Friday, January 30, 2009

Collier and Haiti, Power UP!

I heard Paul Collier speak today about a report he wrote on Haiti for the Institute of Peace. Collier is well known for his book the Bottom Billion, which discusses four traps that cause severe underdevelopment. As he points out of the four traps Haiti does not fall in 3 (land locked, bad neighbors, or natural resources). He even think that governance has been OK there, with bad governance being the fourth trap.

The main solution he presents was to increase garment production. Haiti gained extremely favorable access to US markets for the next 9 year for garment exports, but still there has been little increase in the garment industry there. He blames the lack of infrastructure, particularly electricity which costs nearly twice what it does in China as the lack of a quality port.

I recommend Collier’s book the Bottom Billion, and his new book War, Guns, and Democracy comes out Tuesday. I’ll try to review and let you know how the two compare.
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Thursday, January 29, 2009

Giving People Money is Popular, Political Reaction to Conditional Cash Transfers

Conditional Cash Transfer, which give money to poor families in Latin American if their children go to school and the mother attends health seminars, are popular with the development community as many studies have shown their effectiveness at increasing school enrollment and nuitrition. But, they are also popular with politicians, President Lula has increased/maintained
his popularity by expanding the Brazalian program.

Chris Blattman points to a new paper, that showed in Uruguay that giving families a conditional cash transfer raised the popularity of the in power political party by over 20% compared to groups that did not receive them. So are conditional cash transfer just political pandering?

Where democracy is intact, politician still must run these programs effectively as evident by a recent paper (de Janvry, Finan, & Sadoulet) that showed for Bolsa Famalia the Brazilian transfer program, that effectiveness at decreasing drop out rates was closely linked to mayors facing reelections.

So maybe the result is that the programs increase political popularity if they are run well, that's a result I can live with

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Wednesday, January 28, 2009

Small Farms, Supply and Demand

“To think that someone’s going to make a living on five acres is ridiculous,” “That’s not a farm.”

A local official reaction to David Knaus a local Portland farmer trying to farm a scant five acres outside of Portland, reported in this article. As the article notes David and other farmers faces four problems: expensive land, limited water access, difficult learning curve, and hard labor.

In Madison, I purchased a lot of food grown locally and had produce delivered during the summer from a local farm, and worked a couple of weeks over a summer on the farm. So I'm sympathetic to local farming.

I wonder if the best thing Knaus could do to help himself make his farm more viable is to raise his prices? More from the article:

For those who can grow crops as well as Knaus, there’s no shortage of buyers. “Demand for this type of produce is far outstripping supply,” Knaus

I feel the need to provide a teachable moment about supply and demand. I don’t mean to be snarky here, but in economic terms when demand is greater than supply there is a shortage, in this case sellers should raise prices. If on the other hand if Knaus raised his prices and then he could not find buyers, because they bought from somewhere else (or purchased non-organic food) then it is likely that supply and demand are equal.

h/t to Michael Andersen, the reporter for this story who is also a Grinnellian
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Tuesday, January 27, 2009

There is No Such Thing as Free Parking

There are no longer any free parking spots left on Towson's campus.

From an article in the Towerlight, Towson’s student newspaper. Over break it appears the county has installed parking meters for spaces on the only street with parking that borders the main campus. In the past this street has had free parking and was always filled with cars. Now I’ve notice the spots are around 50-75% full depending on the time of day.

So is free parking good from an economic stand point? Some questions to ask.

1. Are the people who park there now with a meter, the ones that would have parked there before when it was free. If that is the case, then the meters make things worse off for parkers (since some people pay instead of not paying and some people don’t pay, but no longer get free parking).

2. Are others, new parkers, using the spots that would not have parked there previously?
a. Do these people have a higher willingness to pay for parking?
b. Should the new parkers' happiness be given a higher priority than those in free parking?

3.Finally, are there unintended consequences, will this hurt demand for University garage parking passes? For faculty willing to move their car or students only on campus a few hours twice a week, metered parking might be cheaper than a parking pass in the campus garage.

Not a question, but economists know (good article here) there is no such thing as free parking, since instead of "free" parking spaces we could have an extra lane of traffic or a flower bed so there is an opportunity cost of having a parking space.
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Monday, January 26, 2009

Opportunity Cost, Does it Pay To Make Your Own Beer

Tomorrow is the first day of class for me (thank you January term), on the first day in intro to economics we usually teach the concept of opportunity cost. The idea is that cost of something is not only what you pay for it, but also what you could have had instead. If I go to a lunch with my colleague, I give up eating lunch while reading blogs.

