Measuring Mobile Subscriber Growth

I have mentioned a couple of times in this blog of my interest in understanding how firms and other institutions use figures to communicate reality. My intention is not necessarily to identify faults but to ask myself why they chose a given method of rendering their data and not another. This idea was formed from my realization that when it comes to China and India, their large size is used to present data that tells one no meaningful or new information. As a result, some of the figures thrown out end up obscuring as opposed to illuminating any matter about the economy or businesses performance in those countries.

Looking at this article from the GSM Association's business briefing, I realized that the same broad errors are being repeated. To my mind, the title of the article and good portion of its contents present only one side of the correct picture. It correctly claims that the developing world today accounts for the four in every five connections for mobile telephony.  To which my polite question would be; So?

Consider that in accordance with the data presented in Table 1 of the piece, 84.7% of the world's population reside in the countries classified by the World bank Data as developing countries. It is not news therefore to state that mobile telephony growth there is growing. Indeed, it would be odd for acquisitions to be any other way. By virtue of the fact that a majority of the population reside in the developing countries, then growth there is expected to lead to the patterns that one sees. As a consequence, the explanatory variable should be population distribution across the developing and high income country divide. 

Growth in the high income countries is incomparable to that in the rest because they have nearly reached a point of saturation with a per capita mobile phone subscription of more than 1. So the reason 80% of new subscriptions occur in low and middle income countries is because it cannot be anywhere else. Noting China and India's demographic sizes also means that there raw numbers will drive those subscription rates when measured in units. Table 2 and 3 also show that population disproportionately determines explains subscription numbers.  

As an industry information article, I think that the GSM Association newsletter is very well done and I have used it to my own great advantage. However, its editors could consider the rendition of the data in ways that actually inform its readers. 

The Currency Fights Begin

In this blog post, I stated that the controlled conflict between the US and China over the relative value of their respective currencies was worthy of looking at again. While it is now common wisdom that the Chinese currency is undervalued, I confirmed even then that competitive devaluation cannot be a long term development strategy for facilitating exports. Annie Lowrey of Slate Magazine writes here that many ministers of finance are beginning to feel that any adjustment in other currencies, the Yuan aside, will have adverse effects on their ability to make exports.

Looking at the arguments that are resented in that piece, the concern for competitive devaluation is that it is a strategy that is open to any nation. As a result, a full scale adoption of currency devaluation as a way to facilitate more exports cannot work in the long term.

This state of affairs also exposes the fact that export-driven growth is a proven development strategy but the pursuit of the strategy can create imbalances since one's country's exports must result in imports by a counterpart. The big lesson in my view is not only that currency manipulation can only work for some time before it faces competition by competing nations, but also that every economy needs a fair balance between consumption and exports. But that is easier said than done because mercantilism is instinctively attractive to many nations.

Cheap Sneakers Still Ideal

Despite my general reluctance to accept the value of marketing, I am sure that the one are where demand reflects the marketing input is in sports equipment. Whether it is jerseys or trainers, the use of sophisticated marketing techniques, channels and sports personalities certainly drives people to purchase equipment at premium prices. And yet, as I stated in a blog post here and here, trainers and running shoes have a wide range in price and some are very expensive. 

My contention is further reinforced in this piece by Lesley Alderman in the NYT that cost does not seem to correlate with the prevention of injury, overall comfort and other variables that matter to runners. In that story, the reporter specifically follows a keen runner who has learnt over time that understanding one's gait is critical to the decision about comfortable running shoes. That athlete's feeling that cost does not provide as much advantage as is claimed is confirmed by studies conducted bears her out. In short, choosing a modest pair will work perfectly provided one picks the size that allows for some space, breaks them in for at least two weeks and ensures that it fits at the heel. 

Running barefoot seems to be gaining currency and the production of a show glove tries to simulate that that perfectly but ends up producing an expensive gadget. Perhaps an algorithm that weighs sufficiently the three variables mentioned above would suffice for choosing shoes while taking care that technology- infusion hardly affects performance and comfort.  

Rinderpest Follows Small Pox

Among other things, I have an amateur's interest in the history of diseases generally and more especially in the eradication of epidemics and serious diseases. I am therefore impressed by the scientific achievement that has worked in the background to lead to the declaration that rinderpest has been eradicated. Scientists at the Food and Agriculture Organization (FAO) announced that they have virtually ensured the eradication of the rinderpest, a viral disease that affects livestock.

Reading this piece by Ian Sample of the Guardian, the achievement marks only the second time that humanity has succeeded in eradication of a viral disease. While rinderpest affected livestock and therefore had effects on livelihood for animal keepers, Small Pox directly afflicted people and had caused human deaths for three millenia before its eradication in the early 1980s.

