Environmental consequences of a gentle touch...

Toilet paper is notoriously by now a luxury good (ah?). There are several brands which compete on a specific attribute: "softness". Those people who want to be pleased in every second of their life, end up spending lot of money on this product. It's the market baby! But wait a minute...isn't toilet paper made from forest? Does it make a difference by how much I want to increse my daily intake of self-inflicted gratitutde? Apparently, the answer is: Yes, a lot!!

Allen Hershkowitz, at the Natural Resources Defence Council, a US based environmental action group, has launched a campaign against the American obsession of extra-softness in toilet paper use. For those out there who go for a soft/gentle touch, Hershkowitz said "This is a product that we use for less than three seconds and the ecological consequences of manufacturing it from trees is enormous". Greenpeace this week launched a cut-out-and-keep ecological ranking of toilet paper products. The full story is here.

Dambisa Moyo and the Rigotnomics Development Bank

Wow! Look at this chick! A native of Zambia with advanced degrees in public policy and economics from Harvard and Oxford about to publish an attack on Western aid to Africa (Dead Aid)

Interviewed by the New York Times, she was asked "What do you think has held back Africans? " She answers "I believe it’s largely aid. You get the corruption — historically, leaders have stolen the money without penalty — and you get the dependency, which kills entrepreneurship. You also disenfranchise African citizens, because the government is beholden to foreign donors and not accountable to its people" (Is there any empirical paper showing more aid reduces entrepreneurship? Sounds like a great paper!)

She also mentions Kiva, where you can make a loan directly to an African entrepreneur. This has lead me to creating the Rigotnomics Development Bank (RDB) and lend directly to entrepreneurs (thorugh Kiva). Anyone with a deposit in the RDB (minimum 5$) has a vote in which projects get financing and returns are shared proportionally to deposits. For those interested, let me know and I'll organise a meeting so we can discuss how we want to run this thing. We could definetely borrow a lot of money for HEID students, and it's a safe depoist, not aid! and I will make it 100% transparent, on a kick ass website)

She also as some non-academic credibility. She was working for Goldman Sachs in London in the capital markets, helping mostly emerging countries (Israel, Turkey and South Africa) to issue bonds. Asked why she didn’t get a bond issue going in her native Zambia or other African countries, she answers that "issuing a bond would require that the president and the cabinet ministers go out and market their country. Why would they do that when they can just call up the World Bank and say, “Can I please have some money?”

David Roodman (the xtabond2 guy) is skeptical about her ideas, though he glamors her as the anti-Bono!

Now let's set up the RDB.

The Inconveniences of Being a Geneva Citizen

- Part I : Public Transportation -

Geneva is a lovely place to live. It provides, for a town of so small size, tremendously many interesting job opportunities, a pretty decent night and cultural life. It is placed in a very handy location attached to an awesome lake and nearby mountains that invite to plenty summer and winter outdoor activities. Even flight and train connections are pretty well. However, the beautiful panorama across lake Geneva, despite the jet d’eau, is topped by the one in Lausanne and Montreux. Nevertheless, I agree with the rankings that put Geneva as one of the towns with the highest quality of life.

The only thing that makes me go crazy about this place is the way in which politics has failed in so many ways to make this a truly perfect place. Sometimes, I get the impression that wherever the state intervened it caused more harm than good. Here, I am thinking of potentially everything the state of Geneva is involved in: from public and individual transportation over housing to opening hours.

For today let me start with a rather harmless issue: Public Transportation within the city.

The first point regards the ticket machines. Often you arrive at the tram when it is about to leave and have no more time to take a ticket. A serious dilemma for the honest beneath us. Why can ticket machines not exist in trams? It would even lead to savings rather than extra costs, since the town would just need to remove the (useless) second machine that exists at most tram stops and save people time and hence money.

The second point regards the fact that using a bicycle brings you faster form A to B compared to the public means (and according to PL also using a skateboard). This has two reasons, The first is difficult to tackle: Tram Stops tend to be too close to each other. The second is easier to tackle: Public transportation should have a higher priority before ordinary cars, making public transportation faster and hence more preferable.

I am not even going to discuss the fact that ticket machines give no change (the ridiculous solution that was implemented recently is even more of a joke).

