Curious

How long for Turkey? How long's a piece of string?

2006-11-29T20:31:00.000Z

Turkey should be part of the EU by now; it is a very important/strategic member of NATO and is important for security.

My view of Turkey is that it continues to perform well as an economy. Its central bank has some credibility with regards to inflation targeting, and the IMF recently stated that it was happy with its pension reform, which amongst other things, provides a “good” sentiment about the country. On the flip side, public finances could be improved upon, with a fiscal deficit that leaves little to the imagination of how it might be funded. Comparative advantage in the textiles sector continues to diminish due to stiff competition, though still supports a large labour force. The economy is not bad, and could do better – a statement that holds true for many “performing” countries, and indeed, some EU members.

“Those who live in glass houses should not throw stones”

The EU - as a unit – is ill placed to hurl accusations of unacceptable standards at anybody. Famous for protectionist policies (citing France and Italy) that directly harm poor countries and a raft of do-as-I-say-not-as-I-do policies that I don’t have the energy to cite at length, it would suffice to say that the EU does not epitomise a halo.

There are quite a few EU members that want Turkey in, against a minority of powerful dissenters, who have made a meal out of antagonising the process. The elephant in the room is the failure to openly recognise the imminent benefits of having an Arab country as an EU member. Perhaps this lies behind a view that traditional European countries are Caucasian countries, rendering non-Caucasoids as immigrants of some order, which would make Turkey a non-Caucasoid EU state. Perhaps!!!! I wonder quite loudly whether the EU might be tacitly entertaining such backward stances. This is just a thought, though not difficult to imagine however.

The West needs to understand Arabs so that it can have better, inclusive policies, which are formed out of genuine need, rather than hasty xenophobia. Turkey will bring more diversity into Europe. Yes, there will be more labourers, but that should be offset by willingness for companies to set-up low cost units in Turkey, a willingness by western companies to engage the Turkish economy. If we in Europe just want to seal the walls around us, then, let’s just do so without the ceremonious nonsense. Better still, why don’t the majority quell the minority dissenters, for the benefit of the greater good? If anybody responds to this question by citing that democracy will not permit such a move, my rebuttal would be - after an expression of shock at their selective ignorance – that democracy is largely ignored in world matters too often to discount, and an apparent lack of knowledge about this warrants no further attention.

I suppose Turkey can join the EU tomorrow if it wanted – metaphorically – it’s a question of how far it’s willing to bend.

How far should any country have to bend?

The fiasco continues…

Coming soon......Turkey and EU accession

2006-11-21T13:31:00.000Z

My views on this debate will be posted shortly.....

Image from www.europeunited.org

Been away for a while

2006-10-21T10:12:00.000Z

Hello people,
Apologies for the long period of silence. I have been incredibly busy but will be back very soon.

Keep blogging.
Curious

Development summarised (somewhat)

2006-08-11T15:46:00.000Z

I saw this link this at C'est vrai. Absolutely fantastic. The World Bank and IMF should watch this (and probably NGOs).

It is a cartoon book that summarises the western development idea and the real outcomes.

Have a look at "New cartoon book that satirises 'development'"

Picture: Book cover from Survival International

The status quo principle and the Middle East

2006-08-07T10:48:00.000Z

Catallaxy writes an interesting peice, illuminating various schools of ideas surrounding the middle east crisis.

Some excerpts are as follows:

"The west exported Marxism and nationalism to the rest of the world with truly disastrous consequences. Can we find a way to export better ideas? Do we have better ideas?"

"Just as some would now depict Israel as the embodiment of all that is wrong with the world, for these supporters it has become the foremost fighter for what is right. As a consequence they sometimes make it seem that, if you want to defend democracy and civilisation, then you have to support bombing raids on Lebanon. In similarly shrill fashion, leading supporters of Israel insist that the drunken outburst by Hollywood star and Catholic crackpot Mel Gibson, about how ‘the Jews are responsible for all the wars in the world’, is somehow proof of a rising tide of anti-Semitism in the Western world."

Read on here

Good people do nothing

2006-08-01T09:48:00.000Z

"All that is necessary for evil to succeed is that good men do nothing." Edmund Burke

Alexcia write's a refreshing piece covering the Israel-Lebanon crisis, amongst other issues. The post starts:

"As the tiny nation of of Israel pounds all its fears and frustrations on another tiny nation and inchoate democracy in Lebanon, the "Good people" of the world do nothing, say nothing and even engage in "i told you so" self righteousness and "you brought it on yourself" crap. Last I heard, the kawa citizen of Lebanon was being asked to get rid of the Hizbollah "terriosts" by himself or be bombed and punished."

...Read on here

WTO chit chat - ad nauseam!!!

2006-07-24T12:56:00.000Z

Why, oh why do we still have trade rounds??????

This is one issue in which the outcome is known by even the most illiterate in the remotest part of the world. Today's Financial Times provides an appropriate summary:

"Three things are absolutely certain about the outcome of farm subsidy talks in Doha. First, the EU will say the US is not doing enough. Second, the US will say it is doing more than enough.....[the third is knowledge specific]"

and another....

"Kamal Nath, India's trade minister, who has millions of rice growers to protect, is fond of saying: "Indian farmers can compete with US farmers but not with the US Treasury.""

On the 24th July, the Financial Times reported that:

"Doha trade talks collapse over farm subsidies...
...The talks, launched in November 2001 in the Qatari capital, have strained from the beginning to reconcile the disparate interests of WTO members."

The WTO is not a forum for the world's citizens. Instead, it is a club for the elite, who continually decide to squeeze the hungry, and the afflicted for the gain of the already wealthy nations. I don't understand how humans can treat other humans with such dispassion, as though they don't exist. I don't understand how any nation can stand in front of an international audience and impose double standards as clear as daylight, but it happens everyday.

The impasse that swiftly gets into play in Doha rounds is to do with how much more the poor can be squeezed [answer: much more], and how policy can be fairer [answer: not any more than it currently is - unfair]. The WTO should be disbanded or have its mandate rewritten by the people who matter, not those in power.

Dollar safe haven? I don't think so!!

2006-07-21T12:32:00.000Z

Yes ! the dollar has gained some strength on the back of more risk aversion.

Yes ! interest rate arbitrage continues to be a big determinant in which currency will underlie investments.

My view is that there is more downside than upside risk for the dollar. This is because of:

The growth-inflation trade-off issue that is bothering Bernanke, with sources of inflation being partly exogenous. The US gasoline market is hugely exposed to oil price movements, which openly and directly exposes US consumers to [almost] the full effect of changes in oil prices.
Core inflation will continue to be under upward pressure from rising imported goods prices.
As the Fed struggles with the inflation-fighting mandate, the economy has long shifted from the goldilocks position into possible stagflation.

and possibly most importantly:

Anything that is going to be a challenge for America is bearish for the dollar. What are the current challenges: 1) the ever worsening Iraq situation, 2) American-Iranian relations, 3)American-Russian relations, 4) American-North Korean relations and 5) The effect and subsequent costs (in money terms) of taking Isreal's side in the current 'situation' between Israel and Lebanon.

Over the medium to long-term, challenges such as those posed above will weigh down on the dollar's image as a safe haven currency. They will have a net negative effect and that will translate into poor confidence in the country.

Over the immediate term, some may cite that moneys from oil and commodity producing countries are being loaned to America in exchange for bonds. However, all that will achieve is another bond market bubble, with an inverted yield curve (because the long end is falling, relative to the short end).

Does the above constitute a good investment strategy? I think not.

Let me point some focus on two things :
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1. Between the end of 2002 and June 2006, a long real/short dollar carry, and a long lira/short dollar carry strategy would have yielded between 26%-30% average annual returns (sharpe ratio approx 1.95), outperforming most (if not all) major FX trading strategies.
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2. Due to the flight of investor capital away from emerging markets, assets within these locales are relatively cheap, with even more potential for big gains upfront.

Emerging markets are now sources of cheap assets, relative to the period before the recent resumption of risk aversion. At some stage (very soon) investors will begin to purchase these assets and hold for the band wagon effect, at which stage they'll have made big returns and may be slightly indifferent about closing their positions or continuing to hold the assets. Why will they be indifferent? Because a simple cross-over trading rule can be implemented to limit losses.

Soon, money will rush back into emerging markets. Watch and see!

Validated - flow of investor funds into poor countries

2006-07-11T09:38:00.000Z

Well, the ink is barely dry (metaphorically) on the recent piece that I wrote titled Political uncertainty - a money machine, where I highlighted that poor countries will very soon find themselves overrun with cash due to investor greed for high returns, as opposed [obviously] to acts of philanthropy.

The Investors Chronicle magazine (owned by the FT) has published an article in its latest issue* titled Emerging markets funds: Undiscovered Africa, in which the author starts:

"If you want to find genuinely emerging markets that are not simply geared plays
on the US, then you need to look to Africa"

The author also rightfully states that Africa is not for the faint hearted, I agree and add that emerging markets in general are not for the faint hearted. Only the risk loving, high yield seeking investors will be found in these markets. Why? Because there are no other alternatives. Yes, really !

For now, the US is offering near comparable returns on its 10 year bonds with far less risk compared to emerging markets. But let's not forget that the US is going to have to stop its contractionary monetary policy because such a policy will soon push the US consumer too far into financial constraints. If this happens, the Fed will then start lowering interest rates dramatically so that it can assist in delivering reasonable economic growth (which is part of its remit, coupled with inflation fighting). So, comparatively high returns on US bonds will be short lived, hardly a proper strategy for a consistent high yielding portfolio. Already, global investors are indifferent between US 3 month currency futures and 10 year bonds (3month money and 10 year money), which leaves them still searching for higher yields (more likely outside the US than in other asset classes within the US).

Money did start to [noticeably] exit the emerging market scene (a bit of capital flight), but that - as always these days - was a market overreaction, where everyone feared another repeat of the Asian Crisis kind. But, risk aversion is a luxury (I am convinced), because if you are risk averse, you may as well keep your money in your mattress because depositing it into a high-street bank is equally unimaginative (though you may not think so). I personally endorse the concept of making my money work hard for me, getting as much leverage and gearing as possible, otherwise, I sacrifice a rather large opportunity cost by just depositing cash into a bank account.

I now expect many market commentaries talking-up emerging markets, and going further to highlight a wider range of poor countries as potential for new money investment. I said it first :-)

*(dated 7th-13th July 2006, page 7 of the feature articles)

Pic of the week - wimbledon?

2006-07-07T12:11:00.000Z

Click to enlarge

From the Econimist magazine

These lot aren't seeded, but it's just a matter of time....

Political uncertainty - a money machine

2006-07-06T13:52:00.000Z

The first priority for developed countries was to maximise their own growth, achieve high levels of prosperity, enviable living standards, high standards of education, etc. Heavy protectionism is typical at this level.

The second priority for the developed world was to trade more openly with others of the same ilk, so that there could be a mutual gain. National champions, tariffs and subsidies became less important, as inclusivity became more important. The EU is one such unit.

What else can the developed countries do to continue growing?

If these were the colonial days, colonial empires would overrun many poor countries. However, those days are long gone, and many of us in the west try to imagine that it didn't happen (through absolving ourselves of the consequences of interference).

Developing countries have been the object of attention from the West for financial gains for a long time. From the old-school mining industry, to the new-school financial markets (sovereign risk). The wealth of political uncertainty that developing countries present is the chowder that feeds volatility in financial markets. Without volatility, markets are boring, traders make very small margins from closing one position and re-hedging another, moving horizontally, etc. The market cannot thrive without volatility and developing countries have it in abundance. Volatility separates the risk loving from the risk averse. It is the sieve that sorts the wheat from the chaff.

I do believe that, within the developed countries alone, avenues for money making (new instruments/derivative products, etc) have almost been exhausted, and due to good macro-economic management, the economies are sound (sound economies do not thrive with volatility). Heavy business regulatory burdens from the respective developed country governments are the only thing that creates some "noise" in that it causes firms to merge or relocate, in an effort to reduce the amount of tax burden, or to take advantage of a loophole in regulation. This is by no means the future for developed countries.

Very soon, investors will be queuing up to invest even in the most unthinkable countries (which I will not mention. I don't want any embassies writing to me). If you are reading this from a poor country, wondering what the future holds for the nation, wondering whether the west will ever help poor nations like it should, take heart in the knowledge that the west will be falling over itself to throw money into developing countries. Why? Not because of benevolence, but because of greed. The desire to make money will take western conglomerates to the doorsteps of the most impoverished in the poor world.

Needless to add, political uncertainty fuels the arms trade, which in itself is big business that involves developing countries.

Ironically, someone else's greed will put food on your table - finally !

"Man has almost constant occasion for the help of his brethren, and it is in
vain for him to expect it from their benevolence only......It is not from the
benevolence of the butcher that we expect our dinner, but from his regard for
his own interests"
- Adam Smith

Inflation oversight goes a long way

2006-07-03T14:54:00.000Z

So the global economy has had broad money supply (M3) growth outstripping money GDP growth since the year 2000. The outcome is not rocket science.

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What happens when there is excess liquidity in the global economy? It is used to purchase all manner of assets, from property, to equities, to bonds, to paintings, to anything and everything. Global aggregate demand for goods and services increases, which creates stiff competition for the limited goods and services available in the economy, resulting in rising prices = inflation.

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The world economy - and certainly the G-10 - has had a liquidity overhang for some time now. Central bankers have been talking about the possibility of this excess money rushing into specific assets, causing outright bubbles (like the dot.com bubble). What has happened instead is that the money has rushed into a broader basket of assets, from the UK to Iceland, US to S.Africa, etc. Following the US Fed reserve's interest rake hikes, global investors are re-pricing risk and rushing their money into the US, to take advantage of similarly high yields but in a low risk environment (arguably risk-free). The consequence of investors quickly closing their investment positions and pulling funds out of one region/asset class, and into another region/asset class overnight is a lot of market volatility. Financial crises can occur in weaker economies and contagion would soon follow.

Right now we have a lot of market volatility, uncertainty and risk averseness because we have caused it. This does not necessarily imply that we have a danger of recessionary times ahead, it simply implies that the market is (as always) being driven by sentiment, mainly greed, then swiftly followed by fear.

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The inflationary pressure (upward) that is now "terrorising" the minds of many a central banker has been caused by energy prices, commodity prices and too much money running around.

>
Solution:
Let it [current inflation] pass through [the economy] because most of its stimulus is exogenous. Be warned about the risks of monetary policy over-zealousness. Central banks cannot remedy externally driven inflation, they can only remedy domestically generated inflation. Right now there is a big push for central banks to be seen taking stances and talking tough about inflation, but if the current inflationary pressure proves to be transitory, big economic troubles will be brought about by central bank over-excitement.

The cost of the Iraq war, in context

2006-05-22T15:05:00.000Z

By Martin Wolf of the Financial Times.
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Definitely worth a read, but if you haven't got a subscription, listen to his free podcast here instead.

"Before the Iraq war began, Lawrence Lindsey, then president George W. Bush’s economic adviser, suggested that the costs might reach $200bn. The White House promptly fired him. Mr Lindsey was indeed wrong. But his error lay in grossly underestimating the costs. The administration’s estimates of a cost of some $50-$60bn were a fantasy, as were Saddam Hussein’s weapons of mass destruction, and much else."
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Listen here

Hands off the internet

2006-05-22T14:04:00.000Z

Click here to watch a very short flash presentation about how regulation is attempting to change the internet. If you blog, etc, it affects you because it may eventually affect your [civil] rights (and in some cases - where required for persecution reasons - anonymity).

Have a look: Hands of the internet.

Teleshopping - guns for sale !!

2006-05-22T13:30:00.000Z

This is a poignant illustration by Oxfam. If it comes across as ridiculous (the concept of it), then the sad truth is that for those that deal in arms trade, it is as simple/ridiculous as what you see in the Oxfam video.

Watch it here: Guns for sale

See the following link as well: The problem with arms is...

Answer to Asia’s rise is not to retreat

2006-05-22T12:54:00.000Z

Martin Wolf of the Financial Times presents (in a podcast) the facts about how developed economies should respond to up and coming Asian economies. It is refreshing, and he utilises basic pure economic argument that is literally common sense, to explain the pros and cons.

To quote him on another of his podcasts (Tyranny of vested interests), the [simple] solutions to the challenges posed are deemed easy to achieve, which couldn't be farther from the truth. The tyranny of vested interests is a heading that fits perfectly over the current developed world stance, vis-à-vis emerging and poor countries.

Listen to his other podcasts here

One theme that keeps precipitating in my research is that we [in the world] are now well knowledgeable about what holds us back, the threats to globalisation, international integration and the lot of it. The forces of vested interests that distort world trade and subsequently incomes, etc, and the vested interests behind corruption within poor countries are behemoths that are difficult to breakdown and eliminate. This has been explained ad nauseum.

It appears that the modus operandi is for a politician or celebrity to come along, every now and again, to remind us of the consequences of our inward vision and inaction, often with an agenda of their own. It is refreshing when an economic heavyweight such as Mr Wolf reminds everybody that the solutions are not rocket science, they just lack support. As simple as that, but how do you effectively generate consistent support?

Dollar - appreciating or depreciating?

2006-05-19T10:31:00.000Z

The markets are confusing many, myself included. This is a time when even seemingly positive information is working against the respective home currency for "other" reasons. Let me explain.

When the Fed signalled that its monetary tightening might have come to an end at 5%, the expectation was that, say, sterling would appreciate against the dollar, as attention - finally - turned to fundamentals like the current account deficit and the inflationary impact of the insatiable appetite of the US consumer. But, even though sterling has appreciated against dollar, the impact of cheap imports has been disinflationary in the US, which has allowed investors to still see the dollar as a worthwhile vehicle for carry trades, creating some dollar support.

There was a recent upside surprise in US inflation data, which now has markets speculating that the FOMC may raise interest rates to keep in inflation under control. This has generated two opposite views:
1. Some will now go long on the dollar, expecting the inflation-controlling moves to be supportive from a currency perspective.
2. Others are selling dollar because they are concerned that the US may be close to the tightening tipping point, from which further interest rate rises will cause a retrenchment in consumer spending and a slowdown in the rate of economic growth.

So, the question is do you buy dollar or sell dollar? Apparently dollar traders have been selling Euro and buying dollar (which supports a dollar appreciation), and Euro traders have been doing the opposite, selling dollars and buying Euros (resulting in Euro stability).

The consensus seems to be that the dollar should depreciate but nobody wants it to do so relative to their currency, and especially not the Asian economies. Therefore, there may be some intervention that is preventing the dollar from breaching the $2/£ mark.

In the UK, the housing market seems to be continually improving, retail sales volumes have also been improving (year-on-year); explained by short-term household liquidity (with price discounting in consideration), and surveys suggest a positive picture for the economy, which, in totality, makes a neutral-hawkish MPC look likely to turn more hawkish than neutral, a scenario that would favour sterling.

Which way are we going?

Even with a more hawkish than neutral MPC, raising UK interest rates may not happen for the near-term. Why? Because, the sterling exchange rate index (ERI) has risen quite a bit, helping to keep the rate of UK inflation lower than it could be (because of cheap goods for UK consumers, relative to our exports), which is comparable to raising interest rates. So the ERI has done/is doing the job for the MPC, creating a disinflationary environment.

I don't know how anyone can make a decisive strategic decision regarding dollar-sterling at the moment. Does anyone hold a different view?

So, why are economists different?

2006-04-06T14:21:00.000Z

...because they do it in an edgeworth box.

Sorry, I couldn't resist!!

So, here's a paper that explores why economists are different from the rest of society. I don't know where I stand on it, because I found the conclusion somewhat leaning towards an apologetic stance.

See what you make of it (pdf):
Why economists are different from Mahalanobis

Efficiency bias

2006-04-04T14:42:00.000Z

Chris Dillow (author of Investors Chronicle page 42 comment, and Stumbling and mumbling blog) asked in the Investors Chronicle dated 31st Mar - 6th April, why people don't believe that markets are efficient.

Chris states:

"But why do so many people believe - contrary to both common sense and the evidence - that markets are inefficient, and that we can risklessly beat the index by using our own skill? I suspect numerous cognitive biases are to blame."

He adds,

"An obvious one is wishful thinking - we like to think there's easy money to be made. This is buttressed by the Lake Woebegon effect: we all believe we're smarter than all the other idiots in the market."

To both the above points, I would like to point to the existence and good performance of hedge funds, especially in the recent past. I am aware that the market is mostly efficient, in that one is not likely to easily find a mispriced asset, and once found, a majority of household investors have not got the resourceful capability to quickly or easily arbitrage it. But the existence of hedge funds and the large volumes of money that can be made from such undertakings undermines the theory of perfectly efficient markets. Investors might be delving into areas of knowledge previously only privy to hedge funds and may be inclined to take more risk for higher return. I suppose that the efficient part of the market is boring as an investment prospect because it puts everyone into the same box. We are sufficiently different as people when it comes to tastes, risk preference, etc, and some people will pay considerable amounts of money (premiums) to be different from the sheep. However, the sheep will find safety in numbers.

