the 24/7 news cycle drums up everything that is negative and hence most of "feel" that it is getting worse
Lewis Lapham said something brilliant and hilarious about this in a Google talk: people who wonder why the news is always so negative haven't noticed what the positive news is: it's the commercials! Crime, war, and terror, but Tide washes the dirt right out of your clothes!
Part of me wants to accept this information, but I am worried that some kind of Freakonomics will come into play and we'll find that the reason why there appears to be less poor is because X is no longer being considered as Y.
I wonder - is the amount adjusted base on cost of living and inflation? IE if $2 a day now gets the poor the same as $1.50 in the 90s, they haven't really gained anything.
As much as I despise all of the negativity in the news, the optimistic part of me sees it as a way to shine light on the many things wrong with the world at present. While the news may be a bit of a downer, I believe the lasting effects of it are for the best.
When I learn of something terrible or even of a minor crime or injustice, the first thing that comes to my mind is along these lines: "There is obviously some ideal we're working towards, but the current system is inherently flawed; so what can I do to hack this system and make it better?"
Maybe someday we'll have the kinks worked out and will have managed to minimize the "bad" things happening throughout the world. And I believe the news will have ultimately played some role such improvements. The day we see more good news than bad will be a great day.
The problem is that a skewed sense of what's going on in the world can give you a skewed sense of how to improve the world. Case in point: many people imagine that the developed world buying cheap goods and labor from the developing world is a kind of exploitation rather than a form of enrichment.
It also tends to focus on exceptional events rather than on broad trends (positive or negative).
I think one would most reasonably hold that it is both a form of exploitation and a form of enrichment.
The interesting part of the article is that the biggest benefit has been to those in abject poverty: "Most of the progress has been concentrated among the poorest of the poor—those who make less than $1.25 a day. The bank’s figures show only a small drop in the number of those who make less than $2 a day."
One interesting bit buried in the lede was that the article also highlights the benefits of counter-cyclical fiscal expansions among governments. Those that expanded government programmes held down the damage caused by the recession. I would be interested in seeing if those that tried austerity measures suffered more.
Update: changed last sentences to better reflect the point I wanted to make.
"I think one would most reasonably hold that it is both a form of exploitation and a form of enrichment."
Sure. But that's how it works. If I pay a photographer to take my portrait then I am exploiting as well as enriching him, it's a 2 way street of trading things the other person wants. In an unequal relationship such as between the developed and developing world then sometimes the exploitation can seem a bit much compared to the level of enrichment. However, at present there is no known better way to enrich the developing world. In the short term it may seem like it's only exploitation but in the long run the overwhelming likelihood is that it pulls people out of poverty. And this has been true not just in recent times in the countries I've listed, and others, but also farther back in countries like Japan and the US.
However, I should make clear to differentiate trade from other kinds of work. It is very possible to make use of labor in the 3rd world without enriching the people there. There are certainly a good number of examples from the history of colonialism where that was the case. But manufacturing seems to be fundamentally different.
I think one would most reasonably hold that it is both a form of exploitation and a form of enrichment.
Enrichment would leave them -- well, enriched, and exploitation would leave them poorer. These possibilities are diametrically opposed, unless you change the referent of "them" midargument.
It can depend on what you count as riches, in part. For example, several African countries are being enriched by oil and mineral sales, if you count wealth in currency. But several of the countries have cut very bad deals (often due to corrupt governments) over their commodity exports, so that they're exporting considerably more valuable commodities than what they're getting paid for them in currency. So if you include commodities as a form of value, net value is flowing away from the country, enriching the government's short-term budget figures at the expense of draining their long-term commodities reserves.
A country can be simultaneously enriched and exploited if the people in the country are not equally enriched and exploited, which is usually the case. It doesn't have to sum out.
Also you need to consider that you can be enriched by one factor and exploited in another. Say I pay you $10,000 for your kidney and you agree because your family is destitute. I have both enriched and exploited you.
I think the problem here is that "exploitation" is very poorly defined. It's widely used concept, and most people have an intuitive sense of what the word means, but these definitions conflict.
Let's step back a moment: Let's say person A has a widget, which he values at $5. Person has $20, and would like a widget, which he values at $10. In a free market we would expect these people to negotiate and reach an agreement where A swaps the widget with B in exchange for between $5.01 and $9.99 of cash. The aggregate benefit of the transaction is $5 (that is, as a society, we are $5 better off after this transaction is made), and A and B are each somewhere between $0.01 and $4.99 better off.
In this simple model, clearly both sides are benefiting, or if you prefer, are being enriched. Question: Is anyone being exploited? Does it depend on the price? Or do we need to know more details about the transaction, and if so, what?
I think most people intuitively have one of two reactions:
1) "Unless fraud or force is being used, of course nobody is being exploited. Both sides enter into the transaction with open eyes, and both sides benefit. They can negotiate however they want to divy up the $5 in benefit - but as long as fraud or force aren't used, this can't be exploitation."
2) "Well, we need to know more. If one side has a lot more power than the other, they might drive the price unfairly far to one side or the other. If A is a large factory churning out widgets, a price of $5.10 might be a perfectly reasonable wholesale price; if A is peasant hand-crafting widgets and B is a multi-national widget trader, maybe anything less than $6 may represent the unfair exploitation of A. Conversely, a price of $9.90 might be fine if B is a collector of rare widgets, but even $8 might be exploitive if B is desperately trying to find a widget to repair his generator after an earthquake. We just can't know."
I don't think either response is inherently more correct - both definitions are valid. But, obviously, they conflict. :) Also, in my experience people rarely, if ever, will change their initial intuition. Either you think exploitation is only the result of fraud or force (ie, using slave labour to produce widgets), or you think exploitation is involved in any transaction with a price that seems "unfair" (to you, based on fuzzy and usually undefined metrics).
As a result, I'm not sure discussions of exploitation really make a lot of sense. Given the same objective and universally agreed facts about, e.g., Foxconn, a certain chunk of the population will say "that's obviously not exploitation" and a certain chunk will say "that's clearly exploitation", despite there being no real disagreement about what's actually taking place on the ground.
