Economics Tattoos

I saw a group of pictures of nerdy tattoos yesterday, but I can't find the link. There were pictures of maybe 50 tattooed people with things like DNA, Darwin's drawings, physics formulas, and chemical bonds as well as a few famous lines from great books. There were no tattoos related to economics. Then I did a google search on economics tattoos no luck.

A search of Supply and Demand tattoo shows that Peter Leeson author of The Invisible Hook: The Hidden Economics of Pirates has the curves tattooed on his bicep (From Economists Do it With Models)

I'm not really into tattoos but if I had to get an economics tattoo, I think I would go with a set of indifference curves with a budget constraint.

Lucky for my family my indifference curves on the two axis of tattoos and nontattoo goods intersect at no economics tattoos.

Monopoly = 1 firm and Confusopoly = ?

Over at Economists Do it With Models (ECDIWM) a recent post attempts to explain why airline prices move around so much and why there are so many little fees (checked baggage, sodas, pillows ect.).


I need to buy airline tickets this week. We'll be traveling with my 6 month old daughter so we'll be checking luggage. I don't have time to check out each companies' luggage policy.

I agree with ECDIWM that part of the little fees is to separate types of customers and get increased profits. If I don't check bags and don't drink soda the ticket may even be cheaper for me. But I'm wondering at what point it becomes too hard to compare airlines if they have prices for several different parts of the trip.

This makes me think of a term Scott Adams the writer of the comic strip Dilbert coined a few years ago.

Confusopoly --"a group of companies with similar products who intentionally confuse customers instead of competing on price"

Luckily the Internet is on our side. Will it be long before travel search sites like kayak allow you to compute costs based on the number of bags you would check and sodas you would drink.

Convincing the Most Important People Aid Works

Over at Aidwatch William Easterly & Laura Freschi have a great post on a puzzle of economic development. The world's poor (those living on $1-$2 a day) might actually have enough money to pay for things that would aid their economic success. In short research shows the poor spend 10% of their incomes on what we might think of as luxury goods alcohol, tobacco, soft drinks, and celebrations (e.g. weddings, funerals, holidays).

I have two thoughts:

1.) Easterly and Freschi are right people rich and poor make questionable decisions I like their line about a white American middle class dad "driving while talking on his cell-phone after having a few beers, risking the lives of his children in the car." So to get people to spend more money on school or not drink and pay attention on the road you have to convince them it’s the right thing to do.

2.) Relating to point #1 it is really hard to convince those living on $1-$2 that the strategies that development agencies think work will actually help. I like to think of the example of agricultural production. Several studies have shown that poor farmers will not use new crops or new techniques until they see that it works for others like them. With crops you can show that fertilizer increases yields or that farm profits increase with growing pineapples in a year or two. With bed nets and school two items mentioned in the post it is really hard to convince people they work, since the benefits are hard to observe.

The Economics of Daycare and Douglas North

Below that’s a picture of my daughter Sylvia and me reading a book about farming. Taking care of Sylvia has taken precedence over taking care of the blog for the last six months. Today, however is Sylvia’s first day at daycare. So in her honor here is a post on the economics of daycare.




One thing I have been thinking about lately is how pre-school and daycare might be part of a national development strategy. I’ve been participating in a couple of seminars at the InterAmerican Development Bank on early childhood development. In the US there has been a growing body of evidence that early interventions before kindergarten have a huge payoff for the individual child (a previous post). At the seminar one participant mentioned that the payoff to daycare often isn’t in terms of test scores in math or reading, but that it increases children’s ability to socialize when they get older.

Douglas North, a Nobel Prize winning economist, theorized that much of economic development is based on the institutions and social norms that a society forms. These social norms will certainly play a role in what is taught in daycare. I wonder if it might work the other way around, if daycare increases in a country could it improve how people get along and trust each other thirty years later. It’s a hard empirical question to answer, but if as North points out trust is central to economic development and early childhood development formed in daycares shapes the ability to trust then it might follow that daycares are a driving force of a country's economic development.

Kiva Update, Kiva $s are Fungible

Thank you to those who votes on the Kiva proposals! I really like the project and hope my students do to. Congratulations to the winners!

An extremely timely blogpost was made a couple of weeks ago by David Roodman about Kiva, which I was just e-mailed today. In the post Roodman outlines a lack of clarity in how Kiva presents the loans you can fund. In short, nearly all Kiva loans are prefunded. That is the person you want to give money to may have already received it from a microfinance organization. Roodman carefully discusses the implications for this highlighting the problem of a lack of transparency.

The founder of Kiva,Matt Flanery, responds to the blog post here (here).

