Ben Muse

Economics and Alaska

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Agreement at the WTO talks in Geneva

The WTO website statement about the agreement is here: "Round-the-clock meetings produce ‘historic’ breakthrough". Here is the text of the agreement: "Text of the ‘July package’ — the General Council’s post-Cancún decision".

Forbes carries an Associated Press report on some of the elements of the agreement: "Update 5: WTO Negotiators Reach Tentative Accord".
    "In agriculture, the document agrees to eliminate export subsidies and other forms of government support for exports, while making big cuts to other subsidies. It includes a "down payment" that would see an immediate 20 percent cut in the maximum permitted payments by rich nations.

    The highest agricultural import tariffs will face the biggest cuts, although no figures have yet been agreed. Nations will have the right to keep higher tariffs on some of the products they consider most important.

    Tariffs on industrial products will also be cut according to a formula, but the exact details have yet to be established. Developing countries will have longer to make the changes.

    The deal also approves the launch of new negotiations on trade facilitation - "further expediting the movement, release and clearance of goods" by streamlining customs procedures.

    Developing countries in particular have been congratulating themselves for forcing issues onto the agenda that they say were ignored by rich nations in the past - such as the devastating effect of U.S. cotton subsidies on producers in Africa."

Saturday at the WTO

Exhausting, marathon negotiations in Geneva, reports "No result in marathon WTO debate". And it can't go on forever. Logistical issues may put a stop to it by Sunday:
    "...Other diplomats noted, however, that logistical rather than political reasons would prevent the talks from continuing indefinitely.

    Switzerland is due to celebrate national day tomorrow
    [Sunday - Ben], raising security concerns as thousands of people flock to Geneva, while many delegates, who have already postponed flights home, are due to leave in the next 24 hours.

    "It's going to end this afternoon, whatever happens," said one trade diplomat on condition of anonymity..."
Friday night and Saturday the negoitators plowed through the agricultural elements of the document and then moved on to industrial tariffs. The Group of 90 (poorest countries) and the EU have signed off on the agricultural sections, reports the Jakarta Post: "Consensus on farming at WTO within reach: Spokesman".

Richard Waddington and Patrick Lannin also report that things are coming together in this Reuters dispatch (from just after noon in Geneva - many hours ago now):">"Breakthrough on WTO Trade Pact Seen Close".
    "...I think that the momentum is such that it is difficult not to conclude (successfully)," Brazilian Foreign Minister Celso Amorim told reporters at the WTO's headquarters.

    "This is the beginning of the end for (farm) subsidies. Export subsidies will be eliminated first," Amorim added.

    Brazil leads the so-called G20 group of nations which played a key role in the failure of last year's talks in Cancun, where they mounted fierce attacks on rich countries' farm subsidies..."

Max Zawicky evaluates Kerry

A view from my left: "KERRYNOMICS" Zawicky likes the fair trade talk, but doesn't believe it. Clinton fooled him once, and its not going to happen again.

"Kerry is making fiscal commitments -- balanced budgets, tax cuts and program expansions -- that defy the laws of arithmetic." But, "A friend tells me to cheer up -- that we can expect better in regulation of the environment, labor, reproductive rights, and other areas. Plus better judges. He's right."

Zawicky's not happy with Democratic party economic orthodoxy: "FED ACHE". Read Galbraith's review of the Lawrence Meyer book for more moderate left critique of the Democratic mainstream view.

Economists and eugenics

The latest issue of the Journal of Economic Perspectives came today. Bernard Saffron's column "Recommendations for Further Reading" has this interesting item:
    "Thomas C. Leonard has published a fascinating article, “‘More Merciful and Not Less Effective’: Eugenics and American Economics in the Progressive Era.” He includes an argument for the minimum wage that is new to me. “More surprising than Progressive support for legal minimum wages was the fact that Progressive economists, like their marginalist interlocutors, believed that binding minimum wages would result in job losses. What distinguished supporters of minimum wages from their marginalist opponents was how they regarded minimum-wage-induced job loss. . . . .[M]inimum-wage advocates regarded minimum-wage-induced disemployment as a social benefit—a eugenic virtue of legal minimum wages.” Leonard also includes a coda about Gunnar Myrdal, a Nobel-winning economist, “both Myrdal and his wife Alva were themselves eugenicists who promoted an expansion of Swedish-coercive sterilization laws during World War II. More than 60,000 Swedes, over 90% of them women, were sterilized from 1941 to 1975. The Myrdals’ eugenics was not racist. They saw forced sterilization of the unfit, says Daniel Kevles, ‘as part of the scientifically oriented planning of the new welfare state.’” History of Political Economy, 2003, 35:4, 687–712.

Was Kerry's acceptance speech protectionist?

Geitner Simmons identifies a protectionist slant in Kerry's acceptance speech, arguing that, since the speech is designed to have a "centrist tone" it signals that the Democratic party "now regards protectionism as well within the policy mainstream." See "That which must not be named".

I didn't see the speech, but I'm curious to see what Kerry said. The text of the speech is here: "Text of John Kerry's acceptance speech" Here are some selections:
    "...And here at home, wages are falling, health-care costs are rising, and our great middle class is shrinking. People are working weekends - two jobs, three jobs - and they're still not getting ahead.

    We're told that outsourcing jobs is good for America. We're told that jobs that pay $9000 less than the jobs that have been lost is the best that we can do. They say this is the best economy that we've ever had. And they say anyone who thinks otherwise is a pessimist...

    What does it mean in America today when Dave McCune, a steel worker I met in Canton, Ohio, saw his job sent overseas and the equipment in his factory literally unbolted, crated up, and shipped thousands of miles away along with that job? What does it mean when workers I've met had to train their foreign replacements?

    America can do better. So tonight we say: help is on the way...

    ...So here is our economic plan to build a stronger America:

    First, new incentives to revitalize manufacturing.

    Second, investment in technology and innovation that will create the good-paying jobs of the future.

    Third, close the tax loopholes that reward companies for shipping our jobs overseas. Instead, we will reward companies that create and keep good paying jobs where they belong – in the good old U.S.A.

    We value an America that exports products, not jobs – and we believe American workers should never have to subsidize the loss of their own job.

    Next, we will trade and compete in the world. But our plan calls for a fair playing field – because if you give the American worker a fair playing field, there's nobody in the world the American worker can't compete against..."
Someone is going to be disappointed. Either the unsophisticated voter who thinks, on the basis of the code words, that Kerry is going to make foreigners play "fair," or the sophisticated Laura Tyson who thinks we should look at what Kerry has done in the past, not what he says.

Friday at the WTO

Delegates received a 20 page draft framework for continuing negotiations this morning ("WTO Mediators Make Final Bid for Accord") . This text is available at the WTO site: "Second draft of post-Cancún decision for the General Council".

Negotiations begun on Thursday continued until 4 AM this morning. An informal 2 1/2 hour "Heads of Delegation" meeting started at 7 AM - shortly after the new document was circulated. The meeting is described here: "Members comment on new draft as chair warns of overload".

Channel NewsAsia reports on the new document here: "WTO lays out last-ditch compromise to unlock global trade talks". Peter Gallagher has some early thoughts on the draft here: "Second Grosser text ". Here is some early analysis from the High Plains Journal as well: "Details Of WTO Proposal ".

African countries are reported to be pleased with the result: "African Nations Happy With U.S. Agreement".

    "...The agreement would establish a special subcommittee to look at issues related to cotton as part of the WTO's agriculture negotiations.

    It also instructs WTO Director-General Supachai Panitchpakdi to work with other
    international agencies, like the World Bank and the International Monetary Fund, to "direct effectively existing programs and any additional resources toward development of the economies where cotton has vital importance."

    Most importantly, the agriculture agreement as a whole - if approved - would see an end to export subsidies globally and major cuts in domestic subsidies paid by rich nations...

    [Ousmane Ngom, Senegalese minister of trade - Ben] acknowledged that the African nations also had to make some compromises. They had originally demanded that cotton be treated separately from other agricultural issues, and that African nations be compensated until subsidies were eliminated..."
This story, "India rejects revised WTO draft" indicates that India, one of the "Five Interested Parties" that negotiated the agricultural section of the draft, has rejected the draft released today. However, the Indian trade minister, who was in Bangkok is returning to Geneva to see if acceptable revisions can be made. This story from India's Business Standard elaborates a little more on Indian concerns: "India scuttles US WTO move". This story by Ritu Sarin in The Indian Express ("India, Thailand ink FTA pact") indicates the nature of India's concerns today:
    "...He [Kamal Nath, India's trade minister - Ben] also admitted that it was the prickly problems of Aggregate Market Support (AMS) and the amber box formulae being postulated by the US, that India was objecting to. The position being taken by India is as a developed country, the US should have a more drastic reduction of subsidies to agriculture. Secondly, EU had agreed to reduce subsidies to a nil level, the US had asked for a slow pace of reduction, necessitation from India’s viewpoint a redrafting of the proposed WTO agreements."
One final story on India's role, from the Times of India: "New WTO draft 'unacceptable' to India".
    "Explaining the rejection of the draft, Indian officials said the document pushed through by the US would have allowed it to get away with a lower reduction of subsidies and at a slower pace.

    At the same time, the US had insisted that India should commit itself to reducing its aggregate support for agriculture from 5 per cent allowed now to nil.

    The current round of negotiations has seen India using deft footwork, switching allegiances to further its interests.

    It was only on Thursday that it was seen leaving its familiar perch among the "developing countries" to join the so-called NG-5 (Non-group-5) with the US, the European Union, Brazil and Australia. The NG-5 is described as such because of their conflicting interests."
Peter Wilson writes, in The Australian ("Australia blamed for hiccup in Geneva"), that the deadline for completing the negotiations has offically been pushed back until midnight on Friday to Saturday.

    "...The first three days of this week's four-day meeting in Geneva were basically put on hold to wait for an agreement behind closed doors between Australia and four other major players in agriculture -- the two biggest distorters of farm trade, the US and the European Union, and two representatives of developing nations, Brazil and India.

    They finally agreed on a draft for future negotiations under which Europe's promises to eventually end export subsidies would be matched by a US vow to reduce its huge domestic supports for American farmers and an Australian promise to study whether state trading enterprises for commodities such as wheat were hidden forms of government subsidies..."
Elizabeth Becker, reports in the New York Times ("U.S. Will Cut Farm Subsidies in Trade Deal") that U.S. concessions were an important element today:
    "GENEVA, July 30 - The United States yielded to pressure from developing countries on Friday and agreed to make a 20 percent cut in some of the $19 billion in subsidies it pays to American farmers each year, as members of the World Trade Organization met round the clock here to win approval for a new deal governing world trade.

    Working until 4:00 a.m. on Friday, Robert B. Zoellick, the United States trade representative, reached an agreement to cut subsidies for such crops as corn, rice, wheat and soybeans. He also reached an accord with four cotton-producing countries in West Africa for eventual cutbacks in subsidies paid to American cotton growers...

    In exchange for reducing agricultural supports, the wealthy nations are asking the developing nations to reduce their tariffs on manufactured goods. That issue was left in general terms for more precise negotiations in later talks. Mr. Zoellick so far has failed to get significant concessions to open up new markets for American agricultural and industrial goods."
The EU foreign ministers met this morning, and there was general agreement that the new draft framework is an improvement. Only France found objected to approving the agreement: "France stands alone among EU states opposing WTO accord".

Revised 9:30 PM Juneau time

Thursday at the WTO

Agricultural negotiations, dominated by the US, EU, Brazil, India, and Australia, (the so-called "Five Interested Parties," or "FIP") continued until midnight Wednesday or early Thursday morning. The five have now turned their ideas over to New Zealand Ambassador Tim Groser, the WTO's chief agricultural negotiator.   Elizabeth Becker of the New York Times reports that the U.S. made significant concessions during the evening "U.S. and Europe Reach Informal Agreement on Agriculture".
    "..With less than two days remaining, delegates and officials said that the United States in particular had made significant new compromises on Wednesday night, inspiring cautious optimism that the talks will lead to an agreement and advance the Doha round of trade for the developing nations...

