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Archive for October, 2009

Fenced Fourth Estate

How could you not take subversive pleasure in this letter-duo found in the week’s Economist?

SIR – Philip Bowring’s account of the Far Eastern Economic Review’s encounter with the Singapore government is inaccurate (Letters, October 17th). In 1987 the government restricted the circulation of the Review after it had engaged in Singapore’s domestic politics. But an advertisement-free version was distributed widely at bookshops and supermarkets, and sold more than 1,000 copies. In March 1988 the Review applied to produce a similar version. The government agreed, subject to a ceiling of 2,000 copies, but the Review refused its offer. Would this have happened in Maoist China and North Korea?

Michael Eng Cheng Teo
High commissioner for Singapore
London

SIR – You will be tempted to give the Singapore government the last word on its censorship strategy—as its “right of reply” policy demands—but this will neutralise the criticism of Mr Bowring and others. Readers will simply assume you agree with the government. Assuming you don’t, please print this alongside its next rebuttal, to expose this subtle yet powerful manipulation of the press.

Duncan M. Butlin
Chichester, West Sussex

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Everything reminds Milton of the money supply. Well, everything reminds me of sex, but I keep it out of the paper.

So said Robert Solow of Milton Friedman. I’ll beg Solow’s and your indulgence, Reader, for these days I have wine on my mind, and I can’t keep it out of the blog.

A few days ago I read the following passage in The Alchemist, which I’ve now finished:

Page 60

The old man continued, ‘You have been a real blessing to me. Today I understand something I didn’t see before: every blessing ignored becomes a curse. I don’t want anything else in life. But you are forcing me to look at wealth and at horizons I have never known. Now that I have seen them, and now that I see how immense my possibilities are, I’m going to feel worse than I did before you arrived. Because I know the things I should be able to accomplish, and I don’t want to do so. ‘

A fun coincidence, reading this when I did, as it came just after a disappointing meeting with a restaurant owner. Despite a drawn-out conversation, the owner to the end held the position that while our wines were better than her limited selection and reasonably priced, she thought her customers were content with what she had and couldn’t be bothered to care about something better. Perhaps she was right, but to me her position smacked of a certain cognitive dissonance, as if she felt she would be better off by denying a choice existed rather than having to make one.  Even still, I doubt this business owner, unlike the one in the book, felt worse afterward.

***

As for my thoughts on the book itself, in short, I didn’t like it. Too easy, simple, trite, thoughtless, contradictory. It reminded me of this bit of data showing Americans, particularly better off ones, like to use the metaphor of a journey to describe their lives. Like Tyler Cowen, I wonder if just reveals “our tendency to impose a false or misleading narrative on events.”

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Minty Fresh

At some point in the past few days I acquired an unusually decrepit–even for Rwanda– 2,000 franc note (~$4); not only is it nearly torn asunder, but it’s also missing a quarter sized chunk at the top of the bill. So is it still worth 2,000 francs? The National Bank of Rwanda would say yes, but common sense says no: damaged money is less valuable than its freshly-minted brethren.  This leads to a phenomenon known as Gresham’s law, which Wikipedia outlines as follows:

Gresham’s law is commonly stated: “Bad money drives out good”, but more accurately stated: “Bad money drives out good under legal tender laws.”

Let’s say the government issued a 100% gold coin with a face value of a dollar. After a few mintings, however, the government decides to increase its seigniorage by minting a new series of dollar coins, but this time with only 50% gold. Now two coins are circulating about the economy, and both must be accepted as worth $1 in any transaction. But the citizenry knows one coin has twice as much gold in it as the other and is thus more valuable, so they will hold on to the full-gold coin and use the half-gold coin as much as possible. Soon enough, all full-gold coins will have disappeared, having been driven out by the less valuable but legally equal half-gold coin. In my real-world case, I utilized my full measure of clever to swap out my bad note with a good one in a bank deposit for my wine company.

And now that we’re speaking of wine again (weird, huh?), I’ve come across an inverse wine corollary to Gresham’s law, as explained to me by a restaurant manager as I replenished his supply. Since buying our wine, the manager had instructed his pseudo-sommelier first to get rid of his old inferior stock from another supplier. For whatever reason, however, our good stuff drove out of circulation the bad stuff, of which he has hardly been able to sell a drop.

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In Vino Veritas

Several projects command my attention on any given day, but the one consuming most of my time at the moment is a wine business I run with the financial backing of a few expats. We’re currently importing 19 types of South African wine and retailing it in Kigali. In the past week or so, we’ve begun pushing our juice to several restaurants, whom we’ve found are in desperate need of palatable wine.

Last night as one restaurant manager was sampling a few bottles of our selection, he showed my colleague and me his wine list. He explained that he had spent little money or effort on the menu because he was never sure of his supply and always had to be ready to produce a new list. Making the list cheaply meant he could be more responsive to whatever changes might come his way.

This little explanation brought to my face what one housemate calls my “stupid grin,” because it was a great example of what economists call intuitively (for once) menu costs: the costs of a price change. If duck suddenly becomes more expensive, for instance, a restaurant serving foie gras will probably want to charge a higher price for it. They may not do so, however, because the extra cost of updating their menu could outweigh the extra revenue resulting from the higher price. If this were in the fact the case, the price would be dubbed sticky, or resistant to a change in the market.

Some schools of thought in economics stress price stickiness (such as with wages, which don’t tend to go down even in bad times) as an important factor in understanding the ups and downs of economic activity.  I on the other hand stress price stickiness as an important factor in understanding why it’s hard to remove price tags from wine glasses.

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I think it was Jay Leno who had a bit long ago with the observation that while we know we’re more likely to die in a bathroom accident than on a commercial flight, we’re always going to worry about the latter more because no one’s ever opened their medicine cabinet and been sucked out into a slipstream at 30,000 feet. Similarly, I’ve not yet padded into the bathroom for a glass of water and found myself clenched in the jaws of a croc when I turned on the tap:

Deaths by crocodile attacks in Nyagatare district, along the crocodile infested Akagera River have compelled government to rush to the rescue of worried area residents, The New Times has learnt.

This comes after 14 year old Stella Mutesi, the latest victim was killed by a crocodile about a month ago while she was drawing water from the river.

Rosette Rugamba, Rwanda Development Board’s Deputy CEO in Charge of Tourism and Conservation, acknowledged the regrettable incident on Sunday explaining what is being done to prevent other such nasty deaths.

The article gives no indication as to how often this happens, but I’d bet death by croc is extremely rare relative to other life departures in Rwanda. Thankfully it appears this fact is being acknowledged in the government response:

Even though plans are underway to fence off the park so as to check human – wildlife conflicts, Rugamba underlined that in this particular case water scarcity is the challenge, which is going to be hastily addressed, “at the national level.” Safe water sources are said to be scarce in the area, leaving the residents with one alternative, albeit a deadly one – Akagera River.

(…)

Rugamba says a research study on where to erect boreholes in the communities has been concluded, by the ministry in charge of lands.

“The study has actually been done and finished, showing various points where the community can get water from without getting near the river. This issue is being addressed at a national level.”

Still, there’s a perversity to the fact that it takes a croc killing, a non-event in probabilistic terms, to draw attention to the bland common killer represented by a lack of access to drinking water.

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