The “dot-corn” Bubble

The April 7th cover story of TIME, “The Clean Energy Scam,” claims that by pushing corn-derived ethanol in the US as an additive to oil, politicians and Big Business are making a bad situation worse. It is causing food prices to rise globally, contributing to global warming, and stealing money out of the public purse.

To some this is old hat. For a while people have been arguing against corn-based ethanol. Mother Jones magazine did a story on it in November 2007 (where I had come across the term “dot corn”). The graphic below from there succinctly makes the case against corn-based ethanol.
Continue reading “The “dot-corn” Bubble”

Milk Does a Body Good?

Let me start off with the confession that I don’t like milk. It is just a matter of taste, nothing more. For years, I had felt somehow deprived that I didn’t have a taste for something that was clearly so beneficial. But as the evidence against milk mounted, I started feeling a sense of smug satisfaction — I figured that my taste buds had figured out a truth that I had not known. But I am sure that you are not interested in my dietary preferences. I bring this up only because the story of milk illustrates a number of deeper issues.

The first lesson is that it is possible for people to believe something sincerely and yet to totally mistaken. The second lesson: commercial interests motivate many to maintain a falsehood in the face of mounting evidence. Third, the world is connected and therefore even if you don’t directly promote harmful activities, even seemingly innocuous activities can indirectly cause suffering. Fourth, sometimes a proposed cure can aggravate the situation. Fifth, what appears to be a well established ancient practice could well be a relatively recent result of the modern way of living. Sixth, it is not easy but eventually with due diligence, researchers figure out what are the causes of a problem. That is, empirical studies reveal truths that are not analytically tractable. Seventh, the power of advertising and marketing is immense and can brainwash people into believing whatever the commercial interests dictate.

Enough of the editorializing. Here are the relevant articles. The first one is a two-part report in the Guardian: Diary Monsters – part 1, and part 2. A few excerpts below the fold.
Continue reading “Milk Does a Body Good?”

Virgle

You know that some people just naturally think big. Like Richard Branson and the google guys, Larry and Brin.

[Click on image for link.]

An invitation.
Earth has issues, and it’s time humanity got started on a Plan B. So, starting in 2014, Virgin founder Richard Branson and Google co-founders Larry Page and Sergey Brin will be leading hundreds of users on one of the grandest adventures in human history: Project Virgle, the first permanent human colony on Mars.

[Sorry, this should have gone up yesterday.]

We’re back

And just in time for April Fool’s Day. I wonder what the newspapers around the world will unleash on the unsuspecting on April 1st. The greatest April fool’s joke is undoubtedly the Swiss spaghetti harvest of 1957. The BBC explained that the harvest was particularly bountiful not only because of the mild weather but also “the virtual disappearance of the spaghetti weevil.”

Here’s the full text of the TV broadcast: Continue reading “We’re back”

The Management Regrets to Announce . . .

. . . that the chief typewriter monkey has called in sick the last couple of days. Which also means that there will be no posts for the next few days. However, the management recommends the archives for your reading pleasure.

An economics moment

This is a personal post. Not exactly what I had for breakfast type of post but close.

I clearly remember the moment when a light went off in my head. Brian Wright was teaching and we were talking about EV and CV. Equivalent variation and compensating variation, and the related concepts of “willingness to pay” and “willingness to accept.” As I had come to economics rather late in life, I had had the opportunity to figure out some of the basic concepts in my head. But I did not have the vocabulary to fully express the ideas. So when I got the vocabulary, it was an “aha” moment.

I remember Brian posing the question: so PG&E (the local gas and electricity utility company) is going to string up high-tension cables above your backyard. You know that that increases health risks. In economics terms, negative externalities accompany this action. That raises two questions.

  • How much are you willing to pay to stop PG&E from doing so?
  • And how much are you willing to accept to allow PG&E to do so?

Note that in the former case, the assumption is that PG&E have the right to string high-tension cables over your backyard and you wish to stop them; in the latter case, you have the right and can disallow PG&E from stringing wires across your backyard. It’s a matter of who owns the rights.

The willingness to pay is bounded by how deep your pockets are but the willingness to accept is open-ended. If PG&E owns the rights,then most likely you are out of luck because you will not be able to pay them enough to deter them from going ahead. If you own the rights, then you can make a pretty neat pile of cash by holding out.

Ronald Coase showed that regardless of who owns the property rights, if there are no transaction costs, then bargaining among the parties is sufficient for the discovery of the economically efficient amount of pollution.

Sometimes I wonder. I wonder if we would continue to have the kind of problems such as Nandigram if basic economics principles were better appreciated by a large percentage of the population. I think a lot of coercion and violence could be avoided. But perhaps I place too much faith in rationality.

Education Spending

This is a follow up to the post on Indian spending on education abroad.

The actual spending may not be $13 billion annually but the argument does not change even if the figure was much lower. What matters is that it is indicative of a problem and we should be concerned about it. It should be noted that this spending is an outflow of resources. That in itself is not a bad thing, however. We need to ask if this is a net outflow in the education sector. That is, what is difference between the inflow and outflow.
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India Spends $13,000,000,000 on Education Abroad

That’s what a report in the Hindustan Times claims: US $13 billion each year. Figures such as these are unbelievable but I suppose someone must have done the numbers. In any case, I had estimated that number to be around $10 billion a few years ago.

Let’s pause for a moment and figure. $13 billion every year. Or in the last 10 years, about $100 billion. Imagine what you could buy for that money. How about 100 colleges with first class infrastructure with housing, classrooms, labs? Each year India could have an additional capacity for 10,000 college students and in 10 years you could have 100,000 additional capacity. Imagine the multiplier effect of that spending — in construction, in salaries to teaching and non-teaching staff. Imagine the boost to the industry from creating human capital. The imagination boggles at the sheer waste.

Imagine how much infrastructure you could build for $100 billion.

One of the principal lessons one learns as one studies economic development is that success or failure depends largely on the set of economic policies that govern the economy. India, for instance, is poor and economically a failure because its economic policies are extremely brain-dead. Of course one can explain why these brain-dead economic policies exist. We will not visit that now. Here I would only mention that the policy on education is the most brain-dead and that educational policy is largely to blame for why India is poor today, and if the policy is not changed, then it will certainly doom India in the future.
Continue reading “India Spends $13,000,000,000 on Education Abroad”