    While officials were reluctant to describe specifics of the discussions or even describe them as an agreement, they did say that the United States seemed willing to put off some of its more contentious demands on agricultural subsidies and, instead, offer to make specific cuts in other areas..."
Groser is to finish turning these ideas into a document describing an agricultural framework, and he and WTO Director-General Supachai Panitchpakdi are to present a complete version of the revised framework covering all the issues late Thursday night, or possibly Friday morning. (see this Associated Press story: "WTO Proposal Delayed As Govt's Struggle", and this Richard Waddington story for Reuters: "Hopes for WTO trade deal rise".)

This Reuters dispatch indicates that a number of countries feel "left out" of this process ("Fate of World Trade Talks Hangs in Balance"):

    "At a stormy meeting late on Wednesday, a number of countries also expressed anger at the special role being given to the FIP countries, saying that they would not be steamrollered into accepting a text just because it had been approved by them."
This South African Mail & Guardian story amplifies on the frustrations felt by some countries not included among the five core countries in the negotiations: "Trade talks by big five spark outrage".

The WTO held a "Heads of Delegation" briefing meeting late last night about 10 PM (the "stormy meeting" of the Reuters dispatch?). The meeting is described in a WTO release this morning: "Supachai welcomes input from the Five as a key first step".

    "...At chairperson Oshima’s invitation, Ambassador Groser reported on the latest state of play in the agriculture negotiations. He said he was “in a much better frame of mind” than he had been that morning because he had received clearer guidance on how to narrow the gaps on major differences. He said he would not spell out the details yet, preferring to go through all the many proposals he had received first.

    But Ambassador Groser did hint that progress had been made on how to deal with subsidized export credit, food aid and state trading enterprises, in a way that would match the proposal to get rid of export subsidies by a negotiated date. He also said complaints about the unequal treatment for developed countries’ sensitive products (which are described in some detail in the current draft), and developing countries’ provisions for their “special products”, would be amended in response to the complaints.

    There is now a real chance of “saving the Doha Round”, he said. Meanwhile parallel talks are underway on the cotton initiative, Ambassador Groser reported..."
The goal of this week's meetings is to produce a draft Doha Round framework agreement. This agreement will provide negotiators with a framework for future, more detailed, negotiations in coming months. The framework identifies the subjects to address and the approaches to take to them.

A final agreement is due sometime before the General Council meeting ends on Friday. Various news stories talk about a mid-night deadline, but one recent story is talking about a meeting running into early Saturday. The framework document was originally expected on Tuesday or Wednesday. Yesterday it was hoped to have something early Thursday. Now delivery is late Thursday night or Friday morning.  This late delivery doesn't give much time for delegations to review it, debate it, or consult with their home governments. If there is much controversy about the delivered document, there may not be any time for further revision. Representatives of the FIP countries have been briefing other groups privately on the Wednesday night outcomes on Thursday, pending release of the final document.

This EUPolitix story notes that the EU negotiator, Pascal Lamy, must defend the proposals before a meeting of EU foreign ministers. Ministerial approval is needed for the EU to sign off on any agreement. Some EU states, including but not limited to France are concerned that too many concessions may have been made: "EU to quiz Lamy on new WTO deal"  This meeting was originally scheduled for Thursday, but this story from Channel NewsAsia reports that the meeting has been postponed until Friday morning, because of the delays in preparation of the framework document: "Tempers fray as WTO talks rumble on without result".

I'll close out today's post with some notes on Paul Blustein's story in tomorrow's Washington Post ("5 Powers Agree at WTO on Farm Talks").
  • There was still a lot of uncertainty among the delegations about the nature of the agreements that had been worked out among the "Five interested parties."

  • The draft was still being rewritten late on Thursday night, and was still "hours and hours" away.

  • Although the deadline was midnight Friday, the draft is so late that to give delegations more time for review and consultation with their governments, the deadline may be extended 24 hours.

  • I mentioned above, based on another, earlier, story, that FIP spokesment had been briefing delegations on the agreements worked out last night.  Blustein reports that FIP spokesmen have remained "silent on the substance of the agreement for fear of fuleing resentment among the other WTO members left out of the elite group."

  • "Just as optimism surged about the agriculture text, officials said a number of developing countries are balking at a proposed formula for cutting tariffs on industrial goods. The formula would require countries with high tariffs to reduce them much more sharply than countries with low tariffs.

    That is a major goal of the United States and the European Union, which hope to swap concessions in agriculture for concessions that would help their big industrial exporters sell their products more easily around the world. But the prospect of freer trade in manufactured products unnerves many developing countries that fear being overwhelmed by competition from China."
Revised Thursday, July 29, (7:30 PM Alaska time)

Likely Kerry Administration Trade Posture

Matt Yglesias reports that Laura Tyson, former Clinton, current Kerry, economic advisor says that Kerry would pursue pro-free trade policies. Despite some of the things he has said on the on the campaign trail:
    "...The thing to look at "is Sen Kerry's very courageous, very consistent, very long-term record on trade and global economic integration." A man who has consistently voted for a pro-trade, pro-integration agenda. His career has been oriented in this direction. He has shown "courage in this direction because a significant part of my party's base is a voice of concern about trade . . . and is consistently asking for policies that would take the US backwards." Kerry has consistently heard those voices, "and consistently voted a pro-trade record."
("Notes on Tyson on Kerry on Trade")  I learned about this from "AB" at Angry Bear ("Free Trade Update")

Wednesday at the WTO

(Our story so far...)  Remember that the General Council of the World Trade Organization (WTO) is meeting this week to develop guidance for negotiators on how to proceed on the current round of negotiations on liberalization of the world trade.  Last September in Cancun, the trade ministers of the member nations met to try to do this, but they failed to produce agreement. Upcoming elections in the US and transitional events in the EU, will make it hard to hold a similar meeting for many months. A failure to reach agreement now may hurt, or effectively end, the current round of negotiations. The Council meeting ends Friday.

A draft set of guidelines, floated on July 16, has been the subject of intense negotiation since then. A revised set of guidelines had been expected today. Currently (Wednesday - 12:30 PM Alaska local time and night in Geneva) the revised version is expected very late tonight or early tomorrow (Thursday, July 29) morning. Here is the WTO web page on the status of the negotiations: "Chairs report progress as hours tick by":
    "Consultations on the key issues in the “July package” are progressing gradually and a realistic estimate of when a revised draft text will be circulated is “very, very late” this evening, or early the following day, WTO members heard today, 28 July 2004

    “All delegations are engaged and we’re making worthwhile progress in all areas,” General Council chairperson Shotaro Oshima told heads of delegations at the latest meeting called to keep negotiators informed about the various consultations taking place.

    But above all, a revised text for the July package awaits the section on agriculture, with the subject’s “facilitator”, Ambassador Tim Groser of New Zealand, hoping to produce a new draft later in the day, members were told.

    Many delegations said they were encouraged by the progress and were willing to wait another half day for a revised text if that could lead to agreement. But several warned that enough time should be left for those who are not directly participating to be able to have a say, and for them to seek reactions from their capitals."
The WTO page provides briefings on the progress of negotiations in several key areas over the last few days.

The Forbes website carries an Associated Press ("Update 2: WTO Countries Work on Farm Trade Logjam") story, which indicates that agriculture is the hold-up, and that much of today's activity revolved around meetings between Brazil, India, Australia, the EU and the US, on this issue:

    "Senior trade mediators and government negotiators worked into the night Wednesday, attempting to bridge the divide between rich and poor nations over liberalizing farm trade at talks in Geneva.

    The World Trade Organization's 147 members are frantically working to reach an agreement by the end of the week to clear the way for sweeping changes in world trade. But mediators said disagreements on farm trade liberalization are holding up the talks.

    "It depends on the (agriculture) session, which is ongoing," WTO Director-General Supachai Panitchpakdi told reporters. "I think there's a limit to their time."...

    Five major agricultural producers continued to meet for a second day Wednesday, hoping to find a solution to open up the international farm trade.

    Trade ministers from the United States, the European Union, Brazil, India and Australia met at the U.S. mission in Geneva..."
The African countries remain unhappy about the status of cotton.  Channel NewsAsia reports: "Tied up with cotton, African countries threaten to unravel WTO talks".

    "...The initial draft proposal to steer the talks back on track, which is under review at this week's crunch WTO meeting, pays more attention to the cotton issue [than cotton had received at Cancun - Ben] but African nations contest that the wording is still not strong enough.

    As a result Benin on Friday proposed a revised, more assertive draft.

    A copy of the text, obtained by AFP, states: "WTO members are committed to take a specific, urgent and ambitious actions to address trade distortions in the cotton market."
    It also declares that any agreement on cotton must be implemented on an early harvest basis starting in 2005.

    "The text presented by Benin on cotton is the minimum for us African countries. If it's not accepted, we won't sign" the overall agreement, the African delegate said.

    Several WTO experts, however, felt the Benin document had no chance of being accepted by the United States..."

The revised framework document is due tomorrow.  As noted on the WTO website above, that doesn't leave much time for input by other parties, or for touching base with the government at home.  Note also that the EU trade ministers have agreed that they will approve any document before their negotiator can sign off on it.

Will the chances for an agreement improve if the negotiators drop specifics and draft a more general document? Richard Waddington of Reuters ("Mediators' WTO Pact Plan Could Slip"):
    "...Some developing countries have argued that rather than risk a fresh failure, negotiators should opt to lower their sights and seek a more general accord on principles.

    But others said that it would be difficult for Brussels Trade Commissioner Pascal Lamy, who is already under attack by France for having conceded too much, to keep on the table a firm commitment to end export subsidies when all other issues were reduced to generalities..."
What happens if the negotiations fail? Martin Wolf has evidently argued (in the Financial Times - subscription required) that it would have extremely serious consequences, not just for the current round of negotiations, but for the WTO as an organization. Similar concerns are expressed in these paragraphs from a story by Paul Blustein in yesterday's Washington Post ("Failure in Cancun Haunts WTO"):

    "Accordingly, no one here discounts the possibility that this week's meeting will end in discord. If it does, the WTO's existing rules will stay in effect, "and the talks will just drift," said Jeffrey J. Schott, a trade expert at the Institute for International Economics in Washington. "But what won't just drift is the perception of whether it's better to do business in the WTO or in bilateral or regional negotiations," such as the recently approved free-trade agreements that the United States reached with Australia and Morocco. "I think you would then call into question the viability of the WTO as a negotiating forum. That's a real risk."

    That, in turn, could adversely affect the WTO's "crown jewel" -- its system for arbitrating trade disputes among nations, according to Peter D. Sutherland, a former director-general of the organization. In a Financial Times column this month, Sutherland asked whether the global trade system can continue to function well "if the institution within which it is embedded -- and on whose rules its judgments are based -- ceases to command the respect of governments and businesses."
Peter Gallagher argues that these concerns are overblown. The institution of the WTO itself will survive, and the negotiations themselves may not be over: "The price of 'failure'". Gallagher's point is that the General Council shouldn't agree on a poor set of guidelines, just to avoid the perception of failure.

