The Millennium Challenge Account
The Bush administration is proposing to increase our foreign aid budget by 50 percent over the next five years. A new bureaucracy, the Millennium Challenge Corporation, would be created. Here is a summary from Slate.com:
In response to U.S. government development-assistance directive drift and to the Republican perception that aid has been hijacked by touchy-feely liberals, in March 2002 the Bush administration proposed the creation of the Millennium Challenge Account, which would be distributed via the Millennium Challenge Corp. In contrast to USAID, which administers funds to developing countries of pretty much every stripe and inclination, MCA moneys would be allocated only to those nations judged to be most committed to promoting economic freedom, governing fairly, and investing in education and health–based on scores in 16 quantitative areas (such as government effectiveness, primary education completion rate, inflation, etc.) using data collected by the World Bank, the International Monetary Fund, and other third parties. In order to qualify for MCA funds, a country must score above the median of all candidate nations in half the individual criteria in each of the three broad categories, and above the median in a corruption indicator–unless, of course, it is given a bye by the administration.
Under the current foreign aid regime, the U.S. government, often through USAID, crafts developmental priorities and projects, usually in conjunction with local governments, and oversees their implementation through mostly American contracting organizations. One of the key innovations of the MCA will be to give recipient governments a larger role in designing development programs and make them accountable for achieving results.
I remain to be convinced that this is a good idea. The countries that are truly reforming need foreign aid the least. The plan works best if you think that politicians want to push more reforms, but lack the cash to pay off special interests. The plan also works if you think that we can bribe politicians to reform. The plan works worst if you think that foreign aid leads to corruption and inferior policy. In that case we are penalizing the success stories and pushing them in the wrong direction. Of course, the very push for reforming foreign aid implies there is some truth to the latter possibility.
The real motive might be to bypass multilateral institutions and use foreign aid to reward potential allies in our foreign policy struggles. It is then Machiavellian to market this as an aid program.
If we wish to reform foreign aid, have we considered the cost-effectiveness of the alternative strategy of simply dropping dollar bills from a helicopter? No, this is not a purely facetious suggestion. After all, the Bush people tell us that we can spend our money more effectively than the government can for us. Given the lower quality of government in poor countries, we might expect private spending to be a better option there as well.
If we are going to have criteria for aid allocation, perhaps we should try to predict future growth potential, rather than looking at past reforms. Societies that are starting new investments in health care, education, and intermediate social institutions might be the promising recipients of aid dollars. If you know of any good studies on what predicts future (not current) growth, in the Granger-causal sense, please let me know.
The Slate article also notes the following:
…annual U.S. private foreign aid–via foundations, private voluntary organizations, corporate charity, religious organizations, and, most important, remittances sent home by emigrants and their descendants in the United States–amounted to roughly $35 billion in 2000, or more than three and a half times the aid handed out by the U.S. government. Private aid, like private enterprise, tends to be more focused on the bottom line of success–so the chances are better that (unlike, all too often, development funding from governments) a delivery mechanism or program that isn’t getting the job done will be replaced, pronto.
Here is a link to the relevant research on private foreign aid.
Liability and flu vaccine
Liability law appears to be a critical factor behind the vaccine shortage:
As legal liabilities have chased many vaccine-makers out of the market, there are fewer manufacturers. This means less overall ability to produce additional doses, and less investment on new, faster ways to make vaccines.
In the US about 185m people risk serious flu-related illness each year.
At one time the US had 20 flu vaccine manufacturers. Today there are just four: Aventis, GlaxoSmithKline, Merck and Wyeth.
After the second world war the science of cell cultures led a boom in vaccine production. But gradually profit margins thinned on vaccines, as the government became a big buyer of them. Increasing legal liability drove many makers out of the vaccine business.
Today smaller biotech companies have entered the game. But they lack the capacity and the distribution to solve near-term shortages, experts say.
“One of the problems with vaccines is you put them in healthy people,” says Louis Galambos, history professor at Johns Hopkins University and an expert on vaccine manufacturing. “Now we’re in a situation where we have too few producers.”