At this point it might be important to remember an important part of microcredit and money in general, that it is fungible. If we loan a woman in Bangladesh $100 to buy cloth, but she would have purchased the cloth even without the loan but instead uses the $100 to send her children to school. Then the loan was in fact for schooling, even though she said it was for cloth. If Kiva shows a proposal that says they will loan the money to a woman in Bangladesh, but instead have already loaned her that money and use that money to loan to a store owner in Bolivia, which they later post. The money is fungible.

I think I'm OK with what Kiva does, just like Roodman. I do like that Kiva's founder stresses the importance of transparency in his blog post. I applaud Roodman's for his in depth discussion of Kiva.

Thanks to Roodman if I decide to continue with this project every semester we will know how Kiva actually works.

Kiva Contest II

Dear Blog Readers,

For my Development Economics class I'm holding a contest please help me vote for the best proposal. I had students write a request to fund a micro loan. The micro loan was requested through a website called Kiva. On the website potential borrowers request funds for a loan and people like you and me can provide a loan directly to borrowers in developing countries. To engage my students a little more I chose the top three proposals in the class. The proposal receiving the most votes will receive $150 to put toward the loan of their choice, 2nd place $50, and 3rd place $25.

I would like it if my blog readers, read their proposals and chose their favorite. To vote make a selection using the poll to the right of this post. If you only have time to read a few pick a couple of enteries at random and select one you like.

Fortunately, Kiva is becoming very popular and many of these loans have been funded. In that case I will allow the students to choose a new loan to fund. Thank you for your help, and I hope you enjoy my students' proposals.

Thanks,
Seth Gitter

Contest Proposals

Please Vote on Your Favorite Kiva Proposal

Proposal I (link to loan)

I propose to lend money to a woman by the name of Akouvi Victoire Adanlekponsi from Lomé, Togo, who is asking for a loan of $675 for her business. She is married to her carpenter husband and has two school-aged children. Akouvi runs her own business selling cooking oil, which she started in 1991, in order to help out with family finances and to support her children’s education. Akouvi’s country, Togo, has a GDP per capita figure of $900, according to the CIA World Factbook, making it the 14th poorest country in the world. Because the country is so poor, its citizens might not have access to quality financial institutions, and this is where microfinance institutions play a role.
As Akouvi has sustained her business for almost two decades, the business is certainly viable. According to her Kiva profile, she has built up a loyal clientele over the years and now even has commercial clients. The reason she needs the loan is because her business is growing. In response to growing demands for her oil, Akouvi will be using the money to buy additional oil drums to meet her “urgent need” to increase her stock. Because Akouvi is a female, she is a good candidate for the loan, as women usually manage household budgets and tend to be more responsible. Thus, she will probably be more likely to repay her loans on time. And given the state of poverty in Togo, the loan will not only go toward Akouvi’s business, but if her family hits a rough patch financially, it may also help Akouvi keep up with household finances and continue to send her children to school.


Proposal II (link to loan)

I have chosen Edward to receive a loan to help better the life of his family and himself. He lives in a town called Dormaa in Ghana, and he is an herbalist. I have chosen him over other people because as an herbalist he supplies medicines to drug stores and also goes village to village to sell his medicines. I believe he is more important than most of the others on the kiva website because there are many farmers and general store owners but not many people who can improve the health of others. Edward lives in Ghana which is a poor country with a GDP per capita of $ 1,500, but I chose Edward because Ghana is growing at a high rate and this loan will help their growing economy. Currently Ghana’s economy is growing at a 7.3% rate, which is high. Their GDP per capita has gone from $ 1,300 to $ 1,400 and is now $ 1,500 in the last three years. For a country with such a small GDP per capita this is very promising growth which is why I feel Edward should get the loan he needs to help himself his family and his country. Also Edward makes medicines for people which are a much needed business in a country that is as poor as Ghana. With the right supplies and funds Edward is sure to succeed and improve the health of many people. He has been an herbalist for over twenty years; he already has a client base of drug stores and villagers. So with this loan Edward will help improve the lives of many people including himself.


Proposal III (link to loan)

After reading the loan description for Shapei Asilbek, I believe she is deserving of a loan through the Kiva.org microfinance program. Asilbek, a 33-year-old woman has owned and operated a pharmacy since 2005 with the aid of her husband. She is the mother of two, and lives with her two sons, her husband, and her mother in a traditional ger. Both of her sons attend kindergarten already. Located in Mongolia, a country with a GDP per capita of only $3,200, the need for pharmaceutical drugs is fairly high. She has placed her shop in a high traffic area next to the local market in the province of Bayan-Ulgii. Asilbek is looking for a total loan of $1,725 in order to purchase more medicine for her pharmacy. In the years she has operated her pharmacy, she has gained a lot of experience in the field of business, and has a very good reputation among her peers, many of which continue to come back to her when they are in need of medical assistance. Not only does she sell the medicine, but also she is a doctor and frequently sees her customers in her shop. A link to her lending page is as follows: