Thursday, August 30, 2007

Illegal taxis benefit the public at the expense of "public transportation"

The headline is mine. Gulf News reports,
The Franchise and Performance Control Section at the Agency has launched a new campaign to increase awareness on various categories of illegal ferrying of passengers in Dubai. The practice is inflicting heavy losses on the public transport sector, officials said.

"Statistics gathered from a series of field campaigns between 2004 and July 2007 show the practice of illegal taxis is rampant in virtually all areas of Dubai. It is particularly acute in some locations of Dubai well known to both the offenders and the passengers, but rarely does it take place by the sides of the main thoroughfares," Al Mulla [Mohammad Obaid Al Mulla, CEO of Public Transport Agency at the Roads and Transport Authority (RTA)] said.
Why not go the other direction and legalize competition? Consumers now are saying they prefer the unauthorized taxis, and legalization would only make taxi services even less expensive. But that would be more direct competition for the government taxi monopoly.

Perhaps the concern is that the proliferation of taxis adds to the congestion problem in Dubai. But that's not the justification is giving for cracking down on the illegal taxis.

UPDATE, 31 Aug, Gulf News editiorial
But knowing these risks, some commuters still prefer to hire illegal taxis, so there must be a reason for it. Possibly it is that charges for metered taxis are considered high, and with the ever-increasing costs in Dubai, people look to save a few dirhams or more.

Also, even with over 4,000 registered legal taxis in Dubai, it is insufficient to meet passengers' needs at most times of the day or night. Waiting for the call centre to answer and then for the taxi to arrive can sometimes take well over an hour, precious time exacerbated in hot weather. The answer has to lie in the RTA providing a better public transport system than present.
Could it be that RTA is restricting the quantitied supplied just as any monopolist would?

The irony is that in the larger scheme of things Dubai, Inc. could be even more profitable if it opened up the taxi industry to competition. Afterall, Dubai has become The Place because its economy is so open relative other economies in the region. Lowering the cost of transportation would translate into a fall in the cost of living and lead to a further expansion of the success of Dubai. Government sanctioned monopolization is a short-sighted temptation that has been the bane of many societies.

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Wednesday, August 29, 2007

Spigot-like labor force

From Business Week
A North American economist at Merrill Lynch (MER), [David Rosenberg] is one of a number of economists who say the concerns about too few workers are vastly overblown. Rosenberg recently studied the issue and put out a report entitled Is There a Labor Shortage? If employers are having trouble filling jobs, "perhaps they're not looking hard enough," he says.

The issue may not be the number of workers, but rather the level of pay. Economists like Rosenberg argue that in a market economy, there's really no such thing as a true shortage. If you want more of something, you can pay more and have it. When employers say that there's a worker shortage, what they really mean is they can't get enough workers at the price they want to pay, the argument goes. "While it makes for nice cocktail conversation, the data aren't saying there is an acute labor shortage in this country," Rosenberg says.
Rosenberg argues the simplest way to gauge whether there's a worker shortage is to look at the price of labor. According to the basic laws of economics, the tighter the supply of labor, the more it should cost. So if the economy were operating with full or near-full employment, we would be seeing an "explosion in labor compensation," he says.

The price of labor, however, is hardly surging....
"Employers are very quick to raise the specter of a labor shortage, but often it's another way of saying they can't find the workers they want at the price they're paying," says Jared Bernstein, senior economist for the Economic Policy Institute, a left-leaning think tank in Washington. "They are unwilling to meet the price signal the market is sending, so they seek help in the form of a spigot like immigration."
"I'm a trained economist," says Bernstein. "I can't sign on to the idea that there are jobs people won't do at any price."
Even more so than the US, the UAE has a spigot-like labor force (and a drain-like labor force!).

We hear claims that there are some jobs Emiratis simply will not do. But we don't really know that because wages have never risen to see whether there is a wage sufficient to draw them into those jobs. The spigot from abroad has remained open -- employers can easily obtain work visas and import laborers. Unemployment amongst Emiratis is not what economists would call unemployment; you are unemployed if you would take a job at the current wage but cannot find one.

