“Ask a foolish question and you will get a foolish answer”. These words by Nobel Laureate Milton Freidman echoed in my mind as I read a piece in the African Executive (10/22/2007) under the banner “Will Money Solve Africa’s Development Problems?”
Few days later, the same question appeared in The Economist (October 27th) as an advertisement by the John Templeton Foundation. The African Executive’s piece gave snips of the conversations with eight (8) “leading Scientists and scholars” sponsored by the Templeton Foundation. Responses to the query were as follows: Five (NO); One definite (YES); Two are conditional. The full statements appear at the Foundation Web page.
The essays are quite short, and reflect as one might expect the background and or affiliation of the author. Whether the answer to the question can be put in the positive or negative column, the insight one gains from the response tell a great deal about the author’s own experience in the field of development. Without getting bogged down in the nitty-gritty of what is being said, let me focus on few issues highlighted in the essays.
First: The glaring indictment of “aid”. “Donner nations have spent billions of dollars for development schemes in post colonial Africa, yet there is little to show for this beyond dependency and corruption” (Edward Green); “After fifty years of trying and $600 billions worth of aid- giving, with close to zero rise in living standards in Africa, I can make the case for NO pretty decisively” (William Easterly); “Africa does not need aid from governments and international agencies” (James Tooley).
Second: Africa does not lack money or resources. “The problem in Africa has never been lack of money, but rather the inability to exploit the African Mind (HALALUWA) -- If money was key to solving the problems, banks would send agents in the streets to supply money to afflicted individuals” (They actually do, but this is another issue) (James Shikwati).
Third: Money does not create Wealth. “Big money to Africa – empowers bureaucracies, promotes statism, and weakens government incentives to increase tax revenues through economic growth” (Iqbal Z. Quadir).
True enough. If moneys treated as a consumption good — a pay off to corrupt politicians and institutions, it not only have a zero return to providers, but also waste precious resource by diverting them to conspicuous consumption which most often give rise to social and political unrest.
Let me turn briefly to the Friedman quote. Money can take a number of forms. It can be “fiat” money created by the Central Banks and governments This money creation, increasing the supply of domestic money does not add to resources, in effect it heats up an economy and destroys incentives and long term planning .Money In the Templeton Conversations obviously does not refer to a nation’s domestic supply. Think of it as outside money or more accurately a supply of real resources from countries other than the recipient countries. Put differently, the money affects a transfer of real resources from the donor’s country to the recipient country. The transfer of resources is the “wealth added”, it is the attributes of Money as an instrument for wealth creation.
The question then that needed to be posed at the outset is “In What Form Will IT BE GIVEN?” That is in the form of AID, or LOANS? Most of the conversations seem to revolve about money given in the form of aid. Easterly along with few others have questioned the values of foreign aid given by governments or international institutions. Others, notably Sachs, do not agree. Without getting bogged down into the nuances of this debate the appropriate question to ask perhaps should have been: “WHAT CONTRIBUTION AID WILL MAKE TO WARDS ECONOMIC DEVELOPMENT OF THE AFRICAN CONTINENT?” This question would have focused the discussion on the one aspect of development, namely economic growth and secondly gave respondents a way to assess based on their experiences the use to which aid resources were invested or dissipated. Conversations with scholars and practitioners should not leave the uninitiated with the feeling that all is lost that aid giving has no place in the arsenal against poverty and helplessness. Evaluating Aid relative to loans and foreign direct investment would have given the reader something to think in terms of the efficiency of instruments aimed at spurring economic development in the African continent.
If one were to think of economic development as an outcome to a process, then for every outcome or output there are inputs. Students in ECON 101 learned (hopefully) that to produce positive output requires certain levels of inputs — that output requires the combining of factors: labor, physical capital and know-how. Money given to a country in the form of aid simply adds to these factors if took the form of physical capital or know-how. So how the resource is given matter and not by whom it is given or by whom it is received. One need not forget that Aid add to resources without the requirement that a positive rate of return must be secured in the short or immediate run whereas loans and direct foreign investment require expectation of returns sufficiently high to both service the debt and in the case of foreign investment an after risk positive return. It is unquestionably true that augmenting a country’s resources through foreign aid, as long as not all of it was dissipated through remittances made by corrupt governments to their accounts outside the country, will increase the national output and employment. Let us not forget that economic development requires marshalling of resources, especially capital and know how. Irrespective of how corrupt are government and institutions in an African country the mere exposure to “FRESH AIR” called it the global economy improves its chances for economic development.
One needs to remember in conversation like the one initiated by the Templeton Foundation that DEVELOPMENT is multifaceted, not only economics but social , cultural and political also. To address African development problems let us first enumerate these problems and sort out those that our existing repertoire of knowledge can solve and those that require investment to acquire new knowledge. Second, it may be useful to prioritize developments objectives. Some form of ranking will help in assessing the efficiency of allocation in relation to expectations. In some cases investing extra resources has a measured outcome (access to clean water by every household), in other cases such as returns to good governance or ethnic tolerance may not have ones
The Templeton Foundation has embarked on a mission that hopefully will foster an understanding and not only the dialogue between citizens in the NORTH and the SOUTH. Expanding the base of knowledge is a conduit for problem solving. People and their knowledge matter. Through knowledge wealth is created. Access to knowledge is a prerequisite for not only creating wealth but for knowing how best to use it.
A final remark: It is gratifying to see in some of the responses to the Templeton Foundation question that the resource most in need of development in Africa is the “MIND” (see “Africa development needs development of the mind beyond the University’s border” at http://attiatott.blogspot.com/, March 22, 2007). Mr Quadir puts it best: “The time has come for us to stop pouring billions of dollars into bureaucracies. Instead we must cultivate the billion brains in Africa”.
How to develop the African’ mind? To that end The Institute for Economic Policy Studies will host a conference with the collaboration of the University of Botswana (at the University of Botswana in August 2008). The conference theme: “Developing a Continent: Who is in Charge?” Details will be posted at the Institute web site and by contacting Professor Lecha at the University of Botswana.
Monday, October 29, 2007
Wednesday, September 12, 2007
A Marshall Plan for Sub-Saharan Africa; A Common Market for East Africa; Star Power for Africa; A Zero Hand Out Approach in Africa
These are but a few examples of what has become the most fashionable approach to rid oneself of guilt over the plight of those less fortunate than ourselves. The rich and famous, rich and not so famous, have discovered Africa, a discovery that warrant applause as well as critical evaluation.
Africa is a continent which for long has been labeled the “dark” continent. Since Dr. Levingston put a foot there in search of the source of the Nile, the world has looked upon Africa as some place out there one visits either to take home a “trophy” animal or mineral or to boost of being the first to claim a territory for “God and Country”. The scramble for African territory which began at the end of the 19th century gave European powers virtually the entire continent. All that remained was the division of spoils. At meetings in Berlin, Paris and London, European statesmen bargained over spheres of influences and traded lands and peoples to secure the desired outcome. “When marking out the boundaries of their new territories, European negotiators frequently resorted to drawing straight lines on the map, taking little or no account of the myriad of traditional monarchies, chiefdoms and other African societies that existed on the ground” (Martin Meredith, 2005, p.1). Africans for the most part were spectators. Those who opposed or resisted colonial rule died in battle, executed or shipped out to fight in European battles. No territory in Africa except Ethiopia escaped colonial rule. Africa emerged from the 19th century scramble, a continent divided with its people segmented according to the powers that have been there. There was British Africa, French Africa, Dutch Africa, Belgian Africa, Portuguese Africa, Italian Africa, as well as Arabian Africa. The haggling in Europe was over African territory with little attention to people – their ethnic identity, history or religion. Land and people were little more than pieces on a chess board.
As the world awoken to embrace through benevolent or violent acts the liberal order, people even in the Dark Continent were entitled to “life, liberty and pursuit of happiness”. Africa in the 21st century became theater for social experiments. Some would say it has become a playground for the rich and famous, the rich and not so famous. Africa also has become a theater for war among African themselves, poor and rich, between governments and those they govern.
Several scholarly books and hundreds of articles in scholarly journals have been written about Africa. A devastating assessment of the “goings on” in Africa since independence is given in two volumes: “A continent for the taking: The tragedy and hope of Africa” by Edward French (Alfred A. Knopt, 2004), and “The fate of Africa: From the hopes of freedom to the heart of despair” by Martin Meredith (Public Affairs, 2005).
The scramble for Africa in this century mimics the scramble for Africa at the end of the nineteenth century. Back then, European powers staked claims to Africa resources human and physical, in this twenty first century the scramble for Africa is not for men and gems (although that is true too) but for prestige and publicity. As Mandela’s wife, activist Graça Machel, the former first lady of Mozambique, has put it “what is uniformly true about celebrities is that they get attention for themselves, to some extent, but also for the issues they choose to highlight” (quotation from The Christian Science Monitor, August 22, 2007, p.11).
As the title of this piece suggests, there are several approaches to aid Africa. Scholars like Deepak and Raja Patirana examined the contribution of aid to Africa (it is the largest for any region, averaging 6.3 percent of GDP for all Africa, excluding South Africa and Nigeria, compared to 1 percent to South Asia and 0.3 percent to Latin America and the Caribbean). In their article “The Triumph of Hope Over Experience: A Marshall Plan for Sub-Saharan Africa?” (American Enterprise Institute, August 2007), Deepak and Raja Patirana discussed whether such a program, proposed by British Prime Minister Gordon Brown, is a viable alternative to current aid policies. Although most of the discussion is devoted to a comparison between the preexisting conditions in Europe and the current conditions in Sub-Saharan Africa, a prerequisite for assessment of such a program, the conclusion that emerges is that “European Marshall Plan and post-independence aid to Africa were responses to entirely different situations, so drawing parallels between the two is not justified” (p.3).
Africa statesmen (East African heads of state) offer an alternative to aid “a common market and a single currency for East Africa by 2012”*, again fashioned along the successful European experience.
A departure from aid and trade is “self help” or “a zero hand out approach in Africa” (The Christian Science Monitor, September 5, 2007). The idea behind this approach is capacity building and local control. A US based charity “Care for Life” reports success in promoting self reliant as a development strategy. All to the good, but one data point does not make a statistic.
Let me now focus on the “glamorous” approach to African development. A question that needed to be asked was put forth by a Tanzanian columnist, Ayah Rioba, a day after Bill Clinton visit to Africa: “is this really how to save Africa?” (quoted in the The Christian Science Monitor, August 23, 2007). Good question.
There are as many schools of thoughts about how to help Africa as there are clients and/or reformers. Leaving the academic debate aside for now, a subject for a later piece, the celebrities’ approach to development is a novel one that deserves the economists’ attention (at least this economist). Unlike academicians (except perhaps in the case of Jeffrey Sachs and the staff of the Agency for International Development), celebrities peddle glamour, beauty, riches to a captivated audience.
To gauge effectiveness of celebrities’ actions, let us first look at how celebrities have “carved” Africa among themselves. The Christian Science Monitor has devoted several issues (in August) tracking celebrities path into Africa: Bill Clinton: South Africa, Malawi, Zambia and Tanzania; Mia Farrow: Rwanda, Chad and Darfur; Madonna: Malawi; Oprah Winfrey: South Africa; and, of course, Angelina Jolie everywhere there are refugees as the United Nations High Commissioner for Refugees Spokeswoman. Unlike the European scramble for Africa in the 19th century, the celebrities scramble is far from complete. Why not say Burkina Faso, The Gambia, Guinea Bissau, Mali, Congo or Cameroon to list a few. One wonders how do African in these HIPCs Sub-Saharian countries feel about celebrities “neglect”**. There are 33 countries in Sub-Saharan Africa classified as HIPCs with per capita income of less than $2 per day. South Africa which has attracted celebrities’ attention is not one of them. One also ponders celebrities’ choice.
Pondering these questions is par for the course for an economist. In economics 101, one lays out the landscape of choice – examine the options available and the constraints faced in order to evaluate the choice outcome. The market is the place where such information is gained. Unfortunately, there is no market parallel for examining and/or evaluating celebrities choice, and their aid to Africa. Although one may speculate as to why South Africa was chosen and not the Gambia, it may perhaps be more useful in this instance to reverse the process – from the outcome back to the choice. Oprah Winfrey built a “Leadership School” in South Africa; The Counsel of Elders was initiated to address conflict resolution; the Clinton-Hunter development initiative aimed to expand access to water, sanitation, health care and agricultural markets in Malawi and Rwanda; the Clinton foundation works in 69 developing countries on initiatives ranging from expanding access to HIV/AIDS medication to reducing big cities greenhouse-gas emissions. These are but fragments about outcomes gained from newspapers accounts. From this information one could say that the choice of the country reflects the donor’s own perspective on Africa or on a particular cause he/she likes to advance. These outcomes notwithstanding what is missing is a true accounting of aid effectiveness – what is used to be called the “bang for the buck”. This accounting may hopefully be forthcoming soon. Bruce Sievers, a visiting scholar at Stanford University, is writing a book about the development of philanthropy. He is quoted as saying that for celebrities the bang of the buck is high in Africa (The Christian Science Monitor, August 22, 2007, p.11). But hopefully he can show that this is true as well for Africans.
* Bill Gates, Bono and economist Jeffrey Sachs share Brown in calling for a Marshal Plan for Africa and for a vast increase in aid. An analysis of the Marshall Plan and the common market proposals will be taken up in follow-up pieces.
**See August 2, 2007, blog for HIPCs definition.
Africa is a continent which for long has been labeled the “dark” continent. Since Dr. Levingston put a foot there in search of the source of the Nile, the world has looked upon Africa as some place out there one visits either to take home a “trophy” animal or mineral or to boost of being the first to claim a territory for “God and Country”. The scramble for African territory which began at the end of the 19th century gave European powers virtually the entire continent. All that remained was the division of spoils. At meetings in Berlin, Paris and London, European statesmen bargained over spheres of influences and traded lands and peoples to secure the desired outcome. “When marking out the boundaries of their new territories, European negotiators frequently resorted to drawing straight lines on the map, taking little or no account of the myriad of traditional monarchies, chiefdoms and other African societies that existed on the ground” (Martin Meredith, 2005, p.1). Africans for the most part were spectators. Those who opposed or resisted colonial rule died in battle, executed or shipped out to fight in European battles. No territory in Africa except Ethiopia escaped colonial rule. Africa emerged from the 19th century scramble, a continent divided with its people segmented according to the powers that have been there. There was British Africa, French Africa, Dutch Africa, Belgian Africa, Portuguese Africa, Italian Africa, as well as Arabian Africa. The haggling in Europe was over African territory with little attention to people – their ethnic identity, history or religion. Land and people were little more than pieces on a chess board.
As the world awoken to embrace through benevolent or violent acts the liberal order, people even in the Dark Continent were entitled to “life, liberty and pursuit of happiness”. Africa in the 21st century became theater for social experiments. Some would say it has become a playground for the rich and famous, the rich and not so famous. Africa also has become a theater for war among African themselves, poor and rich, between governments and those they govern.
Several scholarly books and hundreds of articles in scholarly journals have been written about Africa. A devastating assessment of the “goings on” in Africa since independence is given in two volumes: “A continent for the taking: The tragedy and hope of Africa” by Edward French (Alfred A. Knopt, 2004), and “The fate of Africa: From the hopes of freedom to the heart of despair” by Martin Meredith (Public Affairs, 2005).
The scramble for Africa in this century mimics the scramble for Africa at the end of the nineteenth century. Back then, European powers staked claims to Africa resources human and physical, in this twenty first century the scramble for Africa is not for men and gems (although that is true too) but for prestige and publicity. As Mandela’s wife, activist Graça Machel, the former first lady of Mozambique, has put it “what is uniformly true about celebrities is that they get attention for themselves, to some extent, but also for the issues they choose to highlight” (quotation from The Christian Science Monitor, August 22, 2007, p.11).
