TB Prevalence and IMF Loans

I have had an interest in understanding the factors that drive morbidity and how principles of economics could be used to cut the rates of spread of diseases. More recently, I noticed that tuberculosis is very costly to cure and was thinking that an appropriately designed incentives scheme would ensure that patients commit to the long treatment required and thus ensure complete cure and eradication of the pathogen. Admittedly, that would not be a new idea at all.

However, Sydney Spiesel of Slate Magazine alludes to this study which has interesting and very novel findings. Using multivariate regression analysis, David Stuckler, Lawrence King and Sanjay Basu find that programmes designed by the International Monetary Fund (IMF)are correlated with adverse health effects in countries as measured by the spread and prevalence of tuberculosis. The assertion is sensible because IMF programmes are all around known to be very stringent and often require adjustments that lead to a reduction of the quality and quantity of services that were hitherto provided by the public sector. In the case at hand, the study claims that the causality in the increased prevalence of pulmonary tuberculosis is because of the reduction in the number of medical personnel. This is particularly important for TB patients because of the close and constant supervision required in administering the medication. The most sobering claim is that every extra year of the loans associated with the IMF leads to a 4% increase in mortality. Certainly, it is not the IMF loans that is causing the deaths but this is a cruel illustration of the law of unintended consequences.

This fascinating and novel study is bound to inspire a response from the IMF. I cannot wait.

Diet Bullying Japan's Fat People

One subject that this blog has covered innumerable times is about obesity and the public policy responses to it. Broadly stated, I understand that the fear created about the dangers of obesity are as wrong-headed as the approaches for reducing obesity. The consistent view on this blog has emphasized three points.

First, regard for personal freedom makes it difficult to support the view that governments should have to directly engage in patronizing behaviour by directing individuals about ideal weight. Secondly, the figures presented about the welfare losses from obesity are exaggerated and fail to account for the gains that emerge from early mortality that is claimed to result from obesity. Thirdly, if there's a compelling reason to interfere with the lifestyle choices of its citizens, then government should provide a monetary incentive such as was provided by the mayor of Varallo by paying citizens to lose the weight.

I maintain that this is still a sound approach but the government of Japan seems to prefer the sledge hammer approach. Here's an article on Cato Institute's site by John Luik and Patrick Basham that dissects the unbelievable folly that mandates all citizens aged 40 years and above to undergone measurement of the waist to identify the obese and demand the shedding of that weight within some time frames. As if that were not bad enough, the failure to successfully lose that weight would then lead to compulsory re-education on health.

Now, the idea is not only bad in principle but the tack taken towards re-education is a reminder of very intrusive Soviet and other oppressive regimes with little respect for individual liberty and personal choice. If this was not on the Cato Institutes's site, I would have dismissed it as a bad joke. I have not been to Japan but I imagine that few people in a society such as that would wish to be referred to as the Weight Commissar.

Discoveries Come in Multiples

When I read this book by Edward Hooper trying to explain the source and spread of the virus that causes aids, I found it curious that two teams working separately had independently discovered vaccines for polio. The vaccines were produced by Albert Sabin and Jonas Salk within a short period of each other but I did not think it through enough in spite of my earlier knowledge that Isaac Newton and Gottfried Leibinz also independently discovered calculus.

Malcolm Gladwell's dated piece in the New Yorker magazine discusses the fact that there's a very pronounced and definite tendency for scientific and technological discoveries to occur in multiples. Explaining the work by a firm known as Intellectual ventures which was founded by Nathan Myhrvold, he argues persuasively that scientific discoveries are not as rare as conventional thinking has it.

By necessity, thinkers and researchers are acutely aware of the main gaps in knowledge for their disciplines and this may explain the phenomenon of multiple discoveries. To my mind, the factors at work suggests that keen researchers work by assembling critical knowledge about the problem and by looking at the entire set of information, are able to generate insights on where the solutions may lie. To my mind the article also suggests that in the same way that material scientific discoveries lead researchers to arrive at the correct solutions independently, it may also be that errors manifest the same tendency. But the critical factor is that good scientific ideas are not scarce.

Monet Breaks the Record

I recall vividly that I first saw both a painting by Picasso and Monet at the National Gallery in London. While I am by no means a connoisseur of art, I was overwhelmed by the pure beauty and the depth of the collection. I visited a couple of times during a week and found it really taxing to the senses. Placed on different floors throughout the gallery were may but the most impressive included Klimt, Gaugin, Cezzane and Manet in addition to the two mentioned above.

