Making the poor poorer...

According to Gary S Becker and Richard A Posner in the Wall Street Journal:

Some economists deny that a minimum wage reduces employment, though most disagree. And because most increases in the minimum wage have been slight, their effects are difficult to disentangle from other factors that affect employment. But a 40% increase would be too large to have no employment effect; about a tenth of the work force makes less than $7.25 an hour. Even defenders of minimum-wage laws must believe that beyond some point a higher minimum would cause unemployment. Otherwise why don't they propose $10, or $15, or an even higher figure?

They title their editorial "How to Make the Poor Poorer". Unfortunately, too true. Why is it that those who propose policies in the name of the poor ultimately do quite the opposite?

Those who make sense versus those who don't

Greg Mankiw and Arthur C. Brooks in the WSJ define the argument as one between conservatives and liberals. I'm not so sure. While I don't agree that all conservatives and liberals think in those defined boxes, I prefer to define the debate between those who deal in facts and reason and those who don't . From the Wall Street Journal:

While just about everybody -- left and right -- agrees that poverty is unacceptable (although policy makers disagree as to whether a minimum wage hike would help or hurt the working poor), conservatives do not share liberals' concern about income inequality. According to the 2005 Maxwell Poll on Civic Engagement and Inequality, self-described liberals are more than twice as likely as conservatives to say income inequality in America is a "serious problem." And while 84% of liberals think the government should do more to reduce inequality, only 25% of conservatives agree.

This is empirical substantiation for the old cliché that conservatives just don't care about the poor, right? Wrong. In fact, the data do not tell us that conservatives are uncaring; they actually tell us that conservatives are optimists. Conservatives are relatively untroubled by inequality, and unsupportive of government income redistribution, because they believe the American economy provides private opportunities to succeed. Liberals are far more pessimistic than conservatives about the possibility of a better future for Americans of modest means.

Consider the evidence. While 92% of conservatives believe that hard work and perseverance can help a person overcome disadvantage, only 65% of liberals think so. This difference of opinion, contrary to the convention, is not because conservatives earn more money. In fact, lower-income conservatives are about twice as likely as upper-income liberals to say they think there's "a lot" of upward mobility in America. If a liberal and a conservative are exactly identical in income, education, sex, family situation, and race, the conservative will be 20 percentage points more likely than the liberal to say that hard work leads to success among the disadvantaged.

Yep, that just about explains it.

Color me unfashionable...

Fashionable I am not. I figure I'll grow up to be an old curmudgeon at some point if I haven't reached that point already. Here's food for thought - it's worth reading it all:

My own, unfashionable view is that charitable giving, both governmental and private, is more likely to increase than to alleviate the poverty, ill health, and other miseries of the recipient populations.

In aggregate, and having observed the "good works" of overreaching bureaucracies like the World Bank, IMF and UN, not to mention of many well intentioned charities, contrasted to the entrepreneurial energy of some of even my clients and business people those who I feel honored to be able to call friends, I can't help but agree. While there are undoubtedly exceptions, why do we keep pushing our solutions onto the poor instead of providing them with the incentives to develop their own? According to Greg Mankiw:

Smart economic analysts debate the value of foreign aid, but no one seriously doubts that truly free trade would benefit the world's poor.

Unfortunately there are too many who aren't serious.

Equal society = happy society?

Does income inequality really matter? Why do politicians like to use words like "class warfare" if not to fuel politics based on greed and envy? In more equal societies, shouldn't it be true that we envy our neighbours less and therefore live happier lives? Given that more equal societies tend to be more equally poor, shouldn't at least this be a consolation prize? Apparently not:

Studies of personal happiness, based on questionnaires and self-reporting, indicate that the inequality of happiness is not growing over time in the United States. Furthermore, the United States has an inequality of happiness roughly comparable to that of Sweden or Denmark, two nations with strongly egalitarian reputations.

Hat Tip: Greg Mankiw

Plus ca change...

From Instapundit:

Will the U.N. Development Program Probe Be Ban Ki-Moon's First Cover-Up?

Disappointing. Whereas these conceptually appealing programs destroy value, at least in selling products to developing nations multinationals as a whole provide goods and services people want with what appears to be greater ethical responsibility. (And I'm not saying there aren't exceptions, but unfortunately where the UN is concerned these issues approach consistency - at what point do we say enough is enough?)

Update: While an Instapundit reader is calling it "Ban Ki Panky", the WSJ is calling it Cash for Kim. From the WSJ:

The disappointing news is that Mr. Ban appears to be stepping back from his larger reform promise. It's understandable that he'd want to limit his audit order in some fashion; investigations of every nook and cranny world-wide would take years. But that's no justification for defining "external" audits as those done by the U.N.'s own Panel of Auditors and its subset, the Board of External Auditors. These are the same auditors who found nothing suspicious in the Oil for Food program.

