Wal-Mart in Mexico
Wal-Mart is now the largest private employer in Mexico, with over 100,000 workers on its payroll there. Only the United States has more Wal-Mart outlets (3,499) than does Mexico (633), Britain is next with 266 outlets. Last year Wal-Mart did $11 billion of business a year in Mexico, more than the entire tourism industry. That is two percent of Mexican gdp, about the same as the percentage in the U.S. The influence of Wal-Mart alone has lowered Mexico’s inflation rate, read here for more details.
A Wal-Mart cashier in Mexico makes about $1.50 an hour. This may not sound generous, but a significant portion of the country does not make that much in a day. Wal-Mart is also a boon to poor and rural Mexicans, who can afford to buy more at the store’s low prices, or who receive goods that were otherwise unavailable or required a trip to Mexico City. If you are looking for an example of how globalization benefits the world’s poor, go no further than Wal-Mart.
A good idea for my university
Students are making voluntary contributions to increase the pay of their favorite professors, to prevent those professors from leaving for another university. Here is one story:
When Brian Cannon, a 21-year old senior at the College of William and Mary, learned that one of his favorite government professors was leaving for a higher-paying job at Princeton University, he was a little upset.
But when the student body president learned that in the past year, 13 professors have left the prestigious public university in Williamsburg — many of them headed to public universities in other states — he knew he had to do something.
He organized a student referendum, adopted overwhelmingly this week, to raise next year’s student activity fee by $5, to about $80. The extra money would be used to boost the salaries of professors who might leave because state budget cuts have frozen faculty raises.
The fees are usually used to bring bands to campus and help out the debate team and other clubs. But now, three professors, to be chosen by the provost with student input, will each receive $10,000 bonuses, to be funded by the fee increases.
This is but one example of a growing gap in salaries between private and state universities. I expect that over time, for better or worse, many state universities will in effect become privatized. They will remain under nominal state control, but their finances will rely increasingly on private sources of support.
I smell a rat?
The World Bank very recently held a contest to award innovative ideas for fighting poverty. One of the winning ideas involved the use of rats to smell and detect disease:
One of the winners was a scheme to use rats as a cheap diagnostic tool for tuberculosis in Tanzania.
Rats are already being used by the Apopo organisation to detect landmines in Mozambique using their acute sense of smell.
Apopo’s Bart Weetjens told BBC News Online that the rats could also be trained to sniff out TB from saliva samples.
A group of rat detectives could process more than 2,000 samples a day compared with just 20 for a human technician with microscope, he said. Using a set of rats should mean 100% accuracy and a quick diagnosis, he added.
“The TB problem in Tanzania is very widespread… but when it’s detected early it can be treated and it makes a big difference.”
To read about the other winning ideas, click here for a BBC news report.
Medicare and Perverse Incentives
Medicare does little to reward service providers for quality improments, and in fact often punishes them. Friday’s New York Times provided a blistering indictment:
By better educating doctors about the most effective pneumonia treatments, Intermountain Health Care, a network of 21 hospitals in Utah and Idaho, says it saves at least 70 lives a year. By giving the right drugs at discharge time to more people with congestive heart failure, Intermountain saves another 300 lives annually and prevents almost 600 additional hospital stays.
But under Medicare, none of these good deeds go unpunished.
Intermountain says its initiatives have cost it millions of dollars in lost hospital admissions and lower Medicare reimbursements. In the mid-90’s, for example, it made an average profit of 9 percent treating pneumonia patients; now, delivering better care, it loses an average of several hundred dollars on each case.
“The health care system is perverse,” said a frustrated Dr. Brent C. James, who leads Intermountain’s efforts to improve quality. “The payments are perverse. It pays us to harm patients, and it punishes us when we don’t.”
Intermountain’s doctors and executives are in a swelling vanguard of critics who say that Medicare’s payment system is fundamentally flawed.