I may never be able to figure out how to really price any of these rare prices of paintings but Charlotte Higgins reports in the Guardian is an apt reminder that I am not alone. Some wealthy and aesthetically minded person paid up £40.1 million sterling for Monet's Le Bassin aux Nympheas through an auction. Auctions for rare pieces confirms my view that auction theory in economics is one of the more valuable areas of the wide and increasingly arcane scientific endeavor. To my mind the record price for this piece by Monet, all in the midst of a troubling and probably worsening credit crunch, is evidence that the price mechanism correctly values Monet's pieces. Noting that the premium for this piece is determined by its rarity and aesthetic appeal, I am glad that a number are in public display since I hardly would have seen any.

Paying Students for Good Results

Whereas the phenomenon of differential performance in education is one that is an issue for debate in the US, in many societies and countries, there are distinct groups (often minorities) whose educational attainment is comparably lower than that of others. Explanations for these differences in attainment range from innate ability, poor parental supervision, the lack of appropriate models to institutional and racial biases. Still, some people retain vehement opposition to the proposal that students could be given financial incentives to study and perform well in spite of the clear evidence that many students do struggle to do reasonably well in school. It is understandable that it offends the strict moralist view that an individual should make the calculation that good academic performance is in his or her direct interest but that does not mean that such opposition is always well-informed.

Roland Fryer, a professor of economics at Harvard University and the American Inequality Lab is not only qualified to comment on the extent to which any of these answers are true but is also the person from whom one would expect tested solutions. According to this article in Times Online, Roland Fryer is testing an incentive programme in New York city schools. While it may be anathema to many, cash incentives seem to be working and this has attracted the admiration of teachers who were initially skeptical and ideologically opposed to the experiment.

Most fascinating is the professor's argument about why the incentive structure should work for black students. It is because white students often are alive to the benefits of education by looking at the material comforts that their parents are able to afford on account of their superior education. It may be expecting too much to think that this is a silver bullet for problems of the under achieving youth but better learning even for its own sake is good enough.

Defining Hyperinflation

Thanks to the shameless tyrant Mugabe and the craven leaders of the African Union, every Zimbabwean lives the fact of hyperinflation. However, professors of economics and business may find this definition of some use in introducing students who cannot contemplate that phenomenon. A pithy statement on political economy.

"What kind of leader will preside over a country where the weight of the money required for a loaf of bread is heavier than the loaf itself?" Azubikwe Ishiekwene

A Slave for US$ 200,00 Weekly

In my belief that the contract between sportsmen and their teams is based on freedom of exchange and association, I have stated here that Manchester united should accept an offer from Real Madrid soccer club in respect to Ronaldo. In addition to the belief in economic freedom, my thinking was that it is not wise to keep an obviously dissatisfied player in a team merely to make a point to competitors. The case was not complicated because Real Madrid realized that Manchester United would not let off their best player for at a small price. So the pundits had it that the offer for the club was upwards of £ 70 million with a weekly wage of nearly £ 200,000 for the player. the economics of it is clear and that is that the trade should be concluded.

This situation has not been helped by a comment by the Sepp Blatter suggesting that there is "too much modern slavery" in sport. Instead of seeing the obvious irony of a statement like this from a man who heads an organization that makes quite a ton of money every year from the industry for which it does not provide much, Ronaldo must have aggravated his club managers further by unequivocally agreeing with these sentiments. However, I disagree with both Ronaldo totally since his his wages and conditions of work, to which he is fully entitled show that this overstated. I add that it lies ill in Sepp Blatter's mouth to berate clubs for anything when he is at the same time proposing protectionist quarters to prevent the same European clubs from signing players outside that continent.

A person who preaches economic discrimination and tries to limit the rights to freedom of contract should be more humble here. In order to really understand the economics of the slave trade, he should check this book by William Fogel. In short, those conditions are not comparable as no slave was in a position to demand a trade to a better farm.

The Best Book on the Market

One of the most admirable think tanks that I have had occasion to visit is the Adam Smith Institute based in the UK. Eamon Butler is its director and has just written a book under the title, The Best Book on the Market. On the podcast available here he discusses the ideas contained in the book. A reverberating idea in there is the deficiency of text books in stating clearly how markets arise and for emphasizing that it is not a machine but rather an institution created from human action.