It is interesting to note that dedicated scientific enquiry and considered design of an eradication programme may lead to fantastic results that vastly improve welfare. This short history of eradication also proves that pathogens are very resilient and their eradication is the exception rather than the norm. Still, human ingenuity gives me hope that the odds for control, if not eradication, of some pathogens are higher than they have ever been. Of course, it is possible that with prioritization, well designed prizes could hasten the conquest of the disease causing viruses.

Quoting Kong Zi

This is a very obscure blog but I celebrate my 500th blog post with a profound statement from Confucius. I find it extremely helpful for it calls for modesty and humility. And who does not need that.

The Master Said, "He with whom neither slander that gradually soaks into the mind, nor statements that startle like a wound in the flesh, are successful, may be called intelligent indeed. Yea, he with whom neither soaking slander, nor startling statements, are successful, may be called farseeing". The Analects of Confucius by Tsai Chih Chung (Location 667 on Kindle Version)

Pricing Tickets for the Olympics 2012

While I am a complete skeptic about the economic value that accrues to a country for hosting international sports events such as the Olympic Games, I am impressed that London 2012 is going all out for a commercial to find value for tickets. Mark Tran of the Guardian reports that some tickets during the opening ceremony will go for the symbolic £ 2012. This will not necessarily be the price for all the 8 million tickets that will be available across the 26 events, but this pricing mechanism has my support and respect.

I am certain that there will be takers for the more expensive tickets even if I remain uncertain about the ability to sell all the 8.8 million tickets. Still, Lord Coe and his crew are right in trying to get the best value for the tickets because the cost overruns for the venues and the works require very savvy marketing to ensure that the games get as close as possible to breaking even.

Trade Diversification for Africa

The countries of sub-Saharan Africa have shows comparatively higher growth in GDP in the last few years in spite of the effects of the financial crisis. Understandably, this has created a lot of confidence in the overall managers and governments of the countries in the continent. As it is, the view is that growth of 5% annually shows that the countries are doing something well and have managed to overcome the effects of the financial crisis which has crystallized into a general economic crisis in Europe and the US. 

Due to the state of affairs in Africa, nobody would envy the continent of this new growth momentum but still be cautious about its prospects in the medium term. African countries in the early 1960s experienced growth rates akin to what is seen today and failed to maintain that for the medium term. Writing in The Root, Njaramba Gikunju addresses the background issues while covering the later realization by sub-Saharan African governments that they would suffer secondary effects of the crisis. What is less convincing and demonstrably false in that article is that trade with China as replacement for European export markets would be Africa's main avenue for maintaining growth and escape from poverty. 

To my mind, the continent of Africa gets lots of inappropriate advise but it is inconceivable that Chinese investments and trade opportunities alone would lift the continent's people out of poverty. Africa's main problem in trade is that it has a small portfolio of products to ship out and that these are primarily commodities. Trading the same with China, Brazil or India does not in guarantee faster growth in itself. trade diversification goes both in terms of new destinations for imports and exports in addition to diversification of products. It is not one or the other.  

Are Small Businesses Special?

The small business is now an important players part of the policy narrative. Policy discussions in many parts of the world have adulated small businesses to the extent that every policy measure is often considered inadequate unless it delivers some gains for small businesses. Richard Rubin's article in the Congressional Quarterly here offers a level headed questioning of the assumptions that there is something inherently superior about small businesses and that definition is itself an arbitrary classification of very diverse firms.

To my mind, he makes two points that resonate most with me. First, in the US as in many countries, the real definition of small businesses is such a problem that it makes little sense in the scheme of things. Most definitions concentrate either on turnover or the number of employees and these are fraught with dangers as there are many businesses that could have high turnovers and yet employ few people. the reverse is also demonstrably true. However, the political appeal that comes with designing policies to benefit the "small business" is one that politicians see clearly and therefore respond to. 

The second on is that nobody wishes to be seen as criticizing the corporate welfare given to firms defined as small enterprises, with the result that there are extremely perverse incentives due to tax concessions and other exclusions that are meant to help these businesses. Creation of the facility that allows individuals to report income earned from firms together with other income just makes tax policy and administration difficult.

It is clear that I am an agnostic about the view that small businesses posses specific attributes that make them particularly worthy of special regard above other firms. Indeed, there may be reason to believe that the discrimination against large firms in some instances causes massive distortions and creates stunted firms with lower productivity. The designation, small businesses is just a political term and has little relevance for market functions. 

Can Regulation Save Angkor Wat?

