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

Talks Assorted

George Schultz Says Milton Friedman Has `Shown us the Way'

The Economics of Climate Change
Sir Nicholas Stern, head of the UK Government Economics Service and author of the Stern Review on the economics of climate change

Rubenstein of Carlyle Says Private Equity Is Still `Attractive'

Michael Porter of Harvard Says U.S. Needs More Skilled Workers

'The Curer of Souls'
Lindsay Simpson is the Head of the Journalism program at James Cook University in Townsville and the author of a book called The Curer of Souls. Today she talks about the amateur scientists of Hobart Town in the earliest days of settlement. According to her 'the colonies of Australia represented an amateur scientist's dream'.

John Barrow
This week's conversation is with the latest winner of the prestigious Templeton Prize awarded for work bridging science and spiritual beliefs. Dr John Barrow is professor of Mathematical Sciences at Cambridge University and he tackles the big cosmic questions in his new book, appropriately titled The Infinite Book

Free Yourself from Mind Control
Steven Hassan is one of the world's experts on cults and cultic behaviour

Michael Frayn
What does philosopher and playwright Michael Frayn make of what the scientists say? He has put his thoughts about cosmology into his new book, The Human Touch, so called because some believe it takes a human to give meaning to the vastness of the universe.

Bill Bryson - A short history of nearly everything

History of Hezbollah

Forbidden words
Keith Allan on taboo and the censoring of language

Utilitarianism

The Nature of Paleolithic Art
...natural scientist Dale Guthrie's lifelong study of Paleolithic art has led to a very different conclusion: cave art was mainly produced by ordinary adolescent boys with ordinary adolescent preoccupations, notably sex.

The legacy of Milton Friedman

New Delhi Express

Chronic disease self-management

The Protestant Ethic and the Spirit of Capitalism

The psychology of stalking

Caring for America's health

International Celebrities Discuss Darfur
Actor and Director George Clooney, actor Don Cheadle, long-distance track runner Tegla Loroupe and Olympic speed-skater William Cheek discuss the Darfur crisis with the AUC community

Restoring Broad-Based Economic Growth
Roger C. Altman and Jason Furman, the Hamilton Project, on Responding to the Challenges of Globalization and Technological Change

The Art of Reading a Poem - Harold Bloom

Related;
Digital MBA: America's Best Business Schools on Your iPod
45 Free Cutting-Edge Books ... Courtesy of Creative Commons

Quote of Day

“Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution. In this very minute, a child is being born to an American family and another child, equally valued by God, is being born to a family in India. The resources of all kinds that will be at the disposal of this new American will be on the order of 15 times the resources available to his Indian brother. This seems to us a terrible wrong, justifying direct corrective action, and perhaps some actions of this kind can and should be taken. But of the vast increase in the well-being of hundreds of millions of people that has occurred in the 200-year course of the industrial revolution to date, virtually none of it can be attributed to the direct redistribution of resources from rich to poor. The potential for improving the lives of poor people by finding different ways of distributing current production is nothing compared to the apparently limitless potential of increasing production.”

- Robert E. Lucas, The Industrial Revolution -Past and Future, cited in Lucas vs. Lucas: On Inequality and Growth, IMF

Visual for the Day

Via Agoraphilia

See also We're all going to Hell.

Medici Bank

"An interesting section of the chapter recounts the history of the famed Medici Bank of medieval Florence, drawing on the archival research of Raymond de Roover's book The rise and decline of the Medici Bank, 1397-1494 (Cambridge: Harvard University Press, 1963). The Medici Bank lasted ninety-seven years. A run on the bank is not included in the list of reasons De Roover (p. 3) offers to explain its eventual failure.

At first, Huerta de Soto (p. 72) emphasizes, the Medici Bank accepted only fixed-term accounts, labeled depositi a discrezione. (To evade church prohibition of usury, interest on the account balance was treated as a gift at the bank's discretion, hence the label.) Later, in Huerta de Soto's words (p. 73), "the bank began to accept demand deposits and to use a portion of them inappropriately as loans". How do we know that the bank's use of the funds (rather than locking them all in the vault) was inappropriate? No evidence is provided that the bank misrepresented itself as a warehouse for the funds placed into demand accounts. Everyone knew it was lending out the funds placed into fixed-term interest-bearing accounts. Was it also paying interest on demand accounts, clearly signaling that it was not warehousing the funds? Apparently yes. According to de Roover (pp. 103-4), the same account could begin with a fixed term and later become redeemable on demand, while continuing to pay interest. One extant account document "certifies that Cosimo and Lorenzo de' Medici & Co. of Venice have received from Lady Jacopa, the wife of Malatesta de' Baglioni of Perugia, the sum of 2,000 fiorini larghi to be placed on deposit for one year. After this first year, the contract is automatically renewable from year to year, but with the understanding that principal and accrued interest, or rather discrezione, are repayable at any time at the request of the depositor" [emphasis added]. It is clear from the payment of interest that Lady Jacopa neither wanted nor expected the Medicis to act as a warehouse.

To Huerta de Soto (p. 74 n. 62), the holding of fractional reserves means that the Medicis were guilty of "violations of the traditional legal principle requiring them to maintain possession of 100 percent of demand deposits," but Florentine banking of that era seems not to have recognized any such principle. De Roover (p. 17-18) says of medieval Florentine bankers:

Apparently, they always stood ready to change moneys and to make payments by transfer and these were the only two functions which the Arte del Cambio [the bankers' guild] attempted to regulate. ...In the banking field, gild regulations did not go beyond the setting of professional standards and the protection of depositors against fraudulent practices. Insolvent or bankrupt money-changers were, of course, excluded from membership until creditors had been fully satisfied.

