Links of Interest

Poverty in Focus: Cash Transfers : Lessons from Africa and Latin America (good edition on all you need to know about CCTs, its effectiveness, complicated issues related to exit strategies, and challenges.

Are Matlhus's Predicted 1798 Food Shortage Coming True? (Jeffrey Sachs says we still don't know for sure).

Ethiopia's new famine: 'A ticking time bomb' (Ethiopia faces a 'toxic cocktail': drought, global inflation, armed conflict and assorted plagues).

Economic costs of cheating on a spouse differ for men and women 

(Hmm... this is interesting: Men are 7 percent more likely to cheat than women)

According to lead author Bruce Elmslie, professor of economics at the UNH Whittemore School of Business and Economics and co-author Edinaldo Tebaldi, assistant professor of economics at Bryant University, the behaviour of men and women toward infidelity differs substantially, as men and women respond differently to the perceived costs and benefits of an affair.

For women, biological and socio-economic factors like men who are good candidates to father a child and who have the education and financial stability to provide for a family are significant factors women consider when deciding to have an affair. These factors do not come into play for men who, overall, are 7 percent more likely to cheat than women.

The likelihood of a man having had an affair increases with age and reaches a peak when a man is about 55 years old. It then decreases with age. For women, the peak is 45 years old, which the authors say is logical when considering the biological reasons why women cheat.

Globalization and health: Importing Competition

Carpets, duty free treatment, and poverty reduction-- a modern day myth!

Here is call for duty-free treatment of carpet made in Nepal for the sake of poverty reduction. Again, a call for inefficiency!

Nepal needs duty-free treatment of carpets and shirts in India, China, Europe and the US.

It should be noted that almost 98% of the garment and textile firms have gone out of business, especially after the end of MFA in 2005. And, over 80% of the jobs are already lost. Why? Because Nepali exporters never learnt how competition works and were always smug with duty free access in the West. Neither the government nor the entrepreneurs looked into enhancing our industry's capacity, competitiveness,quality, and market access. After all quota restrictions were phased out in 2005, big producers, who enjoy large agglomeration economies and offer cheaper products of the same quality, from China, India, Cambodia, and Vietnam took over the Nepali market pie in the West.

Given this reality, why would Nepal still need duty-free treatment in the West? Nepal is not going to recoup the market pie already lost the its international competitors. Also, the dream of poverty reduction through duty-free treatment is just a myth because already over 80% of the workers are out of jobs! The developing countries like Nepal were already given ample time to enhance their competitiveness in this sector; the first phase out began in 1995 and since then it is more than a decade-- ten years is a lot of time to enhance competitiveness of this sector by increasing investment in capital, quality, marketing, labor skills, etc. No such step was taken, hence this sorry fate! No regrets!

Forget about aiding this sector. It is high time Nepal prioritized other sectors like tourism and hydropower.

Women may be uneducated but not ignorant!

What a nice sentence:

Women may be uneducated but apparently they are not ignorant.

Short and sweet sentence that speaks volumes against the argument that state provision of reservation/allocation of a certain percentage of seats, be it in the parliament or jobs in government agencies, to women is not good in terms of potentiality and efficacy. True in an ideal, perfect job market but not in a semi-market where there is a nexus or series of male dominance in almost all level and structure of political, economic, and social sphere. If we acknowledge that women empowerment has positive effect on the major indicators of development, then we should not hesitate to make decisions considering history, where women were never allowed to rise above the social ladder, irrespective of their qualifications, and were always kept under male dominance.

The trend of male dominance should be broken and it has to be done in such a way that women are given equal footing right from the beginning of reform process. This might also mean that incompetent women may land in positions they are not supposed to be if we consider merit. However market unfriendly it might seem, we have to realize that imperfect markets should not flourish on top of deep social discrimination against women.

If reforms related to representation, which should have a clear cut sunset clause, can temporarily overstep the logic of merit in the job market, and in the long run could lead to a more optimal solution than the existing sub-optimal one, then it is perfectly rational to implement that reform. Read my commentary on the economics of reservation published in January 2008 here (alternative like  here). I support temporary reservation of government jobs and parliament seats to the marginalized groups, including women. The government of Nepal had recently made a provision to allocate 33 percent of jobs in government agencies and in the parliament for these marginalized groups.

Here is a nice article about mainstreaming women.

...The CA holds approximately 33 percent women. Though it fails to fulfill righteous 50 percent—women consist of half of the population—it is still the giant stride from previous six percent women in the last elected parliament. Increasing number of women in politics is an encouraging sign but the question of their potentiality remains crucial, their voices might vanish into the shrill voices of males.

...When the women like tailors, domestic help were nominated as CA members, the media started publishing nonsense. They swept the ethic by blatantly portraying women as banal. News came with loathsome tendency: CA member while sewing cloths, or while washing others utensil. The intention behind this news was, look what has become of our country? Those low profile women have risen. What would those uneducated morons do? 

We cannot or must not undermine efficacy of women saying they are uneducated. Of course, they do not know many things but they can raise a voice for grass root level. They will give points that can be coded as law by the expert CA members. Women may be uneducated but apparently they are not ignorant.

Links of Interest

A very Canadian way to solve a world problem

Together they form the basis of what is often called "hidden hunger," the deforming element of malnutrition that stunts children's growth and can dramatically shorten the lives of youngsters and pregnant women throughout much of Africa and southeast Asia.

The other surprise was that the person advocating the investment is a Canadian: Susan Horton, an economics professor at Wilfrid Laurier University in Waterloo, Ont., who has been involved with Third World nutrition issues since a graduate-student stint at Bangladesh's International Centre for Diarrheal Disease Research about 30 years ago.

