Importing Jobs from India

That's right, importing. A high-tech firm is relocating from India to Halifax because the labour market in Halifax is much more stable than it is in India.

An overheated information technology sector in India is behind a move by American software firm Versata Inc. to transfer its development lab from Bangalore to Halifax, eventually locating up to 85 jobs in Nova Scotia.

Brett Adam, Versatas' chief technology officer, said Thursday it is increasingly difficult to retain staff in Bangalore - the nucleus of India's thriving high-tech outsourcing industry. "We're an innovation company, we need sustaining relationships with our technologists," Adam said at a news conference announcing the move.

He said it was challenging to keep Indian workers on staff for more than nine months due to the number of rich job opportunities available to them.

Brian Ferguson has a detailed analysis of the move at A Canadian Econoview. He concludes,

So what's happening? A tech firm is locating in Halifax despite the fact that wages are higher there than in Bangalore because it's more profitable to be in Halifax. Profit opportunities create jobs for labour, despite what the left (and increasingly centre-left) will tell you.

And, somewhere in Bangalore, India's counterpart to Lou Dobbs is fuming.

Water and Electricity Shortages

Ontario has been hot and humid for quite some time; the forecast is for more of the same. And despite the humidity, we have had little rain.

The result has been huge peak-load demands for electricity and water. And since we don't have time-of-day or seasonal or any other type of peak-load pricing, we often find ourselves facing shortages. The shortages manifest themselves as brown-outs, blackouts, brown lawns, and dying gardens because of restrictions on water and electricity use that are enforceable with serious fines. There is a very good posting and discussion of this problem at The Western Standard.

We have no excuse for not moving toward peak-load pricing. People respond to incentives, and charging them more during the peak periods of demand will induce many to shift their usage to off-peak periods.

County Fair? Country Fair? what's the difference?

NY Governor George Pataki is considering a run for the U.S. Presidency in 2008. To test the waters, he is going to visit Iowa.

His schedule includes an appearance at a private fund-raising luncheon by the Iowa Republican Party, which is expected to raise $100,000 for the party; a visit to a Little League game; and even the Saturday morning farmer's market in Des Moines.

"We might do a country [sic] fair - I just love those," said Mr. Pataki, who grew up in Peekskill, a northern Westchester suburb. "If we're going to be out there and there's one nearby, I want to do one."

In other words, he hasn't done his homework to find out when and where the various county fairs are being held. The tone of these remarks is so condescending, he clearly should be running for the democratic nomination.

Go back in mid-August, George, for the big Iowa State Fair. Or if you can't make that fair, see the MInnesota State Fair in late August. Both are terrific! There will be lots of people there, and you might get some insight into how Middle America lives.

The Impact of Lifting the U.S. Ban on Canadian Beef

From the Globe and Mail [registration required], the U.S. ban on Canadian beef has been lifted [also see the comments at The Western Standard]:

The unanimous decision by a three-judge panel of the 9th U.S. Circuit Court of Appeals was released Thursday after a one-day hearing in Seattle, where an American ranchers' group argued Canadian cows are unsafe.

If what I posted yesterday is correct, then the big gainers will be U.S. meat packers, and, to a lesser extent, Canadian beef farmers and U.S. beef consumers,. The losers will be U.S. beef farmers and Canadian meat packers. There is also a chance that beef prices for Canadian consumers might increase a bit.

But as I said there, the effects on prices will be smaller than the media might lead us to believe because the markets were already open for pre-dressed beef.

Macro-volatility and Development;a hocus-pocus excuse for a conference

I just received a call for papers for a conference to be held next March:

"The Growth and Welfare Effects of Macroeconomic Volatility."

The conference will take place in Barcelona (at Pompeu Fabra's downtown campus) on March 17-18, 2006.

The conference will include the presentation and discussion of 12 original papers and a closing panel on policy making issues. It will serve to bring together researchers working on the long-run effects of macroeconomic volatility, with a particular emphasis on issues relevant to developing countries.

