Month: June 2014

Entrepreneurs and the informal economy

Here is a very interesting new paper on the informal economy by Andrei Shleifer and Rafeal la Porta. It is great to see two prominent economists write on the subject. The abstract gives an overview of the first half of the paper:

We establish five facts about the informal economy in developing countries. First, it is huge, reaching about half of the total in the poorest countries. Second, it has extremely low productivity compared to the formal economy: informal firms are typically small, inefficient,  and run by poorly educated entrepreneurs. Third, although avoidance of taxes and regulations is an important reason for informality, the productivity of informal firms is too low for them to thrive in the formal sector. Lowering registration costs neither brings many informal firms into the formal sector, nor unleashes economic growth. Fourth, the informal economy is largely disconnected from the formal economy. Informal firms rarely transition to formality, and continue their existence, often for years or even decades, without much growth or improvement. Fifth, as countries grow and develop, the informal economy eventually shrinks, and the formal economy comes to dominate economic life.

I found the second half more interesting. They critique Hernando de Soto, who argues informal economies are an untapped reservoir of potential constrained by regulations. Because of the need for business permits and government recognition of property they are unable to enter the formal economy. Shleifer and la Porta find that most informal businesses are constrained by finance, not regulation, and fail to enter the formal economy. This suggests the problem is not regulation. Instead, they conclude:

The evidence suggests that an important bottleneck to economic growth is not the supply of  better educated workers; indeed, at least on many observable characteristics the workers are rather  similar in informal and formal firms. Rather, the bottleneck is the supply of educated entrepreneurs –  people who can run productive businesses. These entrepreneurs create and expand modern businesses  with which informal firms, despite all their benefits of avoiding taxes and regulations, simply cannot compete.

This is largely consistent with my experience during the last week in Honduras. I was interviewing with a firm run by an Italian. In his words, the firm imports business models from middle income countries, Mexico and Argentina, to low income countries, Honduras, Guatemala, and Nicaragua. His success, without substantial changes in economic freedom, suggests the problem is not institutional, but entrepreneurial. I very much look forward to more research along these lines.

exit-through-door-shutterstock_131011736

Exit and ideology

Exit, the ability to leave, has been gaining traction as an institutional arrangement. If exit costs are sufficiently low, people can choose the ideal community for their preferences. Further, the low exit costs force competition between institutional regimes to satisfy client preferences.

Though best enunciated by a liberal economist, Albert Hirschman, exit has largely been associated with the right. In America, secession, the ultimate form of exit, has forever been tainted by racism due to our own War of Secession. However, exit was once a celebrated value of the left. The Guardian, hardly a bastion of conservatism, offered mild support for the south during the American Civil War:

The great stumbling-block issue for the Guardian and many other liberals was the right to self-determination. The paper believed that the south had the right to secede and to establish an independent state.

Of course, if exit is to be a primary political value, the right to exit must extend to all persons, something the south did not do. While intellectually exit has been associated with the right, politically some the distinction is less clear. American states decriminalizing marijuana and legalizing gay marriage in contravention of federal laws has been a milder form of exit, in pursuit of leftist values.

In a very interesting piece Scott Alexander tries to reclaim exit as a liberal (in the modern American sense) value. He envisions competing communities:

Usually the communities are based on a charter, which expresses some founding ideals and asks only the people who agree with those ideals to enter. The charter also specifies a system of government. It could be an absolute monarch, charged with enforcing those ideals upon a population too stupid to know what’s good for them. Or it could be a direct democracy of people who all agree on some basic principles but want to work out for themselves what direction the principles take them.

While he desires a world government to prevent war and ensure the protection of children, he acknowledges that his ideas are largely analogous to Nozick and Moldbug, the advocates of libertarian exit and conservative exit respectively.

(more…)

6358613209_e4059b531f_z

What we talk about when we talk about vaccines

Recently, the CDC posted new, sobering numbers on the recent outbreaks of measles, a disease previously thought eradicated by mass inoculation efforts over the course of decades.  Like the spots found in the mouth of a patient, it’s not pretty:

Two hundred and eighty-eight cases of measles were reported to the Centers for Disease Control and Prevention (CDC) in the United States between Jan. 1 and May 23, 2014. This is the largest number of measles cases in the United States reported in the first five months of a year since 1994.

The cause is equally disgusting:

“The current increase in measles cases is being driven by unvaccinated people, primarily U.S. residents, who got measles in other countries, brought the virus back to the United States and spread to others in communities where many people are not vaccinated,” said Dr. Anne Schuchat, assistant surgeon general and director of CDC’s National Center for Immunizations and Respiratory Diseases.

Keep these thoughts in mind. I’m going to tell you a little story.

