Aditya's Lame Attack on Charter Cities

Paul Romer's stature and reputation among professional economists is very solid. He is responsible for creating new ways for thinking about growth and this theory is called the New Growth Theory. More recently, he established a site in which he is discusses and updates his views on the new idea of charter cities. The idea is that high quality life and economic growth could be fostered in places by allowing new rules to be apply within sections of countries. His main example is the growth of Hong Kong by virtue of a different set of rules being applicable in it that were separate from those on the mainland. 

After the privilege of a meeting with Paul Romer in California, Aditya Chakrabotty dismisses the idea completely. To my mind, i think that the idea of charter cities leading to more Hong Kongs can be questioned legitimately, Aditya seems to have a different problem with the professor. To start with, he betrays his bias by sneering at the fact that Romer lives on a ranch overlooking the estate and further that Romer dismisses the concerns that assertions of sovereignty in many developing countries are often empty posturing. To tell the truth, there's no valid reason except for an ideological one for the harsh treatment of the professor's ideas. What a wasted trip!

Ferrari Rigged the Race Result

Formula 1 is a sporting competition that is unlike many others for a number of reasons, including the extremely fast and technology-dependent machines. In my view, it is also a distinct sporting activity in the sense that Formula 1 is a monopoly franchise which allows teams to enter up to two cars for every race.  What this means is that the individual drivers compete against each other while they are also part of a team as their total points per race add up to the team's score. In short, it is really two championships in one where drivers compete against each other but are also part of the same team.

Yesterday's race in the German Grand Prix race in Hockenheim attracted lots of deservedly negative commentary for the Ferrari team whose drivers won the first two places on the podium. With 18 laps to go before the end of the race, communication from the team to Felipe Massa curiously informed him that his team mate Fernando Alonso was faster. The same voice on radio asked Felipe to confirm that he understood the message.  It does not take much intelligence from regular viewers of the races to note that this was a hint that the leader should let his colleague overtake and thereby improve both their total points haul for the race in addition to improving the prospects of Fernando to rise in the points rankings for the individual drivers.

The FIA  reviewed the case and levied a fine of US$ 100,000 on the team for team orders that fixed the result finishing order  of the race. I think that the despite this explanation, team's tactics here were very crude because if a teammate is really faster, then he should not need the subtle aid of being let to go through as the faster driver should be able to master the speed and skill to overtake his team mate. While this may have been a defensible decision in the view of the team, it was so blatantly executed and the staged celebration between the drivers and the team president principal just reminded me that sometimes these smart guys underestimate the intelligence of their fans.

Hong Kong Tinkering With Success

Milton Friedman's hypothesis that freedom is a prerequisite for human prosperity was very difficult to refute whenever he pointed to Hong Kong. This was a small country with very little natural resources but thrived as a colony in the last half of the 20th Century. And because empirical facts will beat ideology, few people would refute the claim that there is a connection between freedom and prosperity. Hong Kong elevated the role of enterprise to such a degree that its highest political governor bears the title of Chief Executive.

The Economist shows that Hong Kong is now adopting a series of policies that would be a reversal of what its free market credentials have been. Starting with the introduction of a minimum wages, there is an industrial policy in place and other regulations that show that the size of government is growing steadily. At the same time, the maintenance of state-favoured monopolies in gambling and subsidies to entertainment industries.  With the exception of the laws to sensibly regulate monopoly power, I am unsure that these regulations, populist as they are, would be good for Hong Kong's growth. Much Just as the article claims, the country that comes closest to truly open markets is gradually ending the experiment and teachers of economics will be the poorer for it.

The Changing Books Market

When the iPad was launched with aplomb accompanied by serious media reviews, some commentators suggested that it would probably displace the Amazon Kindle. At the time, my guess was that it was not possible for the iPad to fully supplant the Kindle largely because the latter was a highly specialized product while the former was a more general and flashy gadget. To be honest, that assessment was based on my experience with the Kindle and reading of reviews and Steve Jobs' presentation on the capabilities of the iPad.

My reasoning that the Kindle would not be wiped out completely by the iPad seems to be borne out by the fact that both have grown in sales over that time. NYT's Claire Cain Miller writes that Amazon has reported that the sales of books for the Kindle have outnumbered sales for hard back books. That seems to suggest that e-book readership is expanding at the same time as ownership of the gadgets is spreading.    Analysts quoted in the story are making the inference that this is an inflection point at which e-books are acquiring stature as an important market for literature. I think that its too soon to say that but the trends suggests that as the prices of e-readers continue fall, the place of hard back books and other printed material will change fundamentally. The gadget of choice for most people will be revealed but I do not expect a single dominant gadget for reading.  

Multidimensional Poverty Index: Any Difference?

Two days ago, some scholars attached to a research facility in Oxford University together with the United nations announced the development of a new instrument for measuring poverty.  The Multidimensional Poverty index (MPI) is intended to take account of the geography and other variables that may affect the material condition of individuals and people. In detail, the piece report by the Radio Netherlands Worldwide site here states that the MPI is comprised of ten factors including education, health and standard of living and how these factors overlap at the household level.

As explained in the piece, the application of the MPI reveals that sub-Saharan Africa has deeper pockets of poverty but the south Asian nation of India has the largest number of poor persons by count.  In addition, this new index also places a further 400 million people in poverty when compared to the UN estimates show.

I am partial to the use of integrated data and innovative algorithms to provide meaning to phenomena. as a result, I concede that measuring poverty precisely has to be a complicated process because poverty is not only about income or the lack of it. However, as I stated earlier here, the production of new measures for different human can sometimes lead one to ask whether more indices necessarily lead to new knowledge or insights about poverty or how to respond to it. so while I respect the deep thinking hat has gone into construction of the MPI, i wonder whether it tells me much more than what common measures such as per capita incomes would. As described so far, I would agree with Paul Hoebink in the story that I remain unsure that a new index is nothing more than a mathematical stunt.

Making Data Useful For Soccer Management

Managers in sporting disciplines such as Baseball and Basketball know that the use of data provides a view against which tactics can be checked and diagnoses for outcomes made. However, their contemporaries in soccer have not yet been convinced of the value of the intense use of statistics. And while I am convinced that a degree of insights could be extracted from the use of statistical techniques, it is yet unclear how to deploy this data in the arena of soccer. This is because soccer has far too much variety and possibilities that make it difficult to design neat algorithms that predict outcomes accurately.

It is this dilemma of making use of the trove of data on soccer that has faced many coaches during the ongoing World Cup 2010 tournament in South Africa. Thomas Kaplan of NYT describes the situation that obtains and the difficult decisions that coaches have to make regarding what data choices to incorporate in their strategy.  There is obviously scope for use of data in decision making for tactics and other sports management issues but designing of those algorithms will still take a while. 

Use of data to determine decisions such as the value of a player, the methods of training and conditioning of players are already well-developed.  In spite of books such as this, the envy that soccer coaches have for baseball is justifiable. Number crunchers will need to find the metrics that matter most.     

Firm No From Grisha

A story on Grisha Perelman in the NYT escaped my attention but I got to it a couple of days ago. In a past blog post, I stated that Grisha appeared reluctant to formally accept the prize for providing the correct solution to Poincaire Conjecture. At the time, it was clearly premature to call it out as an outright rejection but it appears that he was not bluffing or trying to get media attention. Dennis Overbye confirms that in spite of approaches from the Clay Mathematics Institute, he has stated unequivocally that he will not accept the honour and the prize.  

This should put an end to it but I hope hat Grisha will take time to publish some information on what his disagreements are with the  "organized mathematics community". 