This passage indicates that payment services were central to commercial banking by this time, while warehousing services were not. Those who placed funds in a bank were normally considered creditors, not holders of warehouse claims. There is no indication that fractional reserves were proscribed."

Review of Jesús Huerta de Soto's Money, Bank Credit, and Economic Cycles

Related;
Medici Archive Project
Those Medici

Wired Answers

How much is all the tea in China actually worth?
If you wouldn’t do something for all the tea in China, are you cheating yourself? China produces 855,190 metric tons of tea leaf annually. At commodity prices of $1.86 per kilogram, you’re missing out on at least $1,590,653,400. Feh. Next time, tell ’em you don’t get out of bed for less than all the coffee in Brazil - $6,645,461,089.


Why do fools fall in love?
Blame the neuro-chemicals that fuel the brain’s built-in reward system. Triggered by the sight (or smell) of that special someone, the brain releases dopamine, upping the desire for sex. Serotonin levels plummet, creating that “can’t live without you” feeling. The attachment chemicals, oxytocin and vasopressin, also kick in. No fool can resist

This and That

Economist Wants Business and Social Aims to Be in Sync (profile of Dani Rodrik)

Save Less and Still Retire With Enough

A Who's Who of Fed Policymakers

I won't be happy until I lose my legs

The Mystery of Consciousness

Stress 'harms brain in the womb'

Why Career Planning Is Time Wasted

Small Wonders: Understanding the Way of the Warrior Sperm

Weird, or just wanting?

What We Don't Know

Of thought and metaphor

You Are What You Expect

Getting Back on Track After Kuhn

Stonehenge builders' houses found

Microfinance is a Band-Aid Solution to Poverty

Saving marriage a matter of economics, not 'values'

America must not surrender its lead in life sciences

A Small Matter of Calculating the Value Function...

The U.S. Is Losing Market Share. So What?

The future of Europe's economy

Donald Wittman demystifies economics

Neuroscience and Psychology Blog Carnival

Carnival of Capitalists

Why data, soft or hard, cannot replace eyes and ears

Cartoonomics

“...when we ignore the visual dimension in economic controversy, we systematically bias our understanding.”- Levy and Peart

Interesting paper by Sandra Peart and David Levy- Economics in Cartoons;

“One lesson we can take away from this study is that caricature offers a powerful weapon against appeals to abstract economic man. If we ignore the visual domain of economic controversy we ignore a powerful method of attacking abstractions. Economists are often heard to complain that the general public does not take us as seriously as it does natural scientists. Perhaps the fact that histories of economics do not include the visual domain of economic controversy suggests that we do not take public controversy with all due seriousness. We do not recognize that cartoons can serve as models which compete with the models we propose.”

Else where the authors write;


“Perhaps the most famous image of the cross-dressing Mill is “Miss Mill Joins the Ladies” which Judy published to celebrate Mill’s defeat for re-election, (Kinzer, Robson & Robson 1992, p. 264). These message seems quite straightforward. Attempting to changing the natural order of things is something which indicates an unnatural person. Property is something unnatural for women because they can always depend upon the benevolence of the men in their lives. There is no scarcity of benevolence of men for women.”

Understanding Innovation

An interesting article by Scott Page;

"To understand innovation, we must focus on diversity as well as ability. A scan of the intellectual landscape as well as of the policies of successful companies reveals a tacit understanding of diversity’s role in innovation. George Mason University professor Richard Florida’s work on the creative class, The Rise of the Creative Class and The Flight of the Creative Class, touches on the link between diversity and innovation, as do Yale University's Barry Nalebuff and Ian Ayres in their book and accompanying website Why Not? and whynot.net. Some of the innovation policies of Toyota Motor Corp. and Google Inc. illustrate a similar understanding that differences in the composition of their work forces boosts their bottom lines.

To appreciate the full potential of the power of difference, however, requires opening up the pumpkins. What we find inside people's heads is that people possess ways of seeing problems and solutions—oftentimes different perspectives depending on the kinds of people viewing particular problems and solutions. People's perspectives are accompanied by ways of searching for solutions to problems, something scientists call heuristics. When confronted with a problem, people encode their (often quite different) perspectives and then apply their particular heuristics to locate new, possibly better, solutions.

A person whom we think of as smart is generally someone who has lots of interesting perspectives and many effective heuristics. A smart person performs well, and often innovates, because of the many tools she possesses. Yet most of these tools won’t work on a given problem, which is why innovation is 99 percent perspiration. That's why Edison once claimed that he knew “a thousand ways not to make a light bulb.”

But how would several dozen Edisons, or several dozen Edisons from different social, racial and educational backgrounds, approach the making of a light bulb? To answer that question requires a fuller grasp of the pitfalls and idiosyncrasies of innovation and the power of diversity, which in turn requires a slight detour into theory.

First, for any problem there exists a perspective that makes it easy to grasp a solution, though that may mean waiting for a person as unique as Edison to come along. Second, across all problems no perspective or no heuristic is any better than any other. In plain English, any approach may be just as good as any other until it is tested.

Third, teams of problem solvers—viewed as bundles of perspectives and heuristics brought together to solve a particular problem—do better when the diversity of perspectives and heuristics is greater than the overall ability or talent of the team’s members. In other words, diverse teams outperform teams composed of the very best individuals. Diversity trumps ability.

This last result requires further explanation. A team, a group, or even an entire society innovates through iterative application of perspectives and heuristics. Individuals who perform best obviously possess good perspectives and heuristics (think Edison), yet 30 Edisons each may have 20 useful heuristics while collectively possessing a mere 25. In contrast, the diverse team’s individual members may on average only know 15 heuristics apiece but collectively know 40."