Revised 12:30 PM July 28

How private radio stations came to the UK

Dr. Madsen Pirie reports in this post from the Adam Smith Institute's blog: "We loved the pirate stations"

Perverse incentives

Josh Barr reports in the Washington Post ("Athletes Make the Grade Sooner by Failing First") that:
    "An apparent loophole in National Collegiate Athletic Association eligibility regulations is leading an increasing number of top recruits to intentionally fail to graduate from high school so they can improve their chances of playing sooner in college..."
I learned about this from Skip Sauer at the Sports Economist

OMB expected to report record deficit, maybe Friday

Anna Willard and Caren Bohan report for Reuters that the Office of Management and Budget (OMB) will project a record budget deficit for 2004.  The deficit should be $50 billion more than in 2003. 

The report was scheduled for OMB release on July 15, but it has been delayed. The authors speculate it may come this Friday, after the Democratic convention ends. "Bush Seen Projecting Record Deficit"

Although it looks like the deficit has increased by $50 billion from last year to this, the administration is expected to argue that the OMB release is good news, since the last OMB projection of the increase in the deficit from 2003 to 2004 was much larger.

Should FDA approval of a drug preclude lawsuits?

Alex Tabarrok at Marginal Revolution argues that FDA approval of a drug should preclude lawsuits (unless the drug manufacturer has lied or is negligent): "Double Jeopardy Disaster"
    "...there has to be some sort of cost-benefit test to decide if a drug should be marketed. There is an argument for using tort law instead of the FDA to do this test...and there is an argument for using the FDA instead of tort law but there is no argument for adding tort law on top of FDA regulation, that is a double jeopardy disaster."

Program evaluation

Celia Dugger points to the work of the Poverty Action Lab at MIT.  The Lab has been promoting rigorous, randomized, experiments to see what types of development assistance relieve poverty, and what types don't, or don't very well. From the New York Times: "World Bank Challenged: Are the Poor Really Helped?"
    "...A small band of development economists, who a year ago founded the Poverty Action Lab at the Massachusetts Institute of Technology, have become influential advocates for randomized evaluations as the best way to answer that question. Such trials, generally regarded as the gold standard in social policy research, involve randomly assigning people eligible for an antipoverty program to get the help or not, then comparing outcomes to see whether those who got the help fared better than those who did not.

    It is the same approach that has helped drug companies figure out what medicines are effective and Americans decide how best to reform welfare. Advocates for rigorous evaluations hope to make aid more effective, not by directing money to particular countries, but by spending it on programs proven to work.

    The Poverty Action Lab scholars have made startling discoveries in their own randomized evaluations...

    A series of education experiments in Kenya found that providing poor students with free uniforms or a simple porridge breakfast substantially increased attendance. But giving them drugs to treat the intestinal worms that infect more than a quarter of the world's population was more cost effective, with a price tag of only $3.50 for each extra year of schooling achieved. Healthier children are more likely to go to school. "You can't answer the general question: Does aid work?'' said Esther Duflo, an economist and co-founder of the Poverty Action Lab."You have to go project by project and accumulate the evidence.''

    The World Bank, a lumbering giant that employs more than 1,200 Ph.D.'s, is beginning to listen to critics like her..."

What happened at the WTO on Tuesday?

Tuesday, July 27, was the first day of the WTO's General Council negotiations on the Doha trade liberalization agenda or framework (all this, Cancun and Geneva, and many negotiations between...just to flesh out the groundwork for the detailed negotiations to come).  Elizabeth Becker of the New York Times reports: "Farm Subsidies Again Take Front Seat at the W.T.O.".
    "GENEVA, July 27 - Global trade talks began here Tuesday with officials hoping to break logjams and to satisfy the increasingly vocal complaints of developing nations that rich countries have yet to pledge a substantial enough cut in their $300 billion annual agricultural subsidies and supports.

    But neither the haves nor the have-nots were acting as single blocs, with members of both factions seeking out splinter groups focused on particular issues. At the headquarters of the World Trade Organization, the countries gathered in a general session and later broke into discrete special-interest groups that tried to devise strategies that offer enough concessions to reach a compromise, while also appeasing groups at home..."
Becker describes a fractious meeting, but the short article is ultimately optimistic:
    "After raising serious objections to farm subsidies of developed countries at a news conference, India's minister of commerce, Kamal Nath, nonetheless said: "I'm looking at the next three days with optimism. It is possible to make improvements."...

    Mr. Nshuti
    [Rwanda's Commerce Minister - Ben] said failure of the talks was not an option. "For Africa, we are losers already,'' he said. "If there is a failure here, it is a failure for the whole world, not just Africa.''

    Analysts said that some of the tough new demands from many countries were predictable devices to win greater concessions..."
This report from Michael Madigan in Australia is even more optimistic than Becker's: "Farm trade victory looms".
    "...Trade Minister Mark Vaile and National Farmers Federation president Peter Corish both cancelled engagements in Townsville on Monday to fly to World Trade Organisation talks in Geneva after a dramatic shift towards consensus.

    [This is dated the 28th, so yesterday is Tuesday - Ben] both the Cattle Council of Australia and the NFF confirmed what had been unthinkable only a few months ago – that the removal of subsidies in the US and Europe was a genuine possibility.

    "What they are looking at is the possible abolition of all subsidies for agriculture," Cattle Council president Keith Adams said.

    "It's really been the last 24 hours that have seen the ground shift."
This seems unlikely. Would the Bush Administration, facing a tough election fight, agree to a framework that opens the possibility of an elimination of all subsidies, or that the EU would go beyond the concessions they've already made on export subsidies, given the position taken by the French.  Maybe this is referring to information about an agreement on export subsidies only.

Here is Peter Gallagher's latest report.

Paul Blustein at the Washington Post weighs in here with a general overview of the background to, and purpose of, the Geneva meetings: "Failure in Cancun Haunts WTO". Blustein surveys some of the outstanding issues. What's at stake:
    " one here discounts the possibility that this week's meeting will end in discord. If it does, the WTO's existing rules will stay in effect, "and the talks will just drift," said Jeffrey J. Schott, a trade expert at the Institute for International Economics in Washington. "But what won't just drift is the perception of whether it's better to do business in the WTO or in bilateral or regional negotiations," such as the recently approved free-trade agreements that the United States reached with Australia and Morocco. "I think you would then call into question the viability of the WTO as a negotiating forum. That's a real risk."

    That, in turn, could adversely affect the WTO's "crown jewel" -- its system for arbitrating trade disputes among nations, according to Peter D. Sutherland, a former director-general of the organization. In a Financial Times column this month, Sutherland asked whether the global trade system can continue to function well "if the institution within which it is embedded -- and on whose rules its judgments are based -- ceases to command the respect of governments and businesses."

Revised 8:45 PM Alaska local time, 7-27-04.

Political platforms and stock prices

Brian Knight asks, "Are Policy Platforms Capitalized into Equity Prices?..." in a National Bureau of Economic Analysis (NBER) working paper summarized here: "Are Political Platforms Capitalized into Equity Prices?". From the summary (written by Les Picker):
    "...Brian Knight systematically measures these ties between political parties and industries using evidence on equity returns during the six-month period before the 2000 U.S. Presidential election. He studies a sample of 70 firms favored under the policy platforms of either Bush (41 firms) or Gore (29 firms), as identified by financial analyst reports.

    For this sample of 70 politically sensitive firms in the United States, Knight confirms that favorable policies play a key role in determining a firm's total value. During periods in 2000 when the prospects of a Bush victory were increasing, Bush-favored firms outperformed Gore-favored firms. Likewise, during periods in which prospects of a Gore victory were increasing, Gore-favored firms outperformed Bush-favored firms..."

WTO General Council meetings open today

The General Council of the WTO should have begun this week's formal meetings at 10 AM today. The Economist reports on the start of the meetings with a short article on the prospects for the negotiations, here: "From Cancun to Geneva"

The article makes these points:
  • The EU has agreed to eliminate agricultural subsidies. This represents progress since Cancun.
  • The EU has shown flexibility by agreeing to back off some of the "Singapore issues."
  • However, there hasn't been any progress since Cancun in other areas, such as the development of the framework for negotiating redcutions in industrial tariffs.
  • Divisions between poor countries are becoming more obvious - for example, countries that already are given special access rights to developed markets are not eager to see the value of those special rights reduced by a general reduction in barriers to trade.
  • Negotiating framework is shot through with special exemptions.
With respect this this last, the article reads:
    "“Nobody’s vital interests will be put at risk by the deal we are seeking,” said Supachai Panitchpakdi, director-general of the WTO, “but everybody’s will suffer if we do not get it.” The draft framework reflects this fear of failure and this eagerness to please. It is full of exemptions, “flexibilities” and loopholes. The majority of WTO members, it seems, are “special” in some way (ie, the laws of free trade should be suspended for them) and many industries are “sensitive” (ie, they have vocal lobbies in their respective capitals). Any progress made in this week’s negotiations will thus be of a limited and qualified kind. But failure would be an unmitigated disaster, calling into question the very workability of the WTO."
Richard Waddington of Reuters has a distinctly downbeat opening day report: "WTO Chief: 'Lot of Work' Needed for Deal". David Uren of The Australian also focuses on the difficulties facing the General Council: "WTO on knife edge"

Revised, including title change, 7-27-04

How to talk about outsourcing without getting in trouble

This past February, the Chair of the Council of Economic Advisors, Greg Mankiw, created a controversy with remarks about service imports that weren't politically astute - although they made good sense about what would be best for the country. This CBS News analysis by Douglas Kiker tells what happened: "Bush Econ Advisor: Outsourcing OK".

A recent Fred Barnes article in International Economy contrasts Mankiw's comments with an alternative, politically sensitive, and vaguer, way of talking about the issue that Barnes attributes to Treasury Secretary Snow (although he doesn't say exactly when Snow made the remarks) : "Grading Bush's Economic Team"

    What Mankiw had said was hardly incendiary. It merely reflected mainstream economic thinking. The Economic Report of the President, which Mankiw authored, contained this sentence: "When a good or service is produced more cheaply abroad, it makes more sense to import it than to make or provide it domestically.? Asked about this during a White House briefing, Mankiw reported to have labeled out-sourcing ?a good thing."

    His answer was actually more elaborate than that. "Outsourcing is just a new way of doing inter-national trade," he said. "We're very used to goods being produced abroad and being shipped here on ships and planes. What we're not used to is services being produced abroad and being shipped here over the Internet or telephone wires. But does it matter from an economic standpoint whether values of items produced abroad come on planes and ships or over fiber optic cables? Well, no, the economics is basically the same. More things are tradable than were tradable in the past and that's a good thing."

    It was left to Snow, more experienced in Washington than Mankiw, to come up with
    a way to discuss outsourcing. It's a four-step approach, first empathy for those who lost jobs, then economic growth as the source of new jobs, then job training, and finally a denunciation of "economic isolation" as harmful to American producers. The word "outsourcing" is never mentioned."

The EU and the WTO negotiations

Agricultural issues will dominate the World Trade Organization (WTO) talks in Geneva this week.  European Union (EU) countries differ in their dependence on agriculture, and on the ways they may be affected by the negotiations.  The farm sector is relatively more important in some countries, notably France, and not so important in others.  France's President Chirac has been distinctly skittish about the current draft framework for negotiations.

Today (Monday, July 26) the EU Foreign Ministers (through the EU's General Affairs and External Relations Council) met and sought to paper over their different perspectives, confirming a joint negotiating position. The text resulting from their deliberations is here.

Tobias Buck and Frances Williams Financial Times report on the meeting, here:"EU seeks united front for global trade talks". The staff of the Deutsche Welle report, here: "EU Prepares for WTO Agriculture Talks".

Added link to text 7-27-04.

West African nations compromise on cotton

The WTO's General Council meet's tomorrow to hammer out a framework to guide future negotiations.  But a lot of wrestling over the draft framework has already taken place.