As some of you are aware, polio, the debilitating disease that renders a person physically disabled for the rest of their life, still continues to persist in parts of the Middle East, especially the northern provinces of Pakistan. This is mainly due to efforts by the Taliban and related organizations, as well as tribal leaders, to prevent vaccine distribution. Now, from an untrained standpoint, some would suspect the motives of the Taliban’s anti-vaccine efforts have at least some backing in Islamic thought. But that is not really the case: Inoculation has long been used in the Middle East and the Indian subcontinent, predating Western introduction of the practice. While there were previous concerns surrounding the religious validity of modern vaccines, the use of Muslim medical workers alleviated this problem. There is not much religious justification going on against the vaccines themselves.

Rather, the problem is not so much the vaccines as it is the source:

Anxieties and distrust about the polio vaccine and its western providers were rampant in some communities, and suspicions about CIA links with the polio vaccination campaigns, and rumours they were a front for the sterilising of Muslims, had been around for a decade after 9/11.

Given all the attention Pakistan got after 9/11, that the CIA would be rumored to have some sinister involvement in polio eradication did not seem far-fetched for the average Pakistani. Then came the revelation that a Pakistani doctor led a fake vaccination drive as a CIA cover operation to confirm Osama Bin Laden’s hideout in Abottabad in 2011, which caused the whole thing to fall apart. Two years after the fact, the region remains the largest endemic source of polio and continues to grow.

(more…)

Secession lagniappe

Reid Wilson passes on a map of the U.S. that could have been, by Andrew Shears:

USNeverWasBig

Mixed results in the Jefferson State referenda this week:

California voters in two northern rural counties split the difference Tuesday on 51st state ballot measures aimed at carving out a new state called Jefferson.

Measure A lost by 41 to 59 percent in Del Norte County, while Tehama County voters approved Measure A by 56 to 44 percent, according to figures from the county clerks.

… In Del Norte County, a union-backed group called Keep It California waged a battle against the measure, arguing that it would further impoverish the county by removing state funding for services like schools. The school board had also opposed the proposal.

Supposedly the AFL-CIO and SEIU-backed opposition spent more than 40k opposing the measure. More county boards are taking it up next week, so stay tuned. Mark Baird fires back at local officials regarding the unsuccessful Del Norte county vote:

We are not finished by a long shot. It took Maine three tries to break away from Massachusetts. The apathy from the Massachusetts legislature toward a distant corner of the state is a reflection of what is going on here.

Liars, lie. It is what they do. It is in David Finnigan’s nature to be a liar. He has violated county administrative procedures by denying the other Supervisors the opportunity to speak and to vote. He has denied the public their First Amendment rights in a public meeting. He has lied to his constituents regarding attempts to widen the highway, when he is a member of the group which wants to keep a dangerous road. Martha McClure is cut from the same cloth.

Isn’t Hendricks the guy responsible for the alleged missing funds from the waste management district?

He’s quoted in this Washington Times report too.

Here’s Keli’i Akina’s piece on why the Obama administration’s proposal for what amounts to tribal recognition for Native Hawaiians is unconstitutional and doesn’t address the aspirations of independence advocates.

(more…)

Sacred Harp 176b: ‘Blooming Youth’

Courtesy Dust to Digital:

In the bright season of thy youth, / In nature’s smiling bloom,
Ere age arrives, and trembling waits / It summons to the tomb.

Remember thy Creator, God; / For Him thy pow’rs employ;
Make Him thy fear, thy love, thy hope, / Thy portion and thy joy.

The Lord will safely guide thy course / O’er life’s uncertain seas.
And bring thee to the peaceful shore, / The heav’n prepared for thee.

george-rodger-10

Elliot Rodger’s OMG chronicles

We’re about two weeks out from the Isla Vista massacre, and salacious round-ups of available social media information have given way to thoughtful columns about what it all means.

One of the most striking things about Elliot Rodger’s mental state, in his manifesto and elsewhere, is his insistence that, despite all evidence to the contrary, he was “a drop-dead gorgeous, fabulous, stylish, exotic gem among thousands of rocks.”

As many have noted, this and other details seem to indicate a privileged cast of mind taken to the extreme, which is why his rampage made for the perfect ‘teachable moment’ to a media increasingly devoted to narratives about patriarchy and white supremacy — Rodger was simply a malignant version of the latent biases within all of us; his violence an individualized form of the structural oppression embedded in all corners of our society, and so on.

The truth seems somewhat more complicated — the boy really did have a pedigree; one that, like so many others, decayed. The image above is one of Elliot Rodger’s grandfather’s many famous photographs.

George Rodger’s definitive posthumous collection is called Humanity or Inhumanity, covering his many years of work, including most famously his photographs of the Bergen-Belsen concentration camp. If his work resides in the tension between those things, it seems to have been resolved in his grandson’s only artistic creation two generations later, with Elliot’s realization of “just how brutal and twisted humanity is as a species.”

(more…)