Month: April 2008

“The limited liability corporation is the greatest single discovery of modern times. Even steam and electricity are less important than the limited liability company”.

Professor Butler President of Columbia University, 1911.

"This limited liability corporation is the bedrock of the market economy…And what do we, the citizenry, get in return for this generous public grant of limited liability? Originally, we told the corporation what to do. You are to deliver the goods and then go out of business. And then let humans live our lives. But corporations gained power, broke through democratic controls, and now roam around the world inflicting unspeakable damage on the earth."

Russell Mokhiber and Robert Weissman, Mother Jones 1999

Police in southern China have discovered a factory manufacturing Free Tibet flags, media reports say. The factory in Guangdong had been completing overseas orders for the flag of the Tibetan government-in-exile.

Here is the link, hat tip to Christopher Hayes.

One would not have thought it
possible for the internet bubble of the late
1990s, the greatest boom in the history of the world, to be replaced within five
years by a real estate bubble of even greater magnitude and worse stupidity.
Under more normal circumstances, one would not have thought that the same
mistake could happen twice in the lifetimes of the people involved…

The most straightforward explanation begins with the view that all of these
bubbles are not truly separate, but instead represent different facets of a
single Great Boom of unprecedented size and duration. As with the earlier
bubbles of the modern age, the Great Boom has been based on a similar story of
globalization, told and retold in different ways
– and so we have seen a rotating series of local booms and bubbles as investors
price a globally unified world through the prism of different markets.

Nevertheless, this Great Boom is also very different from all previous bubbles.
This time around, globalization either will succeed and humanity will achieve a
degree of freedom and prosperity that can scarcely be imagined, or
globalization will fail and capitalism or even humanity itself may come to an
end. The real alternative to good globalization is world war. And because of
the nature of today
‘s technology, such a war would be apocalyptic in the twenty-first century. Because there is not much time left, the Great Boom, taken as a whole, either is
not a bubble at all, or it is the final and greatest bubble in history.

This also means that catastrophic risk has never been higher and the peso problem — changing small probabilities of total collapse — is screwing around with asset prices to an unprecedented degree.  Here is the full essay, which also has much of value on China, among other topics.  If nothing else, remember this:

…there is no good scenario for the world in which China fails.

And this:

…a long
“China” position is not a forecast that financial globalization will succeed, but
rather a bet that its internal contradictions will persist.

The hat tip is from wunderkind Ben Casnocha.

Thousands of people in Africa will be paid to avoid unsafe sex, under a groundbreaking World Bank-backed experiment aimed at halting the spread of Aids.

The $1.8m trial – to be launched this year – will counsel 3,000 men and women aged 15-30 in southern rural Tanzania over three years, paying them on condition that periodic laboratory test results prove they have not contracted sexually transmitted infections.

The proposed payments of $45 equate to a quarter of annual income for some participants.

Here is the full story.  It is a joint private sector, public sector initiative, in case you were wondering.  I thank Johannes for the pointer.

Yes, I am opposed to many forms of zoning.  Without zoning our cities would be denser, more eco-friendly, cheaper to live in, more able to produce economies of agglomeration, and more immigrants would benefit from American prosperity.  Matt Yglesias periodically has good posts on this topic. 

More specifically, Manhattan would look more like Sao Paulo, with a true forest of skyscrapers instead of the current puny and indeed embarrassing line-up.  Many of these towers would be residential, as they are in Sao Paulo.  Many problems of cities, including congestion, would of course become worse.  Overall I see the gain as real but a small one, at least relative to gdp.

A key question is what zoning means.  Let’s say you wanted to set up a shack on the sidewalk and live in it; should that be allowed?  How about a modest apartment building but without a water connection?  Should Manhattan really become like Sao Paulo?  Only in extreme cases would I wish to waive such infrastructure requirements for the housing stock.  And if you agree with me on that one, then you don’t want to get rid of most zoning either.

The main point of my piece is that inter- and intra-national
restrictions on trade in rice are bad, not that free trade reduces
the price of rice for everyone.  Consider a simple analogy: if the quality of
Interstate 95 declined, the price of barbecue in North Carolina might
fall, namely because people like me wouldn’t drive to go eat there.  Yet few
people would argue that a nation can do better feeding itself by
lowering the quality of its roads or for that matter littering its
harbor with dangerous rocks or for that matter imposing export restrictions.  It doesn’t knock down the trade argument, as an empirical claim, to cite the existence of pecuniary externalities.

Maybe Rodrik has in mind the commonly-heard argument that eliminating the agricultural subsidies of rich countries would produce vast benefits for poor countries.  I’ve criticized that claim myself; my column is careful to argue that the poor countries are the worst protectionists, often internally as well as externally.

Here is a related part of Rodrik’s critique:

Freer trade would reduce prices of food (relative to other prices) only
in countries that are food importers.  Food exporters would experience
a rise in the relative price of food, and there is simply no way of
escaping that reality.

The great strength of Rodrik’s work is how much he stresses the
context-dependent nature of economic arguments and how "one size fits
all" is often an oversimplification.  So beware when anyone writes "there is simply no way of
escaping that reality."  Increasing returns are one way of escaping that reality.  Would the price of cars be lower in Japan today, if the Japanese had placed heavy export restrictions on Toyota autos?  Probably not.  (Constant returns, by the way, are another means of escaping from that reality.)  Now rice production may or may not be subject to increasing returns, but surely rice trade is a positive-sum game and also has broadly pro-egalitarian effects.

Trade really is an issue where a) economists have something to say and b) human lives are on the line.  If Rodrik wishes to argue, "Indonesia should ban the export of rice," then by all means he should just come right out and say so.  Let’s have that debate.  But if not, I wonder if he could see his way toward using his considerable influence and writing eight simple words:

"The world should have free trade in rice."

One of Mexico’s biggest drug cartels has launched a brazen recruiting
campaign, putting up fliers and banners promising good pay, free cars
and better food to army soldiers who join the cartel’s elite band of
hit men.

From USA Today.  Hat tip to Peter Gordon.