I have been to Uganda a few years ago to work on a voluntary project. If you see numbers like the number of people living under $1 per day and you see the images on TV you come to think of people in Africa just as pitiful. However, I got the feeling that the people in Uganda are actually more happy than the people in Northern Europe. Maybe wealth is actually inversely correlated with happiness?
There is vast scientific evidence that 'happiness' is positively correlated with 'wealth' (both in quotes to indicate that they're broad concepts, I'm not interested in discussing specific definitions). The scientific history is broadly that in the 1970's, it was thought there was little correlation (the 'Easterlin paradox'), in the 1980's and 1990's it was thought there was correlation up to some point of wealth (e.g., income of 15k USD) and after that there was little to none, but in the last decade (with better data and more thought into the subject) even that doesn't seem to hold any more. (yes marginal utility decreases but aside from that).
So, in general, the empirical evidence points to 'more money = more happiness'.
The literature on this spans decades, a 'popular' paper of the last few years that references much of the historical papers and as such can serve as a starting point is [Stevenson & Wolfers, 2008] (http://bpp.wharton.upenn.edu/betseys/papers/Happiness.pdf).
(a quote in the 'community' on this topic nowadays is (although I haven't been able to verify a source for it): "the average Togolese man would be hospitalised for depression in Denmark.").
Let me start by saying that although I work in academia in a field where I work with these issues from time to time, I am by no mean an expert in any sense of the word, although I do work with people who are - but in those cases I just do what they say, we're not 'equals' or anything. I'm just saying: I'm not arguing from authority here, no do I want to give off that impression.
The link to the original source in your link is dead, so I'm not quite sure which paper they're talking about, but it sounds like the conclusions in the 'third phase' that I described. Issues are obviously much more complex than just 'make 1000 USD more to feel a lot happier', but I'd be surprised if the study would find a real plateau after 75K, rather than a tapered off increase per dollar amount. Some studies have plots that show relationships on a logarithmic scale (after a 'baseline' cutoff point, e.g. 30k or 50k), making it much move obvious that there is a continually rising correlation (or, to put it more bluntly, that yes, more money does make you 'happier', for certain definitions of 'happy'). Of course there are all sorts of methodological issues at that point, comparing between regions, across cultures, etc etc.
Let me put it this way. There are studies who conclude that e.g. people who own 5 million are happier than those who own 100k. This is easily explained: 5 million makes you 'independently wealthy', taking away the stress from having to hold a job to provide subsistence. Do people who make 75k a year typically have 5 million? No. Would it be reasonable to assume that somebody making top 1% in a community would have the same level of happiness than somebody else in that same community who makes double? Yes. So it's all in what you measure and compare. I'm sure the authors of the article referenced in your link acknowledge that, but that they just had a much more narrow research question; a question that lead to the magic number of 75k within the confines of their research. Those nuances get lost in the AP summary, then again in the WSJ summary, then even worse in the headline. I mean the WSJ blurb even acknowledges that happiness does continue to rise even after 75k.
I'm not sure where I'm going with this, just that your link does describe an increasing effect after 75k and not a 'hard' plateau, so yes it's consistent with what I posted before.
Actually, I had though about this issue some more and I looked up this type of research. So my actual point of view is a little bit more nuanced then what I wrote in the parent post. However, I though it would be helpful to start with a proactive thesis to get people thinking about this issue.
Often people in the West just see people in Africa as victims, based on what they see in the media. Start seeing them as humans.
The average Togolese man would be hospitalised for depression in Denmark.
That sounds a bit odd to me, though. How come the suicide rate in Africa is much lower (close to zero) than in Europe?
"However, I though it would be helpful to start with a proactive thesis to get people thinking about this issue."
Well sorry to sound like a grumpy grandpa, but if anything, this site needs less posts of higher quality, not more empty posts with the explicit goal of provoking replies.
"How come the suicide rate in Africa is much lower (close to zero) than in Europe?"
First, correlation between depression and suicide is not linear as you seem to imply. While I don't have the expertise to have an authoritative opinion on this matter, depression is much more complex than 'my life sucks'. It's just as much (more?) about 'I feel my life sucks'. Japan has a very high suicide rate, yet ranks high in various happiness indexes, and has first world GDP.
Secondly, your claim that suicide rates in Africa are close to zero is flat out wrong, as even a cursory google search would have revealed to you. To start there is the objective problem with getting data - many African countries keep little to no statistics on this. Then there is a cultural issue, which incentivises all involved actors to mask or under-report actual causes of death (this is Greenspan talk for: families report suicides as accidents to avoid the social stigma). Furthermore, even the data that is available and at least somewhat reliable, points to African suicide rates that are not substantially different from countries worldwide. For example, the only African country on http://en.wikipedia.org/wiki/List_of_countries_by_suicide_ra... (Zimbabwe) is somewhere in the middle, just above (meaning: slightly worse than) Luxemburg, the most prosperous country in the EU. While Wikipedia isn't the end and all of data, I found that WHO data paints a similar picture when I looked into it a while ago when I had the same discussion, but that data is a lot harder to distill and I don't have time right now to do so.
Well sorry to sound like a grumpy grandpa, but if anything, this site needs less posts of higher quality, not more empty posts with the explicit goal of provoking replies.
I assume you mean more posts of higher quality. I agree with you in general, except that I know no site where the density of high quality posts is so high as here. If it was any higher, I would probably be afraid to post anything. However, social science works different than the topics the discussion is usually about on this site. The best university professors often start their courses by asking provocative questions, which make the students think for themselves. Sometimes the question is more interesting than the answer, if it provokes thought.
Well I meant 'less posts, but of higher quality', but I admit that my wording was unfortunate to the point of indefensible.
I guess we're going off topic here and into a not so interesting discussion, but with the advent of universal access to heaps of data, the old ways of thinking are becoming less relevant. What we need is data and evidence; facts, not talk. Now you and I are from a country where it is a high good to let everybody have an 'opinion' (I dislike that word and the concept because opinions are like assholes: everybody's got one and most of them stink) about everything, but luckily we're now beginning to realize the detrimental effects of the excesses of that, and are curbing it. Many scientific fields are moving the same direction: less vacuous talk, more substance.
> How come the suicide rate in Africa is much lower (close to zero) than in Europe?
