Labor for Convergence, Big Time.

Just came back from Lant Pritchett's lecture, which was fabulous! The title of this blog post is how he signed my copy of "Divergence, Big Time." [That's right kids. I have a signed copy of his paper!]

Pritchett's lecture sparked a lot of controversy here at Wellesley, which goes to show the degree of sensitivity with which such issues as migration and nationalism must be addressed. Good thing Lant is so engaging and likable.

Quote that I liked: "You find power in silence, not in controversy."
Lant explained it this way: we no longer believe in racism, sexism, sexualism, etc. However, we still believe in nationalism. While people think it is absurd to treat others differently based on race, sex, or sexuality, nobody thinks it is absurd to treat people differently based on nationality. There is silence when it comes to nationalism. Nobody questions the validity of such "imagined communities."

Nayan Chanda makes a similar point in Bound Together. He argues that people have gone from believing in separate towns, to separate states, to separate countries. So why stop there? Isn't it time we made the transition from separate entities to one global community?

Economists always talk about free trade and free movement of goods. However, the gains from free movement of goods are dwarfed by those that are potentially made from free movement of labor. According to Lant's calculations, a lifetime of micro-credit made available to a person in Bangladesh results in gains that are equivalent [in NPV] to those made by a person being allowed to work in the U.S. for 2.4 weeks. 2.4 weeks!
If we allowed 3,000 Bangladeshi workers into the U.S. [the labor force is ~153.1 million in the U.S. including those unemployed], we could help Bangladeshis by as much as Grameen Bank does each year.

Usually people argue that such immigrants would push down wages for U.S. workers. However, a study by Peri found that low-skilled immigrant workers from Mexico actually created more job opportunities for Californians, and added scarcity value to skilled American workers in CA. Why? Because more often than not, low-skilled immigrant workers are imperfect substitutes for high-skilled American workers.

If free migration leads to such pareto improvements, why are people so hung up on the importance of nationalism/borders?

Several friends of mine argued that Lant's idea of a world without borders is a pipe dream. They also argued that culture comes from people being tied to specific places that are not open to everyone. However, the more I talked about this issue with my friends, the more I found myself defending Lant's point of view. I agree that Lant's proposal is somewhat of a pipe dream. However, the more I argue about it with people, the more upset I am that it IS a pipe dream.

One argument that someone made against Lant's idea was that culture is created and preserved because people are tied to a specific place. An example that was presented to me was India. If everyone in India were allowed to move to the U.S., what would happen to the Indian culture? Wouldn't it fade away?

My response to that is as follows. I believe that cultures are preserved not within places, but within people.
This is my over-simplification of the issue: I'm from NYC, and I am very much a New Yorker. I jaywalk all the time, I don't know how to drive, and I am weirded out by strangers who smile or wave to me unnecessarily. However, I attend school in Wellesley, MA. Not because I was tired of NY, or because I wanted to give up being a New Yorker, but because the college that I wanted to attend happened to be in Wellesley, MA. Obviously, I had to make adjustments. However, I still jaywalk [not that it's hard to do in wellesley, ma], I still don't drive, and I am still weirded out by strangers who smile or wave to me unnecessarily. My "New Yorker-ness" has been diluted in the sense that I no longer make a weird face when strangers wave to me. However, I don't think that the people of Wellesley, MA have the right to refuse my entry on the grounds that it is my responsibility to maintain the "New York" culture by staying in NY. Likewise, I don't think one can make the argument that other people should not be allowed to migrate freely b/c their country of origin's culture might fade away. People will preserve their culture no matter where they are if they are so compelled. My parents would rather live in NY than in South Korea any day, but they're certainly not going to tell other South Koreans to stay in S. Korea b/c well, somebody has to preserve the culture. No. Also, if people need to choose between preserving culture, and finding a way to provide food for their families, they are going to choose the latter. It's kind of like the environment. Countries don't give a shit about the environment until after they've developed and have reached a certain level of income.

I feel like one can even argue that victims of various diasporas have been even better about preserving culture than those who have always had a country called home. Maybe people who don't have a country to go back to feel a greater sense of responsibility about preserving culture within themselves. [Just a theory based on comments from Jewish and Armenian friends]

Also, Lant argued that "brain drain" is a concept that has only stuck around for so long b/c it rhymes. He suggested an alternative phrase: "cortex vortex!"