As the title of this piece suggests, there are several approaches to aid Africa. Scholars like Deepak and Raja Patirana examined the contribution of aid to Africa (it is the largest for any region, averaging 6.3 percent of GDP for all Africa, excluding South Africa and Nigeria, compared to 1 percent to South Asia and 0.3 percent to Latin America and the Caribbean). In their article “The Triumph of Hope Over Experience: A Marshall Plan for Sub-Saharan Africa?” (American Enterprise Institute, August 2007), Deepak and Raja Patirana discussed whether such a program, proposed by British Prime Minister Gordon Brown, is a viable alternative to current aid policies. Although most of the discussion is devoted to a comparison between the preexisting conditions in Europe and the current conditions in Sub-Saharan Africa, a prerequisite for assessment of such a program, the conclusion that emerges is that “European Marshall Plan and post-independence aid to Africa were responses to entirely different situations, so drawing parallels between the two is not justified” (p.3).
Africa statesmen (East African heads of state) offer an alternative to aid “a common market and a single currency for East Africa by 2012”*, again fashioned along the successful European experience.
A departure from aid and trade is “self help” or “a zero hand out approach in Africa” (The Christian Science Monitor, September 5, 2007). The idea behind this approach is capacity building and local control. A US based charity “Care for Life” reports success in promoting self reliant as a development strategy. All to the good, but one data point does not make a statistic.
Let me now focus on the “glamorous” approach to African development. A question that needed to be asked was put forth by a Tanzanian columnist, Ayah Rioba, a day after Bill Clinton visit to Africa: “is this really how to save Africa?” (quoted in the The Christian Science Monitor, August 23, 2007). Good question.
There are as many schools of thoughts about how to help Africa as there are clients and/or reformers. Leaving the academic debate aside for now, a subject for a later piece, the celebrities’ approach to development is a novel one that deserves the economists’ attention (at least this economist). Unlike academicians (except perhaps in the case of Jeffrey Sachs and the staff of the Agency for International Development), celebrities peddle glamour, beauty, riches to a captivated audience.
To gauge effectiveness of celebrities’ actions, let us first look at how celebrities have “carved” Africa among themselves. The Christian Science Monitor has devoted several issues (in August) tracking celebrities path into Africa: Bill Clinton: South Africa, Malawi, Zambia and Tanzania; Mia Farrow: Rwanda, Chad and Darfur; Madonna: Malawi; Oprah Winfrey: South Africa; and, of course, Angelina Jolie everywhere there are refugees as the United Nations High Commissioner for Refugees Spokeswoman. Unlike the European scramble for Africa in the 19th century, the celebrities scramble is far from complete. Why not say Burkina Faso, The Gambia, Guinea Bissau, Mali, Congo or Cameroon to list a few. One wonders how do African in these HIPCs Sub-Saharian countries feel about celebrities “neglect”**. There are 33 countries in Sub-Saharan Africa classified as HIPCs with per capita income of less than $2 per day. South Africa which has attracted celebrities’ attention is not one of them. One also ponders celebrities’ choice.
Pondering these questions is par for the course for an economist. In economics 101, one lays out the landscape of choice – examine the options available and the constraints faced in order to evaluate the choice outcome. The market is the place where such information is gained. Unfortunately, there is no market parallel for examining and/or evaluating celebrities choice, and their aid to Africa. Although one may speculate as to why South Africa was chosen and not the Gambia, it may perhaps be more useful in this instance to reverse the process – from the outcome back to the choice. Oprah Winfrey built a “Leadership School” in South Africa; The Counsel of Elders was initiated to address conflict resolution; the Clinton-Hunter development initiative aimed to expand access to water, sanitation, health care and agricultural markets in Malawi and Rwanda; the Clinton foundation works in 69 developing countries on initiatives ranging from expanding access to HIV/AIDS medication to reducing big cities greenhouse-gas emissions. These are but fragments about outcomes gained from newspapers accounts. From this information one could say that the choice of the country reflects the donor’s own perspective on Africa or on a particular cause he/she likes to advance. These outcomes notwithstanding what is missing is a true accounting of aid effectiveness – what is used to be called the “bang for the buck”. This accounting may hopefully be forthcoming soon. Bruce Sievers, a visiting scholar at Stanford University, is writing a book about the development of philanthropy. He is quoted as saying that for celebrities the bang of the buck is high in Africa (The Christian Science Monitor, August 22, 2007, p.11). But hopefully he can show that this is true as well for Africans.
* Bill Gates, Bono and economist Jeffrey Sachs share Brown in calling for a Marshal Plan for Africa and for a vast increase in aid. An analysis of the Marshall Plan and the common market proposals will be taken up in follow-up pieces.
**See August 2, 2007, blog for HIPCs definition.
Tuesday, August 7, 2007
What Africa needs now is benign neglect
The new Millennium was welcomed not only with fanfare and fireworks but also with renewed sense of obligation, hope and good will towards those less fortunate countries of the world. Foremost among these countries are the so called HIPCs (for definitions and other info see my blog, August 2). As the majority of the HIPCs are located in Africa, 33 countries out of 41 as classified by the World Bank, the spotlight in the new Millennium was placed on
But the Millennium also spotlighted a dark picture of
The news about
In the past two weeks, few articles on
The second article, an OP piece written by Mr. Uzodinma Iweala also appeared in The Christian Science Monitor, July 24th with the title “ An African Plea: No More Saviors”(p.9).
My first reaction as I read the title of Mr.Iweala’s piece is that he did not care much about the “elders” initiative, I did harbor the same thought myself. But then as I read the article, I found a lot more to his chagrin than what a group of “elders”, free agents with no political responsibilities hope to do for Africans. In his article Mr. Iweala articulated (based on my interactions with scholars from Africa) what many African felt the way African are presented in the Media; about slogans, to quote Mr. Iweala, such as “ Save Darfur”, “Keep a child alive/ I am African”, and white men painting the I am “African on their white skins”.
A more damaging indictment of those would be “SAVIORS”, is Mr. Iweala’s contention that the saviors campaign smack of colonial ideology. In his words “Such campaigns, however well intentioned, promote the stereotype of
Sympathy with the sentiments expressed by Mr. Iweala’s aside there is no denying the fact that many countries in the African continent are in a much worse shape today than shortly after independence ( see Martin Meredith “ The Fate of Africa: from the Hopes of Freedom to the Heart of Despair ” NY, Public Affairs 2005). But there are also success stories, countries like
Perhaps donors, policy makers, movie stars as well as ordinary citizens are over eager in showing that they do care about
Thursday, August 2, 2007
TOO LITTLE OR TOO MUCH: THE G-8 SUMMIT 2007 DECLARATION, Growth and Responsibility in Africa
“If you are interested in helping the poor, it makes sense for the developed world to forgive the debt, and that is what the United States will continue to do”. President Bush Speech to the Group of 8 (June 6-8, Heleigendamm, Germany).
At least for the past 10 years or so, at the summit meeting of the G 7-8 pledges are heard, commitments declared to help the poor, heavily indebted poor countries referred to as HIPCs rid themselves of the debt overhang, improve their living standards and achieve a sustainable rate of economic growth. The problem that is yet to be solved is how exactly these excellent goals are to be achieved. Good intentions aside, concrete measures need to be taken to lift HIPCs out of poverty and achieve a sustainable level of economic growth. One can use an example of a sick patient seeking relief. Prescription drugs or therapy require good diagnosis. This may not always be the case. Even in the best “milieu” diagnoses can err, drug therapy may not be followed or disrupted. Treating a patient with multiple illness is difficult enough, treating a country suffering from a multiple of diseases may border on the impossible.
To gain insight into the problems facing HIPCs and to evaluate the efforts exerted on their behalf, both in actuality and through pledges and pronouncements, a few statistics may be helpful. But first, who are those countries that are labeled HIPCs?
According to the World Bank, there are some 41 countries classified as HIPCs, 33 of which are in sub Sahara Africa (Angola, Benin, Burkina Faso, Burundi, Cameroon, Chad, Cote D’Ivoire, Democratic Republic of Congo, Eritrea, Ethiopia, Ghana, the Gambia, Guinea, Guinea–Bissau, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Niger, Republic of Congo, Rwanda, Senegal, Serra Leone, Somalia, Sudan, Tanzania, Uganda, Zambia, Zimbabwe). Non-African countries in the HIPCs group are mostly in Latin America.
The classification is based on three criteria: being poor with per capita income of less than $695 per annum, a present value of external debt to GDP ratio greater than 80%, a ratio of present value of external debt to exports greater than 220%.
To appreciate the enormity of the problems facing HIPCs and the efforts of the international community in addressing the debt issue one needs to look at the development of some of these indicators. For example, in all HIPCs, the external debt stock was at least twice the value of exports on average during the 1992-94 with several countries having ratios that exceeded 1000%. The present value of the debt service to exports was over 25%. The debt has grown so rapidly so that by 1995 (the eve of HIPC initiative), it stood at $406 billion or 9 times its value in 1970. As of 2004, the debt stock stood at $441 billion. The debt service which was equal to $1.8 billion in 1970 reached $35.7 billion in 2004 (the external debt consists of multilateral credits, official bilateral credits and private credits).
The call for debt relief (debt write-downs) for this group of countries came to fruition in the mid 1990’swhen the HIPC initiative was launched by the IMF and the World Bank. Earlier commitments towards debt relief were announced during the 1987 G-7 Summit in Venice, the 1988 G-7 Summit in Toronto where a menu of options, including partial forgiveness, lower interest rates to help poor countries meet their debt obligations. Additional debt relief measures were announced in subsequent Summits: the 1990 Houston Summit, and the 1991 London Summit. The Paris Club (the club of official lenders) also called for additional relief both in 1993 and 1994.
These waves of debt relief, from Venice to London were not sufficient to deal with the external debt problem of HIPCs. Thus, the HIPC Initiative was born. The initiative was put in place in 1996 and expanded in 1999. The initiative is a comprehensive program aimed at achieving “long term debt sustainability and poverty reduction”. But to be eligible a country must meet certain criteria such as a track record of macroeconomic policy that promote economic growth. The HIPC Initiative was supplemented in June 2005 at the G-8 meeting by a new program — the Multilateral debt Relief Initiative (MDRI). The program proposed that the three multinational Institutions, the IMF, the World Bank, and the African Development Fund, “cancel 100%” of their debt claims on these countries thus freeing their resources for development. Countries eligibilities for this program are spelled out in terms of completion of certain requirements under the HIPC Initiative. MDRI’s goal is to half the poverty rate by the year 2015.
Too Much or too Little? Whatever judgment one makes about the debt relief efforts, the debt problem of HIPCs and their poverty status had changed but little (for more details on this see W. Easterly “How Did Heavily Indebted Poor Countries Became Heavily Indebted? Reviewing Two Decades of Debt Relief’, World Development, 2002).
With all these expended efforts, what did the G-8 Summit has to offer? One interesting development is the group focus on Africa. This as it should be since the majority of HIPCs are Located in the African Continent.
“Today we underline once again our strong interest in a stable, democratic and prosperous Africa. We stress our firm resolve to implement the commitments on development made in Gleneagles (the 2005 Summit meeting). These include the historic Multilateral debt relief of up to $60 billion; increasing ODA (official development aid) to Africa by $25 billion a year by 2010.” With that the group of 8 made a number (63) of pronouncements and recommendations to improve African countries governance, Stability and developments (see Summit Declaration, June 2007). A short sample is given below:
- Good Governance in Africa is vital to Peace, Stability, Sustainable development and Growth. The G-8, with its Africa action plan, has provided a strategic framework for partnership based cooperation.
- The G-8 reaffirm their commitments to actively support countries that implement sound policies with the recommendation of the APRM (African Peer Review Mechanism).
- The G-8 reaffirm its support for infrastructure Consortium for Africa to address infrastructure shortcomings.
- The G-8 will support national and regional efforts to improve the investment climate by means of regulatory and administrative reform.
- The G-8 reiterate their commitment to education for all.
Good intentions may not always bring good outcomes. And wishing it does not make it so. No one doubts the good intentions that underlie the G-8 measures to promote sustainable development in Africa. Unfortunately a lot is wished for and little has been accomplished.
Debt relief like drug therapy is futile for a patient who lacks incentives to follow the prescribed treatment. No one belittle, or should belittle, the enormity of the problems facing the HIPCs. But, prescribing remedies may be necessary but not sufficient to secure good health outcomes. The same should be applied to HIPCs. Outcomes should be the criteria for extending debt relief or any other forms of aid. Multinational creditors should not set multiple tasks or grandiose schemes for eligibility, nor follow a protracted program of relief. As Easterly (2002) has argued: “a once and for all program is superior to a gradual program of increasing relief”. The once and for all program has to establish a credible policy that debt relief will only be given to governments with a shift in development orientation. IT MAY BE EASIER SAID THAN DONE. NEVERTHLESS IT SHOULD BE TRIED. NOTHING VENTURED, NOTHING GAINED.
At least for the past 10 years or so, at the summit meeting of the G 7-8 pledges are heard, commitments declared to help the poor, heavily indebted poor countries referred to as HIPCs rid themselves of the debt overhang, improve their living standards and achieve a sustainable rate of economic growth. The problem that is yet to be solved is how exactly these excellent goals are to be achieved. Good intentions aside, concrete measures need to be taken to lift HIPCs out of poverty and achieve a sustainable level of economic growth. One can use an example of a sick patient seeking relief. Prescription drugs or therapy require good diagnosis. This may not always be the case. Even in the best “milieu” diagnoses can err, drug therapy may not be followed or disrupted. Treating a patient with multiple illness is difficult enough, treating a country suffering from a multiple of diseases may border on the impossible.
To gain insight into the problems facing HIPCs and to evaluate the efforts exerted on their behalf, both in actuality and through pledges and pronouncements, a few statistics may be helpful. But first, who are those countries that are labeled HIPCs?
According to the World Bank, there are some 41 countries classified as HIPCs, 33 of which are in sub Sahara Africa (Angola, Benin, Burkina Faso, Burundi, Cameroon, Chad, Cote D’Ivoire, Democratic Republic of Congo, Eritrea, Ethiopia, Ghana, the Gambia, Guinea, Guinea–Bissau, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Niger, Republic of Congo, Rwanda, Senegal, Serra Leone, Somalia, Sudan, Tanzania, Uganda, Zambia, Zimbabwe). Non-African countries in the HIPCs group are mostly in Latin America.
The classification is based on three criteria: being poor with per capita income of less than $695 per annum, a present value of external debt to GDP ratio greater than 80%, a ratio of present value of external debt to exports greater than 220%.
To appreciate the enormity of the problems facing HIPCs and the efforts of the international community in addressing the debt issue one needs to look at the development of some of these indicators. For example, in all HIPCs, the external debt stock was at least twice the value of exports on average during the 1992-94 with several countries having ratios that exceeded 1000%. The present value of the debt service to exports was over 25%. The debt has grown so rapidly so that by 1995 (the eve of HIPC initiative), it stood at $406 billion or 9 times its value in 1970. As of 2004, the debt stock stood at $441 billion. The debt service which was equal to $1.8 billion in 1970 reached $35.7 billion in 2004 (the external debt consists of multilateral credits, official bilateral credits and private credits).
The call for debt relief (debt write-downs) for this group of countries came to fruition in the mid 1990’swhen the HIPC initiative was launched by the IMF and the World Bank. Earlier commitments towards debt relief were announced during the 1987 G-7 Summit in Venice, the 1988 G-7 Summit in Toronto where a menu of options, including partial forgiveness, lower interest rates to help poor countries meet their debt obligations. Additional debt relief measures were announced in subsequent Summits: the 1990 Houston Summit, and the 1991 London Summit. The Paris Club (the club of official lenders) also called for additional relief both in 1993 and 1994.
