Friday, January 29, 2010

Foreign agricultural land purchases

A new UN brief discusses the recent trend towards cross-border agricultural land ownership has been raising eyebrows and hackles. Increasingly, agribusinesses and sometimes governments from wealthier countries that import food have been buying up large areas of agricultural land in poor countries, particularly in Africa, to produce food for their own markets:

The current land purchase and lease arrangements are largely about shifting land
and water uses from local farming to essentially long-distance farming to
meet home state food and energy needs. It is, in practice, purchasing
food production. This is not completely new, but the process of doing so
mainly or exclusively for home country consumption is.

Driven primarily by rising food prices and increasing water scarcity in developed countries, it's happening on a large scale:

A quantitative inventory of five African states (Ethiopia, Ghana, Madagascar,
Mali and Sudan)...documented a total of 2,492,684 hectares of approved
land acquisitions from 2004 to early 2009. That is almost half the arable
land of the United Kingdom and three times the arable land of Norway.

Is this something to worry about? Not necessarily. If foreign investment means that African farmland can be used more productively, then as long as what the foreigners are paying exceeds what the land is yielding right now- and as long as the people using the land right now are propertly identified and compensated- this can be a win-win.

The problem arises when you consider a nasty little thing called political economy. If the host country government actors are self-interested and corrupt, then these land sales are just another mechanism for them to enrich themselves at the expense of the citizenry, and potentially a very dangerous one. Looking at the major players listed above, there's an interesting mix- I wouldn't be worried about this so much in Mali or Ghana... but Sudan or Ethiopia? And it appears to be a very real concern:

An issue of critical importance is the lack of transparency that surrounds many
of the foreign investments in land and water today. To date, no investment
contracts appear to have been made available to the public, and only a very few
have been made available to intergovernmental and non-governmental organizations seeking to better understand and appraise these issues.

An interesting aspect to this is the role of the property rights system more broadly. Clearly, a system of strong and well-defined private property rights would be helpful here- the holders of property rights would only relinquish them if they felt the terms were fair, and the price they were being offered exceeded the benefit they were able to derive from the land themselves. But ironically, in some circumstances a sufficiently weak property rights system could also be helpful. Foreign investors might stay away if they have to worry about the locals making trouble or the government changing its mind about the terms of the lease, and where host country governments are corrupt scaring away would be land-buyers might actually be a good thing on balance.

Monday, January 18, 2010

A not so modest proposal

A rather strange land and property rights related offer to displaced Haitians from Senegalese president Abdoulaye Wade:

“The repeated calamities that befall Haiti prompt me to propose a radical
solution – to take measures to create somewhere in Africa . . . the conditions
for Haitians to return,” Mr Wade said...

Presidential spokesman Mamadou Bemba Ndiaye told reporters that Mr Wade had
shared his plans with senior aides, and they involved offering voluntary
repatriation and plots of land to any Haitian who wanted “to return to their

“Senegal is ready to offer them parcels of land – even an entire

Sounds like a PR move to me. I would be surprised if any Haitians end up in Senegal, and not very opitimistic about if it actually happened, though it would certainly be interesting to see what happened.

HT: Marginal Revolution

Sunday, January 17, 2010

David Brooks not getting it

In Thursday's New York Times, David Brooks opines on underdevelopment in Haiti and elsewhere:

The countries that have not received much aid, like China, have seen
tremendous growth and tremendous poverty reductions. The countries that have
received aid, like Haiti, have not.
In the recent anthology “What Works in
Development?,” a group of economists try to sort out what we’ve learned. The
picture is grim. There are no policy levers that consistently correlate to
increased growth. There is nearly zero correlation between how a developing
economy does one decade and how it does the next. There is no consistently
proven way to reduce corruption. Even improving governing institutions doesn’t
seem to produce the expected results.

The chastened tone of these essays is captured by the economist Abhijit
Banerjee: “It is not clear to us that the best way to get growth is to do growth
policy of any form. Perhaps making growth happen is ultimately beyond our

We’re all supposed to politely respect each other’s cultures. But some
cultures are more progress-resistant than others, and a horrible tragedy was
just exacerbated by one of them... it’s time to promote locally led paternalism.
In this country, we first tried to tackle poverty by throwing money at it, just
as we did abroad. Then we tried microcommunity efforts, just as we did abroad.
But the programs that really work involve intrusive paternalism.
programs... replace parts of the local culture with a highly demanding, highly
intensive culture of achievement — involving everything from new child-rearing
practices to stricter schools to better job performance.

