Why Haitians periodically flee the country in large numbers

by  Tyler Cowen in

The United Nations’ Food and Agriculture Organization says half of Haiti’s 8 million people can’t meet their minimum food requirements. Relief groups say the number is growing because fighting and chaos have forced them to cut deliveries outside Port-au-Prince.

The U.N. calls Haiti “a silent emergency,” ranking it below war-torn Afghanistan, Ethiopia, Somalia, Sudan and Congo in key health, sanitation and poverty indicators.

That estimate is from before recent troubles. There are so many reasons for this state of affairs, environmental catastrophe is one factor often overlooked:

Rural Haitians live amid barren mountains and valleys that have been stripped of life. The hunt for trees to burn into charcoal for cooking fuel has left the once-lush country with forest coverage of less than 1%. Without mango, gayoc and eucalyptus trees, most of the island’s fertile topsoil has washed into canals, silted up streams and lakes or cascaded into the ocean.

“It’s so environmentally degraded it can’t produce even basic food,” Erikson says.

That is why the Haitians say: “The goat which has many owners will be left to die in the sun.”

What does this all mean? If there is any perturbation in basic conditions, or the ability of Haitians to trade, many more people are plunged below the starvation line. During the last Haitian political crisis about 80,000 Haitians left for our shores, usually with no real plan in hand. Just about any gamble beats staring death in the face.

Good news: our senators are really, really smart

by  Tyler Cowen in

US senators’ personal stock portfolios outperformed the market by an average of 12 per cent a year in the five years to 1998, according to a new study.

“The results clearly support the notion that members of the Senate trade with a substantial informational advantage over ordinary investors,” says the author of the report, Professor Alan Ziobrowski of the Robinson College of Business at Georgia State University.

He admits to being “very surprised” by his findings, which were based on 6,000 financial disclosure filings and are due to be published in the Journal of Financial and Quantitative Analysis.

“The results suggest that senators knew when to buy their common stocks and when to sell.”

First-time Senators did especially well, with their stocks outperforming by 20 per cent a year on average – a result that very few professional fund managers would be able to achieve.

“It could be argued that the junior senators most recently came out of private industry, so may have better connections. Seniority was definitely a factor in returns,” says Prof Ziobrowski.

There was no difference in performance between Democrats and Republicans.

A separate study in 2000, covering 66,465 US households from 1991 to 1996 showed that the average household’s portfolio underperformed the market by 1.44 per cent a year, on average. Corporate insiders (defined as senior executives) usually outperform by about 5 per cent.

The Ziobrowski study notes that the politicians’ timing of transactions is uncanny. Most stocks bought by senators had shown little movement before the purchase. But after the stock was bought, it outperformed the market by 28.6 per cent on average in the following calender year.

Returns on sell transactions are equally intriguing. Stocks sold by senators performed in line with the market the year following the sale.

When adjusted by the size of stocks, the total portfolio returns outperformed by 12 per cent a year on average. The study used a total market index as the benchmark for comparison.

Here is the full story. Here is the home page of the researcher, Alan Ziobrowski. I haven’t scrutinized or even read the original study, but right now I will bet this is true.

Thanks to Jane Galt, who is just back from Mexico, for the pointer.

How The Da Vinci Code became such a hit

by  Tyler Cowen in

Yes readers love it but Barnes and Noble pushed it. The author, Dan Brown, was largely unknown in the world of publishing. But Doubleday distributed a remarkable 5000 advance reader and review copies. Internal readers in Barnes and Noble loved the story and the bookseller was on board. Advance orders from the store upped the print run from an initial 60,000 to 230,000 copies. Some Barnes and Noble stores hired greeters to tell customers about the novel. The book debuted at number one on The New York Times bestseller list and has held strong ever since.

And why should Barnes and Noble care? Competitive pressures are forcing them to promote their products to greater degree. The company faces low price competition from discounters such as Costco. If your bookstore can’t compete on price, it has to emphasize quality dimensions, such as being a source for new and hot book ideas.

