Month: December 2003

Wal-Mart in Mexico

by  Tyler Cowen in

Wal-Mart is now the largest private employer in Mexico, with over 100,000 workers on its payroll there. Only the United States has more Wal-Mart outlets (3,499) than does Mexico (633), Britain is next with 266 outlets. Last year Wal-Mart did $11 billion of business a year in Mexico, more than the entire tourism industry. That is two percent of Mexican gdp, about the same as the percentage in the U.S. The influence of Wal-Mart alone has lowered Mexico’s inflation rate, read here for more details.

A Wal-Mart cashier in Mexico makes about $1.50 an hour. This may not sound generous, but a significant portion of the country does not make that much in a day. Wal-Mart is also a boon to poor and rural Mexicans, who can afford to buy more at the store’s low prices, or who receive goods that were otherwise unavailable or required a trip to Mexico City. If you are looking for an example of how globalization benefits the world’s poor, go no further than Wal-Mart.

A good idea for my university

by  Tyler Cowen in

Students are making voluntary contributions to increase the pay of their favorite professors, to prevent those professors from leaving for another university. Here is one story:

When Brian Cannon, a 21-year old senior at the College of William and Mary, learned that one of his favorite government professors was leaving for a higher-paying job at Princeton University, he was a little upset.

But when the student body president learned that in the past year, 13 professors have left the prestigious public university in Williamsburg — many of them headed to public universities in other states — he knew he had to do something.

He organized a student referendum, adopted overwhelmingly this week, to raise next year’s student activity fee by $5, to about $80. The extra money would be used to boost the salaries of professors who might leave because state budget cuts have frozen faculty raises.

The fees are usually used to bring bands to campus and help out the debate team and other clubs. But now, three professors, to be chosen by the provost with student input, will each receive $10,000 bonuses, to be funded by the fee increases.

This is but one example of a growing gap in salaries between private and state universities. I expect that over time, for better or worse, many state universities will in effect become privatized. They will remain under nominal state control, but their finances will rely increasingly on private sources of support.

I smell a rat?

by  Tyler Cowen in

The World Bank very recently held a contest to award innovative ideas for fighting poverty. One of the winning ideas involved the use of rats to smell and detect disease:

One of the winners was a scheme to use rats as a cheap diagnostic tool for tuberculosis in Tanzania.

Rats are already being used by the Apopo organisation to detect landmines in Mozambique using their acute sense of smell.

Apopo’s Bart Weetjens told BBC News Online that the rats could also be trained to sniff out TB from saliva samples.

A group of rat detectives could process more than 2,000 samples a day compared with just 20 for a human technician with microscope, he said. Using a set of rats should mean 100% accuracy and a quick diagnosis, he added.

“The TB problem in Tanzania is very widespread… but when it’s detected early it can be treated and it makes a big difference.”

To read about the other winning ideas, click here for a BBC news report.

Medicare and Perverse Incentives

by  Tyler Cowen in

Medicare does little to reward service providers for quality improments, and in fact often punishes them. Friday’s New York Times provided a blistering indictment:

By better educating doctors about the most effective pneumonia treatments, Intermountain Health Care, a network of 21 hospitals in Utah and Idaho, says it saves at least 70 lives a year. By giving the right drugs at discharge time to more people with congestive heart failure, Intermountain saves another 300 lives annually and prevents almost 600 additional hospital stays.

But under Medicare, none of these good deeds go unpunished.

Intermountain says its initiatives have cost it millions of dollars in lost hospital admissions and lower Medicare reimbursements. In the mid-90’s, for example, it made an average profit of 9 percent treating pneumonia patients; now, delivering better care, it loses an average of several hundred dollars on each case.

“The health care system is perverse,” said a frustrated Dr. Brent C. James, who leads Intermountain’s efforts to improve quality. “The payments are perverse. It pays us to harm patients, and it punishes us when we don’t.”

Intermountain’s doctors and executives are in a swelling vanguard of critics who say that Medicare’s payment system is fundamentally flawed.

Medicare, the nation’s largest purchaser of health care, pays hospitals and doctors a fixed sum to treat a specific diagnosis or perform a given procedure, regardless of the quality of care they provide. Those who work to improve care are not paid extra, and poor care is frequently rewarded, because it creates the need for more procedures and services.

Does the Bush Medicare bill make any serious attempt to address problems like this? No. Paul Krugman, in his column, described the Medicare bill as “a huge subsidy for drug and insurance companies, coupled with a small benefit for retirees.” If we are to improve America’s health care system, no matter what your political stance, the first order of business is to get incentives working for us, not against us. That fight has yet to begin, nor does it currently have much of a constituency behind it in either political party.

Regulation by Litigation

by  Alex Tabarrok in

Elliot Spitzer, New York’s Attorney General, apparently misunderstands so let me make it clear – it’s the rule of law not the rule of lawyers. As I feared, a real but relatively minor scandal in the mutual fund industry, is becoming the excuse for grandstanders promoting their own agendas that have little do with the original issues. Professor Bainbridge lays it out here (I recommend following up on his links but of course ignore any criticism you might find of my arguments! :)).