Related;
Creative Class blog
The Curse of the Creative Class
In Boardrooms and in Courtrooms, Diversity Makes a Difference
Cheating the Bagel Guy, Part II
Baby Einstein in the SOTU

Quote of the Day

“The interaction of individuals, possessing different knowledge and different views, is what constitutes the life of thought. The growth of reason is a social process based on the existence of such differences. It is of essence that its results cannot be predicted, that we cannot know which views will assist this growth and which will not—in short, that this growth cannot be governed by any views which we now possess without at the same time limiting it. To “plan” or “organize” the growth of mind, or for that matter, progress in general, is a contradiction in terms … The tragedy of collectivist thought is that, while it starts out to make reason supreme, it ends by destroying reason because it misconceives the process on which the growth of reason depends … Individualism is thus an attitude of humility before this social process and of tolerance to other opinions and is the exact opposite of that intellectual hubris which is at the root of the demand for comprehensive direction of the social process.”

- F.A. Hayek, The Road to Serfdom (University of Chicago Press, 1944), p. 181, cited by Easterly in Chapter 2: Freedom versus Collectivism in Foreign Aid, Economic Freedom of the World: 2006 Annual Report

Related;
Hayek, Picture Book Edition

The social norm of leaving the toilet seat down

Working paper of the day- The social norm of leaving the toilet seat down: A game theoretic analysis by Hammad Siddiqi;

We model the toilet seat problem as a 2 player non-cooperative game. We find that the social norm of leaving the toilet seat down is inefficient. However, to the dismay of “mankind”, we also find that the social norm of leaving the seat down after use is a trembling-hand perfect equilibrium. Hence, sadly, this norm is not likely to go away

From the conclusion;

For “mankind”, the analysis in this paper has the following appeal: Once again,
it has been found that the social norm of leaving the toilet seat down is
inefficient; hence, “mankind” may feel vindicated.
For “womankind”, the analysis in this paper is appealing for the following
reason: It has been shown that the social norm of leaving the seat down is a
trembling-hand perfect equilibrium. Hence, this norm is not likely to go away, at
least in the near future.

See also, ‘That Settles It’

Related;
More stories of Improbable Research
Bias Seen in Bias Studies

Guess the country

The following is the IMF annual review of a small state's economy;

"The government of ________ has adopted an ambitious reform program in its endeavor to pull the economy from decades of fiscal weakness-characterized by persistent fiscal deficits, a triple-digit debt burden, endemic arrears, and a large civil service-and declining growth rates. The reform agenda includes comprehensive tax reforms, civil service downsizing, measures to improve the investment climate, plans to reform the ailing social security system, and an impending strategy to regularize relations with creditors. These efforts have been complemented by extensive outreach to build public support. Successful implementation of the ongoing and planned reforms could mark a watershed for _________'s economic prospects.

The reform drive has benefited from an upswing in recent economic activity. The economy is experiencing its third consecutive year of high growth, driven by a construction boom in hotels and housing, as well as projects related to the 2007 Cricket World Cup. Growth in 2006 is expected to reach 8 percent, among the highest in the region. Over the medium term however, growth will slow as the construction boom winds down. Inflation has remained low, largely reflecting the stability provided by the regional quasi-currency board arrangement.

Fiscal outcomes deteriorated in 2005 but are expected to improve in 2006. Data till the first half of 2006 show an improvement in the fiscal position, largely due to revenue gains, while capital expenditure increased sharply in preparation for the Cricket World Cup. The government was able to access the regional government securities market-the first time ever for ________-and use proceeds to partly pay off high-end debt. Despite these efforts, arrears continued to accumulate and the debt stock remains in excess of 100 percent of GDP.

The external current account deficit increased to 15 percent of GDP in 2005 and is projected to widen further to 20 percent of GDP in 2006, but will be fully financed by foreign direct investment.

The financial sector faces risks in the context of a lending boom-by both, the banking and non-banking financial sector-and already high non-performing loan levels at locally-incorporated banks. Some progress has been made in banking sector supervision with the implementation of the revisions to the uniform Banking Act. Legislation for the supervision of the non-bank financial sector (by the Financial Services Regulatory Commission) has been prepared but is yet to be approved by the Parliament. The authorities are continuing to strengthen their Anti Money-Laundering framework."

Here's the government's website.
IMF's PIN

Poverty in America

A new report from GAO on poverty; Poverty In America: Consequences for Individuals and the Economy;

"In 2005, 37 million people, approximately 13 percent of the total population, lived below the poverty line, as defined by the Census Bureau. Poverty imposes costs on the nation in terms of both programmatic outlays and productivity losses that can affect the economy as a whole. To better understand the potential range of effects of poverty, GAO was asked to examine (1) what the economic research tells us about the relationship between poverty and adverse social conditions, such as poor health outcomes, crime, and labor force attachment, and (2) what links economic research has found between poverty and economic growth. To answer these questions, GAO reviewed the economic literature by academic experts, think tanks, and government agencies, and reviewed additional literature by searching various databases for peer-reviewed economic journals, specialty journals, and books. We also provided our draft report for review by experts on this topic.