A couple of months ago, I attended a conference in the Cambodian City of Siem Reap. Naturally during the stay, I and some colleagues visited the ancient city and religious complex of Angkor Wat and was impressed not only with the scale of that cultural edifice but also with the degree of scientific knowledge that led to the construction of a building that precedes by centuries Asia's most valued structure, the Taj Mahal. 

Thereafter, I took some readings, watched a documentary speculating on the both the purpose and the religious leaders who brought the construction to its height. All this while, I wondered how to justify the inclusion of those pictures on a blog dedicated to the discussion of applied economics and public affairs.

It appears now that I need not have worried because Ben Doherty of the Guardian states that the Angkor Wat complex is threatened because of the illegal extraction of water by corporations. As it is, the land on which the complex is based is an original swampy area that enabled the planting of rice from the reverse flow of melted glaciers of the Himalayas. Rising number of tourists is creating a demand for more water whose extraction from the ground threatens the foundation of the ancient religious city.

Wearing my thinking cap, this situation illustrates once gain the fact that tourist receipts that are arguably helping to fund the conservation of the complex have the unintended consequence of leading to water extraction whose longer term effects are yet unknown. there's no clear policy response here save to estimate the amount of water extracted and charge hotels and other establishments for that extraction since the state owned corporation is unable to supply sufficient water. Regulation here is necessary and a sensible reaction because the businesses that thrive in Siem Reap rely to a large extent on the enormous tourist appeal of the Angkor Wat complex. The number of visitors is impressive but I am certain that Ben Doherty has got the population of Siem reap right because I assessed it at far more than 200,000 people.

Currency Manipulation Has Limits

Reading many analyses of China's export performance today, I always wonder that everyone has an opinion on the merits maintaining a low exchange rate as part of trade policy. to my mind, many people are probably misreading China's export competence as entirely driven by currency manipulation and this may lead to a policy disaster before long. Ttrue, maintenance of a low exchange rate vis-a-vis the US$ has allowed China to maintain a trade surplus for a long time. Opinions are understandably divided whether the US should try and coerce China to revalue its currency appropriately or whether as Anatole Kaletsky states in the NYT here, this is part of the new Asian model of growth and development that the US would be well advised to learn to accommodate.

While I have not studied currency pegs much, it is clear to me that the copy cat tendency of mostly Asian countries in competing in currency manipulation so as not to lose export opportunities can only work for so long. For all China's capabilities, it is unlikely that a low currency alone will ensure all anticipated growth for all time because of the ability of other competing nations to engage in the race to the lowest currency. Tim Webb of the Guardian newspaper states that Brazil has already thrown out an alert to the possibility that further aggressive manipulation could result in a "currency war". Brazil may not be China but given the copy cat effect of currency manipulation and the rush to ensure exports, this policy will not be effective for most of these players for long because it is far too easy to copy.   

Musing on Laffer Curve and Government Size

I attended a brain storm session with some officers of the public sector together with some scholars and a few professionals of various background sometime during the week. While it was not specifically mentioned, many suggestions seemed to take the Laffer Curve as embodying truth. As a libertarian, I was led to think more clearly about the contradictions that inhere from supporting tax cuts as a mechanism of raising more revenue.

My personal view is that at all times, it is more preferable to consider the lower marginal tax rate in designing policy. This means that while I may be reluctant, policy choices may sometimes require raising the tax rates as a matter of fact. What I found disturbing is that a fiscal conservative should be careful in arguing that more taxes follow from lowering tax rates because of the assumed rise in total tax collection. To my mind, this is inconsistent because if that were true, then the rise in revenues would mean that lower taxes lead to bigger government. And that's why I maintain that lower taxes as supported by libertarian thinking is more defensible because it merely argue for letting individuals or corporations to keep a greater share of their incomes. Anything beyond that is to overstate the need for lower taxation.

Isocrates Warns Modern Greece

Vanity Fair published this microscopic view of the Greek economy and culture by Michael Lewis whose description suggests how they country gamed its way into the EU monetary union system through subterfuge. It is an article worthy of careful reading as it suggests that the monks of Vatopaidi monastery are too clever for the overpaid, corrupt and unsophisticated bureaucrats.  His conclusions about the prognosis for the Greek economy into the future are a serious cause to worry as both the public and bureaucrats are unwilling to examine the society's many shortcomings and structure incentives differently.

"Democracy destroys itself because it abuses its freedom and equality. because it teaches its citizens to consider audacity as a right, lawlessness as freedom, abrasive speech as equality, and anarchy as progress".

