Month: August 2004

Cyclopaedia of Political Economy

Have you ever wondered what nineteenth century, classical liberal political economy looked like? No, not the classic writers but rather ordinary political economy?

A new web resource answers your question. John J. Lalor’s Cyclopaedia of Political Science, Political Economy collected classical liberal writings on the economic issues of the day, circa 1881. You can now access and read the work in its entirety. Here is information about the book and author.

For one sample, here is the brief article on the political economy of debt. Or try this entry on the balance of trade, still relevant today. The item on the division of labor remains eloquent and insightful. Gustav de Molinari writes passionately on the link between freedom, prosperity, and the arts, a favorite topic of mine. I’ve spent a good bit of time browsing through the book (both recently and much earlier), and it offers surprisingly few clunkers. On social issues it is consistently liberal and progressive.

Kudos to the ever-excellent Liberty Fund for putting the work on-line. Until their efforts, you could buy the book for a mere $675.

Addendum: The links to the previous version of this post have now been fixed.

Nigeria gets a movie theater

No, not an open-air cinema, or a DVD player projecting onto a large screen, but rather a real movie theater:

Lagos is the biggest city in Nigeria and sub-Saharan Africa, but until recently it did not even have any cinemas.

Lagos now has its first multi-screen cinema complex – a rarity in Africa

That is all the more surprising given that Nigerians love watching films: the country is famous for its thriving and expanding home-video industry.

Now, however, that has all changed, thanks to the Silverbird Cinemas – an upmarket five-screen Cineplex in the heart of Victoria Island.

The project has faced numerous obstacles:

There were cinemas in Lagos in the 1960s, but they began going out of business in the 1970s – partly because of the difficulties of operating under military dictatorship.

Cinemas closed down across the country and today many are used as Pentecostal churches or Islamic education centres.

But even with Ben Murray-Bruce’s enthusiasm, this was not the easiest project to get off the ground.

Nigeria has an erratic power supply, which means that seven generators have been installed to make sure that the films do not stop mid-show and the air-conditioning does not break down.

Mr Murray-Bruce has also had to convince film distributors that it is safe to send prints to Lagos – a city already awash with pirated DVDs of top Hollywood films.

Here is the full story.

Think about this account next time you hear someone blame the small number of African films on Hollywood or Bollywood cultural imperialism.

Regulating sex work

In June of 2003, New Zealand decriminalized prostitution. As a result, the industry fell under the aegis of the NZ Occupational Safety and Health Service who have produced a Jocelyn Elders? Alas, the New Zealanders are not so liberal with regard to other policies – you can go to a brothel, for example, but don’t try lighting up after sex or you will be in contravention of the law.

All of this reminds me of the following IQ test question:

What is the minimum number of condoms required for safe sex in each case:
(a) two men with two women
(b) one man with three women or three men with one woman
(c) three men with each other
(d) 2k+1 men with one woman
(e) m men and n women

Is there anyone in the world smart enough to figure out the answer and lucky enough to find the knowledge useful? Answers here in case you are simply lucky.

Addendum: Tyler also wrote about condoms recently. I promise we will get back to economics soon. Of course, the great Richard Posner did write a whole book about sex so we have strong precedent for these discussions. More information on the regulation of prostitution can be found at Wikipedia. Thanks to Eric Crampton for the link.

Has there been a free trade breakthrough?

Remember that old saying, something like “Things are never as bad, or as good, as they seem.” It applies to international trade as well.

Numerous reports suggest that the WTO has achieved a breakthrough. The core deal appears to suggest that many poor countries will lower their tariffs on manufactured goods and the rich countries will limit or eliminate export subsidies and protection for agriculture. But there is more here than meets the eye.

The first worry is an obvious one. There is no date given for the change in agricultural policies. Keep in mind that the rich countries are masters of obfuscation and delay on this issue, if not outright obstruction. Plus the rich countries can exempt “special” products, if they so choose.

Arvind Panagariya suggests that our concerns should run deeper:

Current production and export subsidies flood world markets with the subsidised products and drive their prices down. The removal of these measures will raise the prices of the products in question. This will benefit the exporters and hurt the importers of these products. Food products happen to be among the most heavily subsidised items and as many as 45 of the world’s least developed countries are net food importers, according to calculations by the economists Alberto Valdes and Alex McCalla. Even when we consider all agricultural products, 33 least developed countries are net importers.

