Do Women Make Damn Good Leaders?

Molly Kinder, a graduate student at Harvard's Kennedy School of Government thinks so;

"On one hand, the ascent of so many talented women to presidential posts reflects an emerging openness to women (and minorities) that should rightly be heralded as a watershed shift in societal attitudes. But perhaps more importantly, that Ellen Johnson Sirleaf and Drew Gilpin Faust were chosen to lead war ravaged Liberia and unwieldy Harvard University reveals a far more salient reality: that women make damn good leaders and, importantly, different leaders. The fundamental contrast between Ellen Johnson Sirleaf and Samuel Doe and Charles Taylor, and the contrast in style between Drew Gilpin Faust and Larry Summers -- these are both evidence enough of this fact. Consensus building, accomplished, competent, pioneering and principled. (And, notably, all are mothers). Now that's a style of leadership that the developing world -- and my own country -- would do well from."

Related;
Helen Fisher on TEDTalks
"...discusses the natural talents of women, and their new significance in the modern world."

Carly Fiorina on Tough Choices
In this excerpt from her book presentation, as hosted by the World Bank Infoshop, former Hewlett-Packard CEO Carly Fiorina discusses business as a woman, globalization, and her career at one of the world’s largest technology companies

Women are the most wasted resource in the world

Econometric Modelling and Climate Modelling

“Also, it is important to recognise that the scientific models follow a different modelling strategy from standard econometrics. The physics and quantitative chemistry constrain the model parameters, so specifying such models is not simply a curve-fitting exercise; in any case, the complexity of the models, the number of variables of interest that they try to explain, and the number of possible criteria by which to judge goodness to fit preclude choosing the value of uncertain parameters to obtain the best fit...

Assessing the merits of policies entailing different degrees of mitigation and adaptation requires the comparison of very different possible paths for economic development. This is a problem in non-marginal dynamic stochastic cost–benefit analysis quite different from the usual project appraisal approach to cost–benefit analysis that treats macroeconomic parameters such as growth rates and discount factors as given and known.

Let me explain this in the context of scenarios for future greenhouse gas (GHG) emissions. The key points are that, in the absence of an appropriate policy framework, first, global economic growth is likely to lead to rising GHG emissions and, second, incentives to develop and adopt less carbonintensive technologies are and will remain absent.11 This gives rise to a substantial risk of adverse impacts on economic growth and human development, particularly in developing countries, in the future. This risk should be reflected in the policy-maker’s growth modelling and approach to evaluating future benefits in the ‘business as usual’ scenarios. Generally, where extra benefits accrue in more difficult circumstances, they should have higher weight than on more attractive paths.

In the absence of policies to correct the externalities and market imperfections associated with the emission of GHGs and with innovation, markets cannot be expected to deliver efficient or desirable outcomes. Further, fossil fuels, particularly coal, are available in sufficient abundance to make the ‘business-as-usual’ scenarios feasible. Trajectories of GDP and emissions can, and should, be very different from ‘business-as-usual’. This could, we shall argue, be achieved with fairly modest net initial costs relative to ‘business-as-usual’ but very large benefits from avoided damage later in the century. Thus appropriate analysis must be non-marginal in the sense that it must be able to compare possible paths some of which perform very badly later in the century (i.e. those involving ‘business-as-usual’ now) with paths that take corrective action now and that allow continued growth.”

- Reply to Byatt et al. by Nicholas Stern, World Economics, Volume 7, Number 2 (April-June 2006)(emphasis mine)

Related;
A Battle Over the Costs of Global Warming
Stephen Gordon: Economics and Climatology
Jousting on global warming
Leonhardt gets Stern's discount rate wrong

Visual for the Day

SARS transmission in Singapore; Five people caused more than half of the 205 cases there.

Related;
Author Steven Johnson takes us on a 10-minute tour of "The Ghost Map," telling the story of a cholera outbreak in 1854 London, and the famous map of the disease's path, which not only proved cholera was waterborne, but also brought about profound changes in science, cities and modern society

Does my doctor know what he's talking about?

Interesting article from the Economist on use of statistics in the medical profession;

"PEOPLE born under the astrological sign of Leo are 15% more likely to be admitted to hospital with gastric bleeding than those born under the other 11 signs. Sagittarians are 38% more likely than others to land up there because of a broken arm. Those are the conclusions that many medical researchers would be forced to make from a set of data presented to the American Association for the Advancement of Science by Peter Austin of the Institute for Clinical Evaluative Sciences in Toronto. At least, they would be forced to draw them if they applied the lax statistical methods of their own work to the records of hospital admissions in Ontario, Canada, used by Dr Austin.

Dr Austin, of course, does not draw those conclusions. His point was to shock medical researchers into using better statistics, because the ones they routinely employ today run the risk of identifying relationships when, in fact, there are none. He also wanted to explain why so many health claims that look important when they are first made are not substantiated in later studies.

The confusion arises because each result is tested separately to see how likely, in statistical terms, it was to have happened by chance. If that likelihood is below a certain threshold, typically 5%, then the convention is that an effect is “real”. And that is fine if only one hypothesis is being tested. But if, say, 20 are being tested at the same time, then on average one of them will be accepted as provisionally true, even though it is not.

In his own study, Dr Austin tested 24 hypotheses, two for each astrological sign. He was looking for instances in which a certain sign “caused” an increased risk of a particular ailment. The hypotheses about Leos' intestines and Sagittarians' arms were less than 5% likely to have come about by chance, satisfying the usual standards of proof of a relationship. However, when he modified his statistical methods to take into account the fact that he was testing 24 hypotheses, not one, the boundary of significance dropped dramatically. At that point, none of the astrological associations remained.

Unfortunately, many researchers looking for risk factors for diseases are not aware that they need to modify their statistics when they test multiple hypotheses. The consequence of that mistake, as John Ioannidis of the University of Ioannina School of Medicine, in Greece, explained to the meeting, is that a lot of observational health studies—those that go trawling through databases, rather than relying on controlled experiments—cannot be reproduced by other researchers. Previous work by Dr Ioannidis, on six highly cited observational studies, showed that conclusions from five of them were later refuted. In the new work he presented to the meeting, he looked systematically at the causes of bias in such research and confirmed that the results of observational studies are likely to be completely correct only 20% of the time. If such a study tests many hypotheses, the likelihood its conclusions are correct may drop as low as one in 1,000—and studies that appear to find larger effects are likely, in fact, simply to have more bias."

Assorted Podcasts

The Secret Impact of Social Norms
Robert Cialdini, author of "Influence: The Psychology of Persuasion", talks about "Which messages spur citizens to protect the environment?"

