Mar 31, 2010

Blame Germany!

The French economy minister, Christine Lagarde, has found the problem with the EU: Germany. Indeed, it is too productive, and Germans save too much and consume too little, which is clearly not "sustainable for the long term". In an interview with the FT, she said Berlin should raise wages to make its workers less competitive. Is she on crack? Apparently, the FT thinks she is the best minister of Finance of the Eurozone. Is everybody on crack?

Smuggling Indonesia's islands, one boat load at a time!

freakonomics reports:
Black-market smugglers are literally stealing Indonesia’s small islands, including the legendary UNESCO heritage site of Krakatoa. “Sea reclamation projects in China, Thailand, Hong Kong and Singapore are driving a black market in Indonesia’s abundant supplies of soil, sand and gravel,” reports The Times of London. Twenty-four islands have allegedly disappeared since 2005 due to erosion driven by sand mining. 

Mar 30, 2010

Global sports salaries database

A new report compiled by, the "Review of Global Sports Salaries", finds that the New York Yankees are the world's highest-paid players in a team sport. The ranking is below. They also have a free sports salaries database that compares athletes’ wages covering a variety of football leagues (soccer) and baseball leagues, plus NBA basketball, NFL football, NHL hockey, IPL cricket, the top 20 earners from each of the ATP and WTA tennis tours, and the top 30 earners from the PGA annual world money list. This data could be interesting to study incentives or market structures.

ht: fv

Mar 29, 2010

Opportunity cost of cars vs. trains: The Case of Switzerland and the United States

This is a follow up to the post from Mar 25, 2010: Is the Geneva-Lausanne train ride really expensive?

Take it as given that the opportunity cost of train is car. (obviously, as by def. the next best alternative ;)

Assuming that on average you can get 10 km on 1 litre of fuel, in Switzerland at the current gas prices:1km = 0.151 USD and in the US, 1km = 0.078 USD.

At the current exchange rate this is more or less equivalent to the price in CHF, namely: 0.16CHF and 0.08CHF respectively.

Now we can explore the train costs with respect to car costs.

Paying tribute to old mate David,
"Double, double toil and trouble;
Fire burn, and caldron bubble." and ta-da!

In USA, the opportunity cost of 1 km on train cost is 0.66 CHF of 1 km by car but only 0.47 CHF of 1 km by car in Switzerland.

Of course, if you are a true baller boasting a Hummer, then the above may no longer apply.

However, as recession hit hard the USA, and keeping in mind that in 2000, 57% of households owned 2 or more cars, then assuming slightest amount of rationality within the jungle that we are living in, we can expect that people tried to make more trips with the environmentally friendly, fuel efficient cars of the wives... In this sense, the vehicle ingredient of the above calculations is no longer as heterogeneous, and shouldn't bias the USA-CH opp costs results.

Optimist's bottom line: Swiss trains are a good deal
Pessimist's bottom line: Swiss cars are "uber-piggy-bank-breakers

Mar 28, 2010

gotta love these forecasts!

"Stocks have reached what looks like a permanently high plateau."
Irving Fisher, Professor of Economics, Yale University, 1929.

"1930 will be a splendid employment year."
U.S. Department of Labor, 1929.

Mar 25, 2010

Is the Geneva-Lausanne train ride really expensive?

The 45 minute train ride from Geneva to Lausanne costs 20.5 CHF, enough to discourage us from going there for seminars. But is this really expensive? To answer that question, I compare it to the New Haven - New York line in the US. The latter costs 15 CHF but takes 1:50. A lot cheaper at first glance; you go further for less. Indeed, it costs you 0.12 CHF per km, rather than 0.34 CHF!

But what about the opportunity cost of time? Taking this into account, the US train remains the better deal, but not by much, costing 0.22 CHF per km per hour instead of 0.26 CHF in Switzerland. One could argue comfort should also enter the equation, making the Swiss train a better deal after all. But then we could also include the Dunkin' Donuts at New Haven Grand Central. But that would be unfair competition.




CHF per km


CHF per  km/h

New Haven - New York







Geneva - Lausanne







Mar 24, 2010

Tackling crime in Geneva

Geneva has the highest criminality rate in Switzerland. Last year, we asked for the city to react. But the police has remained the most unprofessional. Things may be about to change. The Geneva police is launching the "Figaro" operation. It will boost up its presence in the Pâquis, Eaux-Vives, Rive and around Cornavin. The goal is to punish small crimes, be visible, and regain the confidence of the population. Is this the right way to go? Abortion is already legal, social problems are minimal. A more effective police might be just what is needed.

Mar 23, 2010

Innovation and economic development

WIPO is launching a series of seminars on “The Economics of Intellectual Property” on March 26, 2010. The event will feature leading economists from around the world and is designed to stimulate and inform international debate on the linkages between intellectual property and development. Could be interesting for some of us.

This week, five economists are coming: Keith Maskus, Colorado,  Brownyn Hall, Berkeley, Keun Lee, Seoul, José Tavera Colugna, Perú, and Francois P. Kabore, American University. The roundtable will be chaired by WIPO’s Chief Economist, Carsten Fink and begins at 3PM. Will they offer pizza and beer? Check this link for more details.

Google will try to stay in China

In the 15th century, China was technologically superior to Europe in many fields but turned its back to the world. In 1436 an imperial edict was issued forbidding the construction of ocean going vessels. Foreign missions and voyages were banned. Trade and even contact with foreigners were officially discouraged. (source)

Will China mess it up again as Google tries to stay alive in China? Or will it turn its back to the world, once again? This could be the beginning of the end...better stay cool...