These waves of debt relief, from Venice to London were not sufficient to deal with the external debt problem of HIPCs. Thus, the HIPC Initiative was born. The initiative was put in place in 1996 and expanded in 1999. The initiative is a comprehensive program aimed at achieving “long term debt sustainability and poverty reduction”. But to be eligible a country must meet certain criteria such as a track record of macroeconomic policy that promote economic growth. The HIPC Initiative was supplemented in June 2005 at the G-8 meeting by a new program — the Multilateral debt Relief Initiative (MDRI). The program proposed that the three multinational Institutions, the IMF, the World Bank, and the African Development Fund, “cancel 100%” of their debt claims on these countries thus freeing their resources for development. Countries eligibilities for this program are spelled out in terms of completion of certain requirements under the HIPC Initiative. MDRI’s goal is to half the poverty rate by the year 2015.
Too Much or too Little? Whatever judgment one makes about the debt relief efforts, the debt problem of HIPCs and their poverty status had changed but little (for more details on this see W. Easterly “How Did Heavily Indebted Poor Countries Became Heavily Indebted? Reviewing Two Decades of Debt Relief’, World Development, 2002).
With all these expended efforts, what did the G-8 Summit has to offer? One interesting development is the group focus on Africa. This as it should be since the majority of HIPCs are Located in the African Continent.
“Today we underline once again our strong interest in a stable, democratic and prosperous Africa. We stress our firm resolve to implement the commitments on development made in Gleneagles (the 2005 Summit meeting). These include the historic Multilateral debt relief of up to $60 billion; increasing ODA (official development aid) to Africa by $25 billion a year by 2010.” With that the group of 8 made a number (63) of pronouncements and recommendations to improve African countries governance, Stability and developments (see Summit Declaration, June 2007). A short sample is given below:
- Good Governance in Africa is vital to Peace, Stability, Sustainable development and Growth. The G-8, with its Africa action plan, has provided a strategic framework for partnership based cooperation.
- The G-8 reaffirm their commitments to actively support countries that implement sound policies with the recommendation of the APRM (African Peer Review Mechanism).
- The G-8 reaffirm its support for infrastructure Consortium for Africa to address infrastructure shortcomings.
- The G-8 will support national and regional efforts to improve the investment climate by means of regulatory and administrative reform.
- The G-8 reiterate their commitment to education for all.
Good intentions may not always bring good outcomes. And wishing it does not make it so. No one doubts the good intentions that underlie the G-8 measures to promote sustainable development in Africa. Unfortunately a lot is wished for and little has been accomplished.
Debt relief like drug therapy is futile for a patient who lacks incentives to follow the prescribed treatment. No one belittle, or should belittle, the enormity of the problems facing the HIPCs. But, prescribing remedies may be necessary but not sufficient to secure good health outcomes. The same should be applied to HIPCs. Outcomes should be the criteria for extending debt relief or any other forms of aid. Multinational creditors should not set multiple tasks or grandiose schemes for eligibility, nor follow a protracted program of relief. As Easterly (2002) has argued: “a once and for all program is superior to a gradual program of increasing relief”. The once and for all program has to establish a credible policy that debt relief will only be given to governments with a shift in development orientation. IT MAY BE EASIER SAID THAN DONE. NEVERTHLESS IT SHOULD BE TRIED. NOTHING VENTURED, NOTHING GAINED.
Wednesday, May 16, 2007
The Income Tax and the Single Female: The Case for Gender Based Taxation
A recent article in the Financial Times (April 18) written by two economists, Alberto Alesina and Andrea Ichino, advocated “gender based taxation”. The write-up is an extract from their research paper (March 2007). In the paper they make the case for differential taxation of income based on gender. The argument put forth is simple. Female labor supply is more “elastic” than that of males to after tax wage rates. Using “the Optimal Taxation Theory as the basic principle for allocating the tax burden “optimally”, they argued for “lower” tax rates on labor income of women, “higher” rates for men.
The proposal, irrespective of whether one agrees or disagrees with it, is timely since the US Congress (once our representatives get out of the Iraq war rut) is considering yet another change in the federal income tax code — a reduction in the minimum income tax and/or a change in the threshold. What makes the differential taxation issue worth revisiting is that it has surfaced THIRTY TWO YEARS after the famous Playboy Interview with then Secretary of the Treasury William Simon (May 1975).The Secretary, in one interview, was able to accomplish what many of us economists, tax experts and consultants have tried for many years — to reduce the tax rates on single person households. In the Playboy Interview, Simon used the phrase “the tax and the single man”. Some of you, the older generations, may remember that the Federal Income Tax had a tax rate on single persons that was 200% of that on married-couples households with the same income (the saying that “two people can live as cheap as one” did not sway the tax man). Differential rates much lower were imposed on other types of households — married filling separately, heads of households, and surviving spouse. Such tax treatment neither met any standards of equity nor was it based on efficiency measured by differences in the labor supply elasticity of single person or married couples. The Playboy Interview succeeded in prompting Congress to lower the rates on single persons, males and females. Without going through old issues, it suffices to say that since its inception the Federal Individual Income Tax has been evolving.
Enacted as an emergency measure during the Civil War, the tax was allowed to lapse in 1872 when the urgent need for revenues disappeared. For almost 20 years after the Civil War income tax, attempts at resurrecting the tax all but failed. The Sixteen Amendment to the Constitution ratified in 1913, gave a legitimate birth to the income tax. The Amendment gave Congress the “power to levy and collect taxes from whatever source derived”. The rate structure was progressive. Allocation of the tax bill among taxpayers under the guidance of the Sixteen Amendment would have meant that the FEDERAL INDIVIDUAL INCOME TAX SYSTEM does not DIFFERENTIATE AMONG EQUALS AND DOES SO AMONG NON-EQUALS. At the time, the tax unit was the INDIVIDUAL, HENCE THE NAME. The progressive rate was set in relation to income and income alone — not gender, not circumstances, or any other criterion. No good thing last for long! Over a span of 94 years and more than 20 reforms later, one would be hard pressed to find a semblance between the original intent and what the “reformers” have put on our plate.
With this brief history, let me return to the case being advocated for gender based taxation. Here we need to ask a couple of questions: is the proposal sound? Secondly, will such a proposal takes its “rightful” place in the tax code?
I will take up the second question first. My answer is unequivocally in the negative. It is unlikely to be acted upon at least in my lifetime. Reforms are slow and piecemeal. For over 25 years, I have written, testified before the US Congress House Way and Means Committee, consulted to the US Treasury Department about reforming the Federal Income Tax. I have learned through the years through such channels and experiences that reform is a slow process; it needs “powerful” advocates and persistence. And at the end what was advocated and what come to be are not one and the same. As the saying goes “you win some and loose some”. It is not only the PROCESS that makes implementation of reform lengthy but also the tax issues that have to be resolved are quite complex and far from easy. Think about the textbook principles of taxation which accompany any tax proposal: the tax and tax reform should be designed to meet three criteria — equity, efficiency and simplicity, a task beyond (thus far) the best efforts at reform (for a review see Ott and Vegari (2003), “Tax Reform Chasing the Elusive Dream”, in William Simon Contribution to Economic Policy, Atlantic Economic Journal, September 2003, 266-282). Even though the likelihood of passage of gender base taxation may be slim, it is worthwhile to see what it offers. The proposal is sound. The authors base it on two theses: taxes should depend on “non-modifiable characteristics of subjects that are related to their earning capacity” (Akerloff (1978), “The Economics of ‘Tagging’ as Applied to the Optimal Income Tax, Welfare Programs, and Manpower Planning”, American Economic Review, pp. 8-19), and taxes should be low on goods with high elasticity and high on goods with low elasticity (Ramsey (1927), “A Contribution to the Theory of Taxation”, Economic Journal, pp. 47-61; Mirrlees (1971), “An Exploration in the Theory of Optimum Income Taxation”, Review of Economic Studies, pp. 175-208).
What exactly “non-modifiable characteristics” means? The Federal Income Tax, levy taxes on US households. As mentioned above, the tax system classifies households for setting rates according to marital status and survivability. Clearly these are modifiable characteristics of the subjects. A single person household may become a married couple household; a married couple household may turn into a single person, a head of household, and so on. Thus, one needs to look for another characteristic — gender is a non-modifiable one. Gender based taxation fits Akerloff criterion. Note however that it does not state whether women should be taxed less, same or more than men. To differentiate we need the second theory.
Here I would like to pose to answer a question posted by someone to the Alesina/Ichino blog in relation to the optimal tax theory. The writer states: “As a complete and total non-economist, this is what I want to know: (1) is “goods with a more elastic supply should be taxed less” in fact a “general principle of public finance?” (2) What (briefly) is the force behind this general principle? How important is it, and why?”
These are very good questions. As a public finance economist, I shall briefly explain for the answer addresses the underpinning of gender based taxation. To (1), it is not a general principle of public finance, properly phrased it is a PRINCIPLE OF TAXATION, REFERED TO AS OPTIMAL TAXATION THEORY.
The theory was put forth back in 1927 by Frank Ramsey, who was asked by his professor the following question: If there are two goods, one has an elastic demand, the other inelastic demand and we want to raise a certain amount of tax revenues, what tax rates should you set on these goods, assuming that all persons have same preferences (utilities) for theses two goods (economists can’t answer questions without making simplifying assumptions). His answer was to impose a low tax rate on the good that is elastic and a high rate on the one with inelastic demand. Bravo. To see why this was a correct answer we need a bit more of economics. A good that has a high elasticity of demand (or supply) is characterized by two things: it has at least one substitute that is equally desirable and that a small rise in its price makes the consumer switch to the other good. If the switch is total, the good is said to have “infinitely” elastic demand or very high elasticity, if not total the elasticity is measured by the reduction in the quantity bought associated with the price increase. In short, an elastic demand for a good means that the reduction in the quantity bought as the price rise is quite large compared with the drop in the quantity associated with the same percentage change in the price of a good with inelastic demand. The same analysis applies to the supply. In the case of labor supply, the subject of discussion here, the price of offering one’s labor is the after tax wage rate. The change in the quantity of labor supplied due to a change in the after tax wage rate depends on a lot of things beside the wage rate (the measurement is a bit tricky), it depends on whether you can at least over the short hall get out of the market, cut the hours worked (under contract that may not be feasible), not enter the job market in the first place. Note again that a substitute activity has to exist. The substitute to labor is leisure, like fishing, playing golf, boating and so on. Leisure is valued by the after tax wage rate. Thus there are two steps. You either would enter the job market and the labor supplied changes, at least over the medium term with the change in the after tax wage rate or you do not enter the job market in preference for leisure.
Now we are ready to answer the question to whether the elasticity conclusions are correct, and why is it important to apply the optimal taxation theory — lower tax on the elastic supply relative to the inelastic supply. The response of the quantity to the price change based on the elasticity is correct. Since women labor supply is more elastic than the labor supply of men, a cut in their tax rate relative to men will increase their labor supply and income. Men, on the other hand have a highly inelastic supply so raising the tax on their wages will result in a very small drop in their labor supply. Why is this important?
Alesina/Ichino talk about “goals of society”, but for economists generally the reason given is “efficiency” of outcome. Economists use the term efficiency loss or excess burden to explain why the optimal taxation principle should be applied. The loss (which economists succeeded in measuring) arises due to the “tax induced behavior”. When the after tax wage falls and labor supply is reduced, the reduction is not voluntary — the individual is forced to substitute an activity that is not taxed to the one that is taxed. Since the choice is altered, there is a loss not only because work and hence output is reduced but also because of the substitution of a less desirable activity measured by the after tax wage rate for the activity (work) valued at the before tax wage. This is the efficiency loss. Think of having to use mass transport as the price of gasoline rises because of higher federal and excise taxes. In the case of labor supply, if the tax takes a big bite and your supply is elastic you might say the heck with it, I will go fishing. A working woman may decide to be a homemaker, a stay home mom, educate the kids at home and so on. The critical thing to remember here is that these were not the choices made before the tax is raised or imposed. Since labor is an important factor of production, when work is withdrawn capital or other factors are substituted and that (if you assume the best combination of factors were initially used) will result in less efficient outcome — output is lower and or prices higher. The loss to society is the sum of the loss in output and the loss associated with forced substitution of activities. If taxes are lowered on those with the elastic supply we get the opposite result. This is what optimal taxation is about (sorry economic theory takes a bit more space to explain even a simple idea).
The questions that need to be asked are: how does society value the input — the labor supply of women and labor supply of men? How each gender value its leisure time? And what valuation does society put on women’s alternative use of their time? I will not get into these issues. Alesina and Ichino (full paper) have a great deal to say about women making role models and children success and so on. They offer statistics to support their arguments for lowering the income tax rates on women (it is interesting that although single women have a lower elasticity of labor supply the proposal does not advocate an increase in their tax rates relative to married women!). To conclude, whether one accepts or rejects the case for gender taxation, and there is plenty on either side, it is well to remember that:
To strife for an optimal (efficient) tax structure in a many person economy, one needs to make specific assumptions about the nature of differences between individuals and the form of their utility or preference functions. Secondly, one needs to consider the implications of tax changes. As one reformer put it “when you close a loophole you end up opening a foxhole”.
The proposal, irrespective of whether one agrees or disagrees with it, is timely since the US Congress (once our representatives get out of the Iraq war rut) is considering yet another change in the federal income tax code — a reduction in the minimum income tax and/or a change in the threshold. What makes the differential taxation issue worth revisiting is that it has surfaced THIRTY TWO YEARS after the famous Playboy Interview with then Secretary of the Treasury William Simon (May 1975).The Secretary, in one interview, was able to accomplish what many of us economists, tax experts and consultants have tried for many years — to reduce the tax rates on single person households. In the Playboy Interview, Simon used the phrase “the tax and the single man”. Some of you, the older generations, may remember that the Federal Income Tax had a tax rate on single persons that was 200% of that on married-couples households with the same income (the saying that “two people can live as cheap as one” did not sway the tax man). Differential rates much lower were imposed on other types of households — married filling separately, heads of households, and surviving spouse. Such tax treatment neither met any standards of equity nor was it based on efficiency measured by differences in the labor supply elasticity of single person or married couples. The Playboy Interview succeeded in prompting Congress to lower the rates on single persons, males and females. Without going through old issues, it suffices to say that since its inception the Federal Individual Income Tax has been evolving.
Enacted as an emergency measure during the Civil War, the tax was allowed to lapse in 1872 when the urgent need for revenues disappeared. For almost 20 years after the Civil War income tax, attempts at resurrecting the tax all but failed. The Sixteen Amendment to the Constitution ratified in 1913, gave a legitimate birth to the income tax. The Amendment gave Congress the “power to levy and collect taxes from whatever source derived”. The rate structure was progressive. Allocation of the tax bill among taxpayers under the guidance of the Sixteen Amendment would have meant that the FEDERAL INDIVIDUAL INCOME TAX SYSTEM does not DIFFERENTIATE AMONG EQUALS AND DOES SO AMONG NON-EQUALS. At the time, the tax unit was the INDIVIDUAL, HENCE THE NAME. The progressive rate was set in relation to income and income alone — not gender, not circumstances, or any other criterion. No good thing last for long! Over a span of 94 years and more than 20 reforms later, one would be hard pressed to find a semblance between the original intent and what the “reformers” have put on our plate.
With this brief history, let me return to the case being advocated for gender based taxation. Here we need to ask a couple of questions: is the proposal sound? Secondly, will such a proposal takes its “rightful” place in the tax code?