Congress passed a law in 1986 to limit liability on vaccines for children. There are no such liability limits for adults, however.
Pharmaceuticals companies are inhibited by the particular structure of the US vaccine market, experts say. The US government is a large buyer of vaccines, leaving relatively poor profit margins on vaccines.
Here is the full story from The Financial Times.
What are the best Christmas gifts?
Experiences, not possessions. Concerts and travel are remembered for longer than clothes and jewelry. The result is robust to different ages and groups, but tends to be strongest for high-income individuals. Here is the full story, here is another summary. Here is the original paper. The home page of Van Boven, one of the researchers, offers many interesting papers on human psychology.
The economics of capturing Saddam
Eugene Volokh draws our attention to the following article about Iraq. Here is a snippet from the abstract:
The capture of Saddam Hussein…demonstrates that poor intelligence is not inherent in U.S. guerrilla war-fighting; the United States overcame it by identifying the central weaknesses of its opponents. In this case, the central weakness was money — and this was not only a financial weakness, but also a cultural one.
Here is some more of the substance:
The guerrillas did have one major vulnerability: money. The Baathist regime long ago lost its ideological — and idealistic — foundations. It was an institution of self-interest in which the leadership systematically enriched itself. It was a culture of money and power, and that culture permeated the entire structure of the Iraqi military, including the guerrilla forces that continued to operate after the conventional force was defeated. Indeed, the guerrillas substituted money for recruitment. In many cases, they would pay people outside their ranks to carry out attacks on U.S. troops as a supplement to attacks by the main guerrilla force.
The culture of money made the guerrillas vulnerable in two ways. First, they relied on support from an infrastructure fueled by money. Whatever their ideology, they purchased cooperation with money and intimidation. Second, much of the money the guerrillas had was currency taken from Iraqi banks prior to the fall of Baghdad. A great deal of it was in U.S. dollars, which continued to have value, but most of it was in the currency of the old regime. One of the earliest actions of the U.S. occupation forces was to replace that currency. Over time, therefore, the resources available to the guerrillas contracted.
The United States brought its financial resources into play, purchasing information. As U.S. money surged into the system and guerrilla money began to recede, the flow of information to the United States increased dramatically. Obviously, much of the information was useless or false, and it took U.S. intelligence several months to tune the system sufficiently that operatives could evaluate and act upon the intelligence. Over time, the very corruption of the Baathist system was turned against it.
Mistaken predictions about this war have not been in short supply. But let’s hope they are right.
Why not more price discrimination for medicine?
Physicians and hospitals can not waive or significantly reduce their fees they charge to uninsured patients even if they want to because they would technically be committing Medicare fraud! Ant’ mindless and impersonal government bureaucracy great?!
Read more from Dr. Rangel. And don’t neglect to peruse his further comments on national health insurance, and yet more is here. These are some of the most accurate and pungent observations on the topic I have seen.
Letters of recommendation
Students ask professors to write letters of recommendation for them. Today’s professors frequently respond by asking the student to write a first draft of the letter. Henry Farrell at CrookedTimber comments on this practice. Obviously the ethics of such a request are questionable. Furthermore it puts the student in a very difficult position. How great can you claim to be and keep a straight face, not to mention a reputation for probity?
That being said, I am not very worried about the practical repercussions. Most people, especially undergraduates, do not know how to write a very good recommendation letter. They fail to realize that such letters, to be effective, should offer very specific and pointed comparisons. Those few students who understand this fact are probably too shy to call themselves “comparable to Greg Mankiw as an undergraduate.” Nor will they write “comparable to your Professor Mediocre [fill in the name yourself!] as an undergraduate.” So if a professor asks the student to write the letter, the professor does not care about the letter or student very much. The resulting letter is likely to be very generic and thus not very effective. In addition, the professor probably has a hard time saying much about the student. This again suggests the letter will be less than overwhelming, no matter who writes it.
