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Tuesday, February 22, 2011

Why Getting Rid of Dictators is Not Enough

A perceptive piece by Arvind Subramanian on why the Arab revolution might not see an economic boom. A fundamental change in the political economy is also needed. While reading this, I was about to say: case in point, 1986 Philippines:
Even if the people of Libya and Bahrain join those of Egypt and Tunisia in overcoming their cursed political systems, the economic manifestations of their rent curses will remain. Even if they become more democratic, because these countries benefit from substantial rents they will have less need to tax their peoples. This precludes the need to reform state controlled industries to create private sector wealth. It also will stop the development of genuine democratic systems, the usual basis for the legitimate taxation of citizens. 
The history of economic development suggests that rent-ridden countries create governments with few incentives to build strong political institutions or listen to their people. In Egypt, for instance, these various rents account for about two-thirds of foreign exchange earnings. Directly or indirectly they generate at least a third of government revenues. This is not as large as other oil exporters in the region, like Libya, but substantial nonetheless. And Egypt’s state, in common with others across the Middle East, has used these rents to appease and suppress dissent, creating circumstances in which they have little need to develop competent political institutions.
Weak economic institutions will be the consequences of these nations’ ongoing reliance on rents. These will fail to deliver essential services, such as education and skill creation, in turn limiting the pool of entrepreneurial talent. Such institutions also create bloated bureaucracies, weak legal enforcement of property rights, and obstacles for starting businesses, especially for those outside the regime’s inner circle. Without reforms the private sector will still likely thrive only through connections to a rent-addled state, not because of the raw dynamism found in many Asian countries.

Monday, February 21, 2011

On the Laws of Economics Holding True in a Board Game

A wonderful piece by the NYTimes on Monopoly, the board game:
The precise details of our classic game are blurred by the alcohol consumed that night and the years that have passed since then, but this much is recalled. We decided that Monopoly was hostile to a free market because it restricted the number of houses or hotels one could buy. We voted that a player could buy as many hotels as a property could physically bear and rents would be raised proportionally. 
But the bank soon began to run out of money. So we did what any government would do. We began printing more of it, by scribbling $500 on scraps of paper. We printed a lot of money.
Prices shot up, which we all knew, even in that inebriated state, was the consequence of expanding the money supply. (After all, the great economist told us, “Inflation is always and everywhere a monetary phenomenon.”) 
The inflation became so extreme that we eventually voted to alter the rules again: we’d cut the money supply. Any money we printed that came back to the bank would be taken out of circulation. 
A severe depression kicked in, of course. Prices plummeted and it was a race to liquidate assets. One by one the players quickly went bankrupt, and sometime around 4 that morning the game was over.
This got me thinking: Perhaps macroeconomists should start to work with game developers. They could run experiments, say like jack up the monetary supply in World of Warcraft and see how gamers would react.

HT to James Choi for the pointer.

Wednesday, February 16, 2011

The Triumph of Cities

John Stewart interviews Ed Glaeser about his new book, The Triumph of Cities: How our Greatest Invention Makes us Richer, Smarter, Greener, Healthier, and Happier. I am convinced to get a copy, despite the high price Kindle still has for it. There are numerous positive reviews online; and judging from this video, Ed Glaeser seems to be a pretty cool and smart.

I am interested in how cities work (and not work), primarily because they have implications to migration, a topic I would like to work on in the future. But personally, I just find cities fascinating. I've been to some great American ones like New York and Chicago, and I've lived in one, D.C.

Close friends will note that I have made a pact that I will never settle down in a non-city. I'm done with driving, seriously; I would rather much just use public transportation and walk - the best way if you ask me to get a feel of the heartbeat of a place. And cities have this youthful energy in them that draws me infinitely.

If anyone is interested in this sort of thing, I would suggest the canonical 1960's The Death and Life of Great American Cities, by Jane Jacobs if you haven't read. I've written about the book before and to me, it captures very well how we should think about cities, and how to design them.

TY Jeff Smith for the pointer.

GMA Posts Racist Billboard alerts me to this billboard of GMA's newest soap, Nita Negrita. I knew there was something subtly wrong about the billboard, which disturbed me, but it took me a while to pin it down. It took a friend, CH Herrin, to point out that exactly what's wrong with the frame is that they portray someone who is supposed to be a Filipino African-American with a whitish kid painted black. As if saying that both are the same. They should have hired a real Filipino African-American instead.

I am willing to consider this an honest mistake on the part of producers at GMA Network. The write up about the show hints at good intentions. The poor execution, however, is completely outrageous. If you are still not outraged, imagine this: an American network produces a show that tells the story of an inspiring Filipina nurse living in the US. But they hire, say, Miley Cyrus to portray the role and then paint her brown. Wouldn't that get you up in arms?

Why haven't I seen the the internet community in the Philippines fuming over this? Remember three years ago when we demanded an apology from ABC's Desperate Housewives for their slur about Filipino medical professionals? Where has that cultural sensitivity gone to?

Billboards like this will not fly anywhere else. That this could be put up, even in the best of intentions, says something about our country's lack of racial sensitivity, borne out of the absence of constant exposure to true racial diversity.

Please GMA, take this show down.

ADDENDUM: Cess Celestino informs me that this is like Blackface. Incredible. This makes the Philippines 50 years behind in terms of the civil rights movement.