Results for “water” 1132 found
Haitian update
Can it get worse? With Haiti the answer is always yes. This is from The Independent:
It now looks certain that more than 2,000 Haitians lost their lives in the flooding that followed Tropical Storm Jeanne last weekend. A similar number drowned in floods in May…simply a light rainstorm that swept away their shanty homes.
That is just the beginning. At least a quarter of a million Haitians face two more coming storms. They have no food and many are still living on rooftops. Human and animal corpses are drifting down the dirty river, which currently provides the only source of drinking water. Starving dogs have been seen tearing off the limbs of human corpses. The morgues are not working and there is risk of a large-scale epidemic. And social cooperation has broken down. The Washington Post reports:
Hungry, thirsty and increasingly desperate residents attacked each other in a panic Thursday to get scarce food and water as workers struggled to bury hundreds of corpses five days after the city was struck by Tropical Storm Jeanne.
To make matters worse, radical deforestation, caused by ill-defined property rights, may make Haiti a virtual desert by the end of the decade. In the 1950s, 25 percent of the country was forest, now it is 2 percent. Floods of this kind will only get worse.
Outside of wartime, Haiti represents new depths in how bad things can get. The current standard of living is well below that of most hunter-gatherer societies. We don’t spend much time studying economies with negative real rates of return; I am sorry to report that developing such a theory is becoming increasing relevant.
Minimum Wage Effects in the Longer Run
The minimum wage reduces employment, especially among low-skilled workers for whom the minimum wage is most binding. That remains the consensus view but note that holding the consensus view does not preclude thinking that the decrease in employment is small relative to the increase in the wages of those who remain employed. If the employment effect is small, however, it is also important to understand why it is small – the policy implications of monopsony, which I think implausible, are quite different from the implications of the the idea that other aspects of the labor-contract adjust in response to enforced changes in wages (i.e. the converse of the hot water argument). See also Tyler on this.
When I discuss minimum wages in class I tell my students that one of the best ways to get a high-paying job is to get a low-paying job and work your way up. The minimum wage can put the least employable out of work and have permanent negative effects when training and work skills not acquired in youth are difficult to accumulate later on. I think the theory makes sense but until recently it had not been extensively investigated.
David Neumark and Olena Nizalova look at the how exposure to the minimum wage in the past impacts workers today. They find that teenagers who grow up in states with a minimum wage that is significantly and consistently higher than the federal minimum have lower earnings and work less a decade or more later when those workers are in their late twenties. The negative effects are larger for blacks, for whom the minimum wage tends to be more binding.
To generate variation, Neumark and Nizalova use data on minimum wages by state relative to the Federal minimum. The data is more aggregated than I would like and the variation by state only picks up in the late 1980s so there is less data than meets the eye. In theory, there is nothing special about the minimum wage as the driving factor that pushes people out of the work force, unemployment brought about by bad economic conditions should have similar effects. Thus, I wish that they had discussed the literature on hysteresis and unemployment. Welfare could also pull people out of the work force. I’m not fully convinced that they adequately control for economic conditions although they do use some clever techniques to try to address some of these issues. Nevertheless, my priors are supported so this must be a good paper! More seriously, Neumark and Nizalova are to be credited with opening the question of the long run effects of the minimum wage.
The bottom line? If you don’t work at McDonald’s when you are a teenager, don’t expect to manage a McDonald’s when you are middle-aged.
Addendum: Thanks to John Thacker and others who pointed out that one of my sentences, now fixed, was difficult to parse if you hadn’t read the paper – which sort of defeats the purpose of the blog, doesn’t it?
New items in my Mexican village
As many of my readers know, I visit a small Mexican village, San Agustin Oapan, one or twice every year. This pueblo in Guerrero has about 1500 people, most of whom farm corn and paint for a living. You’ll hear more when my book on the place comes out next year, from University of Michigan Press. In the meantime, here are the new items I have noticed in the village this year:
1. Apples
2. Green beans
3. A much improved road. A four hour trip now takes less than an hour and a half, at least if the rains permit. This makes an especially big difference if you have to take your kid to the doctor.
4. Stoves. They were once a rarity, now they are commonplace. It takes the fun out of watching people cook for you, but hey that is progress.
5. Small shops with wrapped items from the larger city of Iguala. Shampoo and band-aids, for instance, are now easy to find.