Against screen quotas

by  Tyler Cowen in

France, Brazil, Pakistan, Mexico, China, and South Korea are among the countries that set screen quotas for their domestic films. An astute reader/blogger Tony referred me to the following Korean opinion piece, critical of such quotas. The English is at times choppy, but the author is on the mark:

What the screen quota system provides is a shelter without any competition. But it is an age-old truth that true competitiveness is only bred through competition. If the Korean movie industry really wanted the kind of international competitiveness that could take on Hollywood movies, it should break out of its protective shelter and meet the challenge straight in the eye. We will never see the day when our industry will leave behind the danger of being dominated by foreign movies if it keeps on being obsessed with the screen quota system.
Second, supporters of the screen quota system claim that it is the last bulwark protecting Korean culture. Who on earth bestowed the sacred duty of protecting the culture of Korea to the movie industry? Culture is the form of life that every one of us takes part in creating. It is found in our mountains and streams, our cities, our history, culture, art and crafts. This writer finds it hard to believe that the Korean culture has become more refined because a few domestic gangster movies outdid foreign movies at the box office.

The author asks why we should not have comparable quotas for womens’ fashion or for alcoholic drinks, both areas where Korean culture competes against foreign imports. The author also complains of the “the self-righteous and exclusivist advice of the French,” the whole (short) piece makes for lively reading.

What does the American public believe?

by  Tyler Cowen in

Many things that ain’t so, according to our colleague Bryan Caplan. They believe that protectionism creates jobs, and they think that big corporations, rather than supply and demand, set the price of gasoline. See the link for a longer discussion and some citations of specific questionnaire evidence.

Here is my favorite bit:

The only category of spending that the public invariably wants to cut is foreign aid–which amounts to about 1% of the federal budget!

Believe it or not, it is not unusual for a member of the general public to think that foreign aid consists of forty percent of the United States government budget. Of all the biases we observe in voters, “suspicion of foreigners” appears to be the most pronounced. Bryan, who has done the relevant work here, is writing a book on how and why democracy can go astray through irrational voters, I await its release eagerly.

Here are some broader polls on NAFTA and free trade, compiled by AEI. Even the people who favor free trade, presumably for its benefits to consumers, think it costs us jobs. Given how the public feels, I am always surprised that we have as much free trade as we do.

Banned GloFish

by  Tyler Cowen

The new GloFish, genetically engineered to glow in the dark, have been banned in the state of California. Chris Mooney tells us why there is no good reason for this decision. One state official commented:

“For me it’s a question of values, it’s not a question of science,” said commissioner Sam Schuchat. “I think selling genetically modified fish as pets is wrong.”

This argument is weak, and presumably could be used to ban dogs and cats — both the products of selective breeding — as well. The GloFish nonetheless have a deeper symbolic value, and are likely to go down in history as a turning point of sorts. Once we let the market create and promote commercialized products in this arena, it is hard to imagine tough regulations working in the long run. Consumers will demand the products, experimentation will be rampant, and how will you enforce the laws? Will California check the cars entering from Nevada for contraband GloFish? If that is the case, GloFish “coyotes” will cross with their booty only in the day, not the night, a reversal of the classic smugglers’ methods.

The economics of cheese

by  Tyler Cowen in

Free trade is not only good for prosperity, it is also good for fine food shopping. Here are some pithy comments on a recent book on the history of Camembert cheese:

Fifty years ago, or even twenty-five, it was very hard, if not impossible, to get cru Camembert – or gold seal balsamic vinegar, or single-estate Tuscan extra virgin olive oil, or jambon de Bayonne, or Ortiz salt-packed Spanish anchovies, or Niçoise olives – if you didn’t live in a world metropolis or in the regions near where they were produced. Now they are all widely available. Thanks to the Internet, Fedex, the food-writers (and their globalised publishing firms), the once-local has become global.

Nor is it just the distant local that has a place in the markets; preferences for the local local are now better catered for than at any time in the recent past: farmers’ markets flourish as never before in both Britain and America; the role of the “forager” – searching out the quality produce of local farmers for top restaurants – has become institutionalised; the formerly resistant Californian wine industry is rediscovering the power of place as against the manipulations of the scientific winemaker; the cheese plates at better American eateries feature increasingly convincing Sonoma County goat cheeses and one of the finest semi-soft goat cheeses in the world, the Cypress Grove Humboldt Fog; the Slow Food movement gathers strength throughout the world and reinforces the revival of the local and the seasonal.

Here is the full book review, from The London Review of Books, the piece is interesting throughout. Here is an earlier post on the corporate origins of Maytag cheese in the United States. Here is a post on using radar to improve the quality of wine.

The bottom line: When I first started going to Europe, in the early 1980s, I was amazed at the quality of the foodstuffs, but America is catching up rapidly. The next steps: lower price supports for dairy products, lower duties on foreign cheese, and free importation of non-pasteurized cheeses, the opposite of what Hillary Clinton wants.

A Romanian liability crisis?

by  Tyler Cowen in

A Romanian pensioner has lodged a complaint against a TV station claiming their horoscope is unreliable.

The woman, from Maramures, says the horoscope repeatedly predicted she would receive a big sum of money but it never arrived although she waited for three months.

Thanks to cronaca.com for the link to Ananova. Here is the clincher:

Officials said they will analyse the complaint and take a decision.

But they advised the broadcasters to include an announcement that the horoscope may not be 100% accurate and that they cannot warrant for the truth of astral predictions.

Perhaps they will consult their horoscope before rendering a final verdict.