Quotulatiousness

December 23, 2012

We’re at “peak farmland”

Filed under: Economics, Environment, Food, Health, Technology — Tags: , — Nicholas @ 10:17

Matt Ridley on an interesting paper from Jesse Ausubel and Iddo Wernick of Rockefeller University, and Paul Waggoner of the Connecticut Agricultural Experiment Station:

Globally, the production of a given quantity of crop requires 65% less land than it did in 1961, thanks to fertilizers, tractors, pesticides, better varieties and other factors. Even corrected for different kinds of crops, the acreage required is falling at 2% a year.

In the U.S., the total corn yield and the total corn acreage tracked each other in lock step between 1870 and 1940-there was no change in average yield per acre. But between 1940 and 2010, corn production almost quintupled, while the acreage devoted to growing corn fell slightly. Similar divergences appeared later in other countries. Indian wheat production increased fivefold after 1970, while wheat acreage crept up by less than 1.5 times. Chinese corn production rose sevenfold over the same period while corn acreage merely doubled.

Yet the amount of farmland in the world was still rising until recently. The reason is that increased farm productivity has been matched by rising demand for food, driven by population growth and swelling affluence. But the effects of these trends are waning.

[. . .]

Even with these cautious assumptions, the researchers find that over the next 50 years people are likely to release from farming a land area “1½ times the size of Egypt, 2½ times the size of France, or 10 Iowas, and possibly multiples of this amount.”

Indeed, the authors find that this retreat from the land would have already begun but for one factor so lunatic that they cannot imagine it will not be reversed soon: biofuels. If the world had not decided to subsidize the growing of energy crops on 3.4% of arable land, then absolute declines in the acreage of arable land “would have begun during the last decade.” The prospect of “the restoration of vast acreages of Nature” is enticing for nature lovers.

December 21, 2012

Externalities explained

Filed under: Economics — Tags: , — Nicholas @ 00:01

H/T to Popehat for the link.

December 20, 2012

“Japanese are smart. Chinese are smart. Americans are smart. Even Finns are smart. But Canadians? We tend to be plodders.”

Filed under: Cancon, Economics, USA — Tags: , , — Nicholas @ 12:38

William Watson on a terrible psychological burden Canada has been labouring under for generations — the productivity gap — which does not actually appear to exist.

The good news just keeps pouring in. Last week we learned courtesy of a special report from TD Economics that median income in Canada had caught up with median income in the U.S. Never mind that the measure of income used was a little screwy: market income plus cash received from the government — basically all the goodies — with no accounting for taxes paid to the government. Most Canadians seemed tickled by the result anyway, as we always are when outperforming the Americans.

Now this week, just in time for Christmas, comes news that Canada’s productivity, far from having flatlined over the last 30 years, has actually been growing at a perfectly respectable pace that’s even comparable to American rates. It turns out we’re not nearly as incompetent as our official productivity numbers have been suggesting we are. We’ve just been calculating them wrong. In fact, it’s tempting to say our incompetence is mainly in the productivity section of Statistics Canada. Tempting maybe, but not fair. It’s Christmas, after all, and, besides, calculating productivity is like doing Sudoku for a living and there’s plenty of room for disagreement over what the data are saying.

[. . .]

StatCan’s estimates of our MFP have consistently suggested that as a people we aren’t at all clever. We may be lumberjacks. We may be OK. But doing more with less — or even more with the same — just hasn’t been our game. Japanese are smart. Chinese are smart. Americans are smart. Even Finns are smart. But Canadians? We tend to be plodders. Thus over the last half-century our business-sector MFP growth has averaged just 0.28% per year. By contrast, the Americans are used to rates a full percentage point higher. In 2010, they hit 3.4%! But now Diewert and Yu estimate that in fact over the last 50 years our MFP growth has averaged a perfectly respectable 1.03% per year. If you can add 1% a year to overall output without adding more and smarter people and machines to the mix — which of course you’re also allowed to do and we have been doing — your living standards will rise very nicely over time.

How can StatCan’s estimates have been so wrong? Diewert and Yu use quite different techniques at different stages of the calculation, but the main problem surrounds capital services. StatCan’s estimates of how much capital we use in production typically are much higher than Diewert and Yu’s. Partly the difference revolves around abstruse discussions about what internal rates of return to assume when trying to measure capital.