Business as usual at the UN

This relates directly to the leadership of Kofi Annan. Of course it didn't start with him, and I doubt it will have stopped with him. From FoxNews:

Has North Korean leader Kim Jong Il subverted the United Nations Development Program, the $4 billion agency that is the U.N.’s main development arm, and possibly stolen tens of millions of dollars of hard currency in the process? According to a top official of the U.S. State Department — using findings made by the U.N.’s own auditors — the answer appears to be a disturbing yes, so far as UNDP programs in North Korea itself are concerned. And just as disturbingly, the U.N. aid agency bureaucracy has kept the scamming a secret since at least 1999 — while the North Korean dictator and his regime were ramping up their illegal nuclear weapons program and making highly publicized tests of intermediate range ballistic missiles.

Hat Tip: Instapundit.

Catching up...

Flew into HK on Thursday so I'm catching up on my blog reading.

I hear that gas prices are under 80 cents (Canadian/litre)! (I shouldn't have filled up before I left grr... ). Which to Glenn Reynolds is good news, quoting the Wall Street Journal:

Mild winter weather has something to do with it. So does heavy selling by financial funds. But a largely overlooked factor in the recent plunge in oil prices may portend an end to the multiyear rise in crude: For the first time in years, the developed world is burning less of it. Fresh data from the International Energy Agency show oil consumption in the 30 member countries of the Organization for Economic Cooperation and Development fell 0.6% in 2006. Though the decline appears small, it marks the first annual drop in more than 20 years among the OECD countries. . . . The fall in oil use by the industrialized world is a sign that the reactions to higher oil prices by businesses and consumers from the U.S. to Germany to Japan may be adding up to a cycle-turning downdraft in demand. The resulting shift in global cash flows could mean a big boost for oil consumers' economies at the expense of producers and exporters.

Er...

You might think it was almost a crime syndicate or something...

Details here.

Nice when seen from a Distance

Henrik Rasmussen from Denmark questions Jonathan Cohn of the New Republic who says "It is entirely possible to have a large welfare state, with generous benefits, without choking the economy". Cohn cites the following:

• Economist Kevin Hassett: "The Scandinavians show that you don't have to have a terrible economy if you have a big welfare state and high taxes."
• Columbia University's Jeffrey Sachs: "A generous social-welfare state is not a road to serfdom but rather to high levels of satisfaction, fairness, economic equality and international competitiveness."
• Former Treasury Secretary Robert Rubin: "I think I would like to move to Denmark."

Though some might want former Treasury Secrety Rubin to do the same, kidding aside, the reality is somewhat different. I don't recall who said it, but for every society, it's become clearer that there are only two choices when it comes to income distribution and wealth creation: 'do we want to be less equal but wealthier overall, or equally poor?'

"Mother of all Surprises"

A good friend of mine has become quite a fan of the Globe and Mail's Neil Reynolds. Unfortunately his columns don't come for free online. He references Newsweek and its recent article on Iraq as an interesting case study:

Civil war or not, Iraq has an economy, and—mother of all surprises—it's doing remarkably well. Real estate is booming. Construction, retail and wholesale trade sectors are healthy, too, according to a report by Global Insight in London. The U.S. Chamber of Commerce reports 34,000 registered companies in Iraq, up from 8,000 three years ago. Sales of secondhand cars, televisions and mobile phones have all risen sharply. Estimates vary, but one from Global Insight puts GDP growth at 17 percent last year and projects 13 percent for 2006. The World Bank has it lower: at 4 percent this year. But, given all the attention paid to deteriorating security, the startling fact is that Iraq is growing at all. [...]

Roadside bombs account for fewer backups than the sheer number of secondhand cars that have crowded onto the nation's roads—five times as many in Baghdad as before the war. Cheap Chinese goods overflow from shop shelves, and store owners report quick turnover. Real-estate prices have risen several hundred percent, suggesting that Iraqis are more optimistic about the future than most Americans are.

Of course Reynolds doesn't attribute the same causes as Newsweek does, according to Newsweek:

Iraq is a crippled nation growing on the financial equivalent of steroids, with money pouring in from abroad. National oil revenues and foreign grants look set to total $41 billion this year, according to the IMF. With security improving in one key spot—the southern oilfields—that figure could go up.

I'm skeptical that if you pour money into an economy, people necessarily get wealthier or that economic growth is pervasive. Instead, Reynolds points to and credits in part former US administrator Bremmer who implemented a flat tax. From a Washington Post article from 2003:

Iraq has a flat tax, and the 15 percent rate is even lower than Forbes (17 percent) and Gramm (16 percent) favored for the United States. And, unless a future Iraqi government rescinds it, the flat tax will remain long after the Americans have left. [...] Bremer's new economic policy for Iraq will slash Saddam Hussein's top tax rate for individuals and businesses from 45 to 15 percent.

