TED: How To Gage If Aid Works To Cure Poverty

As many of you know, I am passionate about international development. If you did not know this, then now you do. I love that this woman has thought of a way to test if aid has worked. She uses testing to test the null hypothesis and behavior. Amazing! And on top of it, she is able to come up with least expensive and effective programs.

A New Look At Economics: Co-Op Capitalism

I was inspired by this article about Noreena Hertz. She has a new theory called co-op capitalism where she argues Capitalism needs to adapt to take into consideration about human costs of the system. She says if corporations will insist on having all the control, they will need to step in a take care of the externalities that the governments used to monitor.

Are Borders As Destructive As Religion?

This was a very interesting take on Borders and the detrimental effects of protecting those artificial lines.

Time To Give It Up: The US Dollar Ain't All That

People are actually debating if the US dollar should maintain currency "hegemony" in today's world. Given the emergence of the Euro and the rise of China, we should have been realizing the reality years ago: sooner or later there will be some sort of basket of currencies that are considered a valid store of value. And that is not a bad thing.

For the US to be concerned about this instead of looking to other issues makes me want to buy everyone a copy of that stupid business managment book called "Who Moved My Cheese?". Sadly, this book seems to resonate for me these days. It seems to be the source of almost all political and personal issues out there. Sad, but true.

But I digress. The US has been fortunate enough for a very long time to be able to do whatever they want without having issues with the value of the dollar.

Have enormous deficits and need to barrow insane amounts of money? The dollar stays high! Lower interest rates to practically zero? The dollar stays high! World falls apart? The dollar stays high! This will not be reasonable into the future.

Growth in the US is fully mature, demand is coming from counties on the rise, and in my opinion, the world may be less volatile if the entire global financial system were not dollar denominated. We would still be one of the most important, but the risk would be diversified. Time to recognize there is plenty of room for cheddar and provolone, the cheddar is getting too sharp anyhow.

Game Theory: Can It Be Used To Predict Political Events

This is a very interesting article about using game theory to predict possible international political outcomes.

What is game theory, any normal person may ask? It is essentially having a model to predict behavior taking into consideration other players behavior (here is a good explanation). When I was in school we learned about game theory and I have always struggled with doing it properly, however, it is one math application I wish I knew better.

Enjoy!

Policy Proposal: Time To Get Skinny

I have some not very PC views on obesity. I fully agree with this article that talks about how unhealthy behaviors should be taxed and the burden of behavioral based societal externalities should be born by they people who create those extra costs. This is not to say that if you have poor genetics that you should not be given some dispensation, but for the 40% of obesity that can be reduced by behavior, you should be expected to change you behavior.

Executive Pay

I hate to say I told you so, but I told you so. What have investment banks learned from the populist attempt to limit pay - exactly what I said they would - they would either:

A. Not call it a bonus anymore
B. Contractually guarantee the bonus (Aka - same as salary)

All of the bankers who are unemployeed have learned that the money was not free, and that in the future they should save because that is what they are getting paid for, the riskiness of the job and the potential of being laid off.

I am not saying the system is perfect, but putting limits on performance is a bad idea. Instead, the money should be tied to longer term incentives and not paid out all at once. That is what we want anyhow, which is more "investment" in longer term success of the financial system.

Is GDP A Good Measure Of National Wellness

This is an interesting oped about how GDP is not a good measure for wellbeing. While it might seam that rising GDP would indicate an overall betterment of a nation, it clearly is not digging deep enough. There are always winners and losers in development, and distribution of wealth measures are key to understanding what affects people on the ground in each country.

Eliminating Poverty: The Seemingly Impossible Is Possible

This was done a year a half ago, the use of statistics is amazing to understand development. I hope his vision of poverty eliminating itself will hold true given the world as is today. Sadly, he knows the economic growth is key, and without it, poverty will remain.

Read It: The Economic Consequences Of Peace

I came across this very interesting blog post comparing current conditions to a historical cautionary tale about creating excess government debt.

This tale is "The Economic Consequences Of Peace" by John Maynard Keynes. This book is a must read for people who like economics and history. Do you want to see how strapping Germany with obscenely high debt as punishment actually forced them to become militaristic and led to the rise of the Nazi Party? All I can say is it is a compelling story of unintended consequences.

Just FYI - Keynes is otherwise known as the godfather of government spending used to bolster economic growth in time of economic decline - otherwise known as Keynesian Economics, so even if you don't agree with him, you can learn something new!

Grading Obama's First 100 Days

Here is Robert Reich's thoughts on the first 100 days of the Obama Administration. Not sure I agree, but read and make up you own mind...

People Finally Realize That Women Do Most Of The Shopping

Check out this article in the Economist about how marketers are finally focusing on women. It took a near depression for them to finally understand real behavior, which is the key to economics. And behavior, might I add, is not at all rational.