I will take up the second question first. My answer is unequivocally in the negative. It is unlikely to be acted upon at least in my lifetime. Reforms are slow and piecemeal. For over 25 years, I have written, testified before the US Congress House Way and Means Committee, consulted to the US Treasury Department about reforming the Federal Income Tax. I have learned through the years through such channels and experiences that reform is a slow process; it needs “powerful” advocates and persistence. And at the end what was advocated and what come to be are not one and the same. As the saying goes “you win some and loose some”. It is not only the PROCESS that makes implementation of reform lengthy but also the tax issues that have to be resolved are quite complex and far from easy. Think about the textbook principles of taxation which accompany any tax proposal: the tax and tax reform should be designed to meet three criteria — equity, efficiency and simplicity, a task beyond (thus far) the best efforts at reform (for a review see Ott and Vegari (2003), “Tax Reform Chasing the Elusive Dream”, in William Simon Contribution to Economic Policy, Atlantic Economic Journal, September 2003, 266-282). Even though the likelihood of passage of gender base taxation may be slim, it is worthwhile to see what it offers. The proposal is sound. The authors base it on two theses: taxes should depend on “non-modifiable characteristics of subjects that are related to their earning capacity” (Akerloff (1978), “The Economics of ‘Tagging’ as Applied to the Optimal Income Tax, Welfare Programs, and Manpower Planning”, American Economic Review, pp. 8-19), and taxes should be low on goods with high elasticity and high on goods with low elasticity (Ramsey (1927), “A Contribution to the Theory of Taxation”, Economic Journal, pp. 47-61; Mirrlees (1971), “An Exploration in the Theory of Optimum Income Taxation”, Review of Economic Studies, pp. 175-208).
What exactly “non-modifiable characteristics” means? The Federal Income Tax, levy taxes on US households. As mentioned above, the tax system classifies households for setting rates according to marital status and survivability. Clearly these are modifiable characteristics of the subjects. A single person household may become a married couple household; a married couple household may turn into a single person, a head of household, and so on. Thus, one needs to look for another characteristic — gender is a non-modifiable one. Gender based taxation fits Akerloff criterion. Note however that it does not state whether women should be taxed less, same or more than men. To differentiate we need the second theory.
Here I would like to pose to answer a question posted by someone to the Alesina/Ichino blog in relation to the optimal tax theory. The writer states: “As a complete and total non-economist, this is what I want to know: (1) is “goods with a more elastic supply should be taxed less” in fact a “general principle of public finance?” (2) What (briefly) is the force behind this general principle? How important is it, and why?”
These are very good questions. As a public finance economist, I shall briefly explain for the answer addresses the underpinning of gender based taxation. To (1), it is not a general principle of public finance, properly phrased it is a PRINCIPLE OF TAXATION, REFERED TO AS OPTIMAL TAXATION THEORY.
The theory was put forth back in 1927 by Frank Ramsey, who was asked by his professor the following question: If there are two goods, one has an elastic demand, the other inelastic demand and we want to raise a certain amount of tax revenues, what tax rates should you set on these goods, assuming that all persons have same preferences (utilities) for theses two goods (economists can’t answer questions without making simplifying assumptions). His answer was to impose a low tax rate on the good that is elastic and a high rate on the one with inelastic demand. Bravo. To see why this was a correct answer we need a bit more of economics. A good that has a high elasticity of demand (or supply) is characterized by two things: it has at least one substitute that is equally desirable and that a small rise in its price makes the consumer switch to the other good. If the switch is total, the good is said to have “infinitely” elastic demand or very high elasticity, if not total the elasticity is measured by the reduction in the quantity bought associated with the price increase. In short, an elastic demand for a good means that the reduction in the quantity bought as the price rise is quite large compared with the drop in the quantity associated with the same percentage change in the price of a good with inelastic demand. The same analysis applies to the supply. In the case of labor supply, the subject of discussion here, the price of offering one’s labor is the after tax wage rate. The change in the quantity of labor supplied due to a change in the after tax wage rate depends on a lot of things beside the wage rate (the measurement is a bit tricky), it depends on whether you can at least over the short hall get out of the market, cut the hours worked (under contract that may not be feasible), not enter the job market in the first place. Note again that a substitute activity has to exist. The substitute to labor is leisure, like fishing, playing golf, boating and so on. Leisure is valued by the after tax wage rate. Thus there are two steps. You either would enter the job market and the labor supplied changes, at least over the medium term with the change in the after tax wage rate or you do not enter the job market in preference for leisure.
Now we are ready to answer the question to whether the elasticity conclusions are correct, and why is it important to apply the optimal taxation theory — lower tax on the elastic supply relative to the inelastic supply. The response of the quantity to the price change based on the elasticity is correct. Since women labor supply is more elastic than the labor supply of men, a cut in their tax rate relative to men will increase their labor supply and income. Men, on the other hand have a highly inelastic supply so raising the tax on their wages will result in a very small drop in their labor supply. Why is this important?
Alesina/Ichino talk about “goals of society”, but for economists generally the reason given is “efficiency” of outcome. Economists use the term efficiency loss or excess burden to explain why the optimal taxation principle should be applied. The loss (which economists succeeded in measuring) arises due to the “tax induced behavior”. When the after tax wage falls and labor supply is reduced, the reduction is not voluntary — the individual is forced to substitute an activity that is not taxed to the one that is taxed. Since the choice is altered, there is a loss not only because work and hence output is reduced but also because of the substitution of a less desirable activity measured by the after tax wage rate for the activity (work) valued at the before tax wage. This is the efficiency loss. Think of having to use mass transport as the price of gasoline rises because of higher federal and excise taxes. In the case of labor supply, if the tax takes a big bite and your supply is elastic you might say the heck with it, I will go fishing. A working woman may decide to be a homemaker, a stay home mom, educate the kids at home and so on. The critical thing to remember here is that these were not the choices made before the tax is raised or imposed. Since labor is an important factor of production, when work is withdrawn capital or other factors are substituted and that (if you assume the best combination of factors were initially used) will result in less efficient outcome — output is lower and or prices higher. The loss to society is the sum of the loss in output and the loss associated with forced substitution of activities. If taxes are lowered on those with the elastic supply we get the opposite result. This is what optimal taxation is about (sorry economic theory takes a bit more space to explain even a simple idea).
The questions that need to be asked are: how does society value the input — the labor supply of women and labor supply of men? How each gender value its leisure time? And what valuation does society put on women’s alternative use of their time? I will not get into these issues. Alesina and Ichino (full paper) have a great deal to say about women making role models and children success and so on. They offer statistics to support their arguments for lowering the income tax rates on women (it is interesting that although single women have a lower elasticity of labor supply the proposal does not advocate an increase in their tax rates relative to married women!). To conclude, whether one accepts or rejects the case for gender taxation, and there is plenty on either side, it is well to remember that:
To strife for an optimal (efficient) tax structure in a many person economy, one needs to make specific assumptions about the nature of differences between individuals and the form of their utility or preference functions. Secondly, one needs to consider the implications of tax changes. As one reformer put it “when you close a loophole you end up opening a foxhole”.
Wednesday, May 9, 2007
To Be Eighty Years Young: Work, Health and Income of the Elderly
On April 27 2007, I was one of 200 invitees to a party to celebrate the 80th birthday and retirement of a member of the James Buchannan Center for Public Choice, at George Mason University. The feted lady, by all accounts and for those of us who are fortunate to know her is a remarkable person. She exudes warmth, efficiency and good southern hospitality. Whether at the society meetings or during my stay at the Center, I have always marveled at how such an efficient person could be so warm and caring for all of us visitors at the Center and not just to members of the Center and the University. On The 27th of April all of us who came to celebrate the day had no need to tell her how much her warmth have touched us all. On that day a major event had taken place for her and for us as well. She turned “Eighty”, and she has “Retired”, thus concluding her tenure at the Center. At eighty years young, she is as vibrant as she was at sixty, happy and in good health.
The celebration prompted me to revisit an issue that has been festering in my thoughts for some time: “AGING”. This issue has occupied, still does occupy economists, gerontologists, health care professionals, cosmetologists, policy makers and the public at large. The inevitability of aging is something that stares us in the face on a daily basis. Our society is obsessed about it. The health and beauty market is saturated with products that claim to restore our youth, products that let us “deify” aging and prolong our life. Yet when everything is said and done, no one “thus far” has escaped the aging process.
Over the past few weeks, Brian Williams the News Anchor of NBC have been exposing his viewers to snippets of the perils of aging in the “Trading Places” segment of the broadcast. The program opened with a view of how some aging family members of the network are dealing with aging. In putting before us the experience of their parents as how they cope with aging, the program succeeded in reminding its viewers that “we shall all be there”. Most importantly perhaps, the program brought to the forefront the dilemma facing adult children in caring for their aging parents. In another segment of the program the problem facing childless single parents was briefly highlighted. Given that sooner or later we shall all be aboard this train, it is perhaps useful to put forth some statistics before enumerating some of the problems facing the elderly.
It is a common practice to use the term “elderly” to refer to person 65 years old and over. As of the year 2000 in the US there were 32.6 million in that age group; 13.9 million males and 18.7 million females (this year is chosen for availability of data which will be cited here). Classified by marital status, single persons constitute 3.9% (4.2% male, 3.6% female); married with spouse present 54.6% (72.6% male, 41.3% female), widowed 34.2% (male 14.4%, female 45.3%).
What are the survival probabilities for this group?
One can assess survival probability for everyone aged or not from three types of information: age, race and sex. Expectation of life at an age in the bracket (67-70) is estimated to be in the range of 16.9-15.5 years; (71-75) in the range of 14.2-12.3 years; (75-80) in the range of 11.7-9.4 years; (80-85) in the range of 8.4-7.0 years ; (85-90) in the range 6.6-5.1 years; (90- 95) the range is 4.8-3.7 years. After the age of 95 it is somewhere between 3.5 and 2.5 years. The numbers are somewhat different when the population group is broken down by race, with the difference is more between white and black males than between white females and black females (data from National Vital Statistics Reports, vol54, # 14, April 19, 2006).
According to The National Vital Statistics, a male who was 65 years of age in 2003 would have ahead of him 16.8 years to enjoy; a female would have 19.7 years. Ten years later, at the age of 75 the years are 10.5 for males, 12.5 for females. At 80 years young, the numbers are 7.9 for males and 9.5 for females. The years dwindle down so that once the age 90 is passed it is but a few years left (unless you are an economist, as reported in THE ECONOMIST: “Economists live longer”).
Year in and year out, the data show an increase in life expectancy of both males and females with the largest increase recently recorded for black females. It is interesting to note that the much talked about “obesity” of the US population did not impact the survival probabilities. The 10 year probability of death between the years 1999-2002 has fallen for all age groups. Among those aged 55-74, it fell from 25.7% to 21.7% based on the findings of Cutler, Glaser and Rosen (NBER, program Report Winter 2006-2007). According to the authors, the risk profile of the US population is healthier now than it was bock in the 1970’s.
Longevity has good and not so good implications. The “Trading Places” stories shown on NBC, although small in magnitude to be statistically significant, nonetheless they give the impression that it is the latter than the former. It is good to be alive one hears, but few would couple the sentiment with at what price. The quality of life falls by the wayside, but when compared to no quality at all – what can one say; after all we have yet to discover the “quality” of dying. Perhaps someday we shall.
Having put down the life expectation statistics, there is a need to enumerate the problems associated with ageing. Clearly the first and foremost among these are the work and health status; the second is income or wealth, and the third is the life style and the delivery of care.
Let me first begin with few of my prejudices about labels. I do not much care for the labels “Elderly” and/or “Retired”. These labels project images of frailty and zero productivity. Let us think a bit about the work- income experience of persons 65 years and older. Retirement laws, written and unwritten employment codes influence if not often dictate retirement decisions of workers irrespective of health, ability to perform tasks assigned or productivity. At the work place, there is “a silent majority” voice for easing the “elderly’ out to enhance the upward mobility of the young and to economize on the wage bill. Given the statistic that a 67-70 years old who has already retired has a survival probability of 16-15 years how might one measures the value of life for such a person? And, given that we are healthier than three decades ago the chances are pretty good that such a person is likely to be as productive or nearly so as a person much younger in earlier decades. But society does not enter that into its calculus. For a non economist, the question may not be relevant even down right silly. But for economists this is as much as relevant as our valuation of risk to life (health and safety in the work place and or in cases of accidents). Value of life estimates (the courts use them to make awards) are made on the basis of the person age, education, income and work history. This value measures the contribution of the individual to society. If the individual is retired (assuming he/she does not have a second carrier) what measure should we use to calculate his/her contribution? I have always wondered why when a person is retiring it is assumed that he/she will be taking up fishing. This probably is an activity for which productivity can be calculated – the number of fish caught, the price of the fish, the value of the leisure associated with the act of fishing (assuming of course that one can make a catch). Of course there are non societal valuations of the retiree’ activities such as the contribution to friends and family as well as the contribution to oneself in term of enjoyment of leisure. But there is a diminishing utility to the consumption of leisure, when that is the only use of one’s time. Moreover, as with any non market activities valuations are individual specific. Since the “retiring” population in the years ahead is likely to increase in numbers, I would like to put before you the following questions: How should society valuate retirement as a non-market activity? Does it really matter for the individual and social welfare if a social value (positive or negative) were to be placed on a year of retirement? These are questions worth thinking about.
Being engaged in a non market activity does not mean that no income is received. Through the public and private pension systems and insurance plans, most retirees will receive pension income. There are numerous studies about retirement plans and retirement income and wealth. If the lack of income or insufficiency of income is not an issue facing a retiree, then the question of meeting need whether for living expenses or health care or nursing care would not arise. However there are segments of the populations 65 years and older whose needs currently are not being met and most likely will not be in the future. A quick reference is to look at poverty statistics.
In the year 2000, 9.7% of people 65 years of age and older were below the poverty level with the percentage much higher for females (11.8% compare to 9.7% for males). Add to this the fact that the majority of this age group are women without partners — single, divorced and widowed (56.1% of the total number of females), this places a further hardship on this group, not only to meet basic needs but also their future health care need. This is a subject that needs to be addressed collectively and individually. In reforming the health care system in the US, a subject that is likely to be taken up by the presidential candidates on their run to the White House, it is worthy of discussion to get informed about the future health care need of an aging population and the special needs group. Personal and social responsibilities for care have to be identified and choices of various options for the future critically examined. For the moment, two pieces of information are of note. In the year 2000, 4.5 % (1,557,800 persons) of the 65 years of age and older are in nursing homes. Of this total, 574,908 persons are in the age group 75-85, and 772,737 in the 85 years and over group. The cost of care varies according to type of accommodation, quality of care, location and severity of condition. A 2006 study by Sheila M. Loboprablu et.al. (Care Giver in Dementia: A guide for Health Care Professionals), put the cost of informal care at $257 billion, home care at $32 billion and nursing care at $92 billion. A Harvard Medical school study (2004), reports that the Massachusetts Division of Insurance put the yearly cost of nursing care at $76,000, while the average yearly Medicaid nursing care is put at $ 12,000 ( Care Giver’s Hand Book: A Guide to Caring for the ill, Elderly and Disabled—and Yourself). That is the good and bad of it. The good news, we live longer than our parents and grandparents; the not so good news is that without planning for longevity, getting quality care turn out to be an elusive dream.
The celebration prompted me to revisit an issue that has been festering in my thoughts for some time: “AGING”. This issue has occupied, still does occupy economists, gerontologists, health care professionals, cosmetologists, policy makers and the public at large. The inevitability of aging is something that stares us in the face on a daily basis. Our society is obsessed about it. The health and beauty market is saturated with products that claim to restore our youth, products that let us “deify” aging and prolong our life. Yet when everything is said and done, no one “thus far” has escaped the aging process.