6. The number of “retail” (and I use that word cautiously) watermelon sellers has gone from one to at least three.
7. The number of pigs has doubled over the last five years, though not always to the benefit of the town streets.
As far as I can tell, most of this does not show up in the growth statistics for Mexico. No one (except for yours truly) comes to the place to count anything. Most of the transactions occur in black or grey markets. And even if the data were recorded, using market prices to measure underestimates the benefits from a sudden introduction of new commodities (in essence the price is falling from infinity to a market level, and the first consumers at the new price might value the item at more than a small amount above the observed price).
It is commonly the case that consumption statistics, when we have them, measure changes in income better than do income statistics.
Globalization does not make everyone better off, but its beneficial effects are commonly underestimated, and undermeasured by available statistics.
Economic foundations of law
If tenants benefit from a law that says apartments must have hot water then surely a law that says tenants must have hot water and a dishwasher benefits them even more, right? What about a law that says tenants must have hot water, a dishwasher and cable tv? By now the students have cottoned on to the idea that the rent will increase. Once you realize that the law causes the rent to increase it’s no longer obvious if tenants benefit or if landlords are harmed.
We can work out what happens with sone numbers. Let’s suppose that after much bargaining the tenant and landlord have agreed upon the rent and the amenities – each party to the contract is profit maximizing, doing as well as they can given market conditions and the interests of the other. Now suppose that tenants value the hot water benefit at $100 and that it costs the landlord $150 to provide the hot water. At these prices the tenant does not buy the hot water. The law is passed; by how much does the rent increase? By at least $100 but no more than $150. The landlord knows for certain that he can increase the rent by $100 because this will make the tenant just as well off as he was before, which by assumption was an equilibrium price. Similarly, if the landlord could profitably raise the rent by more than his cost he would have done so already – the fact that he did not indicates that an increase of more than $150 would not be profitable
Thus the rent rises somewhere between $100 and $150, the precise amount to be determined by bargaining power. Suppose that the rent increases by $120. Then the tenant gets a benefit worth $100 at a price of $120 and is worse off by $20 and the landlord gets a benefit of $120 at a cost of $150 and so is worse off by $30. The law makes both the landlord and tenant worse off!
The lesson here is that a contract is multi-dimensional so if the government changes one dimension of a contract the other dimensions will adjust towards offsetting that change.
Bonus points: a) Suppose the tenant values the hot water at $150 and it cost the landlord $100. Does the regulation benefit the tenant and landlord now?. If so, what is odd about this example? b) Explain why the loss to the tenant and the loss to the landlord must add up to $50. How does this further illustrate the principle?
Going for the gold
This sort of nonsense gives property rights a bad name.
Strict regulations published by Athens 2004 last week dictate that spectators may be refused admission to events if they are carrying food or drinks made by companies that did not see fit to sponsor the games.
Sweltering sports fans who seek refuge from the soaring temperatures with a soft drink other than one made by Coca-Cola will be told to leave the banned refreshment at the gates or be shut out. High on the list of blacklisted beverages is Pepsi, but even the wrong bottle of water could land spectators in trouble.
Thanks to Boing, Boing, Blog for the link.
How did Scotland grow so quickly?
Scotland had been an economic backwater at the time of the 1707 union with England. By 1770 at least the Scottish cities were among the most developed and intellectually advanced parts of Europe. How could this happen?
Arthur Herman supplies at least one piece of the puzzle:
…the fact that Scotland was very much the junior partner in this union also turned out to be an advantage. The new Parliament largely ignored Scotland; outbursts such as the malt riots and the threat of Jacobitism apart, the government in London paid little attention to what was happening north of the border. Scots ended up with the best of both worlds: peace and order from a strong administrative state, but freedom to develop and innovate without undue interference from those who controlled it. Over the next century, Scots would learn to rely on their own resources and ingenuity far more than their southern neighbors would…
A strong government that leaves well enough alone: this was the dual, seemingly contradictory, nature of the British state as it became part of life in post-union Scotland. Scots became used to these dualities, and learned to accept them as basic reality, just as the Union itself involved a fundamental duality: “a ship of state with a double-bottomed hull,” as Jonathan Swift put it. They also learned to think in a new way as a result of the Union: in terms of the long term.
Many economic development problems today stem from a similar conundrum. Ideally we would like a state that is both strong and not too large. Most parts of the world are unable to institute this duality; of course Hong Kong was a notable exception. I am not in general an imperialist, but the most successful instances of imperialism are likely to be highly successful indeed.
