Archive for the 'Economics' Category

The Law

Friday, June 13th, 2008

According to a new report from a UN commission, 2 in every 3 people (some 4 billion in total) are “excluded from the rule of law.” Around 40% of the developing world’s five-year-old children are not registered as even existing. Later, people will find that the home they live in, the land they farm, or the business that they start, is not protected by legally enforceable property rights. Even in the rare cases when they can afford to go to court, the service is poor. India, for example, has only 11 judges for every 1m people.

Because they are outside the rule of law, the vast majority of poor people are obliged to work (if they work at all) in the informal economy, which is less productive than the formal, legal part of the economy. According to the report, this is one of the main reasons why so much of humanity remains mired in poverty.

The law poor,” The Economist

The Law of Accelerating Returns

Friday, June 13th, 2008

 

 

Ray Kurzweil predicts that if you can live another 15 years, your life expectancy will keep rising every year faster than you’re aging. And then you can be around for the Singularity (when humans and/or machines start evolving into immortal beings with ever-improving software) a few decades later.

In 1976, when Kurzweil pioneered a device that could scan books and read them aloud, it was the size of a washing machine. Two decades ago he predicted that “early in the 21st century” blind people would be able to read anything anywhere using a handheld device. In 2002 he narrowed the arrival date to 2008. Kurzweil debuted his cellphone-sized reader this year.

In the late 1980s, Kurzweil predicted the explosive growth of the Internet in the 1990s and a computer chess champion by 1998 (a year late, it turned out).

Kurzweil makes his predictions using what he calls the Law of Accelerating Returns. More than a century ago, machines’ computing power doubled about every three years; then in midcentury the doubling came every two years; now it takes only about a year.

During the past century there has been exponential growth in the number of patents issued, the spread of telephones, the money spent on education, etc.

Exponential progress has recently begun in nanotechnology, the ease of gene sequencing, and the resolution of brain scans.

Kurzweil says that if his predictions seem overly optimistic that’s because exponential upward curves appear deceptively gradual at first.

“Scientists imagine they’ll keep working at the present pace. They make linear extrapolations from the past. When it took years to sequence the first 1% of the human genome, they worried they’d never finish, but they were right on schedule for an exponential curve. If you reach 1% and keep doubling your growth every year, you’ll hit 100% in just seven years.”

The Future Is Now? Pretty Soon, at Least,” by John Tierney

Math Girls

Monday, June 9th, 2008

A new study by Luigi Guiso, Paola Sapienza, et al. (”Culture, Gender, and Math“), took data from the 2003 OECD Programme for International Student Assessment (in which some 280K 15-year-olds from 40 countries took the same math and reading tests) and compared the results, by country, with each-other and with various measures of social sexual equality (such as the World Economic Forum’s gender-gap index).

On average, girls’ maths scores were lower than those of boys. The gap was largest in countries (such as Turkey) with the least equality between the sexes, & vanished in countries with the most equality — except for geometry scores, which had no relation to sexual equality. The researchers did some additional statistical checks to ensure the correlation was material, and not generated by another, third variable that is correlated with sexual equality, such as GDP per person.

The gap in reading scores not only remained, but got bigger as the sexes became more equal. Average reading scores were higher for girls than for boys in all countries. But in more equal societies, not only were the girls as good at math as the boys, their advantage in reading had increased.

This may explain why, despite girls’ rise to mathematical equality in some countries, women in those countries have not invaded math-heavy professions, such as engineering. Economic optimization is about comparative advantage. The rise in female reading scores alongside their math scores suggests that female comparative advantage in this area has not changed.

Vital statistics,” The Economist

Green Cities

Monday, June 2nd, 2008

According to a new report by Marilyn A. Brown, et al., (”Shrinking the Carbon Footprint of Metropolitan America“) each resident of the 100 largest US metropolitan areas is responsible on average for about 2.5 tons of carbon dioxide in energy consumption each year, 14% below the 2.9 ton national average.

Those 100 cities (where two thirds of the people in the US live) still account for 56% of the nation’s carbon dioxide pollution. But their greater use of mass transit and population density reduce the per-person average.

Emissions of carbon dioxide are highest in the eastern US, where people rely heavily on coal for electricity. They are lower in the West, where weather is more favorable and where electricity and motor fuel prices have been higher.

City dwellers dubbed ‘green’,” by H. Josef Hebert

Career Preferences

Thursday, May 22nd, 2008

Women constitute only about 1/5 of US engineers, 1/3 of chemists, and 1/4 of computer and math professionals.

Joshua Rosenbloom surveyed hundreds of professionals in information technology, a career in which women are significantly underrepresented (”Why are there so few women in Information Technology?”; pdf file here). He also surveyed hundreds in comparable careers more evenly balanced between men and women.

The lower numbers of women in IT careers weren’t explained by work-family pressures, since computer careers made no greater time demands than those in the control group. Ability wasn’t the reason, since the women in both groups had substantial math backgrounds.

Using a standard personality-inventory test, Rosenbloom found that men and women who enjoyed the manipulation of tools or machines were more likely to choose IT careers - and it was mostly men who scored high in this area. Meanwhile, people who enjoyed working with others were less likely to choose IT careers. And, on this, women scored higher, on average.

The researchers calculated that preference accounted for about two-thirds of the gender imbalance in the IT field.