Last week West African cotton growing countries agreed to compromise on the treatment of cotton in future stages of the trade negotiations.  They had wanted cotton treated separately from other agricultural issues.  Last week they agreed to folding it in with the other agricultural issues. Here's a Channel NewsAsia report: "African countries ready to compromise on cotton at WTO talks" .  The The East African Standard covers the same issue: "Africa Softens Stand On Cotton Subsidies".
    "Four West African cotton producing states have dropped their demand that the crop be treated as a special agenda item at World Trade organization (WTO) farm talks, but insisted on guarantees of financial aid.

    Benin, Chad, Burkina Faso and Mali told a WTO meeting they were ready to see cotton included in the overall negotiations on lowering barriers to farm trade, on certain conditions..."
Cotton played a key role in the collapse of last year's negotiations in Cancun. The Economist explains ("The WTO under fire"):
    "Prodded and encouraged by non-governmental organisations (NGOs), especially Oxfam, a group of four West African countries?Benin, Burkina Faso, Chad and Mali?managed to get cotton included as an explicit item on the Cancún agenda. Their grievances were simple, and justified. West African cotton farmers are being crushed by rich-country subsidies, particularly the $3 billion-plus a year that America lavishes on its 25,000 cotton farmers, helping to make it the world's biggest exporter, depressing prices and wrecking the global market.

    The West African four wanted a speedy end to these subsidies and compensation for the damage that they had caused. Though small fry compared with the overall size of farm subsidies, the cotton issue (like an earlier struggle over poor-country access to cheap drugs) came to be seen as the test of whether the Doha round was indeed focused on the poor.

    But the draft text that emerged halfway through the Cancún meeting was a huge disappointment. The promises on cotton were vague, pledging a WTO review of the textiles sector, but with no mention of eliminating subsidies or of compensation. Worse, it suggested that the West African countries should be encouraged to diversify out of cotton altogether.

    This hardline stance had American fingerprints all over it. Political realities in Congress (the chairman of the Senate agriculture committee is a close ally of the cotton farmers) made American negotiators fiercely defensive of their outrageous subsidies. For the Africans, the vague text was a big blow. It caused ?anger and bitterness? said one delegate. As a result, the poorest countries dug in their heels when it came to the other big controversial area: that of extending trade negotiations into the four new Singapore issues. Along with many other poor countries, the Africans had long been leery about expanding the remit of the trade talks at all."

This week's WTO negotiation schedule

From the WTO website: "Brief report on on-going work, with revised text planned by Wednesday"
    "General Council chairperson Shotaro Oshima and Director-General Supachai Panitchpakdi reported briefly on work in key issues when heads of delegations met informally on Friday 23 July 2004. A revised draft will be available by Wednesday 28 July at the latest, Ambassador Oshima said. It would be the last substantial draft although some further changes could be negotiated, and Friday 30 July remains the absolute deadline, he said...

    Ambassador Oshima observed that some ministers will be in Geneva next week. He said that the General Council meeting remains a regular general council meeting and not a ministerial meeting although members are free to decide who their representatives will be. He said he stressed this to assure delegations that will not be represented by ministers.

    Consultations will continue over the weekend.
    evidently this briefing was Friday or Saturday - Ben] Another informal heads of delegation meeting will be convened early in the week.

    The General Council will begin on Tuesday 27 July to discuss agenda items not related to the negotiations. Then the meeting will be suspended while consultations continue, to be reconvened for the Doha work programme agenda item when the informal meetings and consultations are completed, Amb.Oshima announced."

Drive-in movies

This weekend the Delsea Drive-in in Vineland, N.J., is opening for the first time since July 18, 1987. The feature film in '87 was La Bamba; the feature film this weekend is "The Bourne Identity." Friday's New York Times carried a story on the reopening by Robert Strauss: "The Drive-In Theater Tries a Comeback"

    "The nation's first drive-in theater was built by the Hollingshead family along the tawdry Admiral Wilson Boulevard in Pennsauken, N.J., in 1933. By 1958, there were more than 4,000 drive-ins. But television, land prices in the suburbs and, eventually, videos and multiplexes killed most of them.

    According to Jennifer Sherer, who keeps tabs on the industry through her Web site,, there are now but 417 drive-ins in the United States, down from 423 in 2003. The Delsea is the only one to open this year.

    "In the past few years, though, we are seeing some growth in the Midwest and the Carolinas into the South," Ms. Sherer said.

    In some cases, Ms. Sherer said, drive-ins are being paired with other entertainment venues. The owners of Wall Speedway in Wall Township, Monmouth County, for instance, are hoping they can overcome neighborhood opposition to put one up in the motor-sports track parking lot by next summer."
It turns out that there are a lot of web pages devoted to drive-ins. I'll only link to the one mentioned in the Times article: "".  This one has a nice page with statistics figures showing the numbers of drive-ins open by year since 1933, and numbers built by year.
The stats page is here.  Most of the increase in the number of open drive-ins took place in the 12 years from 1946 to 1958.  The number of open drive-ins declined in the early 1960s, then leveled out for a while.  It plummeted between 1973 and 1987, declining more slowly since then.

How are the WTO trade talks going?

How are the WTO trade liberalization talks going? This is widely believed to be a "make or break" week of negotiations for the Doha round of trade talks. I posted on the negotiations a few days ago: "Do or Die for Doha?"

WTO members are trying to produce a general framework to provide structure and guidance for ongoing negotiations. A draft framework plan was put in circulation on July 16 and has been the subject of negotiations since. My understanding is that those negotiations may produce a revised draft after this weekend. The WTO's General Council will try to hammer out a final version this week.

Elizabeth Becker has a relatively optimistic report in the New York Times "Trade Talks in Geneva Offer More Hope This Time" This is a useful background piece, but doesn't have very much recent detail.  Richard Waddington also provides useful background, in a Reuters story carried in the Canadian paper, The Globe and Mail : "WTO states make final push to revive stalled free-trade talks.

Peter Gallagher is more current, and points to two positive developments over the weekend in "Experts gloomy on WTO agriculture framework ".  However, his "experts gloomy" title refers to a distinctly less optimistic poll of negotiation insiders conducted by the Institute for International Business, Economics and Law of the University of Adelaide.

Phasing out the textiles agreement

Textile quotas authorized under the World Trade Organization (WTO) Agreement on Textiles and Clothing (ATC) are scheduled to end in January 2005. The WTO web site has background here:

    "From 1974 until the end of the Uruguay Round, the trade was governed by the Multifibre Arrangement (MFA). This was a framework for bilateral agreements or unilateral actions that established quotas limiting imports into countries whose domestic industries were facing serious damage from rapidly increasing imports.

    The quotas were the most visible feature. They conflicted with GATT’s general preference for customs tariffs instead of measures that restrict quantities. They were also exceptions to the GATT principle of treating all trading partners equally because they specified how much the importing country was going to accept from individual exporting countries.

    Since 1995, the WTO’s Agreement on Textiles and Clothing (ATC) has taken over from the Mulltifibre Arrangement. By 1 January 2005, the sector is to be fully integrated into normal GATT rules. In particular, the quotas will come to an end, and importing countries will no longer be able to discriminate between exporters. The Agreement on Textiles and Clothing will itself no longer exist: it’s the only WTO agreement that has self-destruction built in..."
Link to the page itself for more.  The WTO has more on the agreement on this page.

The end of the quotas creates opportunities for some developing countries, and threatens others.  Some developing countries are given special access to developed markets as a form of foreign aid or as the by-product of a bilateral agreement. These countries will lose this advantage as barriers are reduced for everyone else. Mauritius, for one, is concerned, as this article from the weekly trade newsletter Bridges indicates: "Mauritius Calls For WTO Meeting on Textile Quota Phase-out"

    "Mauritius sent a letter to WTO Members on 20 July, calling for a meeting to discuss the impeding phase-out of textile quotas at the end of the year. Textiles coalitions have been calling for an emergency meeting, but only a WTO Member government can make the move (see BRIDGES Weekly, 23 June 2004). According to trade sources, Mauritius would like to see the meeting focus on vulnerable countries in sub-Saharan Africa. A number of developing countries that currently enjoy preferential access to developed country markets, through schemes such as the US African Growth and Opportunity Act (AGOA), fear they will loose all access after quotas are lifted and more competitive producers, such as China and India, pick up large market shares. These small and vulnerable economies are concerned that the development gains that their infant textile industries have allowed them to make will be lost and the industries devastated. The EC recently reviewed its preference schemes in light of the upcoming quota phase-out (see BRIDGES Weekly, 14 July 2004).

    "Mauritius Requests WTO Meeting To Discuss Textile Quota Elimination," WTO REPORTER, 21 July 2004."

The war on terror

Terror is a tactic, you can't wage war on it. We're at war with Al Qaeda and its allies. Terror will be with us after Al Qaeda is beaten.

Terror will be with us from now on because terror works extremely effectively for entities that are weak in traditional power. A large part of its effectiveness comes from surprise. It is hard to defend against surprise attack by enemy you may not know exists and an enemy who has the initiative.

Defense against people using terror as a weapon will depend on intelligence and force, but these aren't always going to be successful.  We also need to change the way we live in order to create a society that can absorb an attack and minimize its results so far as possible. There is work here for city planners, architects, economists, political scientists, and many other disciplines.

This rant was prompted by a short article in the July Wired by Noah Shachtman: "Protected Air Space in the Workplace". Shachtman reports on efforts by DARPA (the Pentagon's Defense Advanced Research Projects Agency) to develop buildings that can sense things that shouldn't be there (anthrax) and can be begin to defend themselves (using "ultraviolet light to kill bacteria, and venting the dangerous stuff away from occupied areas").  

I had a post on a similar topic last summer: "What to do about electricity shortages"

Britain's road-pricing proposal

The Economist reports that the British government has released its new transportation policy report: "Stop-Go"
    "SHORT-TERM cowardice and long-term courage: that's Britain's transport policy in a nutshell, following a bunch of big announcements. This week the government gave its strongest commitment to road-pricing. By 2014, technology permitting, drivers will pay per mile driven, ranging from pennies on lightly used country roads to £1.30 a mile at peak-time on the most congested urban ones.

    That scheme, requiring a meter in every vehicle, would cost an annual £3 billion to run, but would bring in revenues of up to £9 billion. The surplus could go to public transport, or be used to cut motoring taxes.

    Either way, the scheme's welcome, if a long way off: rationing road-space by congestion is inefficient, dirty and expensive. In the nearer term, local authorities will be encouraged to adopt their own congestion charges, as pioneered successfully by Ken Livingstone, the mayor of London..."
As I think the proposal must be to put a combination GPS/radio unit in each car; these units would communicate the car's location to a satellite.

Protecting you from foreign socks and bras

Alex Tabarrok at Marginal Revolution has the story:"Socking it to us".

Credit and debit cards

Jathon Sapsford writes about credit and debit card use, in today's Wall Street Journal.
  • in 1970, 16% of households had cards, today 73% do.

  • Credit and debit cards were used in 52% of in-store consumer payments in 2003, up from 43% in 1999.

  • 20% of U.S. GDP is attributed to card purchases.

  • About 60% of holders fail to pay off their balances each month and pay the interest, 40% don't.

  • Much of the article deals with the ubiquity of credit and debit cards: for example, (at least some) Wisconsin state troopers carry card readers and can collect payments for traffic tickets at the time they pull you over.

  • The Navy issued MasterCards to the 5,000 sailors on the aircraft Carrier Harry S. Truman this year. On payday the sailors load up their cards.  Then they can use them for all shipboard (and many on-shore) purchases. Soft drink machines are card operated, saving the Navy the effort of collecting and redistributing a half ton of quarters each month. There's even a card swiper in the chapel for offerings.

  • This past March, McDonalds agreed to begin accepting the cards.

