Modern Day Homesteading and Economic Development

I came across a blog about a modern day homesteader, she and her family live off of $6000 a year. This translates to about $5.50 a day per person. In East Asia and the Pacific 50% of people live on less than $2 a day, 85% in Southeast Asia 23% in Northern Africa, 75% in Subsaran Africa, 20% in Latin America (more information). It is worth noting this $2 a day is adjusted for differences in prices in each of these countries.

I’m not criticizing the modern homesteader, it is just worth realizing that a large part of the world lives within these economic means.


Next week I will do an analysis of retirement savings for people in their mid 20s, based of of a recent NBER paper.

Who’s the boss? Cable TV, Gender in India

Continuing on the theme of economics and gender issues. Emily Oster, an economist at Univ Chicago, has a recent paper showing that when cable TV is introduced in rural India, that women’s lives improve. Particularly they make more decisions in the household, there are less instances of domestic violence, and the households show less gender bias towards their children. The findings suggest that by watching cable TV, these women see the possibility of gender equality. (Link to brief description of her work with links.)

Perhaps a policy solution in the U.S. and India is to show more reruns of the 1980s sitcom Who’s the Boss, where macho Italian Tony Danza does the housework for advertise executive Angela.

Or maybe they are getting the Life Time Original Movies Channel (so hilariously described by my friend Sarah on her blog).

Who is Happy?

A few interesting results from a paper by Betsey Stevenson and Justin Wolfers Economists at Univ. of Pennsylvania (quotes taken from this NY Times Article)

“In the early 1970s, women reported being slightly happier than men. Today, the two have switched places.”

“Women are not actually working more than they were 30 or 40 years ago. They are instead doing different kinds of work. They’re spending more time on paid work and less on cleaning and cooking.”

The article goes on to say that basically men are doing less stuff they dislike and replacing it with relaxing.

“Inside of families, men still haven’t figured out how to shoulder their fair share of the household burden. Instead, we’re spending more time on the phone and in front of the television.”

Gender Issues

An article the Sunday New York Times describes how women are now more likely to pay for dates, in part because employed women in urban areas are now starting to earn more money than men. Additionally, the percentage of men in the labor force has been steadily declining as the percentage of women increases. This extremely readable report from the Boston Federal Reserve on gender issues in the U.S. labor force. Some trends remain there are still few stay at home dads (less than .5% of married Dads with children under 18) and according to the Fed. Report married working women still do 6 more hours of house work a week than their working husbands.

Perhaps my favorite take on the subject from an economist's point of view are my old undergraduate professors Mark Montgomery and Irene Powell who write about married economist. Here is their conversation about who does the dishes (an excerpt)

You [Spouse 1]: "I've done the dishes every night this week - it's your turn.
Spouse [2]: "What a shame to waste all the human capital you've built up."

Perhaps that is why I do all the cooking in the house as it would be a shame to lose all that human capital, I earned from the cooking lessons I received when I was 12.

$100 laptops

The $100 laptop are ready for sale (bbc link). These laptops were designed especially for children in developing countries. The design includes the low price (although it’s now about $200) , water proof case and the ability to use solar or foot power to charge the battery. While the cheap laptop seems like a marvel of technology, I’m still skeptical that the money is best spent on laptop. As a Tunisian government official said:


"If you live in a mud hut what use is that computer for your children who don't have a doctor within walking distance?" (article)


I'm still looking for good economic evaluations of the impact of giving out these laptops to students in the developing world.

Welcome Towson

Last night at new faculty dinner each department chair introduced their new faculty. During my introduction my chair was kind enough to mention this blog. Perhaps you were at this dinner and this your first visit to the blog. Thank you for coming. Towson already has a couple of well known blogs. First our University President Robert Caret has one (linked here) and a recent Towson graduate turned his blog into a job at the New York Times.

The goal of my blog is to discuss what I find interesting about economics or life and bring those stories to you each weekday. On my drive into Towson today, I started thinking about how the recent history of the school mirrors a trend in education. Around the time I was born Towson had an enrollment of about 10,000 students in the past 25 years or so it has doubled in size and plans to increase to 25,000. Towson has taken on a lot of the growth in the number of students attending college in Maryland, which has experienced a similar increase. Why are those students going to school in larger numbers, one reason is that average income for college graduates is now 85% higher than high school graduates, back in the early 1980s it was around 55%.

Sirens and Seatbelts

The other day on Marginal Revolution Tyler Cowen asked how many lives should be saved in order for a seat belt law to be enacted. One point of view is if the only person hurt by the lack of seatbelt is the driver without a seatbelt, then we should let them make their own decision. However, not all car decisions only impact the driver. It reminded me of this recent story about Mazadas surrounding a Hummer on a Chinese Highway, imagine what their boxing in could do to the Hummer driver. Even more so I liked this description of the Mazadas

“Many had their Mazda 6s tricked out with souped-up engines, spoilers, and even police sirens. Modifying cars is technically illegal in China, but the laws are not strictly enforced.”

