Sunday, November 16, 2008

Illogical Protectionism

Today's Sunday Times economist's column is well worth a read. Here's an important observation,
The President when introducing the Budget said the cesses and increases in several import duties were to encourage local production of these commodities or substitutes for them, as is the case of milk, sugar, wheat and maize imports. The economic logic is that higher prices for these goods would raise domestic prices for them or substitutes and be an incentive for domestic production. Therefore the increase in prices is needed for this incentive effect. However the Minister of Consumer Affairs and other government parliamentarians are saying these increases in duties would not raise prices.The Minister of Consumer Affairs, an Economics teacher is on the contrary taking steps to control prices of these commodities. If prices do not rise then there is no way in which the measures taken by the budget are incentives for domestic production.
The whole thing here.

Logic was never a strong point of the present administration. Import substitution, which the administration's economic strategy is based on, will give the results it has always given -- higher prices, fewer choices, less quality of life and eventually, a resounding victory for the opposition.

Wednesday, November 12, 2008

The world's most annoying paragraph

Could possibly be this:
At the end of the day, what would you add to this fairly unique list? With all due respect, I personally, at this moment in time, absolutely shouldn't have suggested that it's not rocket science because 24/7 people are saying this and it is literally a nightmare.
Here's the background story. Pointer and the paragraph from MR.

P. J. O.Rourke on the Free Market

P.J. Has an excellent piece on how the Republicans 'blew it'. Here's an interesting paragraph:
What will destroy our country and us is not the financial crisis but the fact that liberals think the free market is some kind of sect or cult, which conservatives have asked Americans to take on faith. That's not what the free market is. The free market is just a measurement, a device to tell us what people are willing to pay for any given thing at any given moment. The free market is a bathroom scale. You may hate what you see when you step on the scale. "Jeeze, 230 pounds!" But you can't pass a law making yourself weigh 185. Liberals think you can. And voters--all the voters, right up to the tippy-top corner office of Goldman Sachs--think so too.
I agree. The market fundamentally provides a bunch of signals. You can ignore them -- and this is true whether you're an automaker or a lawmaker -- at your peril.

The article offers a lot of insight with less-than-usual, but still good, humor. I recommend you give it a read.

Here's another sample of what you can expect:
If we do have morals, where were they while Bosnians were slaughtered? And where were we while Clinton dithered over the massacres in Kosovo and decided, at last, to send the Serbs a message: Mess with the United States and we'll wait six months, then bomb the country next to you.
The whole thing here.

Saturday, November 08, 2008

Budget-Econ 101

Friday's Daily Mirror Cartoon captures the economics of government budget proposals with surprising accuracy:

Yet I'm sure come next year, there will still be many who believe they can get something from the government for "free". More on the budget, later.

Friday, November 07, 2008

The Youth Vote

There are few things in the world, that you don't need a chart to tell you. Sex is pleasurable, Mervyn Silva is a crook and Barack Obama has a large youth following.

But here's a chart anyway. The chart shows how much the Republican party has lost the youth vote to Obama compared to the other elections.

According to Andrew Gelman, this idea of a great youth voter turnout is a myth. Gelman writes,
But there was no massive turnout among young voters. According to the exit polls, 18% of the voters this time were under 30, as compared to 17% of voters in 2004. (By comparison, 22% of voting-age Americans are under 30.)
So what does this mean for the Republicans? Harvard econ professor Greg Mankiw thinks that this suggests that the GOP needs to be more libertarian -- be less social conservative while maintaining it's fiscal conservatism. If that is indeed the direction GOP is going to take, I'd be much happy. It's about time.

Wednesday, November 05, 2008

The iPod Nano Index (or where you should buy your electronics stuff)

At the moment it's Australia, followed by Indonesia and Canada. No surprises there. Anyone who has been watching the the exchange rate will know that the Aussie dollar has plunged more than 25% against the dollar over the few months.

CommSecs' iPod Index(pdf) takes after the Economist's Big Mac Index in trying to show the cost of local goods for foreign buyers (measuring PPP). Basically it denotes the price of 8 GB Apple iPods from 62 countries in USD terms. Here's the full index:

Sri Lanka is on the expensive side when it comes to electronics. But you'd be happy to note, we have the cheapest Big Macs.

Here's the full report on the Index. I thank Paul Kedrosky for the chart and MR for the pointer.

President Obama

Congratulations. It truly was historic.

Sunday, November 02, 2008

The case for Barack Obama

The economist makes it:

[Compared to McCain,] Is Mr Obama any better? Most of the hoopla about him has been about what he is, rather than what he would do. His identity is not as irrelevant as it sounds. Merely by becoming president, he would dispel many of the myths built up about America: it would be far harder for the spreaders of hate in the Islamic world to denounce the Great Satan if it were led by a black man whose middle name is Hussein; and far harder for autocrats around the world to claim that American democracy is a sham. America’s allies would rally to him: the global electoral college on our website shows a landslide in his favour. At home he would salve, if not close, the ugly racial wound left by America’s history and lessen the tendency of American blacks to blame all their problems on racism.

So Mr Obama’s star quality will be useful to him as president. But that alone is not enough to earn him the job. Charisma will not fix Medicare nor deal with Iran. Can he govern well? Two doubts present themselves: his lack of executive experience; and the suspicion that he is too far to the left.

There is no getting around the fact that Mr Obama’s résumé is thin for the world’s biggest job. But the exceptionally assured way in which he has run his campaign is a considerable comfort. It is not just that he has more than held his own against Mr McCain in the debates. A man who started with no money and few supporters has out-thought, out-organised and out-fought the two mightiest machines in American politics—the Clintons and the conservative right.

Political fire, far from rattling Mr Obama, seems to bring out the best in him: the furore about his (admittedly ghastly) preacher prompted one of the most thoughtful speeches of the campaign. On the financial crisis his performance has been as assured as Mr McCain’s has been febrile. He seems a quick learner and has built up an impressive team of advisers, drawing in seasoned hands like Paul Volcker, Robert Rubin and Larry Summers. Of course, Mr Obama will make mistakes; but this is a man who listens, learns and manages well.

It is hard too nowadays to depict him as soft when it comes to dealing with America’s enemies. Part of Mr Obama’s original appeal to the Democratic left was his keenness to get American troops out of Iraq; but since the primaries he has moved to the centre, pragmatically saying the troops will leave only when the conditions are right. His determination to focus American power on Afghanistan, Pakistan and proliferation was prescient. He is keener to talk to Iran than Mr McCain is— but that makes sense, providing certain conditions are met.

Our main doubts about Mr Obama have to do with the damage a muddle-headed Democratic Congress might try to do to the economy. Despite the protectionist rhetoric that still sometimes seeps into his speeches, Mr Obama would not sponsor a China-bashing bill. But what happens if one appears out of Congress? Worryingly, he has a poor record of defying his party’s baronies, especially the unions. His advisers insist that Mr Obama is too clever to usher in a new age of over-regulation, that he will stop such nonsense getting out of Congress, that he is a political chameleon who would move to the centre in Washington. But the risk remains that on economic matters the centre that Mr Obama moves to would be that of his party, not that of the country as a whole.

There's much more on the economist piece, endorsing Barack Obama. More than anything else, it's a heavy indictment of how John McCain has run his campaign. It's a cautious, calculated endorsement; no orgasmic (and naive) blabber about how inspiring he is. I can't endorse Obama, but I can endorse the article.

For a slightly different take on Obama and McCain, see Swaminathan Aiyar for the Times of India.