Some still point to the massive unemployment as is the case for Newsweek:

Yes, Iraq's problems are daunting, to say the least. Unemployment runs between 30 and 50 percent. Many former state industries have all but ceased to function. As for all that money flowing in, much of it has gone to things that do little to advance the country's future. Security, for instance, gobbles up as much as a third of most companies' operating budgets, whereas what Iraq really needs are hospitals, highways and power-generating plants.

But Reynolds also debunks the myth of unemployment being as high. Again, his article isn't available but hopefully this is a decent substitute. I'm glad at least someone's noticing. I would have to say that I agree with the arguments for a flat tax. It is a bit odd though that the economy is doing as well as it is given one of the basic requirements for efficient commerce is rule of law and commerce. But perhaps that's only part of the story since as Bush, noted "eighty percent of Iraq's sectarian violence occurs within 30 miles of the capital." It would also be notable that Israel's eocnomy has thrived despite being under constant threat.

The Limits of Microfinance

Muhammad Yunus and the Grameen Bank were awarded the Nobel Peace prize this past year (one of the few whose contributions seemed to deserve it, rather than being a political response to American foreign policy). His contribution to microfinance of "group lending" (borrowers who co-sign for each other) really gave the concept the momentum it has today by considerably reducing the cost of lending. Due diligence was reduced since community members would know each other the best, and transaction costs were brought down to the group level and consolidated to the lender.

The success of microfinance is that it has leveraged markets - financing entrepreneurs from the bottom up, instead of massive white elephant projects that go to disrepair and require considerable graft to erect. Grameen bank has lent to more than 1 million people in Bangladesh, but there have been limits. Microfinance has had little macro-level impact on Bangladesh however leading those who wonder about its effectiveness.

I think one should view it in a different way. That microfinance has succeeded conceptually may have prevented far worse outcomes for those at the economic base. Today there is news of political upheaval in Bangladesh:

President Iajuddin Ahmed on Thursday declared a state of emergency, stepped down as leader of Bangladesh's caretaker government and indefinitely postponed elections scheduled for Jan. 22 following violent protests by a key political alliance that had said it would boycott the vote.

But looking at it in an even greater context, consider the following:

• Bangladesh places 156/163 (2006) perceived as being amongst the most corrupt countries in the world by Transparency International
• 141/147 (2006) in the Heritage Institute's barometer of economic freedom
• And, 88/175 (2006) in the World Bank's [Ease of] "Doing Business" ranking

There are those who would misrepresent "crony capitalism"/oligarchy, or worse, anarchy as being free markets, but property rights and the rule of law (for all, not just for the few) are basic requirements for free let alone successful markets. Is it really any wonder then that Bangladeshis remain some of the poorest and least developed in the world?

Who needs qualifications for running the UN?

Perhaps a bit frightening, or for the more cynical, more of the same after Kofi Annan's leadership. Secretary General has chosen his deputy Asha-Rose Migiro to be his deputy. Her qualifications? Claudia Rosett was one of the few reporters who asked critical questions during the scandals over the UN managed Oil for Food program in Iraq. According the Rosett:

Pressed at the UN noon briefing for details on Migiro’s qualifications to manage the secretariat of the UN’s sprawling $20-billion-per-year system —with its rich history of waste, fraud and abuse — the spokeswoman cited Migiro’s recent experience chairing a regional conference for the Great Lakes region of Africa.

It strikes me as rather unserious that this is one of the best qualifications UN PR staffers were able to come up with. Rosett however follows the money and wonders if it has anything to do with payback:

Last year, when Ban, a South Korean, was campaigning for the job of UN Secretary-General, Seoul became unusually generous in its largesse to a number of countries, including Tanzania — which happened at the time to hold one of the ten rotating seats on the UN Security Council [...] the Times of London reported that South Korea last year pledged $18 million in aid to Tanzania, or about four times what it had given in the space of a dozen years from 1991 to 2003.

Perhaps more troubling is that according to the Iranian Migiro supports "Iran's right to access peaceful nuclear energy." Rosett goes on to note the last few sentences of the Iranian article:

The Tanzanian energy minister, for his part, expressed satisfaction with the current level of relations with Iran and voiced his country's readiness to negotiate with Iranian companies active in construction of power plants.

Referring to the activities of Iran's Construction Jihad Bureau in Tanzania in the past, he welcomed reopening of the office in the country.

If supporters of the United Nations truly believe in its mandate, shouldn't they expect better?

Tech Tip

Learn how to disable Microsoft's auto reboot after its automatic updates - here.

Update: The auto-restart still continues to nag, after you change the settings. From here, temporarily disable the auto-update to get rid of the notification by typing "net stop wuauserv" at the cmd dos prompt. Windows Update will restart next time you decide to reboot. Much better now :)

Lessons not learned: Venezuela

Just as Cuba might be going the other way with the impending death of Castro... With Chavez's announcement of the nationalization of utilities, power and media, he'll no doubt blame the ensuing economic chaos on the bourgeoisis, the CIA, and western decadence. Though his efforts have about as much popularity as Bush's maligned leadership these days, one wonders why they elected him in the first place:

Ordinary Venezuelans may also disapprove of Mr. Chávez's approach. U.S. pollster Greenberg Quinlan Rosner recently found that 49% of Venezuelans were opposed to turning the country into a socialist state. Other polls have shown a broad majority is against turning the country into a Cuba-like communist nation.

