Saturday, October 30, 2004
Save the World
With much of Asia coming out of extreme poverty, many have asked, "what to do about sub-Saharan Africa?"The Economist ("How to save the world", Oct. 30) cites recent work by Jeffrey Sachs that suggests $75 billion a year of aid.
Yet, Peter Bauer and others have pointed to the obvious fact that government-to-government aid has never paid off. Sachs, of course, knows this but suggests that aid with conditions can work. He even suggests that relatively uncorrupt Ethiopia be used as a trial case.
Africans outside of Africa do relatively well, just as Chinese expatriates and Indian expatriates had done much better than their stay-at-home countrymen. These comparisons are, of course, complicated by powerful emigration selection effects.
Nevertheless, the failed states of Africa beget civil wars and banditry which, in turn, spawn chaos and misery.
Iraq was to be the demonstration of deomocratic institutions -- and development -- imposed via invasion. Demonstrations, perhaps like Ethiopia, where investments and incentives can plausibly beget reform and development might accompany the Iraq mission. It could even involve the high-minded Europeans.
It would be awful if both fail.
Monday, October 25, 2004
Stop Me Before I (Home) Improve Again
Do people make uneconomic home improvements? In this era of booming home improvement, the question is often asked. Real estate columnists often compare the costs of a home improvement (such as adding a bath) to some datum on how the market values such an addition. A hedonic analysis was done in 2003 by G. Stacy Sirmans and David A. Macpherson and received substantial coverage. It seems that home improvers do all sorts of over- (and under) investing.A recently published paper by Virginia Tech's Robert E. Lang (in Vol 1, No. 1 of Opolis) argues that, "features that add to a property's 'urban intensity' can lower the sales price of single-family detached suburban homes." Lang also notes that homeowners' associations have all sorts of rules to prevent owners from making these sorts of additions.
Interesting. It is quite reasonable that homeowners demand rules that sustain neighborhood quality (as Bill Fishel and Bob Nelson have been arguing for years). Lang adds that they are also buying into rules that (a la Tom Schelling?) help them to protect themselves from themselves.