Medicare, the nation’s largest purchaser of health care, pays hospitals and doctors a fixed sum to treat a specific diagnosis or perform a given procedure, regardless of the quality of care they provide. Those who work to improve care are not paid extra, and poor care is frequently rewarded, because it creates the need for more procedures and services.
Does the Bush Medicare bill make any serious attempt to address problems like this? No. Paul Krugman, in his column, described the Medicare bill as “a huge subsidy for drug and insurance companies, coupled with a small benefit for retirees.” If we are to improve America’s health care system, no matter what your political stance, the first order of business is to get incentives working for us, not against us. That fight has yet to begin, nor does it currently have much of a constituency behind it in either political party.
Against screen quotas
France, Brazil, Pakistan, Mexico, China, and South Korea are among the countries that set screen quotas for their domestic films. An astute reader/blogger Tony referred me to the following Korean opinion piece, critical of such quotas. The English is at times choppy, but the author is on the mark:
What the screen quota system provides is a shelter without any competition. But it is an age-old truth that true competitiveness is only bred through competition. If the Korean movie industry really wanted the kind of international competitiveness that could take on Hollywood movies, it should break out of its protective shelter and meet the challenge straight in the eye. We will never see the day when our industry will leave behind the danger of being dominated by foreign movies if it keeps on being obsessed with the screen quota system.
Second, supporters of the screen quota system claim that it is the last bulwark protecting Korean culture. Who on earth bestowed the sacred duty of protecting the culture of Korea to the movie industry? Culture is the form of life that every one of us takes part in creating. It is found in our mountains and streams, our cities, our history, culture, art and crafts. This writer finds it hard to believe that the Korean culture has become more refined because a few domestic gangster movies outdid foreign movies at the box office.
The author asks why we should not have comparable quotas for womens’ fashion or for alcoholic drinks, both areas where Korean culture competes against foreign imports. The author also complains of the “the self-righteous and exclusivist advice of the French,” the whole (short) piece makes for lively reading.
The blogosphere as a spontaneous order
Read Jonathan Wilde’s insightful analysis of how blogs serve as an unplanned order, a’ la Hayek. Lynne Kiesling offers excellent commentary and further links.
What does the American public believe?
Many things that ain’t so, according to our colleague Bryan Caplan. They believe that protectionism creates jobs, and they think that big corporations, rather than supply and demand, set the price of gasoline. See the link for a longer discussion and some citations of specific questionnaire evidence.
Here is my favorite bit:
The only category of spending that the public invariably wants to cut is foreign aid–which amounts to about 1% of the federal budget!
Believe it or not, it is not unusual for a member of the general public to think that foreign aid consists of forty percent of the United States government budget. Of all the biases we observe in voters, “suspicion of foreigners” appears to be the most pronounced. Bryan, who has done the relevant work here, is writing a book on how and why democracy can go astray through irrational voters, I await its release eagerly.
Here are some broader polls on NAFTA and free trade, compiled by AEI. Even the people who favor free trade, presumably for its benefits to consumers, think it costs us jobs. Given how the public feels, I am always surprised that we have as much free trade as we do.
Banned GloFish
The new GloFish, genetically engineered to glow in the dark, have been banned in the state of California. Chris Mooney tells us why there is no good reason for this decision. One state official commented:
“For me it’s a question of values, it’s not a question of science,” said commissioner Sam Schuchat. “I think selling genetically modified fish as pets is wrong.”
This argument is weak, and presumably could be used to ban dogs and cats — both the products of selective breeding — as well. The GloFish nonetheless have a deeper symbolic value, and are likely to go down in history as a turning point of sorts. Once we let the market create and promote commercialized products in this arena, it is hard to imagine tough regulations working in the long run. Consumers will demand the products, experimentation will be rampant, and how will you enforce the laws? Will California check the cars entering from Nevada for contraband GloFish? If that is the case, GloFish “coyotes” will cross with their booty only in the day, not the night, a reversal of the classic smugglers’ methods.
