Category: Economic Growth

UNESCO Condemns Africans to Live in a Poorer Past: More on Why Africa is Poor

DjenneMaliBrickBuildings2011-01-12.jpg “As a World Heritage site, Djenné, Mali, must preserve its mud-brick buildings, from the Great Mosque, in the background, to individual homes.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 4) DJENNÉ , Mali — Abba Maiga stood in his dirt courtyard, smoking and seething over the fact that his 150-year-old mud-brick house is so culturally precious he is not allowed to update it — no tile floors, no screen doors, no shower.

“Who wants to live in a house with a mud floor?” groused Mr. Maiga, a retired riverboat captain.
With its cone-shaped crenellations and palm wood drainage spouts, the grand facade seems outside time and helps illustrate why this ancient city in eastern Mali is an official World Heritage site.
But the guidelines established by Unesco, the cultural arm of the United Nations, which compiles the heritage list, demand that any reconstruction not substantially alter the original.
“When a town is put on the heritage list, it means nothing should change,” Mr. Maiga said. “But we want development, more space, new appliances — things that are much more modern. We are angry about all that.”
. . .
Mahamame Bamoye Traoré, the leader of the powerful mason’s guild, surveyed the cramped rooms of the retired river boat captain’s house, naming all the things he would change if the World Heritage rules were more flexible.
“If you want to help someone, you have to help him in a way that he wants; to force him to live in a certain way is not right,” he said, before lying on the mud floor of a windowless room that measured about 6 feet by 3 feet.
“This is not a room,” he said. “It might as well be a grave.”

For the full story, see:
NEIL MacFARQUHAR. “Ancient City in Mali Rankled by Rules for Life in Cultural Spotlight.” The New York Times, First Section (Sun., January 9, 2011): 4.
(Note: ellipsis added.)
(Note: the online version of the article is dated January 8, 2011 and had the title “Mali City Rankled by Rules for Life in Spotlight.”)

DjenneMaliResidents2011-01-12.jpg “Many residents of Djenné say they long for more modern homes, but Unesco preservation guidelines limit alterations to original structures.” Source of caption and photo: online version of the NYT article quoted and cited above.

Higher Cancer Rates Due More to Longer Life Spans than to Modern Life Styles

PrehistoricSkullCancer2011-01-12.jpg“DIAGNOSIS. Evidence of tumors in the skull of a male skeleton exhumed from an early medieval cemetery in Slovakia. Often thought of as a modern disease, cancer has always been with us.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. D1) When they excavated a Scythian burial mound in the Russian region of Tuva about 10 years ago, archaeologists literally struck gold. Crouched on the floor of a dark inner chamber were two skeletons, a man and a woman, surrounded by royal garb from 27 centuries ago: headdresses and capes adorned with gold horses, panthers and other sacred beasts.

But for paleopathologists — scholars of ancient disease — the richest treasure was the abundance of tumors that had riddled almost every bone of the man’s body. The diagnosis: the oldest known case of metastasizing prostate cancer.
The prostate itself had disintegrated long ago. But malignant cells from the gland had migrated according to a familiar pattern and left identifiable scars. Proteins extracted from the bone tested positive for PSA, prostate specific antigen.
Often thought of as a modern disease, cancer has always been with us.
. . .
(p. D7) . . . , Tony Waldron, a paleopathologist at University College London, analyzed British mortality reports from 1901 to 1905 — a period late enough to ensure reasonably good records and early enough to avoid skewing the data with, for example, the spike in lung cancer caused in later decades by the popularity of cigarettes.
Taking into account variations in life span and the likelihood that different malignancies will spread to bone, he estimated that in an “archaeological assemblage” one might expect cancer in less than 2 percent of male skeletons and 4 to 7 percent of female skeletons.
Andreas G. Nerlich and colleagues in Munich tried out the prediction on 905 skeletons from two ancient Egyptian necropolises. With the help of X-rays and CT scans they diagnosed five cancers — right in line with Dr. Waldron’s expectations. And as his statistics predicted, 13 cancers were found among 2,547 remains buried in an ossuary in southern Germany between A.D. 1400 and 1800.
For both groups, the authors wrote, malignant tumors “were not significantly fewer than expected” when compared with early-20th-century England. They concluded that “the current rise in tumor frequencies in present populations is much more related to the higher life expectancy than primary environmental or genetic factors.”
. . .
“Cancer is an inevitability the moment you create complex multicellular organisms and give the individual cells the license to proliferate,” said Dr. Weinberg of the Whitehead Institute. “It is simply a consequence of increasing entropy, increasing disorder.”
He was not being fatalistic. Over the ages bodies have evolved formidable barriers to keep rebellious cells in line. Quitting smoking, losing weight, eating healthier diets and taking other preventive measures can stave off cancer for decades. Until we die of something else.
“If we lived long enough,” Dr. Weinberg observed, “sooner or later we all would get cancer.”