Islam and Democracy in Indonesia
Dr. Amien Rais, former chairman of Indonesia's largest modernist Islamic Organization, Muhammadiyah

A Conversation with Abdullah Gul

The Neoliberal City
David Harvey, distinguished professor of geography, department of anthropology, Graduate Center of the City University of New York

Burns, Presidential Historian, Discusses Book `Running Alone'

Ravi Batra Sees `Political Turmoil' Followed by `Golden Age'

Sala-i-Martin of Columbia Says Aid `Does Not Promote' Growth

Sachs of Columbia Says U.S. Aid to Africa Has Been `Too Little'

Lazear of White House Calls U.S. Payrolls Data `Confusing'

Norton Garfinkle, Author, Discusses Rise of U.S. Middle Class

Robert McTeer Says Globalization Has `Disinflationary' Effect

Bacevich of Boston University Says More Troops Needed for Iraq

Perceptions of body image
Karen Throsby from The University of Warwick's Sociology Department talks about the relationships between gender and body image as well as cosmetic and weight loss surgery

Marketing the Movies
Chris Meir talks about the Marketing the Movies Conference and how academics are analysing the way films are promoted

Metal ring round white dwarf solves missing planets puzzle

Veiling
Not since the introduction of the miniskirt has an item of women's clothing caused such a stir. But the Islamic headscarf has stolen the limelight

Baghdad Bell
After the first world war, Iraqis revolted against a British occupation which hadn't moved fast enough to create an independent Iraqi nation. It was the era of Lawrence of Arabia, an intelligence officer who was sent to the middle east to encourage Arab nationalists to side with Britain. But precious few have heard of another talented informer who often crossed paths with Lawrence. Her name was Miss Gertrude Bell. Europe correspondent Jane Hutcheon looks at how a little known woman made a big difference in Iraq

Religion and Tourism

2007 Index of Economic Freedom (starts at end of the podcast)

The Catholic Origin of Everything- Part 1 and Part 2

Sporting globalisation

Free Yourself from Mind Control

Spiritual Classics II - Bede Griffiths and Thomas Merton

Breast density and the risk of breast cancer
A recent study has suggested that breast density is a risk for breast cancer. There is also a risk that mammography will not pick up a breast cancer the higher the density

Chronic disease self-management

Palliative Care

Uncomfortable Thoughts on Gallipoli and the Armenian Genocide

The origin of crops
Martin Jones is an archaeologist, but he's not digging for shards of pottery or hidden ruins, he's looking in archaelogical sites for early grains. This week, In Conversation traces the origin of ancient crops

Tim Entwisle
Dr Entwisle is a specialist on algae, but he is also involved in a botanical curiosity: the Amorphophallus titanum, a gigantic phallic plant which smells extremely bad but attracts plenty of attention every few years when it flowers.

Derek Denton
Brains are expensive to run, so why do human beings invest 20% of their energy in running what is 'the most complex collection of matter in the universe'? Could it be that something so 'primitive' as thirst was the impetus? Professor Derek Denton, founding director of the famed Florey Institute in Melbourne has written a new book on this idea

The social intelligence hypothesis

The anthropic universe

Stalin and the Soviet Science Wars
From 1945 until his death in 1953, Joseph Stalin paid special attention to the disputes and debates going on in the scientific community, weighing in on genetics, editing reports on physics and writing journal articles on linguistics, amongst other things

Unintended Consequences
The unintended consequence of the current war in Iraq are obvious. However, historians Ian Bickerton and Kenneth Hagan argue that every one of the last ten MAJOR wars the U.S. has been involved in have resulted in outcomes far removed from those intended at their outset

Poverty and the Super Rich
Professor Atkinson says the escalation in corporate CEO salaries is a product of globalisation and tends to be restricted to English speaking economies

Somalia: a land in chaos

Where to now?
This week, Graham Priest, Professor of Philosophy at the University of Melbourne, asks where philosophy has got to at the start of the 21st century and where it may go from here. What were the major influences that brought us to where we are now, and what will these be in the years to come?

Taking stock of America's global PR offensive

Charles Dickens: the journalist as novelist; the novelist as journalist

The changing media environment in Singapore

Who Will Explode the Next Nuclear Bomb

World Economic Update
Listen to Roger W. Ferguson Jr., R. Glenn Hubbard, Stephen S. Roach, and Daniel K. Tarullo discuss recent global economic developments as part of the Council's signature World Economic Update Series

C. Peter McColough Series on International Economics: Developments in the Global Economy and Implications for the United States

Ending Global Poverty
Listen to Muhammad Yunus, founder and managing director of the Grameen Bank and recipient of the 2006 Nobel Peace Prize, discuss the role of microcredit in fighting poverty

Diamonds for Development
Listen to Botswana President Festus G. Mogae discuss how diamond production has shaped the country's economy and development.

The lure of Sierra Leone diamonds

Michael Sherraden on Savings
A penny saved is a penny earned, they say. But for impoverished people, that’s often easier said than done. In this presentation, Professor Michael Sherraden from the Washington University at Saint Louis discusses savings and whether the banks can outperform the mattress

Ron Ross on E-Security

Aart Kraay on Measuring Governance

Guiseppe Iarossi on The Power of Survey Design

Robert Bates on Governance Systems and Political Effectiveness

Bruce Bueno de Mesquita on Democracies and Dictatorships

Lucas on Growth, Poverty and Business Cycles

Richard Epstein on Property Rights and Drug Patents

Has U.S. Income Inequality Increased?
Featuring Alan Reynolds, Cato Institute; Diana Furchtgott-Roth, Hudson Institute; and Gary Burtless, Brookings Institution

On the Wealth of Nations
P.J. O’Rourke will give a modern-day spin on The Wealth of Nations and Adam Smith’s revolutionary theories on liberty: pursuit of self-interest, division of labor, and freedom of trade. Employing Smith’s insights, P. J. will tackle such present day topics as outsourcing, blogs, central banks, and lobbyists, to name just a few. As P. J. puts it, he read The Wealth of Nations "so you don’t have to".

Remembering Milton Friedman

Author Robert Wright argues that history has an arrow: That humans have continued to evolve -- if not biologically, than culturally and technologically -- toward greater complexity and intelligence

Economist Bjorn Lomborg makes a persuasive case for prioritizing the world's biggest problems. His recommendations controversially place global warming at the bottom of the list (and AIDS prevention at the top

Kurzweil talk at TED
Inventor and futurist Ray Kurzweil is author of The Age of Spiritual Machines, and The Singularity is Near: When humans transcend biology

Overblown: How Politicians and the Terrorism Industry Inflate National Security Threats, and Why We Believe Them

Parliament of Whores

“The Democrats planned to fiddle while Rome burned. The Republicans were going to burn Rome, then fiddle.”- P. J. O'Rourke

See a comedian’s take on the recent Iraq War resolution debate in the US Congress.

Recommended book- Parliament of Whores by P. J. O'Rourke;

"If you would like to laugh and learn at the same time, then there is no better way to learn about public choice than by reading Parliament of Whores. When your customers have no motivation to know anything about the quality or cost of the product you are selling, then you are almost surely a politician and there is no limit to the bamboozle you can get away with, as long as your serve it up with a steady barrage of sanctimonious nonsense. The resulting waste may be depressing, but the absurdities are hilarious when lampooned by a first-rate humorist such as P. J. O'Rourke. The chapter on Agriculture policy alone is worth the price of this book."

Related;
Michael Gurr on the Gettysburg Address (podcast)

"The star turn on 19 November 1863 wasn't Abraham Lincoln at all. The star turn was the most famous public speaker in America, Edward Everett. He'd been a governor, a senator, an ambassador. A crowd of 15,000 wasn't going to faze him."

Working Paper of the Day

Mankiw alerts us to this important study; Anti-depressants and Suicide- some excerpts from the conclusion below.

“Our results are consistent with the hypothesis that the net effect of the introduction and subsequent sales of SSRIs is to reduce death by suicide. We find that increase in SSRI sales of 1 pill per capita per year (about a 12% increase over 2000 sales levels) is associated with a decline in suicide mortality of around 5%. This IV estimate is about twice as large in absolute value as OLS estimates, consistent with our general concern that both the timing of SSRI approval and the rate at which SSRI sales increase over time may be endogenous to what is happening with mental health and suicide within countries. We also demonstrate that that we estimate no relationship between SSRI sales and accident deaths, which should not be affected by SSRI use, and that there is little relationship between trends across countries in log suicide rates over the course of the 1980s and predicted SSRI sales growth in the 1990s….

Our estimates suggest that on balance SSRIs may be a very cost-effective means for saving lives, which is important in part because data from the National Comorbidity Survey from 2001-3 suggest that only around 40 percent of people with severe mental health disorders were receiving any treatment [Kessler, Demler et al., 2005]. Commonly used SSRIs can currently be obtained in the United States for around $0.10 per pill. Our estimates thus imply that each additional $20,000 spent on SSRIs will avert one suicide completion, far below the cost per life saved from most other public health, regulatory, or other forms of government intervention. But using this estimate in a more formal benefit-cost analysis raises difficult conceptual and normative questions about the appropriate way to value the life of someone who subjectively prefers death (at least at the time of the intervention). If SSRIs reduce the risk of suicide by reducing access to a method of self harm, then the suicidal person may or may not experience a switch to SSRIs as a net benefit, depending on the transience or permanence of their state of pain. On the other hand if SSRIs reduce the risk of suicide by improving the subjective utility of life, then persons at risk for suicide and their loved ones may have a considerable willingness to pay for such an intervention.29 Of course SSRIs also generate other benefits beyond their net effects on mortality that should be counted in this calculus, including improvements in mood, health status, functioning, and productivity.

One important limitation of our study is that we are estimating the average effect of expansions in SSRI use on overall suicide mortality rates. Previous medical studies have raised special concerns about drug impacts on certain patient sub-groups. We provide suggestive evidence that the effects of SSRI use on suicide mortality might have, if anything, even more beneficial impacts for younger people (15-24), the age group that has been a particular focus of recent government warnings in the U.S. and U.K. However this finding should be qualified by the observation that we can measure suicide mortality separately for specific age groups but we cannot disaggregate by age country-level sales of SSRIs. Moreover our data are not at all informative about sub-group effects on patients by pre-existing mental health status, which is important in light of the view by some researchers that any effect of SSRIs to worsen mood might be particularly pronounced among some patients – for example, those with undiagnosed bipolar disorder. Understanding more about heterogeneity in SSRI effects on different types of patients remains arguably the top priority for future research in this area."

Ethical Sluts?

“For psychologists and evolutionary biologists, polyamory is a rare opportunity to see, out in the open, what happens when people stop suppressing their desire for multiple partners and embrace non-monogamy. Proponents say the poly brand of open but committed relationships may be a way around infidelity because it turns an age-old problem into a solution: polyamorists are released from the burdens of traditional marriage vows, yet they seem to keep their long-term relationships intact. What makes poly enticing is the possibility of reconciling long-term stability and romantic variety.

And why shouldn't we consider it? When most people think of non-exclusive marriages, they think of polygamy, an ancient but still widespread practice that involves one person, usually male, acquiring multiple spouses in a harem-like arrangement. Or swinging, in which couples have casual flings on the side. Polyamory is different. It encompasses a dizzying variety of arrangements - anything from couples with long-term lovers on the side to larger groups with overlapping relationships. If anything characterises poly, says Elaine Cook, a psychiatrist who has a private practice in Marin county, California, it is a lack of rigid structure.

What evidence there is shows that poly couples stay together as long as monogamous ones - and, apparently, for good reasons. In a study published last December in the Electronic Journal of Human Sexuality (vol 8), Cook analysed the relationships of seven couples who had been married for more than 10 years, and who had had additional partners for at least seven of those years. She found that most of the couples reported "love" or "connection" as important reasons for staying together. This contrasts with monogamous couples, Cook notes, who often list external factors such as religion or family as major reasons for remaining committed.”

- Love unlimited: The polyamorists

Related;
Monks, Not McMansions, May Hold the Key to Happiness
Helen Fisher at TED Talks (podcast); she is an anthropologist with Rutgers University, specializing in gender differences and the evolution of human emotions

War is what gives us meaning?

“That men are drawn to war is no surprise. How old are boys before they turn a finger and thumb into a pistol? Long before they love girls, they love war, at least everything they imagine war to be: guns and explosions and manliness and courage. When my neighbors and I played war as kids, there was no fear or sorrow or cowardice. Death was temporary, usually as fast as you could count to sixty and jump back into the game. We didn't know yet about the darkness. And young men are just slightly older versions of those boys, still loving the unknown, perhaps pumped up on dreams of duty and heroism and the intoxicating power of weapons. In time, war dispels many such notions, and more than a few men find that being freed from society's professed revulsion to killing is really no freedom at all, but a lonely burden. Yet even at its lowest points, war is like nothing else. Our culture craves experience, and that is war's strong suit. War peels back the skin, and you live with a layer of nerves exposed, overdosing on your surroundings, when everything seems all wrong and just right, in a way that makes perfect sense. And then you almost die but don't, and are born again, stoned on life and mocking death. The explosions and gunfire fry your nerves, but you want to hear them all the same. Something's going down.

For those who know, this is the open secret: War is exciting. Sometimes I was in awe of this, and sometimes I felt low and mean for loving it, but I loved it still. Even in its quiet moments, war is brighter, louder, brasher, more fun, more tragic, more wasteful. More. More of everything. And even then I knew I would someday miss it, this life so strange. Today the war has distilled to moments and feelings, and somewhere in these memories is the reason for the wistfulness.”

- I Miss Iraq. I Miss My Gun. I Miss My War.

IMF Research Bulletin

A new edition of the bulletin is out and covers the following research summaries;

Globalization and Macroeconomic Volatility 1
International Financial Integration and DomesticFinancial Systems
Country Study: Germany
Book Summary: China and India—Learning from Each Other

Remittances in the Pacific Region

Sources of remittances in the pacific small states;

Fiji: Military coups in 1987 and 2000, aimed at strengthening the political control of ethnic Fijians, caused a sharp upturn in emigration by Indo-Fijians including doctors, nurses and computer specialists, to Australia, Canada and New Zealand. Such emigration of about 80,000 persons has reduced Indo-Fijian share in the population from about 50 percent to 40 percent. Ethnic Fijians are longstanding participants in United Nations peacekeeping forces, contract workers in Afghanistan and Iraq, and professional rugby players in Australia, New Zealand and Europe.

Kiribati: Seafarers who have been certified as high quality by the International Maritime Organization are employed on vessels operating worldwide. They normally obtain renewable one-year contracts following graduation from the Kiribati Maritime Training Institute, which was established with United Kingdom assistance in the 1970s.

Samoa and Tonga: Large communities from these countries have existed in New Zealand for many years and generally maintain very close links with their home countries, even after two or three generations. There are also sizeable numbers in Australia and the United States, primarily employed in construction, and agriculture. Numbers living abroad exceed the local population in both countries. Well-established links ensure a continued flow of migrants, even as substantial numbers regularly return home, especially in retirement.

Papua New Guinea, Solomon Islands and Vanuatu: Emigration from these three countries has been very small since independence, notwithstanding relatively low growth and high unemployment rates over long periods. The reasons for this may include the very small number of skilled citizens, less pronounced links than Samoa and Tonga with New Zealand, the high percentage of the population living in rural areas where knowledge of jobs abroad is minimal, and the continued importance of the wontok system whereby a relatively high percentage of earnings would need to be widely shared with neighbors.