I think there is easy money to be made in the market, if you know where to look and – most importantly – have enough of it to start with. We live in a time when information is more readily available in depth and breadth, and those that have it will find arbitraging opportunities, created by those without full information. Just like accountants are forever devising new portfolios that are tax efficient, and remain so until the respective tax collecting arm of the respective government gets fuller information and imposes taxes retrospectively. But even then, it’s always cat and mouse because the accountant is forever arbitraging (in a different sense).

My bottom line is that, the market will be deemed fully efficient in my eyes when its participants have full information at all times. The latter is hard to come by and even harder to sustain, hence, an inefficient market.

The truth is stranger than fiction

2006-03-31T10:17:00.000Z

What is the biggest threat to globalisation and an increase in social welfare? You and me!

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(NB: The above conclusion did not require any econometric regressions or cointegration. The magic ingredient is common sense, which, in all its assumed abundance, is not very common).

I have tried to create a picture board that gives hints for why we live in the turbulent times of today. By far the most obvious theme is selfishness on all counts and by all people. An absolute lack of the human will to do anything that is not rooted from self-interests. Ironically, Adam Smith's invisible hand falls apart because social welfare within countries and internationally is not increasing as a result (it is also invalidated by the existence of wikipedia). If anything, the world is reliably producing more disgruntled and begrudging people. Fear is alienating neighbours, let alone countries, greed is distorting markets, etc.

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The pictures individually reflect:
1. Immigration policy
2. Terror and the fear it generates
3. Protectionism (The picture shows America but old Europe is included)

All pictures are from the economist (http://www.economist.com/)

The old line goes: "Nothing is certain in life but death and taxes". I disagree. Accountants have successfully been avoiding taxes for many years and people seem to be cheating death when they survive situations that they feel should have killed them. Medical advances are also cheating death. My line goes "Nothing is certain in life but shit happening on occasion". However, this is not a covert advertisement by pharmaceutical companies hoping to boost their sales of anti-depression medicines. Therefore, I hasten to add that I recommend "taking shit on the chin and moving on with life", because "the numerous beautiful bridges, buildings and precipices are for admiring, not jumping off".

Have a mentally healthy, welfare increasing weekend!!!

Work ethic? What work ethic?

2006-03-28T09:40:00.000Z

You get what you pay for?

2006-03-23T15:10:00.000Z

See this interesting paper by Freakonomics (pdf) about how estate agents exploit informational asymmetry to their advantage and at the expense of their clients. I suppose this finding is consistent with the belief that there is a positive correlation between the amount of money we pay for goods and services, and increasing quality.

But, go into google and type in "you get what you pay for" and you'll get an endless number of sites, most selling pricey products. The truth of the matter is, however, that the statement "you get what you pay for", is as valid or as invalid as the statement, "you'll never get what you paid for", because both are dependent on an individual's expectations of the benefits of a certain product or service. Neither is fact!

In so saying, I appreciate that there is a far greater tendency for people to say that you'll get what you paid for than to say the opposite. This is a cashable concept that allows sellers to play with the reservation prices of their consumers, without needing to know what their consumers' absolute price ceilings are. People would rather believe that when they pay for something, it will be quality. For instance, when seeking financial advice, as a result of paying it, customers attach an immediate value to it. They then believe that it is superior to public-domain information and will, as a result, over-appreciate it.

What about paying for mediocre services and goods? I have come across TVs that are supposed to be high spec, but their technological attributes are apparently not noticeable to the naked eye? Then what good is the product? But the shopkeeper replies that my comfort should lie in the knowledge that I am paying for quality and I will get what I pay for. I should have asked him, "what about government officials who don't do their jobs properly?" I have already paid for their services in my taxes.

Granted, when dealing in areas where knowledge is limited, consumers in general would rather risk being conned under the guise of quality advice than listen to people who – they think – don’t value their own advice enough to charge for it. The flip-side to that is that there are many companies out there that will charge so that they can reveal to you that the sky is blue. After all, it is not illegal and you can – after you’ve been charged – dismiss the "advice".

Consider that in believing in always getting what you pay for, you’ll have a bias towards paying more for perceived quality, and when the quality aspect disappoints, you’ll have a bias for believing that it was one-off bad luck, as a form of self comforting. Essentially, as a consumer, you develop a habit of paying over the odds for goods and services, which then concludes that you're actually not getting what you paid for, you're getting less, an outcome that is a complete opposite of the initial intention.

Conclusion: Through consumers at large believing in always getting what they pay for, the opposite becomes true, as unscrupulous arbitrageurs appear to take advantage of this bias, something that is second nature to humans.

UK budget 2006

2006-03-22T16:26:00.000Z

“Everyone wants to live at the expense of the state. They forget that the state wants to live at the expense of everyone.”
- Frédéric Bastiat.

Some good news though, the Chancellor announced a sharp increase in the supply of very long-dated gilts. He said that he would direct the UK Debt Management Office to increase the share of gilts issued with maturities of greater than 15 years from just under a half, to just under two thirds of issuance. IT'S ABOUT TIME.

Finally we can see the UK government taking advantage of available funds from foreign (mostly Asian) savers like the US has been for a while, to raise its money. It's a win-win situation because it means less dependence on the country's already heavily taxed people and businesses.

Validation of the “uber-modern” economists

2006-03-22T12:10:00.000Z

Martin Wolf of the Financial Times writes today about "why a long-term bet on the stock market may disappoint", an article in which I find my recent post "the uber-modern economist" validated. Mr Wolf is an "uber-modern" economist.

Yesterday, I wrote about a possible over-dependence of old-school economists on fundamentals in a world where fundamentals are being punched left, right and centre with no reply. This is not to suggest that tried and tested economic heuristics should be ignored, but increasingly, I am wondering whether we [economists] are behaving a bit like historians in that we account very well for past events, and can sometimes come across as looking just into the past to tell us what the future holds, instead of looking at the past, today and utilising current knowledge to forecast the future based on our appreciation of the wiener process.

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Mr Wolf asks the question:

"…If the market has enjoyed a run of exceptional returns, do you conclude that the prospects are for continued good returns, for relatively bad returns, or for either equally?"…And he answers that the future is random.

But, Mr Wolf states that in its strictest form, the Efficient Market Hypothesis would suggest that stock markets are random. I don’t wholly agree with the efficient market hypothesis on the basis that arbitrage has existed because investors and fund-managers have been able to take advantage of some less random occurrings in the market. Additionally, it has been proven that through purchasing certain investment vehicles, investors seem to beat the market when it’s moving down, up, or sideways. This would not be possible in a world where the efficient market hypothesis was 100% effective.

The rule of thumb that investing in stock markets is less risky in the long-term than the short-term is nullified by Professor John Campell of Harvard University’s finding that:

"…if market returns were draws from the same random distribution every year, though the probability of losing money falls with the length of the investment, this is offset by the increasing size of possible losses over long periods"…which Mr Wolf and I both agree with.

In his article, Mr Wolf basically looks beyond fundamentals in explaining why equity markets have been so strong. He talks of cheap money, globalisation (something that I mentioned in my article), aggressively expansionary monetary policy, and more. In my last post, I stated that:

"The uber-modern economist accepts that it is rational to be irrational, and with this understanding, can better anticipate consumer and investor behaviour."

Mr Wolf mirrors this by stating:

"It is as if markets are expecting both inflation and deflation. That is not as irrational as it may seem."

The “uber-modern” economist*

2006-03-21T16:39:00.000Z

The case for adaptive economics in an evolving world.

Like in Information Technology where a short while is long enough for a graduate/professional to become out of touch with the "real" world, financial markets and the world in general have evolved so much that old-school economists can and have been known to be out of touch with the "real" world. And with the new phenomenon of globalisation, coming hot on the heals of, and made possible by, the computer-age and Internet revolution, adaptive economics is now synonymous with adaptive knowledge of I.T, vis-à-vis its relevance in the "real" world today. Because of these above-described advances, and the current global behaviour of consumers and investors, the uber-modern economist thinks outside the box of the home market and he/she looks at the global consumer/investor under one hat.

Joke:
Q: What happened to the fantastic trader?
A: He went to university and got an economics degree

The above joke holds true for old-school economists who, coincidentally, appear similarly endowed with risk aversion and constantly rational expectations. A view of a rational world and subsequent rational expectations made old school economists too practical, such that, when presented with an investor’s scenario of a falling asset price, the old school economist would have held on and taken the losses if he/she believed that in the long-run, the asset in question would exhibit a reversion of some sort; that fundamentals would restore things. But what about the birth of a new equilibrium? This differs from an investor or trader who would close-out the position as a kind of minimax strategy.

There was a time when economists were known to be rigid in their perception of the market and the world, just like there was a time when the world was thought to be flat. Sometimes schools of thought will be polar opposites and still have a large following, such as the proponents of the efficient markets hypothesis (financial economics) on the one hand, and those of behavioural economics (more recent of the two) on the other. An example of an area where traditional economic theory has failed to impress is that of development. Some outmoded principles in development studies are still taught in universities today, but it is the most adaptive economics – that which incorporates context – that is the most useful for countries that don’t fit the framework, i.e.: most poor countries. To quote Frédéric Bastiat,

"...economic truths should be arrived at by observing not only the immediate consequences of an economic decision, but also by examining the long-term consequences. Additionally, one must examine the decision's effect not only on a single group of people, or a single industry, but on all people and all industries in the society as a whole."

The new age economist and adaptive markets hypothesis.

>
What makes the uber-modern economist different? It is his/her appreciation for psychological factors and responses from within a market, taking into account the behavioural biases of consumers or investors, i.e.: the irrationality. The uber-modern economist accepts that it is rational to be irrational, and with this understanding, can better anticipate consumer and investor behaviour. Consumers and investors don’t always want more to less at any given time and it has been proven in many studies, such as this titled: brain battles itself to delay gratification. Increasingly, the consumer and investor psyche has become the new focus of analysis in a world where fundamentals are being blown out of the water, such as in the following scenarios: the UK housing market, the long US consumer boom, the US twin deficits, the conundrum that wasn’t a conundrum a.k.a the inverted US bond yield curve, the recent and sustained US dollar strength, etc.

Chris Dillow of Investors chronicle has suggested that economists often make bad investors because they often fail to see that processes last longer than expected, don’t fully anticipate turnarounds in macroeconomic data, overestimate speeds of adjustments and the market’s discounting ability. To me, the above are characteristics of old-school economists, the kind that still look at the Deutschmark-Sterling cross rate to estimate whether Sterling (£) is overvalued or undervalued against the Euro (€). He suggests that perhaps good investing consists not in being rational but by making the right mistakes. I add to this that if all investors behaved in a rational way, risk preferences would not matter and the market would be extremely predictable and boring. It is the uber-modern economist who champions this new understanding of irrational rationality and spearheads this new chapter of economics.

PS: It is encouraging to see that National Statistics have included items such as ipods into the basket of goods used to measure CPI inflation.

Reference: Economic schools of thought

* "uber-modern" economists can be young or old in age. It is the mind-frame that qualifies an "uber-modern" economist.

In the name of integration

2006-03-17T13:51:00.000Z

Those that thought up the concept of active immigrant integration thought they'd had a moment of genius. Let's look at the intelligence behind it.

What governments do to "integrate" immigrant communities

The UK version: You take a Britishness test that most British people (citizens and residents) would fail appallingly because of ambiguity and lack of relevance (to your daily life and ability to contribute to the country from a social and economic standpoint). I had a quick glance at the "standard" of questions and found a good (bad) example:

Q: "In the UK, how often do parents give their children pocket money:

a) Never

b) When they're good

c) Once a week"

This is a question in which all the answers are correct and wrong. But just in case you'll be taking the test soon, apparently the correct answer is (b). I am thoroughly flabbergasted. Surely the perceived correct answer to the above question depends on an individual's personal context. For example:

a) you're a broke parent

b) you're a rich parent, or

c) you're a tight-fisted parent

An example test can be found on the BBC website: "would you get a British passport?".

The US version: Profiling galore. Leave behind a retina scan, DNA sample, stool sample, piss sample, fingerprint, footprint, toeprint, probably even a print of you buttock cheeks, blood sample, probably even a sperm and ovum sample so that if any of your offspring turn out to be criminals, they'll know which immigrant spawned them (other than checking the respective criminal's birth certificate).

The Dutch version: Show a movie of naked women and homosexuality to potential Muslim immigrants, to make sure they understand the Netherlands is about tolerance.

More accounts of genius coming soon...

Racial differences in intelligence - the commentary that followed

2006-03-15T10:20:00.000Z

So the discourse unfolded over at Stumbling and mumbling as follows:

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Curious, your post merely proves that if someone is looking to be offended, they will be offended.
Actually to me the author seems to be underlining the point that the problem with the performance of black children in our schools is likely not because of inherent differences but because of cultural and/or institutional barriers, such as those you point out.
Posted by: Aceris March 13, 2006 at 12:17 PM

>
I do find your [Chris Dillow's] 'unworthy thought' a bit conspiratorial. The most obvious reason there is no research showing an intelligence diffence is that there is no intelligence difference. The main reason normally to be suspicous that you aren't getting the whole picture is when the conclusions are clearly at odds with what 'common sense' would tell you. In this case as they are in line with 'common sense' it seems odd to wonder whether they are only partial.
Posted by: Matthew March 13, 2006 at 02:17 PM

>
Ditto to Matthew. If a study showed genetic differences, it would be filed under "interesting but probably an outlier, more research needed". Think of the studies that appeared to show that homeopathy worked; they haven't been discredited, just diluted to insignificance by further studies which didn't show it working.
Posted by: Phil March 13, 2006 at 02:42 PM

>
To Aceris:
I have come across your comment "if someone is looking to be offended, they will be offended" many times within the context of people being unable to comprehend the experiences of others and as a consequence, the interpretation of their actions by other people.

>
Your comment would hold true were it, for example, just one case and one experience. However, many have found that in situations where offence has escalated to verbal and, subsequently, legal action, the accused more often than not states "if someone is looking to be offended, they will be offended." It's a get-out-of-jail-free card that is often used and understandably has the sympathy of others of the same ilk.

I have not misunderstood the article, on the contrary. I, like Mathew (comments above) find the 'unworthy thought' a bit conspiratorial. I agree with Mathew that "The most obvious reason there is no research showing an intelligence difference is that there is no intelligence difference."
My comments address the following question and its premise: "This only raises the question. If there are no innate differences in mental abilities between blacks and whites, why do black boys do so badly at school, in both the US and UK? Are black boys held back by teacher racism or by "black culture" or what?"

WHY DOES THIS SORT OF RESEARCH ALWAYS AROUSE PEOPLE'S ANGER? BECAUSE THE PREMISE OF THE ARGUMENT IS NOT SCIENTIFIC KNOWLEDGE OR FOR ANY OTHER PURPORTED REASON OTHER THAN TO ASSERT ONE RACE OVER ANOTHER. There have been papers published at PhD level in American universities that argue that Blacks are superior. This too is unacceptable!!!

At any given time and place, any time in the past and in the future, this sort of useless, self-fulfilling, prejudicial research will destroy rather than build on society, science, etc, regardless of whatever race the researchers are from.
I hope you get my point.
Posted by: Curious March 13, 2006 at 02:58 PM

'curious', given that Chris D has hypothesised that your explanation (teacher racism) fits the data, why fly off the handle? Part of me is morbidly curious about how you'd react to someone who actually _disagreed_ with you...
Posted by: Chris Williams March 13, 2006 at 03:14 PM

"why do black boys do so badly at school, in both the US and UK?"
Two words: welfare culture.
Posted by: John Hustings March 13, 2006 at 03:24 PM

To Chris Williams:
You wrote: "Part of me is morbidly curious about how you'd react to someone who actually _disagreed_ with you..."
>

I quite love a good debate/discussion. I don't believe in dogma. People can agree or disagree, like you can choose to disagree.

>
I responded to this question: "If there are no innate differences in mental abilities between blacks and whites, why do black boys do so badly at school, in both the US and UK? Are black boys held back by teacher racism or by "black culture" or what?"

>
My view is that the DIRECTION of the question suggests that the "proposer" believes in White intellectual supremacy over blacks, otherwise why ask "why do blacks do worse if it is not because they are intellectually inferior?"...or as Chris put it "If there are no innate differences in mental abilities between blacks and whites, why do black boys do so badly at school", which is the same thing.

>
The premise of this question is extremely racist. And as I said in my comments, maybe you HAVE to be a minority to see it.
Posted by: Curious March 13, 2006 at 03:33 PM

>
I'd like for John Hustings to please clarify his answer.
Posted by: Curious March 13, 2006 at 03:34 PM

>
And by the way, I read Chris' blog and have a link to him from mine. I am thoroughly into plain-good intellectual banter. However, I uncomfortable with this latest post.
Posted by: Curious March 13, 2006 at 03:37 PM

>
This may be of some interest:
http://anjool.co.uk/dissertation.pdf
I am saying no more, this issue is *such* a can of worms!
Posted by: The Moai March 13, 2006 at 03:41 PM

>
Curious,
A premise is "a statement presumed true within the context of a discourse". The only premise I can see in this post is that that black kids fare worse at school that white kids. Your own initial comment give anecdotal evidence of that.

>
You must be offended by something else. You seem to think that the way the question is phrased (its "direction") somehow favours the explanation that there is an innate difference in mental ablity. Is that it? If so, well, I think you're mistaken.
Posted by: Luis Enrique March 13, 2006 at 03:58 PM

>
It's amazing how a small grammatical tweak can make such difference. Curious takes exception to the phrase: "If there are no innate differences in mental abilities between blacks and whites, why do black boys do so badly at school?"What I could have said was: "Given that there are no innate differences in mental abilities between blacks and whites, why do black boys do so badly at school?" Until now, I wasn't aware that the difference between "given that" and "if" was great enough to make the difference between being a racist and a non-racist. Curious, I'm sorry if I gave needless offence. Blame my weak grasp of the English language.
Posted by: Chris (author of stumbling and mumbling) March 13, 2006 at 04:04 PM

>
To Chris:
I read a lot of your stuff on markets (page 42 of the Investor's Chronicle) and other stuff that you write here. The bottom line is that you don't come across as gramatically ineffective nor do you come across as offensive. As regards being racist or otherwise, the question posed comes across conspiratorial and - to me - suggests a predisposition that I obviously cannot prove exists but I cited as infered.Had you worded it as "Given that there are no innate differences..." I would still have offered my comments but there would be nothing relating to the premise of the question.

To Luis Enrique:Thanks for the English lesson on semantics. However, I will go a step further and say that the PREMISE" of a study into racial divides in intelligence is racist, IRRESPECTIVE of which race is undertaking it. Hence my comments "There have been papers published at PhD level in American universities that argue that Blacks are superior. This too is unacceptable!!!"
Posted by: Curious March 13, 2006 at 04:38 PM

>
Hey, think nothing of it (although I see you have work to do - a study is not a premise). But anyway, you find very act of investigating possible differences between the races offensive. OK then.
Posted by: Luis Enrique March 13, 2006 at 04:50 PM

>
To Luis Enrique:
You must surely be having a joke at my expense (which I don't mind). You wrote: "(although I see you have work to do - a study is not a premise)."

Even with your provided definition, I mean premise, not something else. I mean the idea that forms the basis for the research, an idea that is deemed reasonable by the researchers and faculty, i.e.: as a line of argument, hence the researchers probe into it to investigate. I mean premise.

You wrote: "you find very act of investigating possible differences between the races offensive."
If, as humans, we don't investigate unknowns then we won't have any advances. This is so in economics, pure science, etc. So I disagree with your statement because it lacks the context of this specific research that we are talking about, i.e.: "Testing for Racial Differences in the Mental Ability of Young Children".

The outcome of such research will invariably be:

1. Who’s better at sports?

2. Who’s smarter?

3. Etc,

4. Etc, etc.
I disagree with this kind of research in as much as I disagree with organisations or countries investigating the possible uses of chemistry for chemical warfare.
Posted by: Curious March 13, 2006 at 05:59 PM

>
"I'd like for John Hustings to please clarify his answer."
Seems pretty self-explanatory to me. Black people are too heavily reliant on welfare of all kinds. Welfare has hugely damaging effects on the family unit, educational attainment, behaviour, self-respect, and career aspiration. When you have a group of people continually demanding something for nothing (and getting it) there is no impetus to go on and achieve something for themselves.
Posted by: John Hustings March 13, 2006 at 07:24 PM

>
Okay... black boys generally perform worse at school than other ethnic groups, and according to this study there's nothing to really indicate that this is genetic, so therefore the question is what does cause it?

That's what I read into the post. No connotations of racial superiority or inferiority, just a plain question.