The really good candidates still will be able to produce credible signals of quality. They will find some professors able to make coherent and specific claims on their behalf. In fact, if professors ask the lesser students to write their own letters, the relative advantage of the very best students may rise.
The commissar vanishes, Beatles style
[Yoko] Ono’s weirdest piece of video trickery comes on the recently released DVD “Lennon Legend: The Very Best of John Lennon.” On one film, for the classic song “#9 Dream,” Ono has edited herself into the original video. There you will find her mouthing the backup vocals that were sung on the original hit recording by Lennon’s girlfriend at that time, May Pang.
In addition:
Ono has dropped [Paul McCartney’s] name from the songwriting credit on “Give Peace a Chance.” The song was written by Lennon only, but at the time the songwriting duo was still putting their two names on everything.
Here is the full story. McCartney, on his side, removed Lennon’s songs “Maggie Mae” and “Dig It” from the re-release of the Beatles’s Let It Be album. He never thought much of these songs, so he added another Lennon composition, “Don’t Let Me Down,” in their place. He also has sought to have many of the Beatles songs switched from the universal “Lennon-McCartney” tag to “McCartney-Lennon.”
Adam Smith suggested that people become more insecure about reputation, the more reputation they have. The theme of vanity as an addiction dates back to the early Christian writers, such as Boethius. But my query is simpler: don’t these people have anything better to do? Oh yes, if the title of the post interests you see here.
New numismatics blog
There is a new blog on numismatics, blogspot.shekel.com. Here is a sample post defending the private trade in antiquities. Blogger Aaron Kendal also offers commentary on Middle Eastern politics and current events.
The Return of the King, French style
I just saw the third installment of Lord of the Rings in a French cinema, on the Left Bank. The crowd loved it, although they kept on laughing at all the faux endings. (I’m not giving anything away by noting that the movie is longer than it needs to be. In the last fifteen minutes it repeatedly feels as if it is just about to end.) Interestingly, “Frodo,” in the subtitles, is presented as Frodon. You know, like “Napoleon” and “Michelin.” That is just in case you might have thought that Frodon wasn’t French. Yes I know about the silent n, still I thought this was ridiculous.
Evolution
Often I love the idea of science fiction more than science fiction itself. I’ve read most of the classics, and I am left with junk at the relevant margin. But lately I’ve been wrapped up in Stephen Baxter’s Evolution, published earlier this year. The book, spanning almost six hundred pages, tells the story of evolution from the point of view of our genes. To be sure, the book would be easy to satirize. It has no central characters, covers 65 million years of history, and frequently presents how different animals think [sic] about copulation. OK, that doesn’t sound like an obvious recipe for success but Baxter pulls it off to a surprising degree. The treatment is reminiscent of H.G. Wells or Olaf Stapledon, a particular favorite of mine. If you, like me, are desperate for science fiction that is actually intellectually stimulating, give this book a try. We are told, by the way, that the capacity to believe contradictory ideas is what makes human beings special.
Baxter pushes the Stephen Jay Gould line that the results of evolution are highly dependent on small accidents. For a contrasting point of view, from a more scientific front, see Life’s Solution: Inevitable Humans in a Lonely Universe. The author Simon Conway Morris argues that the path of evolution is much less contingent than is commonly believed. He points to numerous biological structures, such as the eye, that have evolved repeatedly under different guises. Here is one brief summary, here is a longer and more critical presentation. Life’s Solution, which occasionally verges on theology, should be read with a critical eye. Nonetheless if you feel you have read all the good popular books on evolutionary biology, here is a text with something new and provocative.
The best argument for spam I have yet heard
Historian and travel writer Jan Morris was interviewed about America in the British Times, December 13. She offered the following remark:
There is grossly too much of almost everything. There is too much money, too much food, too much choice, too much power, too much capitalism, too much spam on the e-mail. Wal-Mart, the ultimate American retailer, employs three million people: on one single day during my visit it opened 39 new stores, and its annual sales last year were bigger than the GNP of Switzerland. Eighty-three TV channels were available in my hotel room last night. Last Sunday’s edition of the Chicago Tribune contained, by my bemused count, 51 editorial and advertising sections. The president of Harvard occupies a house valued at $11.5 million. The supermarket Shaw’s, in Boston, offered last week, 432 different cheeses.
