on economics

Iraq

USAID hid information on construction overruns by classifying them as overhead or administrative costs, according to a new report by the Special Inspector General for Iraq Reconstruction. The finding is based on an assessment of a children's hospital in Basra,which had a budget of only USD 50 million but estimation by contractor Bechtel put the actual price of completing the project to USD98 million. (NYT)

European Union

African civil society groups have called on the governments to stop negotiations on the proposed Economic Partnership Agreements(EPAs) with the EU, saying it would undermine development and lead to increased poverty. Addressing a news conference in Nairobi,the 16 civil society organizations from southern and eastern Africa said the new trade deals being pushed by the EU would make thecontinent poor. (Xinhua)

Ukraine

The World Bank has approved a USD 154.5 million line of credit to Ukraine's state bank Ukreximbank so that it can lend to eligibleprivate-sector banks, which would then offer medium-term working capital or long-term investment loans to eligible private exportersto boost their export potential. Continued growth of exports is a priority of the government, said World Bank Country Director PaulBermingham. (Reuters)

Japan

Japan will officially propose establishing a 16-nation free trade area (FTA) in the Asian and Oceania regions during a ministerialmeeting of the ASEAN nations and its partners, scheduled in Malaysia in late August. Japan's Economy, Trade and Industry Ministerhad in April unveiled the idea of launching such FTA talks in 2008; individual talks are already under way. (Asia Pulse)

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Garunteed this will be an anti-China group.

Indonesia

In cooperation with the World Bank the government is initiating a cash-based program to send impoverished child laborers to school.The conditional cash transfer program, which is part of the effort to eradicate poverty and the worst forms of child labor, will betried out in six provinces as a pilot project. It will also provide health care for children and pregnant women. (The Jakarta Post)

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In other news the Indonesian Government is also considering installing seats in buses and trains for pregnant women and the elderly.

The Indian government has announced a ban on children working as domestic servants or in roadside food stalls. The order applies to children under 14 and comes into effect in October. It also bans children from teashops, restaurants, hotels, motels, resorts, spasor other recreational centers. There are an estimated 12.6 million child workers; many work as domestic helps or in small roadside restaurants. (BBC)

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Welcome to the 1880s!

China

China will punish health workers who help to abort female fetuses, despite a recent decision not to criminalize the practice.China's legislature scrapped a bill in June that would have introduced fines and prison terms for aborting girls. But an official said that did not mean there was any relaxation in the policy against selective abortion. (BBC)

Afghanistan

The multi-billion dollar "Afghanistan Compact" blueprint for partnership between the government and international community to bolster security, economic development and counter-narcotics efforts has achieved solid progress since its adoption in January, but continued global support is needed to consolidate gains, an expert panel including the UN has said. (UN News service)

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//Activate Development Decoder//
CMD: run.file,"devdecoder"

...reading

...key suspect prhases identified

1. "achieved solid progress"

2. "continued global support is needed to consolidate gains"

3. "expert panel"

...translating

1. no real gains were made but we will make it sound better by saying they improved anyway

2. no real gains were made but we said things improved so we had better cover ourselves. this is an excuse clause.

3. group of people who cloud issues and ideas with complex language so others can't question their ideas or solutions or expense accounts for that matter.

END TRANSMISSION

- TOVARISHCH

# posted by Penguin @ 8:36 AM 0 comments

Uruguay

Economy Minister Danilo Astori has confirmed that Uruguay made an early debt payment of USD 900 million to the IMF. He said thedecision was based on the series of payments that Uruguay was scheduled to make to the IMF in 2007 and was partly funded by therecent placement of a USD 500 million 2022 bond, with the remainder drawn down from foreign reserves. (Dow Jones)

Zimbabwe

Zimbabwe's central bank has announced that three zeros will be taken off every banknote to help consumers deal with inflation ofalmost 1,200 percent. Zimbabweans have three weeks to exchange existing banknotes for a new series being issued from Aug.1. The bankalso announced what amounted to a 60 percent devaluation of the currency. (BBC)

Here's my comment on the first link from Adbusters.

Sorry it's poorly organised, they upset me.

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First of all I don't think Mr Saul is an economist. Mr Saul does not like economics because it involves mathematics. I would hazard a guess that Mr Saul cannot understand the mathematics of economics and would prefer economists not to use math so he may understand the arguments and make his own arguments in a social science fashion.