Over the past few weeks, Brian Williams the News Anchor of NBC have been exposing his viewers to snippets of the perils of aging in the “Trading Places” segment of the broadcast. The program opened with a view of how some aging family members of the network are dealing with aging. In putting before us the experience of their parents as how they cope with aging, the program succeeded in reminding its viewers that “we shall all be there”. Most importantly perhaps, the program brought to the forefront the dilemma facing adult children in caring for their aging parents. In another segment of the program the problem facing childless single parents was briefly highlighted. Given that sooner or later we shall all be aboard this train, it is perhaps useful to put forth some statistics before enumerating some of the problems facing the elderly.
It is a common practice to use the term “elderly” to refer to person 65 years old and over. As of the year 2000 in the US there were 32.6 million in that age group; 13.9 million males and 18.7 million females (this year is chosen for availability of data which will be cited here). Classified by marital status, single persons constitute 3.9% (4.2% male, 3.6% female); married with spouse present 54.6% (72.6% male, 41.3% female), widowed 34.2% (male 14.4%, female 45.3%).
What are the survival probabilities for this group?
One can assess survival probability for everyone aged or not from three types of information: age, race and sex. Expectation of life at an age in the bracket (67-70) is estimated to be in the range of 16.9-15.5 years; (71-75) in the range of 14.2-12.3 years; (75-80) in the range of 11.7-9.4 years; (80-85) in the range of 8.4-7.0 years ; (85-90) in the range 6.6-5.1 years; (90- 95) the range is 4.8-3.7 years. After the age of 95 it is somewhere between 3.5 and 2.5 years. The numbers are somewhat different when the population group is broken down by race, with the difference is more between white and black males than between white females and black females (data from National Vital Statistics Reports, vol54, # 14, April 19, 2006).
According to The National Vital Statistics, a male who was 65 years of age in 2003 would have ahead of him 16.8 years to enjoy; a female would have 19.7 years. Ten years later, at the age of 75 the years are 10.5 for males, 12.5 for females. At 80 years young, the numbers are 7.9 for males and 9.5 for females. The years dwindle down so that once the age 90 is passed it is but a few years left (unless you are an economist, as reported in THE ECONOMIST: “Economists live longer”).
Year in and year out, the data show an increase in life expectancy of both males and females with the largest increase recently recorded for black females. It is interesting to note that the much talked about “obesity” of the US population did not impact the survival probabilities. The 10 year probability of death between the years 1999-2002 has fallen for all age groups. Among those aged 55-74, it fell from 25.7% to 21.7% based on the findings of Cutler, Glaser and Rosen (NBER, program Report Winter 2006-2007). According to the authors, the risk profile of the US population is healthier now than it was bock in the 1970’s.
Longevity has good and not so good implications. The “Trading Places” stories shown on NBC, although small in magnitude to be statistically significant, nonetheless they give the impression that it is the latter than the former. It is good to be alive one hears, but few would couple the sentiment with at what price. The quality of life falls by the wayside, but when compared to no quality at all – what can one say; after all we have yet to discover the “quality” of dying. Perhaps someday we shall.
Having put down the life expectation statistics, there is a need to enumerate the problems associated with ageing. Clearly the first and foremost among these are the work and health status; the second is income or wealth, and the third is the life style and the delivery of care.
Let me first begin with few of my prejudices about labels. I do not much care for the labels “Elderly” and/or “Retired”. These labels project images of frailty and zero productivity. Let us think a bit about the work- income experience of persons 65 years and older. Retirement laws, written and unwritten employment codes influence if not often dictate retirement decisions of workers irrespective of health, ability to perform tasks assigned or productivity. At the work place, there is “a silent majority” voice for easing the “elderly’ out to enhance the upward mobility of the young and to economize on the wage bill. Given the statistic that a 67-70 years old who has already retired has a survival probability of 16-15 years how might one measures the value of life for such a person? And, given that we are healthier than three decades ago the chances are pretty good that such a person is likely to be as productive or nearly so as a person much younger in earlier decades. But society does not enter that into its calculus. For a non economist, the question may not be relevant even down right silly. But for economists this is as much as relevant as our valuation of risk to life (health and safety in the work place and or in cases of accidents). Value of life estimates (the courts use them to make awards) are made on the basis of the person age, education, income and work history. This value measures the contribution of the individual to society. If the individual is retired (assuming he/she does not have a second carrier) what measure should we use to calculate his/her contribution? I have always wondered why when a person is retiring it is assumed that he/she will be taking up fishing. This probably is an activity for which productivity can be calculated – the number of fish caught, the price of the fish, the value of the leisure associated with the act of fishing (assuming of course that one can make a catch). Of course there are non societal valuations of the retiree’ activities such as the contribution to friends and family as well as the contribution to oneself in term of enjoyment of leisure. But there is a diminishing utility to the consumption of leisure, when that is the only use of one’s time. Moreover, as with any non market activities valuations are individual specific. Since the “retiring” population in the years ahead is likely to increase in numbers, I would like to put before you the following questions: How should society valuate retirement as a non-market activity? Does it really matter for the individual and social welfare if a social value (positive or negative) were to be placed on a year of retirement? These are questions worth thinking about.
Being engaged in a non market activity does not mean that no income is received. Through the public and private pension systems and insurance plans, most retirees will receive pension income. There are numerous studies about retirement plans and retirement income and wealth. If the lack of income or insufficiency of income is not an issue facing a retiree, then the question of meeting need whether for living expenses or health care or nursing care would not arise. However there are segments of the populations 65 years and older whose needs currently are not being met and most likely will not be in the future. A quick reference is to look at poverty statistics.
In the year 2000, 9.7% of people 65 years of age and older were below the poverty level with the percentage much higher for females (11.8% compare to 9.7% for males). Add to this the fact that the majority of this age group are women without partners — single, divorced and widowed (56.1% of the total number of females), this places a further hardship on this group, not only to meet basic needs but also their future health care need. This is a subject that needs to be addressed collectively and individually. In reforming the health care system in the US, a subject that is likely to be taken up by the presidential candidates on their run to the White House, it is worthy of discussion to get informed about the future health care need of an aging population and the special needs group. Personal and social responsibilities for care have to be identified and choices of various options for the future critically examined. For the moment, two pieces of information are of note. In the year 2000, 4.5 % (1,557,800 persons) of the 65 years of age and older are in nursing homes. Of this total, 574,908 persons are in the age group 75-85, and 772,737 in the 85 years and over group. The cost of care varies according to type of accommodation, quality of care, location and severity of condition. A 2006 study by Sheila M. Loboprablu et.al. (Care Giver in Dementia: A guide for Health Care Professionals), put the cost of informal care at $257 billion, home care at $32 billion and nursing care at $92 billion. A Harvard Medical school study (2004), reports that the Massachusetts Division of Insurance put the yearly cost of nursing care at $76,000, while the average yearly Medicaid nursing care is put at $ 12,000 ( Care Giver’s Hand Book: A Guide to Caring for the ill, Elderly and Disabled—and Yourself). That is the good and bad of it. The good news, we live longer than our parents and grandparents; the not so good news is that without planning for longevity, getting quality care turn out to be an elusive dream.
Thursday, April 26, 2007
They Call It SPAM
The World Wide Web has touched us all. It has enveloped us with its largess, mesmerized us with wonders. But like all good things there is a price to pay. The price is SPAM.
Spam is not a private good neither it is a public good, so what exactly is the spam good?
In the olden days, the word spam had one meaning. It referred to a can of meat, mixed with other ingredients. It is private good you have the option to buy or not to buy in the market place. Today when you hear SPAM, the word conjures up a most detestable image of unwanted and unsolicited e-mails, all pertaining to offer you a world of goodies if you would just let them in the door. The goodies are quite varied, from pleasure goods to not so pleasurable goods.
If you think about it you can’t help but appreciate the name SPAM. Whoever conjured up the name could not have come up with a name more fitting than Spam to describe the spammers’ activities. Any one who uses the WWW is spammed. So who are those spammers and how one may categorize the spam act?
Starting from Economics 101, students are apprised of the fact that economic activities give rise to two basic types of goods: a private good and a public good. And sometimes we have a composite good we call it a joint good. A candy bar is a private good because it possesses certain characteristics. First of all, it provides the user of exclusive right to the good, it yields benefit only to the user, it’s consumption we say gives pleasure or utility to the consumer. Note that there is no sharing of the benefit if I were to posses the candy bar and consume it. My consumption of the candy bar “excludes” all others from consuming this particular candy bar. We call this feature in defining a private good “The Exclusion Principle”. Because the consumption of the private good gives utility it commands a price. As every one knows the market price is determined by demand and supply of the good. What about the public good? Using the private good characteristics, for example the exclusion principle we define a public good as one where the Exclusion Principle does not apply. That is the use of the good by one person does not preclude its use by another. An example which is almost always used is the Defense Good say an Aircraft carrier. Defense goods are for the benefit of all. An aircraft carrier is presumably aimed at protecting us from invasion, foreign attacks and the likes. I derive utility from its provision but so does every one who lives in the country. My benefit does not exclude others from same benefits. Another feature is that the benefits or the good supply is not divisible. Because the exclusion principle does not apply and the good is not divisible, the market does not provide it. It is collectively provided by the public sector, with taxes imposed to cover the cost of provision. A joint good is a good that has two elements — Good-Good, like skin and meat from a cow, two products from one source; Good and Bad like Steel and air pollution. Here again the market set the price for this type of good when the two elements are good-good and both the market and the public sector set the prices when it is the latter. So where does SPAM fits in the private–public good space? Good question our textbooks should address. Absent that, let me use my own e-mail spam to place spam in that space.
Every day, I receive at least 500 SPAM even though our institution uses a SPAM BLOCKER. Somehow or other the spammers find ways to get around the blockade. Of this number there are usually 10 or so messages that are repeated over and over and over, with the objective are clearly to get a foot in the door by breaking down one’s resistance. I have always wondered: Who are these people? And if they have something worthwhile to sell why hide behind the veil of secrecy, most significantly perhaps why the over kill? Before I answer the last question, let me give you a sample of these spam. For two months I have been prompted to enroll in college to get a college degree. Finances are available. I am offered so many chances to win a $10,000 in scholarship money, and if I want a degree without the hassle of going to school, no problem I will be handed a degree on line. Of course I must need a car to go to school, so spammers tell me that they are committed to get me a car, no money is needed, I will never be turned down, and if I want a dream car (Hay, why not I am going to be a college graduate) no problem, I will never be turned down. Another offer that go with the car is cloth from Neiman Marcus (they hit it on target), cheap health insurance, I guess to insure my survival to get my college degree, and if I were to feel lonely or overworked they have “ring tunes”, whatever that is, and of course the too many fishes in the sea to find that one “that will take my breath away”. WOW. How can one not be impressed or grateful for such offers? I am neither impressed nor persuaded that SPAMMERS perform a service worthy of the time I spend divesting my computer from their pollution. The spam good should never occupy a spec in the private good/ public good sphere.
Economists for long have dubbed this kind of activity as the TRAGEDY OF THE COMMON. The common refers to grazing land where property rights are not assigned. Because no rights were assigned for the use of the grazing lands users behaving to maximize their income will over graze the common with adverse consequences for future uses. Had property rights been assigned, the users will ensure that the common is not over grazed. The price system will achieve then “efficient” use of the resource. Just as the overuse of the Common has been termed a tragedy, so as the over use by SPAMMERS of the World Wide Web. The tragedy here is not only a frivolous over use of a valuable resource, but also the time of internet users who are in this day and age “must” rely on this technology to carry out private good production.
An argument can be put in defense of spammers. Not unlike other private goods sellers spammers advertise their wares. True enough. But there is a vast difference between the two. There is a market established prices for using airways, posters and flyers to advertise private good wares. Merchants have to include advertising cost in the price of the good. As such the level of advertising will be affected by the effectiveness of the claim and the added cost. Sellers cannot ignore the effect of selling costs on the total cost as well as on the demand for their product. Moreover, advertisers do not hide behind a veil of secrecy. They want the buyer to know who they are, and hence the targeted individual exercises his market power by refusing to frequent a merchant whose products and or advertisements are unsatisfactorily. With spam, one has but one option — to invest one’s scarce resource to rid one’s space of spam.
Economists are the first to acknowledge that any activity, no matter how distasteful, can find a buyer or a user. Since spam activity utilizes a scare resource, the time of the spammer, it suggests that the rate of return to spam activities must be positive for spammers. As we have no data on this rate of return, the fact that it continues to persist suggests that it is positive. Hence it cannot be ignored. As yet we have no data on the spam output, or on the rate of return on this activity. Most of all we have no information on the private and social costs of spam. Hopefully, my small effort will induce others to take up the challenge.
Spam is not a private good neither it is a public good, so what exactly is the spam good?
In the olden days, the word spam had one meaning. It referred to a can of meat, mixed with other ingredients. It is private good you have the option to buy or not to buy in the market place. Today when you hear SPAM, the word conjures up a most detestable image of unwanted and unsolicited e-mails, all pertaining to offer you a world of goodies if you would just let them in the door. The goodies are quite varied, from pleasure goods to not so pleasurable goods.
If you think about it you can’t help but appreciate the name SPAM. Whoever conjured up the name could not have come up with a name more fitting than Spam to describe the spammers’ activities. Any one who uses the WWW is spammed. So who are those spammers and how one may categorize the spam act?
Starting from Economics 101, students are apprised of the fact that economic activities give rise to two basic types of goods: a private good and a public good. And sometimes we have a composite good we call it a joint good. A candy bar is a private good because it possesses certain characteristics. First of all, it provides the user of exclusive right to the good, it yields benefit only to the user, it’s consumption we say gives pleasure or utility to the consumer. Note that there is no sharing of the benefit if I were to posses the candy bar and consume it. My consumption of the candy bar “excludes” all others from consuming this particular candy bar. We call this feature in defining a private good “The Exclusion Principle”. Because the consumption of the private good gives utility it commands a price. As every one knows the market price is determined by demand and supply of the good. What about the public good? Using the private good characteristics, for example the exclusion principle we define a public good as one where the Exclusion Principle does not apply. That is the use of the good by one person does not preclude its use by another. An example which is almost always used is the Defense Good say an Aircraft carrier. Defense goods are for the benefit of all. An aircraft carrier is presumably aimed at protecting us from invasion, foreign attacks and the likes. I derive utility from its provision but so does every one who lives in the country. My benefit does not exclude others from same benefits. Another feature is that the benefits or the good supply is not divisible. Because the exclusion principle does not apply and the good is not divisible, the market does not provide it. It is collectively provided by the public sector, with taxes imposed to cover the cost of provision. A joint good is a good that has two elements — Good-Good, like skin and meat from a cow, two products from one source; Good and Bad like Steel and air pollution. Here again the market set the price for this type of good when the two elements are good-good and both the market and the public sector set the prices when it is the latter. So where does SPAM fits in the private–public good space? Good question our textbooks should address. Absent that, let me use my own e-mail spam to place spam in that space.
