By the end of this year…

Charlie 

…inflation in Zimbabwe may hit 100, 000 percent.

Savior socialist Robert Mugabe, mission accomplished!

A sampling of current commodities prices:

• Bar of Dove soap: Z$140,000

• One kg of rice: Z$230,000

• One litre of fuel, where available: Z$300,000

• 200g local cheese: Z$230,000

• Tin of tuna: Z$290,000

• Tin of baked beans: Z$65,000

• 500ml sterilised milk – where available – Z$32,500

• No chicken, beef, pork, sausages, cooking oil, sugar, flour, margarine, fruit cordial, matches.

Cowen on Karelis on Poverty

Charlie 

As always, Tyler Cowen (spurred by Karelis) demonstrates the fundamental importance of incentives.  He points out that the poor–and especially the poor who have been poor for generations–maximize utility in different ways than the rest of us. 

Poor enough people will accept risk in the downward direction rather than smoothing consumption, so they buy lots of lottery tickets.  They also commit more crime, so they can have at least some joyous times, and they take lots of “stupid” chances.  Yet the poor are not irrational or necessarily dysfunctional in terms of procedural rationality, but rather they are optimizing given constraints.  They are taking the Friedman-Savage model very very seriously.

“Getting tough” with the poor through policy is more likely to backfire than succeed, as it just encourages more mean-reducing, risk-taking behavior….

The more the poor regard themselves as lagging the rich (rather than doing better than, say, their peers back home in Gujarat), the more stupid risks they will take.  That’s why poor immigrants are more value-maximizing than the poor that have lived in America a long time and adapted to American norms and expectations.  The immigrants don’t regard their burdens as insuperable and they are on standard downward-sloping marginal utility curves. 

This makes for a fascinating–and challenging–argument.  

If your interested…

Here’s a snipet of the Amazon review of Dr. Karelis book, The Persistence of Poverty: Why the Economics of the Well-Off Can’t Help the Poor.

With rigor and passion, Karelis offers a radical reconsideration of the problem, resting on twin premises: the importance of distinguishing between enjoyment and relief (e.g., eating ice cream vs. taking aspirin for a headache), and acknowledging that these motivators/rewards have a different effect on the poor than they do the well-off. Karelis argues that while the middle and upper classes seek an even distribution of “pleasers” to increase “positive satisfaction” over the long-run, those acting from a position of insufficiency work for “relievers… goods that reduce pain, unhappiness, or misery” in the moment. As such, what is rational or efficient behavior for the poor is not so for the well-off, and vice-versa.

NOT Sachs or Bono

Sandeep

So the issue here is not remote ideals of regional or continental unity that might, by some undefined and unprecedented magic, lift Africans out of poverty. The real issue is the lack of practical and everyday economic freedom that would allow Africans to lift themselves out of poverty, with well-defined and historically-proven policies.

The beauty of sound economic policies is that they take effect within very few years, as in South Africa and Botswana, unlike fancy political notions, such as Ghaddafi’s oft-delayed union with Egypt. But leaders who can talk of unity while ignoring the carnage in Darfur and the tyranny in Zimbabwe can very easily ignore regional economic barriers.

Our future will not be built by ideology and fine concepts: these are what have kept Africans back when hundreds of millions in Asia were building a better life. Our growth and prosperity depends on proven common sense and freeing the economic shackles that still enslave us.

I don’t pay much attention to any periodic fête of heads of state (and their hip celebrity counterparts) like the G8, UN or the African Union. July’s meeting of the African Union was predictably characterized by the same pan-African rhetoric that has been promulgated by dictators since Kwame Nkrumah wrote, “African unity must necessarily take the form of a continent-wide political unification. There will have to be continental government charged with the management of all essential functions, notably the economy, defence and foreign affairs.”

African “unity” is, of course, an issue which disgustingly defenestrates humans and their endeavors. That’s why we should listen to Franklin Cudjoe, who writes “A United States of Africa: AU chasing a mirage…” posted on the IPN website.