Would anyone like to co-author a submission asserting that macroeconomics has nothing to do with economic development and that the conference is a waste of time? I can imagine that this economist [Lee Coppock] might share my views.

I am lecturing this week in Liberia on the importance of economic institutions that foster growth. I'll talk about property rights, free trade, monetary stability, etc. However, there is a significant issue that Liberia (and most developing nations) need to overcome before these institutions can be effective: corruption.

Marvin Miller, Free Agency, and Say's Law

In Eric McErlain's excellent postings about the NHL/NHLPA settlement, he mentions Marvin Miller, the first successful leader of the Major League Baseball Players' Association.

Marvin Miller, the godfather of MLB's labor movement, noted that the most important concession he got from owners was to structure the league so only a limited number of players would become free agents every season, thereby boosting their value.

I remember having read this several places and having been puzzled by it. When a player becomes a free agent, that increases both the supply and demand, not just the supply. The team that loses the player will also be looking for a replacement. Furthermore, teams that are looking for a free agent will be doing so, typically, because they have freed up a spot. I know there are variations, but typically an increase in supply will also mean an increase in demand (and vice versa). Both curves shift outward, and there is no particular reason to expect the equilibrium price to change, on average.

More trade doesn't necessarily mean lower prices, and thin markets do not necessarily mean there will be higher prices. What if the players who become free agents in a thin market have skills that not many teams want? Then a thin market might just as easily lead to lower, not higher, salary offers.

Isn't this just another application of Say's Law?

Worth Repeating, even though it's more than a week old

From Surf the Mind:

Bono: “Hey Geldof, look at this!”

Sir Bob: “What is it, dude. Just looks like a road to me.”

Bono: “Yeah, it’s a road. But not just any old road. Look! It’s paved with…”

Sir Bob: “GOOD INTENTIONS! Party on, dude!”

Bono: “I heard about this road once. I don’t remember where it goes, though.”

Sir Bob: “Elton’s place, I think.”

Bono: “No, thats paved with yellow bricks, not good intentions.”

Sir Bob: “Oh yeah. Well, let’s follow this one and see where it goes. We can have a few concerts along the way”

Bono: “Sounds like fun. Count me in.”

The Settlement [NHL and NHLPA]

For some of the best analysis and links concerning the settlement between the NHL and the NHLPA, check out Eric McErlain's Off-Wing Opinion. A couple of choice quotes:

Who will be the Bill Belichick of the NHL?

and

Some advice to Commissioner Bettman: Apparently keeping the ping pong balls for the Rangers in a freezer the night before the draft will be all you need to get this right.

It seems, by all accounts, that this deal is much worse for the players than the February offer from the owners. If so, how long can Bob Goodenow last as the head of the NHLPA?

The Continuing U.S. Ban on Canadian Beef

The U.S. continuing ban on Canadian beef was due for a hearing before the 9th Circuit Court of Appeals on Wednesday. From the Globe and Mail:

The U.S. Department of Agriculture insists it is safe to resume the imports, despite a ruling by a Montana federal judge who sided with ranchers warning about dire economic and health consequences from a potential mad-cow outbreak in the United States.

Feedlots and packers maintain that ranchers are concerned only about their profits.
A panel from the San Francisco-based 9th U.S. Circuit Court of Appeals travels to Seattle on Wednesday to hear the federal government's challenge to the judge's ruling.

I may be missing something, but what's the big deal? Like a vast majority of economists, I favour free trade, and I am disturbed that the U.S. ranchers are still seeking protection against competition from Canadian beef farmers. But the protection they are getting is pretty miniscule:

The National Meat Association says its members have lost $1.7-billion in revenue, idling some packing houses and prompting layoffs. In 2002, Canada shipped 1.6 million cattle to the United States, its largest foreign market.

Meanwhile, the U.S. appetite for beef is being supplemented by imports, including Canadian beef processed to remove parts susceptible to mad-cow disease – including brains, bones, eyes and spinal cords – before crossing the border.

