February, 2009

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Comparative Advantage in Poop

Tuesday, February 24th, 2009

 The people in New York City range from the penthouse peaks, to the ill-fated impoverished.  Each has his or her comparative advantage in something.  Those who graduated from Wharton or Harvard are the executives at Goldman Sachs or Morgan Stanley, while those who dropped out of high school are serving the delicious hot dogs on the streets.  Some people produce, and others simply parasite themselves away in Central Park.  The city is full of life and activity.

We can compare the rain forests of Central and South America to a major metropolis like New York City.  Buzzing with life, the rainforest is filled with all sorts of creatures, each with their own “comparative advantage” in something.  The matapalo is a tree that monopolizes its surroundings.  It kills other trees out and strives to be the king of the rainforest.  While doing this, it provides much food and shelter to other organisms.  It serves as  the great “job creating industry”, similar to GM or Ford, and when it goes, a lot goes with it.

There are also species that don’t quite have the capacity to become great like the matapalo.  They didn’t obtain all the “human capital” that they needed to, and are stuck with the crappy jobs.  When thinking of crappy jobs, the dung beetle comes to mind.  They seek their income/nutrition in the poop of other species.  These can be compared to the low-income, pee-on, jobs of New York City.  But without the dung beetles, there sure would be a lot of poop all over the place.  Thanks to you!

Jake

Matapolos

Tuesday, February 24th, 2009

Heather

Can we learn more about ourselves by studying nature?  I wasn’t so sure until I realized that I, just like Chris, am also the type of person who would blatantly deficate in open tropical air and then sit closely by to see what happens.  Yes… I am ‘that’ girl. And I’m not ashamed of it.

Other than that, I think that not only are there lessons that we can learn for ourselves by studying nature and its qualities, but that within nature we find the perfect examples of how thousands of different living things can produce and coexist in harmony.

Plants and animals in the rainforest live by the law of survival.  Because of that they are constantly acting in self-interest.  Plants excrete deadly chemicals so that insects don’t eat them, some vines completely envelop giant trees by strangling them to death, giant bats hollow out trees to create nests, birds and other animals eat forest fruit to survive.  All of these things happen in self interest, yet the destruction leads only to new life and evolution (could be called creative destruction?).

This is pretty strong proof that it is possible to live in harmony within an environment by doing what is best for you, and allowing others to do what is best for them. I like the quote on page 62 in the chapter talking about the Matapalo, “When we look at the sad manifestation of our own malthusian predicament, many of us decry competition and aggression, seeking refuge in ideas like ‘natural harmony’ or Hinduism’s ahisma, the doctrine of harmlessness to all living beings.  But this is wishful fantasy.  There is a more tangible sense of hopefulness in seeing the matapalos of the world and marveling at the manifold ways in which the living take life from death.”

No money or feces on the table.

Tuesday, February 24th, 2009

Chris Martin

During the reading, I had to ask myself an important question:  Am I the kind of guy who wants to defecate in the forest and then closely watch what happens?  Turns out I am.  I’m as surprised as you.

In Chapter 2, the book mentions European explorers that made the rational inference that the enormously fecund plantlife in the forest was a result of unusually fertile soil.  After clearing some land, their attempts at farming “showed the soil weak and easily exhausted.” (p. 17)

Competitive evolution has pushed the tropical ecosystem to efficiency.  As illustrated in this week’s reading, the species in the forest have all evolved into a highly specialized niche – apparently, if there are nutrients available anywhere in the forest, there’s a species that has made evolutionary investments in obtaining those nutrients.

In the market, we expect competition to leave no money on the table.  That is to say, if there’s an opportunity to make easy money, someone will do it.  Eventually (or “in the long run), so many people will do it that it’s no longer easy money.

The rainforest became efficient in the long run.  Finding and filling an evolutionary niche doesn’t happen overnight.  We may look at dung beetles and claim that nobody would want that job, but that’s the niche they chose to fill.  Otherwise, nutrients would be left on the table.  Somebody has to do it not only because it must be done, but because there’s opportunity for progress in the doing of it.  That’s why the forest is so lush with such poor soil, and perhaps that’s one of the reasons that humanity’s output and consumption has increased so much in the post-mercantilist world.