Of course, it's said we get the governments we deserve.

Heh

A hilarious slapdown of Warren Kinsella. Just when I was beginning to wonder if colorful insults were a lost art...

Hat Tip: Smalldeadanimals.

Technology we could do without?

Somewhat bizarre... "TV programme reveals the REAL Frankesteins":

Will a full head transplant be the next question for medical ethicists to consider? It's a prospect that raises many disquieting questions, not least whether our souls reside in our minds or in our bodies, and whether a person's head, living on another body, would still be the same person.

One thing's for certain. With surgical techniques improving at such a rapid rate, the issue will shortly be not whether we could carry out a human head transplant, but, much more importantly, whether we should.

Hat Tip: Smalldeadanimals

Research on Corruption

More from NYT's profile on 13 most promising economists, is Benjamin A. Olken. His research was focused on corruption:

Mr. Olken, who had won a $550,000 grant from the World Bank, hired 70 people to help him administer his study in more than 600 villages throughout Central and East Java. Each village was already poised to participate in a nationwide community-development project, in which the government paid local workers to pave dirt roads with rock and gravel. [...]

The study included three different approaches to reducing corruption. In some of the villages, Mr. Olken increased the number of government audits of the road projects. In some, he handed out hundreds of invitations that encouraged local villagers to attend public meetings. There, road-project officials accounted for their spending. And in some villages, he distributed anonymous comment forms on which villagers could point out corruption without fear of retribution. The forms were later read aloud at the public meetings.

Mr. Olken found that, contrary to a popular theory that favors grass-roots or community participation as the key to reduced corruption, the traditional top-down monitoring played an important role in reducing corruption, even in a highly corrupt environment.

You can find his published research here. He also has a working paper on there that includes the effect/results of assassinations.

Update: I didn't actually even look over that last paper on assassinations until now. Turns out that Mr. Olken believes.... assassinations work! Brave man, according to his paper:

We find that, on average, successful assassinations of autocrats produce sustained moves toward democracy. We also find that assassinations affect the duration and intensity of small-scale conflicts. These results suggest that individual leaders play key roles in shaping institutions and conflict, and that small sources of randomness, such as perturbations in the path of a single bullet, can have a pronounced effect on history.

Economists puzzling over Growth?

From the WSJ's David Wessel:

Why aren't more poor countries catching up faster?

One view, articulated by Ms. Krueger, is that so-called Third World governments and their First World advisers applied sound economic principles incorrectly or without sufficient attention to the reality. Policies to encourage exports and shield embryonic industries from imports until they got rolling sounded good, for instance, but bred corruption, infantilized industries and created politically powerful vested interests that blocked needed change.

Another view is that poor countries got bad advice and paid the price, but that today's experts know much more than their predecessors. "We don't have recipes, or a checklist," Mr. Edwards says. But, he says, we do know the ingredients: educating workers, accumulating capital and investing it widely, improving productivity. Even he concedes economists are better at dissecting success stories -- China, for one -- and identifying particular reasons for each one's success than generalizing to advise struggling countries what steps to take to boost living standards for the masses.

A third view is that earlier economists focused on the wrong thing. Mr. Johnson, among others, argues that what really matters is having solid political, legal and economic institutions -- courts, central banks, honest bureaucrats, private-property rights -- that allow entrepreneurs to flourish. Imposing what seem to be sound economic policies on corrupt, incompetent or myopic governments is doomed. Building strong institutions is a necessary prerequisite. In this camp, there is a running side argument about which comes first: the institutions or the educated people who create them. Was the Constitution key to U.S. success, or was it Jefferson, Madison and Hamilton?

Technological advances and the spread of markets likely will boost the overall income of the world significantly over the next 25 to 50 years. "But," Mr. Johnson warns, "at least half the world's population will likely not participate fully" -- unless his crowd finds better ways to spread prosperity along with better health to poor countries.

Count me solidly in the third camp and entirely unimpressed with the first two. As to which comes first, Americans have been leaders in the world attracting the best and brightest from around the world - particularly in developing countries. It's even been a continuing concern for Canada... but like Michael Ignatieff... ex-pats tend to return at some point. Finding the educated and even educated passionate people shouldn't be the problem.

Economics and AIDS

Greg Mankiw links to a NYT article on 13 promising new economists:

So during her time as a Ph.D. student at Harvard, the younger Ms. [Emily] Oster took on AIDS in Africa. Her most provocative finding was that Africans didn’t really behave so differently from people in countries with much lower H.I.V. rates. They did not have many more sexual partners than Americans on average. And, like Americans, Africans had cut back on unsafe sex in response to AIDS — or at least relatively well-off, healthy Africans had.