The economics of cheese
Free trade is not only good for prosperity, it is also good for fine food shopping. Here are some pithy comments on a recent book on the history of Camembert cheese:
Fifty years ago, or even twenty-five, it was very hard, if not impossible, to get cru Camembert – or gold seal balsamic vinegar, or single-estate Tuscan extra virgin olive oil, or jambon de Bayonne, or Ortiz salt-packed Spanish anchovies, or Niçoise olives – if you didn’t live in a world metropolis or in the regions near where they were produced. Now they are all widely available. Thanks to the Internet, Fedex, the food-writers (and their globalised publishing firms), the once-local has become global.
Nor is it just the distant local that has a place in the markets; preferences for the local local are now better catered for than at any time in the recent past: farmers’ markets flourish as never before in both Britain and America; the role of the “forager” – searching out the quality produce of local farmers for top restaurants – has become institutionalised; the formerly resistant Californian wine industry is rediscovering the power of place as against the manipulations of the scientific winemaker; the cheese plates at better American eateries feature increasingly convincing Sonoma County goat cheeses and one of the finest semi-soft goat cheeses in the world, the Cypress Grove Humboldt Fog; the Slow Food movement gathers strength throughout the world and reinforces the revival of the local and the seasonal.
Here is the full book review, from The London Review of Books, the piece is interesting throughout. Here is an earlier post on the corporate origins of Maytag cheese in the United States. Here is a post on using radar to improve the quality of wine.
The bottom line: When I first started going to Europe, in the early 1980s, I was amazed at the quality of the foodstuffs, but America is catching up rapidly. The next steps: lower price supports for dairy products, lower duties on foreign cheese, and free importation of non-pasteurized cheeses, the opposite of what Hillary Clinton wants.
A Romanian liability crisis?
A Romanian pensioner has lodged a complaint against a TV station claiming their horoscope is unreliable.
The woman, from Maramures, says the horoscope repeatedly predicted she would receive a big sum of money but it never arrived although she waited for three months.
Thanks to cronaca.com for the link to Ananova. Here is the clincher:
Officials said they will analyse the complaint and take a decision.
But they advised the broadcasters to include an announcement that the horoscope may not be 100% accurate and that they cannot warrant for the truth of astral predictions.
Perhaps they will consult their horoscope before rendering a final verdict.
Who are the uninsured?
As the Democratic candidates call for various versions of national health insurance, we will hear a familiar fact many times, namely how many Americans lack medical insurance. According to one estimate, it is over fifteen percent of the population, which amounts to about 43.6 million people.
But who are these people? In reality many of them are immigrants. Here are two simple facts:
Immigrants who arrived between 1994 and 1998 and their children accounted for an astonishing 59 percent or 2.7 million of the growth in the size of the uninsured population since 1993.
The total uninsured population is one-third larger (32.7 million versus 44.3 million) when the 11.6 million persons in immigrant households without insurance are counted.
Hispanics have by far the lowest rates of being insured, here are some visuals. 41 percent of adult Hispanics are uninsured, of course many of these are recent immigrants, Hispanics as a whole account for over 12 percent of national population.
I am all for a liberal immigration policy, but I do not feel we are obliged to offer health insurance to all comers. In fact I suspect that national health insurance would, in the long run, lead to fiscal pressures to limit immigration, thus damaging the health of potential immigrants.
Nor do immigrants rush to buy their own health insurance, in many cases I suspect they would rather send the money back home, where health care crises are likely more severe:
Lack of insurance remains a severe problem even after immigrants have been in the country for many years. In 1998, 37 percent of immigrants who entered in the 1980s still had not acquired health insurance, and 27.2 percent of 1970s immigrants were uninsured.
Many other Americans lack health insurance because they are out of work. True, a good health care system should be robust to macroeconomic disturbances, but with employment and productivity rising, these people do not represent much of a current case for reform.