Lewis picks up Isocrates' injunction above  which forewarned about the dangers of democracy without responsibility. I doubt that democracy condones free riding and widespread mendacity. With monks as smart as the those in the Vatopaidi Monastery, Greece yet has a future albeit one that will require living in a more spartan way.

Niederhoffer on Being Wrong

The discussion about what were the real causes of the financial crises of the last two years will not end with a firm resolution and I have resigned myself to that. And while dwelling on blame is not useful in my view, what I know is that hedge fund managers have got a bad name and yet they have been the most gracious losers among the whole lot of people who took risks. In my view, most bankers who were culpable got way far too easily and those that survived are now back to profitability without proper public acknowledgement of their culpability. 

On the other hand, hedge fund managers seem to be the real adults in the financial services industry because many of them took it on the chin and went on with their lives without crying for public support or blaming others. Among them is Victor Niederhoffer who had good investment record but also had two of his hedge funds collapse out of bad investment calls. 

His interview in Slate Magazine here with Kathryn Schulz provides his views about the errors that he committed on two occasions and the losses that he took when the funds collapsed. That he is a smart man is not in doubt and in the interview, his admission of errors and hubris is reason to respect his candour and sense of self-criticism. But more importantly is that hedge fund managers get a bad rap when most of them went down with their ships while banks got bailed out through public money. Banks should not be too big to fail and like hedge funds, their failure would be good for markets.  

How to Cut Airport Queue Times

A couple of days back, I was on a queue at the Schiphol Airport in Amsterdam when I overheard a conversation between a group of three people that I surmised were traveling together.  In summary form, one of them urged the others to stick to the queue that he had taken because the nearby queue had a number of darker skinned people whose documents would be subject to more onerous scrutiny and therefore would slow down the queue.

To my mind, this piece of wisdom shows two things about airport security. The first is that many travellers understand that the perception of danger by travellers is regionally and perhaps racially concentrated as well. The second and most important point is that travellers know that the measures at these borders lead to a waste of time for other travellers.

Crime is Enemy, Not Gangs

In the last couple of months, I have been particularly alerted to the fact that most private and even public policy is based on very limited evidence and big assumptions. One need not be a very keen reader of the more popular books by professional economists to understand that a large portion of conventional wisdom is flat out wrong when examined empirically. One such area is that of crime reduction and suppression where a lot of untested but popular assumptions that seem sensible are often used to anchor policy.

Writing for  Econlib Russel Sobel summarizes the idea that the whereas law enforcers readily pursue destruction of gangs, the empirical evidence suggests that that approach is wrong-headed. Arguing cogently, the rise of gangs may be associated with higher crimes but the direction of causality is that insecurity causes the upsurge in gang formation. Having reviewed some time series data, he alludes to a paper showing that gang activity is rational response by youth who face a risk of violent crime. As a result, the single-minded quest to eliminate gangs is ineffective policy because gangs arise out of failure of the state to provide protection that is required. Unintended consequences of a successful suppression of gangs may be a rise in crime because of the eroded protection that gangs provide to individual members.  In summary, the paper leads to the conclusion that law enforcers should destroy crimes, not gangs.

OPEC at 50

On 14^thSeptember 2010, the Organization of Petroleum Exporting Countries (OPEC) will be fifty years old. It was formed in Baghdad with the main idea of collective action to increase the rent on oil by the five original member countries. In many respects, this is one of the most blatant forms of cartel organizations in the world and has significant power on energy prices.

My view of the OPEC is that its membership is entitled to control their petroleum and have often used petroleum resources and prices for political purposes too. The profile of its members is interesting because these tend to be hard core dictatorships who expect to use their vast resources as tools of foreign policy. The statement by the secretary General of OPEC here maintains its actions have contributed to faster recovery from recent economic trouble.

So its definitely an achievement for an organization to be alive for half of a century and with expanded membership. I am less confident that it claims to be a source of global supply and price stability because many low-income countries suffer the effects of coordinated petroleum price setting. I am certain that the nett effect of the existence of OPEC is not positive.

Professor Mankiw's Advise to First Years

It is not for nothing that I follow a number of famous professors of economic, not least of whom is Gregory Mankiw. That he is a highly capable economist is not in doubt and I often find that his textbooks provides sound ongoing education for me. In this week's piece in the NYT, he has some advise to students joining colleges during this summer.

