Progress Daily

According to Joel E. Cohen, there is enough grain grown on earth to feed 10 billion vegetarians. But much of it is being fed to cattle, which are eaten by the world’s wealthy.

There may be enough acreage already planted to keep the planet fed forever, because 10 billion humans is roughly where the UN predicts that the world population will plateau in 2060. (In the late 1980s, Brown University’s World Hunger Program calculated that the world then could sustain 5.5 billion vegetarians, 3.7 billion South Americans or 2.8 billion meat-loving North Americans.)

The world’s current population, with 1,000 square feet of living space each, could fit into Texas.

A water shortage that raised prices to around $150 would make it profitable to build pipes from the polar icecaps, or desalinate seawater, as the Saudis already do.

“Malthus Redux,” by Donald G. McNeil Jr.

Once someone owns something, he places a higher value on it than he did when he acquired it. “The endowment effect” has been seen in hundreds of experiments, the most famous of which found that students were surprisingly reluctant to trade a coffee mug they had been given for a bar of chocolate, even though they did not prefer coffee mugs to chocolate when given a straight choice between the two.

The effect is not universally observed. Whereas coffee mugs generate an endowment effect, tokens that can be exchanged for coffee mugs do not.

Owen Jones and Sarah Brosnan suspect that, in the evolutionary past, giving things up, even when an apparently fair exchange seemed to be on offer, was just too risky. To test their theory, they have been training chimpanzees to trade (see “Law, Biology, and Property” — pdf file here).

When presented with a choice between peanut butter and frozen juice bars, 60% of the chimps preferred peanut butter to juice. However, when they were endowed with peanut butter, 80% of them chose to keep it instead of exchanging it for juice. And an opposite endowment effect was observed when the chimps were given juice.

Before they started work Jones & Brosnan predicted that the strength of the effect would vary with the evolutionary salience of the item in question. As predicted, when they tried the same experiments using bone and rope toys, no endowment effect was seen. Food is vital. Toys are not.

“The endowment effect,” The Economist

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

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

Until recently, most “free” commericial products were the result of a “cross-subsidy”: You’d get one thing free if you bought another, or you’d get a product free only if you paid for a service.

The costs of products on the Web are falling fast.

Offering free music proved successful for Radiohead, Trent Reznor of Nine Inch Nails,etc. The fastest-growing parts of the gaming industry are ad-supported casual games online and free-to-try massively multiplayer online games. Virtually everything Google does is free to consumers, from Gmail to Picasa to GOOG-411.

Moore’s law dictates that a unit of processing power halves in price every 18 months, the price of bandwidth and storage is dropping even faster.

40 years ago, the principal nutritional problem in America was hunger; now it’s obesity, for which we have the Green Revolution to thank. Forty years ago, charity was dominated by clothing drives for the poor. Now you can get a T-shirt for less than the price of a cup of coffee, thanks to China and global sourcing. So too for toys, gadgets, and commodities of every sort.

Digital technology benefits from these dynamics and from the 20th-century shift from Newtonian to quantum machines. We’re just beginning to exploit atomic-scale effects in new materials — semiconductors (processing power), ferromagnetic compounds (storage), and fiber optics (bandwidth).

Last year, Yahoo announced that Yahoo Mail, its free webmail service, would provide unlimited storage.

Storage now joins bandwidth (YouTube: free) and processing power (Google: free) in the race to the bottom. Basic economics tells us that in a competitive market, price falls to the marginal cost, and every day the marginal cost of digital information comes closer to nothing.

Give a product away and it can go viral. Charge a single cent for it and you’re in an entirely different business.

In the traditional media model, a publisher provides a product free (radio & television), or nearly free (newspapers & magazines) to consumers, and advertisers pay to ride along.

There are dozens of ways that media companies make money around free content, from selling information about consumers to brand licensing, “value-added” subscriptions, and direct ecommerce. Now an entire ecosystem of Web companies is growing up around the same set of models.

The priceless economy can be broken down into six broad categories:

1. “Freemium.” What’s free: Web software and services, some content. Free to whom: users of the basic version. (Think Flickr and the $25-a-year Flickr Pro.) A typical online site follows the 1 Percent Rule — 1 percent of users support all the rest.

2. Advertising. What’s free: content, services, software, and more. Free to whom: everyone. Examples: pay-per-pageview banners, pay-per-click text ads, pay-per-transaction “affiliate ads,” site sponsorships, paid inclusion in search results, paid listing in information services, lead generation (where a third party pays for the names of people interested in a certain subject), product placement (PayPerPost), pay-per-connection on social networks, etc.

3. Cross-subsidies. What’s free: any product that entices you to pay for something else. Free to whom: everyone willing to pay eventually, one way or another. Expensive wine subsidizes food in a restaurant. In any package of products and services, the price of each individual component is often determined by psychology, not cost. Your cell phone company may not make money on your monthly minutes — it keeps that fee low because it knows that’s the first thing you look at when picking a carrier — but your monthly voicemail fee is pure profit.

