Month: January 2010

Haiti: what’s at stake

by  Tyler Cowen in

Maybe you thought Obama was the "health care President" or perhaps the "Afghanistan President", but to my eyes right now he looks like the "Haiti President."  I predict we'll have over a million Haitians living in refugee camps for the foreseeable future.  (It depends how many of the homeless of those can be absorbed by northern Haiti.)  If people don't make it into camps they will be sleeping on the street with little or no means of food or water or employment.

It's a mistake to think there's any brick-by-brick way out of that predicament.  It's not like the earthquake in Armenia or for that matter eighteenth century Lisbon.  Haiti has no functioning government, no working legal system, and very little remaining infrastructure.  There's no formal means to make decisions about reconstruction and no capital to clear away the mess.  As I've written, the country as we know simply doesn't exist any more (view the second video or try these photos).  Port-Au-Prince is destroyed and the city was the heart of the country, economically, politically, and otherwise.  Léogâne, Jacmel, and other significant locales are mostly destroyed as well and they're not receiving much assistance.

Obama will (and should) do something about this situation.  First, I believe he sincerely wants to help but also he cannot ignore his African-American constituency, especially after former President Clinton devoted so much attention to Haiti and especially if health care reform doesn't go through as planned.  Yet he will have a festering situation on his hands for the rest of his term.  If "looting" (a bad word in this context) increases or continues, how quickly will the American people lose sympathy with the Haitians?  How can the "reconstruction" possibly go well?  Ugly gang rule isn't even the worst case scenario.

Obama now stands a higher chance of being a one-term President.  Foreign aid programs are especially unpopular, especially relative to their small fiscal cost.  Have you noticed how Rush Limbaugh and others are already making their rhetoric uglier than usual?  It will be a test of the American populace; at what point will people start whispering that he is "favoring the other blacks"?

Just as it's not easy to pull out of Iraq or Afghanistan, it won't be easy to pull out of Haiti.

Maybe you thought health care was a hard problem.  Maybe you thought that cap and trade would make health care look easy.  This may be the hardest problem yet and it wasn't on anybody's planning ledger.  Obama won't have many allies in this fight either.  A lot of Democratic interest groups might, silently, wish he would forget about the whole thing.

Mass starvation wouldn't look good on the evening news either.  What does it mean to preside over the collapse of a country of more than nine million people?  It's Obama who's about to find out, not the increasingly irrelevant Rene Preval.  Everyone in Haiti is looking to President Obama.

Markets in everything

by  Tyler Cowen in

Stab vests for the World Cup in South Africa.

From the authorities:

The national police says the company [selling the vests] was causing "unnecessary fear".

South Africa's football boss Kirsten Nematandani has assured visitors that all safety measures were in place.

South Africa has one of the world's highest rates of violent crime.  The full story is here and I thank Stan Tsirulnikov and Wes Winham for the pointer.

Writing down the principal on mortgages

by  Tyler Cowen in

It's obvious that the economy still isn't doing well.  Furthermore the rate of foreclosures won't peak until the end of 2010.  On top of that, most observers agree that the Obama mortgage modification plan has been a failure.

That all said, I'm surprised that so few commentators have leapt on the "we should write off some of the principal" bandwagon.  It's not currently a bandwagon at all.

I know that a) this idea is WRONG, b) it is terrible for the long run rule of law, and c) it is EVIL and UNFAIR.  It's also one of the few suggested economic remedies that might have worked or maybe could still work. 

How so?  It limits value-destroying foreclosures.  It gives homeowners the right marginal incentive to keep on making payments and maintain the value of the home and to maintain their credit capabilities.  It gives the housing market a fresh start rather than this waiting/coordination game where we wait for everyone to move on down a notch in house quality, thereby freezing parts of the housing market and choking off required recalculations.  (How can you have a well-functioning housing market when so many people have negative equity?  I've read estimates of twenty percent of the U.S. population.)  It also limits the problem of future ARM resets, once interest rates rise in the future.

It's all about long-run vs. short-run and I usually side with the long run.  But the short run modification of property rights has so many defenders in other contexts, so why not here?  Call it "clearing up financial logjams" if you wish.

Is it a better marginal incentive than suddenly increasing the taxes on banks?

Bernanke himself once suggested the idea.

I might add that by fostering an actual recovery, writing off the principal on mortgage loans might limit some of the other bad interventions that we will try or have ended up trying.  There's more than one way to toss away the rule of law.