While I think that he is perfectly placed to offer that advise because he is a professor, the quality of the advise astounds me. he does not only stress the need for students to seek to appreciate the subject of economics but goes ahead to explain why that is indeed important. Added to that is the injunction to learn some facility with numbers in the form of statistics and probability theory while being alive to the fact that psychology would supplement a fuller understanding of human behavior. In perfect humility that is rare among accomplished professors and best selling author, he is alive to the variety of advise that first year students will be bombarded with. Accordingly, he tells them to ignore advise as they judge fit. that too is true but I hope that they all cut out or mark this page and read it as they start the exciting academic journey.

If I could add to that list, it would be that every student should try and understand principles of a natural scientific discipline and some course in logic. Given the ubiquity of information of varying veracity, ignorance is not virtue and very thin specialization makes people myopic.  

Kenya's Population Below Forecast

Kenya conducted a population and housing census sometime in 2009 but the results were not released by the Kenya National Bureau of Statistics until sometime this week. The most interesting fact in that data released has been totally missed by the press and commentators and instead there are stories about how the country's population is growing by at least one million people annually. In my view, the statement that the population grows annually by 1 million people is not useful at all especially if neither the base nor  the doubling time is unstated. And yet press statements have concentrated on trying to push through the idea of high population growth rates with undertones of a demographic disaster.

The point that has been completely missed is that the forecasts made about Kenya more recently had placed its population at a minimum of 40 million people. The complete count from the highlights show that Kenya's population is at 38.6 million. That is still a large population as it places Kenya among the top 50 largest countries by population. what is shows is that the Malthusian understanding of population growth remains the dominant lens for viewing demographic phenomenon. 

One presentation included on the site states that the whole undertaking was accomplished at a cost of US$ 104 million. At a cost of US$ 2.7 per individual, it looks like an efficient way to capture data that should find better use than merely broadcasting ethnic composition and sending stories of impending demographic disasters. The dialogue should move to why a country with a large youthful population is not undergoing a Demographic Transition and reaping the demographic dividend that is necessary for take off.  Another notable feature of the results is that settlement in Kenya is still overwhelmingly rural with 67% of the population resident in rural areas.  

Finding the Most Expensive Book on Amazon

Quite aside from Walmart Stores, I am sure that Amazon is one corporation with a very large number of goods available for purchase. This occurred to me as I discovered that the number of publications available for purchase with a Kindle e-reader device goes beyond 600,000 titles. And this is very impressive when viewed against the fact that Amazon also has a large database of physical books, furniture, music, software, computers, watches, furniture and other products available for shipment.

Coupled with the very large number of stock units is an effective search machine that allows for convenient search across the virtual store. It just occurred to me that it is far more difficult to find stuff on Amazon based on the costs than it is to find by name or use. For instance, I have concluded that textbooks are among the most expensive items on the Amazon bookstore. What I am unable to confirm is which single publication is really the most expensive throughout the book store today. Why is it that the search engine does not offer this capability?

Views On BART Movie Prediction Model

I spent the last weekend reading carefully the paper by three professors discussed in this blog post a week ago. They use a complicated statistical technique known as the Bayesian Additive Regression Tree (BART) model to work out a prediction of the receipts from the box office for movies based entirely on the script. The main factors that the model assesses are the Genre and the content variables which includes the storyline, kind of conflict all in the 23 content questions form. 

One need not be a studio manager or movie director to immediately understand the implications of this model on informing investment decisions across given scripts that are being considered for funding. I also think that this reiterates that a well-considered model can still beats so-called experts at making this kind of decision. To my surprise the model provides guidelines on possible Box Office receipts when the dollar value of making films varies over time. So the question I would ask the authors is how this time function was accounted for and whether the model can be tweaked to predict the number of tickets sold instead. As I have mentioned in a separate blog post, comparing movies by the number of tickets sold is more accurate when they are made in different time periods. 

Houses Not Special in UK Too

I asked here whether real property is still a special category of property and my answer tended towards saying that in the US, it appears that those days are long gone. The same fixation on the part of the public and their governments seems to have afflicted the United Kingdom where taxation policy tended to tilt in favour of home ownership. In spite of the fact that the slump in the UK appears to have been corrected and home values have not fallen precipitously, Larry Elliot of the Guardian argues convincingly that house prices will fall for a while yet.

Indicators of the underlying difficulties in real property markets are seen in the fact that first time buyers are unable to afford property and there is a big generational difference in the ability to acquire home. iIn essence, the ownership of homes favours the elderly citizens together with wealthier individuals. In a sense, that house prices in the UK and the US have faced difficulties and are bound to remain low for a while is a good case study for students of economics. One wishes that the laity understands that the problem was the belief pushed by interested lenders and brokers that home ownership is special.

Is Austrian School of Economics Back?