Cheating in College

Trip Gabriel of the NYT writes about the formidable crisis facing colleges and universities in the form of plagiarism and cheating at tests and exams. Unsurprisingly, as the sources of and ease of acquiring information has expanded, the temptation and ability to cheat at tests has grown as well. Most colleges are now adopting almost draconian surveillance methods to keep students from gaining unfair advantage at tests and assignments.

While it is beyond doubt that the colleges bear responsibility to remind students that they ought to study and to make attribution for information that they use, I am sure that this is case where a new approach to the meaning of results is due. For instance, colleges can neither control nor prevent students from finding access to sites that provide answers to assignments, the mechanism for determining the level of understanding and mastery of the subjects should be tried.  While the college professors quoted seem to be questioning the integrity of pupils, perhaps they ought to spend time questioning the exam-driven college courses.

So while I find the claim that only the less-capable students cheat in higher numbers, my suggestion is that colleges should provide students with an exam free option. This will then leave it to whoever cares about the diploma's to interpret the student's ability as they wish. College students may also choose the courses for which they consider themselves sufficiently prepared to face the tests.    

Tools of Judgement

"When people learn no tools of judgement and merely follow their hopes, the seeds of political manipulation are sown". Stephen Jay Gould.

Disease to Intelligence to Poverty?

A study that has been discussed by the Economist Magazine here established that the prevalence of infectious disease correlates highly with intelligence and a society's development. As expected the study by scholars from the University of New Mexico confirmed that tropical countries and Africa in particular has a high burden of infectious disease and that this is related to the level of intelligence measured by Intelligence Quotient (IQ).

The exact findings of the study is that a huge disease burden affects the intelligence of people within that geographical area and in turn undermines economic development. Taken ahead, this view suggests that geography has substantial implications for economic development. As explained, this inverse relationship between the disease burden and the average IQ. infectious pathogens that cause malaria for instance, affects cognitive development of children.

The place of IQ in economic development has separately been explored by Garett Jones and W Joel Schneider in the paper with the title: Intelligence, Human Capital and Economic Growth. In it Garett and Joel find that a 1% increase in average IQ increases a nation's GDP per capita by 0.11%. That led me to think that its all about education and yet this paper introduces public health questions in it. Two papers worthy of sending to Minister of health, education and finance for holiday reading.

Microsoft's Struggle With Smartphones

Commentators on technology today are suggesting that the initiative for innovation has shifted decisively from Microsoft Corporation towards Apple and Google. And my view is that the technology industry does not easily lend itself to very specific forecasting about outcomes and market dominance. Consider that a decade ago, many of the same pundits were convinced that Microsoft was almost secure in its dominance and that this could be extended from PCs towards other market segments.  Ashlee Vance of NYT confirms that Microsoft seems to be having a problem with getting a foothold with younger consumers to whom its smart phones were directed.  

What nobody would have been able to foretell is that at the time, one of Microsoft's perceived strengths may have contributed towards undermining its strength in smart phone technology leadership. This is because the insistence on keeping a closed platform for its products means that new programmers used the more open platforms that have come to dominate. It appears that this has almost made Microsoft absent as a platform for innovation and creativity for this market segment. and the moral of the story is that there is no perfect strategy n business and a strategy that leads to success may be the very Achilles Heel of a corporation. Is Apple taking note?  

President Fires Soccer Team

Needless to say, only deep disappointment has met many people who banked heavily on outstanding performance from African teams during the World Cup 2010. Putting aside the fact that Ghana qualified for the quarter finals by beating team USA, the rest of Africa is disappointed that the teams performed too poorly. To my mind, it appears that the expectation was far too high given the basic organizational and structural issues that produce consistently good performance on soccer pitches. In truth, virtually all African teams are lacking in that.

The disappointment in the performance of the Nigerian team was too much for its politicians to take. As a result, the delightfully named president Jonathan Goodluck of Nigeria unilaterally suspended the national team by announcing that soccer activity at the international level will remain in abeyance for two years. While that is laughable in the main and is bound to lead to conflict with FIFA as stated here, I see a positive side to all this.

To begin with, my libertarian view is that the Nigerian people would have much more to gain from a diversion of taxes away from funding private activity as soccer and into more public goods and services. Bearing in mind that Nigeria is a country of more than 100 million people, it is not useful to spend public money on financing sports played by rich professionals employed by clubs in Europe and Asia. So the president should not have suspended the Nigerian Football Federation's activities but merely withheld state subvention for all time. in this way, soccer organization in Nigeria would remain a matter for private organization.

Update: President J. Goodluck rescinded the decision after two days. He has no libertarian instincts after all.

Clip Art: http://www.cksinfo.com/sports/soccer/index.html

Charity Boxes in Competition

I sometimes think that having read Freakonomics, its sequel Superfreakonomics, together with a whole lot of books that apply economics in non-conventional ways, I have become aware of anything that may present a natural experiment. Last week, I was attending a week-long meeting in the Cambodian city of Siem Reap and stayed at the comfortable Apsara Angkor Hotel. While there, I saw in the lobby this interesting set up which led me to question whether the size and setting of the charity boxes affects donations.

As evident in the picture, there are two boxes for two separate charities in the lobby of this hotel.The transparent box is marked with the name of a charity committed to correcting reducing child labour in urban tourism. Bear in mind that Siem Reap is a small city but has huge tourist attraction on account of the Angkor Wat complex. The second box is set up to collect money for the Cambodian Red Cross Society and is made of solid wood.

Quite aside from the fact that one of the boxes is transparent and the other opaque, there is very little difference between them as they are right next to one another. Notice that they both have the slot for enabling contribution at the top and are of roughly the same height. It therefore unlikely that one would be able to make a contribution to one purely because the other is beyond reach.

Now to the question that made me take the picture. Given that the only difference between the boxes is that one is transparent and the other opaque, is this material for the contributions received by either charity? It is clear to me that the managers at the  Apsara Angkor Hotel have unknowingly set up a fascinating experiment. With their permission, it would be interesting to compare the total contributions that the two charities receive over time in order to know whether the transparency of the box affects contributions. Of course, I make the big assumption that guests are likely to contribute to these charities equally.

An Economist Faces Price Controls

I need to take a break from writing on soccer and try to speak about applied economics for a while. A few days ago, the legislature in Kenya passed a bill that is intended to introduce price controls on a number of essential goods. With tremendous support in the Kenyan parliament, the argument was that traders charge high prices for essential commodities such as sugar, wheat, corn and cooking oil and therefore intervention through price controls would ensure that these prices remain affordable to a number of Kenyan citizens.

To start with, it is true that a majority of Kenyan citizens are extremely poor and it is understandable that legislators in Kenya who earn some of the highest wages in PPP terms should be concerned for their welfare. What worries me is whether a legislature comprised of some professionals are unable to read either history or the most basic texts in economics. Kenya has had a two decade experience with price controls that were suspended in the early 1990s and yet the country's citizens were none the richer for that. In fact, the general shortages of those same essential goods was pervasive and drove corruption and black markets in those goods.  

So i wonder why the Kenyan legislature assumes that new rice controls will yield better results today and in the future. It is just clear that this new law will be subverted both by traders and the bureaucrats who are being asked to enforce it because the Treasury is reluctant to perform that role. A second factor that offers some hope is that Kenya's president, Mwai Kibaki, is a student of economics and should proceed to  veto that bill without apologies.  I am sure that he is quite familiar with the arguments cogently presented by Lawrence Reed here.  

Why It's Time for England's FA Bosses to Read

Punditry and excuses aside, Germany completed a devastating demolition job on the English soccer team sometime yesterday. As usual, this is a traditional and emotion-laden rivalry for which newspapers and fans from both nations have gone overdrive with explanations for why one side lost and the other lost  won. Unfortunately, most of the purported explanations from the pundits and sports journalists tell make no revelations for anyone with even the simplest and objective view of the facts.

