We don't know shit!

When people ask me what economic geography is about, one of the examples I give them is what I refer to as a big-picture question.  And that is: Why are some countries rich and some poor?

People always get excited about this example.  Their response is typically along the lines of "wow, I had no idea that geography includes such topics.  I would love to take your classes."

What I don't tell them is this: Don't ask me for the answer on why some countries are rich and some are poor because, well, nobody knows!

We can fairly easily explain why a country is poor.  That is not what I mean.  But, how to place a country on a path of sustained economic and social growth?  This continues to be a mystery, as it was to me when I began graduate school more than three decades ago.

The Economist addresses this metaphorical elephant in the room:

Economists have precious few hard facts about growth. They know that sustained growth in GDP per person only started in the 18th century. They know that countries can become rich only by growing steadily over long periods. They know that in some fundamental way growth is about using new technologies to become more productive and to uncover new ideas. Beyond that, almost everything is contested.

That's what I don't tell people when they ask me about economic geography.  We don't know shit!

But, this is too important a question for us to ignore. The fact that we don't know shit does not mean that we give up.  Why?

A clearer understanding of how growth happens, and why growth-boosting institutions sometimes wither or fail to take root, could raise the living standards of billions of people. The economics of growth should therefore be central to the discipline, even though the questions it poses are objectively hard, and the answers rest more in history and politics than in elegant mathematics.

Note that dig about "elegant mathematics"?  One of the reasons that I chose to go far away from from the economics folks is because of their worship of the math and statistical models, which really don't give any credible answer.  Yet, that is how the academics play their game.

The Economist wraps it up with a valuable advice:

Until they can give better answers in this area, economists should speak with greater humility about how this structural reform or that tax change might affect long-term growth. They have not earned the right to confidence.

Like I said, we need to admit that we don't know shit.

But then, Que sais-je?!

My obsession with shit!

Regular readers, I mean "regular" readers, know all too well that I talk shit. I mean, about "shit."  From wishing you "Bristol #4" to an arty bathroom.  I tell ya, this is one stinking blog! ;)

And then there is that other shit that I am passionate about.  You know about that too--the lack of sanitation infrastructure for hundreds of millions in South Asia and sub-Saharan Africa.  "If only we can develop less expensive ways of processing shit."  Aha, now you remember.

Do you recall the challenge from the Bill and Melinda Gates Foundation to reinvent the toilet?



In a recent entry at his blog, Bill Gates writes:

I watched the piles of feces go up the conveyer belt and drop into a large bin. They made their way through the machine, getting boiled and treated. A few minutes later I took a long taste of the end result: a glass of delicious drinking water.

Yes, things are happening, even if only slowly.   It is "part of the Gates Foundation’s effort to improve sanitation in poor countries."

Because a shocking number of people, at least 2 billion, use latrines that aren’t properly drained. Others simply defecate out in the open. The waste contaminates drinking water for millions of people, with horrific consequences: Diseases caused by poor sanitation kill some 700,000 children every year, and they prevent many more from fully developing mentally and physically.
If we can develop safe, affordable ways to get rid of human waste, we can prevent many of those deaths and help more children grow up healthy.

The system that we have in this country, or many other countries, is expensive.  It requires sewer lines, sewage treatment plants, qualified personnel, and--to get the system running--electricity, which itself is in serious shortage.

So, if only a re-invented toilet will extract the water from shit and make it potable, and use the carbon in the shit to generate electricity.  My, won't that be multiple birds with one stone?

The project is called the Omniprocessor, and it was designed and built by Janicki Bioenergy, an engineering firm based north of Seattle. ...
Through the ingenious use of a steam engine, it produces more than enough energy to burn the next batch of waste. In other words, it powers itself, with electricity to spare.

 If it were not for Gates Foundation providing the seed money, such efforts to reinvent the toilet might not have even begun?  Isn't that a depressing thought?  To me, this is an example of how we misdirect our talents and capabilities.  We spend enormous amounts on wars.  We develop technologies to send humans to the moon and bring them back. We spend gazillions on sports stadiums that consume more electricity than entire countries in sub-Saharan Africa do.  All these mean that we have the know-how and the resources.  But, we merely choose to spend on things than what are really, really important for humans.

The next step is the pilot project; later this year, Janicki will set up an Omniprocessor in Dakar, Senegal, where they’ll study everything from how you connect with the local community (the team is already working with leaders there) to how you pick the most convenient location. They will also test one of the coolest things I saw on my tour: a system of sensors and webcams that will let Janicki’s engineers control the processor remotely and communicate with the team in Dakar so they can diagnose any problems that come up.