For the full story, see:
GEORGE JOHNSON. “Unearthing Prehistoric Tumors, and Debate.” The New York Times (Tues., December 28, 2010): D1 & D7.
(Note: ellipses added.)
(Note: the online version of the article is dated December 27, 2010.)

If the Feds Want an Effective Stimulus, They Should Spend to Reduce the Patent Backlog

In my seminar on the Economics of Technology on Tuesday night (11/30/10), Gauri presented some interesting information on intellectual property. At one point she summarized that the lag in processing patents is about three years, but it takes, on average, only about 18 hours to process a patent once the processing has begun.
Later in the seminar, we talked about a brief article by Amar Bhidé on whether large economic stimulus programs have worked in the past, and will work in the present. Bhidé was skeptical, and I am too.
But it occurred to me that one modest economic stimulus expenditure might help. Why not make the highest stimulus spending priority to hire and train enough patent examiners to reduce the patent lag from three years to, say, three weeks?

The Bhidé article mentioned above is:
Bhidé, Amar. “Don’t Believe the Stimulus Scaremongers.” Wall Street Journal, (Tues., February 17, 2009): A15.

If You Think Life Was Better in the Past, “Say One Single Word: Dentistry”

(p. 2) In general, life is better than it ever has been, and if you think that, in the past, there was some golden age of pleasure and plenty to which you would, if you were able, transport yourself, let me say one single word: “dentistry.”

Source:
O’Rourke, P. J. All the Trouble in the World: The Lighter Side of Overpopulation, Famine, Ecological Disaster, Ethnic Hatred, Plague, and Poverty. paperback ed. New York: Atlantic Monthly Press, 1994.

All He “Could See Was Cows and Farms” in “Virginia’s High Tech Corner”

(p. A18) . . . government attempts to rejuvenate regional economies have a mixed track record, in the U.K. and elsewhere.

Stuart S. Rosenthal, an economics professor at Syracuse University, remembers driving through Virginia in 1997 and seeing a sign saying, “You are entering southwest Virginia’s high tech corner.”
“And all I could see was cows and farms,” he said. Recent employment data shows that aside from one pocket, little has changed.

For the full story, see:
ALISTAIR MACDONALD. “U-Turn in the U.K.: Big Spending Cuts.” The Wall Street Journal (Fri., OCTOBER 15, 2010): A18.
(Note: ellipsis added.)
(Note: the online version of the article is dated October 14, 2010.)

China’s Continued Growth Requires Reliance on Private Enterprise

(p. A21) No country in the modern world has managed persistent economic growth without considerable reliance on private enterprise and decentralized private markets. All centrally planned economies failed to achieve sustained development, including the Soviet Union before its collapse, China before market reforms began in the late 1970s, and Cuba since Castro’s revolution in the late 1950s.

China’s private sector has led its dominance in textiles, electronics, and other consumer and producer goods. It’s followed the model of the “Asian Tigers”–Hong Kong, Singapore, South Korea and Taiwan–and relied heavily on exports produced with cheap labor. In the process, China has accumulated enormous reserves, as Taiwan, Japan and other rapidly growing Asian economies did in past decades.
Poorer countries like China need not get everything “right” to grow rapidly through exports to richer countries. They need only have some strong sectors that use world markets to fuel overall growth. Japan’s rapid growth from the 1960s-1980s was led by a highly efficient manufacturing sector. Yet at the same time Japan also had a large and inefficient service sector, and an agricultural sector that was riddled with subsidies and inefficient incentives.
Similarly, China’s economy still has a glut of state-owned enterprises (SOEs) with excessive employment and low productivity. Their importance has fallen over time, but Chinese economists estimate that they still control about half of nonagricultural GDP. One crucial example is the state-controlled financial sector that makes cheap loans to other large, inefficient and unprofitable state enterprises. China’s economy also suffers from extensive price controls, restrictions on migration, and many other structural barriers to efficient growth.

For the full commentary, see:

GARY S. BECKER. “China’s Next Leap Forward; The jump from middle-income to rich status is much harder to achieve than the ascent from poverty. But there are plenty of reasons to believe China’s growth prospects remain strong.” The Wall Street Journal (Weds., SEPTEMBER 29, 2010): A21.