Marshall Islands and Micronesia: It is estimated that up to 20,000 Marshallese and 30,000 Micronesians could be resident in Guam, Hawaii and the mainland United States. These citizens do not require visas and there are no restrictions on working in the United States. Increases in emigration have been associated with stepdowns in Compact funds, which have limited public sector employment.

Palau: Palauan citizens also have unrestricted access to live and work in the United States and remittances are sizeable. However, these receipts are broadly offset by outward transfers by Chinese, Filipino and other Asian nationals, who work in the fast growing tourism sector.

Source; Remittances in the Pacific Region, IMF

Further reading;
What Do Remittances Do? Analyzing the Private Remittance Transmission Mechanism in El Salvador
Workers' Remittances and Economic Development
Do remittances have a flip side ? A general equilibrium analysis of remittances, labor supply responses, and policy options for Jamaica

Wine and Phylloxera in 19th Century France

Interesting working paper by Esther Duflo and others, Long Run Health Impacts of Income Shocks: Wine and Phylloxera in 19th Century France;

"This paper provides estimates of the long-term effects on height and health of a large income shock experienced in early childhood. Phylloxera, an insect that attacks the roots of grape vines, destroyed 40% of French vineyards between 1863 and 1890, causing major income losses among wine growing families. Because the insects spread slowly from the southern coast of France to the rest of the country, Phylloxera affected different regions in different years. We exploit the regional variation in the timing of this shock to identify its effects. We examine the effects on the adult height, health, and life expectancy of children born in the years and regions affected by the Phylloxera. The shock decreased long run height, but it did not affect other dimensions of health, including life expectancy. We find that, at age 20, those born in affected regions were about 1.8 millimeters shorter than others. This estimate implies that children of wine-growing families born when the vines were affected in their regions were 0.6 to 0.9 centimeters shorter than others by age 20. This is a significant effect since average heights grew by only 2 centimeters in the entire 19th century. However, we find no other effect on health, including infant mortality, life expectancy, and morbidity by age 20."

Related;
Fluctuations in a Dreadful Childhood: Synthetic Longitudinal Height Data, Relative Prices and Weather in the Short-Term Health of American Slaves
Tall But Poor: Nutrition, Health, and Living Standards in Pre-Famine Ireland
What Can Be Learned from Skeletons that Might Interest Economists, Historians and Other Social Scientists?
Industrialization and Health in Historical Perspective

Australian Government Funded Islamic Study Centre

“Last year when the Federal government announced $8-million in funding for a new Islamic Study Centre based at Melbourne University, Parliamentary Secretary, Andrew Robb predicted the centre would produce a new generation of moderate home-grown imams. But the new Director of the Centre, Professor Abdullah Saeed, says the centre won't be training imams at all. In fact Melbourne University's strict secular charter prevents it even offering theology degrees….

The government of Oman had established a number of chairs in a number of Western countries including Georgetown, Harvard, Cambridge, Oxford and more recently Leiden. It is part of a series of such high profile chairs. The government of Oman gave the University of Melbourne $2.5-million to create this chair...”

Listen to the podcast interview with Professor Abdulla Saeed, The Sultan of Oman Professor of Arab and Islamic Studies at Melbourne University.

The New Petroleum Law of Iraq

Raed has done a translation of the new oil law of Iraq.
On the royalties it has the following;

ARTICLE 34 ROYALTY

A- INOC and other holders of an Exploration and Production right shall pay a royalty on Petroleum produced from the Development and Production Area, at the rate of 12.5% of Gross Production measured at the entry flange to the Main Pipeline.
B- The collection of Royalty shall be in kind or in cash at the option of the Ministry.
C- Where the royalty is paid in cash, it shall be calculated according to the prevailing Market Price in accordance with Petroleum Regulations

.

Quote of the Day

"The capacity of the human mind for formulating and solving complex problems is very small compared with the size of the problems whose solution is required for objectively rational behavior in the real world—or even for a reasonable approximation to such objective rationality."

" ... the first consequence of the principle of bounded rationality is that the intended rationality of an actor requires him to construct a simplified model of the real situation in order to deal with it. He behaves rationally with respect to this model, and such behavior is not even approximately optimal with respect to the real world. To predict his behavior we must understand the way in which this simplified model is constructed, and its construction will certainly be related to his psychological properties as a perceiving, thinking, and learning animal "

- Herbert Simon, Models of man: Social and national, 1957

Cited in the paper by Slovic, P. (1972). From Shakespeare to Simon: Speculations - and some evidence - about man's ability to process information

Dear Economist, Please Advice

“Astronomers are monitoring an asteroid named Apophis, which has a 1 in 45,000 chance of striking Earth on April 13, 2036….

Schweickart plans to present an update next week to the U.N. Committee on Peaceful Uses of Outer Space on plans to develop a blueprint for a global response to an asteroid threat.

The Association of Space Explorers, a group of former astronauts and cosmonauts, intends to host a series of high-level workshops this year to flesh out the plan and will make a formal proposal to the U.N. in 2009, he said.

Schweickart wants to see the United Nations adopt procedures for assessing asteroid threats and deciding if and when to take action...

Mission costs are estimated at $300 million.”

- U.N. urged to take action on asteroid threat

Should the UN create a 'Stern Report' on this threat?

Products Dictators would love- Wall in a Box

"Carried in a standard shipping container, the system is based on strong and lightweight bags made from geotextiles that can be filled with soil or sand to erect barriers that cannot be climbed by attackers. One 13m container provides approximately one kilometer of wall, 2m wide and 2m high.

The range includes the DefenCell Wall System for building vertical walls, road blocks and barriers up to any height, and the DefenCell Traverse System for building traditional embankments and fortifications. The cellular design is lightweight, non-metallic and compact, and is simply and rapidly deployed using almost any available fill materials, even wind-blown sand."

Have a look at the clients of the British company, J & S Franklin Ltd, that produces it. I wonder what would be the cost of it.

Via FP blog

Podcast for Hugo Chavez

Munger on Price Gouging from Econ Talks

A New CEM on Mauritius

World Bank has published a new CEM on Mauritius;

Mauritius - Country Economic Memorandum : Managing change in a changing world

Abstract: This Country Economic Memorandum subscribes to the overall direction of the reform program mapped out by this body of work and it goes deeper in three important areas: (1) public sector management, (2) labor markets and education and (3) science and technology policy. Chapters 2-4 of this report, each one largely self-contained, cover these topics in order. First, however, Chapter 1 gives the context for the transition now underway with an overview of past and present development focusing on the transformation of the economy from factor-intensive to skill- and knowledge-intensive development. Then a forward-looking section offers a medium-term forecast for the economy's emergence from the recent slowdown and discusses prospects for longer-term (potential) growth

Related;
An economics blog from Mauritius
Mauritius related posts at Ben Muse
Mauritius: A Case Study
Who Can Explain the Mauritian Miracle: Meade, Romer, Sachs, or Rodrik?

Watch Oscar Nominated Films for Free?

Go to Oscar Torrents

Via Uni of Chicago Law blog and Scrunity

Related;
BitTorrent
The Pirate Bay

Debate Podcast of the Day

Women are the most wasted resource in the world

Listen to the podcast.

Surreal headline of the Day

Chávez Threatens to Jail Price Control Violators;

"Food producers and economists say the measures announced late Thursday night, which include removing three zeroes from the denomination of Venezuela’s currency, are likely to backfire and generate even more acute shortages and higher prices for consumers. Inflation climbed to an annual rate of 18.4 percent a year in January, the highest in Latin America and far above the official target of 10 to 12 percent...