While I would not say that Austrian economics is mainstream again, this story in the Wall Street Journal profiles one of its main high priests and dedicated thinkers. I noted the resurgence of Austrian School theorists a while back when von Hayek's The Road to Serfdom was top of the Amazon bestseller list. And while I have read a much smaller number of Peter Boettke's works, than I would like, I readily concede that the austrian School is a powerful approach to explaining the limits of central planning on one side and the lottery nature of industrial policy.

My introduction to the Austrian School was an encounter with Von Hayek's Road to Serfdom which I found quite impressive in its rendition of the inherent weaknesses of statism especially in the area of economic management. I have since then considered it as one of the most ideal ways to introduce students of economics to the Austrian School generally and to an appreciation of the limits of state action on the other.  It is also a gentler way of introducing students to the subject political economy by avoiding the large models driven by mathematics. As most of the Austrian School theorists believe, understanding the first principles of economics is important in itself and the mathematics should aid understanding and not undermine it.

As the article concludes, the major problems for Austrian School economists is that while they are able to identify why state action may be harmful, they are not often able to generate much policy advise to fix problems. And that explains why Keynesians fall from favor but always arise again. the Austrian School is one of the most important and ne to which I am most partial.

Louisiana Monks Take On the Casket Cartel

For a country as free as the US, I still get surprised by the degree to which even the state governments try to regulate economic behaviour and choices. The WSJ reports that the Louisiana State Board of Embalmers and Funeral Directors has sent a subpoena to St. Joseph's monks for violating a state regulations by independently manufacturing and selling caskets within the state. I reiterate that regulatory institutions with such long names tend to be useful for nothing. However the membership of this institution set to regulate the sale of funeral merchandise is comprised overwhelmingly of persons with direct interest in the business.

Its nice to see the St. Joseph's trying to bust the casket sellers cartel under the guise of protecting the public and enforcing standards. That the colluding undertakers are so brazen is a sound lesson that the board is largely a conspiracy against the bereaved. These monks should and must win and be allowed to compete.

Houses Not Special Property Anymore

I am not a resident of the American continent but I think that the financial crises has clarified a point that beautifully illustrates the value of first principles in economics and how markets function. While there is understandable argument about the causes and the trajectory of the causative factors, what is clear to me is that the big myth and fallacy that housing as a category of property is not subject to downward price fluctuation has been shown to be untrue. David Streitfield of the NYT files a report whose basic argument is that the magic of house ownership as a sure and superior form of property is being painfully revised.

It states that the belief was reinforced by the fact that for more than a whole generation, real returns on housing were sufficiently high. This allowed many US citizens to take mortgages from which they would build household wealth due to price appreciation. Dean Baker of the CEPR buttresses the argument with the estimate that it will take at least two decades to recover the US$ 6 trillion in wealth lost since 2005. In other words, there is a surfeit of houses and making money out of homes is highly improbable.  Demand and supply do rule but those with an interest in selling houses and whose income comes from selling houses will obviously try to convince people that housing is a special category of property.    

Governments Find Blackberry Devices Too Secure

Soon after President Obama was elected, it was a matter of concern that he was reluctant to accept the surrender of his famous Blackberry phone and communication device. At the time, the concern was that the nature and extent of presidential communication required a high degree of security that would not be guaranteed by such a service. I blogged here that the Research In Motion, the corporation that manufacturers the device would take that as a challenge to assert that the degree of security for that device would make it fit for presidential communication.

Some two years later, a different set of governments have pressured the RIM into some concessions on security based on the thinking that the device provides a very tight level of security that national governments of a number of Asian countries cannot reach.  As the dated piece in the NYT states here, governments of the United Arab Emirates, Saudi Arabia and India are concerned that by guaranteeing a high level of privacy in communication, the security of states may be compromised. It seems that the device is not fit for a president but is too safe for citizens half a world away.

Images are subject to copyright and extracted from RIM website.

Another Formula For Box Office Receipts

To my mind, predictive analytics represents an interesting intersection between statistics, economics and other disciplines, all for the purpose of making decisions about the likelihood of certain events. One of the most impressive models of predictive analytics has been the model built by the firm called Epagogix. This algorithm uses only the script of a movie to make a forecast of the expected receipts at the box office. More recently, a number of financial houses converted their models and used them to predict the outcome of the soccer World Cup that ended last month.

And now two professors from the academy have published a paper here in which they discuss the value of an algorithm that would guide movie houses on the potential box office receipts by application of their mathematical formula. From Sarah MCBrides, blog post here, it looks like they have identified some useful nuggets for making the most out a script and studio bosses may be calling on them shortly. My concern though is not about the ability of a cold model to predict fairly complex business outcomes but that the sample of movies (200) appears to be small and  much less as compared to the number of movies produced worldwide.