December 19, 2012

The “digital divide” didn’t play out quite the way they thought

Filed under: Economics, Education, Media, Technology, USA — Tags: , , , , — Nicholas @ 00:01

In Gregg Easterbrook‘s weekly NFL column, he often discusses non-football topics like this one:

A decade ago — perhaps as recently as five years ago — analysts and educators feared a “digital divide” in which the affluent have access to advancing electronics and the disadvantaged do not, granting the affluent yet another edge in life’s contest. But what if the reverse has happened?

[. . .]

That made this article striking, with research showing children from disadvantaged families now waste more time with video games and on the Internet than do children from affluent homes. Publicly subsidized programs to provide computers and Internet to the disadvantaged were rationalized as tools for education. How are they actually used? The article quotes Vicky Rideout, author of a study on the subject, saying, “Despite the educational potential of computers, the reality is that their use for education or meaningful content creation is minuscule compared to their use for pure entertainment.”

Video games are a really tempting way to avoid studying. If they had been around when I was a teen, there’s no way I would have read so many books or spent three or four hours after school each day at the high school, doing extracurriculars and sports. I might instead have wasted my time with electronics.

Girls and women are taking over college admissions; 57 percent of undergraduate students at four-year colleges are female. There are many reasons, and surely one is that teen girls waste less time on video games than teen boys do. If disadvantaged teen boys are wasting more time than affluent teen boys, that makes the picture worse.

Conservative commentators often “harrumph” about rising living standards for the disadvantaged, many of whom now have air conditioning, laptops and other items once associated with affluence. It’s good that living standards are rising, and it’s good that the digital divide is disappearing. The spread of computers and Internet service into disadvantaged homes creates equity in access to the information and services available on the Web. But society needs to be aware of the downsides of electronics. Those computer and software gifts being opened this holiday season might, especially for teen boys, backfire.

December 18, 2012

Don’t expand the Canada Pension Plan: reform it

Filed under: Cancon, Economics, Government — Tags: , , , — Nicholas @ 10:52

Andrew Coyne briefly praises the CPP before advancing a plan to (eventually) supplant it entirely:

By most measures, Canada’s retirement income support system is an outstanding success. The poverty rate for Canadian seniors, with just 4.4% living below half the median income, is among the lowest in the world. The Canada Pension Plan, once careening towards insolvency, is now on a sounder footing. Millions of Canadians contribute to their Registered Retirement Savings Plans every year, with a view to replacing more of their income than the 25% covered by the CPP; Tax-Free Savings Accounts are a fast-growing alternative. For most people, then, the pension system works well. There is no evidence of a generalized pension “crisis.”

[. . .]

Suppose an additional levy were tacked onto CPP premiums. Only instead of going into the regular CPP pot, the funds would accumulate in the contributor’s own personal fund — like an RRSP, only compulsory. To avoid wasting money on management fees, funds would be invested strictly passively (ie buying the indexes), with the particular asset mix varying as the investor aged: more stocks when younger, more bonds when older.

Any increase in benefits would thus have to be fully funded; at the same time, since legal title to the funds would rest with the contributor, there would be no way politicians could raid the kitty. Moreover, with such a direct link between contributions and the size of their nest egg, contributors would be less likely to see the rise in premiums as a tax increase, and more as savings, mitigating labour market effects, at least on the supply side.

On its own, this would be vastly preferable to CPP expansion. If we liked the results, we might even think of going further. Over time, one could imagine migrating more and more of the regular CPP over to these mandatory personal accounts, allowing the CPP fund to be slowly wound down. Rather than simply expanding the CPP, the challenge of population aging presents an opportunity to reform it.

December 17, 2012

QotD: Argentina’s little white interest rate lie

Filed under: Americas, Economics, Quotations — Tags: , , , , , — Nicholas @ 09:49

No one gives a toss that Argentina is lying about its inflation rate. Well, except maybe the economists they’ve fined and ruined for calculating the real one. We’ve all put up with Cuba lying about everything for 60 years after all.

Except, except … Argentina has issued index linked bonds as part of the 2001/2 debt restructuring. The interest paid depends on what the inflation rate is. If the government deliberately undercounts inflation then they get away with rooking the holders of those bonds.

That’s what this is about. That’s why anyone cares. It’s not simply that they’re liars it’s that they’re thieves.