Let’s take for example making your own beer. In a great post about a beer brewing economist, from Patrik Emerson at the Oregon Economics Blog, he points out that buying the ingredients to make your own beer cost about as much as beer from the liquor store.

For me my ingredients are usually slightly cheaper, and beer seems to be closer to $8 a six pack in the store (with tax). So I guess I’m saving about $5-10, for making my own beer. But wait, I have to spend all that time making it (probably about 5 hours of labor), when I could have been working additional hours. Luckily, I get paid more than $5-10 an hour, so traditionally economists would say, l’m losing money by making my own beer. Since there is the opportunity cost of my time in my beer production (I could have instead made more money giving extra lectures during the January term).

Now here’s another thought. For me beer making is leisure. Instead I could have gone to a couple of movies, purchased and read a book, or gone golfing. So by doing a leisure activity that produces benefits (ignoring opportunity costs), I’m actually coming out ahead.

If that does not quite make sense, do as the homebrewers do and “Relax have a home brew”
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Tuesday, January 13, 2009

How to make a basic model of household decisions

This past weekend I went to New York City for my five year anniversary trip, had a great time! When I got back I was catching up on my reading of Grinnell’s intra-blog system (plans), which was having a fierce discussion of the tradeoffs of being a stay at home parent.
There is a lot of economic discussion of the decision, I still think of the decision in the context of a model I learned in graduate school.

The model, suppose we have a typical household with a male and female who split their time working outside the home to earn money or can do housework. Money can be used to buy things like food, clothes, cars, ect., while housework can produce output for the house (meals, cleaning, child rearing) too, although it may need some of the good purchased with money (you can make dinner with the food you bought). Money can also be used to replace housework, you can go out to eat, get someone else to clean your house or watch your kids.

Really, the goal of any household is to do outside work, household work, and leisure in the amounts that produce the best outcome for the household. I'm of the opinion that this is different for every family, so what ever you want to do go for it.

So what complicates the decision? Men and women sometimes have different preferences, one person might want a cleaner house or have a preference for home cooked meals. Men and women sometimes have different earning abilities, which may influence who works inside and outside of the home. Finally, some have argued that biological difference particularly for breast feeding may make it easier for the woman to specialize in housework if it includes child rearing.
The model does fail to take into account societies beliefs (although, it could). If men or women gain/lose status for being stay at home, then this could also influence decisions. All the above can be adjusted in a more complex model.

I feel the standard model really fails when I ask myself the question would I still work if I had 10 million dollars in the bank, and I think I would quit my job. So happiness may in part be derived from work for me, maybe not for you.

Luckily, my wife and I agree generally on the balance of work and producing goods at home.

Now who’s turn is it to clean the bathroom?
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Wednesday, January 7, 2009

So you want to be a program evaluator? Response from an Ag Economist

Chris Blattman asks today for advice for those who want to be an impact evaluator for international development projects. Here are a five thoughts. For those of you who don’t me I have an Agricultural Economics PhD from Wisconsin and have done a couple program evaluation related consultancies, in addition to several program evaluation papers on a Nicaraguan conditional cash transfer. I now teach at Towson University (but I’m looking for side program evaluation projects)

1. The key point to Chris’s advice is do you want to be a professional or a researcher. The latter should go to MPP (Master in Public Policy) the former should get a PhD. If you aren’t sure, get a master degree, if you like it a lot you can continue on to a PhD.

2. Beware of the bias of the advice givers. PhD economists will tell you to get a PhD in economics, in your schooling most of the non-students you meet will be your professors who have PhDs seek out alumni or network to meet professionals with only masters degrees. Working a year or two after school or doing internships in your undergrad will help.

3. Consider Agricultural or Applied Economics programs for your PhD or Masters. (With #2 in mind) Agricultural and Applied economics degrees both PhD and masters are common at the World Bank, IADB, MCC, ect. A lot of great development work goes on at Ag Econ departments at UC Berkley, UC Davis, Minnesota, Michigan State, Maryland, and of course Wisconsin. Some of these programs will fund masters students. You’ll get plenty of training in econometrics there, but with a more applied focus than most Econ programs.

4. In terms of tools, once you have a background in econometrics you can pick up other stuff when you need it. Learn basic program evaluation well and work on a project. You’ll learn data cleaning, questionnaire problems, ect. Try to learn some fancier techniques like Propensity Score Matching and Instrumental variables.

5. Also consider studying a language. Doing work in Latin America is easier if you can read Spanish surveys. I have known people with Arabic skills have been in high demand, plus you can find scholarships to pay for you to get your masters or PhD and learn a language.
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