The Freedom of a Confucian
The great free-market economists and libertarian philosophers of China were not Taoists, but Confucians, according to Auburn University philosopher Roderick Long. I often say that I never doubted the value of history of thought until someone tried to convince me of it, but Long’s “Rituals of Freedom: Austro-Libertarian Themes in Early Confucianism” Journal of Libertarian Studies 17(3) is an amazingly interesting and learned paper. It is true, Long admits, that the Taoists have a few grand libertarian passages. The favorite from Lao-tzu has to be:
The greater the number of laws and restrictions,
the poorer the people who inhabit the land.
The sharper the weapons of battle and war,
the greater the troubles besetting the land.
The greater the cunning with which people are ruled,
the stranger the things which occur in the land.
The harder the rules and regulations,
the greater the number of those who will steal.
The sage therefore does not contrive,
in order to bring about reform,
but teaches the people peace of mind,
in order that they might enjoy their lives.Tao Te Ching Section 57
Unfortunately, Long points out, a much stronger theme in Taoist is primitivist hostility to modern civilization. Listen to Lao-tzu describe the Taoist utopia:
Lessen the population. Make sure that even though there are labor saving
tools, they are never used. Make sure that the people look upon death as a
weighty matter and never move to distant places. Even though they have
ships and carts, they will have no use for them. … Make sure that the
people return to the use of the knotted cord [in lieu of writing]. … Then
even though neighboring states are within sight of each other, [and] can
hear the sounds of each other’s dogs and chickens … people will grow old
and die without ever having visited one another.
In contrast, Long finds much of value in the Confucians:
The early Confucians, by contrast, may not be as radical in
their anti-statism as the Taoists, but in my estimation they make up for this flaw by firmly
yoking their anti-statism to the cause of civilization, commerce, and the Great Society;
their overall program thus looks a lot more like contemporary libertarianism than the
Taoist program does. One Confucian text, while noting approvingly Laozi’s hostility to
despotism, sharply criticizes Laozi for wanting to “drag the present age back to the
conditions of primitive times and to stop up the eyes and ears of the people”; the best
ruler instead “accepts the nature of the people,” which is to long for “beautiful sounds
and forms,” “ease and comfort.”
The highlight of Long’s article is his discussion of the Sima Qian (c. 145-85 B.C.). Almost two thousand years before Adam Smith, Qian opined that “Wealth and currency should be allowed to flow as freely as water!” and had arguments to defend his position. And who said that Chinese intellectuals had no appreciation for the merchant class? Few Western thinkers match Sima’s appreciation of entrepreneurship:
These, then, are examples of outstanding and unusually wealthy men.
None of them enjoyed any titles or fiefs, gifts, or salaries from the
government, nor did they play tricks with the law or commit any crimes to
acquire their fortunes. They simply guessed what course conditions were
going to take and acted accordingly, kept a sharp eye out for the
opportunities of the times, and so were able to capture a fat profit. …
There was a special aptness in the way they adapted to the times …. All of
these men got where they did because of their devotion and singleness of
purpose. … [T]here is no fixed road to wealth, and money has no
permanent master. It finds its way to the man of ability like the spokes of
a wheel converging upon the hub, and from the hands of the worthless it
falls like shattered tiles. … Rich men such as these deserve to be called the
“untitled nobility” …
Murray Rothbard praised Sima in his history of economic thought, but Long notes that he neglected to mention that he was a Confucian!
It is hard to read this piece and not stand in awe of Long’s command of the Chinese literature. This is a body of thought comparable to Western philosophy in its intricacy and depth. Even if you couldn’t care less about Chinese proto-libertarians, this article exemplifies the true meaning of scholarship. And so the Sage says: check it out!
Diamonds are Forever…Not
How long can the diamond cartel last? I remember, as a kid, watching Milton Friedman tell us that the New York Stock Exchange was the only longstanding market monopoly he could think of. The NYSE has lost much clout, but why isn’t the diamond sector more competitive? Diamonds are found in many countries but the De Beers cartel has been dominant for much of the twentieth century.
But things are now changing:
…this stable, established and monopolistic system is now falling apart…other big miners got hold of their own supplies of diamonds, far away from southern Africa and from De Beers’s control. In Canada, Australia and Russia rival mining firms have found huge deposits of lucrative stones: BHP Billiton, Rio Tinto and Alrosa have been chipping away at De Beers’s dominance for two decades.