Economics does involve ethics and moreover economists have a unique set of ethics. For instance economists don't tend to distinguish between 'us' and 'them'. Economists focus on ideas that make everyone better off (Pareto-efficient). We leave ideas that make 'us' better off at the expense of 'them' to politicians. E.g. Most economists are in favour of immigration. While it has been shown (mathematically!) that immigration in the USA lowers real wages for American born HS drop-outs by between 0 and ~8% (it has no effect on unemployment). No social commentator considers the tremendous benefits to immigration for immigrants. It seems unduly harsh to greatly punish would be immigrants to marginally benefit poor Americans (who are rich in comparison). Unless Americans are worth more than Mexicans (economists value the two equally, unlike other social scientists).

Further, most economists realise the negative externalities of pollution and support programmes whereby polluters pay the full cost of pollution. Kyoto is an example of an economic solution to pollution. A Carbon Market attaches a value to pollution and forces to polluters to pay the costs of polluting. Increasing the price of pollution reduces the amount of pollution.

The vast majority of economists are still macro-economists. Lately more interesting work has been accomplished in Micro so you hear more of it.

Economists ought to be apolitical. The worst economics is done by economists trying to support one political side or another. It is simply bad science to start with your conclusion in mind and work towards it. The head economist for the CAW comes to mind. You can pretty much ignore everything he says as it’s political. For instance support for auto tariffs to protect auto workers is only good for the CAW, not the economy.

Here’s another plus for economists: people actually listen to them (unlike, say, social activists). Economists are much more likely to solve a problem than a social activist. Economics students aren’t coping-out and I resent such a statement.

It seems Adbusters, that bastion of intellectualism, has turned its head to the dismal science. No longer content to mock businesses they are now asking questions about economics. I haven't read all they work yet but here's the links:

Why are Students Leaving Politics Out of Economics

true cost economics

I'll try to answer their questions.

#

I recently went to the Brantford Charity Casino and played poker. I hadn’t really played before. I was very nervous and had trouble following the rules and remembering the hands. I kept a card that told me the hands in my shirt pocket - much to everyone’s amusement.

Afterwards, I thought about the game a bit. I should have done it the other way around of course but that’s how I roll. To be successful in poker you must have skill and luck. Luck because of the role of randomness and probability in the game and skill to figure out the probabilities and the behaviour of your opponents. Poker is, essentially, about math and psychology. It so happens that economics is, essentially, also about math and psychology.

Game Theory (GT) could be useful in determining an optimal strategy to poker however there are several problems to it:

1) GT works best in a one-on-one situation (heads-up play), most poker games are not one-on-one.

2) Most players do not play optimally themselves. This is akin to building defences against an attack your opponent could never mount while ignoring the easy solution. You want to adopt your game to your opponent, therefore you’d need a different strategy against different (categories of) players.

GT can tell us something about optimal poker strategy.

A lot of the information in a poker game is hidden. I.e. you don’t know what cards your opponent has. GT is useful when deciding whether or not to bluff. Bluffing is not a method to win pots with bad hands, it is more complicated than that. If you get caught bluffing then your opponent will be more likely to call when you have a good hand. On the other hand a player who never bluffs will never win a big pot because if he raises the other player will fold before committing much money.

There is also the reverse bluff which is playing as if you have a bad hand when you have a good hand. In this case you call the raises of your opponent but don’t raise. The opponent will try to bluff you out of the pot by betting big. You call and win a big pot.

In 1944 John von Neumann published his work on poker and Game Theory in A Theory of Games and Economic Behavior. His conclusion was that you should only bluff with a bad hand not a moderately good one.

That’s because a modest hand may beat another modest hand so it is worth calling to the showdown if the stakes are low, otherwise you should fold. But a bad hand can only win if your opponent folds. Bad hands should be played aggressively or not at all.

Bluffing also forces your opponent to call your raises more frequently which allows you to win more money with good hands. I.e. your opponent won’t fold when you raise so when you have a good hand you will make a lot.

GT is not really useful due to the imperfection of human opponents however it is useful when building poker playing computer robots. Currently the most successful ‘bot is the University of Alberta’s SparBot which manages to beat most human players.

It is possible that GT and artificial intelligence will eventually solve poker, meaning that there is a correct answer to each situation.

#

I'm not a fan of fair trade. Mainly because it implies free trade is somehow unfair. Of course people only trade if it is beneficial to both parties, otherwise why bother? On the other hand in fair trade one party decides what is fair and imposes that view on other parties. Clearly this is less fair.

Oxfam lists several issues and the 'explains' them to regular folks. It does so poorly and I feel the need to correct them.