Someone argued that borders should not be open b/c "brain drain" "steals" skilled labor away from developing countries that need it most. Lant argued that the alternative then, is to keep these skilled people out of countries where they will be paid their marginal product and force them to stay in countries where they will be more likely to pursue rent-seeking activities in order to compensate for the fact that they are not paid their marginal product.

Overall, I thought Lant made some very interesting points about migration and development. Another quote that I liked from his lecture was: "We have to think about development in terms of people, not places." When we talk about developing countries, we are really thinking about the people in those countries. So why are we so opposed to labor migration? Why is it such a pipe dream?

Lant talked about so much more, but I'm going to go rest my wrists now. This is one of the longest blog posts I've ever written...and it probably did not do Lant Pritchett's lecture justice. You'll just have to see him for yourself when you get a chance.

While Waiting for Lant to Arrive...

Chrysler Bankruptcy Plan (NYTimes)

(The Economist)

Please hire me. Even if it's for next year. Recruitment in the recession. (The Economist)

Before you tell me you are too busy: Tim Geithner's Schedule

We talked about corn subsidies and high fructose corn syrup in Development Econ the other day. We watched this video. I don't want to be like that woman who couldn't respond to "what's wrong with HFCS?" so I memorized this line from wikipedia: "Large quantities of fructose stimulate the liver to produce triglycerides, promotes glycation of proteins and induces insulin resistance." I suggest you all do the same.
See another blog post about HFCS here.

Talked about patents in Health Econ today. "According to the non-partisan Center for Responsive Politics, pharmaceutical companies spent $900 million on lobbying between 1998 and 2005, more than any other industry." [wiki]
Woa.
Government R&D, or promise of monopoly?

Lastly, friends' suggestion for my blog!

[Lant Pritchett will be here in an hour!]

Divergence, Big Time.

Lant Pritchett will be speaking on Thursday, April 30th at 4:45 PM in PNW 212! His lecture is titled: "Is Migration Good for Economic Development? How Could You Even Ask?" He will be discussing the benefits of labor migration.

I was going to do background research and blog about labor migration beforehand, but I think I'll wait for Pritchett to give his lecture so I can blog about it in one sitting.
For now, I decided to talk about the Lant Pritchett's paper on income divergence, because that's interesting too. And it's one of the first papers I read for Econ Growth.

Many people have argued that there is an "advantage to backwardness," as poorer countries grow at faster rates than richer ones. However, in his paper, "Divergence, Big Time," Pritchett argues that "convergence" is tautological because when one examines countries that are rich now, they have to have either been historically rich while growing at a relatively steady rate, or historically poor and growing at a faster rate. Thus, the finding of convergence is tautological.

Pritchett finds that there is more evidence to suggest that countries have diverged, rather than converged. He uses a lower bound per capita GDP of $250[purchasing power parity] in order to impute missing 1870 income data for such countries as Ethiopia, Uganda and Tanzania. He justifies his $250 lower bound with a few methods. For example, the lowest level of caloric intake ever recorded is 1,443 calorie/person in Chad in 1984. Bairoch (1993) reported that $291 (@ market exchange rates) was necessary for minimum food intake. Note, Bairoch's estimate is higher than Pritchett's. Pritchett then calculates the income gaps between the rich and poor countries and finds that the average absolute gap in incomes increases from $1,286 to $12,662. Since Pritchett's lower bound of $250 is probably lower than the actual lower bound, his results actually understate the extent to which countries have diverged.

So perhaps there is no "advantage to backwardness." Maybe poorer countries have the potential to grow at faster rates and "catch up" to richer countries, but Pritchett's evidence suggests that the realization of this potential is rare. Twenty-five percent of 60 countries with initial per capita GDP of less than $1000 in 1960 had growth rates less than zero and a third have had growth rates less than 0.5%.

You can find growth rates of real GDP per capita for different countries here.

This is a rather sad blog post.
This, however, is ridiculous!

In other news: I finished my VERY LAST ECON 321 p-set last Friday! I got to make butterflies.

Swine flu scares me.

The Yankees are breaking my heart.

I still need to think of something to buy for Mother's Day. [May 10th, in case you forgot]

Goodbye Pediatrician, Hello Real World.

Last week I went to see my pediatrician and it was perhaps my last visit to her office. Apparently, once I graduate from college, I am no longer eligible to see my pediatrician. I am a little sad because I think, "what general practitioner can possibly care as much about me as my pediatrician?!"

On that note, I have decided to post some things from Health Econ that I thought might be helpful for those of you who will be entering the real world.

