Truck and Barter

Outsourcing Philanthropy

“How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.”
- Adam Smith, The Theory of Moral Sentiments

Bill Gates quoted the above sentence after giving a gift of the Adam Smith’s two books to Warren Buffet for his very generous donation of some $ 31 billion to the Gates Foundation (only $ 6 billion was given to his children’s charities - he once derided those made rich by inherited wealth as “members of the lucky-sperm club”).

I watched the event online (would recommend highly) and was very moved by both the passion of Melinda and Bill to really make a difference in the world and Mr. Buffet’s belief in them. According to the Economist, Mr Buffett made his gift conditional upon Mr Gates giving up his day job at Microsoft;

“Mr Gates was taught by his mother that he had a responsibility to “give back”. Mr Gates famously brought forward his plans to give away most of his wealth after a World Development Report convinced him that by doing so it would have a greater impact than waiting until he grew old.”

NYT reports that Mr. Gates credited Mr. Buffett for encouraging him, in the early 1990's, to read a copy of the World Development Report.

But did the Sage of Omaha made the right decision in giving the largest share of his money to the Gates Foundation? The agency that seems to have had the largest impact on world development is arguably the World Bank and it currently has a monopoly in generating and disseminating policy ideas with regard to low income countries. I think one of the best ways to help the world’s poor would be to bring in some competition in this field.

Related;

Across the blogs; Charity begins at home, American Philanthropy, A Global Health Colossus, Warren Buffett's Gift to the Gates Foundation

Prioritizing ‘inconvenient truths’

Q&A: Gates' Growing Public Health Brand

Honor Thy Mother

DATA campaign (Debt, Aids, Trade, Africa)

Drug Development for Neglected Diseases (podcast)

Earlier blog posts; Are Asian billionaires Stingy?, Bill Gates's Post-Microsoft future

Saving the World through Socratic Method

Pablo links to an interesting NGO, ‘dropping knowledge’ which invites people to ask questions and later plan to host some ‘leading thinkers in the world’ to answer their questions.

See their blog- the drop, and their introductory video.

People seem to have a lot of free time and a lot of money for these types of things- could the money and effort be spent on more worthwhile cause? That’s my question.

Related;

How to save the world; Bolton v Gore

Copenhagen Consensus

Farm vs Blue-Collar Wages in China

The latest radioeconomics podcast with Dr. Fan Gang contains this bit of information about Chinese workers (starting at about 17:00):

The labor costs remain low for quite a long time. Why? Because, although in the past 20 years, China has relocated 200 million rural labor force into the industries and the service sectors, there's still 200 to 300 [million] workers -- labor workers -- in the farming sector (in the agricultrual). Most of them are waiting to move out. Their wage is even lower. You know, in the blue-collar workers, in the industries now, can make $1000 US Dollar per year., but the rural farmer only make $400 or $500 US Dollars per year. So they are looking for the job too. They are competing in the job market who are already in the sector, in the industries.... They are waiting for more jobs... People are desperate for the jobs.

Also, starting at 31:45, he notes that China's large ownership of U.S. government securities is not, in itself, a problem:

Number 1. We need to think about the problem -- not of who buys the treasury bonds, but why you issue so much Treasury Bond. I think that is the fundamental Issue... whoever buys the bonds depends on how much you issue. America's fiscal deficit is the issue we need to worry -- all we need to worry. Not only America... America may not worry very much, but we need to worry very much. Because, this is, from my point of view, as a macroeconomicst, this is a fundamental reason why the U.S. Dollar keeps falling.... One of the fundmantal reasons is the fiscal deficit... I would say the real problem is not who buy... is the why you issue so much.

I don't think the Chinese will stop buying... If we have more foreign reserves, we need to... get the best revenue... from this resource... You need a portfolio... avoid most of the risk.

No Escaping "Us and Them"

Your a good person, and want to do good by others. People are fundamentally the same the world-over, and deserve a shot to get the quality of economic life that you have. You recognize the current smallness of the world, and find it hard to understand how life south of the Rio Grande can be so much less appealing.

Yet, Us and Them is real. Don't believe me, ask Them!