Economic research suggests that individuals living in poverty face an increased risk of adverse outcomes, such as poor health and criminal activity, both of which may lead to reduced participation in the labor market. While the mechanisms by which poverty affects health are complex, some research suggests that adverse health outcomes can be due, in part, to limited access to health care as well as greater exposure to environmental hazards and engaging in risky behaviors. For example, some research has shown that increased availability of health insurance such as Medicaid for low-income mothers led to a decrease in infant mortality. Additionally, exposure to higher levels of air pollution from living in urban areas close to highways can lead to acute health conditions. Data suggest that engaging in risky behaviors, such as tobacco and alcohol use, a sedentary life-style, and a low consumption of nutritional foods, can account for some health disparities between lower and upper income groups. The economic research we reviewed also points to links between poverty and crime. For example, one study indicated that higher levels of unemployment are associated with higher levels of property crime. The relationship between poverty and adverse outcomes for individuals is complex, in part because most variables, like health status, can be both a cause and a result of poverty. These adverse outcomes affect individuals in many ways, including limiting their development of the skills, abilities, knowledge, and habits necessary to fully participate in the labor force. Research shows that poverty can negatively affect economic growth by affecting the accumulation of human capital and rates of crime and social unrest. Economic theory has long suggested that human capital--that is, the education, work experience, training, and health of the workforce--is considered one of the fundamental drivers of economic growth. The conditions associated with poverty can work against this human capital development by limiting individuals' ability to remain healthy and develop skills, in turn decreasing the potential to contribute talents, ideas, and even labor to the economy. An educated labor force, for example, is better at learning, creating and implementing new technologies. Economic theory suggests that when poverty affects a significant portion of the population, these effects can extend to the society at large and produce slower rates of growth. Although historically research has focused mainly on the extent to which economic growth alleviates poverty, some recent empirical studies have begun to demonstrate that higher rates of poverty are associated with lower rates of growth in the economy as a whole. For example, areas with higher poverty rates experience, on average, slower per capita income growth rates than low-poverty areas.

Related;
Essays on the macroeconomic impact of poverty

New Blogs

Some new blogs (new to me);

Causal Analysis in Theory and Practice
This blog is devoted specifically to the topic of causation to be driven by visitors with interest in the field

Chocolate and Gold Coins by an Econ PhD

Yet another Sheep

Game Theorist

Talk of the Day- Alexander Hamilton of Afghanistan?

Ashraf Ghani, the former Finance Minister of Afghanistan, at TED

This is how John Taylor described him;

"For example, there is Ashraf Ghani. I call him the Alexander Hamilton of Afghanistan. Ashraf Ghani was appointed the finance minister by Karzai right after the loya jirga, which appointed Karzai officially. What was his job? He had to set up a finance ministry. It was a shambles. The Taliban had just not been running things. So he had to set up a finance ministry. He also had to find a way to rein in the warlords, who were collecting their own revenues at the borders, and try to find a way for them to send some of their money back into the central government so he had some sense of a national government. The Karzai government didn't have a way to collect Customs revenues. And, by the way, Customs were the only source of revenue a country like that has, so they had to find a way to bring in those governors, just like Alexander Hamilton had to find a way to bring in the states and get them to pay the federal government when he was the first Treasury Secretary. So there is that similarity as well"

Listen to the John Taylor podcast.

GDP revisions in Greece

“At end-September, 2006 the Greek authorities announced large revisions to the national accounts for 2000–05. The level of GDP was revised up by about 26 percent, although real growth rates were little changed. Since the nominal values of the general government deficit and public debt were not affected, their ratios as percentage of GDP became markedly smaller. This was the first major revision since the application of ESA79 to the base year of 1988, which resulted in a 20 percent revision of GDP.

The authorities emphasized that the revisions are meant to bring Greece national accounts into conformity with ESA95 and resolve a number of reservations raised by Eurostat regarding earlier estimates. Indeed, the bulk of the revision (20.9 percentage points of the 25.7 percent revision in 2000, the new base year) are accounted for by this latter factor. The estimates for 2002−05 are still provisional because the results of the new surveys have yet to be incorporated.

The revision incorporates the 2001 general census, new surveys on retail and wholesale commerce, transport, hotels, and dwellings, better use of administrative databases, and new estimates of rents, the capital stock, and capital consumption. For 2000, the census raised estimates of total employment of persons by 10.4 percent. More than half the output revision is concentrated in four branches: wholesale trade (16.4 percent), hotels and restaurants (15.4 percent), construction (11.1 percent), and other business activities (10 percent).”

- From the most recent Greece Article IV Staff Report IMF, p. 15

See also
Greece: Selected Issues (IMF); covers the following three main topics-

Greece’s Competitiveness Deficit: How big is it and how could it be unwound?
Greece’s Fiscal Adjustment in an International Context
Credit Growth and Bank Vulnerability in the Euro Area and Greece

Assorted Odd News

Should Illegal Drugs Be Taxed?
In April of 2005, Jeremy Robbins was arrested attempting to traffic two tons of marijuana from Arizona to East Tennessee. Indicted on federal drug conspiracy charges, Robbins was soon assessed a $1.1 million fine from Tennessee's Department of Revenue. The reason: failure to comply with the state's Unauthorized Substances Tax, which requires anyone in possession of a certain quantity of contraband — in the case of marijuana, more than 42.5 grams — to buy a tax stamp from the state government and affix it on the drug.

Nappy art work gets Vietnam ban

Court orders Saudi drug user to memorise Koran

Top 5 Political Brawls

Web chucks '.um' domain

Stat mistake doubles China's divorce rate

Yesterday's technology today, and other dumb business mistakes

Spain resizes clothes for women

Vietnam jails footballers for fix

Cognac and iPod ban for N Korea

Most Horrible Sound in the World

Of Gay Sheep, Modern Science and Bad Publicity

'There is no war on terror'

Free Reads

From the magazine, The American;

The Ten Best Business Novels

Techno-Ideas
Mass conformity is dead. Long live mass customization! NICK SCHULZ on the explosion of variety and personalization

Forgive Us Our Debts

Russia’s Oil Woes

What Works in Africa

Celebrity Power
Information overload makes our attention the next hot commodity, writes DAVID ROBINSON. An endless variety of niche sources could leave us absorbed—and isolated—if not for the big-name celebrities who bring us back together.

British women spend half the year dieting

"According to a new report, British women spend an average of six months a year counting the calories and more than a fifth are on a permanent diet throughout their lifetime in a seemingly never-ending quest for the perfect figure.

But they aren't the only ones waging a constant fight against the flab.

The average adult male spends 28 years slimming, the poll has revealed.