Pareto-optimal exchange equilibria vs. inequality (incentives vs. kalashnikovs)

An intesresting note from Brad this morning:

"The standard mode of discourse in economics is positive-sum win-win Pareto-optimality. You provide people with the right incentives through property rights to invest and accumulate and they do so—and the benefits of their investment and accumulation spill over and produce higher incomes for everybody else as well [...]

But a look back at human history suggests that this focus is perhaps misplaced. Much of human economic and political history looks as though it is made up of thugs with spears (or kalishnikovs) taking stuff; or those who can for some reason command the services of thugs with spears taking stuff; or those who can for some reason command the services of thugs with spears threatening others so inducing them to enter into contracts on unfavorable terms. Slavery. Serfdom. Debt peonage. Latifundia. Land barons. Cattle barons. Capital barons. Perhaps economics should focus not on Pareto-optimal exchange equilibria and economic growth but instead on distribution: perhaps economics should be not a hymn to the win-win bounties of the division of labor but instead a discourse on the origins (and maintenance) of inequality."

Zedillo's weird proposal

I am a bit puzzled by Ernesto Zedillo's proposal. Tonite at the CTEI conference he suggested countries should legally retaliate against each other right now in order to avoid a future trade war! He said this would be horrible but effective as only then countries would understand the dangers of their actions. But retaliating for free trade sounds like bombing for peace, or f*&$ing for virginity...I still think free trade, as democracy, is best taught by example, not by war! And carrots always work better than sticks...

He's still an inspiration for us...after his PhD in economics at Yale, he went on to become President of Mexico (1994-2000) and set his country on the democracy and growth path...

The Mouse's Tale

Last week, while examining the cameo of the Rigotnomics patron mascot in The Economist, I was struck by an odd sense of familiarity. Not only did the mouse in the picture look familiar, but so did all the other animals and the little girl sitting around it. That's when it struck me. It's a picture from my favorite book: Alice's Adventures in Wonderland by Lewis Carroll! The Rigotnomics mouse was born back in 1865 when he was drawn by Sir John Tenniel for the first publication of the book (Tenniel died in 1907, meaning that the illustrations came out of copyright in 1964)!

So who is the mouse? Most people might not recognize him since his scenes never made it into the Disney version of the story. But, he is passionate, a leader, speaks french, and you can discover him for yourself here (he appears at the end of Chapter 2 and throughout Chapter 3).

Cheap Chow

Does it matter for your wallet in which super market you do your shopping?

You may be excused to answer yes to this question even if you are an economist. Admittedly, this is a bit stretching the argument. But in Germany the discounter market (which hit the news recently with rather negative news) is such that no matter where you go shopping the difference in the overall cost of a basket of so called “Eckartikel” (brand products with low prices that are bought with high frequency: e.g. milk, shampoo or coffee) is around 1%.

Does this imply that the German discount market is highly competitive?

Again you my be excused to answer yes to this question unless you are German. Well compared to the Swiss market it seems competitive. How can it be that prices are identical and probably the lowest in Europe and still the market structure is not competitive. Tricky question. My best guess is that it is due to the big market leader and price setter ALDI (founded and still owned by two of Germany’s richest and media shyest brothers). For ALDI to be in the position of setting the price, it must have some monopsony power in buying the products for resale, which is certainly true for ALDI.

But why does ALDI then not set prices such that others have to exit the market. I guess it has to do with location and the transaction cost of driving/walking to the next closest ALDI. But then again ALDI could try to locate better. Hence, there must be some reason to keep “competitors”.

If you are keen on shopping cheap and do not mind the hassle of going to different stores and you life in Germany, here is where you can find the currently cheapest products: Preszeiger (only avaiable in German).

How the US is destroying Mexico

News from CNN:
Drug violence spins Mexico toward 'civil war'

• Story Highlights
• Drug-related conflicts bring waves of violence, death that some liken to a civil war
• U.S. helps fuel violence with market for illegal drugs, weapons supply for drug gangs
• "The drug gangs are better equipped than the army," expert says
• Pervasive corruption among public officials also at center of drug cartels' success

The US has to stop fighting this war with arms and border controls. Any economic paper explaining this conflict?

Rigotnomics in The Economist

Notice anything special about the picture on page 83 of today's economist? Indeed people can learn from social animals!