The economy grew by more than 10 percent last year, helping Mr. Chávez glide to a re-election victory in December with 63 percent of the vote. Yet economists who have worked with Mr. Chávez’s government say that soaring public spending is overheating Venezuela’s economy, generating imbalances in the distribution of products from sugar to basic construction materials like wallboard.

Public spending grew last year by more than 50 percent and has more than doubled since the start of 2004, as Mr. Chávez has channeled oil revenues into social programs and projects like bridges, highways, trains, subways, museums and, in a departure for a country where baseball reigns supreme, soccer stadiums."

Muslims Should Know This

"after the Murder of filmmaker and journalist Theo van Gogh, house prices in neighborhoods with morethan 25% Muslims decreased with about 0.1 to 0.2 percent per week relativelyto the other neighborhoods in Amsterdam"

Via Stumbling and Mumbling, an interesting working paper-The Effect of the Theo van Gogh Murder on House Prices in Amsterdam by Pieter Gautier, Arjen Siegmann, Aico van Vuuren;

"This paper estimates the impact of the murder of film maker Theo van Gogh on November 2, 2004, on listed house prices in Amsterdam with a unique dataset. We use an hedonic-market approach to show that general attitudes towards Muslim minorities were negatively affected by the murder. Specifically, we test for an effect on listed house prices in neighborhoods where more than 25% of the people belong to an ethnic minority from a Muslim country (type I). Relative to the other neighborhoods, house prices in type I neighborhoods decreased in 10 months by about average 3%, with a widening gap over time. The results are robust to several adjustments including changes in the control group. There is no significant difference in the time it takes for houses to be sold in type I versus other neighborhoods. Finally, people belonging to the Muslim minority were more likely to buy and less likely to sell a house in a type I neighborhood after the murder than before"

One novelty of the paper;

"We use a difference-in-difference (DID) approach to identify the impact of the murder. This approach has become very popular in labor and development eco nomics. The only other paper that applies DID to the housing market is Abadie and Dermisi (2006). Many of the problems related to this method are less severe for the housing market. This is due to the fact that houses are fixed and cannot move between neighborhoods. Therefore, we do not have to worry about mobility between the treatment and control group (see for example Blundell and Costa-Dias, 2000). In addition, the murder can be regarded as an unanticipated and exogenous event. Difference-in-difference methods have often been applied to study policy changes where it is always questionable whether the policy changes are really exogenous. Still, serial correlation is a potential problem for reasons pointed out in (Bertrand, Duflo and Mullainathan, 2004). We deal with this in our robustness checks. Another fundamental problem in cross sectional neighborhood-effect studies is to distinguish between a neighborhood effect and the aggregation of individual effects: the so called reflection problem, see Manski (1993, 2000). However, we are not so much interested in identifying neighborhood effects but more in the effects of the Van Gogh murder (which can be treated as an unexpected event) on different neighborhoods."

Related;
Social Interaction and cost-benefit analyses in economics: Initial observations
Structural Analysis of Discrete Data and Econometric Applications (free downloadable book)
ECONOMIC ANALYSIS OF SOCIAL INTERACTIONS
Is Terrorism Eroding Agglomeration Economies in Central Business Districts? Lessons from the Office Real Estate Market in Downtown Chicago
How Much Should We Trust Differences-in-Differences Estimates?
Microdata Methods and Practice
Schelling's Spatial Proximity Model of Segregation Revisited

Global Warming and Developing World

A new study from the World Bank- The impact of sea level rise on developing countries : a comparative analysis;

“The authors calculate that, with a one meter sea-level rise, approximately 0.3 percent, or 194,000 square kilometers and 56 million people (1.28 percent of the population) in 84 developing countries would be impacted. An estimated 1.3 percent of GDP would be lost for those countries.

Loss estimates were also calculated for up to a 5 meter level rise.
The paper takes both a global and a regional perspective. In terms of population impacted, the top 10 countries/territories worldwide are: Vietnam, Egypt, Mauritania, Suriname, Guyana, French Guiana, Tunisia, United Arab Emirates, The Bahamas and Benin.

In Vietnam, an estimated 10.8 percent of the nation’s population would be displaced with even a 1 meter sea level rise – and disproportionately high impacts in the Mekong and Red River deltas

Egypt’s Nile Delta would be similarly affected, with 10.5 percent of the population at risk, and 25 percent of the delta inundated.”

Related;
The IPCC Debate on Sea-Level Rise: Critical Stakes for Poor Countries

“The stakes in this debate are critical for the people of coastal developing nations. Before joining the Center for Global Development in December, I worked with a World Bank research team that used the latest digital maps to study the implications of sea-level rise. Our results were sobering: Of the world's 300 million people who live less than 5 meters above sea level, 80% are in developing countries: 200 million in Asia (90 million in China alone); 17 million in the Middle East and North Africa; 11 million in Sub-Saharan Africa, and 8 million in Latin America and the Caribbean. Rapid sea-level rise will threaten millions with inundation, as well as more severe flooding from storm surges and abnormally high tides”

Stern Review on the Economics of Climate Change

The Stern Review: a response (podcast from ABC)

Predicting Prediction Markets

"Over the last few years, Intrade — with headquarters in Dublin, where the gambling laws are loose — has become the biggest success story among a new crop of prediction markets. Another company, Newsfutures, helps the world's largest steel maker, Arcelor Mittal, run an internal market on which executives predict the price of steel. At Best Buy, a company called Consensus Point has helped start a market for employees to guess which DVDs and video game consoles, among other products, will be popular. Google and Eli Lilly have similar markets. The idea is to let a company’s decision-makers benefit from the collective, if often hidden, knowledge of their employees….

In every case, the market price reflects the sum of the traders’ knowledge — about the extent of the housing bubble in Los Angeles, for instance, or the likely size of next year’s wheat crop. This market price usually ends up being a more reliable forecaster than any individual, even an expert, can be. In a nifty 2004 book, James Surowiecki gave the phenomenon a catch phrase: “The Wisdom of Crowds.”

N. Gregory Mankiw, a former adviser to President Bush, who has written about Intrade on his blog, explains it this way: “Everybody has information from their own little corner of the universe, and they’d like to know the information from every other corner of the universe. What these markets do is provide a vehicle that reflects all that information.”

- Odds Are, They’ll Know ’08 Winner

Related;
Prediction Markets in Theory and Practice- Justin Wolfers
A Discussion With Justin Wolfers (podcast)
Predict the Oscar Winners
Bloomberg Discussion podcast
Guessing games
Information Markets: A New Way of Making Decisions
Using Information Markets to Improve Public Decision Making

Prediction Markets Blog

Throwing Money or Value for Money?

Does a small country like Bhutan (with a poultry population of 230,000) deserve free donor money to the equivalent of 1.5m dollars to fight avian influenza? World Bank thinks so;

Bhutan’s risk status: Bhutan is a landlocked Himalayan country of under 700,000 people, many of whom live in remote mountain villages. Bhutan is not directly affected by the current avian influenza outbreaks in Asia but is highly vulnerable. The country may be affected by H5N1 virus through importation of infected poultry, through migratory birds, or through humans if the virus acquires the ability to spread from person to person in currently affected countries. Bhutan and India share a porous border with heavy traffic of people and goods. The majority of the poultry import comes from India.

