Monday, August 30, 2010

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. 

IMF Economic Counselor and Research Department Director Raghuram Rajan briefs the press on the World Economic Outlook on April 13, 2005 at the International Monetary Fund Headquarters (IMF), Washington, D.C. The IMF World Economic Outlook presents analysis and projections of economic developments at the global level, in major country groups and in many individual countries. 
IMF Staff Photographer/ Stephen Jaffe
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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Thursday, August 26, 2010

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 20th 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.
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


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

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 |

Is the ceiling caving in?

guaranteed rate

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.

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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: · Census Watch

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Tuesday, August 24, 2010

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.

Monday, August 23, 2010

A ‘Straddling Bus’ Traffic Solution in China

A ‘Straddling Bus’ Traffic Solution in China -

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."

Tuesday, August 17, 2010

Do Canadians pay high taxes?

A favourite Canadian pastime is to complain about taxes. The general belief is that the Canadians are over burdened with taxes. Yes, Canadians do pay more in taxes (as % of GDP) than Americans, but Canadians do enjoy many more public services than what is available in the US.

Furthermore, the French, Germans, Dutch and many others pay far more in taxes than Canadians.

There is no free lunch. Of all the great services (health and education among others) we enjoy in Canada, taxes are only a small price to pay.


Data from The Heritage Foundation (taxes) and CIA Fact Book (GDI)
Jose Antonio Meira da Rocha

Attribution Link:

China's economy overtakes Japan's in real terms

The Economist reported this week on the fact that India and China accounted for at least 50% of the Global GDP up until 1600. Their combined GDP was a little shy of 50% of the global GDP up until 1820.

Hello America

China's economy overtakes Japan's in real terms

CHINA has become the world's second biggest economy according to data released on Monday August 16th. Japan's economy fell behind China's at market exchange rates in the second quarter (it has been number three in PPP terms for some time). These numbers are not strictly comparable: Japan's data have been seasonally adjusted while those for China have not. Quibbles aside, Japan will surely be eclipsed soon, if it has not been already. Data compiled by Angus Maddison, an economist who died earlier this year, suggest that China and India were the biggest economies in the world for almost all of the past 2000 years. Why they fell so far behind may be more of a mystery than why they are currently flourishing.

Friday, August 13, 2010

Wal-Mart's green supply chain

"FORTUNE -- One year after Wal-Mart launched an ambitious plan to help its suppliers track their energy and materials use and carbon emissions, the effort has officially become a trend among corporate multinationals."

Triple convergence of floods, Ramzan, and global wheat crisis threatens food security in Pakistan

The devastating floods in Pakistan, which have killed over 1,600 and displaced nearly 14 million individuals, have also adversely impacted the food supply chains. Nearly 17 million acres of cultivated cropland has been lost to floods. The loss of livestock may also be in millions. At one point, nearly one-third of Pakistan's landmass was affected by the devastating floods.
The loss of crops from floods alone can cause huge spikes in the price of necessary food items given the uncertainty about the supply of grains and livestock. At the same time, almost 75% of those affected by floods are the ones who rely on agriculture for sustenance. Even after the flood waters recede, it will take months, if not more, to resettle the internally displaced farm workers on the land they once tilled.
Compounding the devastating impact of floods are two additional factors, i.e., the start of Ramzan in Pakistan, which has always been accompanied with unexplained inflation, and the global wheat shortage that has caused the price of wheat to increase by 90% since June 2010.
The triple convergence of floods, Ramzan, and global wheat crisis suggests that low- and mid-income households in Pakistan may face huge price increases for staple foods. Already, the food markets in urban centres are reporting 100% to 200% increase in the price of food items over the pre-flood levels. Onions are selling for 80 rupees per kg and tomatoes are averaging around 120 rupees per kg in Islamabad alone, which has been spared by the flood waters.
Item Price after floods (Rupees) Price in week preceding floods (Rupees)
Tomatoes (kg) 120 40
Shimla Mirch (kg) 80 40
Lady finger (kg) 70 35
Green chilli (kg) 80 40
Lemon (kg) 80 40
Tori (kg) 80 40
Aubergine (kg) 60 30
Arvi (kg) 70 40
Bitter gourd (kg) 70 40
Even without the flood-related inflation in food prices, 50% Pakistanis were considered food insecure. The triple convergence causing further price hikes may render a much larger proportion of Pakistanis unable to secure food at affordable prices.
While the floods may be a new phenomenon in Pakistan, price hikes during Ramzan have been the norm in not just Pakistan, but in most Muslim majority countries, such as Indonesia and Egypt. In the past few years, flour, sugar, and other staple foods initially disappeared from markets and later emerged at inflated prices during Ramzan. This happens even after the governments' explicit promises to check hoarding and price inflation.
Consider the graph below that highlights the increase in consumer prices across 71 markets in Pakistan since 2001. The graph is derived from the Consumer Price Index maintained by the Federal bureau of Statistics in Islamabad. The index is based on a basket of goods and services consumed by an average household in Pakistan. This includes food expenses; shelter, fuel, and transportation costs; and recreation, education, and healthcare expenses.

