Comments on: How Economists Kill People

By: Learning The Lessons of Nixon » The Pope has died

Learning The Lessons of Nixon » The Pope has died — Sat, 02 Apr 2005 23:51:48 +0000

[...] intro to this topic that won’t put you into a coma, try An Economist’s Tale. Here’s Crooked Timber’s take on An Economist’s Tale. [...]

By: Crooked Timber » » Wolfowitz for the World Bank!

Crooked Timber » » Wolfowitz for the World Bank! — Tue, 22 Mar 2005 19:47:50 +0000

[...] Posted by Daniel My favourite passage in Peter Griffiths’ book “The Economist’s Tale” is one where he ruminates on the nature of the [...]

By: Peter Griffiths

Peter Griffiths — Sat, 12 Feb 2005 16:44:46 +0000

As I have said I was working towards an improved system which would do away with subsidies and imports, when some free market nutter came up with the view that if the price went up tenfold, local farmers would produce more food instantly (without having to plant it, let it grow, harvest it, and distribute it), and that local consumers would have no difficulty in paying ten times the price. Result, I had to concentrate on the very short term aim of stopping a famine, and ignore the long term. No I do not claim to have saved the world, just to have stopped one famine, leaving the general situation no better than it was before. I do not know that SL ever managed to achieve the reform, and certainly its long civil war grew out of the situation I described. So I do not know to the nearest couple of million how many died specificially out of the various attempts at reform. But die they did. At 50% toddler mortality there would have been more than one death for every adult alive today. Shall we say 4 million over the last 20 years? And AdamSmithee asks about the odd 200000! Given how births and deaths statistics are collected in a LDC, the statistical error is far higher than this. But they had the decency not to die in front of a TV camera, so we can ignore them.

By: Uncle Kvetch

Uncle Kvetch — Fri, 11 Feb 2005 14:50:30 +0000

if you carry out this reform then the likely near term effect will be that 200,000 children will die in the city. However, I believe that in the long term, because of the effect of the pricing mechanism, 400,000 farmers’ children who would otherwise have died will live. I do not have any conclusive evidence for this conclusion. Hey, if that kind of thinking can justify a unilateral war (after the fact, of course), is there anything it can’t justify?

By: AdamSmithee

AdamSmithee — Fri, 11 Feb 2005 14:26:02 +0000

To go back to a point made further up the comment chain, they key lines appear to be “people could not buy enough to live on at the subsidized price, so it could be argued that removing the present 25% subsidy would push prices beyond the means of half the population. But the reality was much worse than this. Over the last year, the leone’s value had collapsed against the dollar to a tenth of its previous level. ” I’d imagine it would be almost impossible to keep subsidies high enough (over 90 percent of the world price of rice) that the local price of imported rice would stay the same. The temtation to smuggle the stuff across the border, the cost to a cash-strapped government, and so on. So, presumably, the price went up at some point. When it did, did hundreds of thousands starve? Indeed, I notice from the government statistics below that the consumer price of foodstuffs went up 24 percent over the last year in Sierra Leone. Was there mass starvation? It has to be the case that sudden price shocks in basic staples should be avoided everywhere, but especially in very poor countries. Having said that, (1) 90 percent plus subsidies on imported foods aren’t sustainable and destroy any incentives for locals to produce crops (think how much we all complain that EU subsidies are bad for LDC farmers) and (2) Griffiths needs to temper his claims for saving the world, they aren’t terribly plausible. http://www.daco-sl.org/encyclopedia2004/ 5_gov/5_4/Statistics%20Sierra%20Leone/SSL_cpi.pdf

By: abb1

abb1 — Fri, 11 Feb 2005 12:52:35 +0000

Tracy, If they are doing it to further the political interests of the US government it implies a remarkable level of what we might call public-spiritedness (not necessarily nice public spiritedness) for a company that I would expect to be primarily responsible to its owners. You’re right, and this is why he is criticized as ‘overly focused on conspiracies’ in that review I quoted. However, the obvious response to this is that the the IMF and the US government are simply arms of The Big Business. To a degree, of course. For example, I don’t think you can deny that the US government often acted as an arm of the United Fruit in Central America in the 20th century, right? IOW, by advancing political interests of the US government they advance their own financial interests, it’s the same thing. As far as government spending and what’s better rich or poor – government spending is not the only game. There’s also control over natural resources and access to cheap labor. Another thing with NZ and other developed countries is that there’s much less corruption there and much more real competition, so it’s probably a lot of risk and not much profit. You don’t become a billionaire in an Adam-Smith-style environment where a lot of entrepreneurs are fighting for their vanishing share of the market. You become a billionaire in a crony capitalism environment. So, as I said before, I do agree that there are many different dynamics in this, and I think the ‘economic hit men’ phenomenon is probably one of them.