De Beers once controlled (though did not mine directly) some 80% of the world supply of rough stones. As recently as 1998 it accounted for nearly two-thirds of supply. Today production from its own mines gives it a mere 45% share. Only a contract to sell Russian stones lifts its overall market share to around 55%.
An Israeli named Lev Leviev has been instrumental in breaking down the old system:
Mr Leviev recently moved into diamond retailing. He claims that he is the only tycoon with interests in every stage of production from “mine to mistress” (a canard in the industry holds that men buy more diamonds for their mistresses than for their wives). But his real power lies in the cutting and polishing businesses. He has factories in Armenia, Ukraine, India, Israel and elsewhere. These give him power to challenge De Beers’s central clearing house and seek instead to channel stones directly, and at a lower price, to his own polishers.
The price of diamonds, however, has yet to fall. My more fundamental question is why these supply-side developments have taken so long.
Perhaps synthetic diamonds will put the market under for good. Few people if any can tell the difference. The diamond industry is spending large amounts to tout “the real thing.” But will a generation used to reproduction and “multiples” buy this line? And will men manage to move to a lower-cost signaling equilibrium in the marriage (and mistress) market?
The bottom line: File this one under “Markets Economists Do Not Understand.” But if there was one commodity I would not want to be holding today, it is diamonds. Someday students will wonder why they ever called it the “diamond-water paradox.”
Markets in everything
But hey, when you buy bottled water isn’t fluoride what you’re trying to avoid?
Imagine a whole string of products along these lines:
“Organic produce with pesticides“
“Large print books, we fit more on the page than anyone else!”
Remember the old joke about the Soviet Union producing “The world’s largest microchip”?
I discovered the strange water on my second visit to Wegmans. By the way, I need to revise my last post about this super-supermarket. Upon further scrutiny, I can report that the prices are much lower than you will find in the competitors. It is truly a marvel of the modern world.
A comment I would never make on MarginalRevolution
Read Matthew Yglesias on the Endangered Species Act:
Did the president really gut the Endangered Species Act yesterday while no one was paying attention? So I’ve heard, at any rate. If so, good riddance. You’ll all yell at me, I suppose, but really: Who cares? Species die, shit happens, get over it. Clean air, clean water, and lower carbon emissions I’ll get behind that stuff impacts, you know, people.
Here are my more moderate comments from some time ago.
I should link to Matt more often, we share a Best Buy, plus he doesn’t want to worry about Iranian nukes. But when it comes to Dick Gephardt, however…read this.
Eggers vs. Supply and Demand
Dave Eggers, accalimed author of works of genius, has written an article in Mother Jones bemoaning the relatively low pay of teachers (click here). Here’s a representative excerpt:
The first step to creating an education system full of the best teachers we can find is to pay them in line with their importance to their communities. We pay orthodontists an average of $350,000, and no one would say that their impact on the lives of kids is greater than a teacher’s. But it seems difficult for everyone, from parents to politicians, to shake free of a tradition in which teaching was seen as something of a volunteer project for women whose husbands brought home the real money. Today’s teachers need to, but very often can’t, support a family on their salaries. They find it difficult or impossible to buy homes, to save money, to live comfortably, and, in wealthier areas, to live in or near the towns where they teach.
Eggers misses a basic point about work: The salary one makes is determined by supply and demand. A price doesn’t indicate how important the job is, or even if people think it is important. Take a simple example: water – it’s cheap because there is plenty of it, not because we don’t think it is important!
Same goes for work – the price of someone’s labor – their salary – is the result of how badly people want the labor and how many other people do the job. People want education for their kids – they pay thousands of dollars in locals taxes, have significant college savings accounts and the most prestigious colleges can harge over $30,000/year. Seems like the demand is there.
So why the low pay? Teacher’s low pay is due mainly to the fact that there are tons and tons of teachers! There is a huge supply of teachers. Education schools have huge enrollments – and surveys routinely report that education is one of the most popular majors in the country. Click here for a short Yahoo article reporting the most popular intended majors among incoming freshmen in 2002.
Some solutions for low teacher pay are non-starters. For example, simply demanding higher pay for public school teachers isn’t going to cut it because that means shifting money from other public services. There is a political solution – limit by fiat the number of teaching certificates awarded each year. That’s why the orthodontist makes a lot of money – there are few orthodontists relative to the demand for nice teeth. This might have undesirable consequences. Wealthier school districts might employ all the teachers. Perhaps the best response to low teacher pay is to realize that it’s a signal that fewer people should go into teaching. Next time you see someone express a desire to be a teacher, just tell them that we have too many!