It isn't. Africa is a large continent. Some areas have higher suicide rates. Other areas have lower suicide rate. I've already posted a supporting link. I'm not sure where you get the idea that the rate of suicide in Africa is near zero.
I read somewhere that suicide is correlated with post-traumatic stress disorder. People who live in a constant state of trauma are unlikely to suicide, which is also why suicide rates are believed to go down during wars. That doesn't mean that people are happy, just that they are not killing themselves.
The life expectancy at birth for someone in the Republic of Uganda is about 53 years. Only 2% of their population is over 65. (US: 78 years & 13%) So you're missing a bunch of old people who would be depressed, if they weren't dead.
Stigma means that you just don't see people with psychotic illness. People with mood disorders tend to self-isolate, so they're hidden too.
And mental illness isn't always recognised nor treated in Uganda.
> Mental illness does not receive the same attention as HIV/Aids or malaria, but is just as serious. A consultant psychiatrist at Butabika hospital, Uganda's national referral mental hospital, recently told The New Vision newspaper that 35% of Ugandans – about 11.5 million people – suffer from some form of mental illness, with depression being one of the most common. But barely half of these people seek medical attention from health centres in a country where people only associate mental illness with advanced and manic psychosis.
(I'm not sure that mental illness is as serious as HIV / AIDS. It is serious.)
But Uganda has made lots of good changes to their mental health treatment systems.
This wikipedia list shows mixed results for developing world nations for rates of suicide. Suicide isn't a great indicator for rates of poor mental health, but it gives an indication.
It's probably got more to do with choice. If those TED talks are to be believed, then choice is bad for mental health. If you are wealthy or live in a wealthy country then you have lots of choice. It's somewhat ironic because politicians that operate within wealthy countries will often emphasize choice as a reason for privatising public services etc.
The paradox of choice is not very robust in practice. The experiments are often difficult to replicate and small variations in experiment design make the paradox of choice vanish.
The problem with choice is that even knowing that it's bad for mental health, that doesn't translate into a moral prerogative to forcefully limit the choice of other people.
But yeah, choice, and its cousin perspective: If a bad day involves not eating or your brother dying from preventable disease, it's not hard to see how a meal every day of the week and good health can translate into happiness.
I went to Uganda three years ago and I was amazed at their amiability and apparent happiness, especially considering their situation. I was greeted with smiles everywhere I went. I'm from Iceland and in comparison Icelanders are very cold. Perhaps the climate is a factor?
because you were a foreigner, a guest, an attraction.
i went to iceland and only found nice, cheerful people. i am from austria, so did blend in a bit. if you're nordic and visiting uganda your appearance alone makes you something special and easily recognized (and potentially wealthy, so treating you nice might pay off).
that's why being a short-term visitor teaches you practically nothing about a culture. you need to live and work there to actually see the true nature of everyday people, you're novelty needs to wear off.
exceptions to this exist, some cultures simply treat foreigners/tourists badly. classic viennese coffee houses have some of the most irritating waiters on earth, embodying the anti-thesis to the US-services-smile. try getting a cheque in under 5min, i dare you :)
I had this same feeling while living in Nepal. Nepal is about on par with Uganda according to the HDI but the people there seem much happier in their day to day lives.
I am genuinely curious why the poverty calculation is done with respect to some dollar threshold ( earning below $1.25 is poor ??).
In some part of the world $1.25 (after converting to local currency) per day can buy generous meals 3 times a day and still be left with amount to pay for transport, clothing and housing. But in some part even $10 per day would make you poor.
Also, a person earning more than $1.25 now compared to last year doesn't mean he crossed the poverty barrier. The ever increasing inflation would have reduced him to a worse than poverty condition.
The calculation should be based on some quantity of food (amount of rice / starch he can buy with his earnings) etc.
You're absolutely right, which is why that's exactly how poverty is measured. :) The World Bank actually uses a PPP measure of $1.25 per day in 2005 dollars for "extreme poverty". Let's break that down:
First, as I said, the World Bank uses a PPP measure of $1.25 per day. PPP stands for Purchasing Power Parity, which means that this is measure doesn't mean "has US $1.25 of local currency at current exchange rates", but instead means "has enough local currency to buy a basket of goods and services which could be purchased for $1.25 in the US". Or in more concrete terms, the World Bank is defining it as "can buy as much rice or flour as would cost $1.25 in the US", not "can buy $1.25 of rice or flour at local prices".
Second, the measure is in constant 2005 dollars, which means that it is indeed indexed for inflation.
And now you know. :) (Other poverty measures do focus directly on calories or food, but food isn't the only good or service the very poor need to purchase. That's why the World Bank uses a basket containing a mix of goods and services. Nothing's perfect, but the Bank's measure is pretty good at accurately tracking the condition of the poor both over time and between countries.)
Those aren't currency exchange rate dollars, they are "purchasing power parity" dollar equivalents, which take into account everything you've mentioned.
It isn't true. The calculations are done for some "average" group. And the group is selected based on the research goals, can have nothing in common with say your family.
They have no points at all and you must have missed English 101.
First sentence:
"THE past four years have seen the worst economic crisis since the 1930s and the biggest food-price increases since the 1970s. That must surely have swollen the ranks of the poor."
I'd expect them to at least address the point they are trying to make but nothing in the article supports it. The source of the article (the data) ends in 2008 so that's way too short to make any conclusion on the impact of the economic downturn.
Economies have some level of inertia and I'd say that it's inversely proportional to the said economy's dynamism.
They admit it themselves:
"This implies that the long-term rate of poverty reduction—slightly over one percentage point a year—continued unabated in 2008-10, despite the dual crisis."
Same for 2011, I'd say poor countries have seen very little investment coming from Europe in late 2011 as most economic resources were shed in the debt crisis and protection plan.
"A lot of the credit goes to China"
Absolutely true. Outside China, I have personally witnessed huge changes happening thanks to China and its economic power and fearless investments. They literally blow in Laos' economies and are largely responsible for Myanmar current boom, spending money where their mouth is.
In the end, the article does a great job at showing one of China's good side but they certainly aren't proving their initial claim.
For people with short memories, China is doing what Europe and the North America was doing during the post-WWII era. I bet they are going to make the same mistakes and it's already common knowledge they have started (they bribe foreign officials easily and generously).