So Canadian beef is pre-dressed (or whatever that process is called) in Canada before it is shipped to the U.S. I don't see how this helps U.S. beef farmers all that much. I do understand why U.S. packers and feed-lot operators are upset, though. And in the meantime, does the present U.S. ban on Canadian beef mean that Canadian beef packers are running flat-out?

The 9th Circuit reserved judgement in the case. For more, see here.

On a related topic, here is an intriguing puzzle on sampling properties and economics: what is the optimal number of cows to sample to inspect for mad-cow disease?

Canada and the United States each test about 1 per cent of the herd at slaughter, compared with 25 per cent by the European Union and 100 per cent in Japan, said Diane Farsetta, a senior researcher at the centre whose work supported the 1997 book, Mad Cow USA: Could the Nightmare Happen Here?

Short-term Incentives

From the Silly Economist column of The Smart Economist:

MORGAN STANLEY'S PROFLIGACY

On March 28, Stephen S. Crawford was appointed co-president of Morgan Stanley, an investment bank. Under an agreement reached June 30, Mr Crawford would receive a hefty $32 million severance package if he decided to resign by August 3.

- On July 11, Mr Crawford resigned... surprising, isn't it?

Pretty funny on the face of it. What is behind that arrangement? And why now (and not on August 2nd?)

Do I REALLY Want to Know If I Am Likely to Get Altzheimer's Disease in 20 Years?

We have this notion in economics that more information is a good thing. Well, most of us do; there's that contingent of elitist interventionists who want to choose for us.

But I'm not sure I want to know if there is a ten percent greater than average chance that I will develop Altzheimer's Disease within the next twenty years. If the predictive tests are positive, what would I do other than worry (and/or drink) a whole bunch more than I already do about loss of short-term memory? Well, maybe by then there'll be a treatment of some sort. Would my employer have to know?

From the Daily Telegraph: [thanks to BenS for the link]

Lisa Mosconi and colleagues at the New York University School of Medicine used positron emission tomography, or PET, scans to look at the brains of 53 normal elderly people. They then watched for as long as 24 years to see who developed Alzheimer's.

Nine did, while 19 developed mild cognitive impairment, which can worsen into Alzheimer's.
The PET scans detected reduced activity in an area of the brain called the hippocampus, which is known to be damaged in Alzheimer's. A 15 to 40 per cent reduction in activity in the hippocampus, as measured by PET, predicted 85 per cent of the Alzheimer's patients nine years in advance, Mosconi said.

It predicted 71 per cent of the cognitive-impairment cases.

and,

Dr Neill Graff-Radford of the Mayo Clinic in Jacksonville and colleagues found that blood levels of a protein called amyloid beta 42 plunged three to five years before a patient was diagnosed with Alzheimer's.

Possible preventatives include fruit juice, vegetable juice, and alcohol.

Amy Borenstein of the University of South Florida and colleagues found Japanese-Americans who drank the most fruit and vegetable juice had a fourfold lower risk of developing Alzheimer's than similar people who drank little or none.

... Mark Sager of the University of Wisconsin and colleagues recruited people whose parents had Alzheimer's and found one clear way to predict who would also get the disease - how much alcohol they drank.

He found that moderate drinkers had a lower risk of Alzheimer's than either non-drinkers or heavy drinkers.

Fruit juice, vegetable juice, and alcohol? Well, maybe one out of three will help . . . . some . . . . I hope.

Gasoline Prices in Canada and the U.S.

In my area we pay about 92.5 cents/litre for regular gasoline. In case you cannot do the conversions easily, use Google. Type in

4 litres in gallons

and get the result

4 liters = 1.0566882 US gallons

That means in Canada we pay about $3.50 (Cdn funds) per U.S. gallon of gasoline. At the current nominal exchange rate of 1 Canuck buck = 81 cents US, we are paying the equivalent of about $2.84 (US) for a US gallon of gasoline.

Compare that with the average price paid in the U.S. [roughly $2.30US].

Why do Canadians pay so much more for gasoline than Americans?