Every day, I receive at least 500 SPAM even though our institution uses a SPAM BLOCKER. Somehow or other the spammers find ways to get around the blockade. Of this number there are usually 10 or so messages that are repeated over and over and over, with the objective are clearly to get a foot in the door by breaking down one’s resistance. I have always wondered: Who are these people? And if they have something worthwhile to sell why hide behind the veil of secrecy, most significantly perhaps why the over kill? Before I answer the last question, let me give you a sample of these spam. For two months I have been prompted to enroll in college to get a college degree. Finances are available. I am offered so many chances to win a $10,000 in scholarship money, and if I want a degree without the hassle of going to school, no problem I will be handed a degree on line. Of course I must need a car to go to school, so spammers tell me that they are committed to get me a car, no money is needed, I will never be turned down, and if I want a dream car (Hay, why not I am going to be a college graduate) no problem, I will never be turned down. Another offer that go with the car is cloth from Neiman Marcus (they hit it on target), cheap health insurance, I guess to insure my survival to get my college degree, and if I were to feel lonely or overworked they have “ring tunes”, whatever that is, and of course the too many fishes in the sea to find that one “that will take my breath away”. WOW. How can one not be impressed or grateful for such offers? I am neither impressed nor persuaded that SPAMMERS perform a service worthy of the time I spend divesting my computer from their pollution. The spam good should never occupy a spec in the private good/ public good sphere.
Economists for long have dubbed this kind of activity as the TRAGEDY OF THE COMMON. The common refers to grazing land where property rights are not assigned. Because no rights were assigned for the use of the grazing lands users behaving to maximize their income will over graze the common with adverse consequences for future uses. Had property rights been assigned, the users will ensure that the common is not over grazed. The price system will achieve then “efficient” use of the resource. Just as the overuse of the Common has been termed a tragedy, so as the over use by SPAMMERS of the World Wide Web. The tragedy here is not only a frivolous over use of a valuable resource, but also the time of internet users who are in this day and age “must” rely on this technology to carry out private good production.
An argument can be put in defense of spammers. Not unlike other private goods sellers spammers advertise their wares. True enough. But there is a vast difference between the two. There is a market established prices for using airways, posters and flyers to advertise private good wares. Merchants have to include advertising cost in the price of the good. As such the level of advertising will be affected by the effectiveness of the claim and the added cost. Sellers cannot ignore the effect of selling costs on the total cost as well as on the demand for their product. Moreover, advertisers do not hide behind a veil of secrecy. They want the buyer to know who they are, and hence the targeted individual exercises his market power by refusing to frequent a merchant whose products and or advertisements are unsatisfactorily. With spam, one has but one option — to invest one’s scarce resource to rid one’s space of spam.
Economists are the first to acknowledge that any activity, no matter how distasteful, can find a buyer or a user. Since spam activity utilizes a scare resource, the time of the spammer, it suggests that the rate of return to spam activities must be positive for spammers. As we have no data on this rate of return, the fact that it continues to persist suggests that it is positive. Hence it cannot be ignored. As yet we have no data on the spam output, or on the rate of return on this activity. Most of all we have no information on the private and social costs of spam. Hopefully, my small effort will induce others to take up the challenge.
Monday, April 9, 2007
David Stockman May No Longer Be Alone
“There can be no proper motive for hurting our neighbour, there can be no incitement to do evil to another which mankind will go along with except just indignation for evil which that other has done to us”.
Adam Smith: The Moral Sentiments (1854, p. 119).
The Washington Post (March 26, 2007) had two eye catching headlines: “Reagan Budget Head Stockman is charged with Fraud”, and “Soldier of a Revolution: Stockman was the Face of the Reaganomics”. How the mighty has fallen.
These two articles brought back to me my assessments of Stockman’s budget policy during the early days of the Reagan administration where he was serving as the head of the Management and Budget. Back in the 1980’s and early 1990’s I wrote OP pieces published in the Worcester Telegram and Gazette. My articles focused exclusively on economic policies and most often on the federal budget policy.
When the Reagan Administration came into office, the landscape for making economic policy changed shape — from Keynesian economics to Reaganomics. The architect of this new religion was said to be David Stockman, although a great deal of the underlying philosophy belonged to others.
Having spent quite a bit of time in Washington D.C. writing about federal budget policies, I needed to learn about the new religion. This knowledge was quickly acquired during the deliberation on the first Reagan budget submitted to Congress. On February 2nd, 1982, I wrote a piece for the WT&G titled: “A little Knowledge is a Dangerous Thing”. I wrote then that David Stockman would do well to remember that. It might keep him out of trouble. Little that I knew then how apt this statement would turns out to be. My comment related to his economic policy, a field in which he had no formal training. Had he had that perhaps… I also wrote in the article that Stockman problem stems from his presumption that he knew how the world works. Stockman assumed that the world is like an “unassembled” toy and one only needs to know how to read the blueprints to assemble the parts. Unfortunately for Stockman he either failed to correctly read the blueprint or that the world is a bit more complex than a disassembled toy.
He ran into trouble applying his religion to the budget program – that cutting tax (supply side economics) would increase revenues, and eliminate the deficit over the short hall. Cutting taxes raise revenues by changing incentives. A rise in investment and a higher growth rate ultimately would raise revenues and change the deficit path. Unfortunately, the time framework is usually much longer than the political life of an administration.
Stockman as reported by the Post is accused of defrauding investors and banks during his stewardship of Collins & Aikman, a large Southfield, Michigan auto parts maker that gone into bankruptcy in 2005. According to the Post, Manhattan attorney Michael Garcia that “Stockman and a team of hand picked executives entered into secret agreements with suppliers, created false documents to fool auditors… “Stockman pleaded “not guilty” to the charges”. I hope he is not guilty. The country has had more than it’s share of high profile officials and corporate executives pursuing not only policies of self enrichments at the expense of the public but also of grandiose schemes of corruption that had soiled the nation’s image.
In the “Solider of a Revolution” piece, the writer bemoans the charge: “It’s a shame that a guy who made such a great contribution as a member of Congress and the Reagan Administration has this thing happening to him”. Pardonez moi! The plight of David Stockman falls squarely in his lap. One’s action or lack of action has consequences that cannot simply be laid at the feet of others.
The Stockman story is one of many that smell of corruption. By itself it does not warrant too much of a notice except of course from lawyers and prosecutors. What ought to be of note is the implications of this and similar acts on the nation’s standing. We in the US are quick to point out corruption in many developing countries particularly in Africa. Indeed the International Monetary Fund and The World Bank have devoted a great deal of efforts and resources to make countries recipient of their loans and aid comply with requirements of “Good Governance” in general and the reduction in corruption in particular. Beginning in the 1980’s this mandate took center stage in official documents not only of said agencies but also in US aid policies. This concern gave rise to compilation of corruption indicators. Indicators of worldwide corruption have been reported by Business International (currently named Economic Intelligence Unit), Transparency International and International Country Risk guide (ICRG). These groups publish corruption indices computed from measures such as bribes, red tape, accountability, rules of law and the like. Every country is given a score based on the value of the indices. From ICRG data over the period 1984-2003, one is able to trace the development of corrupt practices in over 100 countries. Based on the calculated scores, countries are grouped into three categories: High corruption (0.0-4.5), Middle corruption (5.0-6.9), and Low corruption (7.00-10.0). Of interest here is a comparison over time between countries. Between the years 1984-2003, there have been “minuses” and “pluses”. A minus suggest a worsening of corruption, a plus an improvement.
Let us look at the US viz a viz regimes that one associates with corrupt practices. It is disheartening to discover that over a 20 years period corruption has gotten worse. More countries have had a negative change (became more corrupt), than countries with a positive change. Out of a total of 101 countries, 67 countries had negative change (mean change of -0.0257), 12 countries with no change and 22 countries with positive change (Mean change of 0.596).
As I have mentioned earlier the presumption is that developing countries, especially those in Africa are riddled with corruption. To some extent this is true, but that is only half of the story. Almost all of the improvements in the corruption scores were recorded for the African countries. Examples are Mali, Congo DR, Uganda, Kenya, Liberia, Ghana, Zambia and the Ivory Coast. The US, which was ranked in the middle group, fell in the negative change group with a change of (-0.221), a change greater than those experienced by some African countries like Tanzania (-0.163), Senegal (-0.125), and Egypt (-0.063). Zimbabwe ranked at the top in terms of increased level of corruption with a score change of -0.745 followed by South Africa with a change of -0.524. For more on corruption scores and analyses of change in the corruption levels see (H.Seldady (2007), “Does Corruption Persist?”, paper presented at the Public Choice Societies meeting in Amsterdam, March 29-April 3).
The numbers reported in the Seldady’s paper paint a picture not very complimentary about the developed world. It is not only that the US score has worsened but so did scores of others like the UK and Canada. The findings bring to mind an old adage: “charity begins at home”. In this context the saying should be changed to “cleaning house should begin with one’s home”.
Adam Smith: The Moral Sentiments (1854, p. 119).
The Washington Post (March 26, 2007) had two eye catching headlines: “Reagan Budget Head Stockman is charged with Fraud”, and “Soldier of a Revolution: Stockman was the Face of the Reaganomics”. How the mighty has fallen.
These two articles brought back to me my assessments of Stockman’s budget policy during the early days of the Reagan administration where he was serving as the head of the Management and Budget. Back in the 1980’s and early 1990’s I wrote OP pieces published in the Worcester Telegram and Gazette. My articles focused exclusively on economic policies and most often on the federal budget policy.
When the Reagan Administration came into office, the landscape for making economic policy changed shape — from Keynesian economics to Reaganomics. The architect of this new religion was said to be David Stockman, although a great deal of the underlying philosophy belonged to others.
Having spent quite a bit of time in Washington D.C. writing about federal budget policies, I needed to learn about the new religion. This knowledge was quickly acquired during the deliberation on the first Reagan budget submitted to Congress. On February 2nd, 1982, I wrote a piece for the WT&G titled: “A little Knowledge is a Dangerous Thing”. I wrote then that David Stockman would do well to remember that. It might keep him out of trouble. Little that I knew then how apt this statement would turns out to be. My comment related to his economic policy, a field in which he had no formal training. Had he had that perhaps… I also wrote in the article that Stockman problem stems from his presumption that he knew how the world works. Stockman assumed that the world is like an “unassembled” toy and one only needs to know how to read the blueprints to assemble the parts. Unfortunately for Stockman he either failed to correctly read the blueprint or that the world is a bit more complex than a disassembled toy.
He ran into trouble applying his religion to the budget program – that cutting tax (supply side economics) would increase revenues, and eliminate the deficit over the short hall. Cutting taxes raise revenues by changing incentives. A rise in investment and a higher growth rate ultimately would raise revenues and change the deficit path. Unfortunately, the time framework is usually much longer than the political life of an administration.
Stockman as reported by the Post is accused of defrauding investors and banks during his stewardship of Collins & Aikman, a large Southfield, Michigan auto parts maker that gone into bankruptcy in 2005. According to the Post, Manhattan attorney Michael Garcia that “Stockman and a team of hand picked executives entered into secret agreements with suppliers, created false documents to fool auditors… “Stockman pleaded “not guilty” to the charges”. I hope he is not guilty. The country has had more than it’s share of high profile officials and corporate executives pursuing not only policies of self enrichments at the expense of the public but also of grandiose schemes of corruption that had soiled the nation’s image.
In the “Solider of a Revolution” piece, the writer bemoans the charge: “It’s a shame that a guy who made such a great contribution as a member of Congress and the Reagan Administration has this thing happening to him”. Pardonez moi! The plight of David Stockman falls squarely in his lap. One’s action or lack of action has consequences that cannot simply be laid at the feet of others.
The Stockman story is one of many that smell of corruption. By itself it does not warrant too much of a notice except of course from lawyers and prosecutors. What ought to be of note is the implications of this and similar acts on the nation’s standing. We in the US are quick to point out corruption in many developing countries particularly in Africa. Indeed the International Monetary Fund and The World Bank have devoted a great deal of efforts and resources to make countries recipient of their loans and aid comply with requirements of “Good Governance” in general and the reduction in corruption in particular. Beginning in the 1980’s this mandate took center stage in official documents not only of said agencies but also in US aid policies. This concern gave rise to compilation of corruption indicators. Indicators of worldwide corruption have been reported by Business International (currently named Economic Intelligence Unit), Transparency International and International Country Risk guide (ICRG). These groups publish corruption indices computed from measures such as bribes, red tape, accountability, rules of law and the like. Every country is given a score based on the value of the indices. From ICRG data over the period 1984-2003, one is able to trace the development of corrupt practices in over 100 countries. Based on the calculated scores, countries are grouped into three categories: High corruption (0.0-4.5), Middle corruption (5.0-6.9), and Low corruption (7.00-10.0). Of interest here is a comparison over time between countries. Between the years 1984-2003, there have been “minuses” and “pluses”. A minus suggest a worsening of corruption, a plus an improvement.
Let us look at the US viz a viz regimes that one associates with corrupt practices. It is disheartening to discover that over a 20 years period corruption has gotten worse. More countries have had a negative change (became more corrupt), than countries with a positive change. Out of a total of 101 countries, 67 countries had negative change (mean change of -0.0257), 12 countries with no change and 22 countries with positive change (Mean change of 0.596).
As I have mentioned earlier the presumption is that developing countries, especially those in Africa are riddled with corruption. To some extent this is true, but that is only half of the story. Almost all of the improvements in the corruption scores were recorded for the African countries. Examples are Mali, Congo DR, Uganda, Kenya, Liberia, Ghana, Zambia and the Ivory Coast. The US, which was ranked in the middle group, fell in the negative change group with a change of (-0.221), a change greater than those experienced by some African countries like Tanzania (-0.163), Senegal (-0.125), and Egypt (-0.063). Zimbabwe ranked at the top in terms of increased level of corruption with a score change of -0.745 followed by South Africa with a change of -0.524. For more on corruption scores and analyses of change in the corruption levels see (H.Seldady (2007), “Does Corruption Persist?”, paper presented at the Public Choice Societies meeting in Amsterdam, March 29-April 3).
The numbers reported in the Seldady’s paper paint a picture not very complimentary about the developed world. It is not only that the US score has worsened but so did scores of others like the UK and Canada. The findings bring to mind an old adage: “charity begins at home”. In this context the saying should be changed to “cleaning house should begin with one’s home”.
Saturday, March 31, 2007
“Mother, Do Not Get Sick over the Loss: It Is Only Bushes"
Whoever said education is a two-way street was quite right. I am an educator. I have educated so many. I have advised and counseled students throughout their Ph.D. studies in economics. I have always been on one side of the street – giving rather than receiving. A few days ago I was on the other side of the street, receiving advice and counseling. Let me explain.
David Ricardo back in the 1800s attributed the value to labor embodied in the good (Principle of Political Economy); hence, this became known as the “labor theory of value”. This clearly aroused a great deal of discussion, not only because of reducing all inputs that went into producing value to a single factor, but because of its neglect of why a good, produced by labor or other factor, would command a value. Alfred Marshall’s “Principle of Economics” (1890) provided an answer which remains in today’s economics textbooks. According to
On the Question of Divestiture
“State Moving toward Divestment from Sudan: Bill Would Affect Small Percentage of Pension System”, Worcester Telegram and Gazette, March 14, 2007.
On March 29, 2007, actress Mia Farrow appeared before the Massachusetts State House calling for state divestment from Sudan, citing the atrocities committed by the Sudanese troops against the people of Darfur. What is going on there is nothing short of genocide. The bloody war in the Darfur region has caused over 400,000 war deaths. According to the WT&G report, Massachusetts wants to become the eighth state to enact divestment legislation, part of an over all strategy to stop the Sudanese government’s systematic slaughter of Darfur citizens.
The sentiment behind this legislation is to be applauded. As the saying goes, “every little bit helps”. But will it? Let us look closely at what is being contemplated. Again according to WT&G, State Senator Edward M. Augustus Jr. believes that “Mr. Patrick would sign divestment legislation if it reaches his desk”. That is well and good. The next paragraph states, “The bill would allow the state to opt-out of divestment of a particular company, if it turns out that divestment has a NEGATIVE EFFECT ON INVESTMENT RETURNS”. About two-tenth of one percent of the state’s pension fund is invested in companies that do business in Sudan. Well, I am floored.