We hear claims that western expats in the UAE are dissatisfied with their pay. But if they were in a meaningful sense they would be leaving in large numbers. They aren't. Wages have not climbed significantly because the wage being paid matches the alternatives foreign workers could get elsewhere.

We hear claims that there are shortages in critical areas like government teachers and nurses in government hospitals. But there is no shortage. Rather the government simply is not paying a market wage. (I hasten to add teacher and nurse "shortages" are chronic issues in the US as well. See here, for example.) It is in a perpetual position of replacing workers who move on as soon as they can find better pay and working conditions. Such as a job elsewhere in the region. Or even in the US.

The UAE labor force is spigot-like. But it is also drain-like as well.

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Monday, August 27, 2007

Islamic investing

In the international market of investing it's not always easy to insure that the company you are investing in engaged in a business that is consistent with your values. But sometimes it is easy to know. Dubai's investment in Las Vegas casinos may tell us a lot about Dubai's values, its revealed preference.

The Kippreport's analysis:
Dubai World is set to pay as much as $5.1bn for a slice of MGM’s leisure and gambling business. The deal will see the government-owned investor take an initial 9.5 per cent share of casino firm MGM Mirage and create a joint venture with MGM on CityCenter Holdings, a resort developer. Dubai has an option to raise its stake in MGM to 20 per cent.

The deal will immediately ask questions of Dubai’s moral right to invest (and profit) from gambling, outlawed under Islamic law. Dubai World's chairman, Sultan Ahmed bin Sulayem, brushed aside questions about the apparent conflict of attitudes by pointing out that the company had long owned a stake in Kerzner International - the owner of the Bahamas' Paradise Island casino (4,500sqm, 850 slots, 78 gaming tables the largest casino in the Caribbean).

"Through our Kerzner investment we're already into gambling, so this shouldn't come as a surprise," he told the newswire service Bloomberg. Terry Lanni, chairman and CEO of MGM Mirage said Dubai had “already crossed the Rubicon” as far as investing in gambling.

True, but the scale and profile of the MGM put morals front and center in terms of Dubai’s investment strategy. Dubai may argue it is investing in a legal business and has no intention of bringing casinos to the UAE. Critics will point out, unless the deal is a Trojan horse, intended to destroy the North American gaming industry, Dubai is now in the business of encouraging people to gamble. What next? Selling marijuana in Amsterdam or prostitution in Sydney is both legal and profitable.
At least Dubai is not allowing itself to be intimidated into altering its investment strategy to suit the preferences of others. And I do not have in mind U.S. politicians concerned that Dubai will take over the U.S. gambling industry as in the ports controversy.

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Iran's central bank chief resigns

From Gulf News:
Ahmadinejad, whose policies have been criticised by economists for fuelling inflation, has already changed the oil and industry ministers. Some analysts said those cabinet members had, like Sheibani, questioned some government policies.
Economic analyst Saeed Laylaz earlier said he expected Sheibani to be replaced because the governor opposed Ahmadinejad on issues such as the president's call to cut interest rates.

Bank rates were cut on the president's recommendation in June, a move criticised by economists at a time when inflation has surged to 16 per cent or more.
Ahmadinejad vowed to share out Iran's oil wealth more fairly when elected in 2005 but economists have blamed soaring prices on his government's spending policies which have been fuelled by windfall revenues from high oil prices.

Although public grumbling about the cost of living has risen, analysts say the government has a cushion of petrodollars to keep the economy growing, even if below potential.
No explanation was given for the resignation, which had been widely predicted in the Iranian media.

But Sheibani had reportedly been at odds with Ahmadinejad over a surprise government decision on May 22 to cut interest rates.

Both Sheibani and Economy Minister Davoud Danesh Jaafari were reported not to have been consulted over the decision, which many economists considered highly unwise in an economy which was already facing inflationary pressures.

Domestic politics is also heating up in Iran up as the country enters a crucial period leading to elections for the conservative-controlled parliament on March 14, 2008 followed by presidential polls in summer 2009.

The economy will be a top election issue and Ahmadinejad has been criticised for Iran's high inflation and for ploughing windfall revenues from high oil prices into expensive infrastructure projects.