1. Alberta has gotten snarky about letting the rest of us steal their oil. 8-)
2. Canada has fewer people scattered over a larger area -- costs of distribution are, on average, higher in Canada [pretty minor in all likelihood].
3. We have higher taxes on our gasoline.

The last explanation is without a doubt the most important.

Western Separatism

For several decades I have been something of a western separatist even though I live in Ontario. What this really means is that I wouldn't blame the west (Alberta, actually) for wanting to separate from the rest of Canada.

These thoughts probably began when Canada's federal gubmnt brought in the National Energy Policy [NEP] of the 1970s, by means of which voters in the rest of Canada laid claim to Alberta's oil by clamping the lid on oil prices. Friends told me you could see the drilling rigs lined up on the highways to leave Alberta after the implemenation of the NEP -- it had a big effect on new drilling for over a decade.

But financial gain is not the only reason that many in Alberta wistfully consider separation. Link Byfield of the Calgary Sun summarizes the views of Leon Craig in this interesting piece.

Alberta, he says, should go it alone.

Almost overnight, we would become one of the most prosperous nations in the world.
But -- and this is his key point -- the main reason to secede is not because Albertans would have more money. Not that there's anything wrong with money.

More importantly, we would create a country that reflects our own political and social beliefs, values and traditions, and our understanding of the common good.

Canada, says Craig, has been so badly governed since the Trudeau era, it has doomed itself to a Third World, banana republic fate.

We will become -- are in fact becoming -- the Argentina of the 21st century.

Political corruption gets rewarded instead of punished, productivity slides, and the opportunistic politics of envy becomes the basis of our whole system of national government.

The only promising place left in Canada, he concludes, is Alberta.

What if Alberta were to separate? Would what is left of Canada become more left-wing and interventionist? Would the rest of us go along with the trend toward looking to Ottawa for solutions to problems?

Would Alberta also become more of a nanny state as its gubmnt struggled with how to distribute the largess from its oil resources? [For example, see The Emirates Economist for a multitude of stories on how the United Arab Emirates intervenes in the marketplace, in part to make its nationals better off but without allowing expatriates to share in the gains]. Would the Alberta gubmnt start providing more "free" health care, "free" education, "free" highways, "low-cost" housing, "low-cost" insurance, etc? If so, it would lose much of what Craig thinks has made it so successful up until now.

My guess is that if Alberta were to separate from the rest of Canada, the division of oil revenues would lead to gubmnt policies that would slowly destroy the rugged individualism that made Alberta the success story it has become.

Free Hearing Test

Many people in my demographic group develop hearing problems.

In addition, sometimes our partners think we have hearing problems; that, or else they accuse us of not listening to them [thanks to BenS for this link and suggestion]. Here is a very basic free hearing test.

I am happy to report that I passed.

Still 63% American Despite Living in Canada for Plenty-Four Years

I was born and raised in the U.S., but I have lived the majority of my life in Canada. Nevertheless, I am still 63% American, according to this poll.

You Are 63% American

Most times you are proud to be an American. Though sometimes the good ole US of A makes you cringe Still, you know there's no place better suited to be your home. You love your freedom and no one's going to take it away from you!

How American Are You?

Quite honestly, I think the survey/poll captured my libertarian tendencies, a desire for freedom of choice, and a belief that the world will be a better place if people are expected to accept responsibility for their own decisions. [h/t to Stephen Karlson at Cold Spring Shops for the pointer]

Are Economists Regular Folk?

The other day I received an e-mail from Ripley, saying,

I started reading your blog a few months ago and I find it interesting. As an economist, you see things differently than us regular folk and I think I've even learned a thing or two!

What is it about economists that causes people to distinguish between us and "regular folk"?

Is it that we appear to be more cold and calculating [e.g. my posting on assessing the incremental costs and benefits of searching for a marriage partner].

Is it that we think more explicitly in terms of probabilities and calculus?

Is it that we appear not to care about people's feelings?