It found that over a tenth of the UK population is currently dieting in a bid to shed the pounds after feasting on festive treats over the Christmas period.

But despite best intentions, three quarters of those who began their New Year with the firm resolution to lose weight will give up by the end of the week.

The average diet lasts 5.5 weeks, with the post-Christmas fast being even shorter at just three weeks.

Half of slimmers throw in the towel due to lack of willpower, while a quarter of respondents said that they give up because their strict diet regime leaves them moody or depressed.

The most determined of dieters are aged between 45 and 64, with almost a quarter spending up to a year slimming.

In comparison, those aged between 18 and 24 are more likely to be yo-yo dieters, with a fifth giving up within a month.

The survey of 1,446 of men and women revealed that nearly two thirds of the UK population are unhappy with their body and feel that being thinner would make them happier.

For women, looks are more important, with over half reporting that they diet to wear fashionable clothes and a third of those surveyed said they watched their weight in a bid to feel more attractive.

But in comparison, men are more focused on their long-term well-being, with over a third saying they wanted to lose weight to be more healthy.

Almost a quarter of the UK population has been on a weight loss diet at one time, with half shedding up to a stone."

- Average woman spends 31 years on a diet, researchers say

Via Offbeat blog- The Yo-Yo Economics Of Women & Diets

Health Franchises for Africa

An idea that is working for Africa;

"Western aid contractors have promoted the idea of “social marketing”—that is, selling, at subsidized prices, products such as bed nets treated with insec­ticides to ward off malaria. It’s a sensible notion: people value things they buy. But aid agencies really know little about commerce. They promote prod­ucts where people either have no money or are not truly interested in what’s on offer.

Instead, what Africa needs is its own business solutions—for-profit solutions, at that. One prom­ising approach is developing in Kenya, a nation with a high mortality rate from malaria and other infectious diseases but, as in so many other parts of Africa, a lack of trained medical staff. The World Bank estimates that Kenya has just 13 physicians per 100,000 people (compared with 206 per 100,000 in Brazil) and is not able to replace medical workers it is losing, mainly to Europe. When I visit London hospitals, I find that over half the nurses are African. Not only are Kenyan children dying, but the few people who look after them are leaving. A nonprofit organization based in Minneapolis that is run on a sound business model, the HealthStore Foundation (HSF), has come up with a model to help clinical staff stay.

HSF was founded in 1997 by Scott Hillstrom, a lawyer who was involved in such businesses as technology, health care, and real estate. It is now run by Steve Dahl, who spent ten years in finance and planning posi­tions at such corporations as General Mills, BMC Industries, and Tonka Corporation, and Liza Kimbo, a former senior manager at Standard Chartered Bank in Kenya. The aim was to “prevent needless death and ill­ness by sustainably improving access to essential medicines.” The foundation finds nurses and community health workers who put up a small amount of their own money to buy into a clinic or shop as a franchisee of HSF. The foundation provides up to 88 percent of the capital and gives four weeks of intensive training in mar­keting and management, as well as some medical training. To recoup capital costs, HSF charges a markup on the essential medicines the clinics sell.

The clinics themselves offer testing and diag­nosis of disease in previously neglected locations (from rural villages to the slums of Nairobi) and sell medicines and other health care products as well. Each location is a for-profit enterprise, generating revenue to pay its owners a competitive annual sal­ary, up to about $1,400 a year, compared with an average of $754 a year for a nurse in Kenya.

Of course, even $1,400 is far lower than African nurses can make in Britain and the U.S., but the cost of living is lower in Kenya, and the freedom and responsibility of being an owner are tempting. So far, HSF has helped establish 64 profitable enter­prises, serving more than 400,000 Kenyans. Within a year, the foundation could have well over 100 locations serving one million people. Meanwhile, in 2005 alone, the franchises treated 50,000 cases of malaria.

Says a recent Columbia Business School analysis: “The HealthStore micro-franchise model gives local entrepreneurs the opportunity to own and operate sustainable, profitable businesses while simulta­neously curtailing incentives for corruption…. By aligning the incentives of customers, government regulators and owner-operators, HealthStore’s franchise model is able to deliver a high quality of care to previously underserved Kenyans while real­izing a healthy return on investment.”

The fallout from these HSF clinics is substantial. Drug prices decline in other shops, where com­petition forces service to improve. So, as in other markets, people who never visit HealthStore clinics benefit from their existence. Some government-owned clinics distribute the same medicines for free but are often out of stock, and the HSF clinics could do even swifter trade if they were better informed of such government limitations.

There have been breaches of franchise standards, but the foundation monitors and cracks down. Competition limits price-gouging. Credit facilities have opened up for patients who cannot pay on the spot—and lending experience has been good. Those who can’t pay at all are usually given charitable help, sponsored by HSF. According to Transparency International, Kenya is one of the most corrupt places on the planet, so the HealthStore success is even more remarkable….”

Related;
HealthStore's Franchise Approach to Healthcare
Micro-Franchising Model
Essentialdrugs
The Challenge of Global Health

"The fact that the world is now short well over four million health-care workers, moreover, is all too often ignored. As the populations of the developed countries are aging and coming to require ever more medical attention, they are sucking away local health talent from developing countries. Already, one out of five practicing physicians in the United States is foreign-trained, and a study recently published in JAMA: The Journal of the American Medical Association estimated that if current trends continue, by 2020 the United States could face a shortage of up to 800,000 nurses and 200,000 doctors. Unless it and other wealthy nations radically increase salaries and domestic training programs for physicians and nurses, it is likely that within 15 years the majority of workers staffing their hospitals will have been born and trained in poor and middle-income countries. As such workers flood to the West, the developing world will grow even more desperate."

