Month: January 2011

The paradox of Tunisian water policy

One quality of life measure put Tunisia first in the Arab world.  If you look at water policy, the Tunisian government has long had a strong reputation.  Here is Wikipedia:

Tunisia has achieved the highest access rates to water supply and sanitation services among the MENA countries through sound infrastructure policy. 96% of urban dwellers and 52% of the rural population already have access to improved sanitation. By the end of 2006, the access to safe drinking water became close to universal (approaching 100% in urban areas and 90% in rural areas). Tunisia provides good quality drinking water throughout the year.

I've never been to Tunisia, but from readings I've found the country especially difficult to understand.  They've had a corrupt autocracy for a long time, but some areas of policy they get (inexplicably?) right.  And usually they are by far the least corrupt country in the Maghreb.  Dani Rodrik called the place an unsung development miracle.  Maybe that was exaggerating but for their neighborhood they still beat a lot of the averages and they've had a lot of upward gradients.  They've also made good progress on education.

And now this.  Perhaps it is no accident this is "the first time that protests have overthrown an Arab leader."  The lesson perhaps is that the path toward a much better world involves…small steps.  Civil society there is relatively strong and has been so for a while.  Democracy is probably not around the corner, but if you're studying social change it's worth spending a lot of time on why Tunisia and Jordan are often so much better run than the other Arab states.

The Music of the Market

Mr. Frost and his team work out of a small, beige corner office with arched windows that used to be a library. There, at about 10:15 most workday mornings, one of them pushes a button on a computer. Across Wall Street, three musical notes – an F, an E and a D – sound on trading terminals, alerting traders that the Fed is in the market.

From the NYTimes.

Hat tip Daniel Lippman.

Freakonomics blog to go indie and leave NYT

The scoop is here and for the pointer I thank Chris F. Masse.  Dubner emailed to Forbes:

Yes, we’re taking indie again because, even though the 3.5 years with has been beyond great, a lot has changed in our universe since then – the film, a radio show, more books, etc. – and we’ve got a big appetite for uniting all these things, and a few more things, into one tight-knit little media channel known as And we just couldn’t do that if the blog still lived at Paywall issue wasn’t a major consideration.

Will Paul Krugman end up behind a paywall?

What Belarus is really like

A hunter in Belarus was shot in the leg by a fox that he had wounded and was trying to kill.

The man was trying to finish the animal off with the butt of his rifle, but as the pair struggled the fox got its paw on the trigger of the gun and fired a shot.

Prosecutors from the Grodno region said the unnamed hunter ended up in hospital with a leg wound.

"The animal fiercely resisted and in the struggle accidentally pulled the trigger with its paw," the Telegraph quoted one prosecutor as saying.

The link is here, other versions of the story are hereIt is said that the fox got away.

Liberal Compromise and Conservative Power

Paul Krugman has complained bitterly that Obama has compromised the progressive agenda. A new Gallup poll shows that such compromise may be an almost inevitable result of conservative and liberal ideologies.

Gallup recently polled a sample of Americans on whether it was more important for politicians to stick with their beliefs, even if little is accomplished, or compromise and get something done. Very conservative Americans were markedly more in favor of politicians sticking with their beliefs while very liberal Americans voted for compromise.

Importantly, this tells us not just about the beliefs of conservatives and liberals but about the incentives of conservative and liberal politicians. Conservative politicians face a high price of compromise and liberal politicians face a low price. Moreover, everyone knows this so conservative politicians can credibly commit that they will not compromise while liberal politicians cannot. As a result, liberals compromise more than conservatives.

If you can pull it off, credibly commiting not to compromise is a neat trick because you can get more of what you want even without an increase in basic aspects of political power such as votes. But where does the credibility originate? Is it inherent to the respective ideologies? The term conservative certainly suggests an unwillingness to change let alone compromise. Or, to turn full circle, perhaps conservative politicians are better at using apocalyptic rhetoric to instill anti-compromise feeling in their constitutients which in turn gives conservative politicians greater power.

Hat tip to L. Indyk.

Should we use the price system for evacuation?

From Boettke:

Stigler reports that he received a letter from Tjallling Koopmans asking whether he had in fact advocated the use of the price system to evacuate NYC in case of a bombing during WWII.  Stigler responded that he had never even thought about the problem before, but upon reflecting on the problem that (1) upon the first bombing of NYC any system of evacuation would be chaotic and inefficient, but that (2) if the bombings were repeated, that indeed he would argue that the price system would be the most efficient way to handle the problem.

It depends on the counterfactual.  It is already the wealthy who have the resources to leave afflicted areas, or who had the resources to send their children to the countryside, in the case of bombed London during World War II.  You could pay a relative to take the kids in, rather than having to rely on the charitability of your relatives.  So very often we already are using the price system, and in a fairly orderly manner.

If you are evacuating a city suddenly, along a constrained road or path, ideally (at least by economic standards, which may or may not be your final moral theory) you wish to favor the people who are young, productive to others, and people who value their own lives highly and are risk-averse.  A market auction tends to favor the wealthy and in this context many of the first leavers in line will be inefficiently old, again with the moral caveat noted above.  The wealthy spend money on the basis of "if I die, my wealth is worthless or worth less because my bequest motive is less than full," whereas from a social point of view the wealth survives the death of the wealthy person.

If institutions will enforce the traditional "women and children first," with a minimum of corruption, that solution may be preferable to the auction.  Men are on average more productive than women in the labor force, but the number of replacement children in the longer run is more closely tied to the number of women than to the number of men.  So, indirectly, favoring women favors men too.

The private sector often chooses the rule of "women and children first," at least when the disaster is explicitly seen as such.  This rule was heeded in the case of the Titanic but not the Lusitania, arguably because the latter ship sunk more quickly and with more panic.

