Dambisa Moyo On Aid!

I think Ms. Moyo is asking the right questions and pointing to the issues related to failed policies of foreign aid.

Nepal Ranks 146 / 178

Whenever one sits down to have a conversation about the development of Nepal, the talk quickly turns to the issue of corruption, and its stronghold on the government of Nepal. Engineers have ideas to build 21st century infrastructure, entrepreneurs have ideas to vitalize markets, economists have ideas to improve financial institutions, others have ideas to run NGOs dedicated to the alleviation of poverty; one could go on and on--all of these young Nepalese (at home and abroad) with such ideas would be an immense asset to the country. However, these ideas succumb to the culture of corruption, violence, extortion, and various anecdotes that attest to this reality.



Corruption Perception Index 2010 (click here to read the entire report) put out by Transparency International ranks Nepal 146 out of 178 with an embarrassing score of 2.2 out of 10. Other countries that have the same rank include Cote D’Ivoire, Haiti, Iran, Libya, Paraguay, and Yemen. Nepal ranks last amongst the member countries of SAARC!

"Didi, Bahini, Ra Sikchya!"-- Education & Kids/Women

I wanted to see what kind of a relationship existed between child per women and girls’ access to education in Nepal since 1991—introduction of multiparty system in Nepal. This graph (click here) does show a positive relationship. Note: this does not necessarily mean that one is the cause of the other—there could be other factors that may be influencing these two variables. However, it does mean it’s a movement in the right direction.

"Jhari Pareko Din..." --Wonkish

Here is an article where the authors tackle the question "[w]hy have some countries remained obstinately authoritarian despite repeated waves of democratization while others have exhibited uninterrupted democracy?"


Abstract: This paper(click here) explores the emergence and persistence of authoritarianism and democracy. We argue that settled agriculture requires moderate levels of precipitation, and that settled agriculture eventually gave birth to the fundamental institutions that under-gird today’s stable democracies. Although all of the world’s societies were initially tribal, the bonds of tribalism weakened in places where the surpluses associated with settled agriculture gave rise to trade, social differentiation, and taxation. In turn, the economies of scale required to efficiently administer trade and taxes meant that feudalism was eventually replaced by the modern territorial state, which favored the initial emergence of representative institutions in Western Europe. Subsequently, when these initial territorial states set out to conquer regions populated by tribal peoples, the institutions that could emerge in those conquered areas again reflected nature’s constraints. An instrumental variables approach demonstrates that while low levels of rainfall cause persistent autocracy and high levels of rainfall strongly favor it as well, moderate rainfall supports stable democracy. This econometric strategy also shows that rainfall works through the institutions of the modern territorial state borne from settled agriculture, institutions that are proxied for by low levels of contemporary tribalism.

Presenting a paper at the University of Utah. Will resume posts on Monday.

"Ghoosh"--Will this be possible for Nepal?

Will something like this work in Nepal? How about a website based in the U.S. (to circumvent the domestic pressure/censor) that exposes such corruption-- people can provide videos/recordings of such activities. Once authenticated, the webmaster can upload them for everyone to see. Just a thought. If you are a web-designer/host and would like to discuss this, please contact me. Enjoy!
 

Seinfeld's Hidden Messages

Do you love Seinfeld? Do you love Economics? If you answered 'yes' to at least one, you will enjoy this website-- a website dedicated to finding the hidden economic messages in various episodes of Seinfeld.
Click here for the site.

Aid Received & GDP/Capita for Nepal

Some of you asked me for aid and GDP over time for Nepal. Here is a graph that I created on GAPMINDER. Click "PLAY" once the graph loads up. Remember, correlation does not imply causation! :)

Are NGOs Addicted to Misery?

I have been spending some time writing an article on the effectiveness of foreign aid. I will post it when I am done. At this point, however, I wanted to share something that caught my attention. Those of us from under-developed countries are aware of the countless number of NGOs that are active in our respective countries. There are plenty of organizations that do good work, but one cannot be naive and overlook the ones that are set up to generate funds for the administrative professionals. Are the incentives lined up in such a way that these organizations stand to lose if they succeed in their mission? This article addresses this question.

Got Milk? Part Deux

MyRepublica.com reports (cick here for the article) that there is a shortage of milk and the state-owned dairy producer- Dairy Development Corporation, “the major player in domestic dairy market – has started importing 50,000 liters milk worth over Rs 1.5 million per day from Patna Dairy Project – an undertaking of India’s Bihar State – to fulfill increasing milk deficit.”


A few days ago this article, which I wrote about on my blog here, painted a gloomy picture of the dairy industry in Nepal. It pointed to the various programs designed by the government to solve the issues plaguing the industry. However, this promising article from the Nepali Times demonstrates that the private industry can innovate to thrive and meet the demand of the marketplace. Entrepreneurial minds will always look for solutions when there are barriers surrounding the industry.

Thus far, it seems like we are pointing towards the market participants as the problem child and suggesting various solutions to these “problems.” Is this the right diagnosis? Or, is it the government’s involvement in production of milk the real culprit?

There seems to be, without a doubt, volatility in milk production, sometimes with shortages of up to 40%. So, why are the investors reluctant to get into the market with promising returns? Why are existing private producers hesitant to expand? Well, could the answer be found in the state’s involvement in production? Does the government-run dairy production create uncertainty for investors?—what if private investors cannot compete with the heavily state supported/subsidized DDC in the future, especially after having invested millions? Does this provide an impetus for private producers to make large financial investments?--I do not think so! It seems like the misplaced incentives are the impediment to a flourishing dairy industry in Nepal. Therefore, a gradual privatization of the DDC, and tax incentives for farmers/private dairy producers for long run investments, might reduce uncertainty, strengthen the industry, and create a reliable and less volatile market for dairy products.