Poorer Africans, who of course make up the continent’s overwhelming majority, had made fewer changes. They had less of an incentive to practice safe sex, Ms. Oster concluded, because many of them could not expect to reach old age, whether or not they contracted H.I.V. Any attack on AIDS should therefore include an attack on poverty.

Of course, for the New York Times, an "attack on poverty" means some type of government (foreign or domestic) intervention and berating the US for not spending enough on foreign aid... but I digress. Economics is being used in increasingly creative ways. As the NYT editorializes:

[...] economists have been acting a lot like intellectual imperialists in the last decade or so. They have been using their tools — mainly the analysis of enormous piles of data to tease out cause and effect — to examine everything from politics to French wine vintages.

Cuba discovering Free Markets?

It's not a public link, but today the Wall Street Journal is reporting that "Cuban Economists Envision Role For Markets in Post-Castro Era":

Among the steps under discussion: decentralizing control, expanding the power of managers at privately owned agricultural cooperatives, extending private ownership to other sectors, boosting investment in infrastructure and increasing incentives to workers.

None of the plans would shuck communism for capitalism or open the island further to foreign investment -- which economists outside Cuba say are critical for the island to prosper.

[...]

"It's an historic moment," says Julia Sweig, a Cuba specialist at the Council on Foreign Relations in Washington. "The Cuban regime feels confident enough to have voices it once purged be at the center of the economic debate on reform."

Admirers of Cuba however, quickly point to Cuba's incredible healthcare system, that's been just that, incredible. They blame the US for its trade embargo against Cuba for its immense poverty, but as PJ O'Rourke points out in Eat The Rich, though a resource-poor wasteland, Taiwan has thrived. Cut off until recently from China it's done better than ok. Brink Lindsey in Against the Dead Hand argues market reforms usually come about, not as welcome initiatives by government, but in painful surrender that their management has not worked. Indeed, the article goes on to state:

The proposals are prompted by the continuing economic privation in Cuba, where state salaries don't come close to covering living costs.

Award for African Good Governance

The Globe and Mail did a profile on one of Africa's most successful business leaders, the founder of Celtel, Mo Ibrahim. Beyond his already large contribution to development in Africa through affordable cell phone coverage he's launched two initiatives as follows:

Two things: one, establish a $5-million (U.S.) prize awarded annually to promote good governance by encouraging African leaders to relinquish power once their mandates are complete; and, two, set up a $250-million fund to invest in innovative companies in sub-Saharan Africa.

His belief in investment, rather than foreign aid, as a development tool for sub-Saharan Africa is backed by the private equity fund. He has little time for the blame game and complaints that Africa's problems stem from its colonial heritage and from unfair trade practices imposed by the developed world.

"I believe in investment as a way of helping the development of Africa," he said in the interview. "Aid is useful but is not a remedy. What we need to do is create prosperity, to create jobs. The best way to do that is to invest."

To be honest, I'm surprised this is coming from the Globe and Mail though it was buried on A13. After a bit of searching, there's more from the Kenya Times Newspaper:

The prize at the same time intends to encourage African presidents to give way when their time is up. But not retirement to poverty, jail or death. “We want them to have a life after office” says Mr. Mo Ibrahim the Sudanese-born billionaire who founded the prize and who will fund it from his immense wealth made in the mobile phone business.

A somewhat surprising critique comes from Transparency International:

“It doesn’t read Africa’s problems correctly. Those who keep governments accountable are the ordinary people and that accountability needs to be strengthened. That’s where he should put his money. Or in to the parliaments that could hold leaders accountable,” Mr Lorgat opined.

While I certainly can see their point, I'm not sure I agree. Like the Nobel Prize, the point isn't the money. The point is the recognition that comes from it and the additional pressure from constituents and supporters to reach it. The western world seems to only care about Africa when there's a crisis. This shines a spotlight on examples of good governance to strive for, though unfortunately the bar is currently set fairly low.

Ibrahim is a posterchild for the potential success of part two of his plan - private equity. Considering this is a man who built a fortune with a company that has helped transform development and transparency of sub-saharan Africa, in a way similar to the virtuous cycle of microfinance, such a fund, if successful, would accelerate development, in a similar way cell phone technology has transformed life in developing countries while pay for more and potentially greater innovations.

Me and My Blog

For those who don't share my sense of righteous indignation and frustration on any number of development related topics will probably conclude that I'm dry as dust (and really dry at that)... and they'd be right. I do also have a silly side as some friends will attest (yes I do have friends despite what my sister might think). It took over an hour listening to animated slugs croon to "Mr. Lonely" from the soundtrack "Flushed Away (2006)" for an hour before realizing I was going nuts, which is admittedly a short trip. I am however hoping that the reason I like the song has little to do with the words themselves.