There was a time in relation of discussion about the looming federal budget deficits that the phrase “smoke and mirror” was coined. If it is for the show, then the legislation or the talk about the possibility for said legislation appease those, who are genuinely concerned over the plight of the Darfur people and lack the power to act on their own, would find the legislation to be the next best thing—to hit the attacker where it hurts the most, in his pocket book. Be real! Is the loss of two tenths of one percent of the state pension fund assets invested in companies doing business in Sudan going to make a dent in the Sudanese government war chest? Remember, they have the BLACK GOLD – oil. Perhaps, this could be so, if all 50 states were to divest. One can but hope.
Let me now turn to examine a most unpalatable provision in the legislation. As quoted earlier, the legislation would allow the state to opt-out of the divestment if pulling out would have a NEGATIVE IMPACT ON INVESTMENT RETURNS. It does not take economic training to figure out the implication of this provision. Companies diversify their investment portfolio to garner highest returns for their investors. In the business world the “bottom line is king.” Investment companies’ executives live and die by the bottom line. The State when investing its pension fund assets in Sudan expected returns on its assets equal if not higher than what it could have earned from different investments. When the State of Massachusetts made their investment decision, the overriding factor was returns for a given risk. The provision that the state would pull out if returns were to fall due to divestment struck me as naïve at best if not downright “erroneous”. All actions are either motivated by profit or social justice. However comforting it may be to believe that the state divestment would speed up the fall of the Sudanese government, or end the devastating effects of the mass killing in the Darfur region, we need to be honest about not only our motives but also our actions. Governor Patrick, if he were to sign the legislation, would further the cause in striking down the opt-out provision from the bill. Most significantly, perhaps, is to make an honest assessment about whether the state divestment will alter the behavior of the Sudanese ruler.
There are no nobler causes than these of restoring life, liberty, and dignity to oppressed people. We, the residents of Massachusetts, should be the ones to ask, “How may we help?” I for one have more questions than answers. Genocide and mass killing in such a far place should not prevent us from asking the question. Perhaps if many of us did, we may be able to change the political landscape. We may even find some answers.
On March 29, 2007, actress Mia Farrow appeared before the Massachusetts State House calling for state divestment from Sudan, citing the atrocities committed by the Sudanese troops against the people of Darfur. What is going on there is nothing short of genocide. The bloody war in the Darfur region has caused over 400,000 war deaths. According to the WT&G report, Massachusetts wants to become the eighth state to enact divestment legislation, part of an over all strategy to stop the Sudanese government’s systematic slaughter of Darfur citizens.
The sentiment behind this legislation is to be applauded. As the saying goes, “every little bit helps”. But will it? Let us look closely at what is being contemplated. Again according to WT&G, State Senator Edward M. Augustus Jr. believes that “Mr. Patrick would sign divestment legislation if it reaches his desk”. That is well and good. The next paragraph states, “The bill would allow the state to opt-out of divestment of a particular company, if it turns out that divestment has a NEGATIVE EFFECT ON INVESTMENT RETURNS”. About two-tenth of one percent of the state’s pension fund is invested in companies that do business in Sudan. Well, I am floored.
There was a time in relation of discussion about the looming federal budget deficits that the phrase “smoke and mirror” was coined. If it is for the show, then the legislation or the talk about the possibility for said legislation appease those, who are genuinely concerned over the plight of the Darfur people and lack the power to act on their own, would find the legislation to be the next best thing—to hit the attacker where it hurts the most, in his pocket book. Be real! Is the loss of two tenths of one percent of the state pension fund assets invested in companies doing business in Sudan going to make a dent in the Sudanese government war chest? Remember, they have the BLACK GOLD – oil. Perhaps, this could be so, if all 50 states were to divest. One can but hope.
Let me now turn to examine a most unpalatable provision in the legislation. As quoted earlier, the legislation would allow the state to opt-out of the divestment if pulling out would have a NEGATIVE IMPACT ON INVESTMENT RETURNS. It does not take economic training to figure out the implication of this provision. Companies diversify their investment portfolio to garner highest returns for their investors. In the business world the “bottom line is king.” Investment companies’ executives live and die by the bottom line. The State when investing its pension fund assets in Sudan expected returns on its assets equal if not higher than what it could have earned from different investments. When the State of Massachusetts made their investment decision, the overriding factor was returns for a given risk. The provision that the state would pull out if returns were to fall due to divestment struck me as naïve at best if not downright “erroneous”. All actions are either motivated by profit or social justice. However comforting it may be to believe that the state divestment would speed up the fall of the Sudanese government, or end the devastating effects of the mass killing in the Darfur region, we need to be honest about not only our motives but also our actions. Governor Patrick, if he were to sign the legislation, would further the cause in striking down the opt-out provision from the bill. Most significantly, perhaps, is to make an honest assessment about whether the state divestment will alter the behavior of the Sudanese ruler.
There are no nobler causes than these of restoring life, liberty, and dignity to oppressed people. We, the residents of Massachusetts, should be the ones to ask, “How may we help?” I for one have more questions than answers. Genocide and mass killing in such a far place should not prevent us from asking the question. Perhaps if many of us did, we may be able to change the political landscape. We may even find some answers.
Thursday, March 22, 2007
Call it Free Enterprise
The New York Times, Wednesday March 21, 2007, revealed on its front page what some of us already know (at least those of us who experienced it) the push drug companies make for physicians to sell their patients on the “new improved technology” – “A state’s files put doctors’ ties to drug makers on close view: debating whether payments affect patient care”. Nothing wrong with pushing new technology. What good are advances in technologies if they cannot be put to use to improve the personal and the national health? I am grateful that our society and our educational system generate technologies that protect us against deadly diseases, improve our life expectancy and the quality of our life. Not all societies can boost of what our technology have contributed to our quality of life. Having said that, I would like to address the issue in the article: Do payments to doctors by pharmaceutical companies affect patient care? My initial thought on this question is unqualified yes. One way or the other, patients’ health is affected by whatever the doctor prescribes. This question, I am afraid, is not all that informative. A more enlightened and pointed question is to ask: “Are payments to doctors “adversely” affect the delivery of care?”. A related question, which is much more critical, should be: “Do payments to doctors raise the cost of health care?”.
As an economist, I believe that my second question goes at the heart of societal problem of dealing with the ever rising cost of health care. Health economists have for long advocated the need to address the rising cost of health care associated with overuse of scarce resources, moral hazard and the resources expended through the use of up to date technologies during the last few months of life. Putting the cost issue aside (there are so much written on this), I would like to turn to the basic question raised by The New York Times. If there is a new drug that has been approved for a given illness, why do pharmaceutical companies have to pay doctors to prescribe new drugs that presumably are more beneficial for patients than old drugs? I will focus on rheumatoid arthritis, first because I have a first hand knowledge of what RA is all about, and secondly because the payment to the RA doctor is one of the highest – according to The New York Times, $6,053, which is 6 times as high as for internal medicine and 2 ½ times as high as for cardiologists, and given that these payments are not overt “bribes”, but most often are made to fund physicians’ research, which presumably will impact treatment, why should drug companies or doctors for that matter be apologetic about making or receiving such payments?
There are good uses as well as abuses arising from such practice. When a doctor, influenced by payments prescribes a drug that is more expensive, such as remicade or enbrel (the cost of monthly treatment ranges from $5,000 to $1,000), which for some patients has outcomes similar to a less expensive therapy (say prednisone or NSD such as celebrex), then the doctor like many other in society has an ethical problem. Overuse of drugs by doctors are not uncommon (see John Abramson’s “Overdosed America: The Broken Promise of American Medicine”, 2004) but so is the over demand placed by patients on doctors – whenever a new drug appears in the market. Drug companies saturate the market with advertisement (see ads for enbrel) that induces even the most enlightened among us to ask for it.
There are two salutary features arising out of the financial ties, reported by The New York Times. First of all, it warns us of possible “corruption” in the delivery of medical care; and secondly, it encourages us to be informed not only about our doctors but also about the various drug therapies out there. Knowledge is the most effective instrument the patient should seek. Unfortunately, many do not seek it either because they are intimidated by the “white coat bigger than life image”, or because of the cost of securing information.
The New York Times did their readers a great service, not just by making a “good expose of drug companies practice” but also in making patients (hopefully) aware of their responsibilities in managing their medical care. To make a choice one needs to be informed. Fortunately, today’s technology, the internet, has made the information accessible to all.
As an economist, I believe that my second question goes at the heart of societal problem of dealing with the ever rising cost of health care. Health economists have for long advocated the need to address the rising cost of health care associated with overuse of scarce resources, moral hazard and the resources expended through the use of up to date technologies during the last few months of life. Putting the cost issue aside (there are so much written on this), I would like to turn to the basic question raised by The New York Times. If there is a new drug that has been approved for a given illness, why do pharmaceutical companies have to pay doctors to prescribe new drugs that presumably are more beneficial for patients than old drugs? I will focus on rheumatoid arthritis, first because I have a first hand knowledge of what RA is all about, and secondly because the payment to the RA doctor is one of the highest – according to The New York Times, $6,053, which is 6 times as high as for internal medicine and 2 ½ times as high as for cardiologists, and given that these payments are not overt “bribes”, but most often are made to fund physicians’ research, which presumably will impact treatment, why should drug companies or doctors for that matter be apologetic about making or receiving such payments?
There are good uses as well as abuses arising from such practice. When a doctor, influenced by payments prescribes a drug that is more expensive, such as remicade or enbrel (the cost of monthly treatment ranges from $5,000 to $1,000), which for some patients has outcomes similar to a less expensive therapy (say prednisone or NSD such as celebrex), then the doctor like many other in society has an ethical problem. Overuse of drugs by doctors are not uncommon (see John Abramson’s “Overdosed America: The Broken Promise of American Medicine”, 2004) but so is the over demand placed by patients on doctors – whenever a new drug appears in the market. Drug companies saturate the market with advertisement (see ads for enbrel) that induces even the most enlightened among us to ask for it.
There are two salutary features arising out of the financial ties, reported by The New York Times. First of all, it warns us of possible “corruption” in the delivery of medical care; and secondly, it encourages us to be informed not only about our doctors but also about the various drug therapies out there. Knowledge is the most effective instrument the patient should seek. Unfortunately, many do not seek it either because they are intimidated by the “white coat bigger than life image”, or because of the cost of securing information.
The New York Times did their readers a great service, not just by making a “good expose of drug companies practice” but also in making patients (hopefully) aware of their responsibilities in managing their medical care. To make a choice one needs to be informed. Fortunately, today’s technology, the internet, has made the information accessible to all.
Africa development needs development of the mind beyond the University’s border
In two previous notes I have welcomed the education reforms contemplated and/or being currently instituted in Burkina Faso and Ghana. I have argued there and I shall argue here that Africa’s development should not focus solely on improving the “material basket” of goods for the population, but should also address the need for cultivating the most significant source of wealth – the mind. Translating into simple terms, the development of human capital. Building schools to alleviate illiteracy and/or provide vocational training although a prerequisite to a developing society, it is by no means sufficient. What is needed is to address a much more powerful resource, the human mind. Universities are the host for such a development. There is an urgent need to focus on this pillar for development. It is not enough to boost that an African country has one or two universities within its border or that there are thousands of students enrolled in these universities. Rather we should be looking at the university not only as a vehicle to generate a higher level of education, which is salutary, but also as an engine for development.
The African Universities have to serve their clients, the students, but much more importantly the community and the country. As it currently stands, the African University is over burdened by lack of infrastructure and teachers. Most significantly is the lack of the freedom and/or capacity for students and faculty to participate in the development of their community and country.
With all the difficulties associated with Africa’s development, I am encouraged by news from Africa about academia’s reach to the community. In February 2007, students from the University of Nairobi (Kenya) visited four villages in a Matayos division (a hard core poverty area) to carry out community development outreach activities. The theme was: “taking the university to the village”. The underlying philosophy I believe is to develop a model for the university to reach out to the community and to learn from the community. Education is a two ways street. The university generates knowledge, but most African universities insulate themselves from active participation in their communities and most often play no role in shaping or formulating development policies. Knowledge is a “treasured” good but it should never be locked up within the walls of the university.
The Institute for Economic Policy Studies’ African Outreach Program is committed to expand the boundaries of the University by enabling college teachers and students to break new grounds in redefining the role of the university. We believe that the university not only is a generator and store of knowledge but also an active participant in dissemination and the use of this knowledge.
The Institute for Economic Policy Studies (see its activities at http://www.iespolicy.org/) is currently in the planning stage for a Conference on the “Role of the University in the Process of Development”. More on the program will be posted later.
The African Universities have to serve their clients, the students, but much more importantly the community and the country. As it currently stands, the African University is over burdened by lack of infrastructure and teachers. Most significantly is the lack of the freedom and/or capacity for students and faculty to participate in the development of their community and country.
With all the difficulties associated with Africa’s development, I am encouraged by news from Africa about academia’s reach to the community. In February 2007, students from the University of Nairobi (Kenya) visited four villages in a Matayos division (a hard core poverty area) to carry out community development outreach activities. The theme was: “taking the university to the village”. The underlying philosophy I believe is to develop a model for the university to reach out to the community and to learn from the community. Education is a two ways street. The university generates knowledge, but most African universities insulate themselves from active participation in their communities and most often play no role in shaping or formulating development policies. Knowledge is a “treasured” good but it should never be locked up within the walls of the university.
The Institute for Economic Policy Studies’ African Outreach Program is committed to expand the boundaries of the University by enabling college teachers and students to break new grounds in redefining the role of the university. We believe that the university not only is a generator and store of knowledge but also an active participant in dissemination and the use of this knowledge.
The Institute for Economic Policy Studies (see its activities at http://www.iespolicy.org/) is currently in the planning stage for a Conference on the “Role of the University in the Process of Development”. More on the program will be posted later.
Thursday, March 1, 2007
Africa on the move
News from Africa is most often grim. The never ending ethnic conflicts in Darfur, the mass killing in Rwanda, the children soldiers in Somalia, to cite a few, although have a shilling effect on our sense of justice and fairness, their frequency leave one to wonder if ever we will hear of good news coming out of Africa.
The African Executive, a magazine accessible online, has weekly features about development events in Africa. In its February 28th issue, two worthy news items were featured. The first, titled “Freedom: The way forward for Africa”, relays to their readers a very significant message that came out of the 2007 meeting of the Mont Pelerin Society hosted by Inter-Region Economic Network in Nairobi. The Society discourse focused on “The Institutional Framework for Freedom in Africa”. This is indeed good news. In my February 27 piece “Africa open for business: A Minister’s view on the role of African University in economic development”, I have made the point that we need to do more than to articulate the link between democracy or freedom and economic development. People in the developing world need to be shown that democracy is a “prerequisite” to economic development. The Mont Pelerin Society meeting in Nairobi is one such and effort. By facilitating exchange of ideas between African scholars, legislators and policy makers from Africa and other continents, they demonstrated that a prerequisite to understanding the link between freedom, political and economic is for the citizenry to be informed about the practice, the principles and the workings of a free society. Hopefully many more such meetings will advance the cause of freedom and economic progress in Africa.
The second news item is about education reform in Ghana. In my piece I have relayed what Minister Pare, the Minister of Education in Ouagadougou, have said about the need to reform the education system in Burkina Faso by linking the University to a house. The African University, in the words of Minister Pare, “was like a house with a roof which is not adapted to the house. To make the roof fit with the house, changes have to be made to the plans.” There is a reason to be optimistic about educational reform in Africa. The Ghanaian Minister of Education, Papa Owusu Ankomah has introduced a new education bill that link the education system to the economic development of Ghana. As reported in the African Executive under the heading “Rebranding our education system”, the Minister makes the case for “decentralization of education management and development” that “in the education planning and management, the respective Ghanaian communities should be involved in the sustainable development of Ghana.” Minister Papa Owusu Ankomah, like Minister Pare, has voiced the need to reform the education system in their respective countries. What is remarkable about this is that both ministers not only have articulated the link between education and economic development, but outlined steps to bring about changes that advance the cause of Africa’s progress.