Both the industry and oil ministers issued stark warnings to Ahmadinejad over his economic policies after they quit.


Sunday, August 26, 2007

The 1-lakh car

The Washington Post
That fantasy may soon be within reach of families like Mahanan's. An Indian automaker is set to roll out the world's cheapest car early next year in what is being called a revolution by those in the industry and a nightmare by environmentalists and urban planners worried about India's already harrowing traffic and overly congested roads, not to mention lack of parking.

The manufacturer, Tata Motors, has provided few details about its new, four-door vehicle other than its sticker price: about $2,500 -- 100,000 rupees, also called 1 lakh, in Indian currency. Dubbed the "1-lakh car," it will cost half as much as the lowest-priced cars on India's roads today.
While two-thirds of the country's population still struggles on $1 a day, millions of people here have emerged from grinding poverty into the lower middle class. The Asian subcontinent's largely service-based economy has been growing 8 to 9 percent a year, and World Bank studies estimate that India's middle class will expand from 50 million people today to more than 500 million by 2025.
The Institute of Road Traffic Education recently estimated that in New Delhi alone, the number of traffic offenses is 146 million -- per day.

Check out the EclectEcon

The EclectEcon, John Palmer, has several items I recommend:

1. Shirking birds.

2. Paying at the pump.

3. The rising price of food.

Saturday, August 25, 2007

The high cost of free parking

The Boston Globe:
Thanks to the work of UCLA urban planning professor Donald Shoup, we now know that the low meter rates lead to congestion, unnecessary fuel consumption, and additional pollution. It also allows parking entrepreneurs to make 20 bucks (or more) for the same 120 square feet of asphalt that the city is practically giving away.
In his recent book, "The High Cost of Free Parking," Shoup claims that curbside parking is a valuable resource that cities squander by "renting" for less than market value. The most obvious consequence is the lost revenue. If motorists are willing to pay $20 to park in a lot for a Red Sox game, why shouldn't the city charge the same amount, or at least something closer to the private rate than $1 an hour?
I'm not so sure. In Sharjah I get the feeling that more drivers would park in the driving lanes. People do respond to incentives. Not all drivers, but some who feel they are above the law. If there's no enforcement and no shame that is what will happen.


$1,000,000,000 per life saved

Kip Viscusi's estimate as reported to Bryan Caplan:
Viscusi told me that, in his judgment, the median number of deaths from domestic terrorism [terrorism occuring in the US] in the coming year will be zero, and the mean number of deaths in the coming year will be 50 - "or about half the number of motor-vehicle related deaths per day." If Viscusi is right, it's safe to say that we're [the US] annually spending more than a billion dollars per life saved.

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Cities are good

The Undercover Economist explains. A snippet,
Many people wrongly think that our desire to gather in big cities comes with a big social cost. William Cobbett compared London, the “Great Wen”, to a seeping sore. Some of my rural friends think he was on target.

The irony is that cities are good for the planet. Recent headlines excoriating London for its poor record on recycling omitted the detail that Londoners produce less household waste than people elsewhere in the UK. Londoners have fewer cars. New York is much the same in this regard. Public transport may or may not work well in cities, but will never work in the countryside. And brute economic necessity keeps city dwellers in smaller, greener homes.


Tuesday, August 21, 2007

A bad equilibrium

"People in the UAE are used to having people clean up after them. It doesn't even cross their minds to walk a few steps and drop their bottles in the bins," said a lifeguard, who asked not to be named.
The photos tell the story. Why would you want to be around this filth? Vacationing is what the UAE is known for?


Girls aid cognitive outcomes....

....because they are civilizing.

NBER working paper by Victor Lavy and Analía Schlosser:
As important mechanisms, we find that a higher proportion of female peers lowers the level of classroom disruption and violence, improves inter-student and student-teacher relationships as well as students' overall satisfaction in school, and lessens teachers' fatigue. We find, however, no effect on individual behavior of boys or girls, which suggests that the positive peer effects of girls on classroom environment are due mostly to compositional change, namely due to having more girls in the classroom and not due to improved behavior of peers.
Via Marginal Revolution.

UPDATE: The Undercover Economist has a nice essay on these results.

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