As I undertake to read the full paper, I have no doubt that this algorithm is definitely more useful than the gut instincts of seasoned movie making experts.  As I had noted a while back, experts so called, are not as sophisticated thinkers as they claim. There's competition for Epagogix now and that can only be good for the movie industry.

HT: Freakonomics Blog

Rodrik on Authoritarian Development Models

A couple of days ago, I was attending a small meeting that was discussing the role of the state in society. As a libertarian, i was not surprised that many people take it for granted that the existence of the state means that it must undertake any activity that it chooses or that people urge it to take upon itself. tThe more surprising part for me was the poor reading of history by educated people. This was because an uncomfortably large number of people took it for granted that China and the east Asian countries have proven that there is a special formula for quick economic growth.

I have stated it here for a long time that China's development record is unprecedented and certainly impressive. What I am unwilling to yield is that there is a "China Model" which proves that political liberalization is a secondary matter in the quest for economic growth.  As I heard, China is very organized and provides a model worthy of emulation by Asian, African and other low income countries. I therefore find immense comfort in the more accurate and sensible interpretation of history by Dani Rodrik in this informative  article.

As it is, the piece is self-explanatory. Authoritarianism is mnot a short cut to growth and any leader who tries that model is more likely to fail than succeed.

FA Quotas Have Unintended Consequences

England's performance during the last World Cup was a great disappointment to the Football Association and it is understandable that they may want to change the situation. Predictably, they have gone for the most obvious excuse which states that young English players are denied a chance to improve by virtue of the large number of foreign players in that English Premier League. In an earlier blog post here, I suggested that this view is convenient but is ill-informed and suggested that the FA bosses should look at this book. In spite of that, the FA introduced a new rule that limits each team in the premier league to a squad of 25 players of which places an upper limit of 17 players that are not home grown. the ostensible reason is that the number of English players in the squads is bound to go up and thereby improve the performance of the English team in international tournaments.

It is difficult to argue with such a knee-jerk reaction especially since it resonates with a number of English supporters and players. And yet as Arsene Wenger reasons, it is bound to generate unintended consequences in the form of court cases especially when considered together with other rules.From that explanation, it seems that the FA did not carefully consider the adverse consequences of that rule and how players and managers may adapt to its imposition. The quota rule already looks like a bad idea even before it is in operation for a full season.

Mexico Must Sustain Drugs Legalization Debate

Reno Gazette Journal reports that Vicente Fox, a former president of Mexico openly stated that legalization of the drugs trade in Mexico would break the power of drug selling organized criminals. It is clear that the series of drug wars that Mexico and a number of South American countries have had did not wipe out the brutal traffickers but instead led to far too many deaths that were altogether avoidable. As I have stressed here, this hardware approach to fighting drug production and sale sounds good for moral absolutists but it has been demonstrated to be impracticable when balanced against social safety and freedom.

While a reversal of drug prohibition policy will not necessarily wipe out all the costs of drugs use, it will definitely save many Mexicans from the effects that arise from high profits being sought by illegal drug sellers. Whatever one's moral persuasion, Mexico's president should take the opportunity to follow up the discussion opened by a predecessor and advance debate to prepare for ultimate reform. The picture described by the Economist Magazine here means that Mexicans who neither consume nor trade drugs will continue to bear the cost of a politician's intransigence. And as implied, the drug gangs have the wherewithal to last for long. Saving lives and restoring peace should not be seen as succumbing to criminals but rather bowing to the force of reason.

John Kay on Economic Value of Arts and Culture

"Similarly, the economic value of the arts is in the commercial and cultural value of the performance, not the costs of cleaning the theatre. The economic perspective does not differ from the commonsense perspective. Good economics here, as so often, is a matter of giving precision to our common sense. Bad economics here, as so often, involves inventing bogus numbers to answer badly formulated questions." John Kay 

Boom Time for British Think Tanks

A story in the Economist magazine this week highlights the work of a number of new and older think tanks in the UK. The gist of the story is that the recent change in government in the UK has provided opportunity for a number of centre right of centre think tanks to influence policy. This is primarily because there is not only a new policy dispensation but that the magnitude of economic and social problems lend themselves to the adoption of reforms or new ideas.  

As a person who respects ideas, I think that this is indeed an auspicious moment for think tanks and a majority of those mentioned seem to have prepared for a change of government in order to bring forth fresh ideas. Equally impressive is the disclosure of the fact that the time horizons for IEA and Reform are completely different. In addition, they are not only prepared to provide new ideas for policy but are also alert to what they see as "Intellectual incoherence" in policies being accepted by the new government. 