It also turns out that many of the uninsured are uninsured for only part of the year. According to the CBO, those uninsured for the entire year amount to somewhere between 21 and 31 million, knocking a full 12 million off the original total.
Some of the uninsured are more accurately a counting error:
According to the National Center for Policy Analysis (NCPA), [a] verification question lowered the estimate of the number of uninsured living in households with annual incomes of $75,000 or more by 16 percent. The verification question lowered by 4 percent the number of uninsured living in households with incomes under $25,000.
Many of the uninsured are in fact college students, who either rely on their parents, or are covered under their parents’ policies, read here. One estimate suggests that one out of seven college students lacks insurance, but it is hard to believe that most of these people have no other resources supporting them.
Finally, the uninsured often have good access to medical care. Consider this:
15 million of the uninsured have incomes of $50,000 or more. The fastest-growing population of uninsured has incomes exceeding $75,000. About 14 million are eligible for Medicaid or the State Children’s Health Insurance Plan but are not enrolled.
The “entire year uninsured” receive about half as much care, in dollar-valued terms, as the fully insured. As a last resort, you can always show up at an emergency room and simply demand care. In the year 2001, uninsured Americans received at least $35 billion in health care treatments.
The bottom line: When you put all the pieces together, the crisis of the uninsured is not nearly as bad as it sounds.
Productivity gains: Can you top this?
The reported rate of productivity growth, for the last quarter, is estimated at 9.4 percent, here is one report. This is following earlier productivity growth rates of 8.1 and 7 percent, obviously this is good news all around.
But do these figures capture all the relevant productivity gains? Graham Tanaka, the author of Digital Deflation, argues that we do not measure all relevant improvements. He cites better medical technology and information technology, as embedded in standard goods and services, as two undermeasured components of true productivity. Or consider cell phones, which today are better than a year ago, maybe by as much as twenty percent in value terms. Yet not all such quality changes show up in the official statistics. For 1998 he estimates that the real but unmeasured gains would add another 2% to productivity growth. In his view the future will bring very rapid growth and low inflation.
The potential for nanotechnology may be much more amazing, read Brad DeLong’s excellent post on the topic. He writes:
The computer-and-communications technology revolution we have been living through transforms twice as large a share of the economy as did the British Industrial Revolution, looks to last three times as long, and proceeds at a pace three times faster than the revolution in spinning and weaving: it is, relative to the size of the economy, eighteen times a bigger deal than the original.
Brad calls for greater investment in education, and an immigration policy aimed at taking in highly skilled labor.
But might Brad’s view be overly modest as well? In a recent paper, Robin Hanson considers the possibility of exponential growth modes. He argues:
World product history since two million B.C. is reasonably described as a CES combination of three distinct exponential growth modes: “hunting,” “farming,” and “industry.” Each mode seems to have grown over one hundred times faster than the relevant previous mode.
In other words, every now and then you get a discrete change in technology that sends the growth rate through the ceiling, relative to the past. Read this summary as well. If we get another such explosion, Robin mentions the extreme possibility that someday gdp could double in less than three weeks’ time, see this graph. It would have to be something like nanotechnology. In my view, long before this could happen, I would sooner say that growth rates had lost their meaning, they work best for relatively small comparisons across time and space. The point remains, however, that we have seen notable great transformations in the past, and they may recur in the future.
How does it matter?: I second Brad’s call for greater skilled immigration. A more interesting question is whether the U.S. government can get away with huge deficits, if mega-growth is on the horizon. I say we still ought to control spending. Future growth will not come evenly across the board, and unpriced quality improvements will not translate into capturable revenue for either the private or public sector. Imagine a cell phone that gave you immediate and wonderful orgasms, as well as other services, this would be a huge quality boost of sorts. But at the end of the day, stable institutions still will require our government to equalize long-term inflows and outflows. Furthermore we want to make sure we are stable enough to last until this future boom, which again suggests a measure of fiscal responsibility.
What do public choice economists believe?
