I recently visited Monrovia, which in the words of P-Square, chopped my money. Food, accommodation, and transportation are much more expensive in Liberia than in any other West African country I have visited.
It’s true that Liberia is a post-conflict country full of UN staff, who, when not struggling to help Liberia maintain its stability and get on its feet, are probably struggling to find enough things in Liberia to spend their money on. But Liberia also differs from other countries in West Africa in that the U.S. dollar is used in parallel to the Liberian dollar. Is it possible that dollarization could also contribute to higher prices?
"Could we buy some dirt? That would help GDP, right?"
First, a couple of observations about money and prices in Liberia. The U.S. dollar and Liberian dollar are used interchangeably. There is no place that accepts only one. Generally, the U.S. dollars are used as large denomination bills, and the Liberian dollars are used in place of U.S. coins. (I didn’t see a single coin in Liberia.) Prices of imported goods in Liberian supermarkets are roughly the same as the dollar equivalent of prices of imported goods in Ghanaian supermarkets. Gas prices also seem to be similar, though a bit more expensive. It seems that the main difference in prices stems from differences in prices of services.
The fact that price differences are concentrated in services, or non-tradeables, makes me suspect that the high prices are in part due to dollarization, and here is why: in a non-dollarized economy, like Ghana, which uses the cedi, if the Ghanaian government pursues a loose monetary policy, the currency will depreciate relative to the U.S. dollar. This doesn’t affect the dollar price of imported goods—these are bought in dollars, so their price in Ghana cedis will just be inflated so that the equivalent price in dollars is unchanged. Other prices in the economy, however, are sticky. Employees have contracts with set wages, and people are used to paying a given price for hiring someone to sew a dress. As a result, the price of these non-tradeables stays constant in cedis, but becomes cheaper in dollar terms.
(Note about monetary policy transmission in West Africa: In West Africa, business and consumer loans are much scarcer. So loosening monetary policy doesn’t lead to cheaper credit very quickly. It does, however, mean that cedi funds are more readily available to banks than U.S. dollar funds, which puts pressure on the exchange rate. So monetary policy transmission through exchange rates is more important in countries like Ghana, and happens more quickly, relative to transmission through interest rate mechanisms, compared to countries where large portions of the population have access to credit.)
What this means is that Ghana, if has a trend of depreciating currency, can have low overall prices in dollar terms because, in dollar terms, prices for non-tradeables have fallen. Liberia, since it is dollarized, won’t see this effect. If Liberia prints more Liberian dollars, the exchange rate may change, with the value of the Liberian dollar declining, but prices in dollars will stay the same.
This does, of course, attribute a level difference to an effect that applies to differences in rates of change, and my observations regarding prices of goods and services are anecdotal (Liberia doesn’t have good CPI data.) If you have comments on the plausibility of the theory, please comment!
Tamale has a number of traffic norms that would make a driver's ed teacher turn to drink on the road.
A classic example is the "Tamale turn", pictured at left. In Tamale, if you are making a left turn off of an arterial, and there is vehicle waiting to turn left ON to the arterial, rather than pass in front of the other vehicle, you pass behind them, while they simultaneously turn onto the arterial.
One can see why drivers might think this makes sense. Both vehicles can turn at once, and if the arterial is busy, the vehicle waiting to turn on to it can take advantage of the other vehicle slowing down.
But as traffic gets denser, the Tamale turn becomes more hazardous. If there are several vehicles waiting to turn on to the arterial, the vehicle turning off the arterial has to negotiate a route behind the turning vehicle, and in front of the waiting vehicles, who may not be on the lookout for a turning vehicle. And more vehicles in the intersection at once raises the risk of a collision as well.
As Tamale's traffic worsens, many similar traffic norms, such as running red lights and passing on the right, technically illegal but general practice in Tamale, will become less efficient and more hazardous. But they will already be ingrained as the standard.
What to do? Some ideas:
1. Give driver's licenses based on merit rather than bribes, to give drivers an incentive to learn the rules on the books.
2. Ticket drivers for practices that threaten public safety rather than focusing on trivial offenses easy to convert to payouts.
Your additional ideas are welcome in the comments!
Clearly, the nations of the world are not going to line up to let me randomize their monetary policy. But what if I could convince one to do so?
Randomized control trials (RCTs), when ethical and possible, present the most reliable way to measure the impact of policy. Units of randomization, for instance people, are put into a treatment group, who gets a program or policy, and a control group, that doesn't get the program or policy. You compare outcomes for the two groups to see the impact of the program.
The key to the validity of the RCT is that the sample size has to be big enough that when you randomly divide into treatment and control, there are no important systemic differences between the two groups. Randomization isn't used to evaluate macroeconomic policies for 2 reasons: 1) it is usually too important for people to allow it to be randomized, and 2) it has to be enacted at a high level-- national or maybe state or province-- so it is difficult to get a large enough sample.