As to why I'm blogging... it's an outlet that will hopefully maintain and improve my writing skills. And sure there might just be a bit of vanity involved. It's been a week since I started fiddling around - and am quite proud of myself in being able to change around the template, and adding a few things that make maneuvering a bit easier.

So far, I've been pretty broad in what I've blogged on. I hope to get more focused and do more independent research into my neglected love of finance/investing in stocks rather than just sopping off links from places like Digg and Instapundit. Well, we'll see how far I get.

Heh

A friend saw these clementines at Longo's and thought she (we'll call her "V") should buy a box just for me adding the "is" between "Clem" and "King". I wouldn't ever want to be a king but if the opportunity ever arose, I assured her that I would be a benevolent one. Of course, my brother thought I just looked like the Clem King at the time.

More on the Minimum Wage

From George Wills on why the Minimum Wage should be 0:

Most of the working poor earn more than the minimum wage, and most of the 0.6 percent (479,000 in 2005) of America's wage workers earning the minimum wage are not poor. Only one in five workers earning the federal minimum live in families with household earnings below the poverty line. Sixty percent work part-time and their average household income is well over $40,000. (The average and median household incomes are $63,344 and $46,326 respectively.)

Forty percent of American workers are salaried. Of the 75.6 million paid by the hour, 1.9 million earn the federal minimum or less, and of these, more than half are under 25 and more than a quarter are between 16 and 19. Many are students or other part-time workers. Sixty percent of those earning the federal minimum or less work in restaurants and bars and are earning tips -- often untaxed, perhaps -- in addition to their wages. Two-thirds of those earning the federal minimum today will, a year from now, have been promoted and be earning 10 percent more. Raising the minimum wage predictably makes work more attractive relative to school for some teenagers, and raises the dropout rate. Two scholars report that in states that allow persons to leave school before 18, a 10 percent increase in the state minimum wage caused teenage school enrollment to drop 2 percent.

That government interventions into the markets always seem to have some type of undesirable consequence shouldn't be exactly earth shattering. But in this case, it should be troubling that raising the minimum wage could result in higher high school drop outs thus potentially creating a rather undesirable cycle.

Traffic in China

Getting around has got to be one of the most exhilerating and exciting things to do in China. There isn't quite anything quite like it to make you feel alive - that is, of course, when you're actually going somewhere. Having travelled through east africa including Kampala (relatively tame) and Nairobi (relatively more exciting) I have often found it remarkable that there aren't a lot more traffic accidents let alone fatailities travelling in China.

Here's a picture of a roundabout in Xiamen from the UK's Daily Mail:

I've come to the view that Chinese people aren't naturally bad drivers per se, in fact, they may rank amongst the best in the world given their ability to adapt and not get into accidents, it's just that they don't really follow any rules to speak of.

Popular Science: The Year Ahead 2007

Highlights:

• Stem Cells Grow Up: "If the Kyoto research is replicated in humans, it will be a game-changer for the science. 'Let’s say you could take your skin cells and reprogram the nucleus to create an embryonic-stem-cell line—without an egg,' says the California Institute’s Mary Maxon."
• Fighting Water Woes: "Electricity-hungry desal plants are becoming more economically viable because of advances in water-purifying reverse-osmosis membranes, tens of thousands of which are contained in a large plant: The newest can produce upward of 10,000 gallons a day apiece, up from 5,000 gallons in the late 1990s. Composite materials may soon double a membrane’s life—10 years rather than five—and nanotube-based membranes will shorten the length each water molecule must travel. 'If this happens, plant productivity will go up 20 times,' says Nikolay Voutchkov of Poseidon Resources, the company behind the Carlsbad and Huntington Beach projects."
• Addictions: "This year, we will find out whether an entirely new solution fulfills its early potential: vaccination."
• X-Prize like Competititions: From flying cars, to space elevators - there's quite a bit of money up for grabs - using a far more decentralized form of research and development.
  

UN Peacekeepers Raping Kids

I'm almost embarassed to say I used to be a fan of the UN, but idealism and reality clashed. In his departing speech, Kofi Annan said "UN remains best tool to achieve key goals of international relations." I don't believe this is what he was talking about. Allegations of sexual abuse and UN peacekeepers are not new. Following the recent departure of Kofi Annan, are new allegations which appear to be only part of a more extensive problem under his leadership.

France and Rwanda

In the aftermath of the genocide, France has much to answer for.
Hat Tip: Instapundit

Market Based Education

Like healthcare, Canadians have a natural aversion to private education. The success after all, of a private institution is always dependent in some degree on its scarcity and in turn a messiness of competition. This does not compare favorably with our idealism of what a childhood should be.

Private education conjures an image of privilege to many Canadians who rightly believe in an egalitarian society - not a chummy boy's club. It is a fallacy though to think that this scarcity must be defined by price. Vouchers is the idea that schools should be funded (in part as a supplement, or as a whole) by the government based on where students go - and that students and teachers should be given the ability to choose where they go (versus being defined within set geographic boundaries).