Among the explanations are a summary posited by Stephen Dubner on the Freakonomics Blog and another on the Daily Telegraph site here. And to my mind, it is understandable that English angst against foreign players is now on show on account of the fact that a number of Premier League clubs are predominantly served by non-English players.

While I do not expect that the loose punditry will lead to a firm solution, I think that many of the ideas posited are at best guesses and at worst diversions. In an earlier blog post here, i was completely skeptical that England was capable of winning the World Cup 2010. And my views were not formed out of strong conviction as much as having read through this book. It states as clearly as can be stated about England's performance in international soccer and what changes the football association would have to make to deepen the ranks from which players are recruited in addition to the scope for England's improvements. Without being a spoiler spoiling, the protectionist backlash against foreign players is not part of the solution.

I would recommend that the Football Association buy a copy for each manager, the players but that the Chairman and the board should read through it in whole. Or perhaps hire someone to present pithy summaries of its main messages to them. the tone of recriminations that i hear are proof that England will blame foreigners, the managers (especially the foreign ones) and cry for more chances for local lads. The authors, Simon Kuper and Stefan Szymanski show with data that this is unlikely to work.

World Cup 2010: Entry 2

To my mind, the first round of matches at the World Cup 2010 reveled that some teams were obviously better prepared than others and that is unsurprising. The unsurprising part is that the host nation saved its firepower for the last match and ended up with a victory that was of little consequence. So for all the goodwill from many supporters at home and abroad, the home team went out of the tournament at the first round. based on their overall performance over three matches, no sensible person would argue that their exit was unfair because Mexico and Uruguay were demonstrably better teams.  

This brings the discussion to the next "Home Teams", which are the teams from the host continent of Africa. Here too, as the SPI showed, few of them performed in a way that would suggest that African football is on a definitive rise as a force to be reckoned with in international soccer. And yet most African teams won only a single match at best and Cameroon, lost all its matches at the group stage. Apart from falling for cheap baiting by other teams, the African teams showed the inability to stay composed under pressure in addition to woeful finishing by strikers. The redeeming thing about African soccer during this tournament remains the goalkeepers who prevented them from conceding dozens of goals. Otherwise, the objective view must be that African soccer still has to resolve systemic weaknesses in team selection, managing player composure during intense pressure and better command from the skippers. Notwithstanding Ghana's qualification for the round of 16 and subsequent elimination of team USA, I do not think that it redeems the overall poor performance by the five African teams.

Finally, the fact that none of the finalists in the preceding tournament reached the round of 16 shows that four years can alter the dynamics of competition substantially. Tactics aside, I think that both France and Italy had fairly aged players though that alone cannot explain the inability to play decently. Whatever the internal divisions in either squad, they did not deserve to play beyond the first three matches. 

iPad Sales Count Reaches 3 Million Units

The consumer electronics industry has certainly entered a new phase with the announcement of release of Apple's iPad machine in 2010. While I do not make guesses about what the ales for individual items may be, I was skeptical for a while that the iPad would sell very well. Apple confirms in this statement that the iPad has sold 3 million individual units in the first eighty days since it was made available for purchase. This is an impressive sales count bearing in mind that the gadget is initially stocked only in US stores.

To have shipped out 3 million units of a gadget that has multiple purposes and which performs functions already available in other devices is an outstanding achievement. I do not study consumer electronics industry very keenly but think that Apple have managed to sell a gadget which is known for its aesthetic value and which I expected to be a niche product. It is far from a niche product now because everyone with US$ 499 to spare seems to be getting one. And the price tag suggests that nobody is buying the gadget just so they may also have one.  

Competition of the E-book Readers

In the last couple of months, its been clear that Apple has made a success of the  iPad and has exerted pressure on Amazon's Kindle and other e-book reading devices. My original thinking was that given the diverse range of capabilities built into the iPad, it would not be a direct competitor for conventional e-book readers. Added to that is the fact that the iPad was more expensive. In my view, I was partly right in my reasoning because the effect of the iPad has been markedly different from was predicted.

It is clearer now that the iPad has indeed altered the market for e-book readers first by intensifying competition between the readers such as the Kindle and the Nook reading devices. in addition, the arrangement with publishers has placed Amazon under pressure in terms of pricing of electronic versions of the books. As the story by Brad stone confirms, the major sellers of conventional readers Amazon and Barnes and Noble are engaged in competition and have reduced prices by large margins. What this implies is that the cost of the products has not only come down much sooner than was anticipated, but also that the e-reader market is getting consolidated around a recognized number of gadgets.

To my mind, this is all for the good and is a lesson to students of price theory generally and competition in particular on how markets work. What remains unresolved is the degree to which the iPad will then compete more directly with these devices. All in all,  the economics of the market for e-book readers is being driven by competition between firms making independent decisions.    

Quoting William Petty

"That which angers men most is to be taxed above their neighbors." Sir William Petty

Its the season for tax returns in the country where I live and I just encountered William Petty's quote. I feel that he speaks for me today.

World Cup 2010: Preliminary Ideas

This blog has few readers but that does not discourage me from recording that this is blog post number 450 in 3.5 years. Besides congratulating myself for telling stories largely to myself, I think that I should try and make comment on something that is more current and undeniably popular.

The largest sports spectacle in the World is at this time being held in the republic of South Africa and the initial facts show that it will be as good as any other. In the five days since, there have been some surprises, a few good matches, drab draws (like Italy vs Paraguay) and some more. So my main comment relates to the performance of the highest rated teams thus far. The defending champions are not known to start strongly but my judgement from watching Italy's first match suggests that the Azzuri is neither as organized nor as imperious as they were in 2006.

Of all the top-rated sides that have played at least a match, England were the most underwhelming in my view. Even putting aside the goalkeeping error that led to the equalizer from Clint Dempsey of the US, I think that not many people were impressed with overall performance of individual players and the whole team. Looking also at the Pool A, it is true that in spite of not winning, South Africa had a decent performance in the match against Mexico for a team regarded as the weakest host nation ever. France too seemed to punch well below its weight in terms of the calibre of players in its squad.

So with five matches played so far, the most impressive squad has been Germany. This is a surprise to many because of the substantial overhaul in the team and the absence of its long-term and dependable skipper, Michael Ballack. The self-assured demolition job against Australia a couple of days ago was impressive and may have upset the odds substantially.

In summary, I still think that there is much to go before firm favorites are confirmed and England may still reclaim its consideration by the quants here as potential champs. However, in spite of its high ranking and expectation of triumph, England does not look like champions in 2010. In all, prediction is difficult but the German teams seems to be well-conditioned and will make it to the next round.

Why Tax Policy is Politics

One of the things that I find useful about the experience of the last recession and accompanying economic crisis is the need to re-examine and distinguish between economics and business policy. The reason for stating this is that many people with a successful business background more often than not assume knowledge and competence in matters of economic policy. In addition, the economics crisis has led me to the more critical distinction between what advise a dispassionate economist may give on the one hand and other issues of policy that involve political choices.  This too is an area in which even economists mistake their political opinion for professional views.

An example of such an area of policy involves taxation generally and the application of appropriate tax rates to capital gains. Economists argue rightly that taxation of capital gains amounts to second-round taxation because these gains arise from income that was already subjected to taxation. Often the happy compromise is to subject capital gains to a lower level of taxation in comparison to other income. Sensible as ever, John Kay illustrates why capital gains is difficult to precisely define and therefore to exempt or to subject to taxation in  a rational and consistent way. His main argument is that maintenance of tax compliance requires that some capital gains taxes be levied. In emphatic terms, he states that the issue is "quite properly the subject for political compromise". This is one point that should be borne in mind as taxation policy is discussed. 