I will come out on record as saying I’m for laws that outlaw people putting police sirens on their car.

YARRRRRRRRRRRRRRRRRRRRRRRRRRRRRR

Ahoy! Today, a Pirate Capt. Black Sideburns, has commandeered this here blog for this Talk Like a Pirate Day. Me thinks that this blog needs more pirate economics. A rouge scurvy ravaged economist has shown that global warming has led to the number of pirates falling like sails in the South China Sea (link). Or you may look to the stern to see an economic take on the pirate code. Although the housing market may yet keelhaul all you land lubbers, me lookout man says invest your booty in pieces of eight.



Godspeed,
Capt. Black Sideburns

Buy Low Sell High

I really like the website ask a metafilter (ask.metafilter.com). In the website people post random questions and those with knowledge (or perhaps free time) post answers. One question asks, If one can purchase a house with student loan money” With the recent sub-prime crises my guess is it is going to get harder to get someone to guarantee you a loan at a reasonable interest rate without any income. The writer also supposes they can purchase the house when the market “really flops”. It is likely a better strategy to buy at a bargain, than hope that buying during an upswing of the market because trends suggest the prices will continue to rise. But you cannot predict where the market will go (if you could you could make a lot of money though) The question asker would also rent out a room in the house to offset the mortgage costs. As the answers given suggest being a landlord is not exactly a piece of cake. So overall I do no think one should purchase a house where the price needs to rise over a five year period or they could be really stuck (plus think of all of the people who leave school after a year or two). But, maybe I’m just a little more averse to risk.

The Price of Pasta

I really loved this article in the Sunday Washington Post about how rising wheat prices are causing an increase in the price of pasta and cookies, although with my love of starch I do not like the trend. Basically we can see the following happening. Corn prices are higher due to demand for ethanol, which causes some to substitute wheat for corn, causing higher cost of wheat, which in turn raises the cost of inputs to bakers and pasta makers, so now the price of pasta is rising. Hopefully my ECON 201 students will know, which way to shift the curves.

I need a phone call

Today one of my students sent me an article on a development project in Africa to provide cellular phone service to 79 villages in 10 African countries. The article begins by discussing how cell phones will help education and health care. I’m skeptical about the returns for cell phone service in terms of education. Where cell phones seem to be the most important are for local entrepreneurs. The article discusses taxi drivers and laborers using the phone to find jobs. However, I think cell phones are even more important for local farmers who can use them to check sale prices in various markets and so they can call around to find the best price for fertilizer. This is because without a phone in rural Africa it is hard to tell when you are getting a good price. On Tuesday in my Development Economics class we will discuss the big push model. In that model entrepreneurs will not start new businesses until enough other people start them. For example, if there is a taxi driver and there are only poor farmers without enough money to pay for a taxi, the taxi business will not be profitable. The taxi drive needs there to be other business men/women to drive around. As Jeffery Sachs, the lead economist on the project and friend of Bono, suggests you need a holistic approach.

Thanks Evelin for the article.

Demand Taste

Sometimes in economics we assume all people are alike in terms of their tastes and preferences. This is helpful when doing theoretical work or showing basic theorems. I often wonder what the world would be like if everyone had my same preferences. My guess is each downtown would have the following businesses: a micro-brewery, a coffee shop, a deli, another coffee shop, an Indian restaurant, a Thai restaurant, another micro-brewery, yet another coffee shop, a brew supply store, and some big box store with everything else. Unfortunately (perhaps fortunately) tastes are different from person to person so there are hair salons, art supply stores, and antique stores. I thought about all of this when I read a recent blog post on Man Bites Blog, which I found through Marginal Revolution’s comments section. He asks pop economist bloggers: What motivates someone to answer a restaurant survey where there is a possibility to win a cash prize if you participate? The post lays out several factors. I think one more to think about is I might fill out a survey if I thought I could influence a business to cater to my taste. I actually did fill out a radio listening survey to hopefully influence radio stations to play better music. Perhaps if I fill out enough surveys my dream downtown can become a reality.

The Big Push to Clean Our Dirty Undies

Marginal Revolution airs the dirty laundry of the Department of Energy. New washing machines are not cleaning our clothes properly due to modification made to meet new federal standards that require a 21% energy reduction (according to Consumer Reports). At first I thought perhaps this is the government screwing up a market and it may actually increase energy use (if we have to rewash our clothes). I may not be so sure now, after reading this I began preparing a lecture on the Big Push model. In that model there are high costs to innovation to create new products. By requiring this new standard there is a larger payoff to inventing a cheap and energy efficient washer. So this policy might create a new and better washer where the old one would not. Honestly I’m not sure if this is good government or bad government policy, but it is important to acknowledge both possibilities. We may see similar issues arise if miles per gallons standards are implemented for cars.

Of course if you really strong believe it is not good policy you could always send the Under(wear) Secretary of Energy your undies.