All depends on the criteria of poverty. It is not just a question of money. It is a question of having access to food, water, safe shelter, security, medical assistance, ... Food and energy price is raising. Are the poor people catching on on these ? I doubt it.
Poverty before revolution in Tunisia was stable at 15%. Just after the revolution, it's predicted to be, actually, more than 35%. Can we really trust the information provided since many of the poor countries (if not all) are living under authoritarian regimes?
The short answer is yes. Generally speaking poor countries get aid based on how poor they are. So the incentive is to make yourself poorer than you actually are and not richer. However, foreign aid organizations, like the World Bank, where the numbers come from in this case, are not stupid and they are thinking about this issue.
That's it. And even if the poverty was still the same or better, what we as a whole get after such interventions is excess amounts of hate. Better let the countries alone, you Barak
In a sense, yes. It's a very nice response in all kinds of arguments, and a question you should ask yourself often. The weaker the threshold of evidence you can offer that would change your position, and the discussion partner not being able to provide that evidence, the stronger your position.
I am not an economist, but thinking about this briefly .. could it be, the west needs to suffer economically for developing parts of the world to prosper? Are finite economics still relevant in the 21st century?
There appear to be some non-infinite limits on some components of standard of living, though. For example, if you extrapolate the resources Americans and Western Europeans use per capita (water, electricity, oil, etc.) to the entire world's population, you at the very least have some serious technological challenges to avoid hitting limits. If technology isn't able to keep up fast enough, it could introduce a bit of a zero-sum element, where a wealthier developing world would put downward pressure on the developed world's standard of living, in that the amount of resources available to an average American might decrease faster than can be offset by technological improvements.
That's some of the current worry with oil, that increased consumption by China et al will mean that oil is more expensive in real terms, and alternatives won't appear fast enough, meaning that Americans' overall standard of living will decrease, as they're forced to either make do with less oil (and stuff oil is an input to), or forego other luxuries to pay for the oil (and indirect-oil).
Past poverty levels, "wealth" becomes much more relative in that it involves wages, imo: a measure of whether you're "well off" is whether you can afford to pay people to do things for you, whether it's clean your house, serve you in a restaurant, tend to your cruise ship, design your website, or work for your company. That definitely depends on relative rather than absolute numbers, with a bigger differential meaning that you can buy more hours of other people's time.
For example, if you extrapolate the resources Americans and Western Europeans use per capita (water, electricity, oil, etc.) to the entire world's population, you at the very least have some serious technological challenges to avoid hitting limits.
I'm almost certain this is going to come off more Whiggish than I intend it to, but do you believe this was true in 1912/1812/1512/12AD? I'd be willing to bet it was.
In fact, I think I'd go further and be willing to guess that the further you go back, the more inconceivable equality of resource use becomes (again without the explicit implication this is an unbreakable line upwards).
Having enough to eat is having enough to eat: it doesn't matter if someone else eats in a fancy restaurant.
Edit: status is relative - if everyone else has a Ferrari, and I only have a Fiat, I probably feel poorer. However, I still have a car that is better, faster, and safer than anything that existed 100 years ago.
Edit#2: the above is one reason that worrying about what you have in an objective sense is a lot healthier than worrying about status/relative wealth.
Thanks for the edit. I understand what you mean - but then wealth is relative to your neighbour. In which case I don't understand how everyone in 1800s or today can be wealthy.
I don't understand your question? No, wealth isn't always relative (it's debatable but not so interesting if it's ever relative) - an 'average' farmer in the 1800's (in Europe) had a vastly worse lifestyle than an 'average' farmer today. Today, he is more wealthy in absolute terms.
If you and I can each grow 100kg of wheat and 2 pigs per year when we work solitary, but if you can grow 400 kg and I can grow 4 pigs if we specialize and trade wheat for pigs, then we are both objectively more wealthy in the second scenario.
Why would you want to avoid inflation? Money is only a measure for wealth at one point in time, for the rest it's just a tool to provide liquidity and efficiency to markets. What do you mean by 'scarcity being used as a yard stick for money creation'?
I mean the wealth of one person in 1800, is relative to the wealth of another person in 1800. Likewise for today.
So perhaps comparing the wealth of people in 1800 to today isn't actually that productive, because the baseline has increased?
I think maybe my view of economics is flawed. My basic premise was that traditionally cost has traditionally been defined by scarcity of an item / service and consumer demand. In which case there's no limit to scarcity (say through sale of IP) how can the system work without bubbles developing / the economic system breaking down?
Likewise how can everyone be wealthy when wealth is measured relatively? (i.e. how wealthy you are is defined by how wealthy your neighbour is).
I think I need to read a bit about economics in general.
That's why I included the example of the wheat and the pig - there is no time component there. It shows that there can be various levels of wealth even at the same point in time, and that wealth is not zero sum, i.e. it's not necessarily true that for person A to get more wealthy, person B has to become less wealthy. They can both become more (or less) wealthy).
How do you conclude that a good with unlimited supply (which is I suppose what you mean by 'no limit to scarcity') would lead to bubbles or economic breakdown? It just means that in theory in a system with perfect substitutes for these goods, the cost would gravitate towards production cost.
The whole point is that prosperity isn't measured relatively. (well you could, but it doesn't make much sense in most cases). Prosperity is quality of life. Would my life be better if my neighbor doesn't have money to take his daughter to a doctor but I do? Only if I was a sociopath, which the majority of us aren't. When the tide rises, all boats go up. And yes there is evidence that in the margin, our feeling of well-being increases when we are higher on the social ladder, but that's a separate issue; "prosperity" and "feeling of well-being" are related but not the same.
> How do you conclude that a good with unlimited supply (which is I suppose what you mean by 'no limit to scarcity') would lead to bubbles or economic breakdown?
If I can take an item of IP (a music download) and sell it indefinitely at fixed rate, and distribution costs are very low; what is the basis for pricing that item when it isn't linked to anything concrete in the physical world?
Could the attribution of money to virtual goods without any link to a physical resource lead to bubbles / economic breakdown, because there's no ceiling on the amount of wealth that can be generated from it?
> The whole point is that prosperity isn't measured relatively.
I'm (incorrectly) using 'prosperous nation' as a synonym of 'wealthy nation'.