The usual story suggests that price competition prevents the more expensive retailer from offering ancillary services. You could speak to the stereo salesman at the good shop but buy at the cheap shop. But the cheaper the per unit value, the more likely a store can profit from offering bundled services. It is not worth your while to hear about The da Vinci Code in Barnes and Noble and then drive to Wal-Mart to buy it. In other words, expect more concerts at your local book superstore. And expect book superstores to take a growing role in shaping consumer taste.

I read the book and was repulsed, though I will admit to finishing it, for reasons of research obviously.

There are now 6.1 million copies of The da Vinci Code in print, the title is slated to become the fastest-selling non-Harry Potter book ever, surpassing Bridges of Madison County.

Some of the above information is drawn from the March 8 issue of Fortune.

Is astrology more scientific than economics?

by  Tyler Cowen in

Many Europeans seem to think so. Here is the original data, scroll to p.21 (pdf) to see the data, the rank ordering for “degree of scientific” is the following:

1. Physics
2. Medicine
3. Biology
4. Astronomy
5. Psychology
6. Astrology
7. Economics
8. History

Thanks to Randall Parker for the pointer.

Addendum: A Charlie writes: “Why not? At least, given the same date, time, and location, two astrologers will agree on all the major points.”

Facts about downsizing

by  Tyler Cowen in

Downsizing occurs when a firm lays off workers to economize on costs. So what do economists know about this phenomenon?

1. About half of all downsizing firms end up with at least as many laborers within a few years’ time. Downsizing is often a matter of restructuring a labor force, not just getting rid of dead wood. In other cases downsizing may be purely temporary, and is reversed once the firm has some extra cash.

2. Downsizing in manufacturing is nothing new and has been going on since 1967. That being said, the smaller manufacturing firms generally have been increasing employment. The notion of “regression toward a mean” describes the manufacturing sector better than the universal downsizing hypothesis.

3. Downsizing is positively correlated with the degree of foreign competition in a sector. So trade does encourage firms to cut their costs.

4. Manufacturing is fifteen percent of the U.S. labor force and thus only a small part of the downsizing story. Retailing and services have been upsizing considerably for many years.

5. Downsizing firms tend to increase their profits but not their productivity. Downsizing commonly leads to lower wages within the downsizing firm. There is evidence for the “wage squeeze” story.

From the recent Downsizing in America: Reality, Causes and Consequences, by William J. Baumol, Alan S. Blinder, and Edward N. Wolff.

The authors conclude the following:

…no special programs appear to be called for, aside from measures to ease the transition of downsized workers to other jobs…the evidence provides no support for the conjecture that the economy is undergoing widespread and protracted reductions in the size of the typical firm’s labor force.

Tom Friedman on outsourcing

by  Tyler Cowen in

…when I came to the 24/7 Customer call center in Bangalore to observe hundreds of Indian young people doing service jobs via long distance – answering the phones for U.S. firms, providing technical support for U.S. computer giants or selling credit cards for global banks – I was prepared to denounce the whole thing. “How can it be good for America to have all these Indians doing our white-collar jobs?” I asked 24/7’s founder, S. Nagarajan.

Well, he answered patiently, “look around this office.” All the computers are from Compaq. The basic software is from Microsoft. The phones are from Lucent. The air-conditioning is by Carrier, and even the bottled water is by Coke, because when it comes to drinking water in India, people want a trusted brand. On top of all this, says Mr. Nagarajan, 90 percent of the shares in 24/7 are owned by U.S. investors. This explains why, although the U.S. has lost some service jobs to India, total exports from U.S. companies to India have grown from $2.5 billion in 1990 to $4.1 billion in 2002. What goes around comes around, and also benefits Americans.

Read the whole column.

Addendum: Here is Virginia Postrel’s latest piece on trade.

Second addendum: How about this press release, India awarding a big contract to Hewlett-Packard, thanks to Kevin Bone for the pointer.

My favorite Haitian proverbs

by  Tyler Cowen in

Number one:

The constitution is paper, bayonets are steel.

