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Month: March 2012

Published March 28, 2012

Beyond the Market, Part 2: Market Paradoxes

Yesterday, I discussed Robert Neuwirth’s book Stealth of Nations: The Global Rise of the Informal Economy, which emphasizes the activities of “illegal street vendors and unlicensed roadside hawkers.”

I concluded by noting how that brought to mind a few conversations I’d recently had with a friend who was observing how, relative to Asia and Africa, few people actually knew how to hustle in America nowadays.

In my Law, Economics, and Organization seminar, I use an old textbook by Milgrom and Roberts. By “old,” I mean that it was the textbook used to teach economics of organization when I was in college. By “old,” I mean that the book is as old as some of my younger students. But I use it because it’s a classic, and because it covers just about everything one needs to know about law and economics and the economics of organization.

Market Paradoxes

In their book, Milgrom and Roberts highlight a first important paradox of markets (I am paraphrasing):

Continue readingBeyond the Market, Part 2: Market Paradoxes
Published March 27, 2012

Beyond the Market, Part 1: Hustle and Flow

I am teaching my Law, Economics, and Organization class this semester. The class is for upper-level undergraduates and graduate students, so there is a good variety of backgrounds and interests among the students who enroll in it.

Since the class is a seminar, I spend about half the time teaching, with the other half spent discussing specific papers.

Last Friday, in the context of the module on relational contracts, we discussed two classic papers. The first is Greif’s (1993) paper, in which he discusses the various mechanisms used by 11th-century Jewish merchants around the Mediterranean to sustain long-distance trade. The second is Bernstein’s (1992) investigation of how diamond traders choose to “opt out” of the legal system by developing their own extra-legal institutions.

Hustle and Flow

In the spirit of both articles, I wanted to link to a somewhat dated article in Wired,  a Q&A with Robert Neuwirth, who published a book titled Stealth of Nations: The Global Rise of the Informal Economy last fall. Here is an excerpt:

Continue readingBeyond the Market, Part 1: Hustle and Flow
Published March 26, 2012

Food Prices and the Arab Spring, One Year Later

I’m in Washington, DC for a roundtable on climate change and conflict at the Woodrow Wilson today, so I thought I should discuss this article in last week’s issue of The Economist which discusses food prices in the Middle East and North Africa:

It is sadly appropriate that Mohamad Bouazizi, the Tunisian whose self-immolation triggered the first protest of the Arab spring, should have been a street vendor, selling food. From the start, food has played a bigger role in the upheavals than most people realise. Now, the Arab spring is making food problems worse.

They start with a peculiarity of the region: the Middle East and North Africa depend more on imported food than anywhere else. Most Arab countries buy half of what they eat from abroad and between 2007 and 2010, cereal imports to the region rose 13 percent, to 66 million tons. Because they import so much, Arab countries suck in food inflation when world prices rise. In 2007-08, they spiked, with some staple crops doubling in price. In Egypt local food prices rose 37 percent in 2008-10.

Unsurprisingly, the spike triggered a wave of bread riots. Bahrain, Yemen, Jordan, Egypt and Morocco saw demonstrations about food in 2008. They all suffered political uprisings three years later. The Arab spring was obviously about much more than food. But it played a role.

The article then goes on to discuss the foolishness of food subsidies in several countries in the Middle East and North Africa. The problem is that the removal of those subsidies is fraught with danger — people come to take those subsidies for granted, and they tend to riot at the slightest hint of the subsidies’ removal.

I also wanted to share one of the background documents which was sent to today’s roundtable participants, a USAID report titled “Climate Change, Adaptation, and Conflict” (link opens a .pdf document), as it is a very useful review of the issues one needs to consider when thinking about the climate change–conflict nexus.