Monday, March 29, 2010

Book Review: "African Development" by Todd J. Moss

This was one of the books on Chris Blattman's Undergrad Development syllabus, so I really looked forward to reading it. Blattman included it most likely to give a basic overview of development issues in Africa. Since I know almost nothing about local African politics, this part of the book taught me something, although it's hard for me to judge since I knew so little coming in. Yet, the part I know something about -- the effect of geography on Development, this book left much to be desired.

Basically, Moss makes all the typical mistakes most conventional economists make when discussing geography. He doesn't realize that there are two distinct (both well-supported) theories about why geography is important for development -- there's the Crosby-Diamond-Kamarck theory, and then there's the NEG/New Trade Theory/Krugman theory about market access/distance to market. Both are incredibly plausible at a basic intuitive level but also have been empirically validated ad infinum. And both apply to Africa, as transport costs to the interior of Africa have always been really high, partly b/c of the disease environment, and partly for natural topographic reasons. Secondly, many agricultural technologies developed in the rich, temperate world simply do not work in Africa.

Instead, the book conflates Diamond's theory with Geographic determinism (I know, in Guns, Germs and Steel he sounds like he's a geographic determinist) but reading him in the round suggests otherwise. And Moss hadn't read Diamond in the round. There was no "Third Chimpanzee" citation. For that matter, there was no Crosby or Kamarck citations either. The author also suggests the existence of two countries near each other with different GDPs implies that geography isn't a key variable. The problem is this only implies that geography isn't the only thing, that it doesn't explain 100%, but who is arguing it does? Nobody, really.

But I stopped reading this book on page 94, when Moss writes "In fact, for some countries it may be that low population density is an economic problem, making transportation and public services much more costly." He says that "the thinking on [demography] has mostly evolved to where high birth rates are considered symptoms of poverty and underdevelopment rather than causes."

He doesn't provide any evidence to back this up.

From 1960 to 2008, the population of Tanzania went from 10 million to 42 million, 80% of whom reside in rural areas. Meanwhile, Tanzanians have shortages of fresh water. They have over-fished the Nile Perch . Tanzania also has a problem with deforestation. And the GDP per capita is about $700, or less than Britain even before the Industrial Revolution (which makes sense, given that Britain in 1800 was also more urban).

In short, I think it's crazy to think that population growth hasn't been a huge, huge negative for Africa. I've never heard anyone explain in detail why it wouldn't be, but then we always get these African Development types who just dismiss it out of hand.

Aim of Blog

FYI -- My general aim is to still do a post every week or so. The issue is that my life has gotten horrendously busy, and it's hard to make the blog a priority... I won't disappear tho'.

Friday, March 19, 2010

X-change Rate, Trade, and China

Ryan Avent continues to find new ways to lose the debate with Paul Krugman, making two questionable arguments -- first, that if China revalues its exchange rate, it would be "good" for China, and, secondly, that America should just let China have its way with us.

While a slight appreciation of the Renminbi might be positive for China, as it would reduce inflation and take off the international pressure, a large revaluation, or free float, would mean an end to "that giant sucking sound" which is the relocation of manufacturing to China would slow dramatically or stop, a relocation which speeds the development of China as an artificially high number of Chinese workers are pulled out of agriculture and get manufacturing experience at the cost of a low Renminbi. On the other hand, the large foreign currency reserves of the government mean that China won't have an Asian Financial crisis.

And, I'm at a complete loss for why economists such as Ryan Avent or Greg Mankiw think that tariffs are the worst thing in the world and should be fought at ever turn, but that an artificially undervalued exchange rate is A-OK. Thing is, both have roughly the same implications for trade.