My suspicion is that we are, indeed, regular folk. It's just that we're a whole lot more explicit about the qualitative and quantitative calculations that are implied by day-to-day decisions.

Sort Your Trash Properly..... or else the garbage vigilantes will get you!

When gubmnts consider recycling programmes, they rarely, if ever, give explicit consideration to the costs imposed on the households, and yet recycling almost always involves time and inconvenience for households. Some programmes in Japan are so complex, they come with a 27-page manual on sorting the different types of garbage into different bags, and then labeling the bags appropriately. [thanks to Brian Ferguson for the link; $ required for more than the abstract].

To Americans [and Canadians!] struggling with sorting trash into a few categories, Japan may provide a foretaste of daily life to come. In a national drive to reduce waste and increase recycling, neighborhoods, office buildings, towns and megalopolises are raising the number of trash categories - sometimes to dizzying heights.

Indeed, Yokohama, with 3.5 million people, appears slack compared with Kamikatsu, a town of 2,200 in the mountains of Shikoku, the smallest of Japan's four main islands. Not content with the 34 trash categories it defined four years ago as part of a major push to reduce waste, Kamikatsu has gradually raised the number to 44.

Understandably, not all households comply with the garbage regulations. But monitoring behaviour and enforcing the regulations is costly; most of the work has fallen to volunteer garbage vigilantes.

In towns and villages where everybody knows one another, not sorting may be unthinkable. In cities, though, not everybody complies, and perhaps more than any other act, sorting out the trash properly is regarded as proof that one is a grown-up, responsible citizen. ...

In Yokohama, after a few neighborhoods started sorting last year, some residents stopped throwing away their trash at home. Garbage bins at parks and convenience stores began filling up mysteriously with unsorted trash.

"So we stopped putting garbage bins in the parks," said Masaki Fujihira, who oversees the promotion of trash sorting at Yokohama City's family garbage division.

Enter the garbage guardians, the army of hawk-eyed volunteers across Japan who comb offending bags for, say, a telltale gas bill, then nudge the owner onto the right path.

In one instance, a young couple consistently and persistently mis-sorted their garbage, and the vigilantes had them evicted from their apartment! That's one way to force people to internalize an externality.

In macroeconomics, is this what is meant by "moral suasion"?

Update: Brian Ferguson has much more on this at A Canadian Econoview.

Does He Get It Now?

From Harry's Place [h/t to MA]:

I appreciated Mayor Livingstone's defiant statement after [the] atrocities in London. And I'm not as bothered as some by his "class angle":

This was not a terrorist attack against the mighty and the powerful. It was not aimed at presidents or prime ministers. It was aimed at ordinary, working-class Londoners...

He did go on to call the attacks "[i]ndiscriminate slaughter irrespective of any consideration for age, class, religion, whatever."

In my frustration at "leftists" who profess to understand the mass murderers of Israeli civilians, I have pointed out that poor and working-class Israelis who depend on buses are more likely to be targeted than those who can afford cars. The Ken Livingstones of the world, who never seemed to notice that fact while defending the Palestinian "national struggle," will perhaps have a different perspective now.

Perhaps also Livingstone will begin to grasp why so many of us were enraged last year by his warm welcome and strident defense of the odious Sheikh al-Qaradawi, who has justified suicide murders of Israelis on the grounds that there are no innocent Israeli civilians-- including, presumably, weeks-old babies.

Be a Farmer;Get a Tax Break

There are cows grazing on sites that are being prepared for suburban development outside Miami, Florida. The reason is that so long as the land is being used for agriculture, the owner receives a massive tax break.

The idea was to protect farmers from soaring taxes. But developers learned long ago that they too could seek tax relief by plunking a few cows on their land or planting a few rows of crops. ''They did not put anything in the law that said the property owner had to be a farmer,'' said Art Hurley, a horse rancher who campaigned for property appraiser in 2000. "The result was that it allowed developers to buy much more land than they could have afforded. So it hurt instead of helped.''

