Link Banana

The Boston Globe’s Ideas section recently featured this interesting idea: natural disaster may actually be an economic good for the affected country.

Rebuilding efforts serve as a short-term boost by attracting resources to a country, and the disasters themselves, by destroying old factories and old roads, airports, and bridges, allow new and more efficient public and private infrastructure to be built, forcing the transition to a sleeker, more productive economy in the long term.

“When something is destroyed you don’t necessarily rebuild the same thing that you had. You might use updated technology, you might do things more efficiently. It bumps you up,” says Mark Skidmore, an economics professor at Michigan State University. “Disasters help people think about things differently.”

But there is this cogent counter-argument:

“Over any reasonably relevant period of time, society is not made wealthier by destroying resources,” he adds. If it were, “Beirut should be one of the wealthiest places in the world.”

Everyone knows the role of supply and demand, but this Explainer column offers a number of interesting factors that make for differences is price both across states and within them. One of the many things I hadn’t considered:

Retail gas prices can vary depending on state and local environmental requirements. Urban areas with particularly dirty air are required by federal law to sell “reformulated gas” for all or part of the year, and because the cleaner-burning fuel is refined through a special process, it tends to be a little more expensive than regular gas.

Roger Cohen made the interesting — if intellectually dubious — contention yesterday that the world isn’t actually flat, it’s inverted:

To understand it, invert your thinking. See the developed world as depending on the developing world, rather than the other way round. Understand that two-thirds of global economic growth last year came from emerging countries, whose economies will expand about 6.7 percent in 2008, against 1.3 percent for the United States, Japan and euro zone states.

In case you’re not sold on the idea that there are upsides to high gasoline prices, I recommend this article.

(via GOOD)

Firm evidence that high gas prices really make people think more and drive less.

At 11 billion miles less in March 2008 than in the previous March, this is the sharpest yearly drop for any month in FHWA history.

(via Marginal Revolution)

I was just thinking that the oft-mentioned dollar-a-day poverty line seems rather arbitrary. The Economist reports that it’s being reconsidered:

They gather 75 national poverty lines, ranging from Senegal’s severe $0.63 a day to Uruguay’s more generous measure of just over $9. From this collection, they pick the 15 lowest (Nepal, Tajikistan and 13 sub-Saharan countries) and split the difference between them. The result is a new international poverty line of $1.25 a day.

Two recent mentions of the psychological trick caught my eye. First: in his review of Nudge, John Cassidy — while pointing out that Senator Obama’s policies share logic with those of the book — offer this interesting test:

If you think you are too smart for this description to apply to you, try this simple mental exercise. Take the last three digits of your cell phone number, obtaining a number between zero and 999, and add two hundred to it. Write down the resulting figure and put the letters AD after it. Now, consider this question: When did Attila the Hun invade Europe?

Unless you are an expert on the Dark Ages, or your brain is unusually wired, the chances are that your answer will be pretty close to the date you write down. Say the last three digits of your cell number are 787 and the number you write down is 987 AD. Then, most likely, 900 AD will sound like a reasonable answer to you, and so will 1050 AD, but [440, the correct answer] will sound wrong. That was certainly how it worked when I tried the exercise.

Also, Matt Yglesias suspects a local developer is employing the technique to show why he should move.

I love a good bit of Farm Bill outrage, so here’s The Economist:

If you measure the success of a pressure group by its ability to cram lousy policy through Congress, you might imagine that Big Oil or Wall Street would top the league: they are the lobbies most berated on the campaign trail. You would be wrong. If there were any doubt, the past few days should have confirmed that America’s farmers are the capital’s handout kings.

Consider their latest masterpiece, the 2007 farm bill that Congress this week delivered, several months late, to George Bush. Congress and the farmers have conspired to make an already unjust agricultural policy—a system that has subsidised the “farming” activities of such paupers as David Letterman and David Rockefeller—even worse. Through a complicated and overlapping system of government-sponsored insurance, counter-cyclical assistance, disaster aid and legacy payments tied to nothing, the five-year, $307 billion bill lavishes cash on wealthy farm households, the main restriction on collecting it being a means test that applies to couples making more than $1.5m a year. And even that can be avoided by employing a reasonably competent accountant.