4. Zero marginal cost. What’s free: things that can be distributed without an appreciable cost to anyone. Free to whom: everyone. (Best example: online music.)

5. Labor exchange. What’s free: Web sites and services. Free to whom: all users, since the act of using these sites and services actually creates something of value. When rating stories on Digg, voting on Yahoo Answers, or using Google’s 411 service, the act of using the service creates something of value, either improving the service itself or creating information that can be useful somewhere else.

6. Gift economy. What’s free: anything & everything, be it open source software or user-generated content. Free to whom: everyone. From Freecycle (free secondhand goods for anyone who will take them away) to Wikipedia, money isn’t the only motivator.

Thanks to Google, we now have a handy way to convert from reputation (PageRank) to attention (traffic) to money (ads). There is a limited supply of reputation and attention in the world at any point in time. These are the new scarcities — and free exists mostly to acquire these valuable assets.

“Free! Why $0.00 Is the Future of Business,” by Chris Anderson

Within a few months China will overtake America as the country with the world’s largest number of internet users. For the past three years China has also been the world’s largest exporter of information and communications technology. It already has the same number of mobile-phone users (500m) as the whole of Europe.

According to India’s telecoms regulator, half of all urban dwellers have mobile- or fixed-telephone subscriptions and the number is growing by 8m a month. India produces more engineering graduates than America.

The World Bank’s recently released its Global Economic Prospects. Between the early 1990s and the early 2000s, the index that summarises the technology adoption indicators rose by 160% in poor countries (with incomes per person of less than about $900 a year at current exchange rates) and by 100% in middle-income ones ($900-11,000). The index went up by only 77% in industrialised countries (with average incomes above $11,000). Poor and middle-income nations, the bank concludes, are catching up with the West.

The main channels through which technology is diffused are foreign trade (buying equipment and new ideas directly); foreign investment (having foreign firms bring them to you); and emigrants in the West.

In the past ten years the ratio of poor countries’ imports of high-tech products to their GDPs has risen by more than 50%. The ratio in middle-income countries has increased by over 70%. Capital goods (mainly industrial machinery) often embody new technology, and imports of these have increased faster in middle-income countries than in rich ones.

Emerging economies’ share of global trade in high-tech goods rose by 140% between the mid-1990s and the mid-2000s.

Relative to GDP, inflows of foreign direct investment to developing economies have increased sevenfold since the 1980s. In some countries, such as Hungary and Brazil, foreign firms account for half or more of all R&D spending by companies.

Nearly half the ($40 billion-worth of) foreign direct investment in China in 2000 came from Chinese abroad. Remittances have doubled in the past ten years and now account for roughly 2% of developing countries’ GDPs — more than foreign aid.

The World Bank looked at how much time elapsed between the invention of something and its widespread adoption (defined as when 80% of countries that use a technology first report it). For 19th-century technologies the gap was long: 120 years for trains and open-hearth steel furnaces, 100 years for the telephone. For aviation and radio, invented in the early 20th century, the lag was 60 years. But for the PC and CAT scans the gap was around 20 years and for mobile phones just 16.

In the World Bank’s database, there are 28 examples of a new technology reaching 5% of the market in a rich country; of those, 23 went on to achieve over 50%. In other words, if something gets a foothold in a rich country, it usually spreads widely.

In emerging markets this is not necessarily so. The bank has 67 examples of a technology reaching 5% of the market in developing countries — but only six went on to capture half the national market.

Technology use in developing countries is highly concentrated. Almost three-quarters of China’s high-tech trade comes from just four regions on the coast. More than two-thirds of the stock of foreign investment in Russia in 2000 was in Moscow and its surroundings. Whereas half of India’s city-dwellers have telephones, little more than one-twentieth of people in the countryside do.

Rich countries spend 2.3% of GDP on R&D, East Asians 1.4%, and Latin America 0.6%. In East Asia and the West companies spend most of the money and do most of the research. In eastern Europe and Latin America the government is the largest source of finance, and in Latin America universities do the largest share of the work.

“Of internet cafés and power cuts,” The Economist

Consumers saved $7 billion by shopping on eBay in 2003, according to a study by Wolfgang Jank and Galit Shmueli (”New Research Finds Consumers Save More Than $7B by Shopping on eBay“).

The researchers measured the money shoppers were willing to pay for a product versus what they actually paid. On average, users paid $4 less, the study found.

Given the huge number of auctions on the site, the savings added up into the billions of dollars.

The researchers used data from a sniping service, Cniper.com, operated by Ravi Bapna.

Sniping services are used by shoppers to help them automatically place bids in an auction during its final seconds. Shoppers set the maximum price they are willing to pay and the technology does the rest.

The researchers found in the 4,500 auctions they examined that users frequently won items before reaching their maximum bid.

“The more you spend on eBay, the more you save,” by Verne Kopytoff

Daniel Esty analyzed the Environmental Sustainability Index, which grades the “environmental health” of 150 countries. He found that the single biggest variable in determining a country’s ranking is income per head.

Economic growth offers solutions to the sorts of environmental woes (local air pollution, for example) that directly kill humans. About a quarter of all deaths in the world have some link to environmental factors. Among these killers (especially of children) are diarrhoea, respiratory infections and malaria.