Moore’s Law Stretched

A breakthrough in chip technology;

"Intel Corp. and IBM have announced one of the biggest advances in transistors in four decades, overcoming a frustrating obstacle by ensuring microchips can get even smaller and more powerful.

The breakthrough, achieved via separate research efforts and announced on Friday, involves using an exotic new material to make transistors -- the tiny switches that are the building blocks of microchips

The technology involves a layer of material that regulates the flow of electricity through transistors.

"At the transistor level, we haven't changed the basic materials since the 1960s. So it's a real big breakthrough," said Dan Hutcheson, head of VLSI Research, an industry consultancy.

"Moore's Law was coming to a grinding halt," he added, referring to the industry maxim laid down by Intel co-founder Gordon Moore that the number of transistors on a chip doubles roughly every two years.

The result of Moore's Law has been smaller and faster chips and their spread into a wide array of consumer products that now account for the bulk of the industry's $250 billion in annual sales.

The latest breakthrough means Intel, IBM and others can proceed with technology roadmaps that call for the next generation of chips to be made with circuitry as small as 45 nanometers, about 1/2000th the width of a human hair."

World Bank responds to criticism of the Chap pipeline project

Marco Mantovanelli, Africa region, World Bank answers to critics of Chad pipeline project;

"In a number of respects, Daphne Wysham's article "World Bank OK with Blood for Oil" is both misleading and inconsistent with the facts.

First, the original agreement between the World Bank and Chad comprised a complex formula that essentially required that about 85 percent of the royalties and dividends be devoted to defined poverty reduction programs, to communities living near the production field and to future generations. As a number of international NGOs pointed out, the agreement didn't include the taxes that oil companies would pay the Chadian government out of their profits—which in the current oil-price environment, turned out to be substantial.

This gap was addressed in the new agreement reached with the Chadians last summer. Under that accord, the government of Chad agreed to devote 70 percent of all revenues, irrespective of the source—including the taxes that weren't included in the original agreement—to poverty reduction programs, plus some badly needed work to strengthen governance. By including the taxes, the new agreement directs more revenues to development this year than would have occurred under the old agreement. The Chadian national assembly has just ratified a 2007 budget in which 70 percent of all revenues are devoted to domestic programs that advance economic development, reduce poverty and improve governance.

Second, the World Bank decided last year to suspend its portfolio and any new lending in Chad after the Government enacted legislation which, if carried out, would have undermined the poverty focus of the original agreement by allowing much higher amounts of Chad's oil revenues to be allocated, for example, to military and security activites. Moreover, to make sure that no money was actually spent in violation of that agreement, the Bank froze the royalties and dividends that were accumulating in a London escrow account established at the outset of the project. Those monies weren't made available to Chad until the government agreed to respect the poverty reduction focus of the original agreement..."

Daphne Wysham responds;

"Mantovanelli claims that “an Independent Advisory Group (IAG) regularly reviews the revenue management program [for the Chad-Cameroon pipeline] and has never found evidence of monies allocated for poverty reduction—either under the original agreement or the new formula—being used for military purposes.”

Again his assertion is neither credible nor verifiable. If the IMF cannot track expenses in Chad, how then can a small team of advisory group members undertake the sort of forensic accounting to determine what the budget of Chad actually contains? No one can get a copy of the budget, let alone records of expenditures.

Furthermore, the report issued following the IAG’s most recent visit to Chad last year was damning, showing that all well-laid plans made by the Bank were either failing or lagging, including the lack of a “regional development plan” for the oil-producing zone of Doba, which was supposed to be place in 2000, prior to Bank approval of the loan for the pipeline..."

Related;
Chad: 2006 Article IV Consultation - Staff Report

The Oxford Companion to Economics in India

Seems like a must read book;

“It is and, in fact, has just been accomplished astonishingly well. The Oxford Companion to Economics in India (OUP), edited by Kaushik Basu, weighs in at five kilos and is priced at Rs 2,750 but is worth every naya paisa for its range of subject matter and learning.

Basu is professor of economics and international studies at Cornell University and well-known to legions of economists and students around the world. But he is no dry academic lost to the world of arcane theories and statistical indices. He sees economics not in terms of Keynes’s prophecy that future generations would have no fear as the world’s economic problems would be solved but, on the contrary, as a field of study that has grown so complex and all-encompassing that it impinges more than before on the lives of every Indian, whether policy-maker or citizen, and also those staking a claim on India, as foreign investors or members of the diaspora.

How Prof. Basu and his five-member editorial board persuaded 200 specialist contributors—fellow economists, policy-makers, industrialists, professional analysts and researchers—to file entries for the Companion to Economics he tells in his witty and erudite introduction. But the triumph of “chasing truant authors” over two years, editing and updating their contributions, is a labour of love that has produced the most impressive A to Z on information concerning Indian politics, economics and social change that hours spent clicking search engines will not yield. From stock markets to software exports, oil to pharma, FDI to PDS, turn the page alphabetically and you have the wisdom from the acknowledged founts. The Companion’s focus is not merely trained on specific industries, trends and micro views. Every now and again it stands back to look at the big picture and fill in the historical details of political and social change. Flip to “H” and you get essays on health indicators, human rights and higher education; “S” has entries on everything from street vendors to sustainable development; “T” will get you up close with the House of the Tatas and, ironically, cheek by jowl with the entry on trade unions.

The range of authorship is truly stellar. From Ratan Tata to Amartya Sen, P Chidambaram to Montek Singh Ahluwalia, all are represented but Prof. Basu and his co-editors in the egalitarian spirit of marking tutorials give them space in accordance with what they say rather than their star billing. Nor are they insensible to the dark stories of disparity and despair that stalk the lives of large swathes of an impoverished population. What good is economics if unable to analyse the failures of modern India? There are gruelling entries on poverty in its manifestations—infant mortality, income disparity, child labour, farmers’ suicides and unorganised labour. “A huge rise in inequality can create political upheavals, which can in turn spell doom for growth … even if the disadvantaged are too weak to protest and destablilize the economy,” warns Basu in his introduction.”