Sometimes the market works, sometimes it does not

In Greg Mankiw’s intro text books he provides seven principles of economics, one is that sometimes governments can improve markets. Sometimes government can screw up markets too. This recent New York times piece discusses how cheap basic pain medication (morphine) can not be purchased in developing countries due to international laws aimed to prevent the spread of heroin. Sometimes markets fail, a recent Atlantic monthly article discusses Bill Clinton’s new foundation that tries to create markets for AIDS drugs and bio-friendly products by agreeing to purchase large quantities. Often Clinton works with developing countries to purchase medicine to distribute it to the poor. In which case I think governments are improving on markets.

The Atlantic article is subscription based, but a link to help you find it is here.

Importing Poverty

As some of my friends have pointed out offline part of payday loan profits come from check cashing particularly for illegal immigrants who cannot open a bank account. In related news, recent figures suggest that most of the growth in the poverty rate in U.S. has been among Hispanics. As Robert Samuelson in an Op-ed in the Washington Post (linked here) stated the below figures:

“From 1990 to 2006, the number of poor Hispanics increased 3.2 million, from 6 million to 9.2 million. Meanwhile, the number of non-Hispanic whites in poverty fell from 16.6 million (poverty rate: 8.8 percent) in 1990 to 16 million (8.2 percent) in 2006. Among blacks, there was a decline from 9.8 million in 1990 (poverty rate: 31.9 percent) to 9 million (24.3 percent) in 2006. “

We can debate our immigration policy, but the figures shown by Samuelson suggest that the recent trend in poverty are in part caused by immigration.

Another payday loan post.

Non-profits have entered into the payday loan business. Two weeks ago the New York Times profiled one such business, unfortunately the Times is a non-non-profits, so the article is no longer free. Based on the article description and some other blogs it looks like a non-profit called Goodmoney charges a mere $10 per $100 borrowed per two weeks. Only a 252% interest rate!

As this article from last year in USA Today points out about $5 of the $10 charged goes to defaults. Perhaps the answer can be found in the beginning of the article where credit unions work with customers to give loans at reasonable interest rates 12% per year, but make sure that customers learn to better manage money.

Two finals thoughts. First, I would like to point to bloggingawaydebt. It is one of many personal finance blogs I have been reading over the summer. They do a great job. Second, in the last post my wife commented about how can we trust the data provided by the report I linked in the last post. There are a lot of bogus statistics out there, but their data seems to be provided by the State of Ohio and other reputable sources. So I feel reasonably confident there data is correct (and my wife is reassured also). Interestingly the USA Today article shows last year there were as many pay day loan places as Starbucks and McDonalds.

Pay Day

Surprising statistic of the day. There are more payday loan franchises in Ohio, my home state, than McDonalds, Wendy’s, Burger King combined. According to this report on pay day loans in Ohio these places charge on average $15 per $100 loan for a two week period. For those of you without a calculator that is an average interest rate of around 400% a year! I’m not an expert on payday loan places, but like the fast food industry it seems that there are several different companies. I assume if one wanted to start their own payday loan place they could if they had enough money, or could borrow enough. In this type of situation economists would predict that if profits could be made at a lower interest rate someone would come in and charge $10 per $100 per two-week period. So I think what this interest rate suggests is there is an extremely high level of default for payday loans.

Clearly the tougher question is how would/could regulation improve the payday loan industry and consumers.

In other news I got my first pay check from Towson today. Thank you Towson!

Lets all go to the movies

My wife and I like to have dinner at home, we also like to go to the movies, we also like to go to bed before midnight. So the ideal movie time for us is between 8 and 9 pm. So we walked over to the local multi-screen theater and not a single movie begins between those hours. In fact, I do not think a movie began after 7:30 and before 9. Movies typically last about 1.5 hours add in previews and clean up time each showing needs about 2 hours. Probably the most likely reason movies start around 7 and a bit after 9, is that more people want to go movies at those times total. The other option for the movie theater is to show two shows one at 8 and one at 10 pm. I guess not enough people want to go at 10 pm. Another possibility is that by having movies around 7, perhaps they can convince people to buy more snacks. Now why is movie popcorn so expensive?

I suggest you see this classic slate article, about why wireless internet is free some places, which also discusses the price of movie popcorn.

More Disaster Relief

Here is the link to the final article in the three part series by my buddy Dan Rothschild on Katrina recovery.

As I said it is even harder in the developing world. Rebuilding after the Peruvian earthquake that struck a few weeks ago is still going slow. I thought this article really demonstrated the difficulties in distributing aid. I also liked this quote from the article from the President of Peru:

"An earthquake is like a war situation arising from a foreign invasion," García said. "In situations like this we need a single chain of command, with less democracy and a more vertical command structure."

This suggestion reminds me of a recent book (that I'm meaning to read) Paul Collier's the Bottom Billion. Collier suggests military action as a way to make sure that funds get properly distributed and economies function properly in the most war torn states.

Although the results in a sample of one in Iraq are not great so far.