A loyal Undercover reader writes:
Just wanted to ask if there is an economic explanation for the fact that real estate in cities in third world countries like India is often more expensive than in cities in the US. (Except for New York,and a few cities in California.)
Is there an explanation for this given the fact that purchasing power of people in India is far lower than in the USA? While India’s population is 1100 million compared to USA’s 300 million and the land area of India is around 20% of that of the USA, I don’t think that’s the reason for the high prices, as the situation in terms of density of population is not as bad as say Japan for example.
I did not have a satisfactory answer, except to wonder whether it is really true that real estate in third world cities is more expensive than in developed-world cities. Any thoughts?
Update: If I’d have known so many of you were already reading this blog, perhaps I’d have tried harder to think of an answer. Good comments below. And Felix Salmon has more.
John Kay is on good form this morning on the subject of the psuedo-survey, concocted for PR purposes:
Universal Widgets is not a very interesting company, widgets are not a very interesting product, and Nigel Snooks, the chief executive, is not a very interesting man. But a survey that shows that two-thirds of men have contemplated hitting their wives with a widget will produce many media slots in which Mr Snooks of Universal Widgets can recount the findings.
Here’s Ben Goldacre on a similar subject:
These “cash for bad science” stories add nothing to our understanding of the world, and they do nothing to promote science. They sell products, pay money, misrepresent the very notion of doing research, and sell the idea that scientists are irrelevant boffins engaged in pointless head scratching.
We might try to look into this for More or Less.
Gary Becker, the 1992 Nobel Laureate in economics, is to be awarded the Presidential Medal of Freedom. Here is my first impression of meeting Becker:
The Chicago shopping mall’s parking lot is packed. The white-haired grandfather pulls into a space with a 30-minute limit, not nearly long enough for the leisurely lunch we have planned. “We should be fine here. I don’t think they check that carefully,” he explains in gentle but distinctively Brooklyn tones. I look across at him and ask, “Was that a rational crime?” He doesn’t hesitate for a second. “Yes it was.”
Becker is a huge figure in the world of economics, and a polarising one. (If you read one thing by Becker, read this.) Even many economists are sceptical about his program of applying economics to issues such as discrimination, marriage, crime and addiction. I am a fan, however: sympathetically interpreted his research is very penetrating. It’s a major theme of my forthcoming book, "The Logic of Life".
Funnily enough, Gary Becker sent through his opinion of "The Logic of Life" a couple of weeks ago:
The Logic of Life offers a fascinating discussion of the use of modern economic reasoning to explain humorous and serious aspects of everyday life… I strongly recommend this book, especially to those who want their economics to be fun as well as important.
Give him another medal, that’s what I say.
Addendum: I should have mentioned Gary Becker’s blog with Richard Posner.
Paul Miner, a campaigner for the Campaign to Protect Rural England, writes to the FT letters page to defend planning restrictions with an unwitting demonstration of how to mislead with a (presumably) truthful statistic:
Green belt designations are hardly a "chafing collar" as more than 3 square miles of green belt have been lost to development each year in England since 1995.
Now as my predecessor on More or Less, Andrew Dilnot, would ask: is that a big number?
Well, there are a couple of ways to do the maths. One is to ask how big the London Green Belt is; Wikipedia says 2000 square miles. 3 square miles a year is not nothing, of course, but it would take another 66 years of development to use up 10 per cent of green belt at that rate.
Or you can ask whether 3 square miles fits a lot of houses. Well, up to a point. The government wants 3 million homes to be built in the next 12-13 years. If the collar continues to chafe at 3 square miles of new development a year, that would be less than 40 square miles of green belt land. How many of the 3 million homes would fit on 40 square miles? About a quarter, at current housing densities of 25 per hectare or 20,000 per square mile.
I find these calculations rather hopeful, actually. There is some slack in the system, as Mr Miner wishes to point out. But there could be a lot more slack if we wanted, without concreting over the green belt.
Here is the original FT editorial that attracted Mr Miner’s ire. Oh, and hate mail in the comments below, please.
Richard Florida is now writing in the Globe and Mail. I enjoy his blog very much but confess to never having read his very successful books. The column seems worth a look:
Clunky sounding or not, mega-regions are the real economic engines of the global economy. The 10 largest account for 43 per cent of the planet’s economic activity and more than half of its patented innovations and star scientists who generate pioneering breakthroughs, while housing only 6.5 per cent of its population. The top 40 produce 66 per cent of the world’s economic activity and more than eight in 10 of its patented innovations and most-cited scientists, while being home to just 18 per cent of the world’s population. All of this convinces me that place, not statehood, is the central axis of our time and of our global economy.
Quite right. Florida and I, along with others such as John Kay, Martin Wolf and Robert Lucas, are huge fans of the late Jane Jacobs, who pointed all this out long ago. Anyone who has not read Jacobs is missing a treat. Start with "Cities and the Wealth of Nations".
She considers and rebutts twelve arguments against vouchers – worth reading the whole thing:
1) Vouchers don’t work This is the best argument against school vouchers. But it’s still not very strong. For one thing, the studies that show this are small, and often funded by the teacher’s unions. For another, the worst those studies purport to show is that vouchers don’t make a difference in educational outcomes; the parents are still happier, and the vouchers cost less than the existing school system.
However, it’s also not really all that clear that the vouchers had no effect; one effect school choice seems to have is that it forces schools that want to keep their doors open to improve.
(Update: Chris Dillow points to further interesting research.) I once wrote an Undercover Economist gently advocating the complete privatisation of the British school system…
An ordinary day surfing FT.com, and suddenly Charlie Pretzlik is chuckling about Richard Branson and speaking lightly of the great Travelling Wilburys. Before you know it, I realise that I’ve long since thrown out my old pirated cassettes – along with the cassette recorder. After a brief pause (to battle the dark forces of hyperbolic discounting) I order the complete works. It arrived last week and it sounds… great.
And don’t forget that Richard Branson indirectly gave us Tubular Bells. Mock not, Mr Pretzlik, mock not.
I gave a talk to a group of economics lecturers recently about how to make economics interesting. The video has gone up on YouTube, for those who are interested. I think the talk went quite well.
Tomorrow I’m debating at Intelligence Squared in the company of, amongst others, John Redwood, the brilliant Frances Cairncross, and Nigella Lawson’s dad. The motion is that "Capitalism can save the planet (with carbon trading we can solve the climate change crisis without damaging economic growth)".
Am I for or against? With a motion like that, who cares? Here is a clue.
An interesting and disturbing article from The Observer:
Amitosh concentrates as he pulls the loops of thread through tiny plastic beads and sequins on the toddler’s blouse he is making. Dripping with sweat, his hair is thinly coated in dust. In Hindi his name means ‘happiness’. The hand-embroidered garment on which his tiny needle is working bears the distinctive logo of international fashion chain Gap. Amitosh is 10.
Horrible. And Gap – which has been caught by surprise by one of its subcontractors – has promised to destroy the blouses involved. No doubt there’s little alternative to that, but I feel uncomfortable about the way such stories tend to be reported and debated. Child labour is an appalling practice but it is not a contaminant like salmonella. You cannot fix the problem by destroying the tainted goods.
The aim here should not be to break the link between child labour and our consumption. It is to end child labour and replace it with something better – children well-cared for, well-fed and well educated. Does the one lead to another? Not automatically.
To The Observer’s credit this question – usually neglected – is asked if not entirely answered:
Gap’s own policy is that if it discovers children being used by contractors to make its clothes that contractor must remove the child from the workplace, provide it with access to schooling and a wage, and guarantee the opportunity of work on reaching a legal working age.