Related;
Some papers from the book-
The Equity Premium in India
Large Dams in India
Unemployment, Measure of,
Biodiversity in India
The Economics of Dowries in India
'Non-banking Financial Intermediaries in India'

See also the excellent Ajay Shah’s blog

“India will surpass China”?

"Perhaps, But at What?. India, which currently has a population of 1.1 billion people, will be the world’s most populous nation sometime in the next few decades. But that may be the only arena in which it overtakes China.

Both countries have large urban-rural gaps and other income and living standard disparities, but China is now well ahead of India on a number of key indicators. China ranks at number 81 of 177 countries on the latest United Nations Human Development Index (in the neighborhood of Armenia or Peru), while India is 126 (below Namibia and just ahead of Cambodia). In China, a person’s chance of dying before the age of 40 is just under 7 percent. In India it’s over 16 percent, higher than in Pakistan or Bangladesh. Eighty percent of Indians live on $2 a day or less, compared with about 46 percent of the Chinese. Almost half the children under 5 in India are malnourished, compared with 8 percent in China.

India’s democratic system prevents it from taking draconian measures, such as China’s one-child policy, to keep population growth in check. India’s population is growing at 1.38 percent a year, a figure that may look low until it is multiplied by more than 1 billion. India adds more than 15 million people a year to its population, nearly twice the population of Austria. Indian leaders are aware that a “youth bulge,” which demographers expect to level off by 2025, can be conducive to economic growth. But countries in this position need to, “broaden the opportunities for young people to develop their human capital and use it productively,” in the words of the World Bank’s World Development Report 2007. That’s the route to prosperity followed by Japan, Taiwan, and South Korea—and now China. The adult literacy rate in China is above 90 percent. In India, it’s 61 percent. About one quarter of primary-school-age Indian children are not in school. In China, the figure is practically zero."

- FP special segment on India- Think Again

Related;
India's dysfunctional police

The Coming War on Terror – on the internet

BBC reports Criminals 'may overwhelm the web';

Mr Cerf, who is one of the co-developers of the TCP/IP standard that underlies all internet traffic and now works for Google, likened the spread of botnets to a "pandemic".

Of the 600 million computers currently on the internet, between 100 and 150 million were already part of these botnets, Mr Cerf said.

Botnets are made up of large numbers of computers that malicious hackers have brought under their control after infecting them with so-called Trojan virus programs.

While most owners are oblivious to the infection, the networks of tens of thousands of computers are used to launch spam e-mail campaigns, denial-of-service attacks or online fraud schemes

Mr Markoff, who writes for the New York Times, said that a single botnet at one point used up about 15% of Yahoo's search capacity.

It used retrieved random text snippets to camouflage messages so that its spam e-mail could get past spam filters.

"Despite all that, the net is still working, which is amazing. It's pretty resilient," said Mr Cerf.

The expert panel, among them Michael Dell, founder of Dell computers, and Hamadoun Toure, secretary general of the International Telecommunication Union, agreed that a solution had to be found to ensure the survival of the web.

Related;
Cracking hi-tech crime
Tips to help you stay safe online
Hi-tech crime: A glossary

Talks Assorted

John Taylor of Stanford Discusses `Global Financial Warriors'

Summers Calls for Fairer U.S. Tax System, Training Programs

El-Erian of Harvard Sees Structural Changes in Global Economy

Fischer Sees `Massive' Foreign Investment in Israeli Economy

Roach of Morgan Stanley Sees Housing, China as Growth Risks

Aart Kraay on Measuring Governance

Archimedes
So how did this Greek mathematician in the third century BC arrive at a calculation of Pi? Did he really create a Death Ray to fight off invading ships? And what does a recently discovered manuscript reveal about his methods?

Daniel Dennett on religion

The biggest questions of the universe
Could we ever travel in time? Will there ever be an equation for Everything? What happens when the Sun burns out? How many universes are there and do they go on forever?

Edmundo Paz Soldán on cyberterrorism, globalisation and political oppression

Farish Noor and 'creeping sharia'
Farish Noor speaks about increasing sectarianism in both Malaysia and Indonesia, a process which has been described as 'creeping sharia'.

The mystery of Linear B, the script that pre-dated alphabetic writing in Greece

Books that Shook the World: The Qur'an
Guests include, Bruce Lawrence Professor of Islamic Studies at Duke University and Abdullah Saeed.

Who wants to see Sexual Freak in High Definition?

New technologies may not be always good for business;

"Pornography has long helped drive the adoption of new technology, from the printing press to the videocassette. Now pornographic movie studios are staying ahead of the curve by releasing high-definition DVDs.

They have discovered that the technology is sometimes not so sexy. The high-definition format is accentuating imperfections in the actors — from a little extra cellulite on a leg to wrinkles around the eyes.

Hollywood is dealing with similar problems, but they are more pronounced for pornographers, who rely on close-ups and who, because of their quick adoption of the new format, are facing the issue more immediately than mainstream entertainment companies...

The technology’s advocates counter that high definition, by making things clearer and crisper, lets viewers feel as close to the action as possible.
“It puts you in the room,” said the director known as Robby D., whose films include “Sexual Freak.”

The pornographers’ progress with HD may also be somewhat slowed by Sony, one of the main backers of the Blu-ray high-definition disc format. Sony said last week that, in keeping with a longstanding policy, it would not mass-produce pornographic videos on behalf of the movie makers.

The decision has forced pornographers to use the competing HD-DVD format or, in some cases, to find companies other than Sony that can manufacture copies of Blu-ray movies.