Her plan: An investment of $347 million a year over five years to scale up the delivery of vitamin A, iron and iodine, and to add zinc and folic acid to the majority of diets in sub-Saharan Africa and much of Asia. She believes the result would be an estimated $5 billion in health-care savings and future earnings — and saving something in the order of 3.5 million lives.

The Copenhagen Consensus for 2008 lists that micronutrient supplements for children (vitamin A and zinc) as the top most solvable (based on what produces the biggest bang for a buck) problem for this year. Every dollar spent on micronutrients would generate a $17 return in health and productivity costs, which is far greater than investments in global warming or counterterrorism, which require enormous amounts of public money to make even a modest amount of headway. The top ten problems in the list are micronutrient supplements for children (vitamin A and zince), the Doha development agenda, micronutrient fortification (iron and salt iodization), expanded immunization coverage for children, biofortification, deworming and other nutrition programs at school, lowering the price of schooling, increase and improve girls' schooling, community-based nutrition promotion, and provide support for women's reproductive role.

Why doesn't aid work in sub-Saharan Africa?

Unsolved problems in economics

1. What caused the Industrial Revolution?
2. What is the proper size and scope of government
3. How can heterogeneous production goods be included in a mathematically tractable intertemporal equilibrium constrution?
4. What caused The Great Depression?
5. The Equity premium puzzle
6. How is it possible to provide causal explanations using the purely logical constructions of mathematical economics?
7. Futures contract model
8. What is the microeconomic foundation of inflation?
9. Is the money supply endogenous?
10. How does price formation occur?
11. What causes the variation of income among ethnic groups?

A fiasco named NOC (a good article about sorry state of state-run Nepal Oil Corporation and the perennial short supply of oil, even when subsidies are scrapped and prices upped multiple times. What's the secret: corruption, political infringement in management decision, poor governance, and poor accountability)

See my take on the Nepali fuel crisis and the troubled NOC here (written in Sept 2007, but for some reason it was not published in the newspaper I usually publish Op-Ed and Commentary).

Large cardamom export touches new record (Nepal is the largest exporter of large cardamom. This product has been identified as having the highest export potential. I don't understand why the policymakers are neglecting this particular product rather than actively promoting its production in the country. Nepal has already squandered decades promoting garment and textile sector. Sadly, the same sector is now reeling under sustained recession (I say the Great Garment Depression of 2005/06 in Nepal) chiefly because of slacking competitiveness of Nepali products and production efficiencies fostered by subsidies and duty free access in the West until the end of MFA in 2005)

Former guerrilla becomes Prime Minister

Finally after two years of political bickering, the political parties have chosen Pushpa Kamal Dahal aka Prachanda, the head of the Maoist guerrillas (former) who waged a bloody decade long war against the monarchy and state, as the first prime minister of the Federal Democratic Republic of Nepal. More here.

It needs to be seen how Prachanda tames his belligerent guerrillas currently stationed at different cantonments supervised by the UN. Also, it needs to be seen what form of political and economic system Nepal would follow under his leadership. My concern about too many potential red tapes here. There will be more questions raised about the Maoists' bullying nature and their ability to lead the nation through the path of peace, which Nepal has barely witnessed in the past two years.

Keynes got it right but ...

Krugman recalls Keynes while explaining why nationalism, militarism and imperialism might overturn the gains from and prospects of globalization:

...Writing in 1919, the great British economist John Maynard Keynes described the world economy as it was on the eve of World War I. “The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth ... he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world.”

And Keynes’s Londoner “regarded this state of affairs as normal, certain, and permanent, except in the direction of further improvement ... The projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions, and exclusion ... appeared to exercise almost no influence at all on the ordinary course of social and economic life, the internationalization of which was nearly complete in practice.”

But then came three decades of war, revolution, political instability, depression and more war. By the end of World War II, the world was fragmented economically as well as politically. And it took a couple of generations to put it back together.

So, can things fall apart again? Yes, they can.

Consider how things have played out in the current food crisis. For years we were told that self-sufficiency was an outmoded concept, and that it was safe to rely on world markets for food supplies. But when the prices of wheat, rice and corn soared, Keynes’s “projects and politics” of “restrictions and exclusion” made a comeback: many governments rushed to protect domestic consumers by banning or limiting exports, leaving food-importing countries in dire straits.

And now comes “militarism and imperialism.” By itself, as I said, the war in Georgia isn’t that big a deal economically. But it does mark the end of the Pax Americana — the era in which the United States more or less maintained a monopoly on the use of military force. And that raises some real questions about the future of globalization.

...the belief that economic rationality always prevents war is an equally great illusion. And today’s high degree of global economic interdependence, which can be sustained only if all major governments act sensibly, is more fragile than we imagine.

Marriage between markets and regulation

The head of the UNDP says we need more regulation that does not stifle individual/market incentives:

Even very strong supporters of “capitalist globalization” believe that greater and more effective regulation is needed to make what some call “financial capitalism” sustainable...What we need to invent and develop are regulatory mechanisms that, on the one hand, don’t stifle private initiative and the creative energy of a market economy, but on the other hand, are very effective in their correction of the market failures that lead to excesses and misallocation of resources. We must also remember that democratic societies can only function well if the results achieved by the market economy are politically acceptable. The current global financial crisis provides a stark example of the consequences of missing and misguided regulation in the market economy.

Read the Q&A with Kemal Dervis, head of the UNDP here.