Rap Song!--Randy Moss :)

You never know what you come across on YouTube!

Do YOU make $100K?

This is how a gross income of $100,000 is taxed around the world. You think you pay too much?--think again!

"Ghar Aaja Pardesi Tera desh Bulayere..." NOT

This article posted on myrepublica.com today points out what most of the NRNs have wanted for a long time. I do not understand what the rationale is behind having to give up Nepali citizenship when one becomes an American, Briton, Australian, etc. I agree with Mr. Hom Nath Acharya, chairman of NRNA, on the fact that huge amounts of capital investments will flow into the country if people are allowed dual citizenship.

I have heard from a high-level source that politicians understand and support such a move behind closed doors, but are scared of voicing it in public. What is there to fear?

$36 a cup! You want one?

Here is an article I wrote for the college newspaper about a year ago (Fall 2009). Since then the law has passed and now banks have to offer customers an option to "opt out" of the overdraft fees. Yeah!


I committed a “card”-inal sin! Despite being a graduate student in Economics, I have allowed myself to overdraw funds from my checking account at First National Bank; the CSU Ram’s bank, the bank where I am “always first!” There cannot be any excuse for my irresponsible behavior; my inability to balance my checkbook even though it was due to extraneous circumstances. The thing that really bothers me is not that the bank has charged me with such scandalous fees but that they are getting away with such actions.


Well, that is about to change! The Wall Street Journal reports that the FED, the central bank of the U.S., has put into place rules that will curtail banks ability to “hit customers with fees for overdrafting their accounts” (Fed Slaps Curbs on Overdraft Fees, www.wsj.com, Nov 13th, 2009). This rule will go into effect on July 1st of next year. I have already paid dearly for my error. So, I am writing this merely to inform my fellow Rams of the danger that lurks in the shadows of the Lory Student Center. Here are a few facts that you need to know about your accounts:

• Your debit card will go through even if you have no money (or not enough money) for transactions. In other words, the card will not be declined because of NSF (nonsufficient funds).

• So, if you bought a coffee for $1 then the bank will automatically enroll you in an “overdraft program” and charge you $36. In fact the Federal Deposit Insurance Corporation (FDIC) found in their research that “75% of banks automatically sign customers up” for such programs (see Executive Summary at http://www.fdic.gov/bank/analytical/overdraft/). The research found that in some cases “customers were not given the choice to opt in or out of the automated program.” An educated guess says that we are part of those “some cases.”

• FDIC reports that the “automated overdraft fees assessed by banks ranged from $10 to $38, and the median fee assessed was $27.” I guess we, with a First National Bank account, get the short end of the stick there as well. The NSF fee for First National Bank is $36. Note that this fee is applied to each transaction. So, if you used the card to buy a cup of coffee for $1 in the morning before class, in the afternoon at the library, and then a cup of decaf in the evening, your total for that day is $108 in fees and $3 for coffee. That coffee better taste good as the taste of the letter you will receive in a week will be bitter!

• The FDIC research finds that “a minority” (about 8%) of banks did inform consumers that funds were insufficient,” which allowed the customers to avoid these high fees. This courtesy call, clearly demonstrated by my ordeal, is not provided by First National Bank. We can’t blame them for thinking about their bottom line, even though the burden falls on the customer. After all, the WSJ article reports that banks bring in “$38 billion a year when customers overdraw their accounts.”

I think because of a few bad apples, banks and businesses get unfairly criticized. However, blatant robbery at the student center, in broad daylight, directly underneath everyone’s nose, does provide fodder for the criticism of the ethical disdain shown by these businesses. Actions such as this are not only startling but also disingenuous. It makes me question my allegiance to First National Bank as a CSU-RAM and doubt the slogan below the big smiling face of the Bank’s President that reads, “You’re Always First With Us.” Really?

OOPS!

The New York Times reports (Click here for the article) that "in August, Senator Richard C. Shelby, Republican of Alabama, asserted that Professor Diamond did not have enough experience for the position, saying, “I do not believe that the current environment of uncertainty would benefit from policy decisions made by board members who are learning on the job.” "

The Nobel Committee writes “The Laureates’ models help us understand the ways in which unemployment, job vacancies, and wages are affected by regulation and economic policy,”

The Nobel Prize in Economics was announced earlier this morning and was awarded to 3 individuals, including Dr. Diamond from MIT.

Global Debt Clock

An interactive global debt clock by The Economist.

False Advertising!

This article reminded me of this commercial that has been running in the U.S.

Sambanomics--"Money"tary Policy

Students of Economics/Business--Scholarship Opportunity

A five minutes video could win you up to $1,000 U.S. Savings Bond.

No Need to Workout--Just Pray for Expensive Gas!

Interesting relationship! --Wonkish

"Doodh Cha?"---"Got Milk?"

It is always a little unsettling when the government involves itself in the production of goods and services; gross inefficiencies, rent seeking behavior, etc. come to mind. In this case the government has decided to support the dairy production. The article states that “[a]ccording to dairy companies, more than 300,000 farmers across the country supply around 500,000 liters of milk every day. The daily demand for milk hovers around 800,000 liters a day.” If this is true, shouldn’t the price of milk sky rocket?—that’s a shortage of about 40%! Also, to fill such a shortage why aren’t the private producers increasing production?  The plan, as the article points out will provide “different incentives like free distribution of semen of improved varieties of cows to boost milk production at lower cost.” Isn’t a 40 % shortage in the market enough of an incentive?

"Nobel Predictions" Part 2-sponsored by Duff!

No comment.

"Thinking outside the box!"

Well,
we will see what really happens or if this actually transpires into actual deeds on the ground; but..its a start!