  • People selling food in the stands at last year's SuperBowl carried portable swipers that worked with a cellphone.
But the cards themselves may not long outlast the cash and checks they are replacing:
    "More technological innovation is coming, and plastic itself may eventually fall into disuse.  After all, it is the numbers carried on plastic, not the plastic cards themselves, that are necessary to complete transactions. Since cards are susceptible to theft and fraud, the industry is working on "biometric" idnetification techniques.  Computers would link credit-card numbers, housed on an electronic database, to unique body parts such as fingerprints, irises or facial characteristics.

    Card industry executives envision consumers being identified at cash registers with devices such as fingerprint readers or eye scanners, which would replace the signature or PIN number that consumers currently use to verify identity.

    Online shoppers might identify themselves by pressing fingers to a silicon wafer embedded in the keyboard, which would read the fingerprint, match it online with a copy held by bank or merchant, then authorize the sale...."

Update on WTO Doha negotiations

Peter Gallagher brings us up to date on the  "Manoeuvring on the Framework text"
    "...In typically haughty style, President Chirac dismissed the entire framework (as usual, for “Europe’s interests” please read “France’s interests”):

    “This proposal is profoundly unbalanced to the detriment of the interests of the European Union,” Chirac said.(UPI)

    But his Trade Minister, François Loos, translated this into a negotiable objection

    “We are asking for full parallelism to be restored,” wrote French Trade Minister Francois Loos in the newspaper Le Figaro Thursday. “If the Americans agree to get rid of their credits it would be a promising start.”... (UPI)"

Harry Potter and bureaucracy

Mahalanobis describes the portrayal of bureaucracy in the Harry Potter books: "Harry Potter, Market Wiz".

Do or Die for Doha?

In the next ten days we may find out whether or not the Doha negotiations will lead anywhere.

These are the world trade liberalization negotiations that fell apart in Cancun last September.  (This article from The Economist has background on the Doha negotiations and the meeting of trade ministers at Cancun: "The WTO under fire". )

On July 16 a new draft of a potential framework for negotiations was floated by the World Trade Organization (WTO) Director-General Supachai Panitchpakdi and General Council Chair Shotaro Oshima. This week's negotiations are aimed at laying groundwork for a meeting of the WTO's General Council next week, and potential adoption of a negotiating framework by the Council.
    "The General Council is the WTO’s highest-level decision-making body in Geneva, meeting regularly to carry out the functions of the WTO. It has representatives (usually ambassadors or equivalent) from all member governments and has the authority to act on behalf of the ministerial conference which only meets about every two years. The current chairperson is Ambassador Shotaro Oshima (Japan)." (WTO web site)
The weekly trade newsletter Bridges explains whats going on right now:

    "On 16 July, WTO Director-General Supachai Panitchpakdi and General Council Chair Shotaro Oshima circulated a first draft Framework Text on the Doha Round trade negotiations, which Members are expected to adopt by the end of July. Following the release of the text, Members met in a number of formats, including a heads of delegation meeting called by Supachai on 19-20 July, informal meetings on agriculture and industrial market access on 20 July, and a video conference among the Five Interested Parties' (FIPs) group -- the US, EC, Australia, Brazil and India. The G-20 group of developing countries comprising, inter alia, Brazil, India, China and South Africa also met on 20 July. Negotiations continue on all issues and in different configurations.

    The end-July deadline represents the WTO's attempt to put the Doha negotiations back on track following the collapse of talks at last September's Ministerial Conference. Members are working towards the deadline in order to keep the momentum up in the Doha round of trade negotiations. Should they fail to agree on the outline for negotiations by the end of the month, trade talks are likely to stall for months, if not for years, with US elections and leadership changes in the European Commission coming up towards the end of the year. The draft Framework Text covers all areas currently under negotiation, including agriculture, industrial market access, development issues, services and trade facilitation (one of the controversial Singapore issues, which also include investment, competition and transparency in government procurement)...

    ...In order to reach agreement on a July Framework, Members will continue to work in various formats to find an acceptable compromise. A HODs meeting will be called on Friday, 23 July, and a revised draft will likely be released following the weekend. The final meeting of the General Council is scheduled for 27-29 July, although Chair Oshima indicated that 30 July was the "drop-dead" deadline. A number of trade ministers -- including those from major Members such as the EC, US and Japan -- are tentatively planning to attend the General Council meeting"
The July 16 framework document is here: "Doha Work Programme - Draft General Council Decision of [...] July 2004".

There are various descriptions of the draft and explanations of its significance. Peter Gallagher provides a very helpful analysis of the agricultural section of the proposal: "A guide to the Annex on Agriculture"Bridges also provides a review of the agricultural text, here: "Agriculture: Developing Countries Criticise Groser Draft for Developed-Country Bias".

Oxfam thinks the draft disproportionately reflects developed country interests, and doesn't provide as much for developing countries as it should: "Rich country self-interest threatens to stall world trade talks" Key areas where change might help:
    "Key areas where changes must be made include the following:

    • Export dumping: While clearer language on the elimination of export subsidies is welcome, there is still no indication of the time frame, and the problem of how to deal with US export credits has not been adequately addressed. Worse, the United States is insisting on relaxing disciplines on subsidies that facilitate dumping (i.e. proposed broadening of the blue box).

    • Market access: improved market access for developing countries was one of the promises made at Doha. The current framework is unlikely to deliver this as it does not address the issues of tariff peaks and escalation, nor does it propose a formula for tariff reductions.

    • Special and Differential Treatment: in stark contrast with the specific attention given to sensitive products of the EU and other rich countries, the current text does not assert the right of developing countries to protect vulnerable sectors in order to assure rural livelihoods and food security"
Gallagher is optimistic that the the framework will obtain the necessary consenus: "WTO "framework" looks safe".

Sunken U-boat Found

Janet Kornblum reports in today's USA Today about the discovery of a sunken u-boat on Georges Bank, off of New England: "'Sea Hunters' find deadly U-215 ".

The havoc in the Atlantic sea lanes was caused by a relatively small number of the u-boats commissioned, and the u-boat losses were enormous:
    "Though they were deadly for the Allies, they were often a death sentence for the sailors aboard. There were 1,171 U-boats commissioned during World War II, says Jak Showell, a naval historian from Folkestone, England, and member of the U-Boat Archiv in Germany. But only 859 U-boats were deployed for battle, and three-fourths of them — 648 — were sunk or captured at sea, Kurson says. And only 321 U-boats actually attacked and caused damage to allied ships, Showell adds."
Minor edit 7-25-04.

Fixing the ETI

George Mundstock on the genesis and evolution of the new Corporate Tax Bill: "No Corporation Left Behind"  (this is the one that does so well by GE).

Mundstock also begins a series on corporate taxation of multinational enterprise, here: "US Taxation of Multinational Enterprise: Part I".

Mundstock is guest blogging at Michael Froomkin's

I learned about this from Brad DeLong.

How to pay a restaurant bill

Michael Stastny marshals the theoretical models and experimental evidence: "The Unscrupulous Diner's Dilemma". It's a public goods problem.

Tom Lehrer

There are a lot of web sites dealing with Tom ("I'd like to take you now, on wings of song as it were, and try and help you forget for a while your drab, wretched lives.") Lehrer- a political humorist, satirist, song writer and performer from the 1950s and 1960s.

For anyone interested - there are biographies here and here.

There are interviews here, here, and here.

A list of songs, with lyrics, here. A lot of work has gone into this site. References that were current at the time, but might not be familiar to younger people, are carefully explained. I was glad to finally see a photo of Alma Mahler Gropius Werfel.

A list of audio CDs available from Amazon is here.

We've come a long way since the mid-sixties. The second world war was only 20 years past; the Cold War was at its worst.  A song like the "MLF lullaby" was funny then in a way it isn't now, because it tapped into anxieties we've forgotten:
    "A considerable amount of commotion was stirred up during the past year over the prospect of a multilateral force, known to the headline writers as MLF. Much of this discussion took place during the baseball season, so the Chronicle may not have covered it, but it did get a certain amount of publicity; and the basic idea was that a bunch of us nations, the good guys, would get together on a joint nuclear deterrent force including our current friends, like France, and our traditional friends, like Germany.  Here's a song about that, called the MLF Lullaby:

    Sleep, baby, sleep, in peace may you slumber,
    No danger lurks, your sleep to encumber.
    We've got the missiles, peace to determine,
    And one of the fingers on the button will be German.

    Why shouldn't they have nuclear warheads?
    England says no, but they all are soreheads.
    I say a bygone should be a bygone,
    Let's make peace the way we did in Stanleyville and Saigon.

    Once all the Germans were warlike and mean,
    But that couldn't happen again.
    We taught them a lesson in 1918
    And they've hardly bothered us since then.

    So, sleep well, my darling, the sandman can linger.
    We know our buddies won't give us the finger.
    Heil - hail - the Wehrmacht, I mean the Bundeswehr,
    Hail to our loyal ally!
    M L F
    Will scare Brezhnev.
    I hope he is half as scared as I!"
On the other hand, our relationship with the French hasn't changed all that much:
    "One of the big news items of the past year concerned the fact that China, which we call Red China, exploded a nuclear bomb, which we called a device. Then Indonesia announced that it was gonna have one soon, and proliferation became the word of the day. Here's a song about that.

    First we got the bomb and that was good,
    'Cause we love peace and motherhood.
    Then Russia got the bomb, but that's O.K.,
    'Cause the balance of power's maintained that way!
    Who's next?

    France got the bomb, but don't you grieve,
    'Cause they're on our side (I believe).
    China got the bomb, but have no fears;
    They can't wipe us out for at least five years!*
    Who's next?

    Then Indonesia claimed that they
    Were gonna get one any day.
    South Africa wants two, that's right:
    One for the black and one for the white!
    Who's next?

    Egypt's gonna get one, too,
    Just to use on you know who.
    So Israel's getting tense,
    Wants one in self defense.
    "The Lord's our shepherd," says the psalm,
    But just in case, we better get a bomb!
    Who's next?

    Luxembourg is next to go
    And, who knows, maybe Monaco.
    We'll try to stay serene and calm
    When Alabama gets the bomb!
    Who's next, who's next, who's next?
    Who's next?"

GE sees and seizes an opportunity

General Electric (GE) is on the verge of winning enormous tax advantages in upcoming corporate tax legislation.  Jeffrey Birnbaum and Jonathan Weisman reported on GE's lobbying efforts a week ago in the Washington Post: "GE Lobbyists Mold Tax Bill"

In 2002 the U.S. lost a case before the World Trade Organization (WTO), which ruled that elements of U.S. international tax laws violated international trading rules to which the U.S. had agreed.  Foreign countries were authorized to begin imposing punitive tariffs on U.S. products.  Congress undertook to rewrite the corporate tax laws to deal with the problem, and things spun out of control. Birnbaum and Weisman note that
    "Lobbyists for the nation's biggest companies have dusted off their favorite tax benefits and tried to sell them as part of the legislation. As a result, the measure, which began as a simple repeal of the $5-billion-a-year export subsidy, has swollen to include more than $140 billion in tax breaks over the next 10 years."
GE has been among the companies doing best in this legislation.  Birnbaum and Weisman have written a short case study describing how this happened:
  • GE had been thinking about what it wanted for a long time - since the passage of the Tax Reform Act of 1986.  Moreover, "In some ways, the recent lobbying campaign was anticipated in 2001 with the release of a scholarly study called "International Tax Policy for the 21st Century" by the National Foreign Trade Council. Lobbyists say the study's recommendations for change in the law, influenced by GE's input, helped lay the groundwork for the provisions that GE now seeks."

  • GE has donated a lot of money to candidates; its lobbyists can expect to get a hearing.

  • Its stable of international tax lobbyists is large, unusually knowledgeable, and worth listening to. "Unlike other corporations, GE's contract lobbyists do more than open doors so that its executives can make the case. The lobbyists are renowned in their fields and the company encourages them to function as much as advisers as pleaders to lawmakers who crave their expertise."

