplane is built in Europe, biggest movie industry is in Bollywood, etc.

Intellectuals wax about the 'decline' of the United States. An upcoming book asks if America is to follow the self-destructive path of the Roman Empire.

This is a sexy story, as there are certainly plenty of savory, superficial parallels between the US and fallen powers of the past.

Zakaria provides a different -- less American-centric -- narrative about the "rise of the rest," complete with insights into what the next steps are for global prosperity and American competitiveness.

Below, I will excerpt liberally from Zakaria's piece to skip to the juicy parts:

Rise of the Rest

• The US has succeeded in its great, historical mission—globalizing the world.
• The world will be enriched and ennobled as they become consumers, producers, inventors, thinkers, dreamers, and doers.
• This is all happening because of American ideas and actions. For 60 years, the United States has pushed countries to open their markets, free up their politics, and embrace trade and technology.
• Now, the underlying reality across the globe is of enormous vitality.
• Share of people living on $1 a day has plummeted from 40 percent in 1981 to 18 percent in 2004 and is estimated to drop to 12 percent by 2015.
• The global economy has more than doubled in size over the last 15 years and is now approaching $54 trillion.
• Global trade has grown by 133 percent in the same period.
• There are more power centers, with nearly all are invested in order, stability and progress.

Remaining Challenges

• There remains real poverty in the world—most worryingly in 50 basket-case countries that contain 1 billion people [ED: This is where Paul Collier comes in...]
• Global growth is also responsible for some of the biggest problems in the world right now. It has produced tons of money—what business people call liquidity—that moves around the world. The combination of low inflation and lots of cash has meant low interest rates, which in turn have made people act greedily and/or stupidly.
• Prices are rising because of growing global demand; the effect of more and more people eating, drinking, washing, driving, and consuming will have seismic effects on the global system.
• As economic fortunes rise, so inevitably does nationalism. [ED: China, India...]
• Whether the problem is a trade dispute or a human rights tragedy like Darfur or climate change, the only solutions that will work are those involving many nations. But arriving at solutions when more countries and more non-governmental players are feeling empowered will be harder than ever.
• The G8 does not include China, India or Brazil—the three fastest-growing large economies in the world—and yet claims to represent the movers and shakers of the world economy.
• If China, India, Russia, Brazil all feel that they have a stake in the existing global order, there will be less danger of war, depression, panics, and breakdowns. here will be lots of problems, crisis, and tensions, but they will occur against a backdrop of systemic stability.
  

The US still has a lot going for it...

• Currently ranked as the globe's most competitive economy by the World Economic Forum.
• Dominant in many industries of the future like nanotechnology, biotechnology, and dozens of smaller high-tech fields.
• Universities are the finest in the world, making up 8 of the top ten and 37 of the top fifty
• If you exclude the car mechanics and repairmen—who are all counted as engineers in Chinese and Indian statistics—the numbers look quite different. Per capita, it turns out, the United States trains more engineers than either of the Asian giants.

Secret to American success

• Immigrants! Most of these engineers are immigrants. Foreign students and immigrants account for almost 50 percent of all science researchers in the country. In 2006 they received 40 percent of all PhDs.
• Faced with the new technologies of foreign companies, or growing markets overseas, it adapts and adjusts. When you compare this dynamism with the closed and hierarchical nations that were once superpowers, you sense that the United States is different and may not fall into the trap of becoming rich, and fat, and lazy.
  

Challenge to the US

• American society can adapt to this new world. But can the American government?
• Yet just as they are beginning to do so, we are losing faith in such ideas. We have become suspicious of trade, openness, immigration, and investment because now it's not Americans going abroad but foreigners coming to America. Just as the world is opening up, we are closing down.
• London is now the world's leading financial center, because they have became more friendly to foreign capital and better regulation
• Or take the U.S. health care system, which has become a huge liability for American companies. U.S. carmakers now employ more people in Ontario, Canada, than Michigan because in Canada their health care costs are lower.
• Twenty years ago, the United States had the lowest corporate taxes in the world. Today they are the second-highest. It's not that ours went up. Those of others went down.