Vouchers had been championed by the recently deceased Milton Friedman and you can read an editorial by him here. Also a recent post on market driven education in India here from Cato.

Optimistic about Oil

Instapundit quotes James Woolsey (formerly of the CIA) in a Wall Street Journal editorial:

Bet on major progress toward independence, spurred by market forces and a portfolio of rapidly developing oil-replacing technologies.

The editorial goes on to note:

Ethanol's appeal rose a few years ago when it became clear that genetically modified biocatalysts could break down the cellulose in biomass and thus enable ethanol's production from a wide range of plant life. This means that, compared with corn, little fossil fuel is needed during biomass cultivation and land use presents much less of a problem. Indeed two years ago the National Energy Policy Commission (NEPC), making reasonable assumptions about improved vehicle efficiency and biomass yields over the next 20 years, estimated that just 7% of U.S. farmland (the amount now in the Soil Bank) could produce enough biomass to provide half the fuel needed by U.S. passenger vehicles, and that production costs for cellulosic ethanol were headed downward toward around 70 cents per gallon. Further, conversion of only a portion of industrial, municipal and animal wastes--using thermal processes now coming into commercial operation--appears to be able to yield an additional several million barrels a day of diesel or, with some processes, methanol.

Granted, this may take 20 years (and possibly more), but in the meantime nuclear power plants are being built we're investigating shale oil and spending billions on oil sands, not to mention the billions going into solar and alternative energy research, it should be clear that there is no need for some of the hysterical headlines we've seen. Though I can't find the link for it now, I remember an article that suggested that by applying technology in oil sands in Canada, we could even double Saudi Arabia's proven reserves.

With long term prices for all commodity prices trending down, this bodes well for users. The possibilities for ethanol alone are breathtaking - over 40% of oil in the US is used for transportation today... not to mention the fact that the 30% efficiency of internal combustion engines has a lot of potential to improve.

Making Predictions & Looking for Trends

As we usher in the new year, I've pretty much always been one to think that the 'best is yet to come'. These are a few of the trends that I'm tracking that I think will change the world:

• Aging Population: By now this ought to be a no-brainer. Baby boomers in Western Europe and the United States are aging. Baby boomers however are living longer, many will work longer and don't want to be seen or feel as old. With their vast purchasing power, they will shape everything from healthcare to entertainment and culture over the next few decades.
  
  Primer(s): Boom Bust & Echo 2000 : Profiting from the Demographic Shift in the New Millennium (Paperback) by David K. Foot, Daniel Stoffman
  

• Dropping Commodity Prices: A somewhat contrarian prediction given the pundits talking about the growth of China and "peak oil" theories abound. Commodities are the closest things we have to efficient markets and in efficient markets, and in efficient markets, prices tend to revert back to the average cost of production. Though it can take a while... illustrating both points is a premature quote from Roger Lowestein in Fortune Magazine at the end of 2004: "developing and pumping a marginal barrel of oil in the U.S. today is $15.30. That is an indication of the theoretical floor, which is a fact to keep in mind when oil reverts to its natural state of surplus. "
  

• The Profitable Poor and Growing Wealth: All segments of the population are getting wealthier - though clearly not at the same pace, this has broad implications for anyone who sells to consumers. While there will inevitably pressures to keep prices down, consumers will demand more and better quality. There is immense opportunity (and risk) for those who get in at the bottom of the curve of countries who begin to implement the proper conditions for growth (more in other posts). It takes less time now to develop than ever given leapfrog technologies their respective falling capital costs (think landlines versus cell phones).
  
  Primer(s): The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits (The Wharton Press Paperback Series) by CK Prahalad
  

• Democratizaton of Luxury Goods, Style and Personal Identity: Luxury hasn't been the strict reserve for just the wealthy for quite some time. As Let Them Eat Cake aspires: "today's luxuries become tomorrow's necessities, as products move 'from the classes to the masses.'" Mass customization has already become a catch phrase. Good design will likely be similar to good programming - modular and simple, improving ease of production.
  
  Primer(s): Trading Up: Why Consumers Want New Luxury Goods... And How Companies Create Them (Revised and Updated) by Michael Silverstein, Neil Fiske, and John Butman
  Let Them Eat Cake: Marketing Luxury to the Masses - As well as the Classes by Pamela Danziger
  

• Dropping Barriers of Entry: Technology continues to be a great equalizer with each new technology exponentially better than the generation before, like compound interest rates, technology is now improving our lives at a continuing lower cost. This is good news for small businesses who can afford now more than ever to start up and more easily challenge better capitalized firms. The internet itself reduces the cost of initial contact and identifying potential leads. One caveat however: marrying yourself to any one particular technology could be suicide given rapidly changing standards and technology.
  

I don't think I've put myself out on a limb on any one of these though I suspect they also betray possibly excessive optimism. You never know when the "dead hand" will rear its ugly head (pardon the botched imagery)...