The rationale for Bank involvement is as follows. First, the growing pandemic risk, and the need for a coordinated international response provides a global public goods argument for Bank involvement. Second, with its experience elsewhere, the Bank is well placed to field multi-sectoral teams to tackle the technical, social, economic, and regulatory dimensions of the problem on a country-by-country basis. Finally, the Bank has now in place an Adaptable Program Loan (APL) to finance the Global Program for Avian Influenza and Human Pandemic Preparedness and Response (GPAI), which can rapidly support country-specific preparedness using guidelines for accelerated project processing.

Let us hear your views.

Chart of the Day-Killed by Drought

"Of all drought-related disasters between 1975 and 2000, 98% of deaths occurred in just three territories: Ethiopia, Sudan and Mozambique."

From World Mapper.

Related;
Worldmapper: The Human Anatomy of a Small Planet
Eight Americas: Investigating Mortality Disparities across Races, Counties, and Race-Counties in the United States

This and That

Some of the stuff I missed in the last two weeks.

The Morality of Rising Inequality

The Psychology of Pricing

“I always joke with people that I’m a department store pricer, because I think that psychologically the first number has an impact,” said Frederick W. Peters, the president of Warburg Realty. “Even though it may seem cheesy, it actually works.”

As an example, Mr. Peters said that it’s wiser to price a property at $4.995 million if it’s worth $5 million. “People are influenced by the first number,” he said, adding, “It’s the 4 that influences the way they perceive the price. Also, if you stay under a threshold, you are going to be found by more computer searches.”

Why poker can beat investment management hands down

A Health Care Plan So Simple, Even Stephen Colbert Couldn’t Simplify It

What’s the Toll? It Depends on the Time of Day

New Takes on the New Deal

From 0 to 60 to World Domination

With One Word, Children’s Book Sets Off Uproar

Russian Soldiers Sold For Sex?

Holocaust Denial — Crime or Free Speech?

North Korean nuke deal cheat sheet

'Just-in-Case': How to Think About Uncertainty and Global Warming

How Iraq Trillion Could Have Been Spent

Sexual Correlation and Causation

The 2007 Economic Report of the President on Exchange Rate Determination

Made in China

Handouts From Hitler

Mr. Counterintuition;

"Tom Schelling expects Iran to get nuclear weapons. "Once a country becomes the owner of nuclear weapons, it is imperative that they learn to deal with them responsibly." He pointed out that it took the U.S. 15 years after World War II to learn to think seriously about the security of its weapons. Before that, weapons did not have combination locks, let alone complex electronic security codes. Now, most weapons will not detonate even if given the codes unless they are at their designated targets. He recalled that a friend who had a role in developing the weapons told him that one day in the late 1950s, he got off a plane at an air base in Germany and saw a military aircraft on the tarmac with a bomb beside it guarded by a single soldier. In those days there were not locks and codes. The man strolled over and asked the soldier what this was. The answer: "I believe it is a nuclear bomb, sir." When asked what he would do if someone started to roll the weapon away, the soldier replied that he would call his superiors for instructions. A further enquiry established that the phone was some 300 meters away."

Saudi oil production cuts

Welfare State Stasis

Growth Regressions and Policy Advising

Purchasing power parity

Are the British genetically capitalist?

This is your brain on Britney

Faces, Faces Everywhere

“The information faces convey is so rich — not just regarding another person’s identity, but also their mental state, health and other factors,” he said. “It’s extremely beneficial for the brain to become good at the task of face recognition and not to be very strict in its inclusion criteria. The cost of missing a face is higher than the cost of declaring a nonface to be a face.”

The Science of Happiness

Workers are fine with fewer unions

How Not to Talk to Your Kids

Microfinance: bigger than Borat?

We the Sheeple? Why Conspiracy Theories Persist

Interrogating inequality

Delaying Gratification and Inequality

Working paper for the day- The origins of monetary income inequality- Patience, human capital, and division of labor. Conclusion excerpted below;

"In this article, we have presented and tested an explanation linking patience, the accumulation of different forms of human capital, self-selection into different occupations, and the growth of monetary income inequality. We found some evidence that patient and impatient people differed in the type of human capital they acquire and in the occupations they pursue, but we do not find strong evidence that occupational differences are associated with noticeable divergence in rates of income growth. Results of the 1999–2000 analysis hold up mainly when using food, rather than money, to elicit patience; the use of an exponential or a hyperbolic discount rate did not affect the results.

Our findings support recent research in embodied capital: those choosing to invest in formal schooling trade off immediate productivity from engaging in traditional activities for delayed benefits from better-paid activities that require schooling, and those who choose not to attend school give up larger future benefits for immediate productivity (Bock, 2002).

Our explanation complements Kuznets’ hypothesis about the growth of income inequality at low levels of income or during the formative stages of economic development. We have added an ethnographic layer to Kuznets’ insight about the initial upsurge of income inequality at low levels of income. We have explained why there might be self-selection into different occupations during the early stages of economic growth. We have found positive associations between impatience and the type of human capital people accumulate, and between different types of human capital and the choice of occupations people pursue. We also found some evidence that patience is associated with higher quarterly growth rates of various forms of monetary income, but results were statistically insignificant. Five years after baseline measures, patient people had higher earnings from wage labor, better indicators of short-term nutritional status, and better self-perceived health than impatient people, but attrition bias might have accentuated the difference.

We end by posing a question for future study. Why would people in the early stages of market exposure allow monetary income inequality to rise from a presumably egalitarian initial base? At least two possible related explanations come to mind. One explanation says that income inequality in a society offends people’s sense of fairness, producing anger and resentment (Brosnan & de Waal, 2003), but does not produce adverse effects on socioeconomic indicators of individual well-being, such as health or nutritional status, at least in the short run. If so, people in past foraging societies perhaps looked the other way and allowed income inequality to emerge because they sensed that it did not hurt them personally. The second related explanation traces the absence of mechanisms to curb inequality to myopia and social capital. The initial growth of income inequality might not have harmed visible indicators of individual well-being as long as strong forms of social capital, such as generalized reciprocity and gift-giving, acted as cushions to protect people (Kawachi & Kennedy, 2002; Kawachi, Kennedy, & Wilkinson, 1999; Wilkinson, 1996; Williams, 1998). The impatient were unlikely to detect the long-term consequences of emerging income inequality, both because local forms of social capital inoculated them against mishaps and because the impatient, in the short term, may have enjoyed higher levels of income than their patient peers. The myopia that made the impatient consume now rather than later would have also clouded their understanding of the possible adverse long-term effects of income inequality on their well-being. With a greater ability to see the future with clarity, patient people probably started to invest in other forms of self-insurance and to rely less on superannuated forms of social capital. There, then, might hang the tale about the origins of monetary income inequality."

Via The Economist article, Economics and anthropology- Patient capital;

"One phenomenon that is almost unique to humans is deferred gratification—in other words, patient anticipation of a reward. Dr Reyes-Garcia and her colleagues therefore guessed that as the Tsimane' became more enmeshed in modern society, the more patient of them would do better than the less. The Tsimane's traditional subsistence economy depends on folk knowledge and learned skills that have quick pay-offs. Formal schooling does not pay off for years, but opens the door to bigger potential incomes.

To test their idea, the researchers offered all 151 adults in two Tsimane' villages a choice between receiving a small amount of money or food immediately, getting a larger amount if they were willing to wait a week, and getting a larger amount still in exchange for several months' wait for payment. They found that the more education a villager had, the longer he was willing to delay gratification in return for a bigger reward."

Talk of the Day- Heart of Darkness

"Written in 1899 by Joseph Conrad, Heart of Darkness is a fascinating fin de siecle critique of colonialism and man's greed...