Two researchers took a poll of public choice economists, defined as those who belong to the Public Choice Society, this includes 201 economists and 125 political scientists. The response rate was 29.6 percent, and here are some of the results:
1. Voters vote out of a sense of civic duty – 80 percent said yes. 54.5 percent said voting is rational.
2. Political rights and civil liberties promote economic growth – 79.8 percent said yes.
3. The size of government has grown due to the proliferation of special-interest groups – 67.8 percent said yes. When asked whether voters are the cause — my view — 53.8 percent said yes.
4. Bureaucrats are budget-maximizers – 65.9 percent said yes.
5. Government does more to protect and create monopoly power than it does to prevent it – 63.7 percent said yes.
6. Most politicians are solely office-seeking vote maximizers – 51.1 percent said yes.
7. Most government programs are driven by rent-seeking – 50.6 said yes.
Here is the source paper, by Jac Heckelman and Robert Whaples of Wake Forest.
The biggest mistake listed is #4, the view that bureaucrats budget maximize. Here is one survey of various critiques. Most generally, Congress and the President monitor the bureaucracy, which as a result pursues complex incentives, and responds to both carrots and sticks. Budget maximization is unlikely to result as a dominant motive. As I understand a talk I once had with Bill Niskanen, founder of the budget maximization hypothesis, even he has moved away from this theory.
And how is this for a striking comparison?
When you ask (a broader group of) economists whether markets, in the absence of transactions costs, achieve efficient outcomes, 57.1 percent say yes. This is itself odd, since I would interpret the proposition as a tautology, but it appears some people simply can’t bring themselves to praise the market. 70.3 percent of the public choice economists say yes, showing that this group has a stronger belief in markets. 22 percent of the surveyed political scientists say yes, showing a far greater skepticism about the market economy from those quarters.
Why do women read more fiction?
Yesterday I asked why women buy and read more fiction than do men, and whether there might be an evolutionary explanation for this phenomenon. In response, Fabio Rojas writes:
(a) It’s sometimes thought that dreaming, play and story telling are opportunities for people for practice their emotional/interpersonal skill without danger. They’re all about fictional social worlds that you can explore and relate to without endangering real world relationships.
(b) Women seem to specialize in cooperative, social interactions. I’m sure there’s an Evolutionary explanation for this.
(c) As specialists in social interactions, women would be more likely to refine and practice that skill, through engagement with literature/story telling.
John Paschetto notes:
…when I used to commute by train to Philadelphia, almost all the men read newspapers, and almost all the women read paperbacks.
My student Erte suggests that men have a greater evolutionary need to be physically stronger, which induces them to read less and be more active, perhaps they play more sports instead.
My take: All of these are noteworthy ideas. I might add that when men do buy books, they often prefer stories of adventure, such as Tom Clancy novels. Furthermore men may invest more effort in potentially high status activities, which presumably does not include reading novels. It remains a puzzle, however, why women start reading more toward the latter part of their childbearing years. True, they are busier when they have young children, but if we are going to use an evolutionary explanation, it would be nice to explain the timing as well. Do older women have some special interest in understanding social networks?
2, raised to the 20,996,011, minus 1.
That number is unlikely to ring a bell:
A 26-year-old graduate student in the US has made mathematical history by discovering the largest known prime number.
The new number is 6,320,430 digits long. It took just over two years to find using a distributed network of more than 200,000 computers.
Prime numbers are positive integers that can only be divided by themselves and one. Mersenne primes are an especially rare type of prime that take the form 2 p-1, where p is also a prime number. The new number can be represented as 2 raised to the 20,996,011, minus 1 [I have changed the presentation here, in lieu of upper case power notation]. It is only the 40th Mersenne prime to have ever been found.
Here is the full story, from NewScientist.com. George Woltman adds: “There are more primes out there.”
The saga is also an account of the voluntary private production of public goods, given the large number of computers whose “spare processing power” was donated toward this end. If you want to contribute toward this sort of endeavor, sign up here.