A counter-argument may be that, once the subsidies are eliminated and world prices increase, the least developed countries will become net exporters of the products. But this is doubtful for two reasons: such a change can turn at most only a handful of these countries into net exporters and the switch from net importer to net exporter status by itself is not enough to bring an overall benefit. As food prices rise, so will losses on food imports. Only if a country becomes a sufficiently large exporter will it be able to offset these losses.

In other words, even if reform comes about, the main beneficiaries will be the taxpayers in the rich countries. Export subsidies benefit consumers abroad, even if they do not maximize aggregate value.

Nonetheless it is trickier than Panagariya indicates. Many agricultural interventions keep world prices up, not down, by preventing the reallocation of farming to its most productive geographic venues. Nonetheless it is not obvious that the very poor countries would be big winners in any competitive reshuffling of sectoral specializations. In fact we might expect technology to make agriculture increasingly high-tech. We are then back to the case where export subsidies hurt taxpayers in rich countries but help consumers in poor countries.

Also keep in mind that many poor countries already enjoy free bilateral access to EU markets for many agricultural commodities, with rice, sugar, and bananas being prominent exceptions. So if liberalization causes food prices in Europe to fall, agricultural exporters in the poor countries may again be worse off.

I am all for free trade, as loyal readers of MR will know. But it is a common myth to think that agricultural free trade will cause say, Africa, to blossom or achieve significantly greater gains from world markets. Even if African consumers end up paying lower prices for food, African producers will see very mixed results. And how effectively do we expect the damaged producers to be reallocated to other sectors? Africa as a whole could still benefit in the longer run, given the theory of comparative advantage, but this is hardly the scenario that everyone has in mind.

Addendum: Ben Muse offers an analysis and extensive links.

Dad is a stinker

Children rate their fathers as among their least popular playmates because they are too competitive, according to research among more than 1,000 youngsters.

They “played to win”, lacked imagination or were simply at a loss as to how to play games, said the Children’s Play Council, which commissioned the survey with the Children’s Society.

Children up to the age of 12 would rather play with their friends, their mother or their brothers and sisters.

Only one in 16 chose their fathers as their ideal companion. Dads were rated slightly above grandparents (one in 33) [so what’s wrong with them, TC asks?]. One in 50 children said they would rather play on their own.

Tim Gill, director of the Children’s Play Council, said: “Dads have difficulty not being too competitive. Several fathers said they found it hard to get down to their children’s level. And they don’t find it easy to let children win.

And what does the resident sociologist say?

Frank Furedi, professor of sociology at the University of Kent at Canterbury, said: “Fathers are living through their children much more which means they lose sight of the line that distinguishes adult from child.

“It’s also partly a power control issue. Fathers want to let their children know they are still ‘players’.”

Here is the full story.

Touching the Void

Imagine that you are trapped on a mountain in the Peruvian Andes, your leg is broken in several places, you are severely dehydrated, bitterly cold, all alone…. and you can’t get this song by Bony M out of your head. You don’t even like the song. Now, that’s hell.

That’s one of the lighter moments in Touching the Void a harrowing, awe-inspiring, true-story of two climbers made into a great movie/documentary. Aside from the sheer entertainment value, very sheer in this case, the move has a lot to say about the diversity of preferences, the will to survive and believe it or not, how to achieve goals. Touching the Void also nicely disposes of that old canard about there being no atheists in foxholes. Highly recommended.

Patents for everything

Or is that Markets in Everything?

Read this patent application for paying people to watch commercials:

Described are methods and apparatus for encouraging viewers to pay attention to television programs, commercials in particular, by offering viewers some incentive to watch. In one embodiment, viewers are notified that they can receive frequent-flier miles for answering one or more simple questions at the conclusion of the commercial. To verify that the viewer paid attention to the commercial, the answer to the question may be based on the content of the commercial. A sponsor might ask, for example, that the viewer identify the name of the sponsor or the color of an announcer’s shirt. A correct answer indicates that the viewer watched the commercial, and that the viewer is therefore entitled to some reward. For example, viewers who watch the commercial may be entered in a prize drawing, or may receive prize points, such as frequent-flier miles. In other embodiments, viewers may verify that they watched a given program by selecting an icon or pressing a button on a remote control.

That’s now owned by Microsoft, by the way, in case you are wondering why they are paying such a huge dividend. Here is the original link from TechDirt.

Literary role models for bloggers

All writers have their role models. To whom should bloggers look?