Graduates in Debt

Attending college and graduating with a degree is an expectation that many parents rightfully place on their children and many children respond by trying to meet that expectation. Needless to state though, some colleges are far more expensive than others even for the similar courses and yet the prestige of exclusive universities makes many students choose the universities with greater recognition. Ron Lieber of NYT covers in detail, the case of a student who attended the NYU and how she accumulated a large portfolio of loans that she is now struggling to service in full. Her situation reveals the paradox that in her case, her good education has left her with a massive amount of debt which affects her life in many respects.

Besides revealing the interesting paradox where good education becomes a long-standing financial burden for a graduate, the most fascinating part of the story is about the choices and incentives that students, parents and their advisers faced. A journey from the student's family to school advisers and to the financial institutions offering the loans tries to pin the blame. To my mind, Ron gets back to the critical issue towards the end of the story by revealing the inadequate preparation of students to analyze their financial options accurately. In other words, while students are prepared at very prestigious schools to undertake technical work and accomplish tasks, they often leave with very little financial literacy. So students take up loans in order to pay for their education but without an assessment of how these loans compare to the incomes that they should expect once they graduate. So what NYU should take responsibility for is the failure to let students understand how the loans that are available compare to their expected incomes.

Nadal Endorses Mille Watches

One of the marketing ideas that I have found to be based mostly on assumptions is the view that sales for certain products can be raised based on an endorsement from an individual with a high profile. I have questioned the idea that sports stars can endorse products not just out of the required skepticism for all marketing mumbo-jumbo but especially out of the view that the endorsement fees should be derived out of the real rise in sales that come from the endorsement.

Eric Wilson of NYT reports that Richard Mille, a designer of super-exclusive Mille watches brand has concluded an endorsement deal with Rafael Nadal to promote that brand of watches. To see Rafael Nadal as a compelling figure for endorsement of watches may make sense but I still wonder how the contract is structured. To my mind, the fact that the watches under consideration here are priced in the half a million US dollar range lads to the question whether popular sorts figures are able to push sales for such exclusive items.  

Undeniably, more people will be aware of the fact that the brand exists and that Rafael Nadal wears one during tournament play. Whether that drives further sales is another matter because the guys who can afford that much money for a watch may be reached in alternative ways. After all, how many people would leave a tennis match at the French Open and go straight to a dealer and take one home immediately. So I agree that Nadal is one of those who can afford and should have the exclusive time pieces but I am trying to understand how that translates into cash for the watch corporation. Perhaps it is one instance where the distinction between marketing and sales is clear.

Imperfect Competition and Immigrant Labor in Middle East

I found myself taking a very interesting position during a conversation with a Wall Street investment banker sometime last week. During a very open discussion about the nature and state of the economy in Kenya, I mentioned that the most intractable economic problem for that country in particular and a number of African countries generally is that of creating employment. Whereas official employment figures in Kenya suggest an unemployment level in the 19-20% range, my argument was that given the large number of people in seasonal and disguised unemployment, that figure was an understatement by as much as 50%.

Thinking that it was a fairly safe and sensible statement to make given that manifestation of unemployment in Kenya would be easy to demonstrate, I was completely unprepared for the demand for solutions that came from my interlocutor. My view was that increased deregulation and better education would be more effective for raising productivity and wages than would government involvement. In response to this, the Wall Street executive, who is well-travelled, asked me why the government in Kenya or other African countries have not initiated a labor export programme similar to that by south Asian countries including Bangladesh and Nepal.

Now our agreement ended at the point where I mentioned that there is a modest labor export programme but that it is unlikely that a large number of Kenyans would find employment in the Gulf states. Asked why, I stated unequivocally that many Persian Gulf residents and employers are not prepared to live side by side with a huge diaspora of Africans on a permanent basis. Now, that is not to suggest that the main reason is racism (though possibly it could be to an extent) but that culturally, it is unpalatable for many in the Middle East.

Obviously, a business person may be acquainted with Gary Becker's work suggesting that discrimination is not rational because a competitor would take advantage of prejudice to grow a business. For a libertarian, this makes sense from the economic point of view but an empirical test of this fact by two professors from the University of Chicago shows that prejudice may persist in spite of the formal models suggesting that it is not rational for businesses in the long term. Kerwin Kofi Charles and Jonathan Guryan wrote the paper reviewed here showing through an empirical test that wage gaps may persist especially in markets with imperfect competition. I suspect that the cultural issues aside, the imperfect competition for immigrant labour may lead to a disproportionate skew towards Nepali and Bangladeshi workers to the exclusion of identical Africans in manual labour in the Persian Gulf.

Now, how do I find the data to test that? I suspect this may be a good paper for the Journal of Political Economy.

      

Motorized Bikes in China

I still maintain that the world's largest experiment in human and economic development is going on in Asia and squarely involves the Chinese and Indian people. To my mind, these two countries are placed to prove to the rest of the world that large-scale human development is possible. By no means do i think that the success of either is inevitable but China in particular has done much better.

As recorded in this post a long while back, China's main cities have faced the problem of traffic congestion and opted to ban motor bikes and motorized bicycles ostensibly because they encouraged crime. It seems that in spite of the ban, motorized bicycles are still the rage in China and that there is public preference for this mode of transportation in urban areas. To my mind, this story in the Economist magazine demonstrate how difficult it is to completely kill and industry. Chinese firms are not only exporting large sums of bicycles throughout the world but local consumption and preference for them is growing.

Adding to the preference for bikes is the fact that they are perceived to contribute less to pollution in comparison to automobiles. The moral of the story is that controlling congestion requires a far more complex cost-benefit calculation than was envisaged.

Quants Claim England Will be Champs

The use of quantitative techniques in sports has spread from the US and is now employed by leading sports franchises in Europe. With the knowledge that the FIFA Football World Cup tournament is to begin in South Africa in three weeks, I have been on the lookout for any predictions of the performance of various teams. However, I have been completely surprised by the prediction mentioned here by J P Morgan that England would be the world soccer champions at the tournament in South Africa.

The reason for my surprise comes not only from my general distrust of the quant technology that many financial services firms have too much faith in, but more especially because of a book  that I read which shows that England perform in excess of what their fair expectation should be. Apart from this book, I am also skeptical of the prediction because the most persuasive algorithm that I have read about is Nate Silver's  Soccer Power Index developed for ESPN.

In a while rival algorithms will be published and their conclusions stated but I trust the SPI most because while portions of its are not available for public scrutiny, Nate Silver explains the logic behind it elaborately and it suggests that England will do well but is still well behind a number of playing countries. In other words, I like English league soccer but the national team is often overrated and I am unconvinced that the team is good enough to win the cup in July 2010.

iPads Welcome in Israel Now

I stated in this blog post that Israel's government impounded iPads from visitors and its citizens one month ago.To me, that was a totally puzzling thing considering that Israel is the Middle east's most technologically driven country. An article from the Jerusalem Post confirms that the government has reversed that policy and while I do not believe the initial reason behind that temporary ban, I still think that it has made the right decision now. True to my thinking that this is a country whose citizens welcome technology, the story confirms that it prides itself in being slightly ahead of other countries who are also launching the product.

Should the US Prepare for VAT?

Any curious person visiting the US notes very quickly that it is one country that has rejected or avoided the imposition of the Value Added Tax (VAT). While not a very perfect replacement, the US citizens pay sales taxes which vary by state and do not end up in the coffers of the federal government. The reasons for this difference between the US and a majority of OECD countries have been debated but the main contention now is whether the US will consider the introduction of a tax designed in the format of the VAT.

And this brings me to this fine piece by Gregory Mankiw addressing the question but through the lenses of a dispassionate professional economist. Mankiw demonstrates easily that viewed from first principles, the taxes pretty much have the the same with the added advantage of making tax dodging more difficult. Not that this clear explanation would resolve the arguments by ideologues. Democratic-leaning professionals are concerned about the fact that a VAT is not sufficiently progressive as a tax even if they prefer to increase government revenues for entitlement programmes. On the other hand, Republican-leaning individuals would be  opposed to VAT for the reason that it would lead to an expansion of government even if it is much akin to their favored flat tax.