In a democratic state, if a particular group performs differently to the rest of society then we need to ask why, and look for ways to change it. Research into sensitive topics is one of the only ways we're really going to do that.
Posted by: Matt March 13, 2006 at 08:59 PM

The problem with such questions are that they're used by people with agendas to push their own prejudices...
As an Asian, I'm not offended by the research or the question, but rather by the intention or the agenda. If the BNP lot were to do the 'research' then it would clearly be suspect. Anyway, I think the problems are more social and cultural than racial. For example, Indian/Chinese boys and girls do better than Pakistani/Bangladeshi boys and girls. Though there is a further split with Bangladeshi boys and girls too - with the girls doing much better.

Class is frequently mentioned as a factor, meaning the richer have a bigger emphasis on education. So is the fact that some groups live in socially deprived areas and therefore don't have enough resources or the inclination to study.

Parents may not be too bothered about their kids doing well at school...
The sociological 'self-fulfilling-prophecy' whereby teachers assume that black students are not going to do well anyway. The list is endless. However, I believe its time we, as ethnic minorities, took charge of this problem, rather than blaming the system. How exactly that translates into action... well I'm still working on it.
Posted by: Sunny March 14, 2006 at 05:10 AM

>
To John Hastings:
Why don't you sign up to the KKK whilst your at it.
Your sweeping and heavily skewed views, which you made very arrogantly warrant no attention or merit at all. Perhaps the BNP would be interested in your views
Posted by: Curious March 14, 2006 at 09:32 AM

>
...And one more thing for Mr Hastings.
Coincidentally, in today's Metro, there's an advertisement for Mayor Ken Livingstone's conference to debate the state of race equality in London (I know this has nothing to do with the research paper above, but your comments have digressed away from the point).

In the advertisement, it states "40% of Londoners are from Black, Asian and minority backgrounds, but many are concentrated in low-grade and menial roles".

I think this is a fantastic opportunity for you to email race.equality@london.gov.uk and tell them that (I quote you) "Black people are too heavily reliant on welfare of all kinds", and "When you have a group of people continually demanding something for nothing (and getting it) there is no impetus to go on and achieve something for themselves."

I also encourage you to show your face an exhibit the same arrogant conviction that you write with. Who knows, you may be seeing the naked emperor that we think is clothed.
Posted by: Curious March 14, 2006 at 11:12 AM

>
Let's look at the question: "If Fred Bloggs is not greedy, how come he's so fat?"
Does this imply that Fred Bloggs is or is not greedy?

Neither and both - it all depends on the context.

The question could be angling at two types of response:
(i) Fred Bloggs is not greedy; he just eats the wrong things(ii) Fred Bloggs is greedy; it's the only thing that can be at the root of his fatness. Curious interpreted Chris's question:
"If there are no innate differences in mental abilities between blacks and whites, why do black boys do so badly at school?" along the lines of (ii) - even though I read it along the lines of (i) - that is, "if we're ruling out hypothesis a, what should we be looking at". So it's not just grammar, it's context, and the context you read it in will reflect your entire lifetime of experiences.

As for researching differences in intelligence between the 'races' - I agree it is wrongheaded but do not find it offensive. Viewing differences between groups as if they had racial causes is so ENDEMIC that I have given up hope that people will stop doing it.

Ask geneticists about the use of race as a biological category and they'll shrug their shoulders and sigh. There is more genetic variation within the so-called races than there is between them.
But as a social category, race clearly exists and affects people's identities, the ways the are treated, how they perform at school etc, jobs, where they tend to live (where they tend to have been born, in effect)...

Fifty years ago, the same sort of debate went on about innate intelligence differences between the classes. What am I saying? Fifteen years ago I had posh students at Oxford telling me that the working classes were obviously genetically less intelligent than the middle to upper classes and why couldn't I see this????
Posted by: Dander March 14, 2006 at 11:28 AM

It's Hustings, not Hastings.
And my point had nothing to do with "race". My point applies equally well to the "white" working class. Welfare culture has ruined many generations of people.
I don't see what you achieve by dismissing all those who wish to address racial disparities as "racist". You're the one who sounds "racist" to me.
Posted by: John Hustings March 14, 2006 at 10:38 PM

Pardon me Mr Hustings for getting your name wrong.

You conclude:"...And my point had nothing to do with race."
"My point applies equally well to the "white" working class."

But you started:"Black people are too heavily reliant on welfare of all kinds."
"When you have a group of people continually demanding something for nothing (and getting it) there is no impetus to go on and achieve something for themselves."

I think B&Q are having a sale. You clearly need a bigger shovel to keep digging with.

I wonder if you are going to take up my suggestion, i.e: go to the Mayor of London's conference on racial equality in London and voice your opinion "Black people are too heavily reliant on welfare of all kinds."

I think we all need our eyes opening so that we can see what you see. I for one would like to know what gives you the right to make such sweeping comments, if it is not because you are prejudiced - against blacks, or Asians, or the white "lower" class, or whoever. Prejudice, in principle, can be expressed towards different targets on a whim, be it sexism, racism, ageism, etc.
You might want to hurry, the B&Q sale ends soon.
Posted by: Curious March 15, 2006 at 09:57 AM

And another thing Mr Hustings...
You said:"I don't see what you achieve by dismissing all those who wish to address racial disparities as racist."

I say:If you want to do something constructive, let's all try to address why minorities are marginalised when looking for jobs, learning in schools, get harassed by the police, get followed around shops by security guards (regardless of how well presented and well spoken they are), get confused for the cleaner when they are queuing for a coffee in the office, get approached by unassuming white upper and middle-class for drugs for absolutely no apparent reason, AND THE LIST IS ENDLESS...

Let's NOT instead delve twice as much effort in investigating which race is smarter, because, as Dander above put it, "As for researching differences in intelligence between the 'races' - I agree it is wrongheaded".

That's all I have to say about this issue
Posted by: curious March 15, 2006 at 10:08 AM

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Racial differences in intelligence

2006-03-13T15:10:00.000Z

I have been forced out of a busy work schedule to deal with the outcome of research undertaken by an idle Havard economist and his comrade. Their paper is titled:

>
Testing for Racial Differences in the Mental Ability of Young Children

The abstract starts:

"On tests of intelligence, Blacks systematically score worse than Whites,
whereas Asians frequently outperform Whites."

...So yet another round of research and funding to split society into racial hate, because absolutely nothing positive can come out of such an undertaking.

After reading the paper, (full pdf here), Chris Dillow (Investor's Chronicle/Stumbling and mumbling) asks: "...If there are no innate differences in mental abilities between blacks and whites, why do black boys do so badly at school, in both the US and UK? Are black boys held back by teacher racism or by "black culture" or what?"

I have offered the following response:

I challenge you to pose your above question to an audience of mainly Black and Asian people and I can guarantee that it will cause offence. The fact that I see no expression of such an offence in your blog suggests that your readers are mostly white, which means that you may find a few sympathisers and even those ridiculous enough to try to rationalise your question, maybe even using economics to do it.

>
Well, let me help you out:"If there are no innate differences in mental abilities between blacks and whites, why do black boys do so badly at school, in both the US and UK?"

>
The DIRECTION of this question suggests that you believe in White intellectual supremacy over blacks, otherwise you wouldn't ask why blacks do worse if it is not because they are intellectually inferior? And I see no argument offering other reasons, such as the possibility of a systemic failure of their teachers to see beyond their own prejudice.

>
The premise of this question is extremely racist. In an audience of non-whites, it will not be construed in any other way. Maybe you have to be a minority to see it, but it's a fact. It is people with questions like these in their heads - teaching in schools with a predisposition - that worsen the stereotype and cause it to happen. I know of a young black boy who represented our country abroad in foreign languages and was by far the best performer in his entire borough and probably the next. He went to the best colleges in London only to be categorically told to his face BY HIS TEACHERS that people like him (black, ethnic minority) didn't belong in top universities. Some other teachers told him - ironically as an encouragement - that he would get in because he was black. There was no consideration of the fact that he was probably a genius, NO!! The teachers predicated the outcome of his education upon favours from the "system" because of his race, not because he was obviously and overwhelmingly intelligent and an excellent achiever. This is a perfect example because it presents a scenario of an obviously very gifted child being deliberately mentally degraded by the people that he looks up to, i.e.: his teachers!!!

>
I have many other examples from well achieved Blacks and Asians, people that I know personally, where their careers advisers in school tried to discourage them from pursuing science or maths related degrees for economics, etc, urging them instead to pursue music or NVQs (or whatever they call them these days). What I see is a career adviser who is acting upon their view that the minority child in front of them is incapable, purely based on thier race.

>
Because my examples capture both boys and girls from different schools, in different rankings of the league tables (top to bottom) and from different parts of the country, I am convinced that it is the teachers who are to blame (who are just white individuals in society who believe - actively or passively/denial - that whites are superior as a race and just happen to be teaching).

>
THAT IS THE PROBLEM. SO IS THERE A RACIAL DIFFERENCE IN PERFOMANCE? YES. IS IT DOWN TO INTELLIGENCE? HOW DARE YOU EVEN INFER THIS!!!

>
I'M DISGUSTED BY THE PERSISTENCE OF SOME IN TRYING TO ASSERT - COVERTLY OR OPENLY - A RACIAL PECKING ORDER IN MATTERS SUCH AS INTELLIGENCE. To make it as an ethnic minority, you need an opportunity, someone to give you a chance without the predisposition, the stereotype, the impatience, the intolerance, all that stuff that white kids cannot even begin to relate to.

Development rhetoric revisited

2006-02-20T17:24:00.000Z

On the 2nd Feb 2006, I wrote this post regarding Easterly's paper titled "Planners Vs Searchers in foreign aid" in which I pretty much commended the fresh angle to development economics.

...my views have changed slighly....

As the caveat on my blog states, "these are just [my] views with the caveat that reality is fluid", I have come across a counter-commentary that I was referred to by one of the readers on this blog, that bolsters some criticisms that I had but didn't mention.

The counter argument is provided by one Amartya Sen in the website titled: Foreign affairs.

So where did I agree with Easterly.

Generally speaking, these are the broad areas:

1. In the criticism of the continued use and teaching of outmoded development economics theory and analysis.

2. In the continued failure by planners to apply project management principles such as "post-implementation-reviews" and hence a failure to learn from the past.

3. The fact that on some general scale, some planner actors are just people with bills to pay and families to raise and so don't really care about development but need a job to survive and a development job is as good as any. This lack of passion affects the effectiveness of the entire system (systemic problem).

But Easterly has been duly criticised for "forgoeing the opportunity for a much-needed dialogue, opting instead for a rhetorical drubbing of those whom he sees as well-intentioned enemies of the poor."

...And also for the subtitle of his book (another thing that raised immediate questions in my head) :The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good. To this title, Amartya Sen responded in parenthesis that:

"As it happens, the empirical picture of the actual effects of international aid (which, incidentally, does not come only from white men, since Japan is a major participant in the effort) is far more complex than Easterly's shotgun summary suggests."

Do yourself some justice and read the worthy counter-argument that follows. I feel that Amartya Sen has made many good points.

Click on the following link: The Man Without a Plan by Amartya Sen

The real relationship: The West & poor nations

2006-02-10T12:15:00.000Z

Image from the independent newspaper

Today, an article by the Independent newspaper on conflict diamonds stated:

"The global diamond trade is continuing to fund vicious civil wars in countries such as Ivory Coast and Liberia, despite international efforts to blacklist stones from regions at war."

I think that today's publication brings us to the point where we can frankly discuss some blatant truisms and the obvious conflicts of interests in the lack-luster relationship between the West and poor nations. These are as follows:

Fact 1. Developed countries (DCs) have repeatedly stated that as a matter of principle, they will not deal with/do not want to be seen dealing with less developed countries (LDCs) that are either corrupt or violate human rights. This stance has been a major reason for withholding aid to LDCs and a major factor in the implementation of sanctions against "offending" countries. HOW NOBLE.

However, ....in opposite,

Fact 2. DCs are more than happy to ignore the corruption and violation of human rights where multimillion ventures in poor nations are concerned. Ironically, the worst forms of human rights violations and the most blatant forms of corruption in LDCs exist on the funding of these multimillion ventures. Examples can be found in LDCs that have rare/valuable commodities such as diamonds, oil, etc.

Conclusion:

1. DCs are not the saviours of LDCs, they are just as corrupt.

2. The moral high ground we very often take in DCs is extremely disingenuous and quite often costs many lives. The only difference between the actual rebel gunman and the developed country multinational is that the latter is a proxy doer, not the trigger man, but both are two sides of the same coin.

3. The truth of the relationship(s) between DCs and LDCs is that DC money is more important than LDC lives. WHY? Because we will not tolerate child labour and human rights violations in the west by anyone or any corporation. In fact, we would rather protest in our millions than see it happen in our own backyards to our children or our neighbour's children. Meanwhile, the big multinationals that employ hundreds of thousands of western employees (you and me) on the back of blood money from LDCs are more than happy to overlook child labour and human rights violations. Whether it be a child in the mines, it is the end product [money] that matters to DC corporations, not the means by which the end is achieved.

4. Finally, DC corporations do not run under the radar of the respective DC governments because they are typically very large and make obscene profits. The respective DC governments enjoy the hefty/windfall tax revenues that they collect from these blood money corporations. It follows that in so doing, the respective DC governments are seen to condone the violation of human rights and corruption that they so openly protest against in "campaigns to limit aid for the greater good". This is the reason why forums like trade talks, aid talks, etc, held in prestigious locations and on big budgets are extremely farcical.

All it takes to eliminate corruption, poverty, human rights violations, etc, is the human will by the perpetrators and the funders (perpetrators by proxy). WHY? Because if there is nothing to be gained from a certain type of activity, we as humans will abandon the idea and search for something gainful. For instance, if slave trade was found to be unprofitable at the time of its wake, it would never have happened. Pure common sense.

But what is really sad is that many of us will read this and just shrug it off because we feel powerless to act or because we [really] couldn't care about a stranger and his/her children dying in a foreign land. This is another truism.

Tired of development rhetoric?

2006-02-02T15:57:00.000Z

If you care about developing country problems but are also simultaneously fed-up with all the Live-8s, Millennium Development Goals and the like, there is a research paper that will leave you utterly satisfied that there is hope. Not everyone is lost in bureaucracy and vested interests. Some developmentalists have got it right!

The paper is titled: Planners Vs Searchers in foreign aid (click on title to download in pdf).
The Adam Smith Institute blog called it "refreshing," which it indeed is.

My review of it:
"I am utterly fed-up with all the media-hyped frenzy that is whipped up to promote celebrity in the name of helping the poor. Equally so, I am fed-up with all the summits that surmount to nothing, an outcome that is discernible before the actual event, preventable but not avoided. Professor William Easterly's paper Planners Vs Searchers in foreign aid comes at a propitious time. I feel encouraged."

Law of diminishing human rights

2006-02-01T13:21:00.000Z

In economics101, students are taught the law of diminishing [marginal] returns, which broadly states that after a possible initial increase in marginal returns, the marginal product of an input will fall as the total amount of the input rises (holding all other inputs constant). Though the "law" is far from universal in its validity, there are many good examples. For instance, if more of a variable input (as opposed to a fixed input), such as labour, is added to the production process, while all other factors are held constant, production reaches a tipping point where the addition to total output per unit of input begins to decline as the units of labour (variable input) increase.

Anecdotal evidence suggests that the benefits derived from having human rights [civil liberties] work quite the same way as the production process. How do I mean?

Consider the following example:

At some point in the history of human rights [civil liberty] law, there was an optimum relationship between the restrictions of this law and the social welfare enjoyed by a country’s citizens. By this I mean that for human rights laws to be enforced for the greater good, some humans must have their perceived rights limited by the same law for an outcome that benefits society at large. However, this is only acceptable when it limits the rights of criminals for the benefit of society.

However, in the UK (and other western countries), we are well beyond the optimum relationship between regulation that protects civil liberties and the actual benefit of that regulation that is enjoyed by the UK’s citizens. In fact, the relationship now appears to have adapted an inverse correlation, well beyond the "diminishing returns" relationship. At least with diminishing returns, each additional regulatory and executive action vis-à-vis civil liberties should add to the total social welfare, albeit on a diminishing scale. But, with an inverse correlation, each addition action by the executive to "ensure" civil liberties literally infringes upon the few remaining human rights in any society. A good example is the right to have a beard.

At this juncture, to remove any supposed bias in my commentary, I best state that I am not a Muslim or Indian and do not [currently] spot a beard. But I have noticed that the police (the executive) seem to have a placed a very high "intuitive" correlation between dark-skinned men with beards walking into public transport and terrorists. The literal non-intelligence behind this approach is ludicrously confounding, as it is done against a backdrop of many other men with all sorts of facial hair preference [and personal convictions] moving freely unrestricted, with or without bags.

These days, all you have to do to be suspected and possibly accosted under the terrorism act is forget to shave for a few days and attempt to use the London underground. It appears that as our societies get more advanced, we are regressing in the area of human rights. See the following example from the BBC website.

"
Travels with my beard
By Rajesh Thind

After the 7 July London bombings could growing a beard completely change the way people treated a British Asian? There was only one way to find out.

It was a week after 7 July and I'd just got on an east London bus. I was on my way to buy razors as I hadn't shaved for days. A couple of stops later a middle-aged Rasta guy got on, sat down next to me and asked:

"So how's it feel brethren?" "Erm, how's what feel?" I replied. "How's it feel now it's your turn to be bottom of the pile?" he said. We had a good chat, we talked about riots and muggers and bombs and beards. We had a right laugh. "Take it easy brother," he said as he stepped off the moving bus.

When I got to Liverpool Street and I went into the station to catch the Tube, I was stopped and searched under Section 44 of the Terrorism Act. It had never happened to me before and I had always felt perfectly at ease in the UK, my home. So I decided to find out whether the Rasta was right; had the 7 July bombings - carried out by three British Muslims and a Jamaican-born UK resident who had converted to Islam - changed British society and put me "bottom of the pile"?

If so, what would that mean in my daily life? Was I, a stubbly British Asian, now going to have to deal with some people fearing me for being the enemy within? Would the terrorists succeed in making us a more fearful, intolerant nation?

The only way to find out, I decided, was to grow my first proper beard, and so started my seven-week journey. The results were immediate and very intense. People were moving off Tubes to get away from me; I would sometimes have a whole carriage to myself. I felt under scrutiny. When I travelled to other places in the UK, I found other young British Asians who felt attitudes had also changed towards them.

One young man in Birmingham - a religious Muslim - said he'd been for a job interview and as soon as he walked into the room and the manager saw the colour of his skin and his beard he was told to "forget it" and sent away. But it was people in authority, whose role it was to be alert, who were the most suspicious. It seemed now I had a beard - and for the first time in my life - members of the Metropolitan Police thought I looked dodgy.

I wasn't sure whether the two were connected. So when I was stopped by police outside Downing Street, and searched yet again, I asked one of them the question: "Do I look dodgy?" The answer was a very definite yes.

"Would I look less dodgy without my rucksack?" I asked.
"Dodgy," he replied. "What about if I wore a suit?" "You'd look like a dodgy bloke in a suit," he said. "How about if I shaved my beard?" "Dodgy. Just face it - you look dodgy," came the disconcerting reply.

Over the seven weeks I was stopped and searched three times under the terrorism act. But it seemed absurd to me, I mean what does a terrorist look like? Do they all have beards and rucksacks? Does making sweeping generalisations make us any safer? No, said John O'Connor, who was in charge of the Met police flying squad in the late 1980s when London faced the threat of the IRA. He told me a terrorist will always do the unexpected and we shouldn't fall into the trap of having reassuring stereotypes.

But people were making generalisations and it scared me, especially when the Met introduced a shoot-to-kill policy. If an innocent, beardless, Brazilian man had been killed, was I even more of a target?

As the weeks passed the hostility towards me subsided, people sat next to me on the Tube again. I was grateful as I think what separates the average Briton from a terrorist is tolerance and respect for those who are different from them. I don't want to point the finger of blame at the public for how I was treated during those first few weeks as their fear was real, just like me they were living in a different reality for a time after the bombings.

But I think as a nation we are too practical to become extreme in this way permanently. I have been to different places in my life, but Britain is my home because you can be who you want. That is why I wanted to make my film, to acknowledge that important characteristic. After seven weeks my journey had finished and I shaved my beard off. I wanted to go back to being me. "

I wonder, which way is forward because we [society] seriously need a meaningful and purposeful direction, NOT the utopias in our heads from watching celebrity lifestyles all day or the fears in us caused by pure ignorance.

Monkeys at the office?

2006-02-01T10:14:00.000Z

Apparently, in the USA, 53% of workers say they feel like they work with a bunch of monkeys and 20% say they think their boss is a monkey. This is according to CareerBuilder.com's recent "Monkey Business" survey of more than 2,050 workers across the country.