One obvious choice is Samuel Pepys, who kept regular diaries for about ten years. But Adam Sisman’s excellent book, written before the advent of blogging, nonetheless directs our attention to the Scot James Boswell:

Boswell’s plain, direct prose was easy to read, and appealed to twentieth-century readers as [Samuel] Johnson’s mannered, classical style never could. Moreover, Boswell’s interest in himself, which seemed so peculiar to his contemporaries, was very much more acceptable two centuries later. Indeed, Boswell seemed to offer a unique combination: a writer who poured the contents of his mind freely into his journal, without either embarrassment or knowingness…Here was a miracle: a pre-Freudian autobiographer who revealed everything in his mind, without restraint, concealment, or distortion. Or so it seemed.

Boswell [borrowed] techniques from the novel, the theatre, and the confessional memoir. With meticulous care, with long-practised skill, and with a generous imagination, he crafted a character who lived and breathed [TC: I have long felt that Boswell, not Samuel Johnson, is the real biographical subject of Boswell’s Life of Johnson]. He also set new scholarly standards; his verification of every possible detail, which seemed so eccentric to his contemporaries, would become the norm. In doing what he did, he relied mainly on instinct, his sense of what would serve his purpose best.

Hmm…and like many bloggers, Boswell often got in trouble for writing up his private conversations with others.

Safe sex, sells saris

The Indian city of Varanasi is getting through around 600,000 condoms a day, but this is no population control exercise. The weavers of the holy city, home to the world-famous Banarasi saris, have made the contraceptives a vital part of garment production.

The weaver rubs the condom on the loom’s shuttle, which is softened by the lubricant thus making the process of weaving faster.

The lubricant does not leave any stain on the silk thread which might soil the valuable saris.

There are around 150,000 to 200,000 hand and power looms in Varanasi alone and almost all are using the technique.

And every loom has a daily consumption of three or four condoms.

At first, weavers stocked up on condoms from the family planning department under a government scheme to provide them free of cost.

Some weavers even registered with fake identities to get their hands on the precious prophylactics.

Here is the full story. Thanks to Paul N for the pointer.

Profits and an Independent Press

He who pays the piper, picks the tune. In China, that moral has proved to be a surprising link between economic reform and political reform.

More than a quarter century after China launched economic reforms while continuing to restrict political freedom, the government still owns and controls all of the country’s newspapers and television stations. But journalists have fought off party censors in one sensitive subject area after another, and they are waging a daily battle for even greater freedoms.

This push is driven in part by economics. In a sweeping industry overhaul, the government is withdrawing subsidies from state media outlets, holding them responsible for their own profits and losses and opening the door to private investment. The market has led newspapers to set aside propaganda and deliver stories that readers are actually interested in. Many have turned to gossip or entertainment, but there is also a financial incentive to produce a scarce commodity: journalism that challenges the government.

That’s from a very good Washington Post story about a courageous newspaper editor in China, jailed for questioning the local police.

Facts about Orkney

Sorry, no links in this post, but I am sticking to the local sources that sound credible:

1. The richest man in Orkney is (was?) a fisherman. His large net turned out to violate EU regulations, so he received $20 million from the British government to stop fishing. He is now building a house that overlooks the entire town of Stromness from above. The townspeople are not happy.

2. One-third of the employment in Orkney stems from an NHS hospital on the main island. Waiting times are significantly lower here than elsewhere in Britain and the service is correspondingly better.

3. Much of the labor force switches jobs over the course of the year. They serve tourists for three months in the summer, and pick up odd jobs the rest of the year. Work is easy to come by, careers are almost impossible to develop.

4. There have been only two murders in Orkney in the last two hundred years. One happened about two hundred years ago. The other is about ten years old; a waiter was shot and killed in Kirkwall’s Indian restaurant. Neither crime has been solved yet.

5. Orcadians eat pickled herring in oatmeal, smoked fish with scrambled eggs, and fried haddock with chips. For dessert they have Orkney fudge or Orkney ice cream. Haggis is nowhere to be found.

Here is a a tourist introduction to Orkney. Here is historical information. The islands are among the most beautiful spots in Europe and remain largely unspoilt, go if you can.

Markets in Everything – country edition

Kansas City radio station Mix 93.3 FM, which threatened its listeners to play Billy Ray Cyrus’s “Achy Breaky Heart” continuously until the station had met their goal of $20,000 to contribute to the travel expenses of Courtney McCool’s (U.S. Olympic Gymnast) family.

The station started with $6,000 and raised $14,000 in a little under four and a half hours, during which they played the song 48 times in a row.

I am surprised it took that long.

