Medical Tourism and Trade Liberalization

Frederic Erixson and L. Davis of ECIPE argue here that freeing trade ins services generally and medical services more particularly would generate huge returns. As they state, what is required is for liberalization of medical care provisions that would enable individuals to travel abroad to countries that would offer services at lower costs without compromising quality.

India's gains from medical tourism has been addressed here before and the primary argument was that due to the large savings possible, it would be a definite growth area. That piece adds to the fact that liberalization would assist low-income countries to retain medical personnel who travel abroad to make the best of their skills. I am unsure that this is a certainty because the push factors for these highly trained doctors and nurses are not related to inability to secure employment i the first instance. To my mind, medical tourism is useful because it would generate demand for more doctors from the countries providing the services and thereby create sufficient resources to facilitate the expansion of medical schools. this is valid because the ratio of doctors to the population inmost of these low-income countries is often very low.

Many Hands Contributed to Olympics Success

As I stated earlier in this blog post, my visit to Beijing early in the year led me to the the conclusion that China would be a wonderful host for the Olympics games this year. During the very brief visit confirnmed to the host city, I understood that the government generally and most of the Chinese people I spoke too considered the hosting of the games as an opportunity to present a face of competence and national confidence in spite of the controversy in Tibet and the demonstrations that accompanied the torch relay in some cities and countries outside China.

For that reason, articles such as this by Christie Blatchford in the Globe & Mail are merely rehashing the obvious. In choosing to highlight the attention accorded to the bathrooms during the games, the piece fails to understand that China merely chose to leverage on its advantage in a huge labor force. This is unsurprising for a person with a minimal understanding of factor prices because China's huge population necessarily means that labor is comparatively cheap hence it is possible to deploy between 3 to 6 people in charge of a single bathroom block. I noted during my visit that even small shops tend to be manned by a large number of people in the city and this is a reflection of that endowment. It is unlikely that with the higher costs of labor in London, that the same number of people will be available to perform the same tasks.

Stealing Bikes for the Metal

When I first read this story about a garage owner who is accused of stealing 2865 bikes in Toronto, I was curious because I thought the incentive is pretty straight forward. To my mind, the accused must be a seller of bicycle parts or must live in a city where the total market of riders is high enough to ensure quick turnover of the stolen bikes. I was baffled when I read further that Igor Kenk stored a majority of the bikes in his shop because this implies large storage costs while increasing the probability of detection.

Instead the story states the theory posited by the NYT that Igor Kenk appeared to have noted the rising prices of steel and metals in general and was intent on keeping all the frames and melting them up once the prices started moving upwards again. Igor Kenk had a good idea based on extracting the metals from bikes and playing the commodities market even if the manner of acquiring the bikes was quite crass.he played a sophisticated market but failed to account for an equally clever police force.

Coase Theorem Applied to Jersey Numbers

It is difficult to understand why but a large number of athletes maintain the odd belief that certain numbers are lucky and they often choose those to mark their team jerseys. I have not come across a widespread study showing whether certain digits are more valued than others but a story by Doug Glanville, a guest columnist at the NYT here reminds me that it sometimes happens when two athletes are drawn to the same number.

Such a clash in coincidental demand for the same number because sports often involves transfer of high profile players who may wish to retain their preferred jersey numbers that is already assigned to a another players. Fortunately, it appears that while some sportsmen have learned to trade away the number for extra coaching, cash or other gifts. Whether they are aware of the fact that they are applying the Coase Theorem or not, I am sure that Ronald Coase would be impressed. The assumption here is that the athlete who gives up the number bears the externality of letting go of the luck that comes with the favored number.

Paradox of Famine and Food Exports

"I have discussed elsewhere the remarkable fact that, in the terrible
history of famines in the world, no substantial famine has ever occurred in any independent and democratic country with a relatively free press". Amartya Sen

As the world's second largest continent and for which the primary occupation of citizens is farming, it is a wonder that a number of African nations find it hard to consistently feed their populations. In the last three years, the costs of food has increased markedly throughout the world and this means that food aid is also increasingly expensive. the upside of this situation is that the world's peasants would take advantage of this agricultural commodity prices to expand acreage and increase income and overall welfare.

Jeffrey Gettleman's IHT story analyzes how Sudan is coping with high food prices and an armed conflict. Since the political crisis in Darfur is ongoing and the affected populations are being fed by food aid, the government of Sudan is instead taking advantage of high food prices to increase exports to Jordan and Saudi Arabia. the clear irony is that a government that has failed to ensure the peace and infrastructure that would enable its poor farmers to continue to produce their own food is unabashedly exporting grain and hiring farms while other countries ensure that some food is available to feed its malnourished and starving population.