Paul Romer doesn’t think a charter city in Haiti can work (now)

by  Tyler Cowen in

The post is here, excerpt:

Contrary to what some have suggested, a charter city in Haiti is simply not an option at this time. A charter city can only be created through voluntary agreement. Under the current conditions, the government and people of Haiti do not have the freedom of choice required for any agreement reached now to be voluntary.

He has another idea:

There are clear limits on the number of Haitian immigrants that nearby jurisdictions are currently prepared to accept. But if nations in the region created just two charter cities, they could accept the entire population of Haiti as residents. There are many locations close to Haiti where these new cities could be built, but for now, Haiti itself is the one place we should not consider.

Here is an offer for repatriation to Senegal:

Presidential spokesman Mamadou Bemba Ndiaye told reporters that Mr Wade had shared his plans with senior aides, and they involved offering voluntary repatriation and plots of land to any Haitian who wanted “to return to their origin”.

“Senegal is ready to offer them parcels of land – even an entire region. It all depends on how many Haitians come. If it’s just a few individuals, then we will likely offer them housing or small pieces of land. If they come en masse we are ready to give them a region,” he said.

Why are the images of Haiti so graphic?

by  Tyler Cowen in

By the way, I favor such graphicness, but I am wondering:

The images coming out of Haiti are more graphic than those from recent natural disasters, and the ongoing wars in Iraq and Afghanistan…

Or is Haiti simply an exception? Is there something about the essential status of the entire country and its people that gives the media new license?

The usual conventions of suggesting rather than displaying trauma seem to have been punctured, at least for now. Bodies caked in dust and plaster, faces covered in blood, the dead stacked in the streets without sheets to hide them — these are all violations of the unwritten code that death can only be seen, in the established etiquette of the mainstream media, by analogy or metaphor or discreet substitute.

Here is more detail.  You'll note there is a long history of portraying Haiti in lurid terms.

Estimating when the Soviets could produce a nuclear weapon

by  Tyler Cowen in

Following up on Alex's post on Soviet economic growth forecasts, I was intrigued to read the 1940s estimates, emanating from the United States, about when the Soviets would obtain a nuclear weapon.  Leslie Groves — who knew something about building a bomb — testified in front of Congress that it would take them twenty years.  In 1948 many Kremlinologists were saying "five to ten years," when in fact the Soviets had a usable bomb in 1949.  In 1948 an engineer in Look magazine predicted the Soviets would get the bomb in 1954.  Many scientists predicted 1952 and some thought 1970.  The Joint Chiefs of Staff were predicted the mid- to late 1950s.  The Air Force was the one institution which got it right and remarks from Senator Arthur Vandenberg were close to the truth as well.

Groves was skeptical of the Soviet engineers, who did not turn out to cause delays and who regularly did very well with what they had to work with.  Other commentators did not realize that 40 percent of the world's known uranium reserves were within the Soviet Union, or that the Soviets could use German uranium quite well.

All this is from the truly excellent new book Red Cloud at Dawn: Truman, Stalin, and the End of the Atomic Monopoly, by Michael D. Gordin.  Here is one very accurate review of the book.

One question is what kind of ideological biases, if any, colored these forecasts.  Another question is whether today's estimates of Iranian production are any better.

*You are Not a Gadget*

by  Tyler Cowen in

That is the new book by Jaron Lanier, a humanist critic of how the internet is shaping our lives and cultures and providing a new totalizing ideology.  Of all the books with messages in this direction, it is the one I would describe as insightful.  Here is one bit:

It breaks my heart when I talk to energized young people who idolize the icons of the new digital ideology, like Facebook, Twitter, Wikipedia, and free/open/Creative Commons mashups.  I am always struck by the endless stress they put themselves through.  They must manage their online reputations constantly, avoiding the ever-roaming evil eye of the hive-mind, which can turn on an individual at any moment.  A "Facebook generation" young person who suddenly becomes humiliated online has no way out, for there is only one hive.

And this:

People live longer as technology improves, so cultural change actually slows, because it is tied more to the outgoing generational clock than the incoming one…So Moore's law makes "generational" cultural change slow down.

It's still a book I mostly disagree with.  You can buy the book here; too bad it isn't on Kindle yet.  Reviews are here.