In the interview conducted by Alex Singleton, he responds to the question of the most mischievous idea in the text by stating that first it is desirable for every person to own a text book on economics and that ownership should be followed by ripping off the chapters on perfect markets because that chapter's description of markets is bound to be wrong. He also puts forth a strong defense of the market as a surprisingly moral institution by harnessing self interest. A text that I will be acquiring presently.

Markets are Tiger Friendly

Wildlife conservation throughout the world is an area in which the application of principles of economics finds very sparse. Oftentimes advocates for conservation of species and governments are loathe to consider commercial use and trade in wildlife. Unfortunately, in discussions on conservation,emotions tend to drive the debate and the instinctive reaction is to call for more laws and prohibition. As a result, the tiger population in Nepal has been consistently decimated to the level that it is not only close to extinction.

As reported here, in spite of the fact that Nepal was home to the third largest population of tigers, it is now estimated that there are fewer than 150 live tigers in the country. Acknowledgment of the problem is fine but I am loathe to accept the blame on the illegal trade in tiger parts. the entry of international gangs in the trade is itself proof that the existing regime is only of help to poachers and traffickers.

Having appeared a couple of years ago, this article by Barun Mitra in the NYT now appears prescient because it stated clearly that saving the tiger population was possible and could be accomplished through commercialization. Even if it is counter intuitive, his thinking is quite sensible and is akin to an earlier argument on elephants that I proposed on this blog. To continue with this wrong-headed approach of prohibitions merely ensures that there will be far fewer naturally bred tigers and that ultimately, only private breeders will own any. It is instructive to note that there are more tigers in private ownership than are available in the wild. Nepal's National Parks and Conservation Department should call on Barun Mitra here.

High Petroleum Prices Not all Bad

This blog has in posts such as this lauded the decision by the former mayor of London in introducing a mechanism for charging vehicle owners for use of roads inn central London. As stated in on of the many posts here, the idea was not only successful, but it was was widely copied. The former mayor's counterpart in New York however failed in securing approval to introduce road pricing within Manhattan. This NYT piece now argues that the rise in the prices of gasoline seems to be having effects proximate to mayor Bloomberg's intention. William Neuman reports that the Metropolitan Transport Authority confirms that traffic reduced by 4.7% as a response to the price of gasoline passing the price of US$ 4 per gallon. Evidence for the claim that the rise in price is responsible for the changed behavior finds support in the concurrent increase in public transport.

Interesting as this unintended consequence of an increase of prices may be, it is still relevant that the effect is a reduction that is not confined to the more congested roads and bridges as the mayor's congestion programme had intended. Thus, the rise in gasoline prices affects all motorists in the same manner as it cannot be targeted to the most congested streets. the limits of the unintended consequence is also that any reductions in price would probably reverse the trends. Most important though is that the gains from congestion pricing are not only in the reduction of traffic and its effects on pollution but also that the revenue generated could be utilized to maintain infrastructure. this advantage is clearly not possible when reduction in traffic is driven by the rising prices of gasoline.

Quoting Bertolt Brecht

"The aim of science is not to open the door to infinite wisdom, but to set a limit to infinite error." Bertolt Brecht

Stop Blaming the Speculators

Most commentaries about the rise in commodities prices are more interested in assigning blame to speculators, US alternative fuels policy or on the growth of China and India and the pressure on supply. I see much less in terms of the apposite responses that corporations, households and governments in terms of pubic policy.

Two articles here and here by David Koenig and Robert Samuelson respectively are taking the discussion forward by reporting on different aspects of the issue. To start with Koenig's piece in Business Week shows how the more astute managers of Southwest Airlines took to hedging against the volatility in prices of fuel by hedging intelligently. The idea behind this is quite clear because it proves that an understanding of the underlying economics and cost structure for running an airline would identify the idea of fuel price volatility as a major risk area. As the report states, they are not only far ahead of the competition in this approach but also that they paid US$ 1.89 per gallon of fuel whereas their competitors are paying in the US$ 2.73-2.83 range. To my mind, it demonstrates the fact that airlines need not be protected or offered public finances to make profits because the right advise should ensure that more of them utilize such financial instruments.

On the other hand, Robert Samuelson is justifiably animated that the correct analysis fr the rise of prices is being forgotten for the purpose of political convenience. Speculators are a convenient excuse for the rise in prices and so both presidential candidates are busy trying to impress the public with regulatory proposals ostensibly meant to reduce the adverse effects from speculation in commodities. This is in spite of the fact that the reason for the rise in commodity prices is clearly about the dynamics of supply and demand. This does seem to be an unduly simple answer for the political season when voters can demand to have their cake and eat it too.