From the perspective of an economist, the resolution of the question of the burden, progressivity and the size of government are purely political questions. As a result, the introduction of the VAT will depend on which side makes the more convincing political argument with voters. All an economist can do is let them know what the consequences of any choice is.

 

Where's the Data on African Firms?

Coverage of success in entrepreneurship has been enabled by the Internet to a very great extent. And yet very few businesses based in Africa have much prominence outside the continent. This may be because a disproportionate number of Africans are engaged in subsistence farming and the main exports from the continent are agricultural and extractive commodities. While there is demand for coffee, tea and other African exports, the main marketing firms are not based in the continent. The ostensible reason is that the commodities are backed with services that add value for which Africans have no developed a sufficient degree of competence and networks for retail distribution.

An article in the Economist magazine shows the rare African firm that has made inroads into the British supermarket chains in order to distribute a coffee brand that is entirely grown and distributed by a Ugandan entrepreneur. As expected of every entrepreneurial tale, Good Africa's penetration into the supermarket chains in Britain required deft manoeuvres. What these small number of entrepreneurs lack is the business linkages that would ease the information extraction process and improve their ability to supply a reasonable quality product. In other words, trust in business is one of the areas that hampers African exporters. I wonder whether a business mechanism for extracting that information is possible. There must be some way.

MP3s and the Changing Music Experience

Everyone who follows technology understands that new developments have a way of altering industrial organization fundamentally. One clear instance of this is the introduction of digital gadgets and the sale of music files digital stores such as iTunes and Amazon.  Together with others, these two have adapted to the fact that listeners today encounter music through portable devices and are prepared to purchase songs as single tracks. Having pioneered this, iTunes turned the rest into history.Music production corporations remained intransigent for a long time because they defended the CD format of sales which guaranteed substantial profits for selling a cocktail of songs. So one sees that CD sales over time have almost collapsed and that a new model for the music industry.

On the other hand, the variety of sophisticated gadgets and software that enables a wider dispersion of music at affordable costs has had its downsides. To my mind, the main one is that MP3 files allow for music portability in comparison to CD but have lost the acoustic fidelity that comes with listening to music on good quality speakers. It is undeniable that the sound quality of MP3 files is comparatively poor. Joseph Plambeck addresses this trade off in this NYT piece by arguing that the need to sell music through Internet stores led to great compression and the loss of the full range of auditory experiences. So to purists, it would seem that the success of the iPod and other portable gadgets mean that CD quality music is being lost. And yet again, many people who started listening to music only on the portable gadgets probably do not know better.

So while it would be exciting to listen to a real Stradivarius Violin through speakers that are as close to a live performance as is possible, the rise of portable gadgets means that only a minority of buyers will buy the expensive equipment that allows this to happen. The equipment will them become even more expensive and exclusive. So anyone with serious interest in high fidelity music today should shop for high end equipment like Burmester audio systems.

Quoting Gottfried Leibniz

"The sources of invention are more interesting than the inventions themselves". Gottfried W. Leibniz

Why Do So Many Policies Fail?

In my reading of applied economics and applied science, one of the things that comes through to me is the fact that most people have confidence in ideas that are not very well considered. This can be demonstrated in the number of business ideas and policy ideas that are wrong-headed but which have enthusiastic support and popularity. I am particularly reminded of the need for modesty in designing public policy by this article by David Brooks in the NYT today.  As expected of David Brooks, he is skeptical of most claims that differences in outcomes between people can find resolution through public policy, however considered.

Citing the interesting cases in the same outcomes among the Swedish immigrants in the US and the rest of the Swedish nation, David comes to the predictable conclusion that culture matters more than many acknowledge. His unstated view is that environment does not matter much and government cannot create success for laggards.

This is especially interesting because I think that David Brooks makes a point that is worthy of more careful review than he admits. To my mind, it is also worth noting that while the Asian American community in the US is made up of achievers, it is notable that there is no equalization in the poverty levels between the large Indian diaspora in the US and those at home. I suspect therefore that the US citizens of Swedish origin make for a biased sample on account of the fact that they arrived under different circumstances and conditions. My explanation for the record of failure of most policy is that the advocates tend to have a vicarious interest that leads to blinkers regarding its obvious failures. It is just proof of human fallibility and brashness.

Buy Soccer Players Now

One of the most fascinating things for sports fans is how the main the managers and coaches make decisions for recruitment of players. related to this is how fans and enthusiastic team owners judge the performance of players. Recently, I read this book by Simon Kuper and Stefan Szymanski and confirmed a number of things about the management and economics of soccer. The authors use as data analysis approach to answer a number of questions that many soccer fans and club managers consider as obvious.

Among the nuggets of wisdom is that the choice of players is not as objective as should be because clubs overpay for blond players and those who have performed well in a major international tournaments.  with this in mind, I have been setting my eyes to see whether managers will again be fooled by performances during the World Cup tournament in South Africa in June. Arsene Wenger, the manager of the Arsenal Football Club has just confirmed that he has commenced negotiations for players and expects to conclude discussion before commencement of that tournament. Indeed, he states publicly that his intention is to avoid the inflated prices that would result from performances during the tournament. the authors mention that this is one of the mangers who trusts data and his economics reasoning above the conventional wisdom. What surprises me is that there will be the inevitable scramble for a few players who perform well after that tournament while the information shows that that is a poor predictor of longer-term performance.

Full of PowerPoint

One thing for which I give credit for professionals in the military is that they understand the need for clear communication. I am not surprised therefore to read here that the US military uses PowerPoint presentations a lot in explaining strategy and for information across ranks. And yet the story emphasizes that a number of officers are frustrated with the uses of PowerPoint as a tool because it fails to capture detailed connections between separate ideas.

As I see it, one is bound to suffer frustration with a tool such as PowerPoint for a number of reasons. the first one is that many people who use the facility forget that it does not dispense with the need to communicate clearly. And so choice of flashy slides is good but that still requires that the presenter should understand the substance. So I cannot be as sure as some people are that Power point is the problem though I have seen enough people forget that it is a tool for communication that should be used with a lot of forethought.  I favour power point in situations where there is limited time as it may help one to construct the presentation by thinking in a sequence. It may just be that the tool is inappropriate for certain levels of communication.

My Forgotten Mathematician

In the last blog post here, I referred to an article in the Guardian that classified the author's mathematicians of all time. In addition, I commented on the fact that there were a number of mathematicians that i would include in the list in addition to mentioning the paucity of female mathematicians and higher order thinkers on that list. Having reviewed that hurriedly-written blog post, I note immediately that I mentioned two mathematicians that would fit in that list. This was an incomplete list because John Nash Jr. and John Von Neumann are contemporary scholars of the subject and whose works are largely related.

So I would like to add the mathematician known as the "Father of Algebra" whose contributions to the study and documentation of mathematics are enormous. Besides contributions to algebra, cartography and astronomy, this individual is credited with the introduction of Indian numerals and the decimal number system to mathematics. The significance of the decimal system and algebra makes him worthy of as much recognition as many on the list on which my last post was based. To my mind though, I am most pleased that one of my favourite words, "Algorithm" is derived from the name Al-Kwarizmi, the scholar from the House of Wisdom in old Baghdad. His contributions were recognized by the Soviet Union in the issuance of the commemorative stamp for Al-Kwarizmi's estimated 1200^th birthday.