It’s time to take that approach abroad, too. It’s time to find
self-confident local leaders who will create No Excuses countercultures in
places like Haiti, surrounding people — maybe just in a neighborhood or a school
— with middle-class assumptions, an achievement ethos and tough, measurable

Does culture impact development? Of course it does. But the problem with this and so many other theories about development is that when you look at the reality of how developing countries have fared, you get a very wide range of outcomes. Some initially poor countries have done very well (South Korea, Botswana) and others have not (Mali, Haiti), and there is no obvious distinction that seperates them. What we learn from this as well as the "What Works in Development" findings that Brooks cites is that there is no single reason or one-sentence explanation- like "they have bad culture!"- that can tell us why some countries remain poor. Because we always need to think about why that explanation applies to some countries and not others. Did China used to have bad culture, and then it became good? What about Brazil's performance over the last half century ? Good culture, that turned bad, that then turned good again?

Not to mention, Brooks is also guilty of drawing a false analogy between poor people in the US and poor countries in the world. Both involve people being poor, but really there is absoultely no good reason why these things would have anything to do with each other. The problem of why certain people seem stuck at the bottom of the income distribution in the US has nothing to do with the problem of why whole countries fail to grow, and there's no reason to extrapolate an explanation of one to the other. It's similar to when people worry about the national debt because it makes them think about someone racking up a huge credit card bill, which is irresponsible and short-sighted. There may be reasons to worry about the national debt, but drawing the analogy between households and countries doesn't tell us why.

What's depressing is that Brooks' editorial will undoubtedly ultimately have more influence on the way people think about development than the thousands of other more intelligent and informed perspectives out there. If there's a silver lining I guess it's that the internet means at least it easier to find those perspectives than it used to be.

Thursday, January 14, 2010

Escaping the natural resource curse?

From the The Financial Times, an article about a new plan for Nigeria and other resource-rich countries to distribute revenues more equitably:

(W)hile petroleum has made Alaskans among the wealthiest people in the
world's wealthiest country, Nigeria's oil province - on which the US depends for
nearly one in every 10 barrels of crude it imports - has known little but
conflict, corruption and misery in the half-century since the first barrel was
shipped. Yet Nigeria's rulers are hoping a new policy to deliver the benefits of
oil to the local population - as Alaska does with its pioneering approach of
distributing petrodollars in cash to citizens - might help placate an insurgency
that has cut production by as much as 40 per cent...

Under government proposals... the state would hand over 10 per cent stakes
in the joint ventures that run Nigeria's biggest energy industry to "host

Sounds like a good idea, but:

Nigeria's eight oil producing states already receive an extra slice of oil
proceeds - but much of the money vanishes... Whether the new scheme can avoid
such problems is critical to its success. "It will not be like the Alaskan case,
when each individual gets his money," Mr Egbogah says. The intended option is a
system of trust funds administered at the behest of each community - bypassing
the delta's state and local governments. By receiving a share in the
proceeds of an oil industry they have long resented, delta dwellers would have
an incentive to facilitate production, Mr Egbogah reasons. But even so, critics
warn that trusts risk replicating what they say is oil companies' practice of
allocating funds to some communities in order to safeguard their own facilities,
generating resentment in less favoured settlements.

I am very skeptical. Even more so than the potential for resentments between more and less favored communities, I would worry that "communities" are often far from harmonious, with their own internal divisions, power structures, and competing interests. There are bound to be winners and losers in the process of how these communities allocate their oil revenues. To the extent that the tensions and social fault lines are already there, something like this could make things worse rather than better.

OK, so what I supposed to teach them now?

One of the courses I teach is an international economics course targeted mostly at non-majors. This semester, on the first day I decided to have the students answer some of the questions from Brian Caplan's poll in Myth of the Rational Voter. In the poll, Caplan poses a bunch of questions about various aspects of economic policy to both the general public and people with PhDs in economics in order to compare the results and try to identify biases and errors in public opinion. So for instance, one of the questions asks whether immigrants are a big problem for the economy; of course, almost all the economists say no, but a significant proportion of the general public say yes. When I gave these questions to my students, most of the answers were about what I would have expected- somewhere in between the general public view and the PhD economist view- with one glaring exception:

Generally speaking, do you think trade agreements between the US and other
countries are good for the nation’s economy, bad for the nation’s economy, or
don’t make much difference?

0- Bad, 1- Don’t make much difference, 2- Good

According to Caplan's results, the average response from the general public is 1.33, while the PhD economists are more confident, coming in at 1.87. My class, it turns out, is even more convinced about the virtues of trade agreements than the economists: none of them put "0- Bad," two of them answered "1- Don't make much difference", and the other 42 all said "2- Good," for an average score of 1.96.

Now, I thought half the point of a course like this is that I was supposed to hammer home the idea of comparative advantage and the gains from trade. But apparently it's closer to the opposite. So what am I supposed to teach them now?