When asked to identify examples of what co-workers did that drove them nuts, respondents offered the following: (in descending order)

10. The manager who tried to get employees in another department fired for eating bagels that were reserved for an event the next day.

9. The co-worker who constantly emails the person who is sitting right next to her.

8. The co-worker who sits in a crowded cubicle area and insists on putting every conversation on speaker phone, including the exploits of the night before.

7. The boss who cut his fingernails while standing in his employee's cube.

6. The co-worker who steals other people's food from the lunch room refrigerator and then acts baffled when asked about it.

5. The co-worker who changed his job title to look more important without approval from his boss.

4. The boss who swears at the top of his lungs and occasionally throws his chair or phone down the hall.

3. The co-worker who walks up and randomly scratches other people's backs.

2. The co-worker who was caught sleeping on the job more than once and would insist he was praying.

1. The co-worker who every morning would greet her fellow employees (before they had any caffeine) with, "Are you ready for another fun and EXCITING day?!"

Solution:

Of those who said their co-workers act like monkeys, 47% plan to change jobs in the next two years. But this implies that 53% are stuck in a rut (or just have inertia where their careers are concerned, at least over the next two years).

Some great advice for the global pool of labour:

"If your boss acts like Tarzan and your workplace is a zoo, it may be time to
join these [47%] workers in moving on to a better job opportunity."

...said Rosemary Haefner, Vice President of Human Resources, CareerBuilder.com.

The story of two cows

2006-01-30T17:10:00.000Z

I have come across this satirical humour. It goes like this:

>>>>

DUBAI SYSTEM:
You have two cows. You create a website for them and advertise them in all the magazines. You create a Cow City or Milk Town for them. You sell off their milk before the cows have even been milked to both legit and shady investors who hope to resale the nonexistent milk for a 100% profit in two years time. You bring Tiger Woods to milk the cow first to attract attention.

QATAR SYSTEM:
You have two cows. They've been sitting there for decades and no one realized that cows could produce milk. You see what Dubai is doing; you go crazy and start milking the heck out of the cows in the shortest time possible. Then you realize no one wanted the milk in the first place.

SAUDI SYSTEM:
Since milking the cow involves nipples the Gov't decides to ban all cows in public. The only method to milk a cow is to have a cow on one side of a curtain and a guy milking the cow on the other or to hire females and train them to milk the cows ... The debate is still going on.

BAHRAIN SYSTEM:
You have two cows. Some high Gov't official steals one, milks it, sells the milk and pockets the profit. The Gov't tells you that there is just one cow and not enough milk for the people. The people riot and scream death to the Gov't and carry Iranian flags. The Parliament, after thinking for 11 month, decides to employ ten Bahrainis to all milk the cow at the same time and so cutting back on unemployment.

LEBANON SYSTEM:
You have two cows. One is owned by Syria and the other is controlled by Hizbollah.

EGYPTIAN SYSTEM:
You have two cows. Both are voting for Mobarak!

AMERICAN SYSTEM:
You have two cows. You sell one, and force the other to produce the milk of four cows. Later, you hire a consultant to analyze why the cow dropped dead.

FRENCH SYSTEM:
You have two cows. You go on strike because you wanted three cows.

RUSSIAN SYSTEM:
You have two cows. You count them and learn you have five cows. You count them again and learn you have 42 cows. You count them again and learn you have 2 cows. You stop counting cows and open another bottle of vodka.

BRITISH SYSTEM:
You have two cows. Both are mad.

PAKISTAN SYSTEM:
You have 2 cows, though there are 500 people who claim that they belong to them because either cow may or may not have stepped on their land at one stage or has a link to their family farming history.

Several people will die as a result of this argument due to shootings. The govt claims the cows and says that they are govt property but offer no explanation and as the army will come along and take them, no one will query it.

All the proceeds of the milk will go in to the pockets of the 1 or 2 govt officials from whichever department they came from. If they sold the milk to local companies then they will have sold it for an inflated price and will have actually given less milk if any at all, and will have made up some 'official explanation' for this.

Though if the customer is external ...from the UK or US then they would give the milk AND cows and will be convinced to waive the fee as it will mean 'diplomatic relations' will exist and that they will be considered an 'ally'.
>>>>

Morals are cashable commodities

2006-01-11T14:41:00.000Z

Consumers don't often get rewarded for making right "moral" choices when allocating their limited resources to a range of products. Often it is the case that when we add attributes to our criteria for any products or services, it limits/narrows our options, and nobody likes to have fewer options than his/her fellow man. However, others do argue that in making the right "moral" choices in what goods and services we consume, "virtue is its own reward". I find this latter belief untrue in principle, but useful to teach in practice.

The concept of fair trade is an ethical as well as a moral one. Ethical for companies to support and moral for the consumers on the shop floor, who have the option to buy in favour of fair trade or otherwise.

I have my mind set in favour of fair trade and can't stomach the proposed wild goose chase that constitutes free trade (a matter I have discussed at length here).

However, there is an issue in the fair trade arena that threatens to nullify its benefit over the long run. The issue is that, fair trade products are differently priced to non-fair trade products (they normally cost more). Price discrimination is a common tactic used to segment the markets between the rich and the "no so rich", and in this case, fair trade products are priced to cater for the richer end of the market because they cost more.

The argument used to justify higher fair trade prices is so that poor third world farmers can earn a bit more money without compromising the profit margins of the large supermarkets selling the products (due to higher input costs). A deeper look at this, however, suggests that in addition to the luxuries afforded by the wealthy, supporting fair trade looks to be another. What about the lower middle class and below who, in the west, earn enough to support a poor farmer in a developing country through the purchase of his/her produce? It appears that incorporating pricing strategies in matters that are mostly driven by a noble intention to help the poor distorts the outcome and compromises the cause all together.

This raises the question:

1. Is the moral issue of fairness, especially where the livelihoods of other humans are at stake, another cash cow?

This I ask because supermarkets make margins for their "trouble" but there is no compelling evidence that supports a view that fair trade farmers are now happily living in a better deal world.

>
In terms of restoring the global wealth imbalance, fair trade is just but one small engine chugging along, one of the final frontiers in the "war against global imbalance". However, there is a compelling argument in favour of development but critiquing fair trade as a viable vehicle over the long run, given its vulnerability to exploitation. Read it here.

What are your comments?

Pricing pollution may hinder development

2006-01-04T16:39:00.000Z

When a noble principle can generate the wrong outcome

What good is the Kyoto treaty really?

To set a backdrop from which I can commence, I start by stating that I support a reduction in global warming. It is not fair that we (the current users of the world’s resources) maximise our utility at the extreme expense of our future offspring. What lies ahead for our future generations is a world of climate-related disasters, from El niño to whatever other calamities await. It is plain immoral (religion aside) to cast such a sinister die into the lives the future. If our great grand parents did to us what we are doing to our future great grand children, there wouldn’t be much of a world to live in today.

Now comes the economics…

The last twenty years of world economic development place us in a completely different context as our great grand parents. Today it is evident, more than ever, that everything in life has a price; even the air we breathe. Corporations have exhausted the old money making routes and now crucially have to be very creative to survive. For example, these days, the most advanced of investors can trade in volatility options, a concept that is not easy to grasp today (unless you are the trader), let alone 20-odd years ago. However, this is a fine example of the "right" kind of creativity that has made the world economy more formidable.

Looking at the "wrong" kind of economic creativity…

The Kyoto treaty is basically the machine that will transform the free air we breathe into a cashable commodity. This will come about in the following way:

1. We all (poor, rich, young and old) agree that industrialised nations need to reduce their emissions of greenhouse gases, principally Carbon Dioxide, over the next decade. This concerns us all.
2. Because some of the world’s largest polluters are also some of the most powerful (and also the most self-satisfying) they can and have objected to a scheme that collectively makes the world a better place for everyone, including themselves.
3. The outcome is that the proper objectives of the Kyoto treaty cannot be met. Instead, we end up with a treaty version that is watered-down to appease the bully nations.
4. The Kyoto treaty will then provide a complex system, which will allow some countries to buy emission credits from others (from around 2008).

The Western nations have already developed (as far as industrialisation is concerned anyway). China is now heavily industrialising, the effect of which can be seen on the commodities markets. Once the Kyoto treaty is fully in play, the world’s poorest countries will only just be starting their development or will still be somewhat stagnant and requiring a lot of room for finessing.

Given that the poorest countries are literally held back by the richest through market distorting trade barriers, and that rich countries taunt the poor ones with the prospect of unattainable free trade, what will happen when poor countries finally get their act together but find that they can't manufacture or industrialise because there is a cap on the total amount of world pollution and developed countries have all the pollution permits?

The only outcome for poor countries will be to buy permit credits, leased to them by rich countries, so that they are not in infringement of the Kyoto treaty. Poor countries have not got the money to lease permits from developed countries, and it is a well-known fact that it is far easier to enforce the law on the poor than the rich. In fact, in some cases, rich countries ignore internationally agreed law, or side step it to suit themselves. But the same rich countries will gladly point-out an attempt by a poor country to ignore international law and aggressively pursue the matter until the poor country has been brought to "justice" so that a bad example is not set. This is just one example of the manifest disequilibria in today's world.

The above situation can be likened to the current focus on China as a major (negative) risk to world economic growth going forward. This is (partly) through its effect on the price of oil and where that consequently leaves developed economies and their highly energy reliant consumers. Given that alternative forms of energy are not yet at the point where the world can migrate away from oil-junkie status, China’s rapid economic development, and hence it’s massive reliance on oil, is not being celebrated as the move towards a global re-balancing that it is, instead, one would almost interpret it as wrong because it's progress presents oil supply issues for developed countries.

>
Therefore, one can infer that when poor countries start to develop, like China has, there will be two huge hindrances from the west:

1. Trade barriers and
2. Having to buy a right to pollute from the stewards of the polluting licences(essentially countries in the west that can afford the licences and have already done their industrialisation (their share of pollution)).

The argument that will be used to enforce the pollution issue against poor countries will be that the environment is at stake. However, right now, somehow this same argument is not good enough for some developed countries to agree to it.

Conclusion:
Much like money itself is not the cause of evil, it is the greed for money that causes evil, the Kyoto treaty will not be the cause of the hindrance to economic growth in poor countries, but it will be the mechanism through which the personal agenda of developed nations will hide behind an emission law when it suits them, a move that will stifle the attempts of poor countries to break away from poverty following an economic development path similar to most western nations.

Being fully aware that poor countries don't strike many an analyst as prime candidates for rapid economic development, my conclusion assumes that poor countries would rather have the opportunity to develop lie somewhere in their future, rather than have their fate sealed tomorrow (figuratively).

Happy new year...and lame jokes

2006-01-03T17:20:00.000Z

Well done for making it this far, there are those who didn't. Spare a moment for them and count yourself lucky.

That done, here are two lame jokes that serve as a warning of what can happen when people take themselves too seriously:

1. Did you hear of the economist who dove into his swimming pool and broke his neck?
He forgot to seasonally adjust his pool.

2. ECONOMISTS do it cyclically
ECONOMISTS do it on demand
ECONOMISTS do it risk-free (in reference to the risk-free interest rate)
ECONOMISTS do it with crystal balls
ECONOMISTS do it with interest
ECONOMISTS do it with models
ECONOMETRICIANS do it if they can identify it. Applied econometricians do it even if they can't.
ECONOMISTS do it discretely AND continuously.
ECONOMISTS do it on Leontief's table.
ECONOMETRICIANS do it with dummies.

If you're sitting there shaking your head in utter disbelief at the absolute lack of humour in these two jokes, just think, it could be worse. You could have been the originator.

Have a prosperous 2006.

...regarding the DOHA round

2005-12-15T14:13:00.000Z

Well, pictures speak a thousand words. So I'll let this cartoon from the economist tell the story so aptly portrayed.

oh, what the heck. I'll add a few words from an article in the Guardian today:

"...Developing world economies today turned on rich nations at the World Trade Organisation talks in Hong Kong over their reluctance to open up farming markets."

"...Developing economies say the EU, US and other rich nations must cut subsidies to their farmers and tariffs blocking imports as part of a global free trade deal."

"...The World Bank added to the indignation expressed by the least developed countries over their treatment at the WTO meeting, saying there had been much talk about development but too little action. "

So what's new? I could have predicted this outcome and saved all that money and time spent at these meetings. It's no wonder the book-keepers won't take any wagers on the outcome of the trade talks. I'm not being pessimistic, I'm being realistic.

If those responsible for distorting world markets want to do something about it, it won't be because a trade-round made them. It will be because they want to. And from that, I can infer that they don't want to, regardless of the consequences, which they are well aware of.

Let's face it, this problem and its ruthless consequences are not the backyards of the perpetrators. From their cloud-nine perspective, they don't give a damn!!!

Inflation beating cartoons

2005-12-14T16:16:00.000Z

If only all economics could be taught this way. Imagine a world where financial economics, engineering, maths, etc could be taught to young people and kids alongside their favourite TV programs. Just imagine a maths cartoon after a dose of the Simpsons.

Well...

The European Central Bank, in cooperation with the national central banks of the euro area, has produced an informative cartoon titled "Price stability: why is it important for you?" for young teenagers and teachers in all the official languages of the European Union.

This tool consists of an eight-minute animated film featuring two secondary school pupils, Anna and Alex, finding out about price stability and learning about the "inflation monster".

Click on any link below to view the video:
Watch in Quicktime, Real player or Windows Media

Sourced from: Mahalanobis

Believe in Santa Claus?

2005-11-23T13:37:00.000Z

I equate believing in free trade like believing in Santa Claus.

Why? Because, like Santa, it was established in the stone-ages that the reasons why free trade doesn't work lie in its noble but utopian assumptions.

For instance, free trade is based partly upon the economic theory of the Heckscher-Ohlin model (H-O model), combined with a few other assumptions that delve into the shark infested waters of political economic policy.

What is the H-O model?

Generlly speaking, the model can be understood as follows:

"Relative endowments of the factors of production (land, labour, and capital) determine a country's comparative advantage. Countries have comparative advantage in those goods for which the required factors of production are relatively abundant. This is because the prices of goods are ultimately determined by the prices of their inputs. Goods that require inputs that are locally abundant will be cheaper to produce than those goods that require inputs that are locally scarce.
For example, a country where capital and land are abundant but labour is scarce will have comparative advantage in goods that require lots of capital and land, but little labour - grains, for example. Since capital and land are abundant, their prices will be low. Those low prices will ensure that the price of the grain that they are used to produce will also be low - and thus attractive for both local consumption and export. Labour intensive goods on the other hand will be very expensive to produce since labour is scarce and its price is high. Therefore, the country is better off importing those goods."

My contention with this model:

Well, I suppose that the HOS model - like many other economic theories - are for ideal markets where we have perfect information, perfect competition, perfect everything. Markets in which the market itself determines prices, etc. Sometimes, conditions are condusive for the HOS model to be seen to be holding. But more often that not, it doesn't.

Why? A quick stab in the dark would be that if the HOS model held perfectly, then the outcomes of globalisation would be all fantastic. The land and labour intensive countries would dominate that part of the market and the capital intensive (mostly western) countries would dominate that side of trade. Everyone would be a winner. However, globalisation is creating some segregation in the world. By that I mean that some regions appear to be left out and there doesn't seem to be a clear way as to how these isolated regions can be reintegrated and kept within the globalised system.

See the Leontief paradox. It just summises my point that in social science, there is generally too much assumption that the markets are rational, perfect, etc . Once political failure/agenda are considered, the economic models become disconnected from reality because they are not programmed to account for the "human condition" - a real stochastic element.

Conclusion:

A free trade world is a world without international trade tariffs or barriers, with free movement of labour between countries, free movement of capital between countries and no trade-distorting policies such as subsidies.

WOW, that sounds like the biblical paradise to me. Perhaps we should all stick to pursuing fair trade, which is far more realistic and achievable.

French riots; an egalitarian lack

2005-11-11T11:10:00.000Z

Full political and social equality for all. That is what the ideal society model should be based on.

Before I comment on the French riots, allow me to present a context.

The power of stereotypes that support prejudice comes, in part, from a more neutral dynamic in the brain that makes all types of stereotypes self-confirming. People remember more readily instances that support a stereotype, while subconsciously tend to discount the numerous instances that challenge it. For instance, on meeting in a bar, an emotionally warm and open Englishman, who unconfirms the stereotype of the cold, reserved Briton, people may resign themselves to think that he's just unusual or that he's been drinking.

>
What's my point?

>
The tenacity of subtle biases may explain why, over the many decades, racial attitudes have become increasingly more visibly tolerant, whilst more subtle forms of bias persist. When asked, such people say they feel no bigotry, but in an ambiguous situation, still act in a biased way, though they give a rationale other than prejudice. Such a situation is now visible in France, though it persists in many other countries, like ours, the USA, etc, sitting just under the surface, hardly visible but very feelable.

I have previously referred to this subtle bias as "undercurrent" in my previous posts. (see an example)

>
Why is it explosive?

Because the unfortunate recipients of subtle racial bias - that can be endemic in a "highly tolerant" society - have a difficult task proving discrimination.

The outcome is that subtle prejudice spreads like a virus and becomes embedded in society like it is today (institutions). When a situation like France's arises, it is merely a trigger to the stockpiles of many years of hurt and subtle maltreatment, consequences of which are - more often than not - poverty and its by products.

>
Before we examine the spec in our neighbour's backyard, let us examine the log in ours.

Happiness and utility

2005-10-21T16:07:00.000Z

Aldous Huxley wrote:

"Happiness is not achieved by the conscious pursuit of happiness; it is
generally the by-product of other activities."

Utility is:

"The value of that which is sought to be maximised in any situation
involving a choice."

Happiness and utility go hand in hand, i.e.: the more utility you get out of something, the happier you become.

I disagree with Aldous Huxley’s comment that in a conscious pursuit of happiness, one cannot achieve it. This is because when one consciously increases their utility, they derive more pleasure from it and subsequently become happier. Why else, if not to have more because it pleases you (hence happier) would one pursue more activities (which increases their utility)?

The basic underlying assumption here is that we wouldn't mindlessly pursue activities that don't confer some sort of benefit (there may be exceptions).

I think that happiness is a complex emotion. It revolves around relative – not absolute – equilibria. The theory of relative wealth provides a good example. It suggests that we are all wealthy as long as we are on the same wealth level. The instance an individual/society is proved to be wealthier, then despite that fact that our own wealth remains unchanged, we feel poorer/worse off.

Similarly, happiness revolves along the same axis; we feel happy but when we discover others who appear to experience "higher levels" of happiness, we then subconsciously engage a "relative scale" in our brains and we immediately compute that we can be happier because we see others whom we deem to be happier. Conversely, when we see others who don't appear to be as happy as we are, we compute in our minds that we have arrived.

My opinion is that if you want to be happier, you have to do things that make you happy and that invariably involves increasing your utility. If eating crisps or drinking beer makes you happy, then you pursue this to the nth degree. But naturally (the law of diminishing marginal returns) the more you consume of a particular item, the less utility you derive from it. By the time you’ve had your 10th beer, you will not be enjoying it as much as your 9th beer or 8th, right down to your 1st. Another example is, most people find that listening to the same piece of music over and over again during a day implies that each additional hearing is less pleasant than the previous one, at least after the initial stage of gaining familiarity with the piece.

This then implies that you should be engaging in other parallel activities that provide utility over prolonged periods of time and hence provide pleasure, joy, and happiness over a longer period. Such a pursuit is continuous and once it stops, we feel less happy (e.g.: consider a time when you pause to remember the "happy" times or the "good old days").

I think that those in the rural parts of poor countries probably have the purest and longest lasting kind of happiness. Why? Because their "relative scale" doesn’t change much over time, hence they are happier over longer periods. This contrasts sharply with we fickle westerners and western-minded folk. One item is barely in fashion before it becomes unfashionable to own it and with the quick turnover of what is fashionable so comes multiple opportunities for our happiness to remain intact or diminish somewhat. Some people are affected more than others but in extreme cases, children try to emulate fashion models to the point of self destruction. Of course all this is subconscious and it takes a lot of effort to consciously manage one’s own relativite positioning and crucially, what it means to us.

The representative heuristic

2005-10-16T11:12:00.000Z

The representative heuristic is what determines the reaction of people to others that are different from them. I.e.: after a report in the media that, for example, black people are x times more likely to commit gun crime (hypothetically), or that muslims are x times more likely to suicide bomb (hypothetically), the representative heuristic will have people generally expecting a random black person to shoot them (irrespective of the black person's context) or expect any random muslim to blow them up.

The representative heuristic is the essence of how society is institutionally prejudiced. It is formed from childhood when as children, we are taught to learn by association. For instance, we learn to associate dark clouds with storms so that we don't need a weather forecast to tell us what's coming when we see dark clouds. We are taught the predispositions and the prejudices of the grown ups. At that tender age, whilst still very impressionable, we absorb ideas like sponges. We hear the adults make comments about others, call names, make jokes, etc, that in our eyes seem acceptable as we grow up. As children, we don't know better.