Tim Worstall, “I wish people would get it right about Argentina”, Tim Worstall, 2012-12-17

December 16, 2012

Stephen Gordon on “The Carney Affair”

Filed under: Cancon, Economics, Media, Politics — Tags: , , , , — Nicholas @ 11:34

His latest post at Maclean’s talks about the distressing revelations from a Globe and Mail article the other day:

It took 20 years and two recessions — both of which were more severe than the one we just had — before we were able to come up with a monetary policy framework that works well. The current practice in Canada is that the government provides the Bank of Canada an inflation target, and the Bank of Canada is free to exercise its discretion in how it meets its mandate. This is not full independence — the Minister of Finance has the legal authority to override the Bank in extreme circumstances — but it’s been enough so that when the Governor of the Bank of Canada speaks, people know that there are no unspoken partisan political considerations through which his message should be filtered. Explanations of how monetary policy is being conducted can be taken at face value, even if they are couched in cautious and nuanced language.

Or at least, that was the case before the Globe story broke. The second paragraph puts this hard-earned reputation for non-partisan professionalism into question. Unless Mark Carney can swiftly and convincingly demonstrate that he responded to those Liberals’ overtures with a quick and unequivocal refusal, we shouldn’t be surprised if non-Liberals start looking through his recent speeches through the corrosive, distorted lens of partisan politics. Was his speech to the Canadian Auto Workers simply a play for union support? Was his dismantlement of the Dutch Disease talking point simply a tactic to put the NDP off-balance? For me, these are rhetorical questions written with a sense of sickening dread; others will doubtlessly repeat them in earnest and with angry, partisan vigour.

But even in the best-case scenario in which Mark Carney’s conduct is blameless, we are still left with the prospect that not-insignificant elements in the Liberal Party of Canada were willing to risk one of the most crucial elements of our governance for partisan gain. If we are extremely lucky, this episode will be quickly forgotten. But if by taking a run at Mark Carney, these Liberals have initiated a never-ending cycle of speculation about the possible political ambitions of future Governors of the Bank of Canada, they will have weakened — perhaps fatally — the foundations of Canadian monetary policy.

December 15, 2012

We solve a worldwide problem … and replace it with a new worldwide problem

Filed under: Africa, Economics, Food, Health — Tags: , , — Nicholas @ 00:02

Malnutrition used to be one of the biggest problems facing the planet: except in the west, starvation was rarely more than a bad harvest away. Today, except in sub-Saharan Africa, that’s been replaced by obesity as a worldwide problem:

Here’s a good news story that warmed the cockles of my heart as I wolfed down my breakfast of chocolate croissant with extra-large latte — obesity is now more of a problem than starvation. As we report:

    With the exception of sub-Saharan Africa, eating too much is now a more serious risk to the health of populations than eating poorly, found the Global Burden of Disease study, published in a special edition of The Lancet.

    Across the world, there has been significant success in tackling malnutrition, with deaths down two-thirds since 1990 to less than a million by 2010.

    But increasing prosperity has led to expanding waistlines in countries from Colombia to Kazakhstan, as people eat more and get less everyday exercise.

[. . .]

Likewise the fact that humanity can not only feed billions of people, but feed them well enough to give many of them Type-2 diabetes, shouldn’t be considered a worry but, after the Moon landings, perhaps humanity’s greatest achievement yet. Yes, we’re all stuffing ourselves silly, but we evolved in an environment where food was scarce and fats were vital to our survival. The very fact that, despite numerous doomsayers, we continue to overcome our problems, is something we should be celebrating.

Santa: Republican or Democrat?

Filed under: Economics, Humour, Politics, USA — Tags: — Nicholas @ 00:01

December 13, 2012

Sweden’s other export: migrant workers

Filed under: Economics, Europe — Tags: , , , — Nicholas @ 10:25

A fascinating story of a small-but-rich country importing workers from Sweden:

As an American, it is bizarre to think of modern Sweden, so often lauded as a paragon of social and economic stability, as coughing up migrant workers. Stranger still is that the Swedes migrate to Norway, which has always been regarded as Sweden’s little brother. Often at war, Sweden forced Norway into an uneven union for most of the 19th century. Though politically independent of Sweden for over one hundred years, Norway has remained culturally subordinate to its larger, more-established neighbor. Norwegians watch Swedish television, listen to Swedish music, and read Swedish books. Before the Norwegian translation of Stieg Larsson’s The Girl Who Kicked the Hornet’s Nest was released, the original Swedish version was the best-selling book in Norway. But in the last 25 years, Norway has added workers to the list of things it imports from Sweden.