Sunday, March 14, 2010

Janet as Number Two

Janet Yellen to #2 at Fed. I don't know enough about Janet Yellen to give an expert opinion, but there are two things I don't like about the choice. The first is her age -- 64 -- and no, it's not just because I'm biased against old people for important positions, although I do think that experience wins out over adaptability/intellect too much for positions such as this. I would rather they pick a younger, up-and-coming liberal Democratic economist who could use the position to augment her/his resume and gain experience for possible appointments to other offices later on, such as Fed Chair.

Second knock against her is that, in the past year or so, I don't recall her disagreeing with Fed policy in the minutes. I felt very strongly last summer that the risks between inflation and unemployment were unbalanced, with continued high unemployment being a significant risk, and inflation being low risk. Janet Yellen was apparently more worried about inflation. Unfortunately, I turned out to be correct and she turned out to be wrong.

Having said all that, she is known as an inflation dove, she is a Democrat, and she's married to George Akerlof, who's just awesome. The problem is that I'm not familiar with any of the evidence which suggests she's an inflation dove. She normally agrees with the rest of the FOMC. According to Larry Meyer: "The final question is whether Janet is really a dove. Let me tell you a story. Janet and I held very similar views when we were colleagues on the Committee, despite the fact that I was immediately viewed as a hawk and she was already viewed as a dove. (I thought of myself at the time as being a "hawkish dove.") In any case, when it comes to ensuring price stability and maintaining well-anchored inflation expectations, there are no doves on the Committee."

Maybe she'll surprise me, but at present, she doesn't strike me as the most inspired choice.

Saturday, March 13, 2010

Alwyn Young on Africa

Over at Free Exchange , as at many other Econ blogs, many Econ bloggers are taking seriously University of Chicago Econonomist Alwyn Young's research that Growth in Africa is on par with growth in any other part of the world. Young sees per capita consumption growth of 3.2 to 3.8 percent in the past 20 years, which, combined with a population growth rate of around 3 percent, means GDP growth of about 6.2 to 6.8%. Colour me suspicious.

Let me just point out that Alwyn Young is a snake-oil salesman, not a scholar, and that rule number one in reading anything with Alwyn Young's name on it is not to believe a word of it. This is the guy who argued that productivity growth in the People's Republic of China from 1978 to 1998, a period of economic growth unsurpassed in the whole of human history, was likely negative, and that the Chinese were merely making up their numbers. The creation of the data Young uses, by his own accounts, happened "over the years, by different individuals using diverse methodologies". According to Young "This produces senseless variation across surveys as, to cite two examples, individuals with the same educational attainment are coded as having dramatically different years of education or
individuals who were not asked education attendance questions are coded, in some surveys only, as not attending."

If that's the case, then Young likely could have used this data to find anything he wants. To his credit, Young recognizes that counter-intuitive results are easier to sell. Had he found that African growth was .8%, he'd have had no paper to sell. The paper is in some ways hilarious. Although all he is doing is measuring increases in consumption, and hence, there's no reason whatsoever for any math to be in this paper, complicated-looking math is a big part of this paper. What the paper does not have is a simple Table showing, for example, how much food people in Sub-Saharan African consumed in 1985 vs. today. That's probably because Alwyn Young doesn't have any idea of how much food these people are eating. And, although the paper includes a table with "children's weight", he does not include their ages. Why didn't he just include a simple table of the average height and weight of 7 year old boys in Uganda over time? I suspect it's either b/c he hasn't got that data, he's just got a smattering of data from different countries over different time periods, w/ no simple comparisons...

Sunday, March 7, 2010

Cool Development Organization

It's called "Think Impact" .

The basic idea is that it takes students and young people to Africa to get involved in social entrepreneurship activities. According to its website "Our philosophy is people-powered global development. Think Impact focuses on the next generation of leaders. We offer students the ideas, leadership, and capital to leverage social innovation and local community resources to alleviate poverty."

As far as development org's go, this is the real deal. What Africa needs is more pipelines into rich country markets... This can happen if either Africans learn about rich country markets, or if Americans and Europeans learn about what can be profitably made in Africa. They've got a link to donate on their website.