Here is a list of some others. How about this?

The goat which has many owners will be left to die in the sun.

Or this:

Ignorance doesn’t kill you, but it does make you sweat a lot.

Another list offers what is surely a current thought of Aristide’s:

I give you a room and now you want my living room.

Here are some Haitian proverbs explained, some in scatological fashion.

George Bush could have used these two:

Pal franse pa di lespri pou sa.
To speak French doesn’t mean you are smart.

And:

Li pale franse.
He speaks French. (A person likely is deceiving you)

In Praise of Borders

by  Tyler Cowen in

Borders Books and Music is tapping into one of the retail industry’s few remaining new frontiers – underserved urban neighborhoods – with stores in Detroit and Chicago…

Of the two projects, the Detroit store is probably the bigger gamble, if only because of the general absence of retail activity of any kind in the downtown area.

“Retail is lacking in downtown Detroit,” said Charles Maday, the chief executive of Exclusive Realty, a Detroit commercial brokerage firm. “All the retailers left. It’s the only major city that doesn’t have even a hardware store.”

A walk around the downtown area confirms that. It is impossible to buy even a T-shirt in downtown Detroit, let alone necessities like groceries or furniture.

Here is the full article. It is hard to believe there was a time when it was debated whether book superstores are a good thing.

The cynical will note that the project developer is receiving a tax break from the city.

Picasso at your local price club

by  Tyler Cowen in

Since last spring, the company has been selling fine art, including limited-edition lithographs by Pablo Picasso, Marc Chagall and Joan Miró.

Greg Moors, an art dealer in San Francisco, began selling art at some of the company’s stores in brief experiments last spring, and for the last two months has been selling on the company’s Web site, Costco.com. The artwork is museum quality, matted and framed.

“There were so many double takes at the stores,” Mr. Moors said. “People stopped in front of these lithographs and said: ‘Wow! What is this?’ “

Mr. Moors sold 43 pieces of art during appearances at Costco stores – in the La Jolla area of San Diego, as well as Concord and Mountain View, Calif., and Issaquah, Wash. “I consistently did fairly well,” he said, “considering that people are coming in to buy hamburger and walking out with a $1,200 work of art.”

Get this:

Ms. Elsner said Costco applied the same pricing system to the art that it did to other goods, marking them up no more than 14 percent above what it pays Mr. Moors. He said his markup was “way below what retail galleries charge” but declined to be specific.

Tony Pernicone, an art appraiser who owns Avanti Fine Arts, a gallery in Larkspur, Calif., north of San Francisco, and previously directed the San Francisco Art Exchange and other art galleries, said: “At a legitimate gallery, generally the markup is 100 to 150 percent, depending on their overhead and the cost of the art. Obviously, you get galleries that try to go higher.” Costco’s price of $1,550 for a Chagall Bible Series lithograph was $500 to $1,000 less than a gallery would have charged, Mr. Pernicone said.

In other words, “non-dignified” intermediaries are entering the market and offering the goods at cheaper prices, thereby separating the artwork from the attached aura of the sale. Let’s root for the artwork, not the aura. Here is the story. Here is the web site, note they are temporarily out of stock. Here is the sort of work you can buy, albeit from another seller.

Teens really are less motivated

by  Tyler Cowen in

Teen brains show less activity in the regions associated with motivation, reveals a brain imaging study.

And adolescents may be more willing to engage in dangerous activities such as drink [sic] driving because this crucial part of their brain is under-developed, the US researchers suggest…Perhaps teens seek more extreme behaviours to achieve normal levels of stimulation in this brain region, he suggests.

Here is a longer discussion. I know I will receive hundreds, maybe even thousands, of angry emails from parents who cannot possibly believe this is true. But the reporting of science must progress, what can I say?

P.S. The skeptical may wish to note that the sample size is twelve teenagers and twelve adults for the study. But alas, no motivated teen wrote to tell me that.

Addendum: Randall Parker adds much more.