Guardian's List of Best Mathematicians

A couple of weeks ago, Alex Bellos put together this interesting list of mathematicians whose works he considered revolutionary. I notice that the list is merely placed in a chronological order but its contents are still interesting for a number of reasons. First is the fact that Pythagoras is recognized as one of the earliest mathematicians whose discoveries are still relevant and recognizable for students in formative school years in spite of the fact that most of his papers were lost and none is available for study today.

Secondly, it is noteworthy that the list has included a woman who would be recognized perhaps by only students of history of science or pure mathematicians. Political correctness aside, it is essential that the role that women have played in development of higher order thought be acknowledged purely as a matter of historical record. Hypatia is worthy of being on the list.

Thirdly, I recognize a good number of contemporary mathematicians starting with Paul Erdos and Georg Cantor whose works would be readily available today even if a very small number would be able to plough through them. Unsurprisingly, Grisha Perelman is on the list and I am sure that his recent contributions and reaction to certain awards ensure that he will be in many lists for a long time.

Asking myself who I would add to the list makes a number of names run through my mind. Among them is Teano, who was Pythagoras' wife and co-thinker in the academy. More recently, I would highly consider John Nash Jr. and his colleague John Von Neumann who made the subject of game theory an important part of modern thinking and scholarship.  

Confronting African Involvement in The Slave Trade

Many people who read dispassionate accounts of slavery are invariably appalled and shocked by the cruelty that accompanied the commoditization and sale of human beings by others. The phenomenon of slavery is one that makes me take a step back to ask where ethics and markets intersect. And any knowledgeable person also knows that the US paid a huge price in the Civil War before the issue was resolved in part. Many people in the US accept the moral error that led to the enslavement of Africans shipped onto the continent and were owned by a number of families and individuals.  An enduring though impractical argument has been that some reparations are due to the descendants of the slaves on account of this moral crime.

In this article, Henry Louis Gates Jr. has confronted the less acknowledged side to the story of the huge market of slavery before abolition in Europe and the American continents. That truth is that a large number of African kingdoms willingly conducted raids and built fortunes through running huge slave markets. As the article reiterates, most of the slave merchants simply appeared on the ports and few ever entered into the interior in large numbers. Understandably, this complicates the demand for reparations because all of Africa has cast itself as a victim of the great injustice based entirely on racial prejudice. Still, I find that while Henry Louis Gates Jr. has exposed the ability of Africans to stand eyeball to eyeball with the contradiction with the main powers from Europe bearing most of the shame. The missing story is that of Arab collaboration in the slavery movement especially in the North and eastern coasts of Africa. To my mind, too often the equally brutal role of the Arabs in Africa is easily forgotten or subsumed in the story about the transatlantic slavery. Unlike the professor, I am less confident that President Obama's involvement will end the blame game and so I only wager that the history be taught with high fidelity to facts.

Rent or Purchase

Granted that the discipline of economics assumes rationality on the part of most individuals most of the time, there are still a large number of myths and legends that inform people's action in markets. Reading through David Leonhardt's piece in the NYT reminds me of one that is most pervasive. Several months after the economic crises that engulfed most of the economies whose citizens earn high incomes, it is still taken as an article of faith that home ownership is much preferable to renting at any time.  I find that it is just so difficult to convince people that rental and ownership are alternatives that are dependent on the circumstances both of the individual and the overall market conditions.

In the piece, the author states that rental versus outright ownership requires a rough calculation of the ratio of rental to that of purchase. While it is not an iron law, it easily demonstrates that by dividing the purchase prices to the annual cost of rental is a good guide about the better decision to make. An index beyond 20 shows that the rental may be a better decision on the margin than ownership. So the instinct to purchase and be a home owner is strong but that should not make one opt to own a house by all means. And this is not advise that only favours the individual who is considering purchase because the same index suggests that an owner may sell to an unwise buyer when the ratio would call for renting instead.  

Bring No iPad Here

If someone asked a question about which state would try to impede the use of the iPad by its citizens, I would not think that Israel would be it. And yet this story in the Washington Post reports that the Middle East's most astute government in economic policy has just done that. I do not fully accept Israel's policies in the political field but its economics and approach to technology is something that I have lauded here before. And that is why I find the reason given for refusing to allow entry of the iPad into the country completely puzzling for its wrongheadedness. What's really happening?  

A Study on African Land Deals

A while ago, I wrote to blog posts here and here on the trend for corporations to approach governments in Africa to allow investments in agriculture through long-term leases. As I called, it then, this land rush was a new area and one in which the investment model was particularly susceptible to local politics and related political risks. I may not have stressed sufficiently but it was clear that this was one area of international public affairs that had not been more incisively examined.

I have just encountered a most professional attempt to by the IIED here to create an understanding of the phenomenon of huge investments in farming through land leases in Africa. The study confirms my thinking that the political risks are real and will ultimately determine the returns to the investments in addition to the fact that the credibility of the governments is questionable because the contracts are highly secretive. This lack of transparency undermines the good faith that citizens of these nations may have for a new investor.

Less convincing is the suggestion that governments should ask hard questions of investors in addition to determining whether land acquisition is meant for speculative purposes. My view is that most governments will have an incentive to record any new investment and that added to the lack of disclosure on the agreements raises the likelihood that the agreements will be skewed and the lease terms will be very low. Overall, the dearth of information on the subject makes the report immensely informative even if its prescriptions are not wholly palatable to me.

Absurdity of Gene Patenting Demonstrated

Following my blog post here on the judgement that gave a much appreciated push-back against broad patenting of genes, I have come across a number of other comments on the implications. Ben Goldacre's article in the Guardian makes me revisit the question because he cites a data-based study that demonstrated the absurdity of allowing such broad ownership over pre-existing genetic matter in humans. In short, the paper that he cites suggests that the patenting of this single genetic sequence makes it impossible to conduct research not only on breast cancer but on a wide number of other genes in every human being. In short, the genetic sequence and its components occur so regularly that it extends to virtually every gene in every single human being.  If one needed evidence from data and basic science that this form of patenting is absurd, then there it is.

Hidden Subsidy and Corporate Perks

One of the most interesting things about any tax allowances is that it does not necessarily eliminate that tax but most likely would transfer it to a separate payer. This fact has been aptly demonstrated in this NYT article by Richard Schmalbek and Jay Soled. The essence of their correct argument is that the decision to allow corporations to deduct the purchase price of baseball tickets from their taxes has not only altered the nature of the crowds attending sports events in the US, but has also driven the inexorable upward trend in ticket prices.

The complete argument goes that these firms are less sensitive to the prices of tickets because they can make total deductions of the prices from their overall tax liability. The unintended consequence is that best seats for sports events are purchased by these competing corporations, with the higher prices of seats conditioning sports franchises to create profits while reducing the sizes of the sports arenas. In spite of the soundness of the economic reasoning in the piece, I am less convinced that the reform of this distortion is necessary primarily to alter the composition of the individuals attending games. The best argument is that government ought not to redistribute taxes through firms that are trying to entertain their clients.

This case of applied economics shows how difficult it is to design tax breaks and how the resulting distortions  can have indefensible consequences.  

Gary Becker on Interest Groups

"The idea that interest groups can derive specific, concentrated benefits from the political system—yes, that's a very important insight," he says. "But you can have competing interest groups. Look at the automobile industry. The domestic manufacturers in Detroit want protectionist policies. But the auto importers want free trade. So they fight it out. Now sometimes in these fights the dark forces prevail, and sometimes the forces of light prevail. But if you have competing interest groups you don't end up with a systematic bias toward bad policy."- Gary Becker 

Push-back on Genes as Property

As a start, I support the idea of individual or corporate property rights as an irreducible question of freedom. This is based on the belief that ownership comes with choices and clearly defined rights are merely ways of according arrangement to a right that is inherent. That notwithstanding, the radical extension of intellectual property rights sometimes leads sensible people to question to what extent the assertion may go. Practitioners and scholars have argued for close to two decades now about the ability of firms or individuals to assert property rights through the legal instrument of patents, on biological organisms or portions such as genes.

