Is honesty always the right policy?

Uruguayan President José Mujica met with hundreds of potential Spanish investors in Madrid this week and gave an exceptionally frank sales pitch.  I’m not sure if the honesty impressed the investors, but it certainly must have been different from the usual dog and pony show they hear.


Among the best tidbits, Mujica noted that:

1. Uruguayans aren’t known for being hard workers.  We are pretty lazy; we don’t like to work.  No one dies by working too hard in Uruguay, but we aren’t corrupt, we are a decent country (this reminds me of Oklahoma’s former license plate motto: Oklahoma ok.)

Geez, one of these statements would have been shocking enough but he just went on and on and on.  We get the point Mujica–Uruguayans don’t like to work.  I’m just not sure why that’s supposed to attract investment.

2.  Mercosur is important, but it suffers from numerous difficulties because of the weaknesses of its members.

3.  They’re working with Brazil on bringing down tariffs, although he admitted that negotiations were going “sector by sector, with sweat.” I don’t know the exact translation in English, but the literal translation is pretty clear.

4. Uruguay suffers from a lack of infrastructure but investors have legal guarantees and it is worth it to invest.

These are all rough translations by me; the original is much better if you read Spanish.

The Business of Doing Business

While Tyler and others have supported the continuation of the World Bank’s “Ease of Doing Business” rankings, I think that we suffer from ranking fatigue. We have multiple rankings of business friendliness, multiple rankings of “economic freedom”, and the dreaded ICRG indices among many others.

There are many problems with these rankings.

First off, in a “confusing the map for the territory” / “cargo cult science” manner, countries are actually targeting the rankings! My grad student from Cote d’ Ivoire reports that his country is considering such a policy. In a very nice essay, Ricardo Hausmann reports that, “Many countries – including Colombia, Liberia, Mexico, and Saudi Arabia – have at some point made improvement in the Doing Business ranking, or that of the World Economic Forum’s Global Competitiveness Report, a policy goal.”

Of course, since we have no notion of causality from the index (really any of the indices) to desirable real world outcomes, targeting the index is likely to work about as well as building an airstrip and waiting for the cargo to arrive.

Secondly, lazy researchers around the world are dumping these indices into the right hand side of regression equations and clogging the research pipeline with bad papers. These indices are not exogenous to outcomes. Even the selection of components is endogenous to the composers’ beliefs about outcomes.

Thirdly, as Ricardo also ably points out, the indices generally make no distinction between de facto and de jure. Suppose the legal, de jure burden of opening a business is onerous, but a $20 bribe to the mayor removes all obstacles. What is the actual ease of doing business?

And, isn’t it possible to be too easy to do business? Consider Ricardo’s example of a country where it’s very easy to comply with very bad regulations. Is that good?

Rich country economists generally fail to appreciate how important the World Bank is for policy in poor countries. WB pronouncements are taken way too seriously in the developing world, where there aren’t armies of professionally skeptical, social media proficient debunkers and snarkers.

I am very uncomfortable with the WB putting its inprimatur on an arbitrary index. Sure it’s great to poke China with their bad ranking, but wouldn’t virtually every developing country in the world like to BE China?

Viva El Peatónito

This story combines one of the things I liked most about living in México, lucha libre, with one of the things I disliked most, traffic. The only thing worse than trying to drive in the DF was trying to walk in the DF. Crossing a street, even in an upscale Colonia like Polanco, was a nightmare.

But this may be changing. Ladies and gentlemen, I give you…..Peatónito (the little pedestrian).


Here’s his homepage. You can follow him on Twitter. Heck, you can read about his exploits here.


Dirt & Development

I have a paper with a former Ph.D. student on the difficulties of agricultural production in tropical sub-Saharan Africa.  It has been an interest of mine ever since I first read Jared Diamond’s Guns, Germs, and Steel and later Jeffrey Sachs’ papers on the development difficulties of tropical climates.  So I was intrigued when I saw that the European Union’s Institute for Environment & Sustainability has just published a Soil Atlas of Africa and it is available online. It uses computer mapping techniques to create stunning illustrations of the the type of soil problems that Africa suffers from.  Below is a picture from the cover of the atlas:


While the maps are incredible, the message is pretty sobering.  Among other things, the atlas finds that:

1. “While Africa has some of the most fertile land on the planet, the soils over much of the continent are fragile, often lacking in essential nutrients and organic matter.”