Friday, January 8, 2010

Moral dilemmas

Here are three moral dilemmas, you have to read them and think about them in order:

1. A train is running at high speed when its brakes fail. The conductor sees five hikers ahead of him on the tracks who will surely be killed by the train if it reaches them. The conductor notices that the track is about the fork, and there is a single hiker on the side track. The conductor can either do nothing, in which case the train will continue on its path and kill the five hikers, or he can throw a switch that will send the train along the side track, killing the one hiker there. Is it morally permissible for the conductor to throw the switch and send the train onto the side track?

2. A train is running at high speed when its brakes fail. A man who is standing on bridge notices five hikers on the tracks ahead who will surely be killed by the train if it reaches them. However, there is a woman standing next to him on the bridge. If he pushes the woman off the bridge onto the tracks, the train will kill her, but the force of the impact will stop the train's progress and the five hikers will be spared (pretend there is no uncertainty as to the outcome). Is it morally permissible for the man to push the woman onto the tracks?

3. Five accident victims arrive at a hospital emergency room, all of them needing transplants of different organs to survive the night. There are no organs available at the hospital. Meanwhile, a healthy young man walks into the emergency room to ask for directions. Is it morally permissible for the doctor to kidnap the young man, kill him, and harvest his organs so that the other five patients can be saved (again, pretend there is no uncertainty as to the outcome)?

Apparently, the most common reaction is to say yes, unambiguously to #1, then to say no, but be slightly uncomfortable with that for #2, and then to say no unambiguously to #3.

However, some people say yes, unambiguously to #1, and then yes, unambiguously to #2, since they figure that the reasoning is the same in both cases: clearly, the action that should be taken is the one saves the most people. But then when they get to #3, they hem and haw and get flustered- obviously, it's not OK to kidnap people and harvest their organs, even though that would save the most people. So they give #3 a very uncomfortable no.

I confess to being in the second group. It seems like #1 and #2 absolutely have to be yes, and #3 has to be no. But I can't think of a good reason why #2 is has to be a yes and #3 has to be a no (can you?) In fact, I think it would be easier to convince me that #3 is a yes than it would of the more widely held view that #2 is a no.

One thing I take away from this exercise is that the more and more you sit down and think about it, the less and less it makes sense to try to tell anyone else what they "should" think is right or wrong.

This is all from Marc Hauser's book Moral Minds.

Wednesday, January 6, 2010

Methodological sophistication in development economics

Following up on Chris Blattman's post, here's a question for my fellow development economists out there: of the important things we know about development in the real world, are there any of them that required more than relatively simple econometrics (along with good data and possibly a clever identification strategy) to discover? In other words, is there anything important that we wouldn't know without sophisticated econometric methods (say, beyond the level of instrumental variables)?

Tuesday, January 5, 2010

Bryan Caplan's The Myth of the Rational Voter: Why Democracies Choose Bad Policies

Good Libertarians have long been plagued by two paradoxes: one, "How can we hate the government for interfering with the choices people are so great at making for themselves, when in a democracy the government is a product of those choices?" and two, "how can we include the people whose political ideology is limited to wanting to smoke more marijuana without having to actually hang out with them?" In The Myth of the Rational Voter, George Mason University economist Bryan Caplan sets out to resolve the first paradox. In doing so, he is heroically successful. When the day comes that Libertarians manage to vanquish government once and for all, the spontaneous order that emerges will undoubtedly include a national holiday celebrating his achievement.

Fortunately for the rest of us, Caplan has produced a fascinating and insightful book along the way. His starts with the idea that for most people, it requires discipline to think rationally and objectively. When people have nothing at stake, they prefer to hold beliefs that are emotionally satisfying, rather than beliefs that are necessarily true. The problem for democracy is that since no election comes down to a single vote, no one experiences the consequences of their own political views. For a voter, there is no incentive to go through the painful process of scrutinizing one's beliefs, since it won't impact the election anyway. When you combine that with polticians who respond to public opinion, you tend to get less-than-perfect policies. It's a compelling way to think about policymaking, and just why it is that so many otherwise intelligent people seem to hold such bizarre political views.

Most (if not all) readers will find much to disagree with in this book. Caplan is not afraid to tread on shaky analytical ground at times- some of his claims are poorly supported, and some of his arguments ultimately ring hollow. But in fact the book is far more compelling as a result of the author's willingness to reach. The approach that Caplan has taken seems to be less one of trying to convince you that everything he says is true; rather, he convinces you that his central thesis is worth thinking about, and then proceeds to stretch it as far and in as many directions as he can. It is then up to the reader how far he or she is willing to go. At one point in the book, Caplan urges his fellow economists to be less equivocal and cautious, and througout he practices what he preaches.