Clinical Trials for Nanotech Cancer Treatment to begin '07

This is cool. Nanotech offers the promise of great breakthroughs particularly in energy and in this case, healthcare:

By replacing surgery and conventional chemotherapy with noninvasive treatments targeted at cancerous tumors, this nanotech approach could reduce or eliminate side effects by avoiding damage to healthy tissue. It could also make it possible to destroy tumors that are inoperable or won't respond to current treatment. [...]

"With chemotherapy," Ferrari says, "we carpet bomb the patient, hoping to hit the lesions, the little foci of disease. To be able to shine the light only where you want this thing to heat up is a great advantage."

Hat Tip: Digg.com

So that explains Air Canada's attendants...

Yeah - easy target, it could just as easily be United after all, and my fault anyway for trying to consolidate my trips on AC for their aeroplan miles. To be fair though, I've found that many try to make do and only really get cranky towards the end of the flight, what with some sometimes equally unreasonable passenger demands. I saw this commercial on TV the other day and had a good laugh:

The Logic of Minimum Wage

In a recent post, Greg Mankiw, author of the dominant economics textbook I had in university and practically any ECON 101 course, and former Chairman of the President's Council of Economic Advisers, questioned the logic of raising the minimum wage. He observes that a minimum wage increase is, in effect, "a tax on employers who hire unskilled workers."

Not convinced? Let's say you're running a small business, forced to choose between a teen who you had hired for $5 bucks an hour and are now forced to pay $7. You know that if you had paid $7 originally you could have hired someone who is better and likely more productive (that is if you decide you can afford someone at all at $7). With the government forcing you to hire at $7 then, why would you continue with the unskilled teen? What then, happens to the unskilled? Consider the difference between how France and the US have approached the problem. With somewhat different results.

The oddity of the arguments for minimum wage (once you get past the idea that what feels good may not actually be good and the cynicism of what's an obviously populist ploy), seems to be that money magically grows from trees and with the sprinkling of a little pixie dust, by creating a "price floor" no unintended consequences will result.

Markets

I have a fetish for markets. Though I don't like being a tourist, I enjoy the energy of the vendors/traders at local markets. It doesn't matter if it's the far reaches of Balikuddembe (formerly known as "Owino", one of the largest markets in east Africa), the local farmers market, NYC or in this case, off Shantou, China. These pictures were taken at a small market on an island off of Shantou (Guangzhou Province) last August late in the afternoon:

Talking about Trade

Daniel Drezner ended 2006 talking about trade. He starts off quoting Foreign Affairs:

Has the current age of globalization already started to come to a close? Will the process of integration continue, or will it grind to a halt?

The paradoxical answer is neither of these scenarios. The technological revolution that has driven the current wave of globalization will continue. Communication will become still cheaper and easier, allowing corporations to spread their operations -- research and development, design, and manufacturing -- around the planet. Companies will exploit scientific talent in other countries to spark a new wave of technological innovation.

At the same time, certain barriers will start to rise. The institutional foundations of globalization -- such as the rules that oblige governments to keep their markets open and the domestic and international politics that allow policymakers to liberalize their economies -- have weakened considerably in the past few years. Politicians and their constituents in the United States, Europe, and China have grown increasingly nervous about letting capital, goods, and people move freely across their borders. And energy -- the most globalized of products -- has once more become the object of intense resource nationalism, as governments in resource-rich countries assert greater control and ownership over those assets.

(Read the whole thing). Hat Tip: Instapundit.

The Rise of the Blog

A recent Wall Street Journal (WSJ) editorial by Joseph Rago lamented the growth of blogs. Having read blogs for quite some time, and you could even say a blog child of Instapundit, I'm not sure that Rago "gets it." To him, the writers of blogs are partisans:

Because political blogs are predictable, they are excruciatingly boring. More acutely, they promote intellectual disingenuousness, with every constituency hostage to its assumptions and the party line.

Though he might well be talking about me, an editor might have told him that to paint in such broad strokes is to ass-u-me. I'm a huge fan and online subscriber of the WSJ given the credibility they've built over time, but blogs themselves have their uses and if you seek it, you can just as easily find quality as you can crap. The irony of course, is that the WSJ itself publishes thoughts from various blogs from time to time - and even the next day, it printed an article from IraqtheModel.

I suspect the growth of blogs has been stunning especially to the media establishment, particularly how well blogs have capitalized from the latter's failure operating at a speed they can't hope to match. You can track the growth of blogs and various statistics at the Blogger's Blog. For consumers and readers at least, competition has been a great thing and in the end blogs only hold their readership because they are saying something and reporting on issues people care about.

Happy New Year!

Not that I've told anyone about this blog yet, but for what it's worth, no more resolutions because I break them anyway.... but if I were going to make a New Year's resolution it would be to work out more. I've been very good at convincing myself that I'm too tired, too busy, etc, but having gone for the first time on Saturday in months, it both hurts so much but also feels so dang good. I need to find a reliable workout partner...