Dec 26, 2011

The price of civilization by Jeffrey Sachs

When it reviewed Sachs previous book, The End of Poverty, The Economist wrote that the man was "brilliant, passionate, optimistic and impatient." Jeffrey Sachs is indeed a humanist and he wants the world to be a better place. After advocating a big push in foreign aid, he turns to US politics in his latest book, The Price of Civilization. It warns against the rise of plutocracy and the fall in civility. He's not happy that lobbyists control the government, that inequality is at an all-time high, and that many people do not seem to care as they prefer consuming gadgets than minding about moral values. He wants better education, better democracy, and more civic engagment. He then shows convincingly that the only possible way to stabilize debt and "pay" for civilization is to increase taxes on wealth, pollution, and financial transactions.

The problem is that his arguments, which would be seen as common sense in prosperous Scandinavian countries, are perceived as anti-American by US conservatives. Indeed, conservatives hate him. For example, the Wall Street Journal writes that his book "is essentially a crusade against the free enterprise ethic of our republic." They argue that his ideal is Europe, and that productivty and innovation is much lower in the latter (which is true but not related to moral values, or is it?). Hence, while his ideas are noble, his facts to the point, and his arithmetic flawless, he's probably only praising to the choir.

Dec 23, 2011

Mexi-Canadian overpass

In addition to facilitating trade between Mexico and Canada, the overpass is expected to increase tourism in both nations by as much as 60 percent. Boasting hundreds of restaurants, gas stations, and hotels, the state-of-the-art overpass will render it unnecessary for Mexicans or Canadians ever to touch U.S. soil when traveling to and from their respective homelands...  "At long last, the people of Canada and Mexico can finally begin to forge the sort of friendship and understanding that was impossible as long as the U.S. stood between us. This is the dawn of a wondrous new era..."  Source: The Onion

Dec 16, 2011

How big is the North Korean army?

North Korea has never published any number on military personnel. Yet, due to its belligerent attitude, it could be important for South Korea and others to estimate how big is the (non-nuclear) North Korean threat. How can one get an estimate? Just ask Moon, the forensic economist.

As he writes on Vox, "North Korea may have accidentally published its number of military personnel. A close examination of the census numbers reveals an anomaly. The population overall is greater than the sum of the populations by administrative district". This is because citizen registration has to be returned to the public security office when the citizen enlists in the Army. This implies that the (700,000) discrepancy consists in part of those enlisted in the army. What's more, when looking at the sex ratio of the census numbers (figure below), one can see a sharp dent between ages 16 and 26. This drop coincides exactly with the end of compulsory-education, when some join the armed forces, and is entirely due to a decline in the number of men. It is likely that these "missing men" are members of the armed forces.

Dec 8, 2011

Melissa Dell and the Mexican war on drugs

Melissa Dell is a PhD student at MIT on the job market this year. Her research is extremely interesting, already published in Econometrica, and, guess what, useful! Indeed, her job market paper,"Trafficking Networks and the Mexican Drug War", might help Mexican government officials map probable trafficking routes and identify locations in the road network where interdiction efforts would force the costliest redirection of drug shipments.

How did she do it? She played with Google maps. Read Ray Fisman's on Slate for a nice and simple summary of her paper.  Not only is she the next big forensic economist, she also seems to be an economic artist, judging by her maps and graphs (see map below taken from her paper). Respect!

Dec 7, 2011

Did higher salaries result in an adverse selection of politicians at the EU parliament?

A while ago, I argued that one reason the UN in Geneva was ineffective was that the high salaries it offered resulted in an adverse selection of workers, motivated by luxury rather than by the work itself. But I had no data to back my claim. Now Ray Fisman et al. come in with a new paper quite supportive of my claim.

They examine the labor supply of politicians in the European Parliament where the introduction of a law equalized salaries, which had previously differed by as much as a factor of ten. They find that:
  • Doubling an member of parliament's (MP) salary increases the probability that she runs for reelection by 21 percentage points
  • A salary increase, however, lowers the quality of elected MPs, measured by the selectivity of their undergraduate institutions. 
  • Higher pay does not affect effort, measured by legislative sessions attended while in office.

Dec 6, 2011

Wouldn't it be nice (to have a bit more inflation)?

Central bankers have in their hands policy tools that allow them to optimize society‟s wellbeing. This paper argues that the latter is best captured by the quality of music and then provides estimates based on a reduced-form non-linear smoother as well as a quadratic fit that suggest the Federal Reserve should aim for a rate around 6.2%, way above the holy-grail target of 2%.

Dec 4, 2011

How many Chinese live in Africa?

Hard numbers are hard to come by. The Economist gives a number only for South Africa (see this post). The two books reviewed on this site give a few numbers but never a complete coverage. The World Bank put some numbers together for around the year 2000, before the last wave of immigration. I just found some data put together by Park in 2009 that seems to be the best currently available. The map below shows their distribution across countries. The scale is in log.