In many other settings, especially where dying is non-immediate or stochastic, the market chooses the auction method.  Think of the market for pharmaceuticals.  In the absence of government subsidy, you have to buy the drugs and there is not always price discrimination in favor of women and children.  Also consider allocation procedures for kidneys, hospital rules for triage, and the sale and resale of fresh water during cholera epidemics, among other scenarios.  What's striking is how many different allocation procedures markets use, depending on context. 

Per capita gdp in Belarus

I am correcting the mistake in the previous post, here is a range of estimates from $5k up through $12k.  The point remains that a country, especially a European country with free and wealthy nearby neighbors, should not be content with the lot of Belarus.  My apologies for the slip-up.

Addendum: As Blackadder notes, in terms of the Satisfaction with Life Index, they are near the very bottom.

The problem

Via Bob Cottrell:

"This is the place," he says. "The economy is booming and there's a real vibe. My son and I went to Ukraine recently and everyone was saying to us: 'Can we have the Belarus president in charge here for a year?'"

It's not difficult to see why. Unlike Ukraine and Russia, Belarus's economy is not dominated by billionaire oligarchs. There is no underclass: according to UN figures, Belarus has one of the lowest levels of social inequality in the world. Lukashenko wins elections not through fear, but because he has delivered social protection and rising standards of living. Growth now stands at 7 per cent.

The danger, some feel, is that a move towards a more market-oriented economy will destroy these achievements, and leave Belarusians sharing the same bitter-sweet jokes as their fellow eastern Europeans.

The full article is here.  But look here for per capita income:

Belarus: $1248.60 per person (update: correction here)

If you want proof that F.A. Hayek is a brilliant and important thinker, there it is.  On the brighter side, not everyone lives in Belarus.  

*Monocle* and high-altitude cities

Edition Alpino, for this month's issue.  I had not known there was a periodical called Monocle and now I have a piece in it, next to the ads for fancy watches and articles geared toward the European elite.  (Given the business model of this periodical, I believe the piece will never be on-line.)  There is also an article "Radio: Four modern alternatives to Alpine horn blowing."  And "Monocle goes on snow patrol with the Federal Republic's Gebirgsjägerbrigade, the traditional Alpine troops with a very modern mission."  

My fun but not very scholarly bit asks why so many cities of the far north are so pleasant to travel to, the task the editors set me.  Doing the piece got me thinking why cold, high altitude cities such as La Paz and Kathmandu do not always offer the same virtues.

In high altitude cities it is harder to raise large herds of pack animals, cultivate broad agricultural plains, establish critical mass in terms of size, or trade with heighbouring regions.  There are also fewer sea connections.  If we look in Europe, the largest Swiss cities are near the plain rather than tucked into the Alps.

This may be historical accident, but two of the more successful high altitude cultures came in the New World, namely the Incas and the Aztec alliance.  Is that because domesticated animals were less important on this side of the Atlantic?  That tomatoes and potatoes and corn can do well or better at high altitudes?  In and near Tenochitlan of course, the Nahuas built their own extensive network of canals.

One further note on Foucault, concerning methodological individualism

In my previous post, I neglected one point.  Reading Foucault is one useful path out of extreme positions of methodological individualism.  By methodological individualism I mean the view that "method aimed at explaining and understanding broad society-wide developments as the aggregation of decisions by individuals," as Wikipedia puts it.

Foucault understood how actual historical explanation relies on the use of broad categories, classes, and exemplars, and in a manner which is not logically reducible to statements about individual beliefs and desires.  The writer (theorist) has nothing close to a complete mental model of how the interacting categories reduce to component individual parts, and so some or most of the moving parts of the explanation retain their autonomy at a partially macro level.  The Austrians will kick and scream on this one, but if you combine imperfect information and the sense/reference distinction, methodological individualism ends up as more of a slogan than anything else.  There is a reflective equilibrium to the explanatory process, and micro relies on some macro foundations, not just vice versa, and individuals rely on the social for some of their cues.  Atomistic reduction to the level of the individual in general will not succeed.

The denier of strict MI is not committed to extreme Hegelian views about the autonomous existence of collectivities and it is debatable how much even Hegel himself made that mistake.

I grant that Foucault takes his own method too far in the anti-individualist direction, as did Hegel.

Foucault is by no means the only or even the best path out of extreme methodological individualism.  See this article by David Levy or late Wittgenstein or William James on pluralism, for instance, or more recently Geoffrey Hodgson, perhaps the best place to start.  Here is a quick overview of some of the debates, though it does not cover the best criticisms.  Neuroeconomics, and modular models of the mind, also can be read as critiques of MI, suggesting, as did Nozick, there is no particular reason to stop at the level of the individual in doing the explanation.

Oddly, for all their talk about methodological individualism, economists hardly ever engage in the medium for which it is most appropriate: biography.

A while ago I wrote a review essay on biography and economics.  Here's a challenge: if economics is so powerful, and MI is so persuasive, try writing a biography of a person, using economic tools, and see how much of that person's life you can explain.  It is a humbling and instructive experience and you can read my attempt here.

I Chose Liberty

I Chose Liberty, a collection of short intellectual biographies of contemporary libertarians edited by Walter Block, is quite entertaining. Richard Epstein, Gordon Tullock, Judge Napolitano, John Hasnas, Ron Paul, Bryan Caplan, myself and many others are included.

Need I tell you whose biography begins:

When I was about thirteen, I decided I wanted to read all of the good books in the public library. I started with the Dialogues of Plato…

You can buy it here or here is the free pdf.

Hat tip: Bryan Caplan.