It is mostly biotechnology firms that have tended to assert patent rights on genetic material by arguing that the isolation of genes creates a property interest in them. A judge in a US District Court appears to have momentarily put the brakes to a biotechnology company's claims to patent a couple of genes that it isolated as predisposing factors to breast and cervical cancer. To my mind, the judgement is correct primarily because the discovery f genetic material such as genes that already existed does not meet the test of having created it. True that it is a great service to isolate the genes but there are scientists who discovered blood groups and rhesus factors but cannot sensibly claim patents on those.

Secondly, my thinking is that because intellectual property rights recognized by the legal instrument of patents create monopolies around knowledge, the test for granting them should be strict indeed. This is not to say that they ought not to exists but rather that the isolation of the two genes by itself has led to an identification of a factor but that should not extend to ownership of those genes which precludes research in alternative ways of conducting tests to determine risk factors. A balance of these factors against the need to provide incentives for basic research leads me to the conclusion that the judgement was correct. As the story states, Myriad genetics was already using the patent to charge patients high fees for tests with full knowledge that the patent meant that there would be no alternative test based on the same genes.        

Banning Poker in Russia

One would think that of all things that governments realize today, it is the lesson that a multitude of rules does not  guarantee improvements in welfare. But bureaucrats have this tendency to ascribe the possibility of armageddon to any activity that some people are drawn to. True to its statist history, the government of Russia has announced a ban on playing poker for cash. This was accomplished by the de-listing of poker as a sport and therefore cannot be played for money.

Besides the annoyance that this creates in people who play poker with their friends for small wager, just what does this new rule accomplish? To my mind, the response form those who wish to circumvent the rule would probably be to keep records away from the playing tables. However, this rule is completely silly because these bureaucrats in Russia seem to be unaware of Partygaming and other online gaming corporations. But pragmatism is not a forte of most bureaucrats and in spite of the certainty that enforcement will fail, they would rather try.

Figuring Out Grisha's Incentives

In the last post, I mentioned that Grisha Perleman treated the fact that he was awarded a prize for having solved the Poincare Conjecture with nonchalance.  And I contrasted this to my strong belief that financial prizes especially are a superior way of organizing for intellectual work directed towards the solution of scientific, technical or policy problems. Searching around for any explanations from professional economists to explain Grisha's rejection of both the Fields medal and the Award that comes with a US$ 1 million prize led me to a talk by Steven Levitt. In it he says that financial incentives are demonstrably overrated because people acclimate to them quickly and they fail to provide incentives thereafter. Granted that prof. Levitt was discussing financial incentives as used by businesses, it is still worth noting that designing incentive systems is difficult.

So that leaves the possibility that Grisha Perelman is surfeit with the "psychic income" emanating from solving difficult mathematical problems. Still, the mystery is that Grisha found the prestige that comes with the Fields Medal and the singular distinction of acclamation from the Clay Mathematics Institute to be unimpressive. Perhaps he just want to solve problems in mathematics and be left alone.

Gregory Perelman Demands No Pay

Grisha Perelman is a mathematician who generated a solution to the Poincaire Conjecture, one of the more difficult problems in mathematics. Sylvia Nasar and David Gruber provide a background to this problem in a profound and revealing piece in the New Yorker Magazine a while back.  Grisha Perelman provided the proof by uncharacteristically publishing it on a website without bothering to send it to the formal mathematical journals. Later, he was deservedly awarded the Fields Medal by the International Mathematics Union and he declined the invitation almost contemptuously. 

 I learn every day that all the principles of economics are very strong and can be objectively demonstrated but also that some have definite limits. To start with, I have argued on this blog that one of the best ways to get solutions for academic or policy problems is to assign adequate prizes for them. The argument being that the financial reward mimics the market mechanism by presenting an incentive towards the development of the solution. About a week ago, the Clay Mathematics Institute announced that it awarded the Millenium Prize for the Poincaire Conjecture to Grisha was confirmed and he was therefore entitled to the US$ 1 million prize. 

Surprisingly, Grisha has neither  acknowledged the prize nor accepted the financial award in spite of evidence that he is not materially wealthy.  It may well be that there are a small number of people whose reward is the conquest of a longstanding and difficult problem and that the solution may be its own reward. 

Misuse of Airport Scanners

It is altogether understandable that concern for security has led to an introduction of procedures for passengers in order to ensure that air travel is as safe as possible. This concern with security has gone to such ridiculous levels that all reason has been abandoned in the quest to show that someone is doing something to protect vulnerable travellers. I think this need to strip belts, take off shoes and undergo a number of searches is just beginning to speak for itself. And all it says is that there is the the introduction of rules every now and again without much thought about whether it really reduces the security risks.

Right after an incident during a flight to the US in December, a number of airports rachetted upwards the security processes. Among the new rules was the full introduction of scanners that can see through clothing. Well, a case in the United Kingdom here shows that airport security officials who use the scanners have been using it to amuse themselves at the expense of passengers and their female colleagues. My purpose is to show that security thinking needs to be based on more sense than the fear.

Is Obama Still A Novice?

Irrespective of one's ideological orientation, a truly historic event took place in the US over the last couple of days. That event was the passage of a substantive health reform bill despite partisan divisions and with the conventional wisdom having been shown to be wrong again. While I have libertarian orientation, I was most displeased with the racist and obstructionist approach that replaced dispassionate analysis of the proposals of the bill. Having done some reading on history and political thinking, I thought that the socialist tag from partisans opposed to the bill was altogether cheap and dishonest.

The main part of this blog post however is to note a factor that many pundits and professionals fail to see about politics in general and the incumbent US president particularly. President Obama is a far more reflective and competent politician than his critics admit in their cynicism. Needless to mention, he got the stimulus package passed, accomplished a good record on economic management in a bad environment to get the markets up by a margin that is impressive and has now got his main domestic policy initiative passed. All this while many still consider him as a novice.

The more substantive issue is what this achievement means for President Obama's leadership. Daniel Gross summarizes the undeclared fact that it is dangerous to short Obama. His explanation for the reason that most of those who have questioned Obama's economic management capability have got it wrong comes from the composition of the self-selected crowd. And to an extent, most of them are Wall Street insiders and some corporate people who are known to have strong ideological orientation against state action but that does not work for positive political judgement. Judging from the group think that still dominates, I agree with Daniel Gross that this crowd has learnt little from this huge miss.

Format for E-reader Referencing

No need to confirm that I have been quite enthusiastic about the availability of electronic books generally and the e-book reader the Kindle in particular. After a couple of weeks of assessment of the device, I am still convinced that while the iPad will be out in a short while, I will not consider buying a more expensive gadget while the Kindle is still available. However, I am faced with a dilemma regarding the use of the Kindle and I am wondering whether there is any solution out there yet.

This dilemma comes from my thinking that most owners of the Kindle so far are probably voracious readers of books of all kinds. A number of them are definitely academics with a substantial proportion comprised of professionals who may even require the gadget for the performance of their regular work. These users of the Kindle have the ability  its users have access to a clipping facility in addition to wide storage of texts. Noting that the Kindle has understandably replaced pagination with a location facility has led me to wonder whether there is a mechanism for referencing pieces from the texts available in Kindle format. What happens when one needs to write an article and the article to be referred to is available in Kindle format. To my mind, this is not a trivial question because e-readers will be a facility for using text books and professional journals soon.