By: Tracy

Tracy — Fri, 11 Feb 2005 02:09:29 +0000

abb1, What do you think multi-national companies get out of driving a country into the hands of the IMF/World Bank? If they are doing it to further the political interests of the US government it implies a remarkable level of what we might call public-spiritedness (not necessarily nice public spiritedness) for a company that I would expect to be primarily responsible to its owners. Sierra Leone, with a population of 6 million people, according to the CIA World Factbook had about $350 million in government spending in 2000. According to the same source the NZ government, with a population of 4 million, spent $30 billion in 2003. Even taking a lot more opportunities for corruption in poor countries, rich countries have a lot more resources available. The NZ government can spend more on roads than Sierra Leone can spend entirely in a year. And, having worked for the NZ government, I can assure you that multi-national firms spend a fair amount of time trying to sell things to it. On the whole, I would not expect any profit-maximising company to have any serious intent for a country to be richer or poorer, since the free-rider problem is too large and the time-periods involved too long. But if they did, going for richer makes much more sense. And, as for inflated cost-benefit projections, that also happens all the time in government. Read some evaluation studies done on government programmes sometime to see the sorts of gaps you get between the original claims and actual achievements. The incentives driving people to exaggerate benefits in the hope of persuading the government to do something are far more basic and common than those you suggest.

By: dsquared

dsquared — Fri, 11 Feb 2005 02:04:06 +0000

This far down on the comments thread is probably a safe place to reveal my favourite passage in the whole book, upon which I am going to base a whole post sometime soon; it’s the point at which Peter thinks to himself about the nature of a consultant’s presentations (from memory as my copy of the book is in the room with the baby) “I am acutely aware of the number of times I have said something of this kind; if you carry out this reform then the likely near term effect will be that 200,000 children will die in the city. However, I believe that in the long term, because of the effect of the pricing mechanism, 400,000 farmers’ children who would otherwise have died will live. I do not have any conclusive evidence for this conclusion. The process by which I arrived at this estimate would certainly not pass the peer review process of any Western economics journal. Nevertheless I strongly advise you to take this course of action”.

By: praktike

praktike — Thu, 10 Feb 2005 21:35:51 +0000

I haven’t read this book, but I do recommend Robert Klitgaard’s. My understanding, in any case, is that the World Bank doesn’t favor structural adjustment any more.

By: Peter Griffiths

Peter Griffiths — Thu, 10 Feb 2005 21:23:32 +0000

I think it is important not to dichotomise. In a complex situation like this – a whole sector of the economy – it is seldom either or, rather “and another thing.” Sierra Leone went from being the richest country in the new Commonwealth to the poorest in the world, from kleptocracy, bad advice from abroad and bad decisions. Agriculture and mining were taxed to a standstill by explicit taxes and an overvalued currency, while the overvalued currency’s cheap imports hammered industry. Everybody saw how bad things were. Everybody had their own utopia – what they would like to see. Possibly a welfare state, Thatcherism or Maoism. The problem is not designing a utopia, or even a situation where fewer children starve, rather getting from here to there without too many deaths. An achievable sub-optimal situation is better than an unachievable utopia. E.g. free markets may or may not be an ideal end situation, but introducing free markets instantly does not lead to that ideal end solution. At the beginning, I was obsessed with the problem Abiola Lapite spells out: increasing rural incomes means more children die in the city, so there are riots near the president’s palace. As it happens, a different problem suddenly became more urgent, but his problem still would have to be tackled before there could be any change. Moral Hazard In the short article I presented it as a simple problem, my career or a famine, a problem which does not take a moment’s thought, but the book examines it more carefully. Why, for example, did I find myself facing a problem most economists never come near? I assume that an economist’s task is the allocation of scarce resources. My scarcest resource is my own time. I allocate it to maximize the payoff. So I am always where the big players want or do not want change. I would be a lot more popular, and less effective, if I stuck to my terms of reference. The moral problems are nasty. E.g. deciding to move money from the city to the country means that hundreds of thousands of children will die in the city, certainly. I hope that over the next decade or so rather more lives will be saved in the country. I have no meaningful statistics. I have not done a real economic analysis. I rely on my judgement. The fact that I have somehow got in this position means that I am the right person to make the decision. I am really important, really wonderful, aren’t I? And while I tell myself that I am not the best person to play God, I don’t really believe what I say. And the same is true of World Bank staff, people working in international organizations and donor organizations. I end with a shocking statement. The overwhelming majority of the World Bank staff members I meet in the Third World are nice chaps. They are truly concerned with the welfare of the people in the Third World and in promoting economic development. They are intelligent. They are left wing by American standards. In the book, I have tried to explore how an organization composed of such people can be so malign. But, as Stalin said, “One death is a tragedy: a million deaths is just a statistic.” And the Third World doesn’t keep statistics of deaths.