As poor countries get richer, they usually invest heavily in environmental improvements, such as cleaning up water supplies and improving sanitation, that boost human health. (Their economies may also shift gear, from making steel or chemicals to turning out computer chips.)

But the link between growth and environment is much less clear when it comes to the sort of pollution that fouls up nature (such as acid rain, which poisons lakes and forests) as opposed to directly killing human beings.

A mixture of factors related to good government -— accurate data, transparent administration, lack of corruption, checks and balances — all show a clear statistical relationship with environmental performance. Among countries of comparable income, tough regulations and, above all, enforcement are the key factors in keeping things green.

“How green is their growth,” The Economist

In China 25 years ago, over 600m people — two-thirds of the population — were living in extreme poverty (on $1 a day or less). Now, the number on $1 a day is below 180m. Worldwide, 135m people escaped dire poverty between 1999 and 2004. This is more people, more quickly than at any other time in history.

In 2007 Unicef said that for the first time in modern history fewer than 10m children were dying each year before the age of five. That represents a fall of a quarter since 1990. Three-quarters of people aged 15-25 were literate in 1975; now the rate is nearly nine-tenths.

The fertility rate in low- and middle-income countries has crashed. In East Asia and the Pacific, the rate was 5.4 in 1970. Now it is 2.1. In South Asia, the fertility rate halved (from 6.0 to 3.1). In the world as a whole, fertility has fallen from 4.8 to 2.6 in a generation (25 years).

The biggest decline is in those countries that are most involved with globalization (especially in East Asia, though China is a special case because of its one-child policy). With the exception of Yemen, all the countries with fertility rates over 5.0 are in Africa.

In closed agrarian societies, families need a lot of children as insurance against disaster. But in countries that have opened themselves up, families can rely on other sorts of protection, such as urban jobs or trade.

These demographic changes help to create a virtuous circle of growth. When fertility rises then falls, you get a bulge of people at and just after the inflection point. Between 1960 and 1990 Europe and America had relatively few old people (because mortality rates had earlier been high), relatively few children (because fertility had fallen) and a disproportionately big number of economically active adults.

Developing countries are seeing a similar confluence now.

A World Bank study of 19 poor countries concluded that every 1% increase in national income per head translates into a 1.3 point fall in extreme poverty.

Last year the global economy entered its fifth year of over 4% annual growth — the longest period of such strong expansion since the early 1970s. Unlike previous expansions, inflation remained relatively tame.

During this boom, according to the World Bank, national income in the European Union rose slightly more than in America for the first time in a decade. Growth in East Asia was 10%, in South Asia over 8%, in eastern Europe almost 7% and in Africa, thanks to the commodity boom, over 6%. Almost half of humanity, spread over more than 40 nations, lives in countries growing at 7% a year or more (a rate that doubles the size of an economy in a decade). This is twice the number of fast growers that existed in the years between 1980 and 2000.

The world’s economic balance is tilting from rich industrialized countries to emerging markets. Their share of world output in 2006 was just below half, and rising.

Since the mid-1990s, the incomes of the poorest fifth have risen everywhere except, marginally, in Latin America, where they have been affected by the after-shocks of debt crises. In Asia, the real incomes of the poorest fifth rose 4% a year; in Africa, by 2% a year, faster than the rise for other income groups.

The World Bank labels as “fragile” (as opposed to “failed”) troubled countries where the government has partial control of territory (Sudan), where it cannot deliver basic services (Zimbabwe) and places with high levels of political conflict (Nigeria).

Fragile states contain roughly half the developing world’s childhood deaths. About a third of their people are undernourished and more than that do not have access to drinking water. Most of the countries with fertility rates over 5.0 are fragile. They are much more likely to be affected by wars, refugees and every sort of political crisis.

“Somewhere over the rainbow,” The Economist

The cost of developing drugs for rare and common diseases are about the same, but the revenues aren’t. Pharmaceutical companies concentrate on drugs with larger markets because larger markets mean more profits.

As a result, patients diagnosed with rare diseases — those ranked at the bottom quarter in terms of how frequently they are diagnosed — are 45% more likely to die before age 55 than are patients diagnosed with more common diseases.

If China and India were as wealthy as the U.S., the market for cancer drugs would be 8 times larger than it is today.

Cancer is now China’s leading killer, with spending on treatment increasing by 17% per year. AstraZeneca and Novartis are building major research facilities in China, which will benefit patients everywhere.

There are only about 6M scientists and engineers in the entire world, nearly a quarter of whom are in the U.S. If the world as a whole were as wealthy as the U.S. and were devoting the same share of population to research and development, there would be more than 5 times as many scientists and engineers worldwide.

Even small changes in economic growth rates produce large benefits. At current income levels, with an inflation-adjusted growth rate of 3% per year, America’s real per capita gross domestic product would exceed $1 million per year in just over 100 years, more than 22 times higher than it is today.

“Dismal Science Sees Upbeat Future,” Alexander Tabarrok