More on Merida Initiative

Blake Hounshell of the foreign Policy Magazine posts on his blog here about the wrong-headed approach to the drugs control policy in the America's. Similar to the views expressed in the last post on this blog, he says that its clear that a doubling up in a failed policy will yield no better results. Militarization of the fight works perfectly into the hands of the cartels. It is pretty clear that the failures are clear to many in the administration but nobody will broach the issue of abandoning the fight in its present form. The worst policy is to fail to accept when faced with a failed policy.

War on Drugs is Like Pushing a String

Perhaps there is no single subject that I have consistently posted opinions on this blog about than that of the appropriate policy approach to drug control. To my mind, the existing enforcement and militarized approach has nothing much to show in terms of good results other than a rise in violent death for innocent citizens and law enforcers. Painfully though, the deaths take place as the cartels and major drug trading enterprises continue to make enormous profits that enable them to destabilize low-income states. This trend continues as the last weekend saw the attack leading to death of two citizens of the United States and their Mexican associate in the Mexican City of Ciudad Juarez.

Obviously upset by the continued violence from the drug cartels, both President Calderon and Obama seem to have decided that more of the same will create the needed change. This NYT story states that the Mexican president visited and commisserated with the families and thereafter promised a more focussed military onslaught on the drug cartels. This is not new at all and will obviously not work even if it is spruced up with some judicial reform and social welfare expenditure. On the other hand, president Obama is to announce the expenditure of more money on joint military units and more law enforcement. This is consistent with the Merida Initiative that was predictably going to fail and from which no lessons seem to be absorbed.

So I offer some recycled simple advise regarding the Merida Initiative. Stop pushing that string.

Exploring Income Inequality on Data Explorer

I use a large amount of Google's products and I consider a number of them quite useful and very well designed. However, I have a growing interest and competence in manipulation and rendition of data in ways that allow for the extraction of meaning and the Gapminder site has been a wonder for me. I cannot recall accurately but I have been aware of its acquisition by Google and so I was not surprised when Google's version of Public Data Explorer was launched.

The chart on this post represents my first use of this impressive facility. However, I am not merely intent on showing the discovery of a new toy but to see what that data illustrates. Based on 2005 data, all the BRICs seems to have a skewed distribution of income with the income share of the lowest 20% of the population being below 10%. I picked Bangladesh for the purposes of comparison and it is evident that in spite of the fact that it has the lowest per capita income levels and the smallest GDP, the bottom 20% of its population earns 9.3% of the total income.

Differences in income alone do not tell much but taken together with other socioeconomic and political factors, it is clear that for all the miracles of their growth, most of the BRICs will be developing nations for a while longer. That chart also reveals that for all its poverty, Asia exhibits lower levels of income disparity than South America.

The Overconfident Investor

Political correctness is so rife today that it is very dangerous to make comparisons between races, people and especially between men and women. Larry Summers last tried to make a sensible distinction and ended up having to leave Harvard University without succeeding in taking required discussions forward. To my mind, political correctness of the worst kind allows for stereotypes and other associations to remain intact without their being subjected to proper scientific discourse.

One of the industries that is palpably under male domination world over is that of investment management. the explanations often given are about the glass ceilings that women and other minorities face. many of the men who undertake most investment decisions are characterized in the media and by business commentaries as extremely masculine and driven by adrenaline. be that as it may, a study by a mutual fund known as Vanguard, suggests that male investors indeed adhere to the stereotype but they often have nothing to show for all the swagger and overconfidence. The argument seems to suggest that unlike female investors, the overconfidence by males leads to errors of frequency of trade and timing entry and exits out of investments instruments and with that losses that would be avoidable. 

Taking forward the discussion about differences in investment behavior between the sexes, Jeff Sommer of NYT refers to studies that confirm that even in that heavy hitter's transaction of mergers and acquisitions, male executives tends to overpay for acquisitions. Now, that sends me dizzy because being a skeptic of most acquisitions and mergers, I already know that they tend to be value destroyers. If men do that badly here too, then perhaps business schools would do well to restructure curriculum for male MBAs. Now this does not in itself give me the license to state that women are "intrinsically" better businesspeople, but its clear that at the margin, the data shows that female managers may be better.       

Is Monsanto Price Gouging on Seeds?

Many people who are suspicious of genetically engineered organisms (GMOs) regularly mention that the commercial seeds industry is an area to watch. The argument being that most of the genetic modification on seeds is motivated by the quest by the largest firms to establish substantial market power and to use this to keep farmers forever beholden to them. On my part, I think that it is unjustifiable to impute malicious intent on firms just because the possibility of future dominance of a market is possible.  

Richard Neumann of the NYT reports that the US Department of Justice has commenced an investigation on the dominant player in the seed industry because of the unrelenting rise in seed prices. While a rise on its own is insufficient evidence to support a finding of dominance and abuse of the same, I too think that the rise in prices well beyond the Consumer Price Index is a curious fact about the seeds market in the US. Indeed, any student of economics would think that such a sustained price rise is only possible for a corporation with solid market power. 

Needless to mention, the corporation under investigation is Monsanto, a leading biotechnology innovator with lucrative licenses and patents on seeds such as cotton, corn and soya beans.  While the story suggests that Monsanto's managers are not worried, the market behavior of this firm will be under especial scrutiny since it has been the firm that faced the most strident, if often unfair, criticism on GMO innovation and marketing strategies. Indeed, a large number of organizations seem to exist merely to attack this firm. While Monsanto may correctly ignore the majority of its detractors, it will again be in the limelight given that the DOJ investigation will attract new concerns about its behavior towards its customers and the competitors. I hope that the firm receives good regulatory and political risk advise because if the farmers quoted in the piece accurately represent the views of many, then Monsanto seems to have lost the support of its most important constituency. That would be make the winded investigation and any court cases unbelievably difficult.  

Kindle or the Ipad?

A  couple of weeks ago, Steve Jobs of Apple Corporation introduced his audience and other techies to the the new gadget called the iPad. As a prelude to that fantastic presentation, he confirmed that Apple has evolved into a mobile devices corporations since it ships MacBooks, iPods, iPhones and the rest. Among the many amazing things that the iPad can do is to act as a mini computer that can handle the word processing and other applications that would include games, email access, photo storage and retrieval, music and an electronic reader. Because this blogger comes late to this issue, I will not try to sum up the many wondrous other things that the gadget is capable of.

However, the conventional wisdom of the Apple enthusiasts is that the Kindle is nearly dead because the iPad is certainly bound to replace it as the e-book reader of choice. As someone who has just recently acquired the Kindle 2 and is just reading the first book on it, I am inclined to disagree with these flowery assessments of the iPad's inevitable conquest of the market for electronic gadgets for readers. 

Judging from my considerable research and limited use of the Kindle 2, I am wont to disagree with the idea that this will completely bring Amazon's Kindle to an abrupt stop. First, I agree fully that the iPad as demonstrated by Steve jobs here is impressive because it can do a lot of things and is therefore not a dedicated instrument for readers. Instead, it does many things out of which reading e-books is merely one of them. To my mind, dedicated readers who are attracted to the Kindle for the reason that it makes reading easy and convenient will not all be impressed with the bell and whistles on the iPad. 

Additionally, my comparison of the prices for the Kindle 2 and the iPad leads me to the thought that the added features of the iPad  places it at a disadvantage in respect of the e entry-level Kindle 2. I must add that apple rarely gets its pricing wrong and that this price will predictably fall when the gadget reaches some critical mass within a couple of years. Still, at US$ 499, the price signal is that this is an Apple product that has wonderful graphics and aesthetic appeal but serious readers are used to the white page. 

In essence, I wager that the iPad will not wipe out the Kindle and that the effect that the former will have may be overstated because of the aesthetic appeal of the gadget and the surefooted legacy of the Apple corporation. As the gadget for a serious book reader, the Kindle is still the standard. I think that what this competition is a mere trumpet call to the publishers to take the industry seriously enough. I am certain that publishing will not be the same again.