A not-so-intellectual debate about the interest rates

An interesting debate has started between two leading American economists, Paul Krugman and Raghuram Rajan. Krugman wants the interest rates to be kept low whereas Rajan wants them to be raised gradually. 

Rajan	Krugman

The difference in opinion is not merely academic, but cultural as well. Rajan is rooted in the academic culture in which an academic usually resides in an isolated intellectual universe and is seldom voted out of the job for offering the wrong advice. Therefore, Rajan advocates raising interest rates without waiting first for the unemployment to decline.

Krugman, on the other hand, is not just an economist, but also a popular columnist and an avid blogger. He is also a political animal and realizes that in a very interdependent society the interest rates would impact unemployment, which would eventually determine the electoral outcomes. Notice in the following graph a lagged increase in unemployment rate after interest rates were raised.

Raising interest rates, even gradually, is likely to force more out of work, which could eventually lead to the President of the United States and other Democratic legislators losing their jobs in the forthcoming elections.

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A private members bill for reinstating the long-form census

For immediate release
August 26, 2010

Liberals introduce bill to reinstate mandatory long-form census

OTTAWA – In a move to bring ‘sense back to the census,’ Liberals today introduced legislation to amend the Statistics Act to bring back the mandatory long-form census questionnaire.
“Liberals believe that sound information helps make sound decisions,” said Liberal Finance Critic John McCallum. “That’s why we will fix the mess Stephen Harper created by reinstating the mandatory long-form census and ensuring the threat of jail time is removed in the Act.”
The Bill – which will be tabled upon the September 20^th return of Parliament – clarifies that 20% of the Canadian population will receive a mandatory long-form questionnaire during the period in which the Government of Canada conducts a census. It will also remove the controversial threat of jail time for not completing the census.
“As one business person put it recently, the first rule of business is ‘you can’t manage what you can’t measure,’ said Mr. McCallum. “It’s also the first rule of government, yet the Conservatives have chosen to blindfold themselves by gutting the census, which means our annual $250 billion budget is more likely to be mismanaged.”
The long-form census plays a major role in improving health care, education, employment equity, immigrant settlement, retirement security, public transportation, and support for veterans and Aboriginals, to name a few.
“Provincial, territorial and municipal governments, community groups, medical associations, religious groups and countless organizations who spoke out against the Conservative decision understand the census is a vital tool that helps inform their decisions,” said Liberal Industry Critic Marc Garneau.
The Conservative decision to make the long-form census voluntary will mean that the results can’t be compared to previous years, and will skew the picture of what Canada looks like, as lower income, minority Canadians will be less likely to fill out a voluntary survey.
“The Conservatives have shown zero interest in listening to Canadians but were forced to add language questions only when they faced legal threat, effectively admitting the voluntary form is inadequate,” added Mr. Garneau. “Now that the Conservatives are the last party to advocate removing the threat of jail time, it’s time to make the long-form census mandatory again, so we can get an accurate picture of Canadians.”
“Canadians rely on the federal government for a multitude of services, and they expect our federal government to make wise decisions based on sound information. This bill will make sure decision makers at all levels of society can do just that,” he concluded.
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Contact:
Office of the Hon. John McCallum, MP: 613-996-3374 begin_of_the_skype_highlighting 613-996-3374 end_of_the_skype_highlighting
Office of Marc Garneau, MP: 613-796-0103 begin_of_the_skype_highlighting 613-796-0103 end_of_the_skype_highlighting

Background:

An Act to amend the Statistics Act (mandatory long-form census)

SUMMARY
This enactment amends the Statistics Act to provide that the census of population taken under section 19 the Act must be taken using a long-form census questionnaire that conforms substantially, in length and substantive scope, to the census questionnaire used to take that census starting in 1971 and at intervals thereafter to meet the requirements of that section. This enactment also removes the punishment of imprisonment for a person convicted for the offence of providing false of unlawful information.
Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:
1. Section 19 of the Statistics Act is amended by adding the following after subsection (3):
Mandatory long-form census questionnaire
(4) The census taken at the time and in the manner set out in this section must include the use of a long-form census questionnaire and the distribution of that questionnaire to at least 20% of all households or whatever percentage of households is determined to be necessary by the Chief Statistician to ensure an accurate statistical representation of the Canadian population and its constituent groups.
"long-form census questionnaire"
(5) In this section, the term “long-form census questionnaire” refers to a census questionnaire that conforms substantially, in length and substantive scope, to the long-form census used to take the census in 1971 and at intervals thereafter to meet the requirements of this section.

2. The portion of section 31 of the Act after paragraph (b) is replaced by the following:
is, for every refusal or neglect, or false answer or deception, guilty of an offence and liable on summary conviction to a fine not exceeding five hundred dollars
Breaking: A private members bill for reinstating long-form census to be announced today at 11am | eaves.ca

Is the ceiling caving in?

Image by TheTruthAbout... via Flickr

Housing sales are down in both Canada and the US. The deteriorating housing affordability due to the rise in mortgage rates is keeping homebuyers at bay.

The picture in Canada is rather mixed. Housing prices are up, but sales are down.

Census Watch

The census fiasco continues in Canada. The influential journal, Nature, has added its voice to the debate opposing the government's decision to scrap the mandatory long form.

Some websites that are watching the census debate:
 datalibre.ca · Census Watch

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Fertility, longevity, mortality, prosperity, and Islam

Fewer babies per family means healthy babies, healthy mothers, longer lives and prosperity for all. If it sounds like a commercial for family planning, remember buchay do hi acchay (two kids are enough), than you’ve guessed it right. There is enough global evidence from the past four decades to advocate lowering fertility rates in low-income countries. 