2. “Aridity and desertification affects around half the continent while more than half of the remaining land is characterised by old, highly weathered, acidic soils with high levels of iron and aluminium oxides (hence the characteristics colour of many tropical soils) that require careful management if used for agriculture.”

3. “Soils under tropical rainforests are not naturally fertile but depend instead on the high and constant supply of organic matter from natural vegetation and its rapid decomposition in a hot and humid climate. Breaking this cycle (i.e. through deforestation) quickly reduces the productivity of the soil and leaves the land vulnerable to degradation”

4. “In many parts of Africa, soils are losing nutrients at a very high rate, much greater than the levels of fertiliser inputs. As a result of rural poverty, farmers are unable to apply sufficient nutrients due to the high costs of inorganic fertilisers or from a lack of farm machinery (Africa has the lowest use of industrial fertilisers in the world). Traditional practices, such as long fallow periods that improve nutrient budgets and restore soil fertility, are difficult to implement due to the increased pressures on land and changes in land tenure that restrict traditional nomadic lifestyles.”

Yikes, sobering indeed.

Zimbabwe, part 2


I’ve never been a bigger fan of Facebook than after reading this article about an anonymous Zimbabwean (aka Baba Jukwa, or “father of Jukwa”) tormenting Mugabe and the ruling party via social media.

Baba Jukwa claims to be a “a genuine insider’s account of the factional battles and corruption with President Robert Mugabe’s Zanu-PF.”  He has posted numerous stories on the evil doings of party members, including tales of “rape, murder and corruption.” One of the best parts of the story is that he often gives out the said evildoer’s mobile phone number and urges concerned citizens to call them with their questions and complaints.

Some have questioned whether Baba Jukwa’s stories are credible, but the government (and its mouthpiece newspapers) certainly seems to be rattled.  For instance,

The Herald newspaper labeled Baba Jukwa’s posts as a “destructive, malicious… an imperialist takeover… working to destroy the revolutionary party from within by engaging in malicious and unholy alliances with the MDC-T party”.

In addition, Mugabe’s party, Zanu-PF, is “offering large rewards for the true identity of Baba Jukwa.”

So far more than 93,000 people have officially “liked” the FB page, which is a lot given the population of Zimbabwe is only 12 million, but “it is widely believed that many more follow him anonymously.”

This story makes me very happy.

Zimbabwe round-up, part 1

Two stories about Zimbabwe recently caught my attention.  The first is the news that Robert Mugabe and his family starred in a 2 1/2 hour reality television program. I’ll discuss it this morning and the second awesome piece of Zimbabwe news later this afternoon.

Here are some nuggets from the reality show:

1. Apparently, the Mugabe family all love each other very much (good to know, they could be the only ones).  They also hold Margaret Thatcher in great esteem (somehow I doubt it was mutual), but regards Tony Blair as fundamnetally dishonest.  They apparently call him Tony Bliar around the house (I’m sure Blair is very broken up about this. Mugabe, a well-known homophobe, once referred to Blair’s government as “the gay government of the gay United Kingdom“).

2. The sycophantic director asked Mugabe about his current wife Grace, who he started seeing while his first wife Sally was terminally ill.  The answer is truly unbelievable, even for Bobby:

“Mugabe blinks, as if holding back tears, and says: ‘Although it might have appeared cruel, I said to myself well, it’s not just myself needing children . . . my mother has all the time said “Am I going to die without seeing grandchildren?”

‘So I decided to make love to her. She happened to be one of the nearest and she was a divorcee herself. And so it was.’
Asked what Sally thought of his infidelity, Mugabe replies: ‘I did tell her and she just kept quiet and said “fine”.’

I’m sure the Zimbabwean public love him even more after hearing that touching story.

A “creative” view on academic ethics

In the last couple of years, I have increasingly received email invitations to obscure conferences.  I wonder sometimes if these conferences are for real and if anyone participates.  I mostly just put them in the trash folder and rarely read the details, but a colleague alerted me to this awesome conference and it’s interesting definition of ethics.

2013 International Conference on Creative Education (ICCE 2013) will be held on September 21-23, 2013, Singapore.

“Note: You are invited to contribute papers either in English or Chinese, which must include English title, abstract and references. The copy rate can not be more than 30%(include references ), and the article must be strictly typesetting in accordance with the template , otherwise the article will not be published, please respect the academic ethics !”