While I am reluctant to fully accept the view that any form of foreign assistance is harmful, I readily concede that the story illustrates clearly that Africa's problems regarding stability and food sufficiency are entirely self inflicted. Indeed, in the Sudanese case it appears to be part of a political strategy to permanently impoverish a section of its population. Dictatorships and unfree societies are breeding grounds for famines and starvation. Sudan is a case study that Amartya Sen's pithy aphorism extracted from this well-read piece is true.

India's PDS Should Use Food Vouchers

Typically, most economic activity and production occurs outside of the public sector. However, I am always amazed that in spite of the good intentions used to justify government-led schemes, there is the tendency to repeat proven errors and thereby reduce the overall effectiveness of such initiatives.

An illustration of the theme of good intentions hampered by poor design and execution is the Public Distribution System aimed at helping households who fall below the poverty threshold in India. The aim is to provide them with a subsidy which enables them to purchase grain at a subsidized cost. Grain purchased by the government is physically transported from the Food Corporation of India's warehouses,these are transported to designated shops. Predictably, the drivers see an opportunity for making a gain from the price differential hence they divert a portion of the grain. In response, the government of New Delhi proposes to install GPS systems on each truck in order to ensure that the trucks are perpetually under surveillance.

From first principles, this diversion is expected because a subsidy for a good creates a differential which provides an obvious incentive for diversion into the real market. While the concern for India's poor is altogether laudable, I see that the better response is to review tested principles about the design of a cost-effective subsidy. The addition of GPS and requirement for SMS communication merely adds to the administrative burden and makes the entire scheme more costly than it should be. In short, the ration cards should be replaced by a voucher system that simply sends the cash to the identified households. there would be no need for trucks and sophisticated equipment. The only monitoring would be of the use and eligibility for the support. Perhaps the increased tinkering with a poorly designed system is because Delhi's bureaucrats have either not read or do not agree with this paper by Ahmed Tritah.

Should Governments Subsidize the Olympic Games?

I was privileged to visit Beijing in late April this year and quickly noticed the excitement and anxiety of the Chinese government and its people over the Olympics that start on this auspicious date. Not only was this a critically sensitive period because the protests that accompanied the torch in a number of cities made the government to go out on a public relations drive but there was concern about pollution in the city. My thinking then was that based on what it had achieved and the way in which the games are hosted, China is a deserving host because the games have become largely commercial.

As the games start, economists as Daniel Gross of Slate Magazine are reviewing algorithms and models to guess how many medals the Chinese team will win while politicians are worried about the possibility of a politically embarrassing event. Both are relevant questions really though it is even more important to ask whether the public expenditure on this sports fest is altogether reasonable. The answer as stated on Los Angeles Times here and argued on the Adam Smith Institute's blog here are unequivocally that it is not justifiable public expenditure.

Being a sports fan, I think that public expenditure on the Olympics is unjustified. One approach may be to entirely privatize the games and let a consortium of corporations or other sponsors bid for the games every four years and then invite countries to enter for the events. While this would incite protests as commercialization of the games, the approach would ensure that taxes are not spent in the bidding war to host games, politicians are cut from using taxes to gain political clout and that there's honesty about the games. It is a commercial show with the tax payers taking the bill. That is the unfair bit.

Talking About China

China's strides from 1978 to date have been largely laudable and the fact that the country has managed to lift about 400 million people out of poverty is proof that this is unprecedented. Notwithstanding this achievement, many speak of China as if its rise into a high income country is inevitable.

Discussions about China are rarely informed by reality but by the fear of the dragon. For instance, there's the assumption that China will easily replace the United States as the largest economy in the world in a short while. While I have been an admirer of some China's economic reforms, I came to the view that this is overstated after reviewing comparative data between China and the US. to my astonishment, they are not close today as the US is far far ahead both in respect to the strength of its economy in addition to the productivity of its workers.

John Pomfret rehashes the main arguments about China's longer-term prospects impressively in the Washington Post. A more incisive review about China's economic and political affairs is addressed in this book. In my view, the book forms a must-read in order to dispassionately discuss China. The book provides a reasonable balance sheet but confirms what that China is still a developing country, albeit a large and fast growing one, as some of its leaders claim.