"what is the basis for pricing that item when it isn't linked to anything concrete in the physical world?"
The same basis that is used to price physical goods: demand, or rather, the maximum a consumer is willing to pay. Supply and demand are not a pricing strategy, they are macro concepts that gravitate towards equilibrium.
If I am Apple and I sell iPods, how do I set its price? Not by looking at how many I can produce, but by looking at what people will pay.
You are confusing two things:
- limited supply: there are only a few items of something, and therefore they are valuable.
- substitution options: people want to pay for this song because it's the one they want to hear, not some recording of my neighbor playing his ukelele.
"Could the attribution of money to virtual goods without any link to a physical resource lead to bubbles / economic breakdown, because there's no ceiling on the amount of wealth that can be generated from it?"
No, although I'm not quite sure how to argue because I don't understand the assumptions leading to this question. An economic 'bubble' is, generalized, a sociological phenomenon where people ascribe an unrealistic value (as in, real value) to a good (the 'irrational exuberance'), leading to a bidding war fueled by the prospect that this value will continue to rise. Then at some point, it becomes clear that the good is overvalued, and the people who at that point own the goods are left hanging, much like musical chairs. If they borrowed to pay for the goods, they're double screwed because now they can't pay on their debts, the effects of which can then ripple through the economy. Bubbles don't come from too much wealth being concentrated in one hand.
> No, although I'm not quite sure how to argue because I don't understand the assumptions leading to this question. An economic 'bubble' is, generalized, a sociological phenomenon where people ascribe an unrealistic value (as in, real value) to a good (the 'irrational exuberance'), leading to a bidding war fueled by the prospect that this value will continue to rise. Then at some point, it becomes clear that the good is overvalued, and the people who at that point own the goods are left hanging, much like musical chairs. If they borrowed to pay for the goods, they're double screwed because now they can't pay on their debts, the effects of which can then ripple through the economy. Bubbles don't come from too much wealth being concentrated in one hand.
So if the maximum price a consumer is willing to pay for a virtual good increased through un-realistic lending over a period, that could create a bubble.
I suppose the part of the equation that's open to 'interpretation' is the amount of money people are prepared to pay when there is no physical counterpart or cost associated with a sale. It does seem (at least to me) that DRM tries to introduce artificial scarcity specifically to maximise that amount.
You're right - I was assuming that limited supply was the basis for pricing and, that not having a limited supply could upset the balance of economics.
DRM doesn't create artificial scarcity; DRM is an attempt at enforcing ownership rights, or contracts, depending on how you look at it. Producers want to maximize profit (just like producers of, say, bricks, or cars). To maximize that, they need to balance the highest price people with pay with lower prices that will entice more people to buy. For physical goods, a sale is a sale - somebody can't copy a car. But when somebody buys a song, and then copies it for his friends, that's a (potential) lost sale for the creator.
Artificial scarcity is when monopolies control the supply of a good to maximize prices (this is an example where pricing is influenced by supply). For example, the De Beers company for years controlled the supply of diamonds to keep prices high. Similarly, OPEC controls oil prices by throttling oil production. As you see, artificial scarcity is not connected to whether a good is physical or not. Even stronger, artificial scarcity is meaningless for digital goods, precisely because the marginal cost of production (how much does it cost to produce one extra item) approaches zero.
DRM controls the amount of IP that is available in the market, because without it - information can be copied freely. I would call this artificial scarcity - simply because it artificially makes a resource more scarce .. but perhaps here we have monopolies controlling the supply of a product simply to be able to price an item.
I would argue that that some consumers are at loggerheads with the prospect of paying for IP simply because the cost of production is so marginal (due to the fact that a copy can be made for no cost).
> due to the fact that a copy can be made for no cost
The second or later copies can be made for virtually nothing. The first copy is often very expensive to make. Think about Toy Story or the SMiLE album or Stephenson's books.
No wealth is not relative. If you have nothing you have nothing thats the baseline. I think what you mean is that it is hard to measure how healthy somebody is, thats why we use money to meausre wealth, with money you get choise and if you can choose you can take what makes you the happiest.
This line of reasoning is flawed but its the best weath got. If you we find out that choise make you unhappy then we have a problem and I don't know how to solve it.
>could it be, the west needs to suffer economically for developing parts of the world to prosper?
Very, very unlikely. The most relevant example of a modern fall from economic grace is the descent of Argentina, from the seventh-richest country in the world in 1900 to somewhere around 50th today. However, if anything, this had a large negative effect on the economy of South America (which stagnated as Argentina fell), and the modern economic rise of Chile and Brazil seems to be helping the countries surrounding them, or, in essence, prosperity is contagious, rather than conserved.
In terms of GDP, the United Kingdom is still the 6th or 7th richest in the world. That's still pretty rich.
There are also a lot of wealthy European countries that had a minimal presence abroad in the 19th century. There doesn't appear to any correlation between the modern wealth of western countries and their past colonialist ambitions.
Agreed, but the original poster didn't mention standard of living, only how "rich" the country was. That sounded more like overall GDP than GDP per capita to me (saying "Luxembourg is richer than the USA" sounds a little wrong, right?), though it admittedly it was just a guess as to what he or she meant.
It seems to me the GP didn't talk about the relative wealth of e.g. Britain, he was expressing a conspiracy theory that everything Britain had was stolen?
It took me a bit to realise that you did answer the GP's "point".
Several former British colonies are now wealthy, first-world nations e.g. Ireland, Australia and America. Being an empire at one period in history would explain why a country was much wealthier than others, but not anymore - now it's trade. Just look at the rise of China.
(Some might argue that America is a de facto empire today, but even then most of its wealth is due to trade).
Isn't this just a capitalist supporting publication trying to justify that which it supports? Poverty groups would, rightly, do the same thing. No criticism, but, well, they would wouldn't they? That's the way it is. Don't we all "big up" that which we believe in?
Trouble is, every one has an agenda and its really hard to ever know the truth. I have no idea if this is self serving fantasy or reality.
Instead of ad hominem attacks, why don't you come with some data to support your accusations? The Economist is one of the last publications with a rigorous policy of publishing original data sources, in this case the World Bank, hardly the obscure special interest group you make it out to be.