Tou recognize that policies and institutional frameworks that work for us in the developed world should work for those in the developing world. Health, infrastructure, local governance, protection of property, constituional law is so much better where you are.

But we are just pretending that we can make them like us if we thrust down our social systems upon them:

"The only way to end poverty is to build viable systems on the ground that can deliver services to the poor in ways that are sustainable," she said.

Not quite. They only way to end poverty is to have the poor capable enough to build and run their own systems. We run our own systems - they've been organically grown. Our acculturation is a big part of what makes capitalism work much better in the US than in the EU.

International capital markets and investment are critical for transferring hard capital, human knowledge, and social institutions to the undeveloped world. But it is they who must adopt and stick to successful solutions. It is they who must change their cultures and ways of existence, if they don't want to be poor.

Our imposition of institutions as ties to loans or relief could work, but only if these become the norm. As long as Lee Coppock can't embarrass Liberian border guards, and ..., capitalism cannot take hold.

Not Enough Globalization

A quick link to a paper by Pierre-Richard Ag�nor of the World Bank, "Does Globalization Hurt the Poor?" A partial abstract:

I use both individual indicators of trade and financial openness, and a "globalization index" based on principal components analysis, and test for both linear and nonlinear effects. The results suggest the existence of an inverted U-shape relationship between globalization and poverty. At low levels, globalization appears to hurt the poor; but beyond a certain threshold, it seems to reduce poverty � possibly because it brings with it renewed impetus for reform. Thus, globalization may hurt the poor not because it went too far, but rather because it did not go far enough.

The above link is to a working paper. Here's a copy that was published in the journal International Economics and Economic Policy, Vol 1. No. 1. March 2004.

More Wal-Mart, More Poverty?

You might want to read about a new WM study that claims to demonstrate: More WM, More Poverty. Full text (19 pages) of study here.

Terrorism and Poverty

A great new paper by Alberto Abadie is up at NBER: Poverty, Political Freedom, and the Roots of Terrorism.

Political freedom is shown to explain terrorism, but it does so in a non-monotonic way: countries in some intermediate range of political freedom are shown to be more prone to terrorism than countries with high levels of political freedom or countries with highly authoritarian regimes. This result suggests that, as experienced recently in Iraq and previously in Spain and Russia, transitions from an authoritarian regime to a democracy may be accompanied by temporary increases in terrorism. Finally, the results suggest that geographic factors are important to sustain terrorist activities.

Even With No Income, My Family is not Poor

My family is not poor.

According to the official U.S. Census definition of annual poverty (cue appropriately stuffy policy directive, and other links), I, my wife, and son stopped being poor some time in April--and we're not given the chance to be poor again until January 1.

That I quit my job in July and have had no income--except Google ads!--since then does not change the (correct) decision that the Census statisticians will make about my family in 2004.

However, my family is poor when looked at on a monthly basis. Granted, it's a strange type of poverty, since our lack of income was planned by me in advance. If we were in the SIPP panel survey, you'd see us as one of those as families who are "poor for six to eight months", or something to that effect.

But in truth, we're not poor.

That's not because we live relatively frugally, or because we saved a considerable sum of previous earnings and have substantial equity in our home. Besides, we're eating those savings now--at just about the expected rate--and will not have to touch the equity.

(You can be rich in assets--like owning outright a quarter million dollar home--and still be "poor", as long as your income from those assets doesn't bump you over the threshold).

Both of those tangible funding sources pale in comparison with my expected future earnings after earning a Ph.D. in economics. In a hyper-efficient market setting, I should be able to borrow against those intangible future earnings; yet nobody except close relatives (from whom I'd never borrow) is willing to loan, at any interest rate. Even though I can't get at those funds, we're still not poor.

We're not poor because I can't accept as poor any person who is able to sip gourmet coffee in a wi-fi cafe while blogging on a new laptop.