  • GE early on identified the possibilities of the bill to address the WTO concerns. "General Electric realized more than two years ago that the need to repeal the export subsidy would snowball into a major corporate tax bill...The GE team also was among the first companies to sign on to Thomas's [House Ways and Means Committee. Chairman Bill Thomas (R-Calif.) - Ben] initial efforts to solve the foreign-treaty issue and stuck with him as other businesses and lawmakers fought him at every turn."
  • GE characterized (or framed) its desired statutory changes in highly favorable terms. "The company's tax lawyers compiled a wish list and framed the firm's desires as simplification." [tax simplification - Ben]

  • GE didn't just lobby Congress. "The company's lobbying team touched every base. Joseph M. Mikrut, a former tax legislative counsel at the Treasury Department, teamed with his colleague at Capitol Tax Partners, Jonathan Talisman, a former assistant Treasury secretary for tax policy, to work the policy experts at Treasury."

Patrolling the Malacca Straits

The Straits Times reports that Singapore, Indonesia, and Malaysia have begun a joint 17 naval vessel patrol of the pirate-ridden Malacca Straits.  "50,000 ships ply the Straits of Malacca each year, carrying oil from the Middle East, and goods bound for Europe through the narrow passage between peninsular Malaysia and Singapore on one side and the Indonesian island of Sumatra on the other.": "3 countries start joint patrol of Malacca Straits"
    "The security of the straits was put firmly on the political agenda in March, when Admiral Thomas Fargo, commander of US forces in the Pacific, said a US plan to heighten security there might involve US elite troops who could 'take action when the decision has been made to do so'.

    The plan was rejected by both Muslim-majority Indonesia and Malaysia, although Singapore embraced the proposal.

    Kuala Lumpur and Jakarta insisted foreign troops were not needed to help safeguard the waterway, and that any active US deployment would infringe on their sovereignty. However, the three countries then agreed to start their own coordinated patrols."
This initiative by friendly countries seems like a good solution for the U.S., which is allowed to economize on its scarce military resources.

Productivity comes unexpectedly

Alex Tabarrok, at Marginal Revolution, describes how new communications tools are changing service procedures at some McDonalds restaurants. The economic meaning of space, and the need to co-locate economic activities in space, is changing radically: "Who would have guessed?"

The economist Ronald Coase argued that business firms evolve because it's often cheaper to coordinate the work effort of different people administratively, rather than through markets and prices. Once it was less expensive for drive-thru order takers in fast food restaurants to yell the orders to the cooks; now it's apparently sometimes cheaper to transmit the orders hundreds of miles to a call-in center which then sends the orders to the cooks. The order takers and cooks don't even have to work for the same firm.

No road to Juneau - yet

You can't drive to or from Juneau - we're cut off from the rest of the world by rivers, arms of the sea, mountains, ice fields and glaciers. You have to fly in or come by boat.
A road from Juneau north to Skagway, where it would connect with the rest of the North American road net, is under consideration, but very controversial.  Sarah Kershaw laid out the issues in Thursday's (July 15) New York Times : "Alaska's Capital Weighs Loss of a Glorious Isolation"

I learned about this from Ben Muse of Cape Cod, Massachusetts.

Talleyrand drops in the Hamiltons

In 1794, the cynical and unprincipled French diplomat Talleyrand was on the lam from revolutionary France.  He fled to England and then the United States...where he met U.S. Treasury Secretary Alexander Hamilton.  Ron Chernow tells the story of the resulting friendship in his new biography of Hamilton:
    "In January 1794, Talleyrand, informed that he had five days to leave England or face deportation, decided to join other stateless emigres in Philadelphia. The Churches [Hamilton's in-laws, then living in England - Ben] subsidized the trip, and Angelica [Angelica Church - Ben] smoothed the way for Talleyrand and his traveling companion, the chevalier de Beaumetz, by writing Eliza [Hamilton's wife, Angelica's sister - Ben] and introducing the two gentlemen as martyrs for "the cause of moderate liberty...To your care, dear Eliza, I commit these interesting strangers..."
In 1794, Hamilton was in his last year as Treasury Secretary.  He would resign early in 1795. Washington declined to meet Talleyrand, for political reasons.  There was, apparently, less concern about contact with Hamilton.

    "Talleyrand soon acquired a mulatto mistress, whom he squired openly through the Philadelphia streets [At this time Philadelphia was the U.S. capital - Ben].  This bothered some priggish souls in polite society but not Hamilton, although Eliza may have been less forgiving. "He was notoriously misshapen, lame in one foot, his manners far from elegant, the tone of his voice was disagreeable, and in dress he was slovenly," she remembered as an old woman. "Mr. Hamilton saw much of him and while he admired the shrewd diplomat for his great inellectual endowments, he detested his utter lack of principle. He had no conscience."...  He and Talleyrand became companions with a mutual fascination, if not close friends.

    During his two-year sojourn in America, Talleyrand cherished his time with Hamilton and left some remarkable tributes for posterity: "I consider Napoleon, Fox, and Hamilton the three greatest men of our epoch and, if I were forced to decide between the three, I would give without hesitation the first place to Hamilton. He divined Europe." Of Hamilton he told one American travel writer that "he had known nearly all the marked men of his time, but that he had never known one on the whole equal to him." Hamilton savored the roguish diplomat's company and gave him, as a token of esteem, an oval miniature portrait of himself.

    Hamilton and Talleyrand were both hardheaded men, disgusted with the utopian dreams of their more fanciful, radical compatriots. As one Talleyrand biographer put it, "They were both passionately interested in politics and both of them looked at politics from a realistic standpoint and despised sentimental twaddle whether it poured from the lips of a Robspierre or of a Jefferson." Both men wanted to create strong nation-states, led by powerful executive branches, and both wanted to counter an aversion to central banks and stock markets.  Oddly, Talleyrand agreed with Hamilton that Britain, not France, could best supply America with the long-term credit and industrial products it needed. Talleyrand recalled vividly how Hamilton asserted a passionate faith in America's economic destiny. In their talks, Hamilton said that he foresaw, "the day when - and it is perhaps not very remote - great markets, such as formerly existed in the old world, will be established in America." Talleyrand confessed to only one complaint abut Hamilton: that he was overly enamored of the grand personages of the day and took too little notice of Eliza's beauty..."
In 1797, Washington's successor, President Adams, sent a three man delegation to France to negotiate the so-called quasi-war between France and the United States.   (Hamilton was now out of office, and was not a member of the delegation.)

    "...When the American commissioners arrived in France in August 1797, they were greeted by a lame minister of foreign affairs who had been a pariah a few years earlier: Charles Maurice de Talleyrand-Perigord, who had befriended Hamilton in Philadelphia. With the end of the Terror, Talleyrand had been rehabiliated and returned to France. Hamilton knew that he was avaricious and regarded public office as a means of obtaining money. The cynical Frenchman once told a mutual friend that "he found it very strange that a man of his [Hamilton's] quality, blessed with such outstanding gifts, should resign a ministry [Hamilton had resigned his position as Treasury Secretary in 1795 - Ben] in order to return to the practice of law and give as his reason that as a minister he did not earn enough to bring up his eight children." After Hamilton returned to New York, Talleyrand was enroute to a dinner party one night when he glimpsed Hamilton toilng by candlelight in his law office. "I have seen a man who made the fortune of a nation laboring all night to support his family," he said, shocked.  After becoming French foreign minister in July 1797, he rejoiced at the plunder placed at his fingertips. "I'll hold the job," he confided to a friend. "I have to make an immense fortune out of it, a really immense fortune. "He proceeded to scoop up an estimated thirteen to fourteen million francs during his first two years as foreign minister."
He demanded bribes from the U.S. delegation, among other conditions for entering negotiations. The three agents he sent to meet with the U.S. delegation were identified in U.S. diplomatic codes as "X", "Y", and "Z".  The conditions, including the demand for bribes, created a political firestorm in the U.S., referred to as the "X Y Z Affair."

Ron Chernow. Alexander Hamilton Penguin Press. New York. 2004

Kerry campaign issues staff: legal issues

Jonathan Groner reports on Kerrry campaign issues staff legal advisors: "The Lawyers in John Kerry's Corner"
    "She's ["She" is Susan Liss - Ben] doing so as part of a group of lawyers that advises Kerry on judicial and legal policy issues.

    That group, headed by Nicholas Gess, of counsel at the D.C. office of Bingham McCutchen, is one of several clusters of well-connected lawyers and policy experts, many of them Clinton administration veterans, relied on by Kerry to brainstorm key issues.

    Other groups, larded with lawyers from the D.C. offices of such firms as Arnold & Porter; Latham & Watkins; Mintz, Levin, Cohn, Ferris, Glovsky and Popeo; and Skadden, Arps, Slate, Meagher & Flom, focus on issues like economics or foreign policy. All of them report to Sarah Bianchi, the campaign's policy director and a former domestic policy adviser to former Vice President Al Gore..."
This mid-February story identifies lawyers advising the campaign on different policy areas.

Angry Bear passes on conservative columnist Bruce Bartlett's thoughts on likely Kerry picks for economic positions: Kerry's Cabinet .
Recently the Washington Post and Slate have carried stories or columns on the same topic.

Which countries are economically freest?

The U.S. is third freest out of 123 ranked countries, according to a new CATO study. The Straits Times reports: "Singapore 2nd in economic freedom". Hong Kong comes in first. The judgment is based on an evaluation of:
    "...the key ingredients of economic freedom are personal choice, voluntary exchange, freedom to compete and protection of person and property."
Does it matter? The blurb for the report says that:
    "Economic freedom is strongly related to prosperity and growth. Countries that are economically free tend to grow faster and be more prosperous. New research in the 2004 report finds that economically free nations attract nearly $11,000 of investment per worker, 12 times more than the $847 investment per worker in unfree economies. Moreover, the productivity of investment is 70 percent greater in economically free nations than in unfree nations.

    Nations in the top fifth of economic freedom have an average per capita income of $26,100 compared to $2,800 for nations in the bottom fifth. Economic freedom benefits the lives of all people including the poor. In nations in the top fifth of economic freedom, the average income of the poorest 10 percent of the population was $6,877 compared to just $823 in the least free nations."
The report itself may be found here: "Economic Freedom of the World: 2004 Annual Report".

House approves FTA with Australia

The Straits Times reports that the U.S. House of Representatives approved the Free Trade Agreement (FTA) with Australia today - 314-109. The Senate takes it up tomorrow: "US House approves FTA with Australia"
    "...The measure had robust bipartisan backing because Australia, unlike less developed free-trade partners, has strong labour rights and environmental laws and poses no threat to US jobs. 'If you can't agree with this trade agreement, I don't know what trade agreement you're ever going to agree with,' said Representative Jim Moran...
Update,  July 15:  The U.S. Senate approved the FTA today, 80-16.  Prescription drug issues were a potential sticking point, according to The Australian: "US-Australia FTA approved"
    "...A rare sticking point during the two days of debate was language that some lawmakers said could undermine efforts to legalise importation of cheaper prescription drugs...

    But lawmakers also objected to language reconfirming US law under which patent holders keep control over sale of imports of their products in the United States, saying that could prevent drug importation.

    "It's an attempt once again to thwart those in this country who want to find a way to put downward pressure on prescription drug prices," said Senator Byron Dorgan, a Democrat.

    But the USTR emphasised the agreement creates no new rights for US patent holders, that Australia bans exports of its subsidised pharmaceuticals, and that the pact does not alter Congress' authority to change US law on importation."

Who should lead a Kerry administration economic team?

