Sunday, June 06, 2004

guess what bitches?

i'm back, and the blog is going to be more diabolical than ever.

i hung out with the young torless this weekend and subjected him to the usual castigation for not posting his trademark nyt.com fueled diatribes. he offered a well-worn litany of excuses, but i wasn't buying any of them. who cares if he has to finish his dissertation on n-dimentional manifolds? i'm calling 'bullshit' on you young torless.

so, i'm going to break the 3rd rule of blogging (thou shalt not blog on the weekend) to point you guys to a couple of articles from the economist. (incidentally, dj i have no friends broke the 1st rule of blogging when he told my parents that i have a blog. et tu brute?...now i'm checking my referrer logs like i have ocd and debating whether or not to point fratocrates.blogspot.com to cnn.com in my parents' hosts file.)

the first article has to do with hamburgers, and i was shocked to find it in a publication that spells 'favorite', 'favourite' and has 'letters to the editor' which bizarrely all begin with the salutation 'Sir'. although, perhaps you are a responsible adult and have know about the economist's big mac index since its inception in 1986, but it's much more likely that you are a complete and miserable failure like myself:

HOW fast is the world economy growing? How important is China as an engine of growth? How much richer is the average person in America than in China? The answers to these huge questions depend crucially on how you convert the value of output in different countries into a common currency. Converting national GDPs into dollars at market exchange rates is misleading. Prices tend to be lower in poor economies, so a dollar of spending in China, say, is worth a lot more than a dollar in America. A better method is to use purchasing-power parities (PPP), which take account of price differences.

The theory of purchasing-power parity says that in the long run exchange rates should move towards rates that would equalise the prices of an identical basket of goods and services in any two countries. This is the thinking behind The Economist's Big Mac index. Invented in 1986 as a light-hearted guide to whether currencies are at their “correct” level, our “basket” is a McDonalds' Big Mac, which is produced locally in almost 120 countries.
[...]
The average price of a Big Mac in four American cities is $2.90 (including tax). The cheapest shown in the table is in the Philippines ($1.23), the most expensive in Switzerland ($4.90). In other words, the Philippine peso is the world's most undervalued currency, the Swiss franc its most overvalued. [ED NOTE: the table shown in the online version of the article has listed additional countries which change these results. see below for more. jhc]
[...]
One big implication of lower prices is that converting a poor country's GDP into dollars at market exchange rates will significantly understate the true size of its economy and its living standards. If China's GDP is converted into dollars using the Big Mac PPP, it is almost two-and-a-half-times bigger than if converted at the market exchange rate. Meatier and more sophisticated estimates of PPP, such as those used by the IMF, suggest that the required adjustment is even bigger.
[...]
Small wonder, then, that global economic rankings are dramatically transformed when they are done on a PPP basis rather than market exchange rates. America remains number one, but China leaps from seventh place to second, accounting for 13% of world output. India jumps into fourth place ahead of Germany, and both Brazil and Russia are bigger than Canada. Similarly, market exchange rates also exaggerate inequality. Using market rates, the average American is 33 times richer than the average Chinese; on a PPP basis, he is “only” seven times richer.
[...]
This helps to explain why commodity prices in general and oil prices in particular have been surging, even though growth has been relatively subdued in the rich world since 2000. Emerging economies are not only growing much faster than rich economies and are more intensive in their use of raw materials and energy, but they also account for a bigger chunk of global output if measured correctly. As Charles Dumas, an economist at Lombard Street Research, neatly puts it, even if a Chinese loaf is a quarter of the cost of a loaf in America, it uses the same amount of flour.


interesting stuff. in case you were wondering and were too fucking lazy to click a fucking hyperlink, the country with the most OVER-valued currency according to the big mac index is kuwait, with a gaudy 153% currency-to-big-mac overvaluation (a big mac there costs $7.33). iceland is second with a 107% overvaluation ($6.01). the most undervalued currency with regard to big mac purchasing power is morocco, undervalued by -91% ($0.26 ... that's right, you can buy a big mac in morocco for 26 cents). saudi arabia (-78% and $0.64) and the uae (-77%, $0.67) follow closely behind.

the second article from the economist is about the conclusions of the copenhagen consensus, which i blogged about previously. for those who don't know, the copenhagen consensus brought together a group of economists that debated over how to most effectively spend a hypothetical $50 billion for advancing humanitarian causes. the number one use of money in their minds? aids prevention:

With something close to unanimity, the panel put measures to restrict the spread of HIV/AIDS at the top of the ranking. The challenge paper on communicable diseases, by Anne Mills and Sam Shillcutt of the London School of Hygiene and Tropical Medicine, having reviewed the literature, reckoned that a package of preventive measures costing some $27 billion (in purchasing-power-adjusted dollars) over eight years would prevent nearly 30m new infections (reducing expected infections from 45m over the period to 17m).


the copenhagen consensus' website goes on to claim that the expenditure of $27 billion would result in "benefits almost forty times as high" (~$1 trillion). providing micro-nutrients, trade liberalization, and controlling malria round out the "very good" category of recommendations.

wondering what the cc says was the worst use of the money? climate control (i.e., the kyoto protocol). however, as stated in the article (and unbenounced to me when i first blogged about the cc), the prime mover of the endeavor was bjorn lomborg, the famously embattled author of "the skeptical environmentalist". most people familiar with lomborg's work are now likely crying foul over the summit -- as the disinfopedia certainly is:

Due to take place over May 24-28 2004 - with the support of The Economist magazine - it will take the form of a meeting of a selection of nine eminent, generally right-wing economists, all of whom are from wealthy, industrialised countries. These economists will consider a set of ten "challenge papers" on subjects such as education and climate change, and prioritise economic solutions to these problems. The ten challenge papers will be published as a collection by Cambridge University Press, which published the English language version of Lomborg's The Sceptical Environmentalist.
[...]
Since the conference was first announced, five of the seven board members of the EAI [ed note: lomborg's environmental assessment institute] have resigned: two for personal reasons, and three in protest at the conference, which they say goes far beyond the EAI's original remit by considering subjects such as financial instability, corrupt governance and infectious diseases. [3], [4]

The exercise has been strongly criticised by NGOs such as Oxfam for drawing attention away from the existing consensus built up over several years and codified in the United Nations Millennium Development Goals.

It has also attracted criticism for an approach which tries to define development goals without involving any representatives from developing countries.

Finally, it has been questioned if a panel of exclusively free-market thinkers, several of whom have published views sceptical of the Kyoto consensus, can produce what is supposedly a neutral output on the issue.


so is this anti-kyoto grandstanding by lomborg? who the fuck knows. on the whole though, i think that with $50b, dealing with aids and malnutrion have got to be the 1-2 punch. but if any of you guys actually know anything about econ or the environment etc., drop some links in the comments for me to read up on when you get a chance.

2 Comments:

At 2:00 PM, Blogger DJ I Have No Friends said...

sorry about telling mom and pops. i think i mentioned it based on writting music reviews. Btw, they don't know the site and won't remember to ever check it. sorry again, hope i didn't cause too many problems. love to post, but right now, i've gots to study

 
At 4:56 PM, Blogger Jesus Henry Christos said...

don't sweat it, i'm just kidding around. hope school's going well...

 

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