If you want to offer alternative interpretations of the data, or point out specific methodological flaws, or whatever, by all means do so - but now you're just saying 'meh I don't like this guy's ideas, he must be a shill, but I guess we'll never know because nobody can know these things anyway' - the most toxic nihilistic and intellectually dishonest 'reasoning' imaginable.
I think cynicism is understandable. It is indeed an "ad-hominem" argument, but it's universal — for example, few in the West took what Pravda had to say at face value, when the Soviet Union existed. When institutions have a record of bias, their claims come under more scrutiny. It's just plain institutional analysis, which everyone uses to some extent.
(The World Bank is hardly a neutral figure. Otherwise, how could the Bush administration move the neoconservative Wolfowitz from the Pentagon to head the World Bank? Did the world's population directly vote him in? It most certainly is a "special interest group", in the sense that it acts in the interests of a tiny minority.)
There is skepticism, and then there is refusing to look into one's opponent's arguments' content. I'm all for skepticism, and I advocate double checking the data and figures of even one's closest allies, but that's not what the GP was doing - it was an outright dismissal of anything the article concluded, solely because if its author.
Oh please, for all intents and purposes, the gist of the GP is 'oh it's the Economist, they're a bunch of shills, so they're wrong'. I'm not going to argue nonsensical things like what exactly is an ad hominem, it's crystal clear that the GP intended to dismiss the message of the article by saying that because it's from the Economist, it's automatically wrong; i.e., that it's wrong because of who said it and their ideological background, rather than the substance of what was said. If that's not an ad hominem, I don't know what is.
And a tortilla isn't a burrito. But if you put your Mexican fillings of choice in it and wrap it up it is.
An aspersion is in the eye of the beholder, of course. The poster says, don't trust them - they're capitalist. He then qualifies that by saying, well everyone has biases or agendas anyway. To me that doesn't really change the first part.
There are two sides of reality: the poor and the rich. This fantasy makes the richer side feel better about the poor. Don't go asking the other way around.
This is good news. However, I believe the reason we think poverty is bad is because we associate it with a poor quality of life. In this vein, poverty is only one slice of the pie. Other factors must still be considered such as, do these people have sufficient medical resources available to them and are they living in middle of a war? What goods are they deprived of and what evils are they plagued by?
We hopefully find it rather soon. The modern form of investment bankers capitalism is not what should be considered the best of our ability as society.
You should call them and let them know that you cracked the case, because 1000's of economists and development workers worldwide who have dedicated their lives to studying these issues cannot hold a candle to the kind of brilliant insights you can bring forth after just 10 seconds of pondering them /sarcasm .
I wasn't trying to be a jerk. I really think that inflation is a big part of it, and that the way we currently measure inflation can be misleading, especially since CPI is measured sans energy/food costs. A large part of the Arab Spring had to do with climbing food prices. It's true that conditions around the world are getting better as people gain more access to clean water, energy, education, etc, but using a benchmark "$1.25" to measure poverty misses the point. I should have explained my comment with more depth.
Yes I think its is possible. There is enougth energie we just have to collect it. If there is a not enougth of one thing it will get more expensive and alternatives will become more attractive and if something is expensive enougth recycling it will be worth it.
I truest in the basic market mechanism (people trie to make there own lifes better by joining the market) this has worked well for a long time.
This is a tiny change. Almost half of the world still lives for less than $2.00 per day.
Amazing that we can look at those statistics and think that there is significant progress or not be distressed by the inequality.
If you honestly assess this fact that almost half live for less than $2.00 per day versus the "first world" consumption then you will come to the conclusion, as I have, that civilization is a myth. This is incredibly unjust.
Your premise is faulty and following through on it could doom the poor of the world to continued poverty.
First world consumption isn't something that's done at the expense of the 3rd world, it's something that sends money and skilled jobs to the developing world to help them bootstrap their way to wealth. Look at china, south korea, taiwan, etc. these countries have climbed out of 3rd world poverty by being "exploited" by the 1st world and have become developed and increasingly affluent. South Korea, for example, is rapidly becoming a 1st world nation. Would that more countries followed those examples.
Don't be so optimistic. The globalization project hasn't ended yet. Who will control the world is to be seen. And whether the nations will be left with the wealth they had acquired is as clear as the Libyan's future at the moment.
Like everything in capitalism, third world improvements is just an investment. The debt is due already for some nations and soon the next batch will follow the "debt settlement".
Look around yourself in your country. Are people good enough there and no "occupy wall street" actions taking place?
I know how the things are in the helped to be "developed" countries, and one from one of those.
Compared to 3rd world poverty even very severe banking and debt problems are nothing. Do you think people in, say, Greece 5 or 10 years from now will think their lives are no better than the average person living in, say, Malawi or Zambia?
To every good thing there is a bad effect. The effect of helping third nations to get in debt is hate. This hate accumulates and the result will be similar to the bubble exodus. This the modus operandi of capitalism - whoever holds the bag last will get in trouble.
There might be some few good cases but the greater part of history just serves my pessimistic view. All the empires claimed to help less developed nations to become "better". Only for some strange reason the latter didn't want this help until persuaded with military force.
No amount voting down can change the fact that economics is another form of war nowadays. The North American empire thrives at the moment, as the Romans did some time ago.
You're being down voted not because of the content of your viewpoint, but because what you say doesn't make sense, is not supported by any substantive reasoning or data and in general is meaningless defeatist rhetoric, antagonizing for the sake of it.
Calling the free market a war is false. Its a game and we have player some good some bad some have a head start some don't. Markets are based on voluntary action.
Give me an example where one countrie does something bad to a nother where they have no choise.
Edit
Typical example:
Greek was not forced to do Austerity they do so because they want to get money. The could, and should (in my opinion) have devolted long ago, like Island there much better of now.
"To help clarify the matter, get rid of everyone else and put our worker on a desert island, hunting and gathering fruit. If he's bad at it he'll work very hard and not end up with much food. Is this unfair? Who is being unfair to him?"
I like reading PG's essays but this one is a nonsense to me. What we (people) don't like about the rich is not their ability to make money, but their ability to corrupt the gvmt and screw the poor. All in the sake of more money.