Haitian fact of the day
In Haiti’s slums, round swirls of dough can be found baking in the sun. They look almost appetizing until you learn the ingredients: butter, salt, water and dirt…
And the dirt biscuits of Haiti – called “argile,” meaning clay, or “terre,” meaning earth – are not exactly a final cri de coeur against starvation.
Like the mice in Malawi, they are a staple of the very poor, somewhere between a snack and a desperation measure. Making them has been a regular business for years. The clay is trucked in plastic sacks from Hinche, on the central plateau. Blended with margarine or butter, they are flavored with salt, pepper and bouillon cubes and spooned out by the thousands on cotton sheets in sunny courtyards that are kept swept as “bakeries.” They cost about a penny apiece.
“They’re not food, really,” said David Gonzalez, a reporter at The Times who has visited Haiti many times. “People with hunger pangs eat them just to fill up their stomachs.”
Here is the full story (NYT); it is sad to even use the “food and drink” category for this entry. Here is a previous installment of “Haitian Fact of the Day.”
Update: I wrote this post a few days ago, before the horrific flood. Flooding is such a severe problem in Haiti because of deforestation, brought on by poorly defined property rights to trees and forest.
What makes a painting more valuable
Many of the results are not surprising. Light colors sell better than dark colors, happy portrait subjects sell better than widows, and horizontal pictures are easier to hang over the fireplace. Here are a few other points of note:
1. Landscapes can as much as triple in value when there are horses or figures in the foreground. Evidence of industry usually lowers a picture’s value.
2. A still life with flowers is worth more than one with fruit. Roses stand at the top of the flower hierarchy, chrysanthemums and lupins (seen as working class) stand at the bottom.
3. There is a hierarchy for animals as well. Purebred dogs help a picture more than mongrels do. Spaniels are worth more than collies. Racehorses are worth more than carthorses. When it comes to gamebirds, the following rule of thumb holds. The more expensive it is to shoot the bird, the more it adds to the value of a painting. A grouse is worth more than a mallard, and you had better show the animal from the front, not the back.
4. Water adds value to a picture, but only if it is calm. Shipwrecks are a no-no.
5. Round and oval works are extremely unpopular with buyers.
6. A Boucher nude sketch of a woman can be worth ten times more than a comparable sketch of a man.
The bottom line: Buyers prefer artworks which in some manner reflect high status.
For the full story, see “Why some Pictures Go For More Than Others,” in the May 2004 issue of The Art Newspaper.
Is the EU a tax cartel?
Germany yesterday threw cold water on the festive mood ahead of this week’s European Union enlargement by telling its eastern neighbours that low corporate tax rates used to attract foreign investment were unacceptable.
Speaking only days before 10 new member states join the EU on May 1, most of them from eastern Europe, Chancellor Gerhard Schröder said tax rates, often less than half those in Germany, were “not the way forward” in a united Europe.
Here is the full story. Here is a good article on the European tax cartel.
Germany does have a valid complaint that it sends subsidies to these lower-tax nations. Would any of you care to guess my vision of “the way forward”?
Markets in everything, the continuing saga
Leading British authors have auctioned off the names of characters in their new books to raise funds for charity.
Successful bidders at the third charity auction for victims of torture included a man who paid £1,000 to see his mother’s name appear in the next novel by the Irish writer Maeve Binchy. Another secured a role in books by two authors, bidding £950 for the children’s writer Philip Pullman and £240 for Sue Townsend, the creator of Adrian Mole.
And one author was also a bidder. Martina Cole, whose own work raised £220, paid £1,000 for her name to appear in the next book by Sarah Waters, who wrote Tipping the Velvet. Tracy Chevalier, whose novel Girl With A Pearl Earring, was adapted into a film, raised £300.
Adi McGowan, a City trader, paid for his mother, Muriel, to appear in the next Binchy book as a surprise birthday present. He said his mother was a fan of the author, whose novel Circle of Friends was adapted into a Hollywood film.
“I usually give a book as a birthday present,” he said. “Maeve’s a favourite. My mother has been waiting eagerly for her next book – now she’s actually going to be in it.”
Here is the full story. Here is a blog post about buying personalized romance novels more generally. Here is a related story of a couple who tried to auction off the naming rights for their baby. No company was willing to pay $500,000, so they named him Zane.
My take: To get mentioned on this blog, all you have to do is send us a useful link, failing that try $100 or more.