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.