I'm sorry, but that is just entitlement garbage that you are spewing. I don't dispute that there are certainly corrupt individuals in the world, but to cast every person of sufficient wealth as corrupting "the gvmt" and screwing the poor is near-sighted at best. I could give you countless examples of wealthy individuals that have donated significant amounts of money and time to help the poor, both domestically and internationally, although I suspect it would be ignored.
You are entitled to your opinion, but your response doesn't even address the reason the poster referenced the article. Instead, you launched into some diatribe about evil rich folk. Reading the full article probably won't change your opinion, but it does address this "us vs. them" mindset you are in to some degree. It also contains well-reasoned arguments for variation in income, including the one the grandparent post mentioned.
From PGs article: But since for most of the world's history the main route to wealth was to steal it, we tend to be suspicious of rich people
> "To help clarify the matter, get rid of everyone else and put our worker on a desert island, hunting and gathering fruit. If he's bad at it he'll work very hard and not end up with much food. Is this unfair? Who is being unfair to him?"
Now introduce one other person, on a different island. This person alters the environment; more rain, less rain, hotter climate, different water temperatures and salinity etc. These all make it much harder for the first person to grow crop and catch food. Sometimes his home is destroyed in flooding. The second guy is okay, he's living comfortably. He's a bit annoyed about the cost of petrol. If he watches a lot of news he may see the first guy being flooded out of his home. Is this unfair?
> Amazing that we can look at those statistics and think that there is significant progress or not be distressed by the inequality.
What is your time-scale? And what would constitute "significant progress"? For all the wars and all the Sudans that we still have left in the world, I still think we are in much better shape than the Romans. Or Feudal Japan. Or XVIII century France.
It comes down to this: if you think that economics is a zero-sum game, then yes, it is unjust. First world consumption comes at the expense of the poor elsewhere, the rich are leeches sucking money from the rest of the economy, and 35 hour work weeks create jobs.
Good news is all signs point to economics not being a zero-sum game, and thus most of the responses you are getting are likely correct - your premise is flawed.
Claiming that anyone discussing inequality is implying economics is a zero-sum game is making a strawman argument.
There is a continuum between two extremes - at one extreme, you have a zero sum relationship, where the total output (as measured by some sensible metric) is capped and it gets divided up, through to a view where there are unlimited resources and no constraints on growth, and the activities of people are synergistic but not competitive.
Both ends of the continuum are easily shown to be fallacious, but your argument only holds if you assume the unlimited resource end of the continuum is true.
The reality is that there are finite resources, and physical, biological and sociological limits how fast and efficiently they can be sustainably exploited. That said, there is clearly a lot of room for improvement in how efficiently we use resources - as many Internet startups are doing - as well as how sustainably we use them.
There is a problem with rich people consuming things that drive poor people into unacceptable employment to provide raw materials for those things.
Materials like gold, or minerals for tech, are often mined in ways that most people would find appalling.
People have a perception of "fairness" and a big tech company making millions, billions of dollars of profit while people are mining minerals in dangerous conditions for very little money is seen as unjust.
For someone getting $2 a small amount of money, just 50c, is a huge raise, and it would have little impact on the end price of the goods.
Quite small amounts of carefully targeted money could make a big difference to developing nations - better schools, clean water, better medicine, etc.
It would be really nice to see tech companies devoting a bit of time and smarts (and maybe even a bit of cash) to tackling those problems.
The problem is that we don't have a real notion how to change it in a large scale, we allready pure tons of money into poor countries but it does not really help (alot of times it even hurts). Alot of people feel like you but nobody has an idea how to help. Do you?
I have a lot of ideas but to start, just the basic thing you are suggesting: 'pouring' 'tons' of money into poor countries.. this is just not the reality.
We won't be able to fix the problem if we can't see it. Most people are living in a false reality, a matrix reality created by the propaganda machine. The truth is that the first world exploits the second and third world and hogs the resources. These 'tons' of money are pittance. The US alone uses more oil than the next three or four countries combined. The second world barely even figures in.
Its very simple: the distribution of things is just quite unfair, deliberately so. Many countries are actively repressed. The World Bank provides loans as a mechanism of economic warfare or modern-day colonization. Again, a major problem is that many of the citizens of the first world aren't even aware of this.
So people in every country need accurate holistic information and to have an egalitarian perspective. The first part is not happening, as I mentioned. The second part is not the case either -- most everyone in the first world subscribe to a type of Social Darwinism which is just the latest rationale for brutal primitive classism.
First, we are spending alot of money on development, not just countries but NGOs too. Mostly in a bad way (somethimes with very good intentions sometimes with with not so got intentions).
"Its very simple: the distribution of things is just quite unfair, deliberately so.
Many countries are actively repressed. The World Bank provides loans as a mechanism of economic warfare or modern-day colonization.
Again, a major problem is that many of the citizens of the first world aren't even aware of this."
This is true in a way. The problem is that these countries let them self get hooked.
- They overspend on stuff (mostly military but infrastructure too) witch the often buy from other countries instead of investing in (and thereby building) there own industries.
- Then the get hooked and let the controll of there resources slide to private industrie from outside the country (witch would be ok if the taxed them enougth)
All this is happening and it is bad I agree but these countries have to learn that if somebody comes and offers something its in the sellers intresst.
This is not really diffrent from telcos offering bad deals you have to look at that stuff befor you buy.
All this said I agree that the first world does really bad things they often act like the give a helping hand but its not really a helping hand.
I agree that this needs to stop. The World Bank and the IMF do alot of bad things.
I do not think that they deserve what they get but I would say that it is in part there fault.
"So people in every country need accurate holistic information "
You cant expect everybody to know enougth about economics but you can expect the countrie leaders to do so. The problem is that building up everything from with the west is much faster then doing it on your own and if you have bad leaders (diktators/persidents/kings) who only care for there themself, accepting "aid" from the west is the fastes way to get rich (a hole other problem is that sometimes the west helps them to stay in power)
tl:dr:
- What is called "aid" from 1st world often isn't
- Developing countries don't look close on what they buy
I just don't like the term economic warfare or modern-day colonization. Its a Free-Market there are just good players using bad players, but the bad players did not get forced to play or to play the way they did (Expet when the are actually forced like Iraq).
