Omnia Mutantur

Greg Mankiw comments succinctly on what I see as the hypocrisy of most people who propose imposing minim wage restrictions on countries as a requirement of free trade (how free trade and restrictions go together is beyond me).

Robert Reich says that, as a requirement for free trade deals, we should tell developing countries to “set a minimum wage that’s half their median wage.” The proposal raises two questions in my mind:

1. Does Reich pay his nanny, cleaning person, and gardener more than half the median wage of members of his family?

2. If not, should I refuse to buy his books?

Made specially timely by the fact that I’ve just read The Choice, a terse description of free trade versus protectionism.

Here’s his post, found via Marginal Revolution.

Ricardo Math and economics

Ron Paul lucidly speaking on the effect of paper currencies and the Federal Reserve’s interest manipulation on actual wealth.

“This deficit shows that much of our prosperity is based on borrowing rather than a true increase in production”. Couldn’t be stated any clearer.

Ricardo Math and economics, News and politics

Randolph Harrison goes into Second Life, expecting to make a quick buck via market arbitrage, and realizes that getting money out of Second Life might not be as easy as getting it in.

Enter the second problem, the L$ exchange markets are effectively rigged. At any given time over the past year or so, the SLL/USD exchange rate has hovered between about 250 and 300. That is, for every L$300 you earned, you could expect to get $1 USD. Now recall, there are supposedly hundreds of thousands of real dollars being spent daily; over L$250,000,000. Between Linden’s official exchange market and the private exchanges, all appearances suggest a large volume of L$ daily exchange trade.

The catch is, however, these headline rates only apply to small amounts. For small time buyers and sellers of L$ — be they virtual Johns paying up for sexy avatar escorts, or small time digital jewelry makers cashing out a couple hundred real dollars – this works well. Most of these people will use Linden’s official LindeX exchange, anyway. LindeX is actually not a virtual currency exchange market so much as it is an open auction, anyway. This means LindeX is not particularly useful for big trades.

[...]

As we scratched our heads trying to figure out if there weren’t a more clever way of disguising our trades, or perhaps creating our own in-game banks and exchanges in order to arbitrage the other direction, it suddenly dawned upon me.

This game was just a pyramid scheme.

SecondLife is not a dramatic taste of our future, in which markets are virtual, currency is free from government control, taxes are non-existent, and normal people can become real millionaires simply by clicking their mouse a few times.

SecondLife isn’t even a simple virtual economy, with legitimate buying and selling, and opportunity for those who would compete.

No, SecondLife is a classic pyramid scheme. Or, more of an Amway-like pyramid: partially legitimate, partially ponzi. Sure, there are plenty of legitimate SecondLife customers who just like to go there to get their kicks, spend a couple dollars, and be on their way.

Somebody in Slashdot commented that making money in your First Life isn’t easy, why would it be on Second Life? Good point, but it obviates the fact that Harrison didn’t have any problems making money – he had problems getting it out of the system.

Here’s the full article.

Ricardo Math and economics, Science and Technology

The index of economic freedom has been released, and Hong Kong is at the top.

The rankings employed criteria such as business freedom, tax rates, inflation, property rights and freedom from corruption.

The United States comes in fourth, after Hong Kong, Singapore and Australia. Looking at the economic freedom map it seems that El Salvador is economically freer than the rest of Central America, including Costa Rica – not that surprising, considering that Costa Rica is seriously lagging in the deregulation process, and they apparently wipe the floor with us in the “Banking and Financial” area.

Via Technocrat. Very interesting note from a Hong Kong resident on the thread.

Ricardo Freedom, Math and economics, News and politics

Bruce Perens over at Technocrat has started a thread on if George Bush is even competent to be president, based on how out of touch his plans to send even more troops to Iraq make him seem. Smart discussions on the comments, both for and against, including the very important point of intelligence having nothing to do with not being incompetent.

Regardless how wise a move it is, it won’t be cheap. I guess we can forget about the dollar reversing its slide.

Hi, NSA! I love you too.

Ricardo Math and economics, News and politics

Marginal Revolution has a brief analysis by Tyler Cowen of a New York Times article called “A Surprising Secret to a Long Life: Stay in School“. Great discussion about causation versus correlation in the comments. The title, of course, is a joke on that very topic.