Yesterday I linked to a Jonathan Weisman story in the Washington Post on the Kerry campaign issues staff, paying particular attention to the economics staff: "Kerry Economic Team"

Today's Daniel Gross Slate column asks who should lead the team: (I assume he's asking who would be the best Treasury Secretary): The Men Who Would Be Bob - Can Kerry find his own Robert Rubin?. Gross reviews the pros and cons for seven candidates.

Did it jump, or was it pushed?

Did General Motors kill off urban mass transit in the 1920s "by employing a host of anti-competitive devices which, like National City Lines, debased rail transit and promoted auto sales." Or not?

Craig Newmark posts links to a selection of essays making and debunking the case: "Follow-up" Also see Newmark's post: "Revisiting two previous topics". Newmark's conclusion, after reviewing the discussion - it jumped.

Is the U.S. the top exporter to Cuba?

The Progressive Policy Institute "Trade Fact of the Week" reports on U.S.-Cuba trade:"Top Exporter to Cuba, 2004: The United States?"
    "...Four years ago, Congress legalized cash-basis food and medicine exports; as a result, tens of thousands of tons of rice, chicken, wheat, corn, and black beans now flow to Cuba monthly. This has pushed total exports up from $7 million in 2001 to $260 million in 2003, and considerably higher in early 2004. The 166,000 tons of rice sold from January to May of 2004, for example, was a tenth of all U.S. rice exports to the world, bringing in $61 million and placing Cuba third (behind Japan and Mexico) as a rice market. Twenty thousand tons of chicken cuts, meanwhile, made Cuba the United States' eighth-ranking poultry market and brought in $29 million. Cuba is also now the third largest export market for American condensed milk, seventh for black beans, and in the top 20 for wheat and corn.

    If these trends hold up for the rest of 2004, total exports to Cuba will top $600 million... Perhaps more interesting, such a figure could make the United States the world's largest exporter to Cuba. The island's total imports in recent years, according to IMF data, have been around $3 billion. Spain is usually the biggest exporter at around $500 million a year. Venezuela is close behind, and sometimes above, depending on the price of oil. Other contenders include Mexico at $150 million a year and Brazil at about $75 million..."

Royal Mistresses

Eleanor Herman's new book, Sex With Kings. 500 Years of Adultery, Power, Rivalry, and Revenge, a history of European mistresses, isn't devoid of information about the public finance. Jonathan Yardley reviewed it in the July 1 Washington Post: "In His Majesty's, Ahem, Service"
    ""In the sixteenth through the eighteenth centuries, the position of royal mistress was almost as official as that of prime minister. The mistress was expected to perform certain duties -- sexual and otherwise -- in return for titles, pensions, honors, and an influential place at court. She encouraged the arts -- theater, literature, music, architecture, and philosophy. She wielded her charm as a weapon against foreign ambassadors. She calmed the king when he was angry, buoyed him up when he was despondent, encouraged him to greatness when he was weak. She attended religious services daily, gave alms to the poor, and turned in her jewels to the treasury in times of war."
The position was fraught with difficulty. Yardley notes:
    "As for the mistresses, they may have been pampered and even adored, but they lived in limbo. A mistress's claim upon the king's time and exchequer rested entirely on her ability to please and amuse him. There was an endless stream of "pretty women attempting to gain the king's attention," and the mistress of the moment was forever on red alert: "When the royal eye wandered, as it did with alarming frequency, there was great speculation as to whether the object of kingly desires would prove a meaningless flirtation or if she would completely replace the existing power structure at court."
I learned about this from the Arts & Letters Daily

Kerry economic team

Tomorrow's Washington Post has a story by Jonathan Weisman on the Kerry campaign's issues organization: "Kerry's Inner Circle Expands"
    "...The campaign now includes 37 separate domestic policy councils and 27 foreign policy groups, each with scores of members. The justice policy task force alone includes 195 members. The environmental group is roughly the same size, as is the agriculture and rural development council. Kerry counts more than 200 economists as his advisers...",
So he's getting plenty of economic input. Key economic advisors include:
    "...Kerry's campaign was not always so expansive. On economic policy, for instance, a core group of four once held the key to the policy process: Bianchi [Sarah Bianchi, now "Kerry's domestic policy chief" -Ben], campaign economic aide Jason Furman, investment banker Roger C. Altman and Gene Sperling, former top economic adviser in Bill Clinton's White House.

    Now, things are more complicated. Three more economists -- London Business School Dean Laura D'Andrea Tyson, Princeton University's Alan S. Blinder and the Brookings Institution's Peter R. Orszag -- are consulted on virtually every policy decision. Former Treasury secretary Robert E. Rubin also weighs in on major policy pronouncements.

    Another circle, including Akerlof
    [George Akerlof, Nobel prize winning Berkely economist - Ben], University of California at Berkeley economist Alan J. Auerbach, Princeton's Cecilia E. Rouse, and Harvard University labor economist Lawrence F. Katz, advises on specific issues.

    A separate "New York group" -- including investment bankers Eric Mindich, Blair Effron and Steven Rattner -- tutors Kerry on matters of domestic and international finance, while helping to raise money and woo business support...
Later sections of the story describe the functioning of this large policy apparatus.

The Carlos Boozer Affair

Michael McCann (on Sports Law Blog) posts on the ethical issues raised by Carlos Boozer's move from the Cleveland Cavaliers to the Utah Jazz:
"Oral Promises & Professional Sports: The Carlos Boozer Saga"

Boozer played high school basketball here in Juneau.

Pricing driving

The Guardian reports on an upcoming, government funded, report in the U.K. that will recommend a new system to price road access. It sounds like cars would be required to carry a combination GPS/radio unit capable of transmitting the cars' locations to satellites. The system could track road usage and bill drivers appropriately. The report is due out later this month. The goal is to address road congestion problems. Here's the story: "Crisis plan for tolls on all roads ".

It sounds like, with this technology, it would be relatively easy to adjust charges to reflect varying levels of congestion in time and space (downtown at 3:30 PM on Sunday morning may be relatively uncongested and the charge per mile could be low; the inbound expressway at 7 AM on Monday morning may be relatively congested and the charge per mile could be high).

The technology sounds like that used to monitor vessel location and movement in the waters off Alaska. Certain classes of vessels are required to carry Global positioning system (GPS)/radio units so that their movements can be monitored. This system was introduced to monitor vessel activity with respect to areas closed to protect the endangered Stellers sea lion.

I learned about the Guardian article from Skip Sauer's Sports Economist blog: "Toll Roads"

The allocation of scarce club tables among competing celebrities

Coco Henson Scales describes her life on the service staff of a hot New York night spot in today's New York Times: "The Hostess Diary: My Year at a Hot Spot". What's Naomi Campbell like? The Bush Twins? Monica Lewinsky? Star Jones (who is Star Jones)? An honest article about a lot of mildly bad behavior.

    "It is near midnight and I am standing at the door of the restaurant with Kevin, the bouncer, patiently waiting for customers, so that I can turn them away.

    "Who are you here with?" I ask a man holding a woman's hand.

    "Just us," he says. Couples are usually passive, pleading. I look them up and down. I look past them and around them, even if there is no one else there. I bite my bottom lip as if I am genuinely worried for them. "I don't know," I say pensively.

    If they are meek and I am bored, I will let them in. But if they become agitated, I turn away, or even better — pick the group behind them. Either way, my ego is going to get a boost..."
How do you learn to accept large bribes for access to tables:
    "...Slowly, I grow thicker skinned. About a month after I start, on a crowded Saturday, a dark-haired young man wants a table for himself and five friends. They don't have a reservation and don't want to wait. I tell him it will be "about an hour," which really means two. After consulting with his friends, he peels off a $100 bill and slips it to me in a handshake. I am surprised — no one has offered me a bribe before — but I give him the next available table. The hostesses all divide the money, and when he and his group leave, we wave to them, smiling.

    I like this business of people paying for tables, and I begin to go out of my way for customers, hoping for a reward..."

Is light rail worth it?

Molly Castelazo and Thomas Garrett of the Federal Reserve Bank of St. Louis think not: "Light Rail: Boon or Boondoggle?" (Boondoggle, they say).
    "...The economic value that society places on light-rail transit is reflected, in part, by people’s willingness to pay for it. This is true for most products and services in the economy. To make a profit and stay in business, private companies must offer a product or service whose production costs are below what consumers are willing to pay for it. The public provision of light-rail services, in contrast, costs more than consumers are willing to pay. For example, fare revenue covers only 28.2 percent of operating costs in St. Louis, 19.4 percent of costs in Baltimore and 21.4 percent of costs in Buffalo.2 Nationwide, annual light-rail operating costs ($778.3 million) far exceed fare revenue ($226.1 million); the balance ($552.2 million) is paid for with tax dollars. Note that these numbers refer only to operating expenses. With such large annual losses, no light-rail system could possibly recoup its construction costs, which can amount to several hundred million dollars. No privately owned system would ever be operated (or even be built) with such a dismal balance sheet.

    One justification for the subsidies paid to build and operate light-rail systems is that light rail will reduce pollution and congestion from automobile traffic. However, building light rail is only a short-run solution to the problems of traffic congestion and pollution. To permanently alleviate the problems of traffic congestion and pollution, policy-makers must address the root cause of both: the inefficient pricing of roadway usage. Traffic congestion and pollution exist because the costs of driving an automobile are artificially low..."
There are also cheaper ways to provide transportation for poor people. For example, for what's being spent on the St. Louis MetroLink:
    "...the annual light-rail subsidies could instead be used to buy an environmentally friendly hybrid Toyota Prius every five years for each poor rider and even to pay annual maintenance costs of $6,000. Increases in pollution would be minimal with the hybrid vehicle, and 7,700 new vehicles on the roadway would result in only a 0.5 percent increase in traffic congestion. And there would still be funds left over—about $49 million per year. These funds could be given to all other MetroLink riders (amounting to roughly $1,045 per person per year) and be used for cab fare, bus fare, etc."
Or maybe just provide traditional bus service - it would still be cheaper than light rail.

Given the draw backs, why do we still keep building light rail systems? Large, concentrated benefits to a few special interests, while the total costs, which may be large, fall lightly on individuals in the overall tax paying population.

I learned about this from Peter Gordon: "Airy Plans".

Pricing parking

Douglas Kolozsvari and Donald Shoup point to the potential benefits from pricing curbside parking so as to effectively ration access. They point to reforms in the Old Pasadena neighborhood of Pasadena, California, that combined: (1) an increase in curbside parking meter charges, (2) earmarking of the meter revenues for investment in the neighborhood in which they are raised, (3) under the supervision of a neighborhood committee.

In the absence of the reform, underpriced curbside parking spaces are a common property good. Creation of a neighborhood committee of residual claimants able to influence the curbside parking price, and the use of the revenues, simulates privatization of the resource. Kolozsvari and Shoup attribute the rehabilitation of the Old Pasadena neighborhood to this approach: "Turning Small Change into Big Changes" What's the neighborhood's optimal charge for curbside parking?:
    "...The right price for curb parking is the lowest price that keeps a few spaces available to allow convenient access. If no curb spaces are available, reducing their price cannot attract more customers, just as reducing the price of anything else in short supply cannot increase its sales. A below-market price for curb parking simply leads to cruising and congestion. The goal of pricing is to produce a few vacant spaces so that drivers can find places to park near their destinations. Having a few parking spaces vacant is like having inventory in a store, and everyone understands that customers avoid stores that never have what they want in stock. The city should reduce the price of curb parking if there are too many vacancies (the inventory is excessive), and increase it if there are too few (the shelves are bare).

