• Population growth and development in disaster vulnerable regions


    Interesting Nature News in Focus on the soaring cost of natural catastrophes. While the jury is still out on the responsability of climate change for the increasing cost due to more frequent storms (see also the book by Kunreuther and Michel-Kerjan, MIT Press, 2009), other correlates seem to matter, which should be of interest to development economists and policy makers.

    “Natural disasters around the world last year caused a record US$380 billion in economic losses. That’s more than twice the tally for 2010, and about $115 billion more than in the previous record year of 2005, according to a report from Munich Re, a reinsurance group in Germany. But other work emphasizes that it is too soon to blame the economic devastation on climate change.

    Almost two-thirds of 2011’s exceptionally high costs are attributable to two disasters unrelated to climate and weather: the magnitude-9.0 earthquake and tsunami that hit Japan in March, and February’s comparatively small but unusually destructive magnitude-6.3 quake in New Zealand.

    And the long-term rise in the costs of global disasters is probably due mainly to socio-economic changes, such as population growth and development in vulnerable regions. That conclusion is backed up by a forthcoming study — supported by Munich Re — by economists Fabian Barthel and Eric Neumayer at the London School of Economics. Their analysis of events worldwide between 1990 and 2008 concludes that “the accumulation of wealth in disaster-prone areas is and will always remain by far the most important driver of future economic disaster damage” (F. Barthel and E. Neumayer Climatic Change; in the press). Any major weather event hitting densely populated areas now causes huge losses because the value of the infrastructure has increased tremendously, they note, adding that if the 1926 Great Miami hurricane happened today, for example, it would cause much more damage than it did at the time.”

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  • Larry Summers as World Bank President?


    Apparently, Larry Summers is considered by the Obama administration to take over as World Bank President later this year.

    I must be naïve, but I thought the required skills for the job would somehow be a combination of deep knowledge of development issues, political skills, and leadership. Is this telling us that such a person simply does not exist?

    Well, actually upon investigation, M. Summers appears to have some background in tackling development issues, from its time as World Bank chief economist… Time to read again some classic writing by the great man (this is a memo of the time):

    DATE: December 12, 1991
    TO: Distribution
    FR: Lawrence H. Summers
    Subject: GEP
    ‘Dirty’ Industries: Just between you and me, shouldn’t the World Bank be encouraging MORE migration of the dirty industries to the LDCs [Less Developed Countries]? I can think of three reasons:
    1) The measurements of the costs of health impairing pollution depends on the foregone earnings from increased morbidity and mortality. From this point of view a given amount of health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.
    2) The costs of pollution are likely to be non-linear as the initial increments of pollution probably have very low cost. I’ve always though that under-populated countries in Africa are vastly UNDER-polluted, their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City. Only the lamentable facts that so much pollution is generated by non-tradable industries (transport, electrical generation) and that the unit transport costs of solid waste are so high prevent world welfare enhancing trade in air pollution and waste.
    3) The demand for a clean environment for aesthetic and health reasons is likely to have very high income elasticity. The concern over an agent that causes a one in a million change in the odds of prostrate cancer is obviously going to be much higher in a country where people survive to get prostrate cancer than in a country where under 5 mortality is is 200 per thousand. Also, much of the concern over industrial atmosphere discharge is about visibility impairing particulates. These discharges may have very little direct health impact. Clearly trade in goods that embody aesthetic pollution concerns could be welfare enhancing. While production is mobile the consumption of pretty air is a non-tradable.
    The problem with the arguments against all of these proposals for more pollution in LDCs (intrinsic rights to certain goods, moral reasons, social concerns, lack of adequate markets, etc.) could be turned around and used more or less effectively against every Bank proposal for liberalization.

    We could just laugh at it, but it’s exactly the type of thing that cheaply discredits our whole profession, which is currently in great need of a bit more sanity. And I guess Abidjan’s inhabitants that were exposed to the Probo Koala’s toxic waste dump will appreciate!

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  • Tracking cholera with Twitter


    As highlighted in Nature News and Comments on January 10, a study published in The American Journal of Tropical Medicine and Hygiene shows that:

    The informal information source, Twitter, was yielding data that would have been a quicker way of detecting and tracking the deadly cholera outbreak in Haiti than traditional methods, according to a study.
    The study found that online social media and news feeds were faster than, and broadly as accurate as, the official records at detecting the start and early progress of the epidemic, which hit Haiti after the earthquake in January 2010 and has killed more than 6,500 people.

    Here is the study‘s abstract:

    During infectious disease outbreaks, data collected through health institutions and official reporting structures may not be available for weeks, hindering early epidemiologic assessment. By contrast, data from informal media are typically available in near real-time and could provide earlier estimates of epidemic dynamics. We assessed correlation of volume of cholera-related HealthMap news media reports, Twitter postings, and government cholera cases reported in the first 100 days of the 2010 Haitian cholera outbreak. Trends in volume of informal sources significantly correlated in time with official case data and was available up to 2 weeks earlier. Estimates of the reproductive number ranged from 1.54 to 6.89 (informal sources) and 1.27 to 3.72 (official sources) during the initial outbreak growth period, and 1.04 to 1.51 (informal) and 1.06 to 1.73 (official) when Hurricane Tomas afflicted Haiti. Informal data can be used complementarily with official data in an outbreak setting to get timely estimates of disease dynamics.

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  • Railroads in the new world


    Interesting blog post by James Kwak on historian Richard White’s Railroaded: The Transcontinentals and the Making of Modern America, drawing a paralel with today’s “capture economy”.