But what if we randomized, not by entities like people or countries, but across years? For example, what if the Federal Reserve allowed me to randomly change the policy interest rate by +25 basis points, 0 basis points, or -25 basis points? Over a long enough time frame, the periods that fall into each randomization group should be statistically the same on average. This would allow us to look at the effect of the interest rate change on the economy.
Of course, there are some kinks to be worked out. Similar to spillover effects, policy changes have impacts across multiple periods; however, these could be measured and accounted for. Another problem is checking the balance of the randomization. There would be no equivalent to a baseline, and you couldn't stratify, since you don't know the attributes of future time periods in advance. These problems would imply that you need a very large sample size.
There are certainly other methodological challenges I haven't thought of. I imagine I will have plenty of time to think through them before the first problem-- the fact that politicians, who insist they can control things they can't, would never randomize something they can-- is solved. But if anyone hears about a central bank looking for a monetary policy consultant, let me know.
Gallup recently published results of a global poll
on people's propensity to express or report feeling emotions. The Washington Post has a nice color-coded map of the results here.
While some regions exhibit trends-- the Americas are bubbly with emotion, while the former Soviet Union is more somber-- Sub-Saharan Africa has a lot of variation. What country characteristics might be associated with increased emotional expression in Africa?
I decided to test the relationship between emotionality and wealth as measured by PPP-adjusted GDP per capita, predominant language (a proxy for colonial influence by France or England), and whether at least half the population was Muslim. I used a linear OLS regression; results are below:
There was no significant relationship between wealth and emotionality for the African countries. Countries with a Muslim population of at least 50 percent had a slightly higher average emotionality score, but the difference was not statistically significant.
People in Francophone Africa were, on average, 3 percentage points less likely to report expressing or feeling emotion, a result that was statistically significant. This may not sound like much, but it's a whole standard deviation below the mean emotionality score. (The model also explains more than a quarter of variation in African countries' emotionality scores!)
So why are the Francophones less effusive? A couple hypotheses:
1. Maybe when translated into French, the survey was less likely to result in positive answers for some reason.
2. The Francophone variable might actually be capturing regional variation, such as lower emotionality in West Africa.
3. The French colonial cultural influence may have included elements of less emotional expression.
The first issue is hard to address (language and cultural translation is always an issue when trying to compare social tendencies across cultures.) Putting in regional variables could address the second issue. Another interesting thing to look at would be the impact of political instability. My data, in .dta format for stata, are here: /uploads/1/7/1/1/1711915/africa_emotionality.dta
I took the Implicit Association Test for race at Project Implicit
(you can register to participate in online implicit association psychology research.) My results surprised me:
I expected to be neutral (don't we all think/hope we are), or if anything, to have a slight preference for European American, given that I am myself a European American.
I wonder if my results are related to the community-oriented culture in West Africa. In Ghana, if you are in trouble, you know people will help you. I would have been unsurprised to find I had implicit associations between African Americans and words like "community", "help", or "friendly", as a result of my experiences with Africans.
In more individualist America, I don't trust that bystanders will help if I'm in trouble. But there are positive words I would associate that culture too-- words like "freedom", "privacy", "efficiency" or "merit". I wonder if the words selected for use in the implicit bias test are more likely to be associated with traits I like about Ghanaian culture than the traits I like about American culture.
I think the important take away, though, is that it is very easy to make implicit but fallacious generalizations-- in my case, that only European features imply American culture, or that African features only imply Ghanaian culture. Living in another culture certainly challenges your preconceptions-- I remember when Trayvon Martin's death made the news, thinking, "Black people wear hoodies??"-- but it's important to remember that it doesn't make you immune from internalizing new biases.
I was out at dinner in Tamale the other night, and I was surprised to see our server wearing a shirt printed with the slogan "Love = Love".
I wondered if he knew what it meant. Most t-shirts purchased in Ghana (and much of Africa) are second-hand, and originate in the U.S. or Europe. The fact that many people are illiterate-- or unfamiliar with American catch-phrases-- can make for some interesting matches between t-shirts and wearers. A friend of mine once saw a very elderly, very traditional man in Kenya sporting a t-shirt with the phrase, "Fuck me, I'm in a Rock Band".
I decided to ask the server about it. He admitted that he hadn't understood it when he bought it, but he continued to wear it because it was a good quality shirt, even though he was embarrassed about the slogan. We assured him it was a good shirt and we supported the slogan.
In Ghana, homosexual acts are a crime, at least between males. (The law is vague about whether this applies to females as well.) There is no legal protection against discrimination based on sexual orientation, and some politicians have urged people to inform on their neighbors if they suspect they are gay. Those arrested for homosexual acts are often subject to police brutality.
(Ghana's laws have not succeeding in completely stamping out the gay community, at least in the most urban areas. I recently tried to attend Gay Night at a bar in Accra with some friends, but we were turned away at the door for not dressing well enough.)