I was dumbfounded by this–I’ve never heard of a journal specifying a “copy rate,” let alone one that allows for 30% of the paper to be copied.  I would have thought the copy rate should be essentially 0, but I guess the idea of “creative education” has an different take on what it means to “respect the academic ethics!”


What’s in a name? Insiders, outsiders and peer-reviewed publications

Oh my. Some experimenters in psychology took previously published articles from, “investigators from prestigious and highly productive American psychology departments” that appeared in, “highly regarded and widely read American psychology journals with high rejection rates (80%) and nonblind refereeing practices.”

They then re-submitted those exact articles for publication with different, less prestigious, names and affiliations attached “e.g., Tri-Valley Center for Human Potential”.

The results?

“Of the sample of 38 editors and reviewers, only three (8%) detected the resubmissions. This result allowed nine of the 12 articles to continue through the review process to receive an actual evaluation: eight of the nine were rejected. Sixteen of the 18 referees (89%) recommended against publication and the editors concurred. The grounds for rejection were in many cases described as “serious methodological flaws.””

Only 3 of the 12 were even recognized as already published? 8 of the remaining 9 were rejected when the only difference was name and affiliation?

People, Rogoff-Reinhart syndrome goes well beyond automatic favorable exposure in non peer reviewed outlets. Name and affiliation can carry considerable weight in refereed outlets as well.

And maybe they should. The average Harvard professor is clearly better than the average OU professor.

So is it just cream rising to the top or is it an exclusionary club? And does the study I’ve described help answer that question? Tell me in the comments.

Inflation follies

Paul Krugman, lamenting our “dangerously low” inflation rate ,offered this explanation of why it’s a problem:

And, at this point, inflation — at barely above 1 percent by the Fed’s favored measure  is dangerously low.

“Why is low inflation a problem? One answer is that it discourages borrowing and spending and encourages sitting on cash. Since our biggest economic problem is an overall lack of demand, falling inflation makes that problem worse.

Low inflation also makes it harder to pay down debt, worsening the private-sector debt troubles that are a main reason overall demand is too low.”

People, I don’t understand Krugman’s reasons at all

I thought that low inflation was a supposed to be a problem right now, because we are teetering on the brink of deflation with its associated fears of the decades long Japanese stagnation.

I thought low inflation was supposed to be a problem in the long run because it means the Fed would be more likely to hit the lower bound on its policy rate, complicating the implementation of a Taylor rule (or of monetary policy in general).

Some people think low inflation is a problem because it doesn’t erode real wages fast enough (phone call for Scott Sumner!).

But “low inflation discourages borrowing and spending?”

High real interest rates and risk aversion discourage borrowing. Hard to see an iron connection between them and low inflation.

Expectations of falling prices in the future and risk aversion discourage spending. Again, hard to link these to low inflation (except as I mentioned from the fear that low inflation will turn into deflation).

Now it’s certainly true for a given fixed interest rate, lower inflation will raise the real rate of interest. But that’s not how the economy works, even at our current “lower bound” situation. It’s the Fed’s policy rate that’s at the lower bound, not corporate bonds or long term government bonds, or mortgage rates. And furthermore, if inflation (or inflation expectations) were to rise, those key borrowing rates in the real economy would also be highly likely to rise, not stay constant. The Fed is unwilling or unable to peg long-term borrowing rates at zero, so higher inflation is not guaranteed to lower real borrowing rates at all.

However, I do have a “foolproof” way of creating inflation in the US. We can simply adopt the Venezuelan Bolivar or Argentine Peso as our national currency. BTW, this could work for the EU as well!



Mixed news from Latin America

In the “truth is stranger than fiction” department, Venezuela (a perennial contender) wins hands down:  “Venezuela’s National Assembly has backed plans to import 39 million rolls of toilet paper, in an effort to relieve a chronic shortage.”  I’m not sure if this qualifies as good news or bad news. I guess good news that the shortage is over, bad news that the government has so screwed up macro and exchange rate policies that such a phenomena could even happen in the first place.  It’s never a good thing when your economic problems sound similar to the ones created by Mugabe in Zimbabwe.

In the “mean reversion” department, there are two contenders.  First, in Guatemala, the country’s top court overturned the previous week’s conviction of former President Rios Montt on charges of genocide and crimes against humanity. Second, in Mexico, it looks like much needed energy reform has stalled.

And finally, in the “questionable causality but hopefully still true” department, there seems to be evidence that economic stability in the region has reduced inequality.