I had at least three reactions. First, you would think that such a famous historian would stay in a hotel with digital cable. Then she would have more than 83 channels, perhaps as many as five hundred. Second, I just had been thinking about writing a blog post complaining about American trade restrictions on French non-pasteurized cheese, the best kind of cheese I might add. Morris may have seen 432 different cheeses but we could do much much better in this area. Let’s have free trade in cheese and real diversity. How many Americans eat cheese wrapped in paper rather than plastic? Finally, spam must have something good to offer if it can be lumped in with all these rosy developments. Morris refers to the current United States as “sclerotic” and “bloated,” can she be serious?
Just the cash please
Florida officials have ditched proposals to offer a trip to space as a lottery prize because players say they just want the money.
Ananova.com offers the full story.
French cheese goes a long way
Contrary to some reports, I remain alive and well.
Is file-sharing dead?
The recent RIAA lawsuits have severely blunted the practice of file-sharing. The music industry has gone after the on-line users who share copyright-protected songs. The movie industry may someday follow suit. Although the number of people prosecuted has been small, the negative publicity has caused many people to shy away from Kazaa, Grokster, and other services.
I don’t know of any good estimates of how much file-sharing has gone down in recent times. All parties to the disputes have incentives to fudge the numbers. But based on conversations and anecdotal observations, combined with written sources, I find it plausible that file-sharing has declined by at least a third.
The days of file-sharing, however, are far from over. First, a judge just ruled that the RIAA cannot petition Verizon for the names of potential file-sharers. CNN.com reported as follows:
…in a strongly worded ruling, the appeals court sided with Verizon, saying a 1998 copyright law does not give copyright holders the ability to subpoena customer names from Internet providers without filing a formal lawsuit.
This ruling should come as no surprise. After all, why should the RIAA have a special right to petition Verizon for the names of potential copyright infringers? I hold some copyrights too. I and many others could petition Verizon for the information concerning various account holders. Without any legal standard of proof privacy is meaningless. More significantly, Verizon would end up swamped under the requests. Imagine various hackers and cyberpunks flooding Verizon with identity requests just to make the reporting system unworkable.
Even if this ruling is reversed, or John Doe suits prove effective in generating the names, file-sharing is likely to return in force. Anonymous networks are becoming more popular rapidly. Read the analysis of Clay Shirky. Right now users are not sure whether these networks are useful or trustworthy. But that information will spread rapidly. Within a year, we will know whether the Palestinian file-sharing network is indeed reliable. If that source of files turns out to be crooked, something else will arise to take its place.
Consider the whole problem in terms of consumer option value. File-sharers have not given up on the idea. They are waiting to see when and how they can start sharing files again. When the proper time comes, they will return in full force.
Addendum: Here is a Washington Post article on the decision. Hit and Run links to the full decision.
The soul of classical liberalism
Here is one of my favorite essays by my colleague James Buchanan, The Soul of Classical Liberalism. Buchanan starts this essay by noting that we have lost the “soul” of classical liberalism in the twentieth century. A new political vision is needed desperately if we are to build that “shining city on the hill.” I have long maintained that Buchanan is one of the last romantic economists, in the spirit of his mentor Frank Knight. By romantic I mean an economist whose work is driven by an intensely personal vision, and driven by an intense desire to root out the truth. Buchanan, perhaps more than any other economist, understands the tension between the objective and the subjective in economic science. Given our commitment to improving the real world, we cannot avoid objective standards for good outcomes. But at the same time economic values and costs are deeply subjective as expressed in neoclassical or Austrian economics. Buchanan’s critics, who do not generally understand this tension, think he is working on pseudo-problems or engaged in mere taxonomy. In contrast, I think Buchanan is far ahead of his time. We are not yet at the point where we can understand the full import of what he is up to. This essay is one good place to get started on his central problems.