Today, four American states (Washington, Minnesota, Maine and Maryland) voted to legalize gay marriage. Wisconsin elected America's first openly gay Senator, Tammy Baldwin. I hope that these outcomes will encourage young people in Ghana to think critically about cultural norms, and to be tolerant of people who fall outside of them. Maybe if America can have a gay Senator, a Ghanaian can consider having a gay neighbor, or even a gay friend. I look forward to talking with my Ghanaian friends and colleagues about these election outcomes, and why they matter to me.
(On the downside, although I support decriminalization of marijuana, I'm not looking forward to discussing legalized pot with every wanna-be rasta on Oxford Street...)
Among non-American ex-pats, it appears to be a mixed bag. People seem to fall into three camps:
1. Those who care a lot. In the past 12 hours, people in this group have been posting on facebook about how late they stayed up tracking the elections, and congratulating America for a job well done. This group sees who the U.S. President is as important to global policy, including the tone of international discourse.
2. Those who care, but only for America's sake. This group tends to think the entire Republican party is bat-shit crazy. When the elections come up in conversation, they give the Americans sympathetic looks and offer up their home countries as residence options should Romney win.
3. Those who don't really care. This group doesn't really think who the U.S. President is matters much to the world, and doesn't have much interest in talking about the elections. One friend of mine has a blanket policy o
Not Ghanaians. Despite the fact that Obama is pretty much universally liked, Ghanaians don't really see themselves as having any real stake in the election. I asked five of my colleagues, all highly educated Ghanaians who could name both presidential contenders, if they cared who won. All five answered, a little hesitantly, "umm...not really." They didn't see any difference in the attention or assistance Africa received with Obama at the helm compared with Bush.
What do the numbers say? Here is U.S. foreign assistance appropriations for Ghana from 2006 to 2012:
(foreignassistance.gov only gives data back to 2006, and I couldn't get the numbers to match up with Census Bureau data, which go back farther but are less current. If anyone knows how to reconcile the series, I'd love to show data for the whole Bush administration.)
Aid appears to be higher during the Obama administration. (The Census data suggest annual foreign aid of under $100 million a year for the earlier years of the Bush administration.)
But wait-- how much of the Obama spending is actually the result of the MCC compact signed under Bush? Although MCC spending isn't trivial-- $457 million for the period-- USAID spending is still much higher, and over half of the MCC appropriations were in 2006. By my reading, Ghana was better off, in terms of simple U.S. dollar aid receipts, under Obama.
These researchers mailed letters
to wrong addresses in 159 countries (including the U.S. and Ghana), collected data on whether the letters were returned to the sender, and then looked at the factors associated with the letter return rate. Some fun findings:
- Most of the countries that sent letters back were the ones you'd expect-- the U.S., Luxembourg,-- but Algeria also made the list.
- The wrong addresses were generated by using the names of Nobel Laureates in economics and famous composers for the street names.
- Postal resources (number of workers and offices per capita) and technology (use of postcode databases) explain almost half of the variation in return rate.
- Countries with bad private sector management indicators also had worse return rates, suggesting that low productivity and poor management practices are endemic in some countries, rather than public-sector specific.
- Countries with private postal delivery fared no better than those with public.
Ghana failed to return a single letter. It's also often hard to get servers to bring you a bill at a restaurant. Is it really so surprising that the public and private sectors would face the same challenges?
"A developed country is not a place where the poor have cars. It's where the rich use public transportation."
If the truth of this statement is not immediately apparent, you probably have never commuted in a West African city. Accra needs a lot of infrastructure improvements, but one thing it does not need are more cars. After work, I can run the two miles to my gym faster than I could take a taxi there. Traffic is similarly bad in Kumasi and Dakar, and is rapidly worsening in Tamale.
Driving is no picnic in American cities, either. The difference? In American cities, rich people often choose to live in places accessible to public transportation, and their taxes and patronage support transit systems that benefit the rich and poor alike (even LA is getting on the bandwagon
). In developing country cities, the poor take low quality public transit, such as trotros and shared taxis, while the rich clog the roads with their private cars and taxis.
While roads in developing country cities could certainly be improved (I would love to see someone apply traffic light efficiency models to Accra traffic), the reality is there is limited capacity to expand current roads or build new ones in the middle of the city. Poor people are already taking public transport. That leaves one viable solution to traffic in developing country cities: getting rich people to convert to public transport.
For practical and cultural reasons, this is an uphill battle. First, the main reason rich people use public transport in developed cities is not because they are altruistic, it is because it is faster and easier than driving. Accra currently has no public transit system that can rival the speed and efficiency of a private car. Considerable investment would have to be made in a rail or bus system with widespread coverage and efficiency in order to convince people to convert. Second, there is a cultural attachment to driving. Owning a car is a definitive status symbol in West Africa; taxi drivers are often confused when I, a person who apparently has the money to take a taxi, choose to walk.
Improving traffic in Accra will require a commitment from the wealthy and elite-- both foreigners and Ghanaians-- to get out of their air conditioned Toyota Landcruisers and both fund and use public tran