According to Susan Pinker  (in The Sexual Paradox), the countries that offer women the most financial stability and legal protections in job choice, have the greatest gender split in careers. For example, in countries with less economic opportunity, like the Philippines, Thailand, and Russia, the number of women in physics is about 30%, versus 5% in Canada, Japan, and Germany.

The freedom to say ‘no’,” by Elaine McArdle

Technological Progress> Globalization

Monday, May 5th, 2008

Globalization has accounted for only a small share of job creation and destruction over the past few decades. According to Pankaj Ghemawat, 90% of fixed investment around the world is domestic. Companies open plants overseas, but that’s mainly so their production facilities can be close to local markets.

According to Thomas Duesterberg, the US’s share of global manufacturing output has actually increased slightly since 1980.

The chief force reshaping manufacturing is technological change (hastened by competition with other companies, foreign and domestic). Manufacturing productivity has doubled over two decades. Employers now require fewer but more highly skilled workers. According to William Overholt, between 1994 and 2004 the Chinese shed 25 million manufacturing jobs, 10 times more than the US.

The Cognitive Age,” by David Brooks

Income Per Natural

Monday, April 28th, 2008

Lant Pritchett and Michael Clemens have devised a new measure of wealth: “income per natural” (.pdf file here). Rather than measuring the income of people who are now residents of a country, they estimate the income earned by people who were born in that country.

For poor countries there is a significant difference. The Liberian-born make 50% more than Liberian residents. The income of the Samoa- & Guyana-born is about twice the income of the residents of Samoa & Guyana (respectively).

“Two of every five living Mexicans who have escaped poverty did so by leaving Mexico; for Haitians it is four out of five.”

Traditional measures of income tend to mask the fact that migration has made a lot of migrants richer. Imagine a man who moves from earning €10,000 in Poland (an above-average wage) to £15,000 in the UK (a below-average wage). Simple arithmetic says that he has reduced the average income of both countries.

Of income and incomers,” by Tim Harford

DNA Mapping

Friday, April 25th, 2008

Reading the 3bn “base pairs” in human DNA — akin to letters, encoding a total of between 20,000 and 30,000 genes that are the “words” of genetics — is getting faster as companies find quicker ways to “read” entire stretches of DNA at a time, like reading a sentence in chunks rather than letter by letter.

The cost of sequencing an individual genome is thus falling exponentially — just as the cost of hard disk space or transistors on a chip did when computing took off.

The rapidly falling cost and time needed to map your DNA:

2003
$440M
13 years to map

2007
$10M
4 years

2008
$100K
4 weeks

2012
$100*
2 days

*Forecast

Mapping the individual - cheaply,” by Charles Arthur

Material Progress Makes People Happier

Thursday, April 17th, 2008

Justin Wolfers and Betsey Stevenson analyzed all the major post-war happiness studies data (.pdf file here), including new data from the Gallup World Poll, which contains detailed data on subjective well-being for 132 countries in 2006. Contrary to previous researchers using less complete date, they found that: 1) Rich people are happier than poor people. 2) Richer countries are happier than poorer countries. 3) As countries get richer, they tend to get happier.

The following chart takes the average levels of satisfaction reported on the Gallup Poll’s 0-10 scale, and plots it against G.D.P. per capita (note the log scale):

The correlation between average levels of happiness and average incomes is very high — greater than 0.8.

The relationship between happiness and log income appears nearly linear. Thus, a 10% rise in income in a rich country like the USA appears to increase happiness by about as much as a 10% rise in income in Burundi — in fact, the slope appears to get steeper above $15K!

A 10% rise in income in Burundi requires one-sixtieth as much income as a 10% rise in income in the USA. Thus, even if the slope is three times as steep for rich countries as poor countries (as Wolfers & Stevenson estimate), this still means than an extra $100 has about a twenty-times-greater effect on happiness in Burundi.

“The Economics of Happiness, Part 1 & Part 2,” by Justin Wolfers

Religion & Economic Growth

Saturday, April 12th, 2008

Robert J. Barro and Rachel M. McCleary (”Religion and Economic Growth Across Countries” & “Religion and Political Economy in an International Panel“) researched the relationship between religion and development.

Their cross-country analysis shows that per capita gdp has a significantly negative effect on religion, both in terms of beliefs and participation. This tendency is gradual as countries grow richer. A steady pattern of secularization has only applied to a few countries, such as Britain, France, and Germany.

For a given level of religious participation, increases in core religious beliefs — notably belief in hell, heaven, and an afterlife — tend to increase economic growth. In contrast, for given religious beliefs, increases in church attendance tend to reduce economic growth. In other words, the main growth effect is a positive response to an increase in believing relative to belonging (attending).

A certain amount of participation in religious activities is positive, in that people acquire useful beliefs. But if people spend too much time in religious activities, there is a negative effect on economic growth.

Religious participation is correlated with a lower probability of substance abuse, juvenile delinquency (Michael J. Donahue and Peter L. Benson, “Religion and the Well-Being of Adolescents“),  and depression (”Immigrant Generation, Assimilation and Adolescent Psychological Well-being“), and positive attitudes toward marriage and having children (Elaine Marchena and Linda J. Waite, “Re-assessing Family Goals and Attitudes in Late Adolescence”).

Overall, urbanization has a negative effect on religiosity, particularly in terms of participation.

Religion and Economic Development,” by Rachel M. McCleary