A report by Jennifer Richeson of Dartmouth College in New Hampshire (USA) on cognitive neuroscience, reveals that brains are drained by hidden racial biases. The idea behind this theory of resource depletion is that the effort expended on suppressing prejudice depletes the ability to use cognitive control in subsequent tasks. To cite a few findings, the report states:

a)

"In the study, 30 white students were given computer test asking them to classify names as those of black or white people, and words as being positive and negative concepts...When viewing photos of black individuals, all the students' brains lit up in the frontal lobe area - known to be involved in cognitive control, says Richeson. In sharp contrast, this area did not light up in any of the students viewing pictures of white individuals. "It's pretty amazing," she says."

"... level of brain activity correlated very closely with poor performance in a test of thinking ability given right after a face-to-face interview with a black person. The researchers believe this indicates that the subject's mental resources have been temporarily drained by their efforts to suppress their prejudices"

"People with implicit racial prejudices are left mentally exhausted after interacting with someone from a different race, perhaps because they are trying to quell their feelings."

What this experiment does not answer, of course, is whether the prejudiced participants were striving to overcome their prejudices, or merely to cover them up. Dr Richeson remarks of her results that, there's a subtle, but powerful, difference between trying not to do the wrong thing, and building positive habits through friendships and cultural exchange, so that doing the right thing becomes the automatic response, one that does not require active damage control. Read the entire article here: New scientist

It is my belief that many are hijacked by the "system" too often, which explains the high levels of "control" exhibited in the presence of blacks in the study above. I do believe that the representative heuristic is responsible for the prejudices exhibited in today's multicultural societies. With so much information about different groups at hand, I'm inclined to think that prejudice is due to some associations embedded in our brains from childhood that are difficult to unlearn.

I have two questions:

1. Has the media helped perpetuate or alleviate the negative effects of the representative heuristic approach to life? (see this article for an example)

2. How do you think the above research can affect an outcome at a job interview?

Native Brits will be minority

2005-10-11T09:31:00.000Z

In Laban Tall's Blog, the blogger (UK Commentators) interprets the findings on the BBC's site and decides to that his opening paragraph in his article titled "Our Future" should start:

"These figures don't alter the big picture (that Native Brits will be a minority by the end of the century) but they do illuminate it rather well."

Though this is likely to be true, I wonder if Laban has considered that native Americans (America Indians) were actually almost wiped out by emigrating Brits and are now (many years on) not even remembered by mainstream America.

However, in sharp contrast to the native American situation at the time of the Brit immigrant, today’s immigrants do not bring with them weaponry to defeat and overthrow the locals. So I think the native Brit is safe unless he/she decides to leave - for whatever reason. Don't you?

However Laban concludes:

"So we see that 66% of recently arrived Indians are employed, but only 40% of Bangladeshis and 12% of Somalis. We also see that settled Kenyans, Ugandans, Zambians, Zimbabweans, Malawians, Malaysians, Zambians, Sri Lankans, even French, make up a greater proportion of the high-paid than the Native Brits. Perhaps the culture of the communities from which people come is actually more important in determining success than the dreadful racism of the natives."

Hmm, definitely food for thought.

Economist magazine blunders?

2005-10-10T12:08:00.000Z

Quickly loosing credibility in my eyes, publishing unworthy and thoughtless articles.

To cite a few:
1. Brain drain – America focus
This article actually states that:

"Well-educated people in America are the least likely in the world
to emigrate"

This to me is like stating that hungry people are the most likely to eat; stating the bleeding obvious. Why on earth would educated Americans emigrate? It is those from less developed economies that do economic migration. Surely this is economics 101 (basic economics for the non-economics mind).

2. Brain drain – Africa focus (click here for my reaction), (other reactions)

3. Investigating the police (click here for my reaction)

And the most recent:
4. Illegal immigration - Decapitating the snakeheads (06/10/2005)

I found the above article imprudent. Turning to page 18 to read the article on illegal immigration and I see this picture next to it.

Keeping in mind that pictures speak a thousand words, it then subsequently becomes irrelevant what else follows in the way of column inches. The message - intentionally or otherwise - has been understood or misunderstood (as the case may be). Before people see/read the rest of the article (if they even bother to), they are first confronted with the title "illegal immigration" then the image (above).

>
Ignorance is never a defence and can on occasion be enjoyed as bliss but to print an article about illegal immigration and place next to it a photograph comprising entirely of people from one specific racial group can be said to be – in the least – imprudent, at the worst anybody’s guess. One thing for certain is that it does not improve racial relations. It has about as much benefit on racial relations as having majority black traffic wardens. People are generally abusive when they get a traffic ticket, but to combine a "moment of madness" from the recipient of the ticket with a black face issuing it and one can imagine the first insult that pops into the brain. It starts with the letter N.

I remember a recent time in London when the topic of illegal immigration and asylum became very real and was in the news around the clock. It was around the same time when ethnic minorities were being looked upon as the "illegal immigrants". A few British born Asian friends of mine were called immigrants by a group of individuals who felt well informed and vindicated. Why did this happen? To answer the question, you have to ask yourself, what is wrong with the picture that follows the title?

It does not account for the diversity of illegal immigration. It therefore begs the question, what then is its purpose on print? >

The irony of the situation is that I have avoided all the reckless newspapers that spew out the editors' propaganda/predispositions under the guise of "information for the masses". I instead turn to well written, supposedly well thought out literature for my news consumption. I then blame the average Joe’s limited but voluntary exposure to "skewed" journals for his/her ignorant view on life. But it then turns out that I have found articles in the "better of the bunch" that perpetuate the average Joe's ignorance.

Newspapers, media, etc have a responsibility. How they exercise that responsibility is an entirely different story. The image that follows the text creates an impression on the brain that associates those within the photograph with the broad issue of illegal immigration. It is therefore irrelevant whether or not in this particular case those in the image are actual illegal immigrants. What is relevant is that in capturing the constructs of the "broader" issue, the photograph misleading. Hence, it follows to ask, why is the photo misleading? Is it there by accident or was it intended to provide a visual representation of the issue - which makes it misleading.

So when people of colour (black, Asian, etc) are randomly labelled as illegal immigrants in their local pub, getting upset at the perpetrators is getting upset with the symptom of the problem, not the cause. One can only suppress a symptom but it will remain a problem until the cause has been dealt with.

See article: Immigration once again.

The end of poverty

2005-10-09T01:01:00.000Z

Real player required, download here.

(Click here to view "The end of poverty")

IQ or EI

2005-10-08T21:47:00.000Z

This book sheds some much needed light on emotional intelligence (EI). There is a vast amount of literature that discusses the correlation between one's intelligence quotient (IQ) and earnings. The general consensus - it appears - is that the correlation is positive; as one's intelligence increases, ones earnings should increase as well (though I'm not sure about the proportionality of the increments in earnings. Does the learning curve apply?)

I put forward that emotional intelligence, that is, "the awareness of and ability to manage one's emotions in a healthy and productive manner" is far superior that booksmart IQ. The expression of EI indicates a broader intelligence or skill that involves the ability to perceive, assess and positively influence one's own and other people's emotions. I will go further to suggest that the correlation between EI and earnings should also be positive, over and above the established (though generalised) relationship between IQ and earnings.

Which is more important in life and business, how many academic theories one can regurgitate or one's ability to read between the lines (assuming at least average intelligence)? The former does not guarantee success, however, the second is in itself manifest success.

What do you think is more important EI or IQ?

Long live skype

2005-10-08T21:26:00.000Z

Couldn't have caught on soon enough. Voice over Internet Protocol (also called VoIP) was a bit ill-timed when it first emerged, your average consumer was running a 56kb/s internet connection that took long enough to load up a single page. One couldn't even conceive the thought of doing anything else over the internet because even the computers were simply not up to the job.

What's different?

These days the off-the-shelf, bog-standard computer is "beasty" (more capacity than the consumer actually needs) and broadband connections are two-a-penny. As with the "excess capacity" computer deals at very affordable prices, the broadband too is excessive in bandwidth.

And, globalisation is the turbo charger that can potentially save consumers telephone costs in the billions of dollars. Outsourcing to developing countries, which, coincidentally are the most expensive to call will not only save on the cost of operations (back-office or whatever), but will save on expensive phone bills through skype calls. If mobile phones (implying a network) are seen in the remotest places in developing countries then surely broadband technology (probably via satellite) should unsurprisingly be relatively easy to install.

I think the days of monopolistic landline companies are seriously numbered. I for one are using and enjoying the skype liberation. Long live skype, hopefully ebay bundling should propel skype even further.

Smoking and social welfare

2005-10-04T10:06:00.000Z

from http://www.zoot2.com/justthefacts/tobacco/index.asp

Should smoking be banned from public places?

I will start by taking the stance that we all have a right to do as we please with our lives. However, when our freedoms infringe on the freedoms of others then it becomes a fallacious argument to say that we have a right to do as we please.

Some economics - smoking and social welfare. Like the old adage "one man’s meat is another man’s poison", I will say, "one man’s utility is another man’s disutility". Social welfare is at its best when the allocation of the individual utilities within a particular society is Pareto optimal. That way, nobody is "living large" at someone else’s expense.

Smoking is a personal choice and is not illegal (well, smoking cigarettes isn’t). What surprises me is that the people who smoke actually put themselves through the rough and tough beginning, the initial stage when one’s body rejects the smoke. It is an unpleasant start at best, but for some, like me, it is enough of a deterrent to keep us away from cigarettes. People that smoke have actually put in the effort (in the beginning) to get used to smoking. It is their personal sacrifice, for whatever reason.

However, smoking in public places infringes on the rights of others not to smoke. Whilst the smoker wilfully ignores the health warning, "SMOKING KILLS" they impose the risks caused by secondary smoke on others, decreasing the social welfare of others around them. In fact, people that smoke in public consciously increase their welfare allocation at the expense of the welfare allocation of others. There is nothing polite or considerate about somebody walking in front of you (you can’t get passed them) smoking a cigarette, or worse still, a cigar. The smoke literally chokes you but the smoker wouldn’t care if you dropped dead. Is it selfish? Extremely.

I would like those that smoke in public to put up an argument that actually makes sense. Let them not say that it is their right because it is no longer a right when it infringes on the rights of others. Let them not say that it is their health because it damages the health of the non-smokers around. In fact, asthma sufferers are a case in point. They literally face immediate health risks in the presence of a smoker. All it takes for asthma sufferers is a whiff of smoke to trigger an asthma attack, not the whole pack of cigarettes.

How can a right to smoke override other people’s right and decision for better health? Surely, the smoker that complains about the restrictions to smoking in public places is complaining about a restriction to a fair share as opposed to a lion’s share of social welfare. Aren’t they? If I acquired a massive tree in my garden, at great personal cost, for my viewing pleasure, but my tree sheds ton loads of leaves into my neighbour’s garden (who has a paved backyard to avoid gardening), is my neighbour expected to live with the inconvenience?

We either all have rights or we all have none. The current situation is a manifest disequilibrium, but then again, society at large is a manifest disequilibrium.

Discrimination versus prejudice

2005-09-26T12:43:00.000Z

This refers to the article discrimination versus prejudice from Stumbling and mumbling.

After reading the article, I saw a comment that provided a case-in-point example of the divide in the school of thought regarding this issue. What saddens me is that those in the school of thought that seems to justify social negatives (as within this context, statistical discrimination) do it so passionately (as expressed in their comments) that it leaves you wondering about your neighbours. I mean, do people really think this way? Is it a majority thought? I surely hope not!!!

Example text from stumbling and mumbling:

"In practice, then, many instances of statistical discrimination are intellectually wrong. In particular, they exaggerate the differences between blacks and whites. Which raises the question. Is there a point at which intellectual error becomes a moral error? "

Example reaction comment to above article:

"The same figures will also show that a black/brown person is y times more likely than their white counterpart to carry out a racist attack."

To see the entire article, click here and leave your comments, it would be interesting to see the schools of thought have it out.

Risk aversion

2005-09-23T13:54:00.000Z

Is it ever the right time to take risks? If you’re risk averse, the answer will consistently have been NO since the day you could walk.

Without overcomplicating things, risk aversion can simply be described as preferring safer returns, even if they are on average smaller. A person with this trait would be unwilling to take risks unless compensated for additional risk (beforehand) by higher returns. An example; bonds.

When the UK housing market crashed in the late 80s to early 90s, those that caught the property market on the up where lucky, though some were just savvy investors. However, a few years on, there are those who believed that the market would crash again. I am surprised to find out from conversation that there are some individuals who, to this date (25 odd years on), are still holding out to buy at the bottom of the market. Their conviction has obviously been reinforced by the 2000-2003 housing market rally and now they are ever more intent on holding out to buy at the bottom of the market. However, those that bought in the early 90s, whether savvy investor or just "lay-man", are now quids-in (in the money) because almost 25 years later, the market has taken a different shape, some property prices having risen by around 150% over 25 years. The risk averse may well be bitter but they surely missed that boat.

Now with the property market in stagnation, there is now a stand-off between the buyers and sellers. Those who want to buy are frightened about buying at the summit of a very high "mountain" (and have very valid reason to do so) and those that bought are hell bent on making some money and so won’t sell.

Does the same context of risk aversion apply in this case for those waiting to buy?

One thing is for sure, the ride down the "mountain", when it happens, will be quick and recovery from it will take a long while (because once consumer confidence has been dented, it's like waiting for a knocked out boxer to stand-up. When he does is anyone's guess).

But, will the market rise any further?

Two years ago, the prospect of higher rises was laughable, but the market rose regardless. It would be unwise however, to base future price expectations entirely on historic data, especially in a the property market where a lot of the "traditional" relationships between indicators have been breached by more than anyone dared to imagine.

Is the risk averse individual vindicated this time around or is it simply a case of "it’s never the right time"?

Bond markets are doing pretty well, obviously driven by an element of risk aversion as bonds are supposed to be the safest assets to hold. But on the other hand, the FTSE all share index has risen by more than 10% since May, which implies that equity prices have been rising, a sign that investors are taking on more risk. These two facts provide two conflicting views about current investor sentiment.

Since one cannot foretell at what/which point to jump onto the bandwagon, one cannot foretell whether an investment will turn out to be a loss. The consolation is that financial markets are advanced enough to be termed as near efficient, which means that asset price action covers all relevant information. Those that take high risks (accept a lot more uncertainty) like in owning emerging market debt instruments, get higher pay-offs but can also make higher losses.

If you don't already own a house, would you buy one now?

The UK mountain (from housepricecrash.co.uk)

Of course I accept that you just want a place to live in and are not particularly interested in the investment side of it BUT buying at the high of the market gives you a higher mortgage debt burden until such a time (from now until 10-20 year on) that house price inflation erodes your debt in real terms.

Right now, the cheap/good deals are gone and all that's left is what is at the top of the market. Mortgage lenders have had a many good applications, have secured a lot of future income and can now be very picky (all signs that you are at the top of the mountain).

Would not buying now be termed as risk aversion or as appropriate prudence?

Beyond a certain level of risk, the returns begin to look rather uncomplementary to the downside.

Access to medicines

2005-09-21T11:41:00.000Z

See the page from "Make trade fair":

"Fourteen million people die from treatable diseases every year. Many of these lives could be saved if cheap drugs were available"

Regarding food production:

"Millions of poor farmers can't sell what they grow because rich countries are forcing poor countries to accept imports of cheap, often heavily subsidised, food. Rice provides a good example of the threats that poor farmers face."

"The EU's scandalous system of sugar subsidies and trade barriers has prevented many small farmers from working their way out of poverty and raising environmental standards. Reforms that lead to a sustainable sugar industry are urgently needed."

From Make trade fair

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Support ethical diamonds. If don't know what ethical diamonds are, there is an entertaining way to learn about it. Watch the music video titled "diamonds are forever" on Kanye West's website.

The economics of martial arts

2005-09-21T09:58:00.000Z

One can find just about anything for which to apply economic theory, for instance, martial arts.

When starting out in martial arts, you’re like a fresh business person without prior experience. Just like it is wise in business to take on manageable amounts of risk for an expected level of reward, in martial arts, one has to start at the bottom and as confidence builds, risk aversion diminishes (probably proportionally or even by more).

The learning curve - the time it takes for a person to learn a new task and perform it competently – can be steep or flat in both business and martial arts, but wholly dependent on the individual’s aptitude and attitude. In business, the reduction in time taken to carry out production as the cumulative output rises, is mirrored in martial arts by the reduction of time taken to execute a series of moves as your cumulative knowledge rises.

Of course, the longer you’re in business, you develop business acumen. This means that generally, the learning curve concept, which is based on the doubling of output, can apply. Broadly, a 70% learning curve means that the cumulative average time taken per unit falls to 70% of the previous cumulative average time as the output doubles. The cumulative average time per unit is measured from the very first unit produced. Similarly, the cumulative average time taken to "assimilate" new variations of martial arts and execute them successfully should fall to 70% of the previous cumulative average time as your output (total martial arts product) doubles.

Illustration:

Consider a man assembling flat-pack chairs from Ikea, having never assembled a chair before. He will take the longest time to assemble his first chair and his speed/efficiency will be very slow to start with. Once he has assembled a certain number of chairs (this dependant on his aptitude), he will discover ways in which he could minimise the time taken and still end up with a complete assembled chair. Soon, his production becomes more efficient and takes less time.

Similarly, in martial arts, the man starts with the basic kick and punch. At this point, this is all he can manage because he may well be very stiff (from not previously working his body in such a way), his ligaments may well be quite tight, which means that even his very basic kick is a poor one – no power, just a fling of the leg. After many repetitive classes, if the man is still attending martial arts classes (because this is the stage at which the first batch of beginners drop out, disappointed that they still can’t move like Bruce Lee - myopia galore), he finds that suddenly his product is increasing with less time taken. The previously known 1-2-3 step is now executed in one move and completed in a position that allows manoeuvring for the next set of moves. Attitude in this case becomes more in important than aptitude. The beginner then reaches a level where the learning is exponential. Suddenly the body (and the mind) is supple.

Achieving your first million is like achieving your first black belt. It has been said that your first million is the hardest to reach (effort and time); the same has been said for your first blackbelt. However, some individuals push further and are goal oriented whereas others are just happy enough to have reached the milestone and leave it at that. After 5-10 odd years in business, you know what works for you, your market, your niche, your risk preference, etc. Similarly, in martial arts, you have honed in to what style of fighter you are. Are you a kicker? Puncher? Or a combination? Can you grapple as well? Are you an all rounder? And most importantly, what is your physical (not mental) limititation as a person and how have you/are you working around it?

Inevitably and invariably, the businessman that survives the longest is the most well-rounded because it implies adaptability. Similarly, in martial arts, those who turn out to be the best (Bruce Lee) are the most well-rounded. Bruce Lee took concepts from judo, fencing, boxing, jujitsu, kung fu, etc, and combined them in a way that enabled him to fight different opponents because no two opponents are alike. Additionally, in combat, one cannot afford to be predictable. In business, what Bruce Lee did is known as strategy. Companies cannot afford to be predictable and their competitors are forever evolving.

Bruce Lee would have been a fantastic business strategist. He was famous for applying the statement below as one of his principles. He said:

“Become formless and shapeless like water. When water is poured into a cup, it becomes the cup. When water is poured into a teapot, it becomes the teapot. Be water, my friend.”

Being a successful strategist (either in business or martial arts) is a competency and I think that there is a direct, positive correlation between the best business strategists and the versatility of their approach to life (adaptability). You have to be able to roll with the ever-changing punches. However, the most adaptable people are not necessarily the most book-smart (though there is a required level of mental acrobatics for both scenarios), because adaptability requires a far broader and multifaceted (hence superior) level of intelligence.

For instance, as in business, there are those in martial arts that study almost everything but fall short in application. Their reasons for falling short of performance can be mostly due to unexpected stimuli but in the real world, businesses and opponents are not predictable.

If you are looking for a potentially successful business strategist, seek out those whom, from their career progression and lifestyle, have displayed the most adaptability. It cannot be taught at school and it speaks volumes about a person’s attitude, which has a bearing on their performance. Preferably, someone who is successful in any competitive sport (from chess to mountain climbing).

As a closing note, and at risk of sounding too geeky, martial arts even has production functions but the outcome of the equation is the successful transmission of energy from the attacker to the opponent. That energy has got to come from somewhere doesn't it?

"Energy transmission is a function of power generation. E = f(power).
>
Power generated is a function of speed, distance, firm footing (footwork), hip rotation, arm and body alignment"
>
...p = f(speed, distance, footwork, rotational force, and the correct alignment of the transmission vehicle)
>
Ok, that's quite enough.

Behind America's façade

2005-09-20T11:07:00.000Z

Dated Monday 19th September 2005, the Newstatesman tells a story that leaves many stones overturned. If you want to be in the know...

