Not All Manufacturing Is Created Equal

Developing country governments typically want to promote manufacturing and de-emphasize agriculture. One of the concepts I teach in my development classes is the importance of backward and forward links.  For example, the creation of a railroad may have positive spillover effects on anything from commerce & transportation (forward links) to steel manufacturing (backward link).  If a government wants to promote a particular industry, it is wise to look for one that has widespread potential links, because not all manufacturing is created equal.

This was brought home to me recently by the great satirist Elnathan John, who regularly excoriates the Nigerian government (as well as many others).  He tweeted:

Screenshot 2015-10-29 08.16.01

I can tell you from experience that Import Substitution Industrialization is not a subject that is ripe for comedy, so kudos to Elnathan John for this.  I can think of some positive backward links to creating arms but not many good forward ones!

p.s. This reminds me of an instance when I asked students once on a midterm to choose an industry that would likely have a lot of links to other sectors and one student chose the unlikely industry of fighter jets.  Again, the backward linkages are clear (steel, airplane part manufacturing, aviation schools) but the positive links…not so much.  Not all midterm answers are created equal either!

“A Billion Lives Are at Stake!”

Every few years I teach a class at OU called Comparative Economic Systems. One of the things that often surprises students is the fact that many countries still have industrial planning, and that this wasn’t solely the reserve of the communist world.  Advocates for this type of planning (called indicative instead of command) argue that it is the process of creating the plans that is important, that there is value in having prolonged discussions between government, employers, labor unions, and farmers about the state of the economy and where it should go.  The claim is that whether the economy actually moves in the direction of the plan is somewhat irrelevant.  I’m not convinced by this argument but it came to mind when I saw the following video from the Chinese government about their new 5 year plan:

This video is amazing in so many ways that it is hard to know where to start, so here are just a few thoughts:

a.  The Chinese 5 year plan is much more indicative than command like it was in the past.  You can see how they trumpet the participation of all levels of government and all types of people in the discussion process. The big question is who they are trying to convince.  Anyone who knows about 5 year plans is already pretty cynical about how they really work (or don’t as the case may be).  This video, with its animation, upbeat music, and breathtaking idealism, seems aimed at young students, but again, which students?  The video is in English, so are they trying to create a gentler, softer image of industrial planning among the minds of American students (and do American students have any image of industrial planning to begin with?)

b.  I’ve seen communist countries promote 5 year plans with brutal slogans about the Year of Working Hard, etc. but I’ve never seen a country try to take this route:  of making economic planning seem both fun and totally successful and also vitally important.  There is an actual line in the video about how a billion lives are at stake with the planning process. Wow, that is some hubris!

c.  While the video is easy to mock, it is at least a lot more catchy and slick than the ham-fisted and embarrassing promotional video the Mexican government aired recently.

Administrative Data Rulz, Survey Data Droolz!

People, did you know that the US uses the Current Population Survey (CPS) as the source for our official poverty and inequality statistics?

I did not.

And that was only one of many things I learned from the abstract of this fascinating new NBER working paper ,”Using Linked Survey and Administrative Data to Better Measure Income: Implications for Poverty, Program Effectiveness and Holes in the Safety Net”

I can’t find an ungated version of the piece, the gated one is here, and here is the abstract:

“We examine the consequences of underreporting of transfer programs for prototypical analyses of low-income populations using the Current Population Survey (CPS), the source of official poverty and inequality statistics. We link administrative data for food stamps, TANF, General Assistance, and subsidized housing from New York State to the CPS at the individual level. Program receipt in the CPS is missed for over one-third of housing assistance recipients, 40 percent of food stamp recipients and 60 percent of TANF and General Assistance recipients. Dollars of benefits are also undercounted for reporting recipients, particularly for TANF, General Assistance and housing assistance. We find that the survey data sharply understate the income of poor households. Underreporting in the survey data also greatly understates the effects of anti-poverty programs and changes our understanding of program targeting. Using the combined data rather than survey data alone, the poverty reducing effect of all programs together is nearly doubled while the effect of housing assistance is tripled. We also re-examine the coverage of the safety net, specifically the share of people without work or program receipt. Using the administrative measures of program receipt rather than the survey ones often reduces the share of single mothers falling through the safety net by one-half or more.”

A shorter version could be Administrative Data Rulz, Survey Data Droolz!

If these findings hold up under the peer review process, it’s a really big deal. Assistance is under-reported, poverty is over-reported and the safety net catches a lot more people that the official statistics report.

Hat tip to Scott Winship.

The importance of the Political in Political Economy

I’ve always been more interested in political economy than economics as a stand alone discipline.  Perhaps because my undergraduate degree was in Political Science and I recognized early on that it didn’t matter how good your economic policies were–if you couldn’t convince the electorate of that fact, you were unlikely to be able to pass said policies.  And if you did, it would be hard to build much public enthusiasm for them.  I try to teach my students how important it is to understand both the politics and the economics of a certain situation because understanding one without the other will be less than useful.  To wit, I once had an undergraduate student many years ago suggest the world would be a much better place if there were economist dictators in each country.  It was hard to keep a straight face on that one and it was also hard to know where to start on the many things wrong with that argument.

Anyway, I’m thinking of these things today because of the Mexican government’s almost ludicrous inability to sell their economic reforms.  I’ve railed before about EPN’s crack PR team that seems to know absolutely nothing about PR.  Here is another instance where I think a tiny drop of common sense would tell a PR person (or anyone actually) that the following TV advertisement is *not* how to sell the government’s economic reforms.  Dios mio, check it out for yourself. Note that it has no English sub-titles, understandably given its target audience, but I think you’ll be able to get the drift even if you don’t speak Spanish.  Strangely, it does have Spanish subtitles, which seems off putting and insulting.  (there is that PR team working overtime again).

Unsurprisingly, the reaction on social media has been scathing  Here are a few reactions:

a. “anuncio imbécil”  (Idiotic ad)

b. ““Nos quieren quitar hasta la libertad de quejarnos.” Ese anuncio es poco convincente, almidonado y construido sobre uno de los estereotipos sociales más humillantes: el del “mexicano humilde.”  [roughly translated:  they even want to take away our freedom to complain.  The ad is unconvincing, stiff (stilted), and based on one of the most humiliating social stereotypes, that of the humble (poor) Mexican.

As the article rightly points out, for a government with such low popularity and credibility to design a campaign arguing that people should shut up and stop complaining is really something. One of the actors in the spot actually says “Ya chole con tus quejas,” which means “enough already with your complaints.”   Hmm, I wonder why their polling numbers are so low?