Archive for January, 2013

Boring is Good

January 24, 2013 Leave a comment

Journalists don’t like boring, but when it comes to economics, for average folks it’s usually good news:

Also of note was the fact that consumption now accounted for 51.8 percent of Chinese GDP growth (it’s around 40 percent of the total economy) up from 50.4 percent a year ago, Barclays pointed out.

Barclays analysts led by Jian Chang wrote in a report dated Jan. 18 that, “We view demographic change, highlighted by a shrinking working age population, as a fundamental driver behind China’s transition from ‘miracle growth’ to normal development.”

China’s working age population is falling. Consumption is growing faster than GDP. The government’s goal is stability.

In other words, the transition to a modern, advanced economy is still going on. China in 20 years will be older and less export oriented. Dollars earned from exporting will be spent increasingly on imports instead of being loaned out or used to buy apartments that stay empty.

Get ready for a different China. Boring can be really powerful over the long run.



An Inefficient Way to Deal With Pollution

January 23, 2013 Leave a comment
Photo: EPA

Photo: EPA

Air pollution is a negative externality. As China moves closer to a free market economy, it over-produces  negative things for which buyers and sellers don’t pay the full cost.

This week officials in Beijing have proposed some solutions. Some (fining polluters) make more sense than others (shutting down factories, banning new cement production).

The most extreme solutions, like closing factories, won’t solve the problem, only move it somewhere else. Those factories will likely be located more out of the spotlight of the international media (note the lack of stories in the Western media about air pollution in Lanzhou, for example). In these areas, people will be even less equipped to deal with the health effects.

It would be far more beneficial for the government to try to internalize the externality. If the price of cement reflects not only its value but also the cost of the pollution it emits, there will be less pollution, but there will still be resources to enjoy (more housing) and resources for improving air quality (extra tax collected from polluters).

Just shutting down cement production in Beijing isn’t likely to do anything other than move the same amount of pollution to a place less in the spotlight.

Most Hilarious Cheating Ever

January 19, 2013 2 comments

Here’s a scan of the beginning of a midterm assignment one of my management students turned in this semester:

student work

Here’s the website the student took it from…word-for-word, 1,179 words exactly the same as the on-line article (except for the “Dear Mr. Kelcy”):

Emotional Intelligence

Lastly, here’s the painstaking research I had to do to discover the plagiarism:

Emotional Intelligence Google



Categories: Education

Vegans, International Trade and Silly Journalists, II

January 19, 2013 Leave a comment


When Guardian journalists write about trade, prepare for silliness.

Hopefully at least one or two of my first year students can spot the trouble with this headline:

Quinoa brings riches to the Andes: Bolivian and Peruvian farmers sell entire crop to meet rising western demand, sparking fears of malnutrition

See if you can follow the logic. (Warning: sit down if you are feeling dizzy.)

That global demand means less quinoa is being eaten in Bolivia and Peru, the countries of origin, as the price has tripled. There are concerns this could cause malnutrition as producers, who have long relied on the superfood to supplement their meagre diets, would rather sell their entire crop than eat it.

Makes sense, right? When farmers sell their entire crop rather than eat, they starve, unaware that their higher incomes could buy more food. Unfortunately Guardian journalists aren’t nearby to warn them of impending starvation. “No, don’t sell your crop! Eat it! If you sell it, you’ll have nothing to eat!”

Ah, for the good old days when we all grew our own food and didn’t have to worry about the malnutrition caused by international trade.

The only people much better off than $3 or so up to 1800 were lords or bishops or some few of the merchants. It had been this way for all of history, and for that matter all of prehistory. With her $3 a day the average denizen of the earth got a few pound of potatoes, a little milk, an occasional scrap of meat. A wool shawl. A year or two of elementary education, if lucky and if she lived in a society with literacy. She had a 50-50 chance at birth of dying before she was thirty years old…. was desperately poor, and narrowly limited in human scope.

Yeah, let’s go back to that.

Vegans, International Trade and Silly Journalists

January 19, 2013 Leave a comment


I recall a professor telling our class, “Remember that what you read in the press about business was written by someone with a journalism degree. They probably know little about business.”

Here’s some proof.

The Guardian’s Joanna Blythman is worried:

But there is an unpalatable truth to face for those of us with a bag of quinoa in the larder. The appetite of countries such as ours for this grain has pushed up prices to such an extent that poorer people in Peru and Bolivia, for whom it was once a nourishing staple food, can no longer afford to eat it. Imported junk food is cheaper. In Lima, quinoa now costs more than chicken.

First, it’s not just “the appetite of countries such as ours” for quinoa, a favorite of high-income vegans, that has pushed up prices. Bolivia’s growers presumably have some say in the price as well, right? It’s not like marauding bands of vegans are forcing Bolivian growers to sell their product on the export market. It’s a voluntary exchange by the people who grow quinoa with people who want to eat it.

Also, note the condescension in this: “poorer people…can no longer afford to eat it. Imported junk food is cheaper.”

Here’s what’s happening. Access to international markets leads to exporting of quinoa. That raises the incomes of growers as well as the price of quinoa.

Imported junk food has certainly become cheaper relative to quinoa but so have green vegetables, medicine and books. Poor Bolivian’s are able to make a wider range of choices about what they consume, including more junk food if that’s what they want. My guess is that in Bolivia, like most other places, poor does not equal stupid. Growers will use their higher incomes, not only to buy “junk food” that Joanna Blythman disapproves of, but also better healthcare and education for their children.

If vegans don’t buy quinoa because they worry about poor Bolivian growers, they may feel better about themselves. But they won’t be helping poor Bolivians by refusing to buy products they want to grow and sell.

Is China Adding or Subtracting to World GDP Growth?

January 16, 2013 1 comment


Derek Scissors makes an interesting but somewhat contradictory point:

There’s this:

The key is the idea of “contribution.” This sounds like China is helping the rest of the world grow faster. In fact, if we are talking about gross domestic product (GDP), China is only helping itself grow faster. It’s reducing everyone else’s GDP.

And later, this:

GDP certainly understates China’s economic contribution to the world

Both are correct.

How can that be? Students, I would like to hear your analysis!

Categories: China, International Trade Tags:

Students, Please Drink More

January 13, 2013 Leave a comment


Coffee, that is.  Drink as much as you like!

“What I tell patients is, if you like coffee, go ahead and drink as much as you want and can,” says Dr. Peter Martin, director of the Institute for Coffee Studies at Vanderbilt University. He’s even developed a metric for monitoring your dosage: If you are having trouble sleeping, cut back on your last cup of the day. From there, he says, “If you drink that much, it’s not going to do you any harm, and it might actually help you. A lot.”

If there’s a more beneficial thing you could easily become mildly addicted to, I can’t think of it.


Categories: Education