Using data from the World Bank and animation technology provided by Google, I illustrate below that life expectancy at birth increases with the decline in fertility rates. Also, as the fertility rates drop, the health of the society improves as is evidenced by a decline in infant mortality rates. Furthermore, societies become more prosperous with the drop in fertility rates.

Let’s look at the animated graph below that demonstrates the evolution of four human development indicators from 1960 to 2008:

1. Fertility rate (total births per woman) plotted on the vertical axis,
2. life expectancy at birth in years, plotted on the horizontal axis,
3. infant mortality rate (per 1,000 live births), demonstrated by the colour of circles representing countries,
4. and finally, gross national income per capita at purchasing power parity in current international dollars represented by the size of the circles.

Click on the play button located immediately below the graph to its left to view development indicators evolve from 1960 to 2008. I have, for comparison, highlighted Afghanistan, Bangladesh, India, Iran, Pakistan, and Saudi Arabia on the graph so that you can visually track their performance over time.

You can also pause the animation at any time, and can use the horizontal bar under the graph to move to a particular year to see the indicator values.  You can also point and click on the graph to determine values for each individual country at any point in time.

The animation reveals a dramatic decline in fertility rates starting in mid eighties for most countries, including Pakistan, Bangladesh, Iran and Saudi Arabia. Iran, in fact experienced the fastest decline in fertility rates of the highlighted countries and ended with 1.8 births per woman in 2008. Bangladesh and India are also not far behind followed by Saudi Arabia.

So why is the fertility rate still very high in Pakistan? And can the sluggish socio-economic growth in Pakistan be explained by the abovementioned dependencies between high fertility and mortality rates, lower longevity, and less prosperity? At approximately four births per woman in 2008, the fertility rate in Pakistan is very high and is comparable to the one observed in very impoverished African states. As mentioned earlier, the fertility rates in Saudi Arabia and Iran, the two primary religious influences on Pakistan’s Sunni and Shiite schools of thought, have declined sharper than that of Pakistan.

A key obstacle to lowering fertility rate in Pakistan is the religious establishment, which has opposed any such move by the state. Convinced that the Creator has guaranteed sustenance of every living organism, which I wholeheartedly believe as well,  the semi-literate mullahs preach against the use of contraceptives and consider birth control sacrilegious since such practices in mullahs’ interpretation of the faith may question the Creator’s ability to provide for its creations.

But the Creator has also blessed human beings with intellect and wisdom that encourage one to live within one’s means. And how would one explain the much steeper decline in fertility rates in Bangladesh, which until 1973 was part of Pakistan. The fertility rate in 1974 in Bangladesh was 6.83 births per woman against 6.96 in Pakistan. By 2008, fertility rate in Bangladesh declined to 2.34 births per woman, a staggering 41% lower than that of Pakistan.

While mullahs in Pakistan have thwarted any attempt by the State to lower fertility rates, Saudi Arabia and Iran have lowered their fertility rates at much faster rates in the past three decades than Pakistan.  The average number of births per woman in Saudi Arabia declined from over seven children per woman in 1982 to just over three in 2008. In Iran, the same rate drop from 6.6 births per woman in 1982 to 1.8 births in 2008.

The reason for this dramatic decline in fertility rates in Iran and Saudi Arabia is the improved access to contraceptives for females in their childbearing age. So why the mullahs in Pakistan are not learning from their mentors in Iran and Saudi Arabia?

It is not just that the lower fertility rates are correlated with longevity, which is evidenced by a simultaneous increase in life expectancy, but lower fertility is also correlated with lower infant mortality. Fewer births per woman result in healthier infants and mothers, thus increasing the chance of infants to survive beyond the age of one. Higher birth rates deteriorate women’s health, especially with poor food quality, and thus lead to higher infant mortality.

If you look at the bottom right corner of the graph, you’ll see big blue circles representing rich European countries with lowest fertility and infant mortality rates, and the highest life expectancy at birth.

However, if you look at the upper left corner of the graph, you’ll see mostly poor African countries with high infant mortality rates, very low life expectancy at birth, and yes, high fertility rates.

At the very top left corner is Afghanistan. With the highest fertility rate at almost seven births per woman, Afghanistan also has the dubious distinction of having one of the highest infant mortality rates at 165 deaths per 1,000 live births, and lowest life expectancy of 44 years at birth. Years of war in Afghanistan has left it as the most impoverished country in the world.

While Afghanistan may not be able to turn its fortunes in the short run, it can at least focus on lowering its fertility rate. The Afghan mullahs are of the same ilk as the one in Pakistan, who vehemently oppose any family planning. However, the mullahs in Afghanistan and Pakistan need to be educated, and not in the western traditions, but about the transformation taking place in Saudi Arabia and Iran.  If the Iranian and Saudi mullahs can consent to, or live with, family planning, then mullahs in Afghanistan and Pakistan should also acknowledge the evidence presented in the animated graph above, i.e., lower fertility rate means lower infant mortality, higher life expectancy, and yes greater prosperity.

A ‘Straddling Bus’ Traffic Solution in China

A ‘Straddling Bus’ Traffic Solution in China - NYTimes.com

Shenzhen Huashi Future Parking Equipment

Rendering of the bus on the road. The vehicle would run on a combination of solar power and municipal electricity.

A company in the southern Chinese town of Shenzhen has done just that. To address the country’s problems with traffic and air quality, Shenzhen Huashi Future Parking Equipment has developed a decidedly odd-looking, extra-wide and extra-tall vehicle that can carry up to 1,200 passengers.

Harvest of sorrow in Manitoba -

Harvest of sorrow in Manitoba - Winnipeg Free Press
"Statistics Canada's preliminary field crop production forecast issued Friday is predicting the Manitoba canola crop to be 30 per cent smaller this year, down to two million tonnes from 2.8 million tonnes last year."