Monthly Bill Fatigue

Christopher Stern of the WaPo lets people complain about both unnecessary and necessary luxuries. Monthly bills take up too much discretionary income! They are separating the haves from the have nots! Many people are spending too much money on cable TV, cell phones, and other services billed monthly! The rest can't afford them!:

Economists and academics are beginning to grow concerned about Americans' willingness to cede a regular chunk of their monthly paychecks to new conveniences and services, saying it is taking a serious bite out of discretionary spending, a key driver of the nation's economy. They also worry that new services are contributing to a growing divide between consumers who have the means to secure special treatment, such as access to free-rolling highway lanes, while others are stuck in bumper-to-bumper standstills.

Excuse me, but consumers have discretion with their discretionary income; why should choosing "new" services be a worse choice for those dollars than any other? Should the "haves" choose goods and services that they think make them worse off? Should they be forced to save those dollars, or be required to spend them on Gucci handbags, or should they be redistributively taxed so that the poor, too, can get HBO? These are the fundamental questions, and no real answers are given to them.

Overall, I'm not worried about individuals' discretionary spending (althought government discretionary spending is another matter); in fact, I'm freaking overjoyed that for $150 a month, or $3 a day, practically anybody can access an incredible library of entertainment, sports, and edutainment on television. For $20 a month, people can continually rent DVD's from NetFlix. Great! Sirius, Comcast, and Netflix are not causing a two-tiered society; get over it!

In the argument over pricing and payment methods, "economists" should not be lumped together with other "academics." In fact, a large swath of economists across political and ideological divides view HOT lanes as a partial solution to traffic and financing problems. Most economists do not worry when people pay for premium services; do you hear economists insisting that 1st class be removed from commercial airlines? There is no fundamental difference between HOT lanes and 1st class on airplanes. If the former save you time in exchange for money, the latter give you a far more pleasant experience.

Of course, the author interviews Jeremy Rifkin:

"We are creating a two-tiered society, not just the way we pay bills or drive on the highways," said Jeremy Rifkin, president of the Foundation of Economic Trends, author of "Age of Access," a book that argues the world is being transformed into a pay-as-you-go society.

Regardless of how we pay for them, the costs always accrue as we go. Mr. Rifkin wants more universally collectivized spaces, and government financing of them. I could respect his opinion if he stated it without the scary rhetoric...

The real moral of the story is that people should not be lax with their expenditures:

Cable, telephone, Internet and other subscription services are also benefiting from changes in the way people pay their bills. Many consumers have fees -- for their gym membership, their online professional journal, their newspaper delivery -- directly applied to their credit cards, which they in turn pay on a monthly basis. Others take advantage of automatic-debit programs that allow companies to pluck money right from the customer's bank account. After they sign off on the first bill, some consumers may not notice the monthly fee unless they take a close look at their bank statements or credit card bills.

Are these the same people who graduate high school unable to read, or the ones who can read but don't care? If after 13 years of government or private education you have not developed a habit of reading your bills--that is, you don't really care to know who is taking your money--what does that say about the aims and methods of education? Your problem is not that you won't be able to afford to listen to Howard Stern in 2006, while others will.

A Challenge to the Poor

Below is a letter to The Times ($,rr,academic) , January 2, 1855; Page 9 col b:

TO THE EDITOR OF THE TIMES

Sir,--I have lately noticed in your journal several letters from persons complaining of the high price of food and the comparatively low rate of wages; among others, one from "A Poor Parson," living near Colchester; where "a labourer with anything like a family requires a bushel of flour a week, costing 13s. 4d.," and where "the tip-top price of labour is 12s. a week."

The "Poor Parson" expresses his opinion that the labourer should be as well off now with 12s. as he was formerly with 7s. per week, and he asks you to use your powerful advocacy in obtaining for these poor people "the common necessaries of life.

Now, Sir, I beg to hint to this gentleman that he lays the saddle on the wrong horse when he blames the farmer for receiving the market price for his produce and for paying his workmen at the market price of labour. He should rather blame the absense of a spirit of enterprise and improvement in the district in which he lives, which I think is fully proved to apply to landlord, tenant, and labourer by the "Poor Parson's" statement that wages are now only 12s., and were formerly only 7s. per week--the maximum in that county being below the minimum in the border counties of England and Scotland. Were the landlords and tenants enterprising improvers, wages would soon rise above the shamefully low rate stated above, or were the labourers enterprising on their part, they would find their way, as do the poor Irish, to more improving counties, such as this is, where I am able to state that, out of many hundreds of men at present cutting drains under my inspection, not one able-bodied man makes less than 18s., and some superior workmen as much as 24s. per week, and even at these prices half the required number of hands cannot be obtained.