My takeaways are the importance of cutting the fat of the American economy, embracing talented, hard-working immigrants from other countries, continuing our higher-education dominance, and acknowledging the multi-polar world we have helped to create.

So far the story of the 21st century is the "rise of the rest," whether it is also the decline of the US depends on us. Read more!

the food crisis explained

The Financial Times features some of the best economists and political scientists in the world, and recently, it's been the universally-celebrated Paul Collier talking sense in their Economists' forum. One of my first posts lauded Collier's terrific analysis of global poverty and general strife in his book, The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It." (Link to Amazon).

Collier is back once again to explain the why there is a food crisis, what stands in the way of an adequate food supply, and what should be done about it. (Hat tip: Alex T at MR)


First, Collier explains the why:

"Why have food prices rocketed? Paradoxically, this squeeze on the poorest has come about as a result of the success of globalization in reducing world poverty. As China develops, helped by its massive exports to our markets, millions of Chinese households have started to eat better. Better means not just more food but more meat, the new luxury. But to produce a kilo of meat takes six kilos of grain. Livestock reared for meat to be consumed in Asia are now eating the grain that would previously have been eaten by the African poor."

Next up, a realistic solution:

"The remedy to high food prices is to increase food supply, something that is entirely feasible. The most realistic way to raise global supply is to replicate the Brazilian model of large, technologically sophisticated agro-companies supplying for the world market."

But, of course, there is a catch:

"Unfortunately, large-scale commercial agriculture is unromantic ... We laud the production style of the peasant: environmentally sustainable and human in scale."

Collier notes that we grew out of this perception of manufacturing (who dreams of owning a small manufacturing "ranch"?), and have enjoyed the manufacturing wealth since.

Yet this romanticism has taken root in agricultural development:

"In Africa, which cannot afford them, development agencies have oriented their entire efforts on agricultural development to peasant style production. As a result, Africa has less large-scale commercial agriculture than it had fifty years ago. Unfortunately, peasant farming is generally not well-suited to innovation and investment: the result has been that African agriculture has fallen further and further behind the advancing productivity frontier of the globalized commercial model."

In case you thought it couldn't get worse, Africa is the victim of more than one breed of romanticism:

"Our longstanding agricultural romanticism has been compounded by our new-found environmental romanticism. In the United States fears of climate change have been manipulated by shrewd interests to produce grotesquely inefficient subsidies for bio-fuel. Around a third of American grain production has rapidly been diverted into energy production."

Collier also reserves some blame for the European Commission, which has its own bio-fuels policy, albeit less "effective" and thereby less damaging. More damning is the EU's ban on the "production and import of genetically modified crops has obviously retarded productivity growth in European agriculture: again, the best that can be said of it is that we are rich enough to afford such folly. But Europe is a major agricultural producer, so the cumulative consequence of this reduction in the growth of productivity has most surely rebounded onto world food markets. Further, and most cruelly, as an unintended side-effect the ban has terrified African governments into themselves banning genetic modification in case by growing modified crops they would permanently be shut out of selling to European markets."

But wait, there is one more nail in the coffin for food supply. Export-restrictions in grain-exporting countries, a product of "the internal tussles between the interests of poor consumers and poor producers, the interests of consumers have prevailed. Governments in grain-exporting countries have swung prices in favour of their consumers and against their farmers by banning exports."

The effect is that grain-exporting countries have lower prices, but less grain is produced than would otherwise be produced, reducing the overall food supply, and greatly raising the prices for grain-importing countries.

What's the main takeaway?

"Unfortunately, trade in agriculture has been the main economic activity to have resisted being subject to global rules. We need stronger and fairer globalization, not less of it."

I like this piece for a few reasons -- it's comprehensive, it's straightforward -- but I especially take note of Collier's condemnation of romanticism. It's similar to what I've been trying to get at in the "moralizing" series of posts, and it demonstrates the shallowness of thinking on the left as well as the right. I'm reading Jane Jacobs' "Death and Life of Great American Cities" right now, and she strikes me a similar thinker, one who is able to see the err of well-intentioned, but entirely unintellectual pursuits. Read more!