Issue 1: Dumping

"Rich countries dump subsidised produce on developing countries, driving down the price of local produce - with devastating effects on the local economy. This unlevel playing field has made many poor farmers even poorer, or forced them off their land completely." (Oxfam, Make Trade Fair)

Ironically Oxfam probably also calls for increased aid to poor countries. If the EU declared they were going to subsidise food for people in poor countries Oxfam would applaud them. There is no difference between "dumping" (as Oxfam defines it) and food aid! People in the poor country should say thank you very much, take the cheap food, do something else, and laugh all the way to the bank.

So EU food subsidies may drive farmers off their land but this is not neccessarily a bad thing!

Issue 2: Market Access

"Rich countries limit and control poor countries' share of the world market by charging high taxes on imported goods. As a result, many poor countries can only afford to export raw materials, which give far lower returns than finished products.

"For example, the rich world buys cheap cotton and cocoa and turns them into expensive clothes and chocolate - reaping all of the profit. At the same time, poor countries are threatened with having loans withheld unless they open their markets to rich countries' exports." (ibid)

It's not clear why poor countries can only export raw materials. I assume the tariffs are lower on raw materials than finished products but this isn't stated.

The rich country is engaged in high value-added work while the poor is not. I think that by definition rich countries add more value than poor countries, i.e. they produce more = more money = rich!

Is Oxfam advocating free trade now or price controls on commodities? Would they understand the differances between the two approaches to solving the problem?

Issue 3: Forced Liberalisation

"Rich countries have long used the IMF and World Bank, and aggressive bilateral trade deals, to push open the door of poor countries' markets to a flood of cheap products but now rich countries plan to use the binding rules of the WTO to kick that door down altogether. " (ibid.)

The answer to issue 2 seemed to be free trade (if we realise that controlling world commodity prices is impossible, unless Oxfam becomes the de Beers of all commodities) but now Oxfam is against free trade. They don't state why though so I can't argue with them. Could this be a new strategy of debate?

Issue 4: Labour Rights

"Globalisation and trade have drawn millions of women in developing countries into paid work. Their labour is contributing to rising global prosperity and to the profits of some of the world's most powerful companies. But women workers are systematically being denied their fair share of the benefits from their labour.

"Companies' demands for faster, more flexible, and cheaper production in their supply chains are undermining the very labour standards that they claim to be promoting.

"Women workers – and their families – pay the price. Many face insecure contracts, intense production pressure, and intimidation in the workplace. Governments, competing to attract investment and boost exports, too often exacerbate the problem. Instead of strengthening protection for labour rights, they have simply traded them away.

"Oxfam and partner organisations around the world are campaigning to end these double standards and to make trade work for women workers. (ibid.)"

Basically, free trade increases competition and makes people (not just women) work harder.

Issue 5: Patents

Increased patent protection for companies in rich countries costs developing countries $40 billion each year.

Under pressure from powerful corporations, the rich world is insisting on stringent patent protection. This will push up the price of essential products like seeds, medicines, textbooks, and software.

Vital drugs will be priced out of reach of poor people. Fourteen million people die from treatable diseases every year. Many of these lives could be saved if cheap drugs were available. " (ibid.)

I can make up stats too! Let's see, without patents the global economy decline by 34%.

The reason poor people don't have access to medicines is not becuase they can't afford them it's becuase their government's are corrupt and haven't spent any money health care infrasructure.

I would refer you to a study I read recently but can't recall it's name. basically found that after Zimbabwe refused to recognise patents for anti-retroviral drugs not a single new patient recieved medication. The problem wasn't prices, it was the ineefective health infrastructure. Mercedes could be free but no one would get any in the middle of the sahara- there's no infrastructure for them!

Further poor countries could buy generic drugs from countries that don't recognise patents such as India or Brazil, this is perfectly legal. Yet the problems remain. It is very unlikely that patents are to blame.

#

OK, I had to read the article just to be sure I was right. And I am.

Quoting from the Economist, "Baby boom and bust" 11 May 2006:

Lately, both men have been giving considerable thought to what impact the impending retirement of the baby-boomers will have on the prices of financial assets. They have reached sharply different conclusions, which they aired in a conference last month at the Milken Institute.

I can imagine that the options are: Either boomers sell stocks and no one buys, in which case the price falls, or boomer sell stocks but other people buy them, so nothing drastic happens.

There are not enough young people in the West to buy all the shares of the boomers (and keep prices at current levels) so people in the developing world will have to buy the shares. They have a much younger population. But they don't have nearly as much money. And given America's recent behaviour young people in China, India, Dubai, Brazil etc may not be allowed to own US shares.