If you want to understand the problem in one simple step, take a look at the graph attached to that article.

Because I’m on a segue kick, Marian Tupy recently offered a comparison of Zimbabwe and Botswana. Though the comparison’s slightly insane — anything looks well-run when compared to a basketcase — it’s an interesting perspective on a country I rarely hear about. Some history of Botswana:

Botswana, previously the Protectorate of Bechuanaland, gained independence from Great Britain in 1966. Her new president, Seretse Khama, a descendant of the local Bamangwato chiefs, received his education at South Africa’s Fort Hare University and Oxford’s Balliol College. In 1948, he married a white woman, Ruth Williams, who clerked at Lloyds in London. Their marriage was political dynamite that was, at first, opposed by both the traditional chiefs in the Bechuanaland and by the government in South Africa, Botswana’s immensely more powerful southern neighbor whose white population had just elected a regime that wanted to increase racial segregation between whites and blacks. Fearing South Africa’s negative reaction, the British government banned the Khamas from the Protectorate for almost a decade.

The racial prejudice that the pair encountered from both sides of the racial spectrum proved to be formative. While most regimes in post-independence Africa sent their white populations packing, Khama and his successors strove for racial harmony. As a result, Botswana benefited greatly from the human and financial capital of her large white community, which totals 7 percent of the overall population. It is surely a sign of Botswana’s relative comfort with racial diversity that on April 1, 2008, Ian Khama, the first-born son of the country’s founder, took over the reigns of power in Botswana, thus becoming the first half-white leader of an African democracy.

Rob Walker has an interesting, if sometimes shallow-feeling, exploration of the increasingly common practice of reviving old brand names that people remember faintly. It an interesting look at psychology and the logic of branding.

Too many such deals, or the wrong kinds, can boomerang: this happens with some regularity in the fashion world, when a famous designer name gets spread over so many products, with so little regard to quality, that the entire image of the brand sinks. Still, if you see a ladder made by Stanley, you may well think, Well, there’s a name I can trust. What you’re trusting, though, isn’t Stanley workers in Stanley factories upholding Stanley traditions and values under the watchful eye of Stanley managers. What you’re trusting is Stanley’s recognition that a badly made ladder with the Stanley name on it could be highly damaging to the Stanley brand. You are trusting Stanley’s recognition of the value of its brand and its competence in defending that value.

The Economist offers two charts about interesting aspects of modern energy:

• The Price of Oil. Looking at this graph makes it at least seem reasonable that oil could actually get to $200 a gallon.
• Energy Efficiency. Though America’s use of energy per dollar of GDP has dropped in recent years, it remains the least efficient country in the world. This data was also used is a story in the magazine.

There seems to be a rapidly increasing number of relatively pointless sites that are just a tad too clever to ignore. More examples:

• How I Spent My Stimulus
• And ManBabies

Thought-provoking piece Mark Gimien about the irrelevance of the much-touted Gini coefficient in capturing the inequalities of everyday life. His conclusion:

When economists talk about inequality, they are talking about something that can easily be captured in an equation about national income. When noneconomists talk about inequality, however, they have in mind not their neighbor’s wallet, which they can’t see, but their own, which they can. They are thinking of what they can and cannot afford, and also of the most visible extremes of wealth and poverty around them. That’s why India’s Gini index may be lower than our own, and yet it will be the rare person who will say that India is more equal in any sense that matters. When we talk about inequality, it’s not about resentment of the next door neighbors’ pool. It’s about gut issues: whether we feel poor, whether we feel that those around us are poor. That’s why it’s worth thinking about in the first place. Unfortunately, the usual way that economists talk about and measure inequality tells us next to nothing about it.