Tropical Nature prompt

Monday, February 23rd, 2009

Helen Keller wrote: “I know no study that will take you nearer the way to happiness than the study of nature—and I include in the study of nature not only things and their forces, but also mankind and their ways, and the moulding of the affections and the will into earnest desire not only to be happy, but to create happiness.”

Some have made the further claim that without an evolutionary perspective, the assumptions of “economic man” as rational and free make no sense.

In your post this week, we are interested in the insights you gleaned from Tropical Nature that have broad application to the evolutionary dynamics imbedded in economic and social systems. Can we learn anything from nature that helps us better understand social and economic institutions?

Eliminating Dead Capital

Wednesday, February 18th, 2009

Andrew Bjork

Eliminating so called “dead capital”, as Hernando De Soto would put it, is a step in the right direction for third world countries.  However, it is not the only step, or even the final step.  There are many differences in the structure of the economies of Africa and the U.S. that widen the gap.  Karol Boudreaux even states that titling of property to individuals, although a wonderfully empowering thing, is not a cure-all way to solve poverty. 

Because property is an innate desire, it crosses nearly every cultural and national boudary.  Yet the difference lies in how that property is esteemed by individuals within each separate community.  It also is judged upon the legal backing that it is given and what restrictions are placed upon it.  Thanks to a highly organized system of laws, there is great freedom of property in the U.S. .  Yet those same laws that make it more organized put more restrictions on what can be done with that property, and in certain cases make it slightly more difficult to transfer property. 

An ultimate goal of property is to allow the individual to increase his own capital by means of incentives.  By enabling citizens to own their property, governments of third world countries can set a rolling stone in motion to increase overall economic output.  However, unless the costliness of the transferring of titles and other licensing options is decreased to a more reasonable opportunity cost, entrepreneurship and innovation will decrease.  To contrast this, it was interesting to note the speakers’ ideas on property restrictions in the U.S.  Here there may exist too many restrictions that limit the ability of the urban poor to change their situation. 

Property: its Geography and Limits

Wednesday, February 18th, 2009

 

I believe the concept of property can be defined as creating the right set of incentives capable of making people more responsible as well as self-sufficient. As Karol Boudreaux demonstrated with the example in Namibia giving property rights of “common” goods to individuals where they can profit and at same time preserve and even increase natural resources is the best way to empower people and make them able to solve their own problems. Before the establishment in Namibia of community-based wildlife management a clear example of the “tragedy of the commons” was taking place. People did not have the right incentives to stop poaching the wildlife since it belonged to everyone and the more poachers hunt the more they would benefit individually, although the community as whole would equally bear the costs.

 

Property and the incentives that involve it, rather than being a Western concept is more of a universal concept which people respond rationally to regardless of geographic location. As the Namibia, Rwanda, and South Africa examples showed private property can applied in any place as far as people have “individual reasons” to protect the “the greater good” if doing so is the result of making the best use of their individual enterprise. For example, today in Namibia, with the new form of ownership, people have incentive to preserve wildlife since doing otherwise would jeopardy their own businesses.

 

With respect to the limits in property rights, I believe they should be set to the point where the marginal private costs and marginal social costs are same so as to not creating an externality like pollution where a problem similar to the tragedy of the commons would be created.

Why can’t follow Africa’s example?

Wednesday, February 18th, 2009

The idea of property being a western concept is absurd.  Property in its most raw and natural form is the body and everything associated therewith.  The mind is property and work and ones very being are property.  It’s desirable for one to own these things and have rights to protect the thing and its produce.

            In the case of the African nations discussed in the podcasts, economic liberty was vastly beneficial to the societies as the government allowed the citizens to regulate themselves and reap the benefits or possible failures.  In the Rwandan case, the way government was handling coffee production lead to the people producing mass amounts of cheap, low quality coffee.  With the government forcing the people to sell their coffee to them at a fixed rate where is the drive to produce something of quality rather than simply of quantity.  When the people are able to regulate and sell their own product the focus has become something of uniqueness and true value, something of character and a greater substance.  The best way for people to solve problems, be innovative, and progress is liberty.

            The amount of liberty that can be allowed or the limits to property rights varies greatly with the situation of the society.  In the African societies, all cases benefitted with a general release of economic restriction.  In the United States it seems there are fairly specific property laws and although a general release of such restrictions may be beneficial in some cases, we are doing well with ours.  I do not presume to understand specifics or propose that we have something even near to perfect however the system that we have works for us from what I can see.  The resources and opportunities that are available to Americans are not in place globally so it’s impossible to compare absolute property right boundaries.  Freedom and liberty, brilliant and necessary as they are for a successful society (according to my definition) have bounds  and are best kept in check to some degree, usually and I think naturally by the government. 