    Underpricing curb parking cannot increase the number of cars parked at the curb because it cannot increase the number of spaces available. What underpricing can do, however, and what it does do, is create a parking shortage that keeps potential customers away. If it takes only five minutes to drive somewhere else, why spend fifteen cruising for parking? Short-term parkers are less sensitive to the price of parking than to the time it takes to find a vacant space. Therefore, charging enough to create a few curb vacancies can attract customers who would rather pay for parking than not be able to find it. And spending the meter revenue for public improvements can attract even more customers..."
I learned about this from Peter Gordon: "Free parking".

Eugene Volokh's new writing exercise

Eugene Volokh shares a new writing exercise that he plans to use in the next edition of his text Academic legal Writing, here: "Writing exercise".

Volokh takes a paragraph written with too many abstract words ("negative consequences") and shows how to put it back together using more concrete and specific words ("social ostracism, government harassment").

Making it cheaper to import services

The Progressive Policy Institute "Trade Fact of the Week" reports that the world deployed 325,000 additional miles of fiber-optic cable between 1998 and 2002: "Miles of Submarine Fiber-Optic Cable Deployed, 1998-2002: 325,000"
    "...Modern fiber-optic cables...began replacing the older copper network in the late 1980s. Telecom companies laid about 325,000 miles of these cables, creating more than half of today's fiber-optic submarine network, between 1998 and 2002. Since then deployment has slowed, but continues especially around India. The effect has been to increase global telecom capacity about 30-fold: the Japan-U.S. Cable Network, for example, can handle three times as many simultaneous phone calls as all of the older Pacific cables combined.

    The shift has cut the cost of calls and so enabled people and businesses to spend more time calling overseas. This is one reason services trade is growing so fast..."
Among other things, investments like this will help us keep our medical costs down, by making it cheaper to get x-rays evaluations and consultations from places like China and India. Not to mention reducing call center costs.

You might enjoy A Thread Across the Ocean. The Heroic Story of the Transatlantic Cable by economic and business historian John Steel Gordon. After moving heaven and earth for years, entrepreneur Cyrus Field and his Anglo-American Telegraph Company completed the first two telegraph lines across the Atlantic in 1866. After working so hard to bring the old and new worlds into instant communication, Anglo-American took steps to limit use of their lines, and to prevent other lines from taking up the slack:
    "...At first, the rates were set extremely high - $10 a word with a ten word minimum. As $10 was a good weekly wage for a skilled workman at that time, these rates eliminated all but large businesses and the very rich from using the cable. Still, between July 28 and October 31, 1867, the Atlantic cable transmitted 2,772 commercial messages across the Atlantic,and this produced enough revenue to be profitable, averagng $2,500 a day. At this rate, however, only abvout 5 percent of the cable's capacity was being utilized. So the company cut the rate in half, charging $46.80 for a ten-word message, and revenue increased to an average of $2,800 a day as many more people began to utilize the cable.

    It was only when competition reared its head that prices began to fall rapidly and usage exploded. In 1869 a new company, the Societe du Cable Trans-Atlantique Francais, laid a cable from Brest, France, to the French Island of St. Pierre, south of Newfoundland, and then on to Massachusetts. The Anglo-American Telegraph Company, naturaly opposed this new enterprise, which was largely funded by British capital, but had not means to prevent it..."

French imports of African services

The Straits Times reports on African call centers selling telephone subscriptions in France: "Outsourcing goes to Africa"

Senegal exploits its advantages:
    "...Senegal, a former French colony boasting a rare African record of 44 coup-free years since independence, is luring outsourcing of the Francophone world.

    Senegal's stability, low wages and stock of young, educated employees attracted Ms Ndiaye's employer...

    So did Senegal's infrastructure - a fibre-optic cable running all the way from France which gives the country telecommunications as good as any in Europe.

    'Besides, here we can get the best and smoothest French accent,' said call centre deputy managing director Abdoulaye M'boup..."
And reaps higher income jobs:
    "...About 600 operators aged 20 to 25 work up to 40 hours a week - each equipped by their employers with a French-sounding pseudonym and a carefully drilled French accent to raise the comfort levels of the customers they'll be calling up.

    Thanks to a generous loan from a West African development bank - and operating costs that are 30 per cent cheaper than in France - the call centre will be more than doubling its staff later this year, Mr M'boup said.

    Eight hours a day earns a starting salary of US$200 (S$340) a week. Pay goes up to US$500, plus benefits and bonuses, for the most productive workers...

    But for a country where the minimum wage is US$85 a week, it's a godsend..."
And the French, I assume, reap more cold calls at dinnertime - but they are made more efficiently.

Do you use your productivity for consumption or for leisure? And why?

Kash at Angry Bear posts an OECD figure showing changes in work hours per capita for a variety of countries between 1970 and 2002: "Labor Versus Leisure in the US and Europe"
    "The astonishing difference between the US and the major European countries is evident; the average person in France and Germany works about one-fifth less now than they would have in 1970, while the average person in the US works about one-fifth more...

    ...In Europe people have preferred to take their higher productivity in the form of leisure time. In the US the preference is to enjoy higher productivity in the form of greater consumption."

Using markets to aggregate information

Skip Sauer has a useful post, crammed with links, on the creation of internal markets by business firms seeking to take advantage of information dispersed among their employees: "Markets as a management tool"

Tyler Cowen also addresses this today: "Idea futures inside the corporation".

The counterfactual "Dominion of North America"

Matthew Yglesias and Brad Delong wonder if the American Revolution was a really such a good idea: "Was the American Revolution a Good Thing?"

Welfare states and work disincentives

Tyler Cowen highlights the work of Peter Lindert: "Where are tax disincentives highest?"

What went wrong in Cancun II

On June 30 I posted on a recent speech, "Reviving the Doha Round", by Jeffrey Schott of the Institute for International Economics (IIE). My post focused on Schott's post-mortem on the Doha meetings of last September: "What Went Wrong in Cancun".

Schott argues that delays caused by internal European Union negotiations over agricultural reforms left preparations for Cancun way behind in the summer of 2003. Efforts to recover on a short time frame were frustrated by a cascade of negotiation failures, confusion, and misunderstanding, as everyone scrambled to catch up. This leaves out important elements in Schott's story - you can read the relevant extract from his speech using the link above.

Peter Gallagher thinks Schott's explanation lets the U.S. off way too easily:

    "Jul 01 2004, 04:13 am


    I think Geoff Schott has 'bought' a post-hoc rationalization of events from his friends in USTR.

    My perspective on this was that the US and EU were asked to come up with an alternative to the 'Harbinson II' paper because neither (until Montreal) had made any substantive contribution for well over a year. The EU was engaged in trying to come up with internal consensus on the "Agriculture 2000" reform package and the USA had retired 'hurt' to its own corner after taking a battering on the 2002 Farm Bill.

    The chairman of the top negotiating group (Amb. Perez del Castillo of Uruguay) perhaps wrongly felt he had no option but to put forward the Zoellick/Lamy paper for the Cancun meeting. But it never had much chance.

    The weakness (not to say, 'implausibility') of the explanation of the supposed US tactic given by Geoff Schott ('hope that other WTO members would push the US back towards its original proposals on agricultural reform') indicates how muddled the US position was. The world's largest trading economy can't play coy games in trade negotiations, hoping to be pulled back from the brink by smaller allies.

    Zoellick had been outmaneuvered by Lamy on several key aspects of the hastily negotiated paper, apparently under pressure to find some sort of deal (he probably already knew that he was not going to pull off the AFTA deal with the Latins).

    Smaller allies (including Australia) were just stunned by the lack of US consultation and/or it's lack of steadfastness, as they saw it. The already-deeply-fractured Cairns Group -- the US' strongest ally on agricultural reform -- split instantly along lines where cracks had been papered-over (market access obligations for developing countries). The leadership of the G-20 was carved out of the side of the Cairns Group (Brazil, South Africa, Argentina) and its 'fellow travellers' (Egypt).

    Now we have a fully fractured negotiation with dozens of 'factions', few good ideas and hardly any leadership. No one (it seems) really knows how to get what they want except the EU. It only has to wait....

    Peter Gallagher"
A January 2004 U.S. General Accounting Office (GAO) report on the Cancun meetings provides additional background: "World Trade Organization. Cancun Ministerial Fails to Move Global Trade Negotiations Forward; Next Steps Uncertain." This is a nice piece, explaining arcane vocabulary, describing key issues, and providing an overview of negotiations between the Doha Ministers' meeting in 2001 and the breakdown in Cancun in 2003.

Constituent services

Liz Ruskin reports (in the Anchorage Daily News) that Alaska's Senator Stevens placed a provision in a military spending bill to buy 160 acres of land from powerful North Slope figures for $2.5 million.

Ruskin reports that, at $15,000/acre, the government will be paying far more than it typically does for similar properties, and apparently far more than the value generated in an appraisal done on the property. See "Stevens inserts $15,000-an-acre offer in military bill".
    "U.S. Sen. Ted Stevens recently slipped $2.5 million into the annual military spending bill to buy 160 acres on the North Slope that belong to Jacob Adams, the president of the powerful Arctic Slope Regional Corp., and two of his siblings...

    The $2.5 million cost comes to more than $15,000 per acre. That's a stunning amount, said Brad Meiklejohn, who has negotiated the purchase of dozens of remote parcels across the state as the Alaska representative of The Conservation Fund...

    The Air Force had the land appraised to determine the fair market value. Hansen said he was not allowed to reveal the appraiser's figure but said it was far less than the $2.5 million the Adams family was asking, and the family rejected the Air Force's offer to buy at the appraised value...

    Meiklejohn, of The Conservation Fund, said conservation groups and government agencies typically pay about $500 an acre for allotments of 80 to 160 acres. He has paid as much as $3,000 an acre, he said...

    The executives of ASRC
    [Arctic Slope Regional Corporation - Ben], one of 12 regional corporations created by the Alaska Native Claims Settlement Act, have aligned themselves with the state's Republican leaders...

    Stevens, as chairman of the Senate Appropriations Committee, is greatly responsible for writing all of the annual government spending bills..."
For other links to stories on Stevens, including other work by Ruskin, see "Alaska Senator Stevens' successful investments".

Follow up - July 11The July 11 Anchorage Daily News carries a story by Liz Ruskin with the other side of the story: "Barrow woman defends value of land".

McConnell on the economics of vampirism

Maggie McConnell links to papers on the economics of vampirism, here: "Standard in the Literature"

McConnell and Zuppman (in the post on the value of statistical lives just below) are posting to "Optimization Prime"

Cass Sunstein wonders if poor people are worth less than rich ones

Should we use a single value of statistical life ($6.5 million?) for everyone, or should we allow it to vary, depending on the value different groups place on a change in the risk of death? Cass Sunstein addresses this issue; Andy Zuppann links to the paper and provides commentary, here: "Controversial Paper Title of the Week"

T. Veblen and utility maximizing man

I've always found utility maximizing, budget constrained, man a very useful idea. But Thorstein Veblen is not sympathetic:
    "...The hedonistic conception of man is that of a lightning calculator of pleasures and pains who oscillates like a homogeneous globule of desire of happiness under the impulse of stimuli that shift him about the area, but leave him intact. He has neither antecedent nor consequent. He is an isolated definitive human datum, in stable equilibrium except for the buffets of the impinging forces that displace him in one direction or another. Self-imposed in elemental space, he spins symmetrically about his own spiritual axis until the parallelogram of forces bears down upon him, whereupon he follows the line of the resultant. When the force of the impact is spent, he comes to rest, a self-contained globule of desire as before. Spiritually, the hedonistic man is not a prime mover. He is not the seat of a process of living, except in the sense that he is subject to a series of permutations enforce upon him by circumstances external and alien to him."
From: Thorstein Veblen. "Why Economics is Not an Evolutionary Science." Originally published in The Quarterly Journal of Economics in July, 1898. You can find a copy of the whole paper at the University of Virginia Library Electronic Text Center, here.