"The destruction caused by Katrina has enabled us to glimpse realities that are usually carefully hidden away. And what we discover is that New Orleans and Baghdad are not so far apart."
>
"The Facade was how we described the dividing line between the America of real life - of a poverty so profound that slavery was still a presence and of a rapacious state power that waged war against its own citizens, just as it did against black and brown-skinned people in faraway countries - and the America that spawned the greed of corporatism and invented public relations as a means of social control ("The American Dream" and "The American Way of Life" began as advertising slogans)."
>
"Behind the Facade, the destruction of democracy has been a long-term project. The millions of poor, like most of the people of New Orleans, have no place in the US system, which is why they don't vote. The same is happening under Blair, who has achieved the lowest voter turnouts since the franchise. As with Bush, this is not Blair's concern, for his horizons stretch far. Selling weapons and privatisation deals to India one day, preparing the ground for attacking Iran the next. Under Blair, MI6 ran Operation Mass Appeal, a campaign to plant stories in the media about Saddam Hussein's weapons of mass destruction. Under Blair, young Pakistanis living in Britain were trained as jihadi fighters and recruited for the first of his wars - the dismemberment of Yugoslavia in 1999. According to the Delhi-based Observer Research Foundation, they joined this terrorist network 'with the full knowledge and complicity of the British and American intelligence agencies'."

By John Pilger

Read the whole article: Behind America's façade

LDC migrants; the real story

2005-09-19T12:57:00.000Z

* LDC means Less Developed Countries

I have come across a report titled "Out of Africa: A migrant nurse’s story" by the New Internationalist Magazine based in Oxfordshire in the United Kingdom, that paints real truths about the people involved, the western world on the one hand and the developing world on the other.

For far too long we, in the west, have as a whole propagated amidst ourselves the propaganda about the desirability of the west to any migrant from a developing country, citing this collective conviction based on sometimes quasi other times pseudo-economic arguments, but failing to realise that the collective conviction is really the west’s self-absorbed view of itself, driven firmly by the view that the world owes the west, not the other way around.

This story of a Kenyan nurse who relocated to England and was accompanied back to her country by a UK journalist investigating the drivers of the difficult decisions the nurse had to make is a must read for anybody who prefers to be in the know, anybody who would rather live in the real world. A world where people don’t just emigrate to the west because they prefer to do so, but go to the west because they have to. I would certainly wish that the authors of the brain drain article I read in the Economist magazine would get hold of such facts before publishing another self denigrating article about economic migration.

Some points from the report:
1. Brain drain is a symptom of wider malaise.
2. The poor in developing countries would like jobs in their own countries. Emigrating is not the preferred option.
3. The west needs developing country professionals.
4. But the west [wrongfully] sees developing country education as inferior and exploitation abounds.

"…In that passport, crucially, a visa allowing her to enter Britain as a ‘student nurse’. Student - It’s a curious description for a state registered nurse with over 20 years’ experience in a wide range of fields including midwifery, family planning, community health, immunisation. A nurse, moreover, who has been a teacher of nurses. But in order to work in Britain, she must become a student again and do a three-month ‘adaptation’ course before she can start practising.

Nancy did her ‘adaptation’ at a private nursing home in the northern English town of Scunthorpe. Like many international recruits she was disappointed that she would be employed not in a hospital but in a nursing home. ‘I was hoping I might learn some new technologies,’ she says.

She was also surprised to discover that during the three months ‘adaptation’ she would be largely unpaid, though she had to pay for food and accommodation. ‘For the first 35 hours a week you worked for nothing. After that you were paid for overtime.’ According to the nurses’ union, the Royal College of Nursing, this is unacceptable. But it is quite common for migrant workers to be exploited in this way – especially in the private sector – and it does not appear to be actually illegal."
5. In hiring nurses from developing countries, the west saves in training costs about as much as the developing world owes in foreign debt (some $552bn).

6. Even with all the odds stacked against them, developing country migrants survive, much to their own benefit and to the benefit of their families back home through remittances, their respective countries of origin through consumer spending from remittances and their host countries through taxes and the training costs saved.

"…I’d walk around with two hot-water bottles to keep me warm – one strapped to my front and one to my back. She moved into a very small house that she shared with another nurse. Then one day, when the other nurse was away, Nancy slipped in the bathroom and injured her head. ‘I suddenly felt very alone. I thought: if I die here no one will know. "

7. The west has big responsibilities to the developing world for its counterproductive "assistance".

"…Its social and economic effects are clear to see. This has not happened overnight. The negative effects of IMF-imposed structural adjustment programmes and globalisation have been filtering through for many years. The public services have been ‘retrenching’ workers by the tens of thousands since 1993.

But in the 1980s and 1990s – when commodity prices collapsed and debt soared – African governments had to cede control over their economic decision-making in order to qualify for World Bank and IMF loans. Conditions attached to these loans undid much of the progress in public health. Food subsidies were scrapped, health budgets slashed and services privatised.

‘User fees’ were introduced for health services that were previously free to patients. The capacity of African governments to cope with the growing health crisis was weakened. The life expectancy of Africans has fallen by 15 years."

8. Ironically, despite the raw deal, the poor are endlessly giving.
"…When she [the nurse] gets back to Kenya [her country of origin] she wants to set up a health clinic in a poor district which has none."

9. While brain drain is an issue, internal resolutions cannot be met because of – again – the west.

"…While the emigration of health workers is undoubtedly making things worse, Nancy and I are hearing another story as well from nurses we talk to. They say that there are a great many unemployed nurses in Kenya. Most are recent graduates. ‘I find that hard to believe,’ says Nancy.

But Dr Francis Kimani, a spokesperson from the Kenyan Ministry of Health, confirms that there are around 5,000 new unemployed nurses in the country. ‘It’s a disaster,’ he says. ‘All the good brains are leaving because they are promised better salaries and working conditions in the developed world. And we can’t employ new ones because of an employment embargo set by the IMF.

The plot thickens when a spokesperson from the World Bank in Nairobi says: ‘The Bank has not put any embargo on recruitment of nurses or civil servants in general. The overall level of wages and salaries bill is an issue though, and the IMF has been discussing with the Government how the wage bill could be contained."

Conclusion:
It is time we gave rest to this issue any many others like it. The facts are available for all that are interested to see. Unfortunately, many would rather bicker for months and years with little facts and a lot of agenda.

The message for the west is do unto others as you would have done unto you. The current actions beggar belief.

..............Well done to the New internationalist magazine for this wonderful piece......................

Also see the Secret life of the office cleaner by the BBC.

"Britain's cleaning industry is worth £9bn - but the immigrant cleaners doing our dirty work are increasingly living in a secret world of abuse, intimidation and illegality."

The shaming of America

2005-09-09T10:15:00.000Z

I will start by saying that racism isn't always conscious. It doesn't always happen in one ceremonious or defining moment, but we (in the community) pretend that we live in an egalitarian society. And for that pretence, some will argue with evidence as clear as a sign post.

This week The Economist magazine redeems itself by standing in the middle. The article titled "the shaming of America" carfelly avoids claiming a racist motivation for the poor response by the US government and even tries to apportion some blame to the supposedly "nonchalant" majority black inhabitants of New Orleans. However, the article also identifies crippling incompetence by the federal government, the kind described by Paul Krugman of the New York times.

Within the article, I find a question that I have come across a lot within the last few days. Would the response to New Orleans have been any different had the inhabitants been white?

America is by large a majority white country, which means that the "system" is basically run by whites (simple law of averages). Given that it is not uncommon in society to find tacit favouritism within groups of the same kind (religion, race, sex, etc), I am inclined to think that a system run by a majority group would favour those who belong to it than any other groups. I hold this theory true for a mojority Chinese, Indian, Black, or other group.

However, what differentiates prejudice from the simple benefits conferred to a specific group by virtue of their larger numbers, is the product of their actions. Put differently, the fruits of their labour. If the majority group (whichever one) acts in a way that alienates, marginalises or sidelines the minority groups, then quite simply, prejudice is firmly on the driving seat. From this understanding going forward, it is then irrelevant how prejudice is subsequently manifested.

So do I think the response would have been different had the inhabitants of New Orleans been majority white? I certainly do!

To quote a comment from Freakonomics:

"If it were even mentioned [that] there was a possibility of 50,000 white people drowning and dying of hunger and thirst, don't you think they [US government] would have organized a massive house-to-house search in New Orleans the very next day and run by the Federal government and the pentagon?"

The article the shaming of America starts:

"EVEN America's many enemies around the world tend to accord it respect. It might be arrogant, overbearing and insensitive—but, by God, it can get things done.
Since Hurricane Katrina, the world's view of America has changed. The disaster has exposed some shocking truths about the place: the bitterness of its sharp racial divide, the abandonment of the dispossessed, the weakness of critical infrastructure. But the most astonishing and most shaming revelation has been of its government's failure to bring succour to its people at their time of greatest need.
The finger-pointing is already under way, with the federal government blaming local government and local government blaming the feds. But if America is to avoid future catastrophes it needs to do more than bicker."

Hurricane Katrina responses

2005-09-08T13:29:00.000Z

After my recent post on hurricane Katrina, I have since found many bloggers and journalists who share the same view (different means in some cases but the same result).

Let's examine some examples:

1. Perfect.co.uk says:

"It’s clear that no one in the vicinity of New Orleans is serious about organising a relief or a rescue. I hope I’m wrong, but it now looks as though the ‘lawful authorities’ in Louisiana are about to ‘do a Fallujah’ on whoever remains. This in response to reports of lawlessness that media outlets have so far been unable to corroborate with filmed footage. Is the flooded city really a nest of outlaw snipers where no policeman can safely go?

God will sort the dead, perhaps. I wonder if God’s a racist. Many of his followers seem to be. If not that, the best that can be said is that those in charge are disordered, in a state of panic and reacting to rumours rather than facts. Expect the worst."

2. Boing Boing says:
"The poorest 20% (you can argue with the number — 10%? 18%? no one knows) of the city was left behind to drown. This was the plan. Forget the sanctimonious bullshit about the bullheaded people who wouldn’t leave. The evacuation plan was strictly laissez-faire [less government interference]. It depended on privately owned vehicles, and on having ready cash to fund an evacuation. The planners knew full well that the poor, who in new orleans are overwhelmingly black, wouldn’t be able to get out. The resources — meaning, the political will — weren’t there to get them out."

3. Paul Krugman of the New York times and a well respected Economist says:

"Thousands of Americans are dead or dying, not because they refused to evacuate, but because they were too poor or too sick to get out without help - and help wasn’t provided. Many have yet to receive any help at all."

...and...

"Each day since Katrina brings more evidence of the lethal ineptitude of federal officials....Here's one of many examples: The Chicago Tribune reports that the U.S.S. Bataan, equipped with six operating rooms, hundreds of hospital beds and the ability to produce 100,000 gallons of fresh water a day, has been sitting off the Gulf Coast since last Monday - without patients.

Experts say that the first 72 hours after a natural disaster are the crucial window during which prompt action can save many lives. Yet action after Katrina was anything but prompt. Newsweek reports that a "strange paralysis" set in among Bush administration officials, who debated lines of authority while thousands died."
>

4. The BBC says:

"The only difference between the chaos of New Orleans and a Third World disaster operation, he said, was that a foreign dictator would have responded better. It has been a profoundly shocking experience for many across this vast country [USA] who, for the large part, believe the home-spun myth about the invulnerability of the American Dream."

5. Perfect.co.uk also says:

"The commander of the Louisiana National Guard certainly knows his mission (“to take this city [NO] back” in the aftermath of Hurricane Katrina. “This place is going to look like Little Somalia,” Brig. Gen. Gary Jones, commander of the Louisiana National Guard’s Joint Task Force).

...the US government now seems to have woken up to the fact that racist weekend warriors don’t necessarily make the best humanitarian relief workers and is also sending in professionals from out of town.Unbelievable."

6. Harry's place in his post Katrina evaluations says:

"Race and (especially) class still matter in this country [USA], as we are reminded rudely by events of this nature."

Well there you have it.

Immigration once again

2005-09-08T09:03:00.000Z

As usual on this issue, no economics, just noise. Actually, it's not so much an issue but people shifting goalposts, suddenly becoming unsettled, etc, all because the cause of the restlessness has not been dealt with.

Complaining about immigrants and even going further to say that they cost taxes (as seen on some papers) when they actually pay taxes and most don't even have access to the welfare system, reveals an undercurrent that has no economic or statistical backing, no empirical backing, just arbitrary reasons for complaining so vehemently about immigrants.

A while back, I watched a Dimbleby show on the BBC where I learnt - to my surprise - that at the time, around 50% of economic migrants into the UK were white American female professionals. It therefore comes as no surprise that this report reveals that there are more American migrants living in Britain than Bangladeshis. However, I also do remember that before Dimbleby revealed the fact (which caught-out many on the panel and the audience with their skewed numbers and skewed thinking), the argument was meandering around race. People came just short of calling it a race thing. But as I remember, Dimbleby did ask the question and somebody (whom I won't mention) confirmed that it was. The responder then went into some nonsense about "integration" or lack thereof as his reason for blatantly citing race as the undercurrent for his argument.

Call a spade a spade, I always say!

We keep releasing report after report on the effects of immigration, etc, but the economic and social pros and cons have been in the public domain for a very long time. You cannot find a sound economic argument, for instance, which will suggest that immigration is hurting the economy. And I am of the view that (like Brazil) the fusion of cultures creates more interesting lives. London is an interesting place with its diverse music, food, etc. So who are these boring people who would like to water down the cultural fusion?

I once read a newspaper poll about a random street survey on immigration. The public was asked what percentage of the population they thought comprised of black people and to my surprise, the average response was well above 20%! That was so shocking given that the Office for National Statistics has correct information, free for everyone to access, that places the total ethnic minority population at just under 10% and in that 10%, we find further breakdown into very small percentages, with Black people coming at around 2%. However, the average Joe will not go to National Statistics to get the facts, he will read skewed reports and listen to agenda-driven politicians and then regurgitate the same wrong thinking without giving it a second thought.

So, given that:
1. Immigrants contribute more to the economy than they cost.
2. A noticeable percentage of the immigrants (though not viewed under this label) are American.
3. When listening/reading on immigration, all we see and hear is about Eastern Europe and ethnic minorities, not the Americans, or Australians, etc

What is the real issue then?

The discussion on immigration is down to:

"more of that lot please, and less of those people. Don't ask why (go figure)".

If you dispute this, read up on the policy and do some maths (using statistics), the devil is in the details.

To quote Chris Dillow from stumbling and mumbling:
"...This doesn't mean there are no arguments against immigration -there are. It's just that the best arguments aren't economic ones."

In writing the above, Chris Dillow was defending his very valid economic point in favour of free immigration. To quote his comments:
" If the "national interest" means anything at all, it can only be the sum of individual interests. If I choose to employ, say, a Nigerian, it can only be because doing this is in my interest. If no-one else's interest is affected, the national interest is enhanced by my decision. Free migration of labour is therefore in the national interest."

"...A third possibility is simply that third parties just hate the idea of immigrants, so their welfare falls when I hire the Nigerian. But politicians would never pander to such racism, would they? "

Well done Chris Dillow, you're asking the right questions.

100% for social justice?

2005-09-07T14:19:00.000Z

The foundations of my principle "100% for social justice" have been vigorously shaken by the rude realisation that it could well be a piped dream. Social justice is impossible to enforce in society if people refuse to speak up for themselves and each other. Social justice relies heavily on collective action from a group of people doing the right thing in whatever circumstance. It cannot be left to one individual because in that case, the individual is seen as trying to be a hero and the offence being committed could well be redirected and channelled at this one individual.

I think that my stance represents the ideal response for an ideal society but the latter is far from ideal. In fact, if ideal bit society in the backside I don’t think society would notice, let alone know.

Why?

Because society is full of people who are firstly too scared to stand up for what is right and then secondly, too selfish to think beyond themselves. However, unfortunately for these selfish people, what you're avoiding may find its way to you. Then you will want some help but it will not be forthcoming - as you'll already know having been of the selfish demeanor yourself.

London city was full of bus related crime (crimes committed to passengers on buses) before the city introduced congestion charging (premium pricing to deter drivers that don’t need to drive into the city). The outcome is that roads are clearer but the number of people on the buses has increased, which increases the number of potential targets for crime. These days, you can even get "happy slapped", which is basically a group of youths with a camera phone selecting a random member of the public and assaulting them (slapping them) whilst recording this crime on their camera phones. How sick is that? These juveniles slap anyone.

I blame society for the extent to which these crimes have stretched. These youths are in their mid to late teens which speaks volumes about parenting. I will go further to blame society for doing nothing when someone is being victimised in their presence. I don’t mean take the law into your own hands, but people are too scared to be seen calling the police, too scared to speak out, to scared to do anything other than wish and pray that they are not next. Outrageous!!!

If you don’t act today, tomorrow you’ll be the one on the receiving end and others, just like you, will be watching doing nothing. So the juvenile criminal wins. The juvenile assaults anybody in your presence and walks off with no consequences!! This makes me sick in the stomach.

What should the public do?

When a single person stands up and instructs the juveniles to stop committing the crime, the whole bus should support this by also instructing the criminals to stop.

People should be vigilant in supporting each other as they wait for the police. But what happens instead is the police arrive to one seriously injured victim and many witnesses, which is fine but these witnesses can – in the mean time - deter the extent of crime by simply standing united and asserting instruction at these juvenile offenders.

In society today, people will just watch, and there is a direct positive correlation between the extent of crime being committed and how far away from the victim people will stand.

A woman colleague of mine was attacked on a crowded train but nobody did or said anything. Nobody but an old man who was – as usual – left to assist this woman on his own. He was left to be a "hero" and suffer the consequences of doing the right thing whilst everyone else climbed over each other trying to hurdle away from the ongoing offence. Luckily, the old man reported the incident to the police and when the criminal was spotted on the train again by the woman whom he attacked, there were police on sight to arrest the criminal. But, on the day that she was attacked, I remember that she was seriously hurt.

I really don’t know what to make of our existence in society. In trying to mind our own business, the offenders take root of society and we then have to subsequently change our patterns to avoid being victimised. A real infringement on our civil liberties.

If you’re not part of the solution, you are part of the problem.

By not assisting the victim, you perpetuate the "easy-target" mainframe, which means that next time, you’d better watch out! You can either be free or live in fear. It seems Londoners prefer to live in fear and this decision means that those of us with enough courage to speak against crime can't because we KNOW that we don't have the backing from anybody. In fact, the minute you speak out, people move away from you so that they don't receive what is perceived to be coming your way - more crime.

Hurricane Katrina reveals racism

2005-09-05T09:37:00.000Z

Natural disasters should unite people, not create racial tensions. This is because, in the face of an indiscriminate calamity, it is useless and irrelevant for people to be blatantly trying to enforce some tacit superiority over others.

The article: Black People "Loot", White People "Find" reveals the racist predisposition of the US media. Thankfully, not all media is this way inclined, the British media tell it like it is.

Beyond the media, there is the government, represented by its officials. When one of the people in charge of the ex post response was asked why - if after the Tsunami food aid was dropped in two days - it took them five days to action a meaningful response for New Orleans (their own country), the man just went red in the face. That speaks volumes for itself.

"Repeatedly, reporters refer to white victims clinging to life as "survivors" and "residents," while African-American victims doing the same things are called "looters" and "criminals." Disproportionately, the humanizing, "heart-breaker" stories feature white victims and families. Meanwhile, images of African-American crowds are almost invariably in the background during discussions of "criminal activity."

It took the US a few days to deploy troops in Iraq in their tens of thousands. Not only can the US foretell natural disasters with some reliable degree of accuracy, but I will go further to suggest that the government has enough demographic statistics to have a reliable estimate of how many poor people would have been unable to leave New Orleans. Unfortunately, these poor people are mostly ethnic minorities and this too would also have been known.

So, now that rampage has begun, another predetermined outcome is played. Instead of sending food to obviously alleviate the cause of looting crime (hunger, survival) the US government is sending well-fed troops to people who are extremely desperate to aggravate the situation. A gunfight is obviously inevitable.

I don't believe that a government can be this daft, I am more inclined to call a spade a spade. I thought this sort of blatant discrimination was a thing of the past.

More comments from other sources:

1. US government Tells the Red Cross to Stay Out of New Orleans

"Judging from the Red Cross's explanation..., government apparently feared that the Red Cross would deliver relief with too much success. So, government decided that letting people die was a better course than risking any success that the Red Cross would likely have at providing disaster relief."
"According to this Knight-Ridder report, the Red Cross isn't alone among well-respected private relief organizations kept, by government, from saving lives in New Orleans. The Salvation Army was stopped from carrying out a planned rescue operation. Here's the key part of the report:
As federal officials tried to get some control over the deteriorating situation in New Orleans, chaos was being replaced with bureaucratic rules that inhibited private relief organizations' efforts."