Tragedy of the Commons no longer?

Wednesday, February 18th, 2009

The title of the podcast, informing me that I would spend the next hour listening to information on poverty and wildlife policy in Africa was hardly a good way to draw me in. However, Karol Bourdreaux provided good insight on avoiding a tragedy of the commons and elevating Namibians out of poverty.
Although I would consider myself generally in favor of free market economics, I’ve had many reservations about the wisdom of regulating common resources on a local level. I believe that the biggest obstacles facing management of common resources are exploitation. Karol Bourdreaux describes a seemingly successful method for preventing abuse of common goods. She suggests that we ought to place common goods currently regulated by the government into the private sector. In Namibia, the government has given ownership of game preserves to local communities who were able to successfully create a constitution. This constitution would determine how the game preserves would be managed and profits divided. According to Bourdreaux, the communities in charge of the preserves have taken greater responsibility for their local areas. Poaching, the primary cause of wildlife depletion, has drastically declined as locals have recognized that the survival of the local animals is tied to their economic self-interest. In addition, locals are able to increase their income as they charge for entrance to their game preserves.
For many common resources, this appears to be a great way of providing incentives to sustaining common resources. However, I still have some questions about resources such as water, air, and roads. Water and air are both transient resources, and so I don’t understand how money could be made by returning regulation to local levels. Roads, I’ll have to leave for another time…because this post is too long…

-Rick

community park or community toilet?

Tuesday, February 17th, 2009

Heather Fawson

Right outside of DanPer, the asparagus production and processing plant that I worked at over the summer in Trujillo, Peru, there was an enormous sign in front of a large open field that read ‘NO TIRE BASURA!’.  It means don’t throw your stinking garbage into this wide open field.  Directly behind that enormous sign was a field full of garbage–and the occasional peruvian dropping his pants to take a dump.  To me, this situation perfectly describes the problems that arise when the issue of private property is ignored in developing countries around the world.  Across the street, inside DanPer (a privately held company), there wasn’t one piece of garbage.  Every house I ever visited in Peru was clean, yet every street was filled with garbage.  This is because in general people take pride in what they can call their own.  They take care of it, and improve it–in hopes of creating something for themselves and their families.

This is not a western concept.  People around the world take pride in things that they can call their own.  It is a basic human tendency.  I, for one, would have taken much better care of the car I drove in high school if my name had been on the title, just as the people of peru don’t chuck their garbage on their own kitchen floors and forget about it forever in hopes that it will just disappear.

Furthermore, owning property gives people power to leverage assets in order to get capital.  This, because of its finance-based motives might be an idea that originated in the west, but it applies easily to anywhere in the world that has experienced any type of western influence.  I would argue that we live in such a globalized world that it is hard to distinguish where western ideas start and stop because almost everyone has experienced  influences from several cultures from around the world. 

The Ancient Concept and Use of Property

Tuesday, February 17th, 2009

Jamie Wilson–Property is anything that someone values and can legally claim to be their own. It can be something physical, as in a house or a possession, or it can be something more abstract like an idea for a better rocket engine. Property is probably one of the oldest concepts known to man. The first caveman to engineer fire probably treasured the ignition process as valuable property just as much as he would have his dog, his sharpened stick, and his cave. Modern Western society is built around protecting individual physical and intellectual property rights, but that does not mean that communities can claim similar privileges, as in Namibia. Property rights is not a Western idea, for every society has its own rules on owning property. Again, the idea of property dates back to the very first man and woman to walk the earth.

We endanger a free capitalistic society if we put too many limits to property rights. Some things that one may claim as property may seem odd, such as a herd of elephants or whales, but as long as that herd can be claimed as such, value can be created (and thus protected) and the whole economy will benefit. If, on the other hand, that herd is placed off-limits as property, it then becomes a drain on resources and potentially a victim to lack of care and adequate protection. The boundaries of property rights should extend more towards defining what government can put off-limits to a group or individual rather than the other way around. This allows individuals and communities to create the largest amount of wealth from the greatest pool of properties.