Since July 2001, prices have more than doubled in Pakistan, as is evidenced by 128% increase in prices in July 2010 over July 2001. Since the graph represents national average prices, certain urban centres would have experienced even a greater level of price hikes. When we tracked wheat and rice prices across various urban centres in Pakistan, the spatial disparities became obvious that show certain cities in Pakistan are more expensive than others.
Consider the graphs below that show that highest rice prices have been recorded in Islamabad, whereas the lowest rice prices are observed in Sargodha. Wheat, on the other hand, was found to be most expensive in Karachi and Hyderabad and much cheaper in central Punjab. Also note that the graphs offer data for July 2010, September 2009, and July 2009 for both wheat and rice. Wheat prices are shown the highest across Pakistan in September 2009, which coincided with Ramzan, whereas rice, with the exception of prices in Balochistan, did not experience excessive inflation during Ramzan in 2009.

While the above graphs track only wheat and rice prices and thus offers a partial picture, one needs to see the change in consumer prices for a larger basket of goods and services to determine how prices change during Ramzan.
I have plotted an interactive graph below that shows the change in consumer prices from July 2002 to July 2010 over a 12-month period, which is also known as the annual inflation in prices. The obvious peak during August to October 2008 in the graph shows that consumer prices increased by almost 25% on a year-by-year basis, which was the worst consumer price inflation observed in Pakistan since 2002. This period coincided with Ramzan in 2008. However, 2008 is not an exception. Since 2002 the highest price inflation has mostly been observed during the months of October and November, which coincided with Ramzan.

If the previous trends in price hikes during Ramzan continue and are further exacerbated by the loss of livestock and crops due to floods, one may see a sustained price inflation of greater than 25% for the months to come in Pakistan. As noted above, and at least in the short run, the price of staples after the floods has already doubled.
The third force behind inflation is the global wheat crisis, which has caused the wheat prices to increase by 90% since June 2010.
The drought in Russia has caused Russia to ban all wheat exports. While Russia accounts for only 11% of the global wheat supply, the export ban sent shockwaves through the commodity prices. Compounding this even further is the loss of wheat crop in China and India due to monsoon rains. The shocking figures released earlier this month suggest that 17.8 million metric tons of inadequately stored wheat, which accounts for 30% of India's wheat supply and can feed 210 million Indians for a year, is rotting because of exposure to rains. Experts argue that India needs to spend at least $1.7 billion to develop warehouses for adequate storage of grains.
While the price of wheat in the global markets is much lower than $13 per bushel, which was observed at the height of global food price crisis in 2008, the short-run hike in wheat prices is certainly becoming a global source of concern even when bumper wheat crops in the United States, Canada, and Australia are being highlighted to calm the markets.
The triple convergence of floods, Ramzan, and global wheat crisis could spell disaster for Pakistan that has suddenly become food insecure while being armed with nuclear weapons. The excessive spending on defense over the past four decades to secure its borders has inadvertently left Pakistan food insecure. The food-starved, yet nuclear armed North Korea, should serve as an example for the policymakers in Pakistan who have preferred spending on ammunition than on grains. If the spending priorities are not changed from military security to food security, there will be not much left within Pakistan to defend at its borders.

Wednesday, August 11, 2010

Housing market continues to cool down

Toronto Star is reporting an expected decline in housing prices in Canada.

Housing market continues to cool down -

Housing prices climbed steeply in urban Canada at a time of moderate wage increases and job losses. This could not have been sustained over the long run. At the end of the day, mortgage rates would climb and the affordable mortgages would suddenly become unaffordable. Speculation can help with housing prices, but only for a short time.

Many economic forecasters and observers have started to call the current slowdown in the United States a double-dip recession. The stimulus funds are running out and suddenly the economy seems to be applying breaks in the United States. this again is not good for the Canadian economy that send 70% of its exports to the United States. With the exports falling in Canada, the job markets would falter shortly afterward and then the resale housing market will experience a decline.

Also reported in the Globe and Mail is the concern that housing starts in Canada re slowing down. This should have a lot to do with Ontario. The new HST adds an additional 8% to the purchase price of new homes over a certain threshold. The tax was introduced in July 2010. This sudden increase in price was expected to drive consumers away from the largest housing market in Canada, i.e., Toronto. Builders should have known this and they adjusted their supply chains accordingly.

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Thursday, August 5, 2010

Dell and its supply chain

SAN FRANCISCO - OCTOBER 13:  Dell Chairman and...

Image by Getty Images via @daylife

When I started researching the supply chains, every textbook had at least one case study on Dell computers and another on Toyota. The praise for Dell never ceased; how it had eliminated the inventory and the entire assembly was now just-in-time.

At the time those books were written Dell was the biggest computer maker.  Since then the global landscape of the technology companies have changed. Dell is no longer at the top of the computer assembler totem pole. Other interesting developments of the recent past  include Apple overtaking Microsoft in market cap and Google trading over $500.

Can you imagine what the next editions of books on supply Chain would contain: the praise for smart mergers and how HP and Compaq made their marriage work by streamlining their supply chains …


A 5-year to date comparison between HPQ and Dell suggests that while HPQ stock would have climbed 89%, Dell would have put you in red at –67.35%. Of course, sticking out with Apple would have returned a 500%-plus gain in stock value.

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Wednesday, August 4, 2010

US retail sales

The US Census Bureau reports monthly retail sales. The following graph presents the data from the US Census Bureau. The data suggest that the retail sales have been generally increasing since the start of 2009 after a steep decline in 2008.

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Sunday, August 1, 2010

What’s new in statistics?

image The 2010 Joint Statistical Meetings are being held in Vancouver. Number crunchers of the world unite!

An interesting part of the meetings is the listing of workshops being offered at the gathering in Vancouver. These workshops indicate what is in vogue in statistics.

For details, visit:

Also note the list of sponsors for the event, which are mostly statistical software vendors, book publishers, and pharmaceuticals.


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