As nominally communist countries who believe firmly in capitalism as a way to economic development, China and Vietnam obviously have a lot in common. From this week’s Economist’s Special Report, an explanation of some of the ways they differ:

A foreign diplomat in Hanoi who used to serve in Beijing says that “everything here is more moderate than in China.” Vietnam is a bit less harsh with dissidents than China, and its capitalism too is less red in tooth and claw. Its health and education services have adapted more successfully to the transition to a market economy. Its press is strictly controlled, as in China, but the growing numbers of internet surfers have free access to most foreign news websites: there is no Vietnamese equivalent of the Great Firewall of China.

Whereas China is led from the top down and one man is clearly the paramount leader—Hu Jintao, who is both the head of the Communist Party and the state president—Vietnam has a consensual leadership. Its triumvirate of president, party boss and prime minister must reach accommodations with an increasingly independent national assembly and a host of other forces, and avoid upsetting the many surviving heroes of Vietnam’s independence wars.

Your disturbing statistic of the day comes care of Passport, who points out that the amount Americans spend on health care for their pets is roughly the same as the GDPs of Botswana or Bahrain.

As Justin Wolfers explains the Easterlin paradox has long baffled happiness researchers. It’s components:

1. Within a society, rich people tend to be much happier than poor people.
2. But, rich societies tend not to be happier than poor societies (or not by much).
3. As countries get richer, they do not get happier.

The trouble is, new data — collected by Betsey Stevenson and himself — suggests that these observations are, well, wrong, and should be replaced by these:

1. Rich people are happier than poor people.
2. Richer countries are happier than poorer countries.
3. As countries get richer, they tend to get happier.

His post links to more information (mostly PDFs) on the topic, as well as this illistrative chart.

Just a small chart to scare the pants off of those who recently found out that the “BRIC” countries are serious about growing. And that the United States is, well, not growing as fast as them. More embarrassingly, because the recession the US is also forecast to grow slower than Japan or the Euro area.

Nudge is a book that’s popped up in a lot of places recently and I really want to give it a look. Says Steven Levitt:

“Libertarian paternalism” is just the sort of phrase that makes me stop paying attention.

Which is why I could not have been more surprised and delighted when I finally got to read a copy of their new book Nudge. Despite my initial misgivings, I’m halfway through it, and this is a book I love.

The main point of the book (paraphrased) is as follows:

Since people don’t think very hard about the choices they make, it is a lot easier to trick them into doing what you want than to try to educate them or incentivize them to change their behavior. There are many ways to trick people, but one of the easiest is simply by giving thought to the way choices are arrayed to them, or what they call “choice architecture.”

Hannah Karp takes an interesting if frivolous romp through the business practices needed for good management of a professional athlete’s entourage.

The economics vary widely. Veteran sports attorney Fallasha Erwin says he’s seen athletes give their friends lump-sum payments of as much as $100,000. But as athletes discover those types of payments can’t easily be written off their taxes, more are putting their qualified friends on professional payrolls. Salaried entourage members doing personal-assistant work typically earn $30,000 to $50,000 a year, plus a percentage of any deals they put together. Indiana Pacers forward Danny Granger, 24, has an economical one-man team — his former college roommate — who pays his own rent and will make $40,000 this year.

(via brijit)

Why it makes sense, according to Mark Gimein:

But you can also see how this works intuitively if you just consider that with a lot at stake in getting it right in one shot, it’s the women who are confident that they are holding a strong hand who are likely to hold out and wait for the perfect prospect.

This is how you come to the Eligible-Bachelor Paradox, which is no longer so paradoxical. The pool of appealing men shrinks as many are married off and taken out of the game, leaving a disproportionate number of men who are notably imperfect (perhaps they are short, socially awkward, underemployed). And at the same time, you get a pool of women weighted toward the attractive, desirable “strong bidders.”

Where have all the most appealing men gone? Married young, most of them—and sometimes to women whose most salient characteristic was not their beauty, or passion, or intellect, but their decisiveness.

Also of note, what Marginal Revolution’s Tyler Cowen had to say about it. Hint, he begins: “I don’t quite buy it.”