Conrad wrote; “My task is, above all, to make you see”. So did he intend this novella to provoke a discussion of the immorality and rapacity at the centre of colonialism? Was he questioning the hero's welcome given to those famous explorers who came back from “civilising” Africa, as they saw it? Or was he, as the Nigerian writer Chinua Achebe put it, “guilty of preposterous and perverse arrogance in reducing Africa to the role of props for the break-up of one petty European mind?”

Listen to podcast discussion from BBC.

You can download an audio version of the book here.

Moral Flexibility of Chinese Foreign Aid

Moises Naim has an interesting commentary on the role of ‘rogue aid’;

“The Nigerian government operates three railways, which are notoriously corrupt and inefficient. They are also falling apart. The World Bank — where my friend works — proposed a project based on the commonsense observation that there was no point in lending the Nigerians money without also tackling the corruption that had crippled the railways. After months of negotiation, the bank and Nigeria’s government agreed on a $5 million project that would allow private companies to come in and help clean up the railways.

But just as the deal was about to be signed, the Chinese government offered Nigeria $9 billion to rebuild the entire rail network — no bids, no conditions and no need to reform. That was when my friend packed his suitcase and went to the airport.”

Via FP blog

Quote of the Day- Know Your Calculus, Secret to Wealth?

“Everything I have is because of them.”- the late Anna Nicole Smith;

“Did you have breast augmentation?” asked Larry King redundantly, bow tie a-quiver, when she appeared on his show. “Up or down?” “Both.” “Aren't there downsides to it?” Yes, Ms Smith said; they hurt her back. But, she might have added, it did no harm to flaunt them in gentleman's clubs in Houston in the half-dark, where ancient oil tycoons would try to grapple them. One such withered specimen, with a twinkle in his rheumy eye, made the attempt in October 1991; three years later, she married him.

Not related; How to Learn Calculus

Travelling

I'm travelling- posting will be light for 2 weeks.

Bridal Exchange in Pakistan

An interesting working paper from World Bank- Watta satta : bride exchange and women's welfare in rural Pakistan;

"Summary: In a setting where husbands wield considerable coercive power, forms of marriage should adapt to protect the interests of women and their families. The authors study the pervasive marriage custom of watta satta in rural Pakistan, a bride exchange between families coupled with a mutual threat of retaliation. They show that watta satta may be a mechanism to coordinate the actions of two sets of in-laws, each of whom wish to restrain their sons-in-law but who only have the ability to restrain their sons. The authors' empirical results support this view. The likelihood of marital inefficiency, as measured by estrangement, domestic abuse, and wife's mental health, is significantly lower in watta satta arrangements as compared with conventional marriages, but only after properly accounting for selection"

Where to invest?

Invest in children;

"In a project in Bolivia, neighborhood child care givers were trained in nutrition, how to stimulate children and encourage play. The program created $2 in benefits for every $1 invested—a good rate of return, says Young.

The 40-year follow-up of the U.S. Perry Preschool Study shows that high quality early intervention programs for disadvantaged children result in higher educational attainment and income, better health, and lower crime even decades later. The benefits were as high as $17 for every dollar of investment, notes Young."

Related;
From early child development to human development - investing in our children's future
The role of education quality for economic growth

Working Paper for the Day- Crime, Punishment, and Myopia

Crime, Punishment, and Myopia by David S. Lee, Justin McCrary;

"Economic theory predicts that increasing the severity of punishments will deter criminal behavior by raising the expected price of committing crime. This implicit price can be substantially raised by making prison sentences longer, but only if offenders' discount rates are relatively low. We use a large sample of felony arrests to measure the deterrence effect of criminal sanctions. We exploit the fact that young offenders are legally treated as adults--and face longer lengths of incarceration--the day they turn 18. Sufficiently patient individuals should therefore significantly lower their offending rates immediately upon turning 18. The small behavioral responses that we estimate suggest that potential offenders are extremely impatient, myopic, or both."

Related;
The Irrational 18-Year-Old Criminal

Financial Sector Supervision for Dummies

A new working paper from the Fund; Building Supervisory Structures in Sub-Saharan Africa--An Analytical Framework;

"Summary: Current trends in financial sector development in sub-Saharan Africa are prompting policymakers to focus on the design of appropriate supervisory structures. Against the backdrop of worldwide efforts to remodel supervisory structures, this paper develops an analytical framework for designing a regulatory strategy that could assist in prioritizing the needs for regulation and supervision over time. Such a strategy should facilitate the design of a supervisory structure suitable for an individual country's current and future needs. The paper emphasizes that in the case of sub-Saharan Africa, any such strategy is constrained by the reality of capacity limitations and should take into account the need to keep the central bank involved in the process. Building on the framework, the paper identifies a number of supervisory structures that could meet sub-Saharan Africa's needs….


The Singapore model
The unification of all supervisory functions inside the central bank has several advantages. New supervisory activities could benefit from the existing ones (scope and scale economies), there would be no regulatory gaps and regulatory scope, and intensity could be built up smoothly—contentious inter-agency issues could be avoided. In addition, supervision could benefit from the central bank’s infrastructure, budget, and expertise, and also from its prestige and, potentially, independence. Crisis management would be facilitated as well.

On the downside, the country would be faced with an extremely powerful institution. Some scholars see this as a potential drawback, although solid accountability arrangements should be able to keep this institution “in check” (Hüpkes, Quintyn and Taylor, 2005). In addition, the commonly cited disadvantages of combining banking supervision and monetary policy (conflicts of interest, moral hazard) would apply in a particularly pronounced form. Moral hazard would be a particular concern if it led the customers of NBFIs to believe that they enjoyed the same level of protection as bank depositors. However, in the circumstances of SSA, the advantages of this model may be sufficient to outweigh these drawbacks, especially given the relative smallness of the NBFI sector.

The U.K.-FSA model
A unified regulator outside the central bank seems the least desirable for developing countries. As discussed earlier, the conglomerates-argument and the blurring-of-boundaries argument are not applicable in largely bank-dominated financial systems. Moreover, not involving the central bank in the supervisory process and instead starting a new institution from scratch will be very demanding in terms of institution and capacity building. In the absence of the need to supervise financial conglomerate groups, the only advantages with this model are that (i) economies of scale can be realized—although it may take some time for them to become apparent, given the extent of institution building that is required; (ii) there will be no regulatory gaps; and (iii) the central bank will not be too powerful and there will be no moral hazard problems in the central bank.”

The Big Sell Off of Iraqi Oil?

I don’t much about of oil contracts- the following complaints about the new petroleum law in Iraq;

"The precise details of the draft law are yet to be made public, but most policymakers have referred to a type of contract known as production sharing agreements (PSAs) - the form favoured by multinational oil companies. PSAs are legal agreements, designed to replace a weak or missing legal framework as in the case of Iraq. PSAs have recently generated headlines in Russia for the unfavourable economic deal the government received in relation to the Sakhalin 2 oil and gas project, signed in the mid-90s when the country was undergoing rapid economic liberalisation and political turmoil.

According to Greg Muttitt, a researcher for UK-based oil industry watchdog PLATFORM, "Along with the US and UK governments, the IMF and World Bank are forcing a policy on Iraq which favours the interests of oil multinationals at the expense of the Iraqi people."...