In the eighties, Norway became rich off of oil. Its sovereign wealth fund is currently valued at about 600 billion dollars. From 1999-2009, average Norwegian family saw an increase of almost 100,000 NOK, or about $17,000. With its population of only five million, Norway needed to import laborers and service workers for its exploding economy. I once hitched a ride from a retired sailor, and after running out of ways to compliment his RV, I asked him how Norway had changed over the years. He thought Norway had it too good now. As a young man, he’d been at sea for over a year at a time, whereas “the young people today don’t want to work at all. It’s good that we have the Swedes.”

Current estimates of the number of Swedes living and working in Norway hover between 80,000 and 100,000. In Oslo alone, it’s thought that there are 50,000 Swedes, which is about 10 percent of the city’s population. Most of these are service workers. Indeed, the Swede-as-service worker has become something of a stereotype in Norway. The 2010 rap hit “Partysvenske” is an extended mockery of male Swedish migrant workers, who are portrayed as effete drunks who invade Oslo’s nightlife. At one point, the rappers — Jaa9 & Onklp — chide, “Make a mojito, do what you do well.” The condescension towards Swedish migrant workers was prevalent enough for Norwegian television to produce a mocumentary series titled Swedes Are People. There’s a weird power dynamic at play, with both groups exhibiting a sort of passive aggressive bitterness towards the other. For their part, Norwegians seem eager to buck Swedish cultural influence and assert their economic dominance. Speaking to the New York Times in 2007, a professor of social anthropology at the University of Oslo put it rather well:

“When I was young, Swedes had whiter teeth, clearer skin, Abba, and Bjorn Borg. We had lots of fish, and not much more. Today, Swedes have been cut down to size. And I would say that many Norwegians enjoy the fact that so many Swedes are here doing menial jobs.”

When the Norwegian cross-country skier Petter Northug beat his Swedish rival across the line at the 2011 World Championships, he used opportunity to taunt Sweden about the low value of the Swedish currency. The Swedish media, on the other hand, laments the fact that Swedes are reduced to literally peeling bananas in Norway — albeit for about $23 an hour.

H/T to Tim Harford for the link.

December 12, 2012

What is driving the increasing price of higher education?

Filed under: Bureaucracy, Economics, Education, USA — Tags: , , — Nicholas @ 12:03

H/T to Daniel J. Mitchell, who adds:

The first part of the video shows that a college degree has become more valuable, so it’s understandable that the relative price of higher education has risen.

But then, beginning at about 1:55, the video discusses the role of subsidies. Echoing points I’ve made in the past, the professor explains how subsidies have simply generated higher prices. In other words, colleges have captured all the benefits, not students.

Business Week recently published a story that provides some glaring example of how universities have wasted all the additional money. Here are some remarkable excerpts.

    “I have no idea what these people do,” says the biomedical engineering professor. Purdue has a $313,000-a-year acting provost and six vice and associate vice provosts, including a $198,000-a-year chief diversity officer. Among its 16 deans and 11 vice presidents are a $253,000 marketing officer and a $433,000 business school chief. The average full professor at the public university in West Lafayette, Ind., makes $125,000. The number of Purdue administrators has jumped 54 percent in the past decade—almost eight times the growth rate of tenured and tenure-track faculty. “We’re here to deliver a high-quality education at as low a price as possible,” says Robinson. “Why is it that we can’t find any money for more faculty, but there seems to be an almost unlimited budget for administrators?” …Purdue is typical: At universities nationwide, employment of administrators jumped 60 percent from 1993 to 2009, 10 times the growth rate for tenured faculty. “Administrative bloat is clearly contributing to the overall cost of higher education,” says Jay Greene, an education professor at the University of Arkansas. In a 2010 study, Greene found that from 1993 to 2007, spending on administration rose almost twice as fast as funding for research and teaching at 198 leading U.S. universities.

December 11, 2012

Reason.tv: James Payne on Six Political Illusions

Filed under: Books, Economics, Government, Liberty, Media — Tags: , , — Nicholas @ 09:27

“The first thing [children] think about of government is that it is like a super parent,” says author and Reason Magazine contributor James Payne. Payne points out that seeing government as having the virtues of a parent — wisdom, responsibility, money, unlimited funds for whatever you need — has lead to illusions about what role the government should be playing in our lives.

Payne sat down to talk with Reason TV at Libertopia 2012 in San Diego, Calif. to discuss his book, Six Political Illusions: A Primer on Government for Idealists Fed Up with History Repeating Itself.

December 8, 2012

A Holiday Album ad

Filed under: Business, Economics, Humour — Tags: , , , — Nicholas @ 00:01

H/t to Daniel J. Mitchell for the link.