The movie makers assert that it is shortsighted of Sony to snub them, given how pornography helps technologies spread.

“When you’re introducing a new format, it would seem like the adult guys can help,” said Steven Hirsch, co-chief executive officer of Vivid Entertainment Group, a big player in the industry. Mr. Hirsch added that high definition, regardless of format, “is the future.”

Despite the challenges, pornographers — who distributed some 7,000 new movies on DVD last year and sold discs worth $3.6 billion in the United States — are rapidly moving to high-definition...

Jesse Jane, one of the industry’s biggest stars, plans to go under the knife next month to deal with one side effect of high-definition. The images are so clear that Ms. Jane’s breast implants, from an operation six years ago, can be seen bulging oddly on screen.

“I’m having my breasts redone because of HD,” she said.

The stretch marks on Ms. Jane from seven years ago when she gave birth to her son are also more apparent. But she deals with those blemishes in a simpler way: by liberal use of tanning spray."

Strengthening the People’s Monetary Policy

A new working paper from the Fund- China: Strengthening Monetary Policy Implementation;

Summary: The People's Bank of China (PBC) has made great strides in modernizing its monetary policy frameworks but their effectiveness will diminish as the sophistication of the economy increases. Empirical evidence supports maintaining a reference to money in China's monetary strategy and enhancing the role of interest rates in its conduct. We advocate adoption of an eclectic strategy involving the monitoring of several indicators, and of a short-term interest rate as the operational target. The PBC should be granted discretion to change its policy rate, and there are no technical obstacles for such a move to occur in the near future.

One box in the paper discusses initial conditions for inflation targeting;

“The initial conditions for inflation targeting can be divided into four groups. First is a mandate to pursue an inflation objective and accountability by the central bank for meeting this objective, autonomy to set monetary instruments accordingly, and transparency in policy formulation and implementation. Second, there is a need to ensure that the inflation target will not be subordinated to other objectives, and the external position is stable to enable monetary policy to focus on achieving the inflation target. Third, the financial system should be developed and stable enough so that monetary policy is not sidetracked by concerns about the health of financial institutions. Markets should be sufficiently developed to enable reliance on marketbased monetary instruments. Fourth, the central bank needs the proper policy tools to influence inflation on the basis of a reasonable understanding of the links between the stance of policy and inflation.”

Further reading;
Challenges to China’s monetary policy
Implementation of Monetary Policy and the Central Bank's Balance Sheet
Monetary Policy Implementation at Different Stages of Market Development
Monetary Policy Implementation at Different Stages of Market Development
Country Cases and Appendices—Supplementary Information
China Program Working Papers- SCID

Corporate Sustainability Reporting

Interesting report (thought I don’t know how important);

“Tomorrow’s Value asks the question: How far has the value lightbulb switched on in corporate brains and boardrooms? On current evidence, the answer is that the links between the evolving sustainability agenda and wider market opportunities are now better understood — with a small number of companies reporting the relationship with value in increasingly interesting ways. Partly as a result, some parts of the financial community are gearing up their use of non-financial, extra-financial and/or sustainability disclosures to better understand emerging environmental, social and governance risks. Nonetheless, our expert panel concluded that most companies are still missing an important opportunity to communicate with financial analysts and institutions.”

Via PSD Blog - Less is more Madonna?

“The concept of materiality has long been part of the legal and financial worlds, yet it is now featuring much more prominently in the ESG (environmental, social, governance) arena.”

Related Concept;
The concept of materiality is derived from the field of financial auditing, where it is defined as, ‘the magnitude of an omission or misstatement of accounting information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or misstatement’. Statement of Financial Accounting Concepts No. 2, Qualitative Characteristics of Accounting Information, Financial Accounting Standards Board (FASB).

India vs China

China seems to be winning;

"Both India and China have large populations, low incomes and rapidly rising GDP, yet the composition of their growth has been quite different. A recent paper by Barry Bosworth and Susan Collins, of the Brookings Institution in Washington, DC, explores the sources of expansion in both countries, breaking down total GDP growth into increases in inputs of labour and capital, and gains in TFP. In the period 1993-2004, China's GDP grew by an average of 9.7% a year, India's by 6.5%. Employment increased faster in India than in China, but this was more than offset by a much slower rise in output per worker: only 4.6% a year, compared with 8.5% in China. This reflected both stronger capital investment in China and much faster growth in TFP, which increased at an annual rate of 4% against India's 2.3% (see left-hand chart). Contrary to the popular claim that China's TFP growth has slowed, the authors find that it has accelerated from a pace of 3.6% in 1978-93.

These figures challenge the conventional wisdom that China's growth is more dependent than India's on investment than on efficiency gains. Over the past decade TFP has in fact accounted for a bigger slice of GDP growth in China than in India. Thanks to economic reforms, India's TFP growth has improved from its paltry 0.2% a year in the 1960s and 1970s before the economy was opened up, but it is still much slower than in China. Worryingly, the figures also show that India's TFP grew more slowly in 1999-2004 than in 1993-99. Since 2004, TFP growth has probably spurted (the figures are not yet available), but this may reflect a cyclical boom.

The relative performance of the two countries varies by sector (see right-hand chart). In agriculture, China has enjoyed much faster productivity growth. Indeed, India's TFP growth in farming has fallen since 1993, dragging down overall TFP growth because agriculture still employs a large share of the population. In 1978 it accounted for 71% of workers in both India and China. Now the respective figures are 57% and 47%. India therefore has huge scope to sustain rapid growth by shifting workers from agriculture to more productive jobs in industry and services."

Related;
India at Davos: Resources from the World Bank
Book Examines Global Implications of India and China’s Growth
Going Forward by Nirvikar Singh
“Accounting for Growth: Comparing China and India”
“Sources of Growth in the Indian Economy”