The policy may have hurt in the sense that it did not help keep farmers (in the traditional sense) on the land, but as Brian Ferguson points out at A Canadian Econoview, it helped the farmers who own developable land. In one instance property taxes were reduced to $461 instead of $340,000 because some cattle were kept on the land even though feed had to be trucked in for them every day. In another instance, land was purchased for $13.75million but assessed for only $18,354 because it was being used for agriculture. The low assessment meant the developer was willing to bid more to buy the land.

As Brian Ferguson notes, even though the tax break lasts only so long as the land is being used for agricultural purposes, if it used for agriculture on January 1, the owner receives the tax break for the entire year.

Cross-posted at The Western Standard.

Update: For more from someone who is taking advantage of the tax break, see Tom Luongo's recent posting on this topic.

What Role Has Collusion Played in High Gasoline Prices?

Not much, if any, according to the Federal Trade Commission, as reported by the Washington Post [registration required].

Gasoline prices are increasing primarily because of market conditions, not collusion or other anti-competitive activities, according to a report released yesterday by the Federal Trade Commission.

The report said a variety of factors have pushed prices higher, including the rising cost of crude oil, increasing domestic and international demand and federal, state and local regulations. The findings included descriptions of investigations into specific price increases and their causes.

The report said a variety of factors have pushed prices higher, including the rising cost of crude oil, increasing domestic and international demand and federal, state and local regulations. The findings included descriptions of investigations into specific price increases and their causes.

The report notes that some observers suspect that mergers, oil company collusion or other anti-competitive conduct may be the reason for higher gasoline prices. But it concludes: "The vast majority of the FTC's investigations have revealed market factors to be the primary drivers of both price increases and price spikes."

Interestingly, those who blame big oil companies for the current high prices for gasoline [see the full article for examples] saw now reason to credit them when gasoline prices were low.

For most of the past two decades, after adjusting for inflation, annual average retail gasoline prices have been lower than at any time since 1919, the report said.

And of course if big oil companies did receive credit for low gasoline prices, it would be blame not credit, accusing them of driving somebody out of business.

Google Maps and Satellite Views,Together

This site provids an intriguing hack that allows a transparent overlay of the satellite view on top of a Google map. The two views scale together, and there is a toggle to change the views.

As Paul Kedrosky says, it is nifty and slick. It is so comprehensive that it includes the US, UK, and Canada. It is so nifty and slick, I was able to move it to cover even Clinton, ON.

I'm a Realisthow disappointing

I took the Christian Science Monitor's recent quiz to see whether I'm a neoconservative [h/t to Ted Frank for the link]. I guess I'm not. My answers revealed that I'm a realist:

Realists…
Are guided more by practical considerations than ideological vision
Believe US power is crucial to successful diplomacy - and vice versa
Don't want US policy options unduly limited by world opinion or ethical considerations
Believe strong alliances are important to US interests
Weigh the political costs of foreign action
Believe foreign intervention must be dictated by compelling national interest

Historical realist: President Dwight D. Eisenhower
Modern realist: Secretary of State Colin Powell

Good grief.

Manhole Covers -- Hundreds of Photos

Former student, Peter Kucherepa [aka "BowTieGuy"], has a very large collection of photographs of manhole covers from all over the world on his website.

If you really like those, try this.

Reminds Me of Head-Smashed-In Buffalo Jump

From ABC News International [with thanks to Alex]:

ISTANBUL, Turkey Jul 8, 2005 — First one sheep jumped to its death. Then stunned Turkish shepherds, who had left the herd to graze while they had breakfast, watched as nearly 1,500 others followed, each leaping off the same cliff, Turkish media reported.

In the end, 450 dead animals lay on top of one another in a billowy white pile, the Aksam newspaper said. Those who jumped later were saved as the pile got higher and the fall more cushioned, Aksam reported.

The risk that sheep will act like lemmings is probably an unforeseeable risk (at least it isn't something I would have imagined). I wonder if this is an insurable risk.

It sounds remotely like Head-Smashed-In Buffalo Jump except that in that case the buffalo were enticed and driven over the cliff.