December 7, 2012

No, we’re not running out of phosphorus (phosphate) and potassium (potash)

Filed under: Economics, Environment, Media — Tags: , , , — Nicholas @ 09:58

The most recent outbreak of the-sky-is-falling, we’re-at-peak-whatever panic mongering is debunked by Vaclav Smil:

Jeremy Grantham, a well-known presence in the financial world, recently published a World View column in the journal Nature in which he concludes that, “simply, we are running out” of almost all commodities whose consumption sustains modern civilization. There is nothing new about such claims, and since the emergence of a vocal global peak oil movement during the late 1990s, many other minerals have been added to the endangered list. Indeed, there is now a book called Peak Everything. What makes Grantham’s column – published under the alarmist headline “Be Persuasive. Be Brave. Be Arrested (If Necessary)” – worth noticing, and deconstructing, is that he puts his claims in terms more suitable for tabloids than for one of the world’s oldest and most prestigious scientific weekly magazines.

His direst example is “the impending shortage of two fertilizers: phosphorus (phosphate) and potassium (potash). These two elements cannot be made, cannot be substituted, are necessary to grow all life forms, and are mined and depleted. It’s a scary set of statements…. What happens when these fertilizers run out is a question I can’t get satisfactorily answered and, believe me, I have tried.” Well, he could have tried just a bit harder: an Internet search would have led him, in mere seconds, to “World Phosphate Rock Reserves and Resources,” a study published in 2010 by the International Fertilizer Development Center (IFDC) and funded by the U.S. Agency for International Development.

This detailed assessment of the world’s phosphate reserves (that are the part of a wider category of resources that is recoverable with existing techniques and at acceptable cost) concluded that they are adequate to produce fertilizer for the next 300 to 400 years. As with all mineral resource appraisals (be they of crude oil or rare earths), the study’s conclusions can be criticized and questioned, and the statement by the Global Phosphorus Research Initiative is perhaps the best document of that kind. But even the most conservative interpretation of IFDC’s assessment shows that phosphates have a reserve/production ratio well in excess of 100 years, higher than that of many other critical mineral resources.

December 6, 2012

Zero Hedge talks Keynes and Hayek

Filed under: Economics, Europe, Government, USA — Tags: , , , — Nicholas @ 09:52

Most politicians have a time sense that lasts just about as long as the current electoral cycle. Economics doesn’t fit neatly into that kind of cramped timescale. Politicians have a lot of influence over the long-term economy, but lack the sense of involvement over that long term because they have to stay tightly focussed on the next election (or they don’t get re-elected). This is one of the systemic faults that’s landed us in the long-term problems we’re facing right now:

Salma Hayek is beautiful, rich and famous. Friedrich Hayek is a deceased Austrian economist. He wasn’t very good looking, certainly not wealthy but he did become famous — but only 20 years after his death and then only within the make believe world of nerdy economists. Fortunately for the World today, if we are lucky, Friedrich Hayek may become the most famous Hayek of them all. Until then, the World remains firmly trapped in an economic hell created by Friedrich’s (and therefore Salma’s) arch enemy — John Maynard Keynes. IceCap’s Keith Dicker points out that, as most politicians and central bankers view the World in very short time frames, to truly understand the devastation wreaked by Keynesian economics, one has to take a step back and see how the financial destruction accumulated over time. It is true that these policies initially provided sugar highs for the economy — but the 3 step cycle of cutting interest rates, cutting taxes and borrowing money to create growth has finally reached its end point. If Mr. Keynes was alive today, we are confident he would be embarrassed that his lifelong work had been so severely distorted.

[. . .]

Since WWII, the Americans, Japanese, British and Europeans have spent way more money than they owned. But that was ok because the money they borrowed wouldn’t have to be repaid until some far away day in the future.

Unfortunately the future has now arrived and today, the next generations of Americans, Japanese, British and Europeans have all plunged into a deathly debt spiral.

Today it is no coincidence that the Americans, Japanese, British and Europeans have all set interest rates as close to 0% as possible.

Also today, it is no coincidence that the Americans, Japanese, British and Europeans are all printing money.

And finally, today it is also no coincidence that the Americans, Japanese, British and Europeans ignored Friedrich Hayek and instead followed the economic principles of John Maynard Keynes.

Today the entire global economic and financial system is rooted in unwavering support for John Maynard Keynes and his beliefs in deficit spending and debt-fueled growth.

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