Country Data on Light Intensity at Night May Be More Accurate than Official GDP

(p. 63) In a new working paper, Vernon Henderson, Adam Storeygard and David Weil of Brown University suggest an alternative source of data: outer space. In particular they track changes in the intensity of artificial light over a country at night, which should increase with incomes. American military weather satellites collect these data every night for the entire world.

It is hard to know exactly how much weight to put on extraterrestrial brightness. Changes in the efficiency of electricity transmission, for example, may cause countries to look brighter from outer space, even if economic activity has not increased much. But errors in its measurement are unlikely to be correlated with errors in the calculation of official GDP, since they arise for different reasons. A weighted average of the growth implied by changes in the intensity of artificial light and official GDP growth rates ought to improve the accuracy of estimates of economic growth. Poor countries in particular may have dodgy GDP numbers but their night-light data are as reliable as anyone else’s.

For the full story, see:
“Measuring growth from outer space; Light relief; Data about light emitted into space may help improve growth estimates.” The Economist (Aug. 6, 2009): 63.

The working paper referenced is:
Henderson, J. Vernon, Adam Storeygard, and David N. Weil. “Measuring Economic Growth from Outer Space.” NBER Working Paper No. 15199, July 2009.

Cro-Magnon Provides Baseline to Measure Our Progress

Cro-MagnonBK.jpg

Source of book image:
http://ecx.images-amazon.com/images/I/51BS%2BtGJZ8L.jpg

Biologically modern humans have inhabited the world for at least 50,000 years, and maybe for 100,000 years or more.
Only in the last 200 years, and especially the last 100 years, has humanity made substantial progress in the quality and quantity of life.
Usually the most recent 200 years are compared with the previous few thousand, because conditions in the previous few thousand years are much better known than those in the tens of thousands of years further in the past.
But comparisons further back are of interest, and Brian Fagan’s book Cro-Magnon is a source of some information that allows us to do so to some extent.
In the next few weeks, I will occasionally be quoting a few passages from Fagan that I believe are suggestive.

The reference for the Fagan book is:
Fagan, Brian. Cro-Magnon: How the Ice Age Gave Birth to the First Modern Humans. New York: Bloomsbury Press, 2010.

“Pork Actually Pushes Private Investment Out of a State”

Some West Virginia miners may have faced unemployment due to technological progress. But what they needed to improve their situation was economic growth from private enterprise, rather than Senator Robert Byrd’s federal pork.

(p. A11) . . . mining companies developed more efficient techniques for extracting coal and natural gas, which eliminated the need for many blue collar jobs. Laid-off workers lacked the skills to attract other types of businesses and college students couldn’t find jobs after graduation, so they left. Such dramatic changes would be serious obstacles for any politician.

. . .
By contrast, Byrd’s solution was to steer federal largess to his state.
. . .
Take Route 50. Thirty years ago, the federal government extended the route from two lanes to four with the hopes of spurring development. But hit the open road today and you’ll notice it’s just that–open. “You won’t see another car for two hours,” says Russell Sobel, a professor of economics at West Virginia University. “You can’t just build roads and expect that things will happen. People who want to transport goods and services need to be there.”
. . .
“We’ve created this culture of dependency,” warns Mr. Sobel, “Our human capital is not good at competing in the marketplace; it’s good at securing federal grants.”
Federal funding is a shaky foundation for an economy because no one can replace Big Daddy. In their recently released paper “Do Powerful Politicians Cause Corporate Downsizing?” Harvard professors Lauren Cohen, Joshua Coval and Christopher Malloy found that states that lose chairmanships on important congressional committees lose 20% to 30% in earmarks.
Even worse, they found that pork actually pushes private investment out of a state. When the federal government intrudes, it raises demand for the state’s workers and real estate, jacking up prices. Often, companies can’t compete, so they flee.

For the full commentary, see:
BRIAN BOLDUC. “CROSS COUNTRY; Robert Byrd’s Highways to Nowhere; Government pork hasn’t made West Virginia prosperous.” The Wall Street Journal (Sat., JULY 10, 2010): A11.
(Note: ellipses added.)

The research referenced is:
Cohen, Lauren, Joshua D. Coval, and Christopher J. Malloy. “Do Powerful Politicians Cause Corporate Downsizing?” NBER Working Paper No.15839, March 2010.

Big Government Slows Economic Growth

(p. A15) Americans are debating whether to substantially expand the size of their government. As Swedish economists who live in the developed world’s largest welfare state, we urge our friends in the New World to look carefully before they leap.