Mar 22, 2010

Land grabs

We talked about a year ago about the spread of land deals in Africa. Well, it seems the practice is alive and well according to a recent article in The Guardian.

One of the cited examples is in Ethiopia, where millions of tomatoes, peppers and other vegetables are being grown in 500m rows in computer controlled conditions. Spanish engineers are building the steel structure, Dutch technology minimises water use from two bore-holes and 1,000 women pick and pack 50 tonnes of food a day. Within 24 hours, it has been driven 200 miles to Addis Ababa and flown 1,000 miles to the shops and restaurants of Dubai, Jeddah and elsewhere in the Middle East. Ethiopian-born Sheikh Mohammed al-Amoudi, one of the 50 richest men in the world plans to spend up to $2bn acquiring and developing 500,000 hectares of land in Ethiopia in the next few years. So far, it has bought four farms and is already growing wheat, rice, vegetables and flowers for the Saudi market. It expects eventually to employ more than 10,000 people.

Isn't this great news?

Well, it seems that in many areas the deals have led to evictions, civil unrest and complaints of "land grabbing". There is no consultation with the indigenous population. The deals are done secretly. The only thing the local people see is people coming with lots of tractors to invade their lands. Thousands of people will be affected and people will go hungry.

But people have been hungry for the past decades, and local farmers refuse to use fertilizer! Land deals may be bad, but are they worse than the proper counterfactual?

Mar 19, 2010

The best paper on the origins of the subprime crisis

The WSJ tells the story of A.K. Barnett-Hart, a Harvard undergraduate who has written a thesis about the market for subprime mortgage-backed CDOs that remains more interesting than any single piece of Wall Street research on the subject. While every economist was explaining that subprime loans package in obscure CDOs rated way too high led to a meltdown, she was the first to provide the much needed empirical evidence. She does have some pretty nice graphs indeed. Grande AK!
“After writing my thesis, it became clear to me that the culture at these investment banks needed to change and that incentives needed to be realigned to reward more than just short-term profit seeking”. She's now  a  financial analyst at a large New York investment bank. Good luck!

Mar 17, 2010

Who better than the IMF to fight climate change

Why in the world is Mr Strauss-Kahn, the IMF chief economist, heralding a new IMF Green Fund focusing on mitigating climate change in Africa? Is this a new kind of IMF conditionality? What does the IMF have to do with global warming? Maybe he just wants to increase his popular appeal before running for the French presidency in a couple of years.

Mar 16, 2010

A European Monetary Fund?

Apart from the fact that it would create jobs for us in a European city...

Mar 11, 2010

UN to polish its image using Hollywood's film industry

The latest  plan from the UN to polish its public image is to enlist Hollywood's film industry's assistance.
"Ban Ki-moon quietly visited Hollywood this Oscar week, devoting an entire day to lobbying hundreds of the world's most influential actors, directors, and film producers about the potential benefits of storylines that portray his organisation in a positive light. Mr Ban's "Global Creative Forum" was attended by Anne Hathaway, Demi Moore, Mira Sorvino, Sean Penn, Samuel L Jackson, and director Jason Reitman. Ban Ki has grown weary of the organisation being portrayed as a bumbling bureaucracy and hopes to persuade film-makers to focus on the heroic stories behind its humanitarian work in countries such as Haiti, and peacekeeping missions in other global trouble spots."

What a great idea!

Source: Independent

Mar 10, 2010

Solidarity account for public debt repayment‏

Pursuant to Bank of Greece Governor’s Act 271/4.3.2010, an account entitled “SOLIDARITY ACCOUNT FOR REPAYMENT OF PUBLIC DEBT” (No. 24/26132462) has been opened at the Bank’s Head Office, Public Entities Accounts Section, for voluntary deposits, to be used exclusively for the repayment of Greece’s public debt.

Deposits to the account shall be accepted, starting 5 March 2010, at the Head Office, the Branches, Outlets and Agencies of the Bank of Greece, as well as through commercial banks.

The details of the solidarity account are as follows:
IBAN: GR 04 010 0024 0000000026132462

For further information, please contact the Public Entities Accounts Section, tel: 210 320 2716 & 210 320 3376.

ht: bunkey

Mar 9, 2010

Investing in people

Ana Ivanovic was from a poor Serbian family but wanted to become a professional tennis player. When she was 14, her parents found a Swiss businessman who spent a total of $500,000 on her coaching and training in Switzerland in exchange of a share of her future earnings. Years later, Ivanovic was signing a four-year, multimillion dollar endorsement contract with Adidas. The Swiss businessman had made a sound investment.

There is now a Jock Market run by Little Yim. You can provide financial support to talented athletes with the aim of receiving a return on your investment!

But it's not only athletes. Marginal Revolution has a post about Kjerstin Erickson, a 26-year-old Stanford graduate who founded a non-profit called FORGE that rebuilds community services in Sub-Saharan African refugee camps, who is offering 6% of her life’s income for $600,000.

This is actually an old idea from...Milton Friedman.

Happy Women's Day

I guess

Mar 7, 2010

Live aid - another example of aid failure

"Former rebel leaders told the BBC that they posed as merchants in meetings with charity workers to get aid money. They used the cash to fund attempts to overthrow the government of the time. One rebel leader estimated $95m (£63m) - from Western governments and charities including Band Aid - was channeled into the rebel fight." For the whole story check the BBC webpage.

While the numbers may be wrong the fact is likely to be true. The question about the usefulness of aid keeps reemerging: I think there are but two options: Either drop it altogether or tighten the conditionalities.

While the first is morally difficult (even though several aid projects have done more harm than good this is certainly not true for the entirety of them) the second option is likely to remain as flawed as the current situation.