Thai-Cambodia refugee camps, 1975-1999

by  Tyler Cowen in

Study this model and try to improve on it.  Here is further historical information.

What does the domestic U.S. political equilibrium look like when we are funding and running these camps?  Will Obama be seen as "doing too much" for "black people"?  How will we punish wrongdoers in the camps?  Will the residents be treated better than those in Guantanamo?  What happens when we, explicitly or implicitly, start using Haitian gangs to keep order in the camps?  How many Haitians will the DR shoot crossing the border? 

Haitians are extremely nationalistic, sensitive to foreign influence, and they have a clear historical memory of the U.S. occupation of 1915-1934.  What if they ask us to leave before the camps are self-sustaining?  For how long will we pretend that Haiti still has a real government?

Those are my questions for today.

Assorted links

by  Tyler Cowen in

1. Why such a deep recession?

2. How much of the consumption binge was health care?

3. An economic analysis of "hearts and minds."

4. DR newspapers (here and here) have lots of extra and highly detailed Haiti stories, in Spanish, mostly bad news relative to U.S. accounts.

5. How much does Minnesota value the Vikings?

6. Why men visit prostitutes; here is one take: "I am paying for it and it is her job to give me pleasure. If she enjoys it I would feel cheated."  It's a scary article.

7. And this time it's legal.  The interview is an interesting and indeed Gladwellian perspective on the "talent" of the first legal male prostitute, via Chris F. Masse.

The political economy of earthquakes

by  Tyler Cowen in

Here's a paper by Nejat Anbarci, Monica Escaleras, and Charles Alan Register:

In our theoretical model, we show that as per capita income decreases and the level of inequality increases, different segments of society are less likely to agree on the distribution of the burden of the necessary collective action, causing the relatively-wealthy simply to self-insure against the disaster while leaving the relatively-poor to its mercy. We then evaluate 269 large earthquakes occurring worldwide (1960-2002), taking into account other factors such as an earthquake's magnitude, depth and proximity to population centers. Using a Negative Binomial estimation strategy with both random and fixed estimators, we find strong evidence of the theoretical model’s predictions.

I haven't read it yet but wanted to pass it along; here are varying drafts, go through JSTOR (gated) and Journal of Public Economics for the final version.  By the way, the model predicts bad news for Haiti.

For the pointer I thank the excellent Daniel Sutter, who has done a good deal of work on the economics of natural disasters.  

My history with Haiti

by  Tyler Cowen in

Looking back fifteen years or so, I regarded Haiti as an extreme which people did not dare visit.  I had the image that if I walked down the street someone would come along and lop off my arm with a machete.  I wondered if visitors could go out without armed support.  Somehow I felt that if I could manage a trip to Haiti, I could deal with many of the life problems which would, sooner or later, come my way.

I also imagined the place was full of lush trees, which is the direct opposite of the reality.

I set off in (I think) 1993.  The place was popular as late as the 1970s, but by then hardly any Caribbean guidebooks covered Haiti at all.  My friend Christopher Weber, the investment writer, ended up coming with me at the last minute, maybe as more of a dare than anything else.  Plus he had the longtime dream of visiting the remote Haitian city of Jeremie, because of its association with the family background of Alexander Dumas.  

Upon arriving, I realized the country was relatively peaceful, provided you were not there in times of elections, coups, or demonstrations.  The terrain is so crowded, and white people are so conspicuous, it is (was) hard to get into trouble.  Plus Haitian crowds are known to knock down and kill petty thieves on the spot.  There's just not enough room for anyone to mug you, at least if you exercise due caution.  Nor, for that matter, were there very many beggars, since usually there was no one to beg from. 

Despite oppressive poverty (other than India, I've never seen anything comparable), there's simply a remarkable feeling there and most visitors to Haiti end up sharing this understanding with other Haitiphiles.  I've long wished I could explain this.  I've since been five times, though never to the north.  I also started collecting Haitian art and reading everything I could about the country and going to Haitian concerts.  

For the last ten years I've been afraid to go, mostly because kidnappings started on some of the roads.  Finally, it seemed safe enough and the economy was improving.  Over last weekend, in Miami, Natasha, Yana and I drove around Little Haiti, ate a wonderful meal, and bought some Haitian gospel and compa CDs, which served as the soundtrack for the rest of the day in the car.  I was all set to plan my next trip back.

Neither Chris nor I ever made it to Jeremie.