Bell Curve The Law Talking Guy Raised by Republicans U.S. West
Well, he's kind of had it in for me ever since I accidentally ran over his dog. Actually, replace "accidentally" with "repeatedly," and replace "dog" with "son."

Saturday, June 05, 2004

What Is To Be Done?

Hi Everyone,

If you don't subscribe to The Economist I strongly encourage you to start. Newsweek and Time et al are trashy tabloids by comparison. While the Economist has a clear editorial bias in favor of libertarian policies, they are open about it and usually provide evidence where others rely entirely on rhetoric. This week's issue has a number of great stories!

The first is an article commemorating the 200th anniversary of Richard Cobden. "Who's he?" you ask? None other than the founder of the British Anti-Corn Law League. The Corn Laws were a series of agricultural subsidies and price supports in 19th century Britain that increased the cost of food for British (and Irish) poor and retarded the development of potential agricultural exporters in developing countries (like the then pre-industrial USA). The article includes a tally of how much the average household in Europe, the USA and Japan are currently OVERPAYING for food each year because of agricultural subsidies and price supports. Europeans pay $646/year extra; Americans pay $366/year extra; Japanese pay $1000/year extra. The total annual amount of subsidies being paid are astounding! Europe aprx. $100 billion; USA aprx. $40 billion; Japan aprx. $44 billion!

Removing these pernicious distortions of the market would simultaneously reduce budget deficits and the cost of living the developed world. It would also lead to increased wages and profits for the agricultural sector in the developing world. Since most people in the developing world work in the agricultural sector and since most of the world's poor are agricultural workers in developing countries, this would be a huge step towards alleviating world poverty. In the United States, these terrible examples of agri-corporate-welfare mainly benefit solidly Republican (allegedly conservative, pro-capitalist) states in the South and the Great Plains. California would also get hit badly - but the parts of California that would suffer are the Republican strongholds in the Central Valley where Mexican migrants are abused and exploited while farm owners get rich off Federally subsidized irrigation projects.

There is also a Special Report on the Copenhagen Consensus. The idea was to get a group of Nobel Prize winning egg heads (and Nobel prize winners to be) and ask them what are the developed world could do that would do the most good for the developing world and the world as a whole. This project was backed by the notorious anti-environmentalist, Bjorn Lomborg (presumably no relation to the boss from Office Space). However, don't throw out good ideas just because a jerk came up with them. The 8 people involved are a who's who of famous social scientists (well, famous among social scientists anyway): Robert Fogel (U. Chicago), Douglass North (Washington U., St. Louis), Vernon Smith (George Mason U.), Jagdish Bhagwati (Columbia U.), Bruno Frey (U. Zurich), Justin Yifu Lin (Beijing U.), Thomas Schelling (U. Maryland), Nancy Stokey (U. Chicago).

They came up with a list of 17 Very Good, Good, Fair and Bad projects based on a series of criteria based mostly on the cost of the project versus the benefit to society. The top project - the one that would do the most good for the least cost - is the control of HIV/AIDS. The rest of the "Very Good" projects are #2: malnutrition, #3: Opening trade and eliminating subsidies (see comments above), #4: Controlling Malaria.

The controversial part is that this group saw little profitable benefit to climate stuff like controlling greenhouse gases etc. They aren't saying we should never worry about that. They are saying we could help more people faster with less cost, by doing the "Very Good" projects first. I would add that successfully resolving any of the projects on the 17 project list would increase the resources of the world's population as a whole enabling us to afford to spend resources on the other projects.

3 comments:

Bell Curve said...

Yes, it's always been my complaint that governments typically do not operate on what is most cost-efficient, rather what is most crowd-pleasing. This is why terrorism takes all the headlines and world poverty takes none. I'd be interested in reading that article.

The Law Talking Guy said...

Bell Curve gets very close to a conundrum in modern democracy: why ISN'T the efficient solution a crowd- pleaser? The investigation of the way political systems respond to input is, of course, what political science is all about.

p.s. repealing the corn laws increased the misery of the rural poor. Of course, they could not vote in England until universal suffrage quite a bit later.

Raised By Republicans said...

Yes, taking away subsidies for agriculture probably hurt the rural poor...but how much of those subsidies were really going to them in the first place? In 19th Century England wealthy, Tory landlords reaped the lion's share of benefit from the Corn Laws. Today, foppish Tory aristrocrats have been replaced by ADM and other agri-business giants who own most of the farm land in the US today.

Besides, I would argue that the misery of the rural poor could have been aleviated by a responsible welfare state and retraining programs. 19th Century England had neither and the US should take steps to institute both before (or at least while) making great changes in its trade policies.

Furthermore, consider this. We could start to implement a wide range of unemployment benefits and retraining programs with some increases in taxes. But remember we would save hundreds of dollars per person in artificially high food prices by removing the tarrifs and subsidies - not to mention the billions of dollars that would be freed up in the budget by removing the subsidies. What's more, improving the economic conditions in developing countries that would take over ag production would mean increased exports for US goods so our economy would get an overall boost. It would also reduce the need to patrol the US-Mexico border. What I'm trying to get at is that we could eliminate the subsidies, institute a substantially increased welfare state and still save money from what we are doing now. The Economist story I mentioned in the original posting reported that the net social benefit to removing these subsidies would outweigh the costs immeasurably.

So why doesn't it happen? Two main reasons: the U.S. Senate and the Electoral College. Both of those institutions are designed to overrepresent rural interests at the expense of the urban majority.