State Well Being: What does being Foreign, Gay, Creative Have To Do With It

Apparently a lot. See this very interesting article with correlations for state well being with:
a. Housing
b, Human Capiral
c. Gays
e. Foreigners

Begging the question - for happy states, what is the chicken and the egg for creating societal happiness?

I Prefer A World With Multi Lateral Organizations Better Than Going It Alone

I like the idea of a world with a World Bank, IMF, WTO and United Nations. In fact, the idea of a world without them makes me kind of sick.

I know at times they have made mistakes, but each time they have stepped in, it was with the thoughtful consideration of a lot of some of the smartest people out there working on incredibly complex issues. Here is a suggestion about how the IMF can be a force for cooperative solutions to this global crisis. Hopefully the world does not shut down and begin full scale and comprehensive protectionism - one of the most insidious possible outcomes of today's challenges.

A Better Alternative To Solving The Housing Crisis

This makes sense to me. It is time for us to find solutions that get at the problem, not so called solutions that make the problem worse and create poor intensives for poor behavior . Writing down the loss in value on house potential home equity makes more sense and keeps people in their homes.

Please don't turn my blue eyes red, Mr Obama

When I was a sophomore in college, I came home to my dad and I said - "Dad, I think I am a liberal republican". And his response was - "we have no republicans in this house - be as conservative of a democrat as you care to be". I have always listed to that with all my heart. I know that I will have to "pay" more for this choice and I am willing to do that because the benefits outweigh the costs.

I consider myself a very socially liberal and fiscally centrist - maybe even a little conservative. I voted for Obama, and I think that we need change. However, I agree with every word of the following op-ed. From what I saw at Obama's speech a week or so ago - he is clearly a very smart man, but he is also leading a party that seems to be a little overly zealous at their new found strength and power. And dare I say, a little drunk on that power. I believe they are not wearing the win well by gloating and throwing the baby out with the bathwater.

Please don't make me sorry I consider myself a democrat. There is a reason why the USA is an economic engine, and certainly an engine in deep need of repair, but please don't throw the wrench in the middle without knowing what will happen by using it.

These are my thoughts only - so please take them as such.

World Trade - May It Rest In Peace, and Hopefully Come Back From the Dead Soon

www.foreignaffairs.org/20090101faessay88102/aaditya-mattoo-arvind-subramanian/from-doha-to-the-next-bretton-woods.html

As some of you may know, I love economics and foreign affairs. That, I know, has created some great conversations with some of you, and really boring for others depending on the your wherewithal for such topics.

It is something I love, so I will share it with everyone, and if you don't like it, feel free to click on other pieces of my blog that are more interesting to you. (In fact, if you have requests, let me know - If I am anything, I am flexible about what I report on)

Attached is only the introduction of an article about free trade and the slow painful death it has been having for 10 years with the Doha Round of multilateral negotiations amongst countries.

I am not allowed to post it, but if it strikes your fancy, send me an email and I can email it to you.

Anyhow, here are my economic ramblings -
A. It is such a shame that free trade seems to be falling apart. While there are winners and losers in free trade that must be addressed, it is really sad that the world has gotten to such a bad place that it looks like protectionists will win. The world is a better place with free flow of information and products and capital - it allows for true competition. I saw this in Brazil first hand. Their goods are protected by a long standing "import substitution" regime, and their goods are therefore crap quality and expensive. For better or for worse, free trade makes products better and cheaper. I am not saying everyone should buy everything and consumerism is an issue - but deal with that, not the products themselves.

B. Disengaging right now hurts everyone and is a band-aid instead of the heart surgery that the world needs - or better yet - Disengaging is like not going to exercise, and then complaining you have back pain. The better option is to engage and work on that muscle.

C. Sadly, the US needs to buck the heck up and see increased competition as a good thing. It makes us stronger and focus on what we do best - which is thinking and coming up with new ideas. India is a real challenge for us - they speak English, they are entrepreneurial, they go to college and they work for less money than we do. This should be embraced, and not seen with fear. I understand it can look like a threat, but we need to get our thinking caps on a define real advantage and look for new opportunities where we shine. And I am optimistic about what we can do in problematic times.

D. The car industry - this is partially a trade issue. The US car manufacturers suck at what they do, they don't understand market trends, they are expensive and bad quality relative to other manufacturers. We should not bail out this industry! If you are concerned about the employees that do a real subsidy of the real problem. I would rather take the multi-billions of dollars and hand every employee a check to either retire or get their college degree - again, let's deal with the problem.

Anyhow, enough for now - you will see me on this topic often, and if you disagree, I love to engage on these topics and learn new things - so please email me or leave a post.