Fifty years ago, Sweden and America spent about the same on their government, a bit under 30% of GDP. This is no longer true. In the years leading up to Sweden’s financial crisis in the early 1990s, government spending went as high as 60% of GDP. In America it barely budged, increasing only to about 33%.
While America was maintaining its standing as one of the world’s wealthiest nations, Sweden’s standing fell. In 1970, Sweden was the fourth richest country in the world on a per capita basis. By 1993, it had fallen to 17th.
This led us to ask whether Sweden’s dramatic increase in the size of government contributed to its sluggish growth. Our research shows that it did.
We surveyed the existing literature looking at the trade-offs between government size and economic growth throughout the world. While results vary, the most recent research, by Diego Romero-Avila in the European Journal of Political Economy (2008) and by Andreas Bergh and Martin Karlsson in Public Choice (2010) find a negative correlation between government size and economic growth in rich countries.
The weight of the evidence demonstrates that when government spending increases by 10 percentage points of GDP, the annual growth rate drops by 0.5 to 1 percentage point. This may not sound like much, but over 30 years this would result in the loss of trillions of dollars each year in an economy as large as America’s.

For the full commentary, see
ANDREAS BERGH AND MAGNUS HENREKSON. “Lessons From the Swedish Welfare State; New research shows bigger government means slower growth. Our country is a prime example.” The Wall Street Journal (Mon., JULY 12, 2010): A15.
(Note: the online version of the article is dated JULY 10, 2010.)

Former French Student Protest Leader: “We’ve Decided that We Can’t Expect Everything from the State”

DynamismEuropeAndUnitedStatesGraph.gif

Source of graph: online version of the WSJ article quoted and cited below.

(p. A16) “The euro was supposed to achieve higher productivity and growth by bringing about a deeper integration between economies,” says Simon Tilford, chief economist at the Centre for European Reform, a London think tank. “Instead, integration is slowing. The lack of flexibility in labor and product markets raises serious questions about the likelihood of the euro delivering on its potential.”

Structural changes are the last great hope in part because euro zone members have few other levers for lifting their economies. Individual members can’t tweak interest rates to encourage lending, because those policies are set by the zone’s central bank. The shared euro means countries don’t have a sovereign currency to devalue, a move that would make exports cheaper and boost receipts abroad.
The remaining prescription, many economists say: chip away at the cherished “social model.” That means limiting pensions and benefits to those who really need them, ensuring the able-bodied are working rather than living off the state, and eliminating business and labor laws that deter entrepreneurship and job creation.
That path suits Carlos Bock. The business-studies graduate from Bavaria spent months navigating Germany’s dense bureaucracy in order to open a computer store and Internet café in 2004. Before he could offer a Web-surfing customer a mug of filter coffee, he said, he had to obtain a license to run a “gastronomic enterprise.” One of its 38 requirements compelled Mr. Bock to attend a course on the hygienic handling of mincemeat.
Mr. Bock closed his store in 2008. Germany’s strict regulations and social protections favor established businesses and workers over young ones, he said. He also struggled against German consumers’ reluctance to spend, a problem economists blame in part on steep payroll taxes that cut into workers’ takehome pay, and on high savings rates among Germans who are worried the country’s pension system is unsustainable.
“If markets were freer, there might be chaos to begin with,” Mr. Bock said. “But over time we’d reach a better economic level.”
Even in France, some erstwhile opponents of reforms are changing their tune. Julie Coudry became a French household name four years ago when she helped organize huge student protests against a law introducing short-term contracts for young workers, a move the government believed would put unemployed youths to work.
With her blonde locks and signature beret, Ms. Coudry gave fiery speeches on television, arguing that young people deserved the cradle-to-grave contracts that older employees enjoy at most French companies. Critics in France and abroad saw the protests as a shocking sign that twentysomethings were among the strongest opponents of efforts to modernize the European economy. The measure was eventually repealed.
Today, the now 31-year-old Ms. Coudry runs a nonprofit organization that encourages French corporations to hire more university graduates. Ms. Coudry, while not repudiating her activism, says she realizes that past job protections are untenable.
“The state has huge debt, 25% of young people are jobless, and so I am part of a new generation that has decided to take matters into our own hands,” she says. “We’ve decided that we can’t expect everything from the state.”

For the full story, see:
MARCUS WALKER And ALESSANDRA GALLONI. “Europe’s Choice: Growth or Safety Net.” The Wall Street Journal (Thurs., MARCH 25, 2010): A1 & A16.