Or boomers will continue to work longer as life expectancy increases. Despite the fact the opposite has been the trend.

It all depends.


Article can be found here:

http://www.economist.com/finance/displaystory.cfm?story_id=6914086

The Economist asks: "Will share prices crash as baby-boomers sell their assets to pay for retirement?"

I haven't read the article but I know the answer. It's the answer to all questions about economics.

Do you want the answer to all economic questions? Do you? You can probably handle it as it's quite simple:

The answer is: It Depends!

Read the article and let me know if I'm right.

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David Dodge, the Governor of the Bank of Canada, told the senate that the Canadian dollar is not priced correctly according to market fundementals. He also reported that the price of oil was not "screwey" given market conditions.

David Dodge later corrected Bob Barker, informing him that according to market conditions the price of the GE Fridge was actually $1,997 not the $2,013 as claimed by Barker. Dodge was not awarded the prize.

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UN News

The UN is now better able to screen prospective contractors and other partners for any involvement in criminal activity -- such asmoney laundering, drug trafficking or terrorist financing -- with the donated assistance of the world's leading researcher of suchinformation, a humanitarian official announced this week. The company, World-Check, joins Eriksson, which provides communications,and DHL, which assists in logistics, as private sector partners for swifter and more effective emergency humanitarian response,particularly crucial in such large-scale disasters as the Indian Ocean tsunami of late 2004, said Kevin Kennedy, Director of theCoordination and Response Division of the Office for the Coordination of Humanitarian Affairs (OCHA).

Addressing senior economic officials from across the world gathered at UN Headquarters in New York, Secretary-General Kofi Annantoday spoke out in favor of "genuine market access opportunities" for developing countries and a rapid termination oftrade-distorting subsidies for agriculture in the developed States. He told a key ECOSOC meeting that rich countries should take"bold measures" to facilitate a successful conclusion of the currently stalled Doha trade talks. Annan's remarks were heard byfinance and development ministers and high-level officials of the World Trade Organization (WTO), the IMF and the World Bank, alongwith representatives of the 54-member Economic and Social Council.

World News

Africa

Eritrea

A senior U.N. envoy said April 26 he had failed, at the start of a visit to five drought-hit countries in the Horn of Africa, topersuade Eritrea to release 100,000 tons of food aid locked in warehouses. Last week, aid officials warned that thousands of tons offood aid from western donors might be rotting in storage because of Eritrea's restrictions on humanitarian handouts. (UN Newsservice)

Kenya

The agency spearheading the fight against AIDS, tuberculosis and malaria has agreed to new funding for Kenya despite the country'sdelay in submitting an audit for a first tranche, a spokeswoman said April 26. The Global Fund has approved a USD 70 million,three-year HIV grant and is negotiating the terms and conditions with the country. (Reuters)

Summary: Aid is ineffective. It rots in warehouses. Aid is given out on condition that it is used appropriately. If it is not used appropriately it is still given out.

Europe & Central Asia

Belarus

Thousands of Belarussians marched through central Minsk April 26 marking the 20th anniversary of the Chernobyl disaster and vowingto turf President Alexander Lukashenko out of office within two years. Liberal opposition leader Alexander Milinkevich tolddemonstrators it was up to them to create awareness, take action, and speed the pace of change. (Reuters)

Kyrgyzstan

Opposition groups and civil society activists are gearing up to hold nationwide demonstrations on Saturday to call for greaterreform in Kyrgyzstan, more than one year after public protests swept former president Askar Akayev from power. The country haswitnessed an upsurge in people demonstrating openly since last year's so called Tulip Revolution. In early April, opposition andsome civil society groups held a protest against organized crime in the country. (IRIN)

Middle East & North Africa

Israel

With donors balking at funding the Hamas-led Palestinian Government, tension between that administration and President MahmoudAbbas' Fatah, increasing violence and lawlessness, and continued settlement expansion by Israel, the situation in the Middle Easthas reached a volatile juncture, Alvaro de Soto, the UN Special Coordinator for the Middle East Peace Process told the SecurityCouncil in the monthly briefing on the issue. (UN News service)

Palestinian Authority

Concerned at the prospect of a further deterioration in the living conditions of Palestinians in the new political climate,Secretary-General Kofi Annan said April 26 that the UN would most likely increase the scale of its assistance and urged intensifieddonor support to the people, while stressing that the Palestinian Authority remains critical to averting a humanitarian crisis. (UNNews service)

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From The The Development Executive Group.

Published by The Development Executive Group
(http://www.DevelopmentEx.com)

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