    Even then, the railroads lost money. Not only was there insufficient demand for their services, but they were run by people who were generally incompetent. (For one thing, they didn’t even know their own costs of doing business.) Yet the people who owned the railroads made fabulous amounts of money (of which Stanford University is one symbol). The main way to do this was simple. The people who controlled a railroad (generally by putting up very little of their own money, thanks to the government subsidies) would also wholly own a construction company. They would cause the railroad to overpay the construction company to build the railroad—in effect transferring wealth from railroad stockholders and creditors into their own pockets. Another scheme was to buy up land along future railroad routes that only they knew to make an easy profit. Only slightly riskier were schemes to make money by using insider information to trade in securities of their own companies.

    The railroads themselves also put the lie to the myth of the efficient, modern corporation. Executives had virtually no control over what went on in the field. Jobs were treated as a form of patronage, with rampant nepotism. Corruption existed on all levels, with station agents routinely pocketing a share of revenues. Competition failed to impose discipline: when one railroad lost traffic to another, it would simply overbuild in another place to compensate, leading to even more overcapacity. The only solution was cartels, but even those failed because the railroad heads were too incompetent to figure out a way to restrain their own behavior.

    All along the way, you also see the other consequences of concentrated power, enormous wealth, and political protection. Railroads resisted installing automatic train couplers for decades, resulting in many unnecessary deaths. The railroads interfered in other markets by setting rates in a discriminatory fashion, influencing what crops farmers produced and determining which competitors won and lost. Through it all, you see rich people surrounded by circles of flatterers and yes-men who despise them behind their backs.

    This is what the golden age of unregulated capitalism looked like. It’s also the world we’re heading towards: one where inefficient corporations run by incompetent bunglers make huge piles of money for a chosen few executives and owners by buying politicians (completely legally, thanks to Citizens United), shifting losses onto outsiders and imposing costs on the rest of society. If this sounds like hyperbole, just think about the financial crisis.

    Relate this to findings on Indian railways from this nice paper, which Dan Bogart presented at our workshop on infrastructure in Toulouse last year.

    This paper provides a historical perspective on the relationship between operational costs and state ownership focusing on the railway network in colonial India. The institutional setting offers a unique natural experiment to identify the effects of state ownership because all the private railway companies were taken over by the colonial Government of India between 1874 and 1912 at predetermined dates set by contracts negotiated in the 1850s. Using a new historical dataset, we find the move to state ownership decreased operating costs by 14 percent within the same railway. The observed cost declines are not driven by anticipation effects, changes in reporting or accounting standards, or long run trends. Rather, the evidence suggests the Government reduced operational costs by cutting labor costs. Our surprising results can be explained by the undemocratic colonial nature of the Government of India, a fiscal system heavily reliant on railways for revenues, and a regulatory environment under private ownership that weakened incentives to lower costs.

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  • Social scientists connecting with policy makers (1): the case for randomized controlled trials


    How do we convey the insights from sometimes technically complex research in the area of economic development to policy makers? How do we address the strategic challenges of providing advice, either directly or indirectly through international organizations such as the World Bank, think tanks, or even media dissemination? This is a notably difficult question for social scientists such as economists. I do not intend here to give a very general answer, but just point to examples of effective communication. Or so it seems to me.

    So for a start here is Esther Duflo in a TED talk on the power of randomized controlled trials, with a bit of emotion (and, if needed, subtitles in 25 languages on the TED site). Considering the space won both in the popular media and in institutional evaluation programs around the world, she sure seems to be a powerful communicator! Something to learn from.

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  • The Generosity Experiment


    How much do you give to alleviate poverty and suffering around you? Sasha Dichter has a pretty bold view on what happens when we feel strongly about addressing the problems of the world, but are also willing to say no to those who ask for help around us.

    Here is the original blog note on that experience:

    On the subway today, a man was asking for donations so he could buy food, sandwiches, deodorant, even hand sanitizer to give for free to homeless people.  He had lived on the street two decades ago, he said, and now does this part time to give back, in addition to a part time job he holds.

    I have absolutely no idea if this is true, but I was skeptical. I, along with everyone else in my car, got off the train without giving him any money.  Right after I got off the train I knew I had done the wrong thing.  It just didn’t feel right.

    Most of the time I don’t give to people on the street. It seems to make sense, rationally, not to give most of of the time — and instead to give to great organizations that are doing things for the homeless. Perhaps, but it’s easy to take this too far. 

    Giving is an act of self-expression, and generosity is a practice. Each time I decide not to give, I’m reinforcing a way of acting – one that’s critical and analytical and judgmental.

    You may not be like this at all.  You may consistently act from the heart first and not the head.  Good for you.  More often than not, I don’t, though it’s something I’m working to change.

    So I’ve been thinking that I need to try a generosity experiment: for a period of time, when I’m asked to give, to say yes.  To everything.  To emails and people on the street and friends raising money.  Everyone.  I think it will be good practice.

    What do people think?  Does this make sense? [sic]

    P.S. More on this topic from the Freakonomics blog, where Barbara Ehrenreich is very clear that you always give to someone on the street who directly asks you.

    For the believers, the Ehrenreich’s bit reminds me a Khalil Gibran quote, which runs something like: the coin you put in the beggar’s hand is the only link between you and God…

    Sasha Dichter: The Generosity Experiment from TED Blog on Vimeo.

    Interestingly close to Peter Singer’s reflections on the barriers and psychological limitations, which prevent us from giving to save lives around us, and how to overcome them.

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