2. Poor, old and black main victims of hurricane

3. Lost in the flood

4. Disaster aid raises race issue Critics say poor blacks not considered in planning for emergencies, evacuations.

5. After Failures, Government Officials Play Blame Game.

6. Katrina: an economic blow worse than 9/11

Some facts about New Orleans:

1. New Orleans population estimated at 462,000 (35th largest US city)

2. About 67% of the population is classified as black (African American) compared with 12% for the US as a whole.

3. The unemployment rate is close to the national average of 4.9%

4. Almost 28% of the city's population is below the poverty line.

...As written in the FT

Corruption: The West Vs Africa

2005-09-02T11:15:00.000Z

Well another one bites the dust. Another large, respectable and trusted organisation, a large employer that would have many applicants longing for an opportunity, another company with clout is once again caught with its trousers down. KPMG is the newest addition to the list.

My point being that the next time Africa (or any other developing country) comes up as a discussion, let him who is without sin cast the first stone (John 8: 7). Let those who live in a perfect, crime free world, where everyone and every organisation is trustworthy cast the first stone.

…. I think I hear the footsteps of critics walking away. I hear the sound of rocks being dropped back onto the ground from where they were lifted.

Hypocrisy is the trait that will hinder EVERY single society in EVERY part of the world from true progress. From the enforcement of the law, to healthcare, to jobs, to clean streets, to security, to aid, to etc, hypocrisy stands as the single most important mountain of hinderance.

When making your next decision, from this moment on, think of the bigger picture, think of your real reasons, think of real justice, look beyond yourself and if we all did that, the world will be a better place.

I'm Starting With The Man In The Mirror,

I'm Asking Him To Change His Ways,

And No Message Could Have Been Any Clearer,

If You Wanna Make The World A Better Place,

Take A Look At Yourself,

And Then Make A Change!

Michael Jackson, "Man in the mirror"

If you've heard it all before, well, why haven't you acted upon it?

Common sense is not very common.

Protectionist producers Vs China

2005-08-30T09:25:00.000Z

The world economies are now back to kindergarten. The teacher’s pet (local manufacturer), not happy about the outcome of a fairly played game (world markets), runs to the teacher (respective government) to beg for favours. Maybe the outcome of the game might be overturned or the rules changed to suit the teacher’s pet.

Why are protectionist-minded producers in the west complaining about China?

Ask any real/true economist and the answer will be that China is doing well and the manufacturers in developed economies feel threatened. But the western manufacturers SHOULD FEEL threatened because of comparative advantage. China has it, the west barely has any!

To quote Adam Smith's "The Wealth of Nations":

" If a foreign country can supply us with a commodity cheaper than
we ourselves can make it, better buy it of them..."

Rostow’s stages of development theory seem to be working for China. The developed economies, however, seem to have stagnated around the services (technology) part of development but are well past the manufacturing (industrialisation) stage.

Developed economies are now almost entirely run on the services sectors and their manufacturing is going. Common sense dictates that those countries in which the cost of living is cheaper, wages are lower, production is cheaper and the necessary factors of production are in abundance become the next manufacturing hubs for the world. Who wants to buy one T-shirt for £30 from Italy when you can buy the EXACT SAME T-shirt for £5 from China?

One problem with my argument, of course, is that it assumes that people are rational. It assumes that people will want more T-shirts to less. However, this assumption is voided by a study that concludes that emotions play a big role in decision making, even if those decisions leave the people worse-off. To quote from the research:

"..The problem, of course, is that people don’t always behave rationally. They make decisions based on fear, greed, and envy ...Economists understand this as well as anyone, but in order to keep their mathematical models tractable, they make simplifying assumptions. "

In this day and age, when developed economies apply protectionism, it is down to 0% economics and 100% political noise. Some fat cat somewhere with a large factory is worried about his/her "position" and wants the government to do something to prevent job loses. However, this ludicrous stance is partly the fault of the respective governments for not having policies that engender flexible labour mobility so that in the likelihood of job losses due to legitimate shifts in comparative advantage, people can move to new jobs in the expanding sectors. In theory, this is what's supposed to happen.

The large fashion houses are in Italy and France. It is therefore not surprising that the producers in these countries oppose Chinese textile imports the most. However, retailers are happy with cheaper products because they can make easier profits without excessive pricing. Consumers are happy because they are not being ripped-off under the forced illusion of "prices for quality". But when the European manufacturers voice their opinions, all I hear is bla, bla, bla, job losses, bla, bla, bla, protectionism. No sound economic points.

But it is useless to impose restrictions on China (another sign of the myopia at play). To quote the FT article "Lessons from the China textiles stitch-up":

"Indeed, the quotas may prove largely futile, because imports from
China will in time be replaced by imports from other developing countries, not by products made in Europe"

Each time a developed economy interferes with the market to protect sectors that have long lost their competitive edge, it compromises any future stances taken, it ridicules the country that does it, it is extremely childish and cannot possibly ever warrant any respect.

The FT aptly concludes that the latest fiasco (EU-China textiles) will at least have done some good if it prompts politicians to think twice before succumbing to the demands of protectionist-minded producers.

Economist magazine garbage !!!

2005-08-26T09:31:00.000Z

I have this morning come across complete garbage in the form of an article by the Economist magazine discussing how criticising the police is “dangerous”. What absolute nonsense. I must say that the respect I have for this publication is seriously dwindling based on the recent obvious lack of meaningful content, resulting in page-fillers about issues that we (as a market) already know about or just plain nonsense that can only be the one-sided view of some individual with enough authority to publish their own article.

No criticism means no feedback, which means no improvement. Does the author of the economist article (and its publisher) think that the police force is so perfect, so well refined, run like a fine-tuned machine that it warrants no criticism? See this (PDF) report by Sir David Calvert-Smith, and this article from The Times newspaper.

Without criticism, society is dead! Systems would fail us and see us to an early grave. Without criticism, the world economies would not be as refined as they are now. Without criticism, there would be no economics!!!

I am disgusted!

See this site to find out what real people think about this issue!

The police should be more accountable than Tom, Dick or Harry. With more authority comes more responsibility and more accountability. YOU CANNOT SEPERATE THE THREE! The police have authority and it can be abused. Can I remind The Economist that the police have been found institutionally racist but I suppose the relevance of this finding is an all or nothing shot depending on firstly, which side of the colour line you stand and secondly, your personal ethics and morals.

The economist article states:

“A poll for The Economist in late July found that just 21% thought the police had been wrong to shoot Mr Menezes”

...which means that 79% of those polled thought the police were right to shoot the poor innocent chap!

Who exactly are these people that were polled? What planet do they live in?

After news came out the victim was not running, in fact, he collected a newspaper and walked to the platform like we all do and that he was later pinned to the chair before he got shot (according to the news), what were the 79% who support the shooting thinking? Inconceivable! Is this the real society that we live in? Somehow, I don't think so!

If the news reports are accurate (they haven’t been challenged), it means that you, your brother, cousin, nephew, etc could have been shot on that day! Whilst I emphasise that we don’t want to be terrorised, we expect that, given all the taxes that we pay, we do not face the random chance of being accidentally shot dead by those who work for us (police - public service provided through tax payers money).

And, in the event that we get shot dead, can somebody have the dignity and integrity to handle the case properly! For crying out loud, somebody died. It wasn’t anybody close to you (friends or family) but you may have noticed that it takes more than a handful to make a society/community and in society everybody is equal and is equally important (at least on paper because in reality this is not evident).

The Economist concludes:

“Even when the police make obvious blunders, criticising them is dangerous.”

What utter tripe! This is such a useless article, it's not even worth printing.
Do we live in a democracy or a police state?

I think The Economist magazine should stick to economics, though its recent article on brain drain was extremely one-sided (unlike real economists who look at both sides of an argument).

Development economics

2005-08-25T10:13:00.000Z

Image above from http://www.chronicpoverty.org/

I am sure by now it is rather obvious that development economics captures my heart. My undercurrent (to quote myself from my article on discrimination) is that I oppose the very unfair policies that are hindering the progress of less developed countries. I am also appalled by the blatant stance of the perpetrators of unethical policies to ignore the cries of the victims. It is inhumane and I am amazed that it still persists.

I recommend the following articles:
1. Can Extreme Poverty Be Eliminated?

"Public opinion in affluent countries often attributes extreme poverty to faults with the poor themselves--or at least with their governments. Race was once thought the deciding factor. Then it was culture: religious divisions and taboos, caste systems, a lack of entrepreneurship, gender inequities. Such theories have waned as societies of an ever widening range of religions and cultures have achieved relative prosperity. Moreover, certain supposedly immutable aspects of culture (such as fertility choices and gender and caste roles) in fact change, often dramatically, as societies become urban and develop economically."

...

"Being economically isolated, they are unable to attract much foreign investment (other than for the extraction of oil, gas and precious minerals). Investors tend to be dissuaded by the high transport costs associated with the interior regions. Rural areas therefore remain stuck in a vicious cycle of poverty, hunger, illness and illiteracy. Impoverished areas lack adequate internal savings to make the needed investments because most households live hand to mouth. The few high-income families, who do accumulate savings, park them overseas rather than at home. This capital flight includes not only financial capital but also the human variety, in the form of skilled workers--doctors, nurses, scientists and engineers, who frequently leave in search of improved economic opportunities abroad. The poorest countries are often, perversely, net exporters of capital."

...

"Western society tends to think of foreign aid as money lost. But if supplied properly, it is an investment that will one day yield huge returns."

...

As U.N. Secretary-General Kofi Annan wrote earlier this year: "There will be no development without security, and no security without development."

2. Crossroads for Poverty

And video:

The End of Poverty: Economic Possibilities for Our Time* (real player video, about 40mins)

* Video: Jeffrey D. Sachs

Director of The Earth Institute at Columbia University, and Special Advisor to United Nations Secretary-General Kofi Annan.

The video link is from Columbia News

Fairness and equality?

2005-08-23T16:00:00.000Z

Freedom and equality? Dream on!

1. Does real freedom of speech exist or does society just say that it does?
2. Does real equality exist or do we settle for the "set" equilibriums?

Society is based on hypocrisy, where subjectivity - not objectivity – govern the way things work. For instance, it is a well-known fact that if you call a company’s customer services department to complain about poor service, the level of problem resolution and subsequent recompense that people get differs widely depending on who they speak to and their ability to articulate their discontentment.

Therefore, those in society who are both eloquent and persistent, generally get better outcomes than those who are frequently shocked speechless by the action of poor service/goods/etc. Why doesn’t society have standards/benchmarks from which everyone can benefit regardless of their ability to express themselves? The challenge is that in most decision making, democracy (consensus) is ignored and those with the official authority to make a certain decision do what is best for themselves and impose their decision on society. In comes the spin-doctor...

For instance, company CEOs often look after their pockets more keenly than they listen to the owners (principals) of the firm – the shareholders. Even when shareholders attend annual general meetings, until recently, their grievances were just "considered" but the resultant action was beyond their control despite them being the owners of the firm.

When do you think people off all races, sexes, religions, etc will ever have mutual respect for each other?

Why do we live in hypocrisy? I don’t mean having another personality that nobody knows about (see a shrink) but having a blatantly different set of rules in society for different groups. Off course, everyone wants to be better off but these days, it seems, it is at the expense of someone else (forget pareto optimality). Every last man wants to shut the door of opportunity behind them.

Some individuals are indeed above the law. Off course nobody would admit to it because we all want to feel as though justice is really blind. However, I submit to you that celebrities can escape your everyday litigation purely because they are celebrities. How’s that for blind justice?

Justice is not blind, it wears a dark pair of sunglasses that give the impression that it is blind. If a computer were the judge, I wonder whether society would be fairer. It is now commonplace for parents to tell their children that life is not fair. How sad !!!

35 years of professional economics

2005-08-23T10:28:00.000Z

No, not me, but someone worth listening to has recently completed 35 years as a professional economist and his ten cited lessons worth learning are as follows:

1) Economic events - what economists call 'shocks' - seldom produce just one consequence. Usually the effects ripple on for years.
2) Good economic policies do not guarantee good economic performance; but bad economic policies inevitably result in bad performance.
3) It is structural, not demand-side, policies that most influence economic performance over the long term.
4) People respond powerfully to economic incentives.
5) Economic and social policies have to be considered as a whole.
6) Competition is one of the most powerful of forces that motivate the perpetual quest for more efficient ways of doing things.
7) History seldom, if ever, repeats itself precisely. Economies have the habit of producing new mixtures of circumstances that require new approaches.
8) Complicated economic policies whose rationale is hard to explain usually fail.
9) Some of the biggest, and most important, economic issues remain unresolved.
10) Just because professional economists don't always have a confident answer, it does not follow that all proffered solutions have equal validity. ...often the biggest contribution [they] ..can make is to demonstrate why the current fad or nostrum is wrong and will fail.

For the full article, click on the title (which is linked to the originator).

Why are poor countries poor?

2005-08-19T14:32:00.000Z

Chris Dillow has commented on the paper titled "The Marginal Product of Capital (PDF)".

I liked his view so much that I have linked to it to share it with those that visit this blog.

He starts...

"How far can globalization raise the incomes of poorer countries? How far can foreign aid help?"

For his full commentary, visit Stumbling and Mumbling.

The paper itself starts...

"Whether or not the marginal product of capital (MPK) differs across countries is a question that keeps coming up in discussions of comparative economic development and patterns of capital flows. Attempts to provide an empirical answer to this question have so far been mostly indirect and based on heroic assumptions. The first contribution of this paper is to present new estimates of the cross-country dispersion of marginal products. We find that theMPK is much higher on average in poor countries. However, the financial rate of return from investing in physical capital is not much higher in poor countries, so heterogeneity in MPKs is not principally due to financial
market frictions.

Instead, the main culprit is the relatively high cost of investment goods in developing countries. One implication of our findings is that increased aid flows to developing countries will not significantly increase these countries’ incomes."

For the full paper, click on the links.

Feedback "brain drain" Africa

2005-08-19T09:23:00.000Z

I have received some kind emails regarding my "Brain drain" Africa article. Thank you all. However, I would like to post one of my feedback emails to level out the obvious bias in my submission.

One respondent that wrote:

"Thanks curious for your email. I like the article, though I think we have
apportioned too much blame on the west. Africa and its nations need to start
getting their act together and creating a conducive environment for our economic and social development. The western powers and China didn't have any to cry foul about or depend on- and they made it. My thought? Only we can save ourselves. How is the million-dollar question. But for sure, brain drain isn't helping us."

Thank you for your feedback. My response was:

"Thank you for your email. I am indeed a bit heavy on the west but for a very legitimate reason - interference. This word encapsulates all that is key/vital to African development. Indeed, the Africans have a lot of work to do (with all the natural wealth, land and labour resources), but beyond that, they need freedom to find their way through the forest (as it were).

The west had that freedom and that's why, after a few well-known recessions and catastrophically poor financial market decisions, western economies are now better refined. China also had its freedom. But the interesting thing is that the west tried to interfere but to no avail. China ignored the west until it was good and ready, however, in the meantime, the west was labelling it communist, etc, finding all sorts of reasons to ostracise it (with its large population). Today China is a force to reckon with and that is not thanks to the west; their success is all internal. Well done to the Chinese for that achievement. Can Africa do the same? Unlike China, Africa is a continent.

To conclude, and to lessen the obvious bias in my article, I will say that the west is a source of economic inspiration to Africa. The west is the forerunner and Africans will do well to learn from the West. My article is weighted against the west to merely reflect the "strategic" interference that renders most other background activity in Africa as just "noise"; the eventual outcomes having already been predetermined.
As a worst case scenario (leaning towards free trade), I would like the markets for Africa to be uncertain (as efficient markets are), purely determined by supply and demand, not pre-biased against Africa from the onset and in broad daylight.

Nevertheless, my views are never set in stone and can change if I'm convinced otherwise.

Thank you,

Curious"

Thanks again to all those that responded to my article. Reality is fluid

War rages over oil prices in Kenya

2005-08-18T12:45:00.000Z

In the last few weeks, the price of crude oil in nominal terms has hit record high after record high. Yet, this has not led to panic in developed country financial markets about the consequences of for global inflation. However, it has been evident that higher oil prices have greatly affected manufacturing and related sectors and transport sectors. The challenge for the companies in the aforementioned sectors is that competition is fierce, therefore deterring any attempt at passing on the mounting input costs on to consumers. The resultant effect has been tightly squeezed profit margins (economics 101).

My RSS feed brought to my attention the situation in East Africa (namely Kenya) where the public transport is in a bit of a crisis due to higher oil prices. The transport operators have extrapolated on the cost-push inflation, resulting in ridiculous pricing strategies.

The article starts (to cite a few quotes for context):

"The Government and matatu operators [privately run public transport] were yesterday at war over increased fares as high fuel prices continued to hit public travel ",

"…the Government is likely to step in to regulate fares",

"…should the Government intervene, the resultant fares
would be lower than the rates charged by operators of public
transport",

…and the government adds:

"It was unfair, for matatu owners to hike the charges by between 50
and 100 per cent when [local] fuel prices had only gone up by a marginal 0.8 per cent"

Do the matatu operators have the right strategy?
Adam Smith’s invisible hand theory suggests that self-interests guide the most efficient use of resources in a nation's economy, with public welfare resulting as a by-product. Smith argued that state and personal efforts to promote social good are ineffectual compared to unrestrained market forces. From the above, one could argue that the transport operators should be left alone to run their businesses as they wish, at whatever expense to society, because the "market forces" will determine optimal prices.

On the other hand, does the government have the right approach?
John Maynard Keynes (Keynesian economics) was of the view that government intervention was needed to regulate markets. There are numerous examples that place this view in high standing.

So which of the two economic theories applies best and subsequently, who (out of the government or transport operators) is on the right route?
My stance is that both the government and the transport operators have a reason to squeal. The transport operators are bearing the burden of higher input costs from higher oil prices and the government has a responsibility to protect its citizens from exploitation by unscrupulous businesses.

From the statement "It was unfair, for matatu owners to hike the charges by between 50 and 100 per cent when fuel prices had only gone up by a marginal 0.8 per cent", it is evident that the pricing strategies used by the transport operators in Kenya are not well thought through. It suggests pseudo-economics.

Price increments of the 50%-100% order, highly disproportionate to the rise in input costs, suggest greed and short-termism. Such a strategy only allows for profit taking over the short-term and results – almost inevitably – in government intervention to disciple the market. In addition, transport operators (at times of severe cost constraints), can form tacit pricing collusion, with few incentives for any of the participants to cheat by undercutting because the effective cartel is unregulated or under-regulated and can therefore deliver serious consequences to the operators who want to renege on the tacit arrangement. It is in this very market that the government has to intervene because the symptoms suggest a progression towards market failure. The government’s appropriate action – to target the stimulus of the potential market failure – is indeed to set a price limit high enough to give room for competitive pricing strategies by the operators, but low enough to restrain any excessive pricing.

It is well known that price discrimination can be a handy tool for maximising profits, but only when market demographics have been analysed (resulting in high, middle or low income regions, etc). With such analyses, businesses can charge different prices in different regions for the same goods and services, to capitalise on the higher or lower reservation prices of their consumers, which are primarily dictated by the consumers' incomes. Indiscriminate pricing, the kind applied by the matatu operators, alienates segments of the market and cannot possibly deliver the highest potential profits for a significant business period. Correct price discrimination (pricing to market) doesn't require government intervention.

However, transport operators sometimes add subjective pricing to their costs. This means that prices can change from one customer to another, from one minute to the next and can be ridiculously high without prior warning. In such a market, it is of no long-term benefit to anyone for the market to remain unregulated. The strategies are unsustainable because incomes cannot match the ever-increasing prices. At some vital tipping-point, people may even decide to walk in protest - an outcome envisaged by Adam Smith's invisible hand theory because if people walk, transport fares would have to fall. The market would indeed be sorting itself out. However, it is not in the economy's best interests to have a partly ineffective labour force, so caused by transport problems. The government can't afford to wait until Adam Smith's invisible hand cures the transport sector.

Conclusion:

Will oil prices fall back?

One explanation seems to be that refinery capacity cannot keep pace with demand for the right type of oil being demanded (sweet crude). With the current political climate in oil producing countries, oil prices seem upwardly biased. However, prices could fall as fast as they have risen, but, in the meantime, given the lack of definite timelines for oil price falls, the Kenyan government should definitely intervene in its transport market. A stitch in time saves nine!

"Brain drain" Africa

2005-08-15T16:32:00.000Z

Africa’s brain drain is a bit of a quagmire. Everybody knows that a country [or as in this case, continent] requires an academically intelligent labour force to effect development (I am aware of the other forms of intelligence).