To my mind, it is altogether a positive thing to see slightly dispassionate people dedicate intellectual firepower to a society's problem. And this is important even if not all those ideas are new or necessarily acceptable to me. The most important insight I extract from the piece is the view that perhaps intellectuals and policy wonks make an error by taking government functions as a given.  As the article states, Mr. Littlewood of the IEA thinks that government should have started on a fresh sheet of paper to define what are its functions and then wipe out all other programmes falling outside that remit.  As a Libertarian, I find that quite refreshing. More brainpower to think tanks of the world. 

Fiscal Sins of America's Political Parties

Whenever I go through analytical pieces and summaries of the state of the US economy, I never fail to notice the stated assumption that main difference between its two political parties is that one party is a better economic manager given to prudence with public finances. And quite unfortunately the majority of blog seem to proceed on this premise and often add to that the view that president Obama's administration is a huge spender of public funds like other administrations led by Democratic Party presidents.

I always muse to myself that as a grown up, the sharp distinction between the two parties is one that only partisans of one side or the other want to believe. And that is why I see this very informative and well-argued piece by David Stockman about the contributions of the Republican party in the fiscal mess that the US finds itself in today. I am reluctant to summarize it because the piece is worthy of careful study but its main idea is that too much expenditure is an equal opportunity error by both parties. In addition, the main assumption of the Supply side arguments of the Reagan administration seem to be catching up with the US as the tax cut fetish alone does not pay for itself as is argued simplistically.   

Of the four points that he makes, I disagree with the assertion that the suspension of the Gold Standard made inflation and too much expenditure inevitable. This point requires some contesting because there's no evidence for it in his illuminating piece. 

Indian Entrepreneur Urges Use of Markets Against Bribery

Corruption in both its grand and petty forms is a defining character of the public sector in many low income countries throughout the world. As a recognized problem, it is often quantified and its manifestations recorded and lots of books published about it. In spite of all the talk and discussions about corruption, the responses that have been adopted tend to be generic. These solutions often require ethical training for policemen, better surveillance, establishment of specific anti-corruption agencies, mandatory disclosure of income for politicians and tightening of rules and new laws against corruption. not only are these ideas uninteresting, they have had little effect in most corrupt countries.

An Indian lawyer and entrepreneur named Shaffi Mather has an idea that has stunned me both for its freshness but also because it introduces a profit element into the fight against corruption. In the TED talk on this page, he talks about having designing a business that uses a number of innovative tools and approaches by trying to fight corruption by adoption of a private and fee-based service to citizens who are faced with demands for bribery in order t receive public services. While the talk is slightly less than a year old, I find this a fantastic approach to a very serious problem that undermines growth in Africa and Asia in particular. Perhaps I should take a sabbatical and study his approach because he seems to have something to teach about business solutions to corruption.  

 

Benefits of e-reader Price Wars

In the last blog post here, i wondered what accounted for the price differential for the same titles of in e-book on Amazon. However. slightly related to that is the fact that the price for e-readers is rushing downwards very first. As stated here, Amazon has introduced two new Kindle e-book readers at much lower prices. One is a Wi-Fi  enabled e-book reader that goes for US$ 139 and therefore is the lowest priced of the main e-book readers.

While I do not understand how far the price war stated here will continue, I am sure of two things. first, it is clear to me that the e-book readers are becoming increasingly handy and are about to become regular electronic gadgets for many people. second and most important is the fact that Amazon's innovation has ensured that most of the value is appropriated by users of the devices. As is evident, today's cheapest Kindle is available for half the price charged a year ago and carries up to 2000 more e-books. And even the second device being launched is the same price as the Kindle 2 but with capacity for 2000 more books. That is a typical trajectory for electronic and new technology devices. may the price war continue.

Price Differences for Kindle Titles on Amazon

Browsing through Amazon's list of best selling titles for the Kindle, I noted an intriguing and non-trivial fact. A number of classics including Adam Smith's and John M. Keynes' popular publications are available in different editions suitable for the Kindle. However, one finds that the prices for the same text such as Adam Smith's, "The Theory of Moral Sentiments" are different. As stated on this page, separate versions of the same text are ranked at 317th and 318th respectively and yet the edition of the December 2008 costs US$ 2.95 while the August 2008 edition available for a 50% premium of US$ 5.79.

I wonder whether this substantial price differential has any effect of how many copies of each are purchased by browsers. I note that they may be different editions but they are probably similar in virtually all other respects. What am I missing about pricing Kindle editions of books on Amazon?

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.