Blame the victim much? Its a lot more malicious than you think. The countries aren't doing anything that makes them deserving of being exploited. http://www.johnperkins.org/
The fact that there are almost 10 billions people alive on this Earth prove otherwise. The population would not flourish if everyone was poor and starving. It's pretty obvious that the world is getting richer and the poors are getting richer no matter what the gap between the poors and the richs is. Now "poor" people in the US have internet access and mobile phones. Come on !
The rate of population growth has been slowing[0] since 1963, and monotonically so since 1991. The UN's "medium" projection suggests that the total population peak is just over 10 billion, and the low peak is just over 8 billion[1]
Inflation figures aren't very complicated, typically they're just a weighted collection of product prices, if you don't believe the official figures you can just calculate your own.
Just create a list of items that you purchase on a regular basis, and calculate a weighted average cost for each year to give you a basket price and then compare the basket price between years to give you a measure of your personal inflation.
I was talking about journalists who ignore exactly that.
I wasn't just talking about individual inflation. For example, when a company that makes international sales reports record earnings in dollar, while the dollar sunk compared to almost every other currency, is this just misleading. Compare the revenue increase of the biggest companies with exchange rates, they are probably not as healthy as they appear on first sight. Maybe they are not growing at all and just the dollar inflated again.
I talk about the value of the dollar, when the author takes the metric 2.00$ this is relevant. The official inflation rate is in almost all cases totally wrong, because it takes way too few factors into account. This is a separate topic, how the inflation should be calculated. I think just that currency exchange rates are a better way to predict inflation trends.
"The official inflation rate is in almost all cases totally wrong" is a nonsensical statement. "Inflation" is not a uniform concept, to quantify it you have to take a certain basket of goods (the definition of which depends on the purpose of the exercise) and their nominal values and calculate the difference (or rate of change) of samples at various points in time. Furthermore, "inflation" is only relevant for nominal values; the that was used in the OP uses real values, and so do most statistics, because real value is the only comparable thing.
Especially your latest sentence shows that you have a completely warped view of monetary economics. How can one "use currency exchange rates to predict inflation trends"? That's a completely nonsensical sentence, but it doesn't matter what you really meant, because PPP is already used to combat this exact problem.
I can't believe I'm defending him, but he does have - perhaps accidentally - two semi-valid points.
First: PPP and inflation are both calculated using a basket of goods - the exact basket differs between researchers or institutions. Typically you want your basket to be fairly broad, and reflective of the goods and services people actually buy. But the very poor buy a different mix of goods and services than the average person - even the average person in a very poor country. IF the price of the most basic staples has increased more than the price of other food, or if the price of food in general has increased more than the price of durable goods and appliances, then the PPP adjustment used by the World Bank for, e.g., Uganda MAY misstate the actual purchasing power of the very poor[1].
Second: If you think that official inflation rates are being tampered with[2] then you may look at other metrics than should drive inflation. One such is exchange rates. If the Canadian dollar is weakening against a trade-weighted basket of other currencies, then the purchasing power of the CAD is declining. (Or if you prefer, if a lot of CAD is being printed, then we have more supply of CAD, and lower demand, resulting in lower exchange rates.) In any case, this should be reflected in inflation. If it isn't then either there is a big untapped arbitrage opportunity[3], the inflation statistics are wrong, or (more than likely) there is some other factor at work[4]. So, no, you really can't use exchange rates to predict inflation, but you almost can. :)
[1]: In other words, it COULD be that the bank is saying that someone living on $2 a day is better off now than a year ago, because coffee makers are so much cheaper that it gives them more money to buy rice, which has only increased a little bit. But if the very poor only buy rice and not coffee makers, they could be worse off now since everything they actually purchase is more expensive, even if the "basket" is cheaper overall. The choice basket of goods matters, and it needs to be appropriate for the group being studied.
[2]: This can and does[5] happen. It could be as simple as fudging numbers, or it could be more complex - for example, my picking an unrepresentative basket of goods. In the US, the most common measure of inflation - CPI - excludes food and fuel costs. This is very appropriate for picking up monetary inflation, but less so for calculating the actual change in living costs people are experiencing. As you say, inflation is not a uniform concept; if a government pretends it is they can pick a measure favorable to them.
[3]: In this case, you could buy CAD using your local currency, purchase goods inside Canada for CAD, export them, and then sell them for your local currency. This would drive the CAD up, and/or drive the prices of goods inside Canada up, until the change in the exchange rate matched inflation. And people seeking such arbitrage opportunities is one reason why inflation and changes in exchange rates tend to match, very broadly, over the long term.
[4]: And there usually is; exchange rates are incredibly noisy, and influenced by everything.
Well yes one can argue about the basket used in the referenced study. I haven't looked into which one was used exactly, but in my experience of working with UN data (of which the WHO is a part), their measurement methodologies are usually quite sound and well-reasoned (of course you can always find something imperfect in the margin, especially for decisions made in the past and that haven't been changed to make it possible to measure change over time, but I'm talking overall). But that's quite a difference from the claimed and unsubstantiated 'totally wrong'.
For the second point, I don't think I'm fully understanding. Yes you can use exchange rates as a proxy or second-order measurement for inflation (measurement, not prediction, unless I'm missing something); but I fail to see the relevance of that for the current study, since we're (presumably, again I haven't studied the methodology and more specifically basket used to measure inflation/PPP in that much detail) talking about goods that are relatively little influenced by exchange rates (i.e., much of the consumption of the people on those 2$ budgets is local and based on subsistence farming and local trade).
If cited in support of the merits of the capitalist mode of production and growth, the absolute number of people below the threshold of hunger (not universally identifiable as "poverty") as calculated via the parity of a centrally controlled currency declining for the first time ever is absolutely embarrassing. I'd expect producers of post-crisis feel-good statistical acrobatics to set their standards much higher.
I'm not sure what your point is. Are you saying that absolute numbers give off the wrong impression because the population overall is declining? If so, you're flat out wrong, because global overall population trends are still pointing up, more pronounced so in the areas where there is the most poverty. Or are you hinting at issues with using PPP as the metric? If so, what's your problem with it?
However, the 24/7 news cycle drums up everything that is negative and hence most of "feel" that it is getting worse.