By: Darren

Darren — Thu, 10 Feb 2005 16:01:21 +0000

Jack I’m not talking about ignoring the starving in order to “concentrate on an ill defined moral hazard”. Yes, that would be monstrous and obviously so. I am asking about what happened earlier in the time line. I am asking how the population got to the position they were in and whether or not mistakes were made that could’ve been avoided and even exacerbated the current situation. “I think you would be more convincing” but I’m not trying to convince anyone of anything. Surely, it is up to those who are advocating policy of one form or another to present convincing argument?

By: Jack

Jack — Thu, 10 Feb 2005 13:38:17 +0000

Darren, Are you saying that it would be more cruel to deny the people of Sierra Leone the right to starve as a result of their own actions than to let them starve? Presumably their own risky action is insufficiently vigorous resistance to the introduction of a fiat currency and the peril it was their duty to avoid was being at the hands of the World Bank. If that is not your point, what is? It is, I suppose, possible that fiat currencies facilitated the crisis experienced by the people of Sierra Leone although I think the blood diamond trade gives the lie to that argument. But even so I don’t really see what that has to do with the subject of the post. Maybe I’m being oversensitive but to concentrate on an ill defined moral hazard when people might be starving seems monstrous to me. I think you would be more convincing if you were clearer about who ran the moral hazard, what is appropriate behaviour towards the victims of a crisis (Tsunami victims for example) and the suitability of the role of Grim Reaper for the World Bank. I note that Mr. Griffiths himself used the phrase kleptocrat. I don’t think there is any condoning of the status quo going on here, it is just that the specific focus was on the lethal effects of myopia and dogma at the World Bank.

By: P.M.Lawrence

P.M.Lawrence — Thu, 10 Feb 2005 13:15:57 +0000

Here are a couple of things I remember from my time in Nigeria. Import permits were brought in under a regulation that insisted they be printed on standard government paper. Only, there was none of the paper in the country. They couldn’t get any in legally without an import permit, so they had to smuggle the first lot in. The USA made its economic weight felt even then (late ‘60s), by diverting the local prawn catch through US factory ships. Prawn availablity and quality dropped dramatically, even as prices increased, since everything had to be channelled through so many links in a value chain. And this was typical. Of corruption there, it was my experience that it wasn’t precisely what we would feel that way. That is, it wasn’t an ethically wrong thing but rather an inappropriate response of old values in a changing world. It showed up as “dash”, which I eventually realised had a great many analogues to the Roman institution of patron and client. All this gave me some insight into the Yoruba in particular, though I wouldn’t claim as much as a specialist. Rather, I am like someone who knows enough law to know when he needs a lawyer.

By: Darren

Darren — Thu, 10 Feb 2005 09:14:35 +0000

williestyle “I suppose you might mean that the typical SL citizen develop an understanding of macro-economics that would drive him to violent revolution at the sight of a fiat currency; but that does not strike me as very realistic.” particularly “but that does not strike me as very realistic.” I don’t disagree but the mechanism of theft and corruption shouldn’t be ignored. The mechanism is also at work in more affluent countries but because these countries aren’t close to the edge of starvation it is ignored (even encouraged if it means stock bubbles/housing bubbles).

By: Canadian

Canadian — Thu, 10 Feb 2005 02:52:47 +0000

The citizen of SL will be well served if they elect enlightened politicians, get rid of corrupt politicians and greedy businessmen, not fight civil wars, and ignore bad advice from the WB and IMF.