Fee-for-service is pretty obsolete now, but it's what your parents might be familiar with. The U.S. has moved towards managed care to contain costs. Thus, we have HMOs and PPOs.

Story: Professor McKnight's friend cut his finger once and went to the emergency room that was closest to him. However, the ER told him that it was not life threatening and that he would have to go to an ER about 40 minutes away to be covered by his Staff HMO. He took a cab to that ER, and they said, "well, you needed stitches, but it's been so long now, that you might as well come back tomorrow."

If you think you would be really upset in this sort of situation, go with the PPO.
But don't worry, HMOs cannot deny emergency care in life-threatening situations.

For network and staff HMOs, you must receive referrals in order to see specialists. For example, you can't see a cardiologist unless your primary care physician gives you a referral.
Also, certain HMOs only cover you in a specific state or region, so you might have to switch to a PPO if you end up moving or traveling.

The difference between network and staff HMOs:
Network HMOs pay physicians through "capitated reimbursement" - fixed fee per patient over a certain period of time.
Staff HMOs pay their physicians a set salary regardless of the number of patients they receive.
Staff HMOs also have their own physicians, clinics and facilities.

Looking at all of this makes me wish I could just see my pediatrician forever, like Ross Geller on FRIENDS...

In other news: Jason Kubel of the Minnesota Twins hit for the cycle. And I got to see it with Evs while eating sushi in Boston last night!

Class of 2009.

EFF

Poor MLB Players!

Look how young Derek Jeter is!

Yankees vs. Orioles [Game 3]
Top of 6th: bases are loaded - Cano at 3rd, Swisher at 2nd, Ransom at 1st. Brett Gardner's up. He hits. Brian Bass throws to the catcher, the catcher MISSES. Cano and Swisher both make runs while Ransom gets to 3rd. AMAZING.

As I am laughing/screaming, my mom says:
"Baseball is so sad and stressful. The poor catcher. He's going to get into so much trouble from his boss!"

So let's see how poor and stressed these players are:

There is a 0.002 chance that a high school baseball player will join the MLB.

From 1990-1992, 20 players had sex scandals, 31 were banned for life, 63 players were arrested/treated for cocaine. 1 player
died of on field injuries, 18 died within a year of having played, 4 were murdered and 5 committed suicide.

Only 5.6% of the MLB had college degrees in 2004 [Mike Mussina graduated from Stanford with a degree in economics!]

Average retirement age of pitchers is ~42-43 years, but the average career of an MLB player lasts 5.6 years.

1 in 5 position players will have only a single year career.

Baseball careers are not normally distributed. Many have short careers lasting only a few years while some have very long careers [10 years+]

The average salary of an MLB player topped $3 million in 2008.

NFL players are jealous of MLB players' pension plans.

Average 10 year retiree gets $180,000 a year.

Their retirement plans are part "defined benefit" and part [optional] "defined contribution."


*This is sad.

Missing Women.

Development Econ was interesting today.

We talked about "missing women" and why there should be more girls in the world than boys [no, not because we're just better. haha.]

"Missing women"
Given the shorter lifespan of men, the fact that more men work in more dangerous settings, etc, there should be more women than men in the world and not the other way around.
Missing women are a result of differences in nutrition provided to daughters vs. sons, differences in schooling [daughters may be exposed to more dangerous elements when they're not in school], etc.
Amartya Sen estimated that about 107 million (~10%) women were "missing" before sex selective abortions were possible in Africa.

One economist, Emily Oster, found high correlation between hepatitis B prevalence and likelihood of having sons. She hypothesized that "missing women" were a result of fewer women being born in countries with high hep. B rates.
This hypothesis was later dismissed because her study only looked at first borns, and results were not robust when looking at 2nd births.

Interesting facts:
Male fetuses are weaker and less likely to survive in high-stress environments.

Our Professor said that the sex of a fetus is not only determined by maternal stress, but also by paternal stress. Apparently, fighter pilots are more likely to have daughters than sons. She said Econ professors also tend to have more daughters than sons. [true of our own Econ department]
Someone in the class then raised her hand to say that you are also more likely to have daughters if you're more sexually active,

so either Econ profs are really stressed out, or they're really sexually active. Maybe they're both...

And you all thought economists weren't sexy.

G-20

$1.1 Trillion.

The IMF

Keith Hennessey's Blog

G-20. Angst.

What the OECD will do to the ECB

What European leaders are thinking

What we want the G-20 summit to be

What I need

Econoland.

Oh what fun!