I may further state, for the information of the "Poor Parson" of Colchester and the insolvent labourers for whom he asks charity, that if they can find their way, by Government train or otherwise (with draining spade and scoop), to this county, I shall be able to set them to work at once in the vicinity of some of the stations on the York, Newcastle, and Berwick Railway.

Your Obedient Servant,
G. A. Grey
Assistant Drainage Commissioner
Milfield-hill, Northumberland

Simplify Your Life

Spending more than you earn? Want to cut down those expenses?

Simplify Your Life, a blog written by a BA in Economics and Business, presents expense-saving tips ranging from the obvious to the drastic--from disconnecting cable TV to selling your car and riding mass transit. From the FAQ:

Why does this blog exist?

It's quite simple, really. I've made a lot of mistakes, learned from them, and would like to share what knowledge I've acquired.

A lot of the tips in this blog will be so common-sensical you would think someone would have to be stupid not to know them. Well, at one point I was likely stupid enough to make that mistake myself, so I won't cast judgements on others. I'm sure plenty of people have made the same mistakes I have.

Another Depression?

This Morning, NBC Today had a report on the US economy--that is, the bad economic news of skyrocketing prices!

But first, one reporter stated that everywhere you turn is good economic news. (Apparently he hadn't heard about this summary from Media Tenor showing economic news as falling off the radar as the economy has improved).

Trying to create tension, the reporter noted the positive news--that the number of jobs in the United States has risen by 1 million, but this positive spin was only a backdrop for the recent bad news--higher (yet recently decreasing) prices for milk, gasoline, and other items that clearly are hurting some.

But instead of saying how the high CPI has risen compared to how high wage indices have risen, this reporter pounds the pavement. Most notable was an interview with a systems analyst who has "no faith" in the economy, and a another woman who, although she has "never lived through a depression", believes the current state of the economy is close to one!

The reporter counters that the statistics say otherwise, but actually treats this woman's blather as something worth taking seriously.

Frankly, this woman is off her rocker! Apparently sitting in a cafe and wearing fasionable eyeglasses has somehow led her to believe that the entire middle class--over a hundred million other people she cannot possibly know anything about from personal obervation--"can't afford to do anything" and is becoming lower class.

Why did I even expect insightful economic news from Today? Really sloppy.

World Competitiveness

In addition to not inducing and sustaining market-failure, governments should be laying down institutions to support competitive business activity, instead of just supporting specific businesses owned by relatives and cronies of the rulers.

The governments of many countries do this well; others have a long way to go.

IMD has released their 2004 World Competitiveness Rankings. I see some Swiss commentators are absurdly forecasting lower standards of living for children than current adults, and Collin May notes that the big EU nations are far down on the rankings.

The current rankings have the US first, as it has been for 5 years. I won't go into the methodology of the report, which basically results in an enormous index number. This procedure means that results could vary depending on what on thinks is most important for competition.

However, shifting the weights doesn't actually change very much. Another national competiveness assessment, independent of the IMD, has a pretty tight correlation with the IMD report over the past few years.

Also, as much as I'd love to blame the governents of poor countries for their citizens terrifying poverty, and as much guilt as they deserve, I gather that a long-term history of terrible governance is really hard to overcome...

Quote of the Day

Ivan Janseens:

Sometimes I think the only thing that is worse for poor countries then being exploited by multinational corporations is not being exploited by multinational corporations. Granted, no country should for it�s development be dependent [on] foreign companies. But being dependent [on] the handouts of foreign governments or foreign bureaucracies like the IMF or the Worldbank is probably even worse. Indeed, there is no denial that multinational corporations can be a powerfull force for economic growth and development.

I'm taking him slightly out of context.