According to Rostow's model* of the stages of economic development, it follows that nations transition through agriculture, then to industrialisation(manufacturing) then technology(services), then … (we don’t know yet, maybe mass consumption). I would say the west is at the technology(services) phase, China is somewhere north of industrialisation but south of the technology phase and developing countries are still at the agriculture phase (as evidenced by the large contributions to the economy - GDP - as a proportion of national incomes solely form agricultural produce).

So an educated labour force is imperative to economic and social development. Africa’s challenge (amid the raft of challenges) is that its apparently intelligent individuals leave the continent in search of better lives in the west. Africans in Africa complain about their "crème de la crème" leaving and the west cite the "brain drain" as an unfortunate scenario that should be tackled to engender Africa’s economic development. So it appears that – for once – Africa and the west are in agreement about some quasi-economic issue but for completely different reasons, quite obviously. Western immigration policy suggests that emigrating Africans are not as welcome in the west. Policy to govern the movement of "third worldees" into the developed countries is quite visibly heavy-handed and conspicuously skewed in favour of non-third worldees.

However, my mind boggles as I wonder why – in the numerous texts covering "brain drains" – the following questions are usually not dealt with:

#1. Why do Africans leave Africa?
#2. Is it only the "brainy" that are leaving?
#3. What is the attraction of the west?
#4. Why is the number of exits from Africa disproportionate to the returns?
#5. What are the incentives or disincentive for returning Africans?
I have therefore decided to attempt at answering them.

#1. Why do Africans leave Africa?
All manner of persecutions aside (which causes migration for life or death situations), consider the following scenario. A force with far superior weaponry invades your country; you are subsequently conquered and become subject to a kingdom you know nothing of. You are maltreated and belittled. In the meantime, your backyard is being plundered of all its resources. All that can move is moved and all that poses geographical and logistical challenges is fenced in and protected like a fortress so that plundering can continue far beyond the foreseeable horizon.

When the indigenous folk finally decide that it is time to die for their land, the oppressors leave but have already left in place policy to ensure continual plundering. This policy coincidentally unites the colonisers from different regions and though they have their differences, sometimes leading to war, on this one issue [policy that allows the looting of Africa’s resources] they are allies. United by cause!

The cause is the skeleton, the organisations that have subsequently been formed to govern world policies become the muscle through which, over time, blatantly unjust/unethical/economically unsound ideas that benefit the colonisers (as a whole) are enforced.

Agriculture/Horticulture - Africans can’t keep farming forever, it is not logical to expect them to do so. They too want to move through the stages of national/economic development and continue progressing. So how has the west done it? They have engaged the factors of production: land, labour and capital (now including technology). Africa has labour but some of the land is unworkable, some is agricultural, some is maintained as game reserves to generate tourism revenue and some is mined for its natural resources.

Mining: the wealth of highly demanded natural resources - Who mines Africa’s land? The big western corporations with political clout and influence. Do they create jobs in Africa? Well, in proportion to the amount of wealth that they generate for themselves and the subsequent number of jobs they create in their own countries (trading, operations, analysts, etc) the answer may as well be no! In their respective countries, these big conglomerates contribute to their own economies. So does the west expect all Africans to become farmers? And if so, how much land is available? Well, look at Zimbabwe’s case (not taking a stance on the rights or wrongs of Mugabe’s approach). I have heard that most of the fertile/workable land was owned by a very small minority (apparently less than 10%) who all happen to be the offspring of former colonial masters. So where is the land to be farmed?

African’s leave Africa because the west is everywhere around them and is all they know. Go to Africa and in the mud hut, you will be astonished to find CNN or SKY News whilst searching for your so called "safari" or "jungle" experience. The west owns Africa's fertile land (in one form or another), the west takes Africa's natural resources (and subsequently creates jobs almost entirely for western citizens), the west tells Africans what to grow, pays Africans what it likes, loans Africans money with many strings attached, denies Africans fair access to world markets, etc, etc. If roles were reversed, westerners would be flooding to Africa! That is plain common sense.

#2. Is it only the "brainy" that are leaving?
Some people swim across dangerous waters for a better life and I cannot find empirical studies that suggest a correlation between education and good swimming. So I would rephrase "brain drain" to just drain.

#3. What is the attraction of the west?
Seeing as all the money is going to the west, all power is in the west (though China is a serious contender), why not?

#4. Why is the number of exits from Africa disproportionate to the returns?
Let me see…..Hmmm…..
So you’ve left Africa, now in the west and enjoy some of the wealth that has partly been generated by your own continent (especially so if you work for an oil or mining company) and partly generated by sound economic policy (giving credit where credit is due). From the west, you see Africa in a continuing state of disrepair and the west ceremoniously giving morsels with one hand and defiantly taking bucket-loads with the other. Do you want to be on the wining side? I hear the laws of self-preservation kicking in. How exactly will you survive in Africa? Will you have a job? A roof? Or do you have relatives in high places?

#5. What are the incentives or disincentive for returning Africans?
Yes corruption is a problem but it is not restricted to Africa. My stance is that corruption is the birthchild of greed and is prevalent all over the world but most obvious where people are desperate. Economic/financial desperation in Africa causes people to embezzle money in broad daylight and then deny it (I know, it beggars belief). However, in the west, there are frequent colossal scandals involving far much more money (Enron anyone?). These take time to unearth because people are comfortable and have therefore taken some measures to hide themselves/their actions. In fact, dare I say, maybe those that commit offences in the west do so because they are bored, a far cry from not knowing where your next meal will come from. However, I am not condoning crime in whatever form or whichever society. I am simply pointing out that there are different stimuli.

Honest, educated Africans in the west work really hard and subsequently make money (despite all the odds against them, starting with the well known ill-assumption that their education is inferior to western counterparts - for example, a maths qualification from Africa is inferior to one from the west. This is a major hindrance and often Africans have to start-out at disproportionately lower levels).

Africans want to continue to be economically active but are faced with the strong probability of not only becoming economically inactive upon their return to Africa, but also dissuaded by the idea of being dependant on a continent that is itself a dependant. There is no welfare state! Sleeping hungry whilst worrying about the shoes on your feet disappearing if you sleep becomes a real/tangible concern.

A second large problem is the reason why Jesus himself was persecuted the most in his own hometown by his own people. Some African expatriates go back to Africa with bursting CVs and tons of advice for systems already heavily riddled with corruption that the only other logical step for their governments is to imprison the returning expatriates under the accusation that they are trying to be revolutionaries (a.k.a citing the truth about mismanagement or poor management). Some expatriates go back to incompetent parliamentarians (an example) and systems that collapse at dawn, and stay down until it is in an official's personal interest to revive them. There is market failure, political failure, judicial failure, all sorts of failure, but the once thin parliamentarians are now fat and wealthy and well known for being consistently incoherent. The majority of Africans are good honest people, but they have no power!

It is only wise to deal with the cause of a problem, not the symptom.

Solutions:

Natural resources should firstly be of benefit to the stewards/custodians, then as a secondary outlet, to the rest of the world. Diamonds, gold, oil, etc, should be state owned, create jobs for the respective citizens and feed economic growth in the respective country. The current situation is the reverse. International conglomerates own (in the literal sense) the natural resources and create jobs in their own countries and fuel their own economies (then the westerner complains that those whose reources are being plundered are migrating to where their resources are taken to - following the money trail). Unfortunately, some conglomerates go on to engender civil unrest in the country that they are plundering so that in the confusion, it is business as usual.
Following economic growth and rising employment, the governments should install effective capital markets to address that market failure. It is therefore required that ill defined, crippling loans from international institutions are removed.
Functional capital markets engender entrepreneurialism, which is high in Africa (the informal sector). More economic growth results.
Implementation of ethical/moral/logical trade policy by the west. This has implications for Africa’s exchange rates, which in turn feed into numerous other economic variables.
Fair global labour mobility. The conspicuous favouritism for "one kind" over another will only create more problems. "Third worldees" are not the favourites, they don't need to become the favourites but a move by the west towards levelling the playing fields of labour mobility will help.
A coalescence of well functioning and developing capital markets, buzzing economic activity and rising employment then creates a demand for highly skilled (higher education) labour. African expatriates are itching for such an opportunity because they want to be part of a revolution - the African economic revolution. In addition, all the local calculus experts can apply financial engineering principles to become very successful Black-Scholes practitioners. Another hub for financial services?

The final outcome (assuming consistently progressive fiscal and monetary policy) is a force to reckon with and ultimately one of the big players in world markets. However, so far international and local policy are a hindrance.

See also "Brain Drain - cHIT cHAT for the Brain Dead?" I thought it made interesting reading.

>>>>>>>>>>>>>>>>>>

* It is noteworthy that Rostow's stages of growth model has been critised by many development economists who argue that it was developed with Western cultures in mind and not applicable to less developed countries. It addition, its generalised nature makes it somewhat limited. It does not set down the detailed nature of the pre-conditions for growth. In reality policy makers are unable to clearly identify stages as they merge together. Thus, as a predictive model it is not very helpful. Perhaps its main use is to highlight the need for investment. Like many of the other models of economic developments, it is essentially a growth model and does not address the issue of development in the wider context.

>>>>>>>>>>>>>>>>>>>

Corporate delivery

2005-08-09T16:10:00.000Z

Click on image Apparently the larger the organisation the higher the likelihood

Originator unkown to blogger.

Discrimination: the costs to society

2005-08-05T13:31:00.000Z

This is in response to the article "When discrimination is right"

Where do I start?

I can write a thesis on this but ultimately we all know what we want to think and what we don’t want to hear.

I will start by stating the obvious – discrimination exists in all its forms (mild and extreme):
1. One colour against another,
2. One sex against another,
3. One tribe against another,
4. One region against another,
5. One religion against another,
Etc.

The single most consistent point that precipitates from all the above forms of discrimination is that people prefer to ignore it/pretend it doesn’t exist/justify it, everything but admit it’s wrong and then subsequently proceed to help curb it.

For instance, some might argue that women these days are paid the same as their male counterparts doing the same job or that "minorities" in any given context are paid the same as the "majority" doing the same jobs. Some people even want to justify racial profiling . To these proponents I say read the numerous credible surveys/studies (1, 2, 3, 4, 5, 6) and stop talking rubbish.

Call a spade a spade:

Life would be far easier if people just stopped pretending! Why do I say this? Because in doing so, you fool nobody but yourself. Those you are discriminating against "feel" the undercurrent* of your discrimination, though they may never be able to prove it. So, if the perpetrators of discrimination know they are engaging in it and the "receivers" of discrimination know they are receiving, then what is the pretence about?

I have far more respect from the onset for people that not only
speak their minds (because apparently even cowards speak their minds) but also and more importantly back their opinions with valid evidence.

The problem is that discrimination can never be validated, on whatever grounds. Anyhow you dissect it, it leaves a heap of collateral damage, a vast group of innocent people who were not the precise/intended target but because of the representative heuristic, they get marginalised, maltreated and left feeling dehumanised.

Principally, what happens when people discriminate in society is that relations become irreconcilable and respect is lost. There is too much downside risk, no medium to long-term benefits. However, in the short-term, the perpetrators may feel a sense of accomplishment.

So to answer all those who spend time splitting hairs on issues that are quite obvious, discrimination is wrong full stop. All that gibberish that follows on about how it can be right is just undercurrent* that finally found an outlet. Plain and simple; you've been told!

Ask yourself, why capitalise on an incident to channel your undercurrent*? The answer maybe that before the incident, you may have felt wrong to think a certain way, maybe even guilty. But, once you realise that you are not alone in feeling that way, it is easier to voice your opinion under the guise of collective opinion. This is a coward's stance that warrants no respect. You want to be in a crowd shouting "stone them" when you can't do it on your own; just voices, no faces.

Discrimination is most effective when the "majority" or those in power find a channel for a common, collective undercurrent* and use it. This is why those that are the minority need correct legislation as their insurance that undercurrent* will not become mainstream life. Let’s not dismiss this, I submit to you that apartheid existed in South Africa for many years because the undercurrent* of those in power became mainstream life until the victims decided to claim social justice, even at the cost of mass loss of life. In fact, some of the offenses committed by those in power were inhumane (man fed to lion). Correct legislation is unquestionably the only form of insurance for the real potential victims of discrimination.

Above all, discrimination makes the victims feel dehumanised and no monetary premium can be worthwhile recompense for that feeling.

It is easy for the majority or those in power to maltreat the minority or those without authority, too easy. But, just because real discrimination has never/is not/will never be a real issue at your doorstep (all else constant, e.g.: where you reside) doesn't mean that you need be a perpetrator because even in the collective act of discimination, all those involved make personal decisions.

So before we air our views regarding an issue such as discrimination, we should ask ourselves:

Have we been a victim of it?
Do we personally know somebody that has been a victim of it?

The short answer is that if we can't answer yes to the above two questions, then we don't deserve to give our twopence. For some opinions in life, one has to walk in the shoes. There is no point in casting our inexperienced views - a bit like recommending medication without medical training.

If you ever get discriminated against in a real sense, you will know about it and it will cost you sleep.

* Undercurrent : Pent-up emotions/predisposition from personal biases channeled through any opportunity (however unrelated) but at the required/desired target. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Suffering developing countries

2005-08-02T13:49:00.000Z

I pause for a moment as I ponder over why Africa and the West have such a heavily skewed relationship - one side is a net taker and the other poor, manipulated and mistreated.

I will start with a comment that I heard on a comedy show on TV. This comedian (can't remember his name) was "solving the world's problems in 60 seconds". That was the name of his act. When he got to the Africa part, he asked, "Why don't you [Africans] move out of the desert?" My surprise was that the audience found it funny.

Hmmm!!, almost everyday I see ignorance of vast proportions passed on from one person/group/body to another within society. We hear very insensitive comments from our colleagues that leave us wondering what planet they live in. Yet, in their minds, there's nothing wrong/insensitive about what they say.

I recently read a report compiled by an ex-world bank official for the Commission for Africa in which the trade policies used by the West against Africa were deemed unethical, immoral, illogical, etc, etc. Yet the West continues to use the same policies in broad daylight. I guess if you're [Africa] deemed defenseless, there is no need for the west to wait for the cover of darkness.

When we examine agriculture, we soon arrive at the use of terminator seeds (more text on it). How can the West recommend these seeds to Africa when right this minute there is food crisis in Niger? This is why so many Westerners do not understand the causes of Africa's problems. All they see on TV are the symptoms, which they have no knowledge of how they come about but readily assume that Africa is inflicting problems on itself. When Africa is mentioned in the west you get one of two responses: safari stories or corruption stories. The latter is a symptom of a far bigger problem that involves the west. Offcourse, this final point is not appreciated!!!

What about medicines? Why are some key medicines more expensive in developing countries than they are in developed ones? The cost of some medicines is so high in developing countries that if Westerners themselves were subjected to the same prices, they would be in Africa's desperate medicine position. It's not rocket science, it's common sense.

I think Africa's position today is down to two broad actions by the West:
1. Exploitation (by a powerful handful)
2. Ignorance (of the masses through propaganda or lack of information all together)

Exploitation:

The large futures contracts on Africa’s mineral resources speak for themselves. These financial positions are large enough for some companies to "facilitate" or "engender" civil unrest within the nation that they are exploiting.
Agricultural produce (still mostly organic) does not benefit the farmers as much as it should. The final price of these organic, premium priced perishable goods does not confer enough benefit to the poor farmer and his family. He/she lives from hand to mouth. Yet some in the west dare to say that what Africa gets is better than nothing. I say this, in the context that you have nothing and get something then the statement is accurate. However, in the context that you are resource-wealthy and produce some of the most exotic products on earth and have nothing, the statement is foolish and inaccurate - obviously. Africa's position is the latter therefore invalidating such a comment.
Colonialism not only took a lot from Africa but it left a legacy that still continues. In fact, some super-wealthy Westerners in Africa (born in Africa) owe their property to their grand and great grand parents, not due to highly successful investments over time. When colonialism ended, not all "wealth" that was taken from its rightful stewards was returned. Therefore, some generations of the westerners simply inherited the "wealth" and its workers etc. This constitutes gross misallocation of Africa's limited resources. In some poor countries, inherited land (from former colonial masters to their offspring) is amongst the most fertile and very large in size. I am amazed at those who insist on maintaining that kind of "position" whilst the masses [rightful stewards] suffer. Can they not foretell the possible outcome of their greed? I heard of a story where the offspring of colonial masters were about 9% of the population but owned 80% of the land and wanted to continue owning it to hand the inheritance to their offspring. How ludicrous!!!!! Yet the West did not butt an eyelid.

Ignorance:

The masses/ordinary people want to get on with their lives. They have their own problems so when they give today to one charity, and tomorrow to another it gets too much. They become immune to the suffering of others, however, not all, but a large enough amount of people. However, if when being urged to give money for food aid to Africa the ordinary westerner was equally informed about the unethical terminator seed, he/she may not only give money but may also lobby against this obviously destructive use of technology, thereby eliminating a cause (seed policy), not alleviating a symptom (food crisis). Through large-scale implementation of the terminator seeds, Africa will become far more dependent on the West for food than it is now. The ordinary westerner doesn't want this and Africa definitely abhors the idea.

Put simply, imagine the subsistence farmer who feeds himself and his family and trades his surplus. He collects the seeds from his harvest for the next season. With terminator seeds (genetically engineered), once the crop has yielded a harvest, there will be no more food until the poor farmer buys his next batch of terminator seeds from western companies. The seeds only work for one season! The saddest thing about this is that there are Africans advocating the "benefits" of these seeds to the masses in Africa. Are they insane? I would like to know what kind of pay packet they get because what they propose is clearly crazy. Once the poor farmers can't afford the next batch of seeds, we will have the Ethiopian and Niger food crisis over and over and over again, but this time it will be all over Africa and will never stop.
Westerners may also wonder why there is so much civil unrest in developing countries. I would say to this, look for the correlation between civil unrest and the abundance of natural resources. In countries where natural resources abound, no amount of "noise" from humanitarian organisations about child labour can prevail. It happens nonetheless.

Conclusion: The simple truth to a complex issue concerning Africa/developing countries and the West. To solve the problem, consider the inter-generational impact on both Africa and the West of decades of exploitation and mass ignorance by the West.

Now Africa is mostly corrupt. Those in power have a keen desire to survive at all costs. They look out for themselves alone and ignore all voices of reason. I wonder where they learnt that?
They annex public resources for private consumption. I wonder where they see that?

In the meantime, whilst we wait for social justice to wake up (if ever), Africans can read a book called "Decolonising the mind". Knowledge is empowering.

The point of this book is in the principles of what it speaks about. Africa’s position needs freedom of the collective mind. It is a rich continent and shouldn’t be a basket case.

What's the deal with broadband?

2005-07-29T14:32:00.000Z

I searched high and low for a good deal. By that I mean a deal that doesn't include small-print catchouts. A deal that doesn't go sour once you start having speed connections.

I have not subscribed to broadband this year after almost five years of it. These are the reasons:

Rude customer service.
Unassuming customer service.
The delay in cancellation because they can't find your cancellation request.
The brilliant one-the-face deals that change in 2 to 3 months to uncompetitive rates (but you can only find this out in the small/fine print).
The pay-as-you-go deals that want to reap you off most of a year's worth of money for a one-off connection/set-up fee.
The really cheap broadband that catches you out when you leave your house and forget to disconnect your internet connection. Then the small print kicks-in.
The fast, too good to be true deal that times-out every two hours without fail. Can you imagine doing some research and having to reconnect every two hours?
The "oh, you want to call customer services do you? Well we'll punish you with extortionate telephone rates per minute as part of our generous policy" broadband.
The "this is a good deal but because of high demand we cannot tell you when your turn to be connected is going to be. However, in the mean time, you have no broadband and cannot use another provider".
The hefty fines for leaving a poor service.
The "we want your money for poor service" broadband branded in all sorts of names.

Why, oh why can't we have:

Good customer service.
Cheap customer service numbers.
knowledgeable staff.
Trustworthy companies.
Broadband that does what it says.
Broadband that is quick to install (from your speedy online order to surfing).
Broadband that does not hide usage policy in tons of small print.
Broadband that does not rely on poor infrastructure (some telephone exchanges) to supply you with service.
Broadband that is simply no catch. You pay, you get !!!

Will we ever get reliable pricing? We will ever get sufficient utility? Surely it's a consumer's market. Why are we being jerked around? The simple answer to this problem is the lack of collective action. As a unit, consumers are more powerful that organisations. Consumers can make organisations work for them and provide them with the best deals. Consumers can make companies eliminate each other from the market whilst trying to secure the most customers.

Dog eats dog is a concept that consumers can apply, making the companies eat each other for our sake. But all this is not in the too distant future. Already the internet has provided a platform for tacit collective action. Consumers go online and buy items from the comfort of their own homes and have those items delivered. In fact, consumers now even buy from abroad and don't even mind a small delivery charge. This is because the feeling of being in control is liberating. Let's sort out this broadband market. There is a good deal out there and we want it.