When we talk about the "internet of things" we are only fascinated with examples like how our refrigerators can keep track of the inventory and how an automated drone can deliver milk that a robot will load up in the fridge.  Because, all we do is gaze at our own navels!  What a contrast the Dakar project is--the connectivity that the internet offers is put to such a constructive use.

I will leave it to Bill Gates to wrap this up:

It might be many years before the processor is being used widely. But I was really impressed with Janicki’s engineering. And I’m excited about the business model. The processor wouldn’t just keep human waste out of the drinking water; it would turn waste into a commodity with real value in the marketplace.

Here's the video of the project and Gates drinking the potable water that was once a part of shit.  Give this man a Nobel Peace Prize already!

On the worry that the least-skilled will fall further behind

Charles C. Mann notes in his insightful essay on the rhetoric and (in)action regarding climate change:

In the 3,600 years between 1800 B.C. and 1800 A.D., the economic historian Gregory Clark has calculated, there was “no sign of any improvement in material conditions” in Europe and Asia. Then came the Industrial Revolution.

The Industrial Revolution was one hell of a game-changer.  China and India, which at that point accounted for more than a half of the world's GDP, had no idea what lay ahead; no surprise that they are both terribly wounded civilizations that are even now trying to figure out what happened and why they are not the admired and prosperous lands, though China is in a hurry to reclaim its status.

In his book, his talks, his interviews, well, anywhere, Andrew McAfee stresses the importance of the Information Revolution by reminding us about the Industrial Revolution:

As historian Ian Morris writes in his fascinating book Why The West Rules — For Now, “the industrial revolution… made mockery of all that had gone before.”

If that changed the world in a hurry, then, as McAfee likes to point out, we ain't seen nothin' yet with respect to how much the next revolution (that is underway?) will completely overhaul everything.

That is not a new topic in this blog.  I keep coming back to it because of a deep concern that the vast middle class was perhaps a freakish accident in history, and that we will revert to conditions that prevailed throughout almost all of recorded history--the patricians and the plebeians.

The concern over the plebs is nothing but another way of saying that inequality is a troubling issue to me.  Not merely within the US, but across the world.  Now, I have quoted Branko Milanovic and others who have correctly noted that global inequality has narrowed, as this chart from an old post shows:

But, within countries, the gap is widening.

And even the Economist pitches in with "why globalisation is not reducing inequality within developing countries"

Economists are puzzled: the data contradict the predictions of David Ricardo, one of the founding fathers of their discipline. Countries, said Ricardo, export what they are relatively efficient at producing. Take America and Bangladesh now. In America the ratio of highly skilled to low-skilled workers is high. In Bangladesh it is low. So America focuses on products requiring highly skilled labour, such as financial services and software. Bangladesh focuses on downmarket products such as garments.
Comparative advantage predicts that when a poor country starts to trade globally, demand for low-skilled workers will rise disproportionately. That, in turn, should boost their wages relative to those of higher-skilled locals, and so push down income inequality within that country. The theory neatly explains the impact of the first wave of globalisation. In the 18th century, Europe had a high ratio of low-skilled workers relative to America. When Euro-American trade took off, European inequality duly tumbled

Any time the Economist or the Wall Street Journal runs such pieces, then I joke that it means it is time to say "holy shit!"

Anyway, what might be the story here?

[Eric Maskin's theory] relies on what he calls worker “matching”. Unskilled workers can be more productive when matched with skilled ones—that is, when they work together. Assigning a manager to a group of workers can do more for total output than just adding another worker. He places workers into four classes: skilled workers in rich countries (A); low-skilled workers in rich countries (B); high-skilled workers in poor countries (C); and low-skilled workers in poor countries (D). Crucially, he thinks low-skilled workers in rich countries (the Bs) are likely to be more productive than high-skilled workers in poor ones (the Cs).
Before the current wave of globalisation started in the 1980s, skilled and unskilled workers in developing countries—the Cs and Ds—worked together.

So, yes, globalization.  What happened?

The latest bout of globalisation has jumbled the pairings: high-skilled workers in poor countries can now work more easily with low-skilled workers in rich ones, leaving their poor neighbours in the lurch. ...
The Cs work with Bs and end up being more productive. The Ds are left by the wayside.

The Ds number in the hundreds of millions.   Which is why the Economist concludes with this thought:

 if he is right, he poses a challenge to globalisation’s advocates: figuring out how to reap its rewards without leaving the least-skilled in poor countries behind.

Well, hey, it might be a realization that is a tad too late.  But, better late than never, right?

There is one easy solution to this; can you guess what that is?  Hint: it cannot happen again, now that we are already here ;)