Thanks to jaded economist Craig Depken.

Econ Journal Watch II

The second issue of Econ Journal Watch is now out. EJW is fast becoming one of my favorite journals (I am an advisor but cannot claim responsibility for the excellent content). Lots of good stuff including:

Economics in Practice: Stephen Ziliak and Deirdre McCloskey examine all the American Economic Review articles from the 1990s, and present systematic evidence of the abuse of statistical significance.

William Davis uses survey evidence to argue that a large portion of professional economists falsify their preferences about economics.

Daniel Klein establishes that Journal of Development Economics authors and editors have extensive ties to the World Bank, the IMF, the UN etc., and asks how such ties affect the character of the field.

Government Sues to Raise Drug Prices

The headline in the NYTimes read “Schering Case Demonstrates Manipulation of Drug Prices.” The article continued:

A $345.5 million settlement by Schering-Plough yesterday to resolve a government Medicaid investigation provides a detailed glimpse into how drug companies can manipulate prices to overcharge state and federal programs.

Government officials have taken a keen interest in how drug makers price and market their drugs in recent years, and the settlement is the latest in a series reached with large drug makers over accusations that they have overcharged Medicaid. Last year, Bayer paid $257 million and GlaxoSmithKline paid $86.7 million to settle similar allegations.

Now you probably think this article is about how drug firms acted collusively in order to raise prices, right? Nope, read carefully and you will see that intense competition from Allegra caused Schering to reduce the price of Claritin. Great! Not according to the Feds. The price reductions violated Medicare’s Most Favored Customer clause which requires pharmaceutical manufacturers to give Medicare the lowest price they offer any other customer.

Most Favored Customer/Nation clauses are routinely analyzed in game theory texts as ways for firms to tacitly collude to raise prices. The idea is simple – it’s easier to commit not to compete if lowering price for one customer means lowering prices for all customers. Indeed, this is precisely why the antitrust authorities often sue to prevent firms from using MFC clauses. The evidence supports the theory, after the MFC clause was introduced pharmaceutical prices rose.

The US Attorney may think that “we’re fighting to keep the costs of health care down for everyone,” but in truth by reducing competitive pressures to lower prices they are helping the pharmaceutical firms to maintain a cartel.

Addendum: Put it this way, now that the government has successfully sued the firms for reducing prices do you think a) the firms will now cut the price to Medicare to match the rebates or b) stop giving rebates?

Has urban architecture declined?

Strolling the streets of Edinburgh, it is hard not to be struck by the beauty and general consistency of the older buildings. It is hard to find post World War II examples where a wealthy Western region has done something comparable. Suburbs have sprung up around the United States, but few of them have architecturally notable exteriors on a consistent basis. There are so many new suburban developments, cannot just one of them be lovely and aesthetically challenging?

What might have gone wrong? I can think of a few possible explanations:

1. Architecture has suffered from the “cost disease.” In this context, a rising general level of wages makes quality handwork more expensive in relative terms. In other words, they don’t handweave many carpets in Silicon Valley. There may be something here, but then why don’t the poorer countries of the world become architectural leaders? And I see home interiors as improving significantly over time.

2. In older times governments at various levels were less democratic. Competition for status within an oligarchy may have upped the incentive to produce beautiful exteriors. This mechanism clearly operated in Renaissance Florence.

3. Perhaps consumers and lenders were less well informed in times past. A nice exterior was a good way to signal the quality and long-term commitment of a business enterprise. Just look what happened to the quality of bank architecture in this country once the FDIC was instituted.

4. Perhaps we idealize times past. The so-called “Royal Mile” is today a leading tourist sight in Edinburgh. In the eighteenth century it was considered “a dark, narrow canyon or rickety buildings, some stacked ten or even twelve stories high, thronging with people, vehicles, animals, and refuse…Sanitation was nonexistent.” (That is from Arthur Herman’s notable book on Scotland.) We may be co-authors in the beauty of the past more than most people realize.

5. Perhaps contemporary suburban developments will be seen as beautiful by future generations. I’ll bet against this one, but we will see.

I am hardly suggesting that architecture is declining in every regard. I love the lights of the Ginza district in Tokyo. And our best stand-alone buildings are no less wonderful than those from times past. But I still wonder why urban architecture no longer yields consistently beautiful urban regions. Anyone who has walked around the major European cities, or even glanced at the Chrysler building, surely has asked the same question. Why is the quality of exteriors declining relative to interiors? Given that nice exteriors are a public good, why were they ever so nice in the first place?