Freedom and Education, let us hope will lead the way forward.
The African Executive, a magazine accessible online, has weekly features about development events in Africa. In its February 28th issue, two worthy news items were featured. The first, titled “Freedom: The way forward for Africa”, relays to their readers a very significant message that came out of the 2007 meeting of the Mont Pelerin Society hosted by Inter-Region Economic Network in Nairobi. The Society discourse focused on “The Institutional Framework for Freedom in Africa”. This is indeed good news. In my February 27 piece “Africa open for business: A Minister’s view on the role of African University in economic development”, I have made the point that we need to do more than to articulate the link between democracy or freedom and economic development. People in the developing world need to be shown that democracy is a “prerequisite” to economic development. The Mont Pelerin Society meeting in Nairobi is one such and effort. By facilitating exchange of ideas between African scholars, legislators and policy makers from Africa and other continents, they demonstrated that a prerequisite to understanding the link between freedom, political and economic is for the citizenry to be informed about the practice, the principles and the workings of a free society. Hopefully many more such meetings will advance the cause of freedom and economic progress in Africa.
The second news item is about education reform in Ghana. In my piece I have relayed what Minister Pare, the Minister of Education in Ouagadougou, have said about the need to reform the education system in Burkina Faso by linking the University to a house. The African University, in the words of Minister Pare, “was like a house with a roof which is not adapted to the house. To make the roof fit with the house, changes have to be made to the plans.” There is a reason to be optimistic about educational reform in Africa. The Ghanaian Minister of Education, Papa Owusu Ankomah has introduced a new education bill that link the education system to the economic development of Ghana. As reported in the African Executive under the heading “Rebranding our education system”, the Minister makes the case for “decentralization of education management and development” that “in the education planning and management, the respective Ghanaian communities should be involved in the sustainable development of Ghana.” Minister Papa Owusu Ankomah, like Minister Pare, has voiced the need to reform the education system in their respective countries. What is remarkable about this is that both ministers not only have articulated the link between education and economic development, but outlined steps to bring about changes that advance the cause of Africa’s progress.
Freedom and Education, let us hope will lead the way forward.
Tuesday, February 27, 2007
Africa open for business: A Minister’s view on the role of African University in economic development
During two weeks in July 2006, a gathering of scholars from African and American universities took place at Clark University as part of the first African Outreach Program, sponsored by The Institute for Economic Policy Studies. The Conference theme was “Democracy, Liberty and Development”. One of the highlights of the Conference was the keynote speech delivered on July 20 by Professor Joseph Pare, the Minister of Education in Burkina Faso, West Africa. Appearing before an audience made exclusively of University teachers, administrators and students, Minister Pare’s talk was devoted to the role of the African University in the process of development.
Minister Pare’s talk was enlightening not only because of what he said but also for what he did not. He eloquently identified the problems facing the African University drawing on his experience as a teacher, vice president and president of Ouagadougou University before being elevated to the post of the Minister of Higher Education of Burkina Faso.
In most of the African countries higher education institutions (elementary and secondary as well) were created, administered and shaped during colonial rules. As such, the African University, in the words of Minister Pare, “was like a house with a roof which is not adapted to the house. To make the roof fit with the house, changes have to be made to the plans.”
Of course, plans can be changed, and a new structure can be erected. But “how and by whom?”. Viewed in the context of economic development, this is precisely the question that has baffled development economists for more than a quarter of a century. Unlike many others, Minister Pare did not dwell on the colonial past neither did he absolve his countrymen from the lack of progress in securing better living standards for the population.
Let me state from the outset that I am not a “development economist”. However, one need not be one to enumerate the failure of this branch of economics to solve the problems of poverty and backwardness that plague so many countries in the globe.
The North-South dialogue that begun during the 1970’s was viewed by many as the first step towards a meaningful dialogue between the have and have not. For awakening the world consciousness to the plight of the South. That of course did not happen. Neither the North-South dialogue nor its successors embodied in the G-7(8) have made much headway in treating, in the words of Pare (referring to Africa), “a continent of desolation, a sick person without a guarantee of recovery.”
Economists and non economists alike have come to recognize that “development” is a challenge confronting every society, although at different times. It is a multidimensional process and not purely economics. Yet, with all the knowledge Universities have generated whether through writing, publishing* and teaching about development, we seem to have failed. But perhaps we have not. Knowledge generated by writing about development, consulting for development, has advanced the cause of development. Collectively we have come to recognize that “poverty and deprivation have proved to be robustly sustainable”, that, as Tullock put it, “it is not enough to argue that democracy will lead to greater economic progress”. We need to show that it does.
* I have counted over 600 articles written about development in Africa just over the past five years.
Minister Pare’s talk was enlightening not only because of what he said but also for what he did not. He eloquently identified the problems facing the African University drawing on his experience as a teacher, vice president and president of Ouagadougou University before being elevated to the post of the Minister of Higher Education of Burkina Faso.
In most of the African countries higher education institutions (elementary and secondary as well) were created, administered and shaped during colonial rules. As such, the African University, in the words of Minister Pare, “was like a house with a roof which is not adapted to the house. To make the roof fit with the house, changes have to be made to the plans.”
Of course, plans can be changed, and a new structure can be erected. But “how and by whom?”. Viewed in the context of economic development, this is precisely the question that has baffled development economists for more than a quarter of a century. Unlike many others, Minister Pare did not dwell on the colonial past neither did he absolve his countrymen from the lack of progress in securing better living standards for the population.
Let me state from the outset that I am not a “development economist”. However, one need not be one to enumerate the failure of this branch of economics to solve the problems of poverty and backwardness that plague so many countries in the globe.
The North-South dialogue that begun during the 1970’s was viewed by many as the first step towards a meaningful dialogue between the have and have not. For awakening the world consciousness to the plight of the South. That of course did not happen. Neither the North-South dialogue nor its successors embodied in the G-7(8) have made much headway in treating, in the words of Pare (referring to Africa), “a continent of desolation, a sick person without a guarantee of recovery.”
Economists and non economists alike have come to recognize that “development” is a challenge confronting every society, although at different times. It is a multidimensional process and not purely economics. Yet, with all the knowledge Universities have generated whether through writing, publishing* and teaching about development, we seem to have failed. But perhaps we have not. Knowledge generated by writing about development, consulting for development, has advanced the cause of development. Collectively we have come to recognize that “poverty and deprivation have proved to be robustly sustainable”, that, as Tullock put it, “it is not enough to argue that democracy will lead to greater economic progress”. We need to show that it does.
* I have counted over 600 articles written about development in Africa just over the past five years.
Thursday, February 22, 2007
Mandates and Bans: Is it Paternalism or “petty tyranny”?
Two headlines are making the rounds in the media: New York City ban on trans fats effective July 2008; and the state of Texas mandates, beginning in September 2008, that girls entering the six grade – girls age 11 and 12 – will have to be vaccinated against the sexually transmitted virus that causes cervical cancer.
The two issues although differ in terms of their effects on the health of the intended subject, both reek of the smell of paternalism. What is wrong with paternalistic legislations? In the first case, the ban on trans fats protect us from artery-clogging artificial trans fats, helps fight “obesity”, cut down on the time and the cost of dieting, going to the gym, visits to weight watchers clinics, and so on. Just like “Popeye” telling kids to eat spinach to build their strength and mothers telling their kids to eat their vegetables, the government is telling us not to eat food cooked in trans fats. Both at the private and public level, the intent appears to be the same – to protect us from ourselves. What is wrong with that? I will address the question later.
The second case, mandating girls 11/12 years old to be vaccinated against cervical cancer, although at the outset appears to be no more no less than mandating school-age children to be vaccinated against chickenpox, typhoid, whooping cough, the acts are not one and the same. The mandate in the cancer vaccine case is predicated on the assumption that teen age girls need to be protected from themselves – cervical cancer is a sexually transmitted disease, whereas in the second case no such protection is the justification for the vaccine.
The debate in media, print, the airway and on the internet, provide us with the opportunity to look closely at ourselves in relation to our government.
Economists, like people in other walks of life, have entered into the debate for they do have a stake in the outcome. The concern goes beyond a debate over whether a ban on trans fats or a vaccine against cervical cancer promote good health, but it goes to the heart of what the economic discipline is all about. Put differently: is the individual rational? Is the individual choice optimal? Economists are not all of one mind. Some of us are libertarian, championing free choice and individual responsibility, others are somewhat paternalistic who have and continue to argue that the individual may not always make choices that are in his/her best interest.
The ban on trans fats and the vaccine mandate could not have come at a better time for our profession. Economists have long maintained that government intervention that falls under the heading of “paternalistic” intervention is justified when “externalities” or third party effects are present. Cases like banning smoking in buildings is for the protection of non-smokers once it was established that second-hand smoking affects the health of non-smokers. In this and other third-party effect cases, economists argued that government involvement may be called for in situations where the party to the act does not bear the full costs associated with the action. Even there economists, notably Nobel Laureate Ronald Coase, find the government case weak when the possibility of bargaining between the parties involved is possible.
Third-party effect is not present in either the trans fats or the cancer vaccine cases. Not everyone will agree with this assessment. The argument will be advanced that obesity has a third-party effect. It imposes cost on society in terms of “national image”, crowding out in the delivery of health care, and misallocation of the economy resources. Likewise in the case of cervical cancer, the third-party effect can be measured by the cost to society for the loss of life of young girls and the resources that need to be allocated for the afflicted individuals.
The third-party argument, whether or not one accepts it, does not fall under the “paternalistic” ideology. Paternalism is predicated on the assumption that someone else knows what is best for you. That someone may be your mother or father or “big brother”. For parent to mandate that their children eat vegetable or abstain from performing a certain activity they have to back their act by coercion when persuasion fails (which most often does). Paternalism, in the form of a ban or mandate, carry with it coercion. This is the question that ought to be at the heart of the debate.
A new generation of economists has put forth the proposition that paternalistic intervention by governments or other institutions are needed to correct problems of self control. Paternalism is advocated by this group with or without coercion and independently of whether or not self control problems give rise to third-party effects.
Individuals are said to exhibit “bounded rationality”, “lack of self control”, do not always act in their best interest and the faster the profession acknowledge this, the better we should be able to accept paternalistic intervention, whether that be asymmetric, optimal or libertarian.
The jury is still out on which of these views will end up in main stream economics. For my part, I cannot dismiss entirely the notion of paternalism. As a mother I often dictated for my daughter rules that have to live by. For me, on behalf of my daughter and myself, I do not accept paternalistic intervention by the state that overrides choices I make for myself or for my child, given that such choices do not infringe on the choices of others or place costs (deprive others from the benefits) on them because of my action or lack of action.
In banning trans fats and mandating vaccines we seem to have forgotten individual and parents’ responsibility.
For those of us who argue for freedom of choice we by no mean overlook the fact that freedom has a price. That price is the responsibility of the act that we have chosen. If the individual lacks self control, he/she is undoubtly not free. Mandates and bans, paternalistic or not, will not restore his/her freedom. What we should be worrying about is how to enhance and not to curtail the freedom of those who are not fortunate enough to be able to exercise it.
The two issues although differ in terms of their effects on the health of the intended subject, both reek of the smell of paternalism. What is wrong with paternalistic legislations? In the first case, the ban on trans fats protect us from artery-clogging artificial trans fats, helps fight “obesity”, cut down on the time and the cost of dieting, going to the gym, visits to weight watchers clinics, and so on. Just like “Popeye” telling kids to eat spinach to build their strength and mothers telling their kids to eat their vegetables, the government is telling us not to eat food cooked in trans fats. Both at the private and public level, the intent appears to be the same – to protect us from ourselves. What is wrong with that? I will address the question later.
The second case, mandating girls 11/12 years old to be vaccinated against cervical cancer, although at the outset appears to be no more no less than mandating school-age children to be vaccinated against chickenpox, typhoid, whooping cough, the acts are not one and the same. The mandate in the cancer vaccine case is predicated on the assumption that teen age girls need to be protected from themselves – cervical cancer is a sexually transmitted disease, whereas in the second case no such protection is the justification for the vaccine.
The debate in media, print, the airway and on the internet, provide us with the opportunity to look closely at ourselves in relation to our government.
Economists, like people in other walks of life, have entered into the debate for they do have a stake in the outcome. The concern goes beyond a debate over whether a ban on trans fats or a vaccine against cervical cancer promote good health, but it goes to the heart of what the economic discipline is all about. Put differently: is the individual rational? Is the individual choice optimal? Economists are not all of one mind. Some of us are libertarian, championing free choice and individual responsibility, others are somewhat paternalistic who have and continue to argue that the individual may not always make choices that are in his/her best interest.
The ban on trans fats and the vaccine mandate could not have come at a better time for our profession. Economists have long maintained that government intervention that falls under the heading of “paternalistic” intervention is justified when “externalities” or third party effects are present. Cases like banning smoking in buildings is for the protection of non-smokers once it was established that second-hand smoking affects the health of non-smokers. In this and other third-party effect cases, economists argued that government involvement may be called for in situations where the party to the act does not bear the full costs associated with the action. Even there economists, notably Nobel Laureate Ronald Coase, find the government case weak when the possibility of bargaining between the parties involved is possible.
Third-party effect is not present in either the trans fats or the cancer vaccine cases. Not everyone will agree with this assessment. The argument will be advanced that obesity has a third-party effect. It imposes cost on society in terms of “national image”, crowding out in the delivery of health care, and misallocation of the economy resources. Likewise in the case of cervical cancer, the third-party effect can be measured by the cost to society for the loss of life of young girls and the resources that need to be allocated for the afflicted individuals.
The third-party argument, whether or not one accepts it, does not fall under the “paternalistic” ideology. Paternalism is predicated on the assumption that someone else knows what is best for you. That someone may be your mother or father or “big brother”. For parent to mandate that their children eat vegetable or abstain from performing a certain activity they have to back their act by coercion when persuasion fails (which most often does). Paternalism, in the form of a ban or mandate, carry with it coercion. This is the question that ought to be at the heart of the debate.
A new generation of economists has put forth the proposition that paternalistic intervention by governments or other institutions are needed to correct problems of self control. Paternalism is advocated by this group with or without coercion and independently of whether or not self control problems give rise to third-party effects.
Individuals are said to exhibit “bounded rationality”, “lack of self control”, do not always act in their best interest and the faster the profession acknowledge this, the better we should be able to accept paternalistic intervention, whether that be asymmetric, optimal or libertarian.
The jury is still out on which of these views will end up in main stream economics. For my part, I cannot dismiss entirely the notion of paternalism. As a mother I often dictated for my daughter rules that have to live by. For me, on behalf of my daughter and myself, I do not accept paternalistic intervention by the state that overrides choices I make for myself or for my child, given that such choices do not infringe on the choices of others or place costs (deprive others from the benefits) on them because of my action or lack of action.
In banning trans fats and mandating vaccines we seem to have forgotten individual and parents’ responsibility.
For those of us who argue for freedom of choice we by no mean overlook the fact that freedom has a price. That price is the responsibility of the act that we have chosen. If the individual lacks self control, he/she is undoubtly not free. Mandates and bans, paternalistic or not, will not restore his/her freedom. What we should be worrying about is how to enhance and not to curtail the freedom of those who are not fortunate enough to be able to exercise it.
Subscribe to:
Posts (Atom)