From the article:

The one social factor that researchers agree is consistently linked to longer lives in every country where it has been studied is education. It is more important than race; it obliterates any effects of income.

Interesting piece, but as Tyler says, it jumps too quickly to a conclusion of causation, and immediately starts analyzing the effects of something they haven’t yet proven.

Ricardo Math and economics, Science and Technology

A report scheduled to be released by the Treasury Department tomorrow is expected to show the true deficit in the Bush administration’s 2006 federal budget to be an astounding $3.5 trillion in the red, not $248.2 billion as previously reported.

[...]

“The United States is bankrupt,” he insisted. “With less than one-tenth of the actual deficit being reported each year, a cumulative negative net worth exceeding $50 trillion has built up in stealth to where the total obligations of the U.S. government are now more than four times our annual gross domestic product.

And then people wonder why silver and gold are on a tear.

Read the whole article here.

Ricardo Math and economics, News and politics

Here’s Steven Levitt, author of the betseller Freakonomics – you can even find that book in Costarrican supermarkets now – talking to the hilarious Stephen Colbert.

Colbert does the confident idiot act so perfectly that it’s almost hard to forget he’s not.

Not a lot of economic insight on that interview, but worth it if just for the quick exposure to Levitt’s ideas.

Ricardo Math and economics, Random funny stuff

Last Friday I was out having lunch with a group of friends. There was a cadre of women in the table next to us (along with an older, pot-bellied guy who looked like an eunuch), discussing quite openly male and female behavior. One of the women kept making the point that infidelity is not the man’s fault – it’s the temptress who lures him that’s to blame. After all, how can a man’s fortress of resolve stand up against a persistant woman?

It was amusing watching the expression in our group, as seveal of us were between cracking up and smacking some sense into her. I guess their comments tell you a lot about both the retrogade mentality still present in a lot of people, as well as to why there’s almost a culture of infidelity here.

I’ve personally always thought of relationships (whether romantic, platonic, frienship or work-related) as being a contract – you have to abide by whatever guidelines you agreed upon at the start. Not only that, both parties should enter that contract as equals, and I would expect that they do it because they derive some degree of enjoyment from it.

Needless to say you shouldn’t break that contract, two examples being cheating on your spouse and behaving like a psychotic bitch. If you want to have a more “open” relationship, you should come out to your partner and tell her – renegotiating the terms of the contract – and not just flat-out sleep around on her.

On a similar note, a recent piece in Marginal Revolution asks should you treat your marriage like a job? Their analysis of the question is a great read, and I recommend you do check it out, but the site they referr to falls flat precisely for the same reasons that most people fare miserably at their jobs. The author basically boils it down to a fulfilling a list of requirements, hoops you have to jump through in order to get some morsel.

Following that approach a marriage may certainly last longer, but unless both parties respect both the letter and the spirit of their agreement, and both find enjoyment in what they’re doing, such relationships are doomed to become nothing more significant than a daily trip to your cubicle.

Ricardo Math and economics, Personal

Last year in Costa Rica inflation was almost 15%, the largest percentage of that due devaluation: a dollar was worth c457.58 when the year started and c495.65 when it ended. There’s an almost 10% drop just because we’re using a currency that allows our central bank to print out new Monopoly bills. Recent studies of inflation in Central America have shown that the two countries with the lowest inflation are Panamá and El Salvador, both which are dollarized, even though both have much higher internal expenses than Costa Rica (like supporting an army) and a much more complicated recent history (internal strife, wars with neighboring countries). Finally, the excuse that dollarization would make us directly dependent on the U.S. economy is absolutely moot – we are already dependent on it: some of our Central Bank reserves are in dollars, the United States is a huge commercial partner, and we bring in about half our imports from there.

As you can imagine, I’m a big proponent of dollarization – but if the government doesn’t want to do it, and the vast majority of people are content the way things are, that’s their problem. It’s always good to read alternate opinions, however, and – once again via Marginal Revolution – I’ve found an article discussing if Argentina should have dollarized back in 2001.

Enjoy.

Ricardo Costa Rica, Math and economics