Coase Colored Glasses

It was interesting in class when we were talking about how in economics Coase said we needed to weigh the overall risks and costs and choose whether its more economically beneficial to choose one risk over the other. There is an op ed column in the ny times “Never heard that before” by thomas friedman that gives a real world example that we can relate to. It discusses how foreign investors are more weary to place there faith in the US when it comes to investing then in other countries like China. This is because investors feel that counries like China and Europe are more econmically stable then the US. I am not a business major so i dont really understand alot of the reasons when it comes to investing and why business choose to act the way they do, but I do know that perception is very important and the president and his administration is less popular then, when he was elected. Part of this i feel has to do with the disapointment that mainstream America faced with the war in Iraq and other problems like healthcare. But when it comes to actually implementing changes that require congress to work together it is much more difficult and the american peolpe tend to get worn out very quickly and from a business standpoint that can be very damaging because the United States Image in foreign countries can be hurt when there is conflict and investing could be difficult to rebound in the long run. I agree with the end that if the republicans and the democrats could be more bipartisan the country as a whole would be much more stronger

The Supreme Court recently released an important ruling (Citizens United v. Federal Election Commission) that essentially extended the First Amendment right of free speech to corporations engaging in “political speech” (the full text of the opinion may be found here; a summary may be found here).

The Court upheld disclosure and disclaimer requirements but removed existing restraints on what can be said by corporations in federal election campaigns and when they can say it (with respect to when the elections are held).  This will most certainly lead to an increase in election spending by corporations and rent-seeking in the political realm.

This is a good example of the conflict between law based upon principles of justice and law designed to produce efficient results.  Protecting the principle of free political speech is a clear appeal to justice, but it is very unlikely that this ruling will simplify the process of policy making or cause it to be more efficient.

After reading about Senator Kennedy’s ailments late this last summer, this is the furthest thing I ever imagined.  The United States is at a political and economic forefront. Bailouts, reform, deficit, unemployment, recession, healthcare, and now a Republican Senator from Massachusetts, what’s next?  We have slightly hit on stable government in class. Delaying the seating of Mr. Brown or forcing the healthcare bill through the Senate will spark strong controversy. This blog shares the recognition of Jim Webb, Virginia-D, taking the stance to respect the choice of the voters and follow the respected course of action. Whether that holds true or what happens next will be an interesting turn of events; and will it be stable? Webb: No Health Care Action until Brown is Seated

I agree with the author of this article that Haiti needs what Adam Smith, in his Inquiry into the Nature and Causes of the Wealth of Nations, called a “System of Natural Liberty” as outlined in the seven steps Mr. Ebling has in his article.

This seems all well and good, but in truth isn’t it a bit idealistic considering that in reality there is nowhere in the world that these thing exist? This is not something that can be forced by governments. These “reforms…must be understood, desired, and finally implemented by the Haitians themselves.” (Or the American too for that matter.) All of the outside influences that have acted on Haiti for the last several decades at least, have only succeeded in maintaining the poverty of Haiti; including the foreign aid. Obviously, the most dysfunctional nation in the western hemisphere probably isn’t going to accept private property and laissez-faire before the US or Canada does.

We talked about in class how few of the aid resources that are sent to poorer nations actually make it through the bureaucratic bottleneck to those in need. Of course the Haitians “can use all the assistance that any and all men of good will may choose to provide right now, but the recovery that can begin “tomorrow” can only come about by releasing the creative energy and abilities of the Haitian people. And that means that their government and other governments need to get out of the way and not make a market-based recovery process more difficult than it has to be.” One thing that is important to remember is that charity and wealth are often closely associated. We are one of the most charitable nations because of our wealth which is a result of economic freedom. We are the sixth most economically free nation in the world. I’m not saying we don’t have room for improvement, but I recognize that we aren’t the worst off either.

I don’t know enough about Haitian history and culture to offer useful advice as to how this is to be done, but I have a strong impression that heeding the likes of Bill Clinton, Aristide, or Paul Krugman would definitely NOT be helpful!

There was an interesting Op-Ed in the New York Times today about what we were talking about in class on Thursday regarding Haiti and what foreign aid has done for Haiti and other developing countries.

In his article The Underlying Tragedy David Brooks said,

We don’t know how to use aid to reduce poverty. Over the past few decades, the world has spent trillions of dollars to generate growth in the developing world. 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.

Brooks suggests that the underlying problem in most of these countries like Haiti has to do with cultural influences. Things like common childhood neglect in the Haitian culture have stopped progress from occurring. What the U.S. needs to do is adopt a paternalistic approach with Haiti instead of throwing money at it like we have been.

Like we were saying in class, the problem with aid is that the government entities (or lack of them) in these countries prevent aid from hitting the ground and reducing poverty. Without stable governments nothing will change. Is corrupt and nonexistent government really a result of cultural influences as Brooks suggests? If so, what kind of approaches should the U.S. take to influence change? How much can we and should we do to change the culture in Haiti to one that will support a stable government and economic progress?