The World Bank is also heavily involved in Iraq's petroleum sector strategy. Appendix III of Iraq's request for an SBA from the IMF clearly states that the World Bank is the lead institution for sectoral strategies including the petroleum sector. In violation of the World Bank's good governance and anti-corruption rhetoric, PSAs could prolong and exacerbate poor governance by allowing investors in the oil and gas sector to effectively bypass the weak or absent legal and regulatory frameworks. Heike Mainhardt-Gibbs, consultant to US-based NGO Bank Information Center said ""PSA-driven development of the oil sector stands to make it even more difficult to ensure that the necessary changes will be made to improve overall governance, such as the creation of checks and balances across government agencies and economic and social sectors. Given this potential, the PSA contract model promoted by the World Bank may lead Iraq down the path of the resource curse".

Related;
The Black Gold Rush: Divvying Up Iraq's Oil
Crude Designs: The Rip-Off of Iraq’s Oil Wealth
Iraq in Talks With Chevron, Exxon
Law Could Help Modernize Iraq Oil Sector

India and China Fact of the Day

"China has just passed the UK to become the world's fourth largest economy and seems set to pass Germany to become the third next year or the year after. Now, with the new projections, India seems likely to pass Italy around 2012, France 2015 and the UK 2016."

- Hamish McRae: India will have a larger economy than the UK in a decade

Three Things to Read

You Want Innovation? Offer a Prize

Is Bush's pressure saving Ahmadinejad?

Macroeconomic Implications of War with Iran

Visual for the Day

For the explanation see here.

Macroeconomic Data

How they are able to manage the Chadian economy with such data deficiencies is truly remarkable;

“The insights in this paper are constrained by data limitations, in terms of both quality and quantity. BOP data are available only on an annual basis. The first full year of oil production, 2004, is also the most recent year for which disaggregated export data are available. Only preliminary 2005 balance of payments data are available. There are no data available on productivity and real wages.

Moreover, data collection methodologies are not reliable. Because Chad’s balance of payments data are compiled from surveys of large exporting companies rather than customs data, they are subject to errors and frequent revision. Huge revisions of the 2002 balance of payments data were made in 2005 based on new information provided by the oil consortium. The revisions showed that there had been large errors and omissions and large swings in short-term capital flows in the crucial pipeline construction years.

It appears from the recent data revisions that oil-related imports increased sharply in 2002, but all other import categories declined markedly in that year only. This raises a question whether non-oil import figures might have been revised to reduce the size of the change in the aggregated number. For example, in 2002, a more extensive multi-country survey was conducted on intra-CEMAC livestock trade; as a result, Chad’s livestock export numbers were almost tripled in 2003. The Bank of Central African States (BEAC), which produces balance of payments data for Chad, chose not to revise the estimates of livestock exports retroactively.

Data on the direction of trade, especially in recent years, are inconsistent with the figures provided by trading partners. Also, the significant 2002 revisions are reflected in current account data but not in the data on the composition or direction of trade. This paper mostly uses partner country trade data.”

IMF Survey

A new IMF Survey is out- covers the following;

Latin America needs higher, more durable growth
WTO membership strengthens Vietnam’s outlook

IMF inaugurates India training program
Colombia: from crisis to recovery

Why FDI may not be as stable as governments think
Boosting women’s status may help strengthen economic growth

Arab states look to institutional change to boost growth and jobs
France’s 35-hour week: benefit or straitjacket?

Related;
Gender Budgeting by Janet G. Stotsky
Gender and Its Relevance to Macroeconomic Policy: A Survey; Janet G. Stotsky

Cost Recovery for the IMF

A recent independent review of IMF finances concludes;

"The Committee's report concludes that the IMF's current income model—which relies primarily on the income generated from lending to member countries—is not appropriate and it recommends a new set of revenue measures. Mr. Crockett said: "This package of measures, which is unanimously supported by the Committee, is designed to align better the Fund's income model with the variety of functions the Fund currently performs. If adopted, the measures would set the Fund's finances on a sustainable basis, and ensure a solid financial foundation for the Fund's important role in the international community."…

Charging for services to member countries. The Committee recognizes that capacity building represents a fundamental contribution of the Fund to the well-being of many of its member countries and that there may be public policy reasons for not discouraging the use of capacity-building services. However, the Committee supports charging for services in principle, not so much for the revenue that would be generated, but to enhance IMF transparency and accountability in the provision of such services and to ensure that the providers and beneficiaries take a disciplined approach to its costs and benefits. The Committee also proposes the resumption of reimbursing the IMF for the administrative costs of managing the program of financial assistance to low-income members, which could yield SDR 60 million (US$90 million) a year."

Lucas vs. Lucas: On Inequality and Growth

The conclusion from the working paper Lucas vs. Lucas: On Inequality and Growth;

"Children who are otherwise identical will start their lives with vast differences in resources and opportunities, depending on which country and which family they are born in. How much consumption and economic growth would a newborn child be willing to give up in order to avoid these birth lotteries? Lucas (2004) suggests that this child would give up very little, because even if the child is born poor, economic growth would help him or her overcome poverty.

Our findings in this paper show that, on the contrary, the child may be willing to give up all growth, in order to avoid birthplace risk, and a large fraction of growth, if not all, in order to avoid family risk. The critical elements for our results are time discounting and risk aversion. Both factors downplay the role of growth for welfare, while risk aversion enhances the benefits of more equal outcomes. A third key factor is the size of the risk involved at birth, which is enormous.

The contribution of this paper is to quantify the social cost of inequality under the most standard assumptions made in macroeconomic theory. Our results suggest that societies could greatly benefit from reducing inequality. They also suggest the existence of a “big tradeoff” between inequality and efficiency, as described by Okun (1975), and help to explain why societies may not always find it best to adopt growth-enhancing institutions, particularly when inequality is large and those institutions may foster further inequality.

Societies commonly face major choices between equality on one hand and efficiency and growth on the other. The degree of progressivity of the tax system, for example, reveals a society’s willingness to trade equality for efficiency. Other examples are trade liberalization and labor market reforms, which are often regarded as beneficial for economic efficiency but detrimental to equality. Similarly, the extent of law enforcement, illustrated for example in efforts to crack down on tax evasion or informal markets, is influenced by distributional concerns at the expense of efficiency and growth. Migration policies are also strongly influenced by this tradeoff. Any correct evaluation of the institutional and policy choices made by different societies requires a proper assessment of the welfare implications of these choices, and in particular, a careful weighing of the welfare gains from efficiency and growth against the welfare costs of more inequality. Our results suggest that inequality concerns are of the utmost importance and should be explicitly considered in any aggregate evaluation of institutions.

Public discussions of the costs of inequality and the value of redistributive policies are often framed in political rather than academic terms and can lead to mistaken impressions of their effects on social welfare.16 We believe that our work provides an important first step in objectively evaluating the costs of inequality in a well-understood welfare framework.

A necessary caveat in interpreting our results is that we have not fully specified the microfoundations of the technological restrictions for inequality, growth, and consumption levels.

We postulate a reduced-form technology, and calibrate it using natural experiments rather than cross-country regressions. Some estimates of the inequality-growth tradeoff appear in the empirical literature on inequality and growth, but there is still no consensus on this relationship. Since most countries seem to share the same long-run growth rate, we suspect that the main tradeoff is not between inequality and growth, but between inequality and consumption levels. In future research, we hope to improve our measurement of these technological constraints using panel data for inequality and consumption levels.

Finally, our exercise suggests that the following is the proper ranking of issues in macroeconomics from the point of view of their potential social welfare impact: crosscountry inequality, within-country inequality, economic growth, and business cycles."

Related;
Inequality (June 2005) Edward L. Glaeser