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Archive for May 2009

Ignatieff is no Economist

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The Globe recently ran an interview with Michael Ignatieff focusing on his thoughts about the federal deficit revision.  I couldn’t help thinking how uncomfortable he seemed while talking through Canadian economic issues and policy.

I wanted to embed the video into the post but couldn’t figure it out.  Check out the interview here:  Will Ignatieff Pull the Trigger

He’s really trying to hammer home how irresponsible our government has been by  i) not correctly forecasting the deficit  and ii) their inability to predict what the final number will actually be.  Doesn’t he realize that over the past few months every major economic forecaster (the IMF, the Fed, the Wall St. Journal etc.) has been downgrading their results?  No one could have gotten it right, and no one is.  Recently the US were forced to revise their deficit projection as well: Estimate of Budget Deficit Now Tops $1.8 Trillion.  Here’s an excerpt:

The budget office’s revised deficit projections bring the expected shortfall this fiscal year, which ends Sept. 30, to $1.84 trillion, from a February projection of $1.75 trillion. For the 2010 fiscal year, the new estimate is $1.26 trillion, up from $1.17 trillion.

So we have a situation where no one seems to be able to predict where the economy is heading,  and yet the opposition demeans our Finance department for not giving a hard-line figure for what the deficit will be at year-end.  The criticism doesn’t make any sense.

I’m of the personal opinion that the Liberals have been looking at the polls and decided an election would be in their best interests.  They are pushing the mantle of economic incompetence on our government not so much for justifiable reasons, but because they want a turn at the top.   Mr Ignatieff keeps saying how he wants to make parliament work, but   demanding the current Finance minister to step down in face of an exogenous global recession doesn’t exactly back up his claim.

Isn’t Harper supposed to be the political hard-baller?  This is political positioning at its best.  It’s not easy to be optimistic about the state of Canadian politics.

Written by jk

May 30, 2009 at 9:59 am

Stem Cells are Cooool

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How cool is this!

A new procedure to help people with damaged corneas is showing promise in three patients so far. A team from the University of New South Wales in Sydney takes stem cells from the patient’s good eye and cultures them in a contact lens. When the cells have multiplied, they place the lens over the patient’s affected eye and leave it for around three weeks. During that time, the cells begin to grow into the damaged cornea and help regenerate it. In effect, it’s a stem cell transplant from one eye to the other.

I wonder how many other cool uses they will find for these things.  Check out HowStuffWorks: What are stem cells and what are they used for. Thank-you Obama!

Written by jk

May 28, 2009 at 8:42 pm

Cell phone billing

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So I was all set to rant about cell (mobile) phone billing in North America. Both out of convenience and as a matter of principle, I was enamored with the European model where you only pay for the calls (outgoing) that you initiate. It’s convenient because if you’re account is low, you don’t have to shut off your phone, you just don’t initiate calls. As a matter of principle, if I didn’t initiate a call, why should I pay for it (eg telemarketers)? It seemed so nice… so simple… I should’ve known that it was too simple to be  the whole story.

My searches were futile until I got the terminology: Europe has “Calling Party Pays” (CPP) and we have “Receiving Party Pays” (RPP), sometimes also called “Mobile Party Pays”. CPP is a bit more logistically difficult to setup because calls are actually “paid” by where they terminate. If Alex calls Bob in Europe, there’s got to be a system for Bob’s company to collect from Alex’s. Alex’s company just passes on the fee, so they don’t really care what Bob’s company charges. This creates a monopoly-like situation where every European company jacks up their own termination fees as it only hurts the customers of their competitors. Euro countries have had to put in place termination fee caps because they were skyrocketing. Consequently, the NA system is much more efficient with lower average cost per minute than in Europe. This is one reason why Europeans actual use voice services of there cell phones much less than we do (they text more).

So the NA system is not so bad. Couple this with “first minute free on incoming call” deals, and I think we’ve got the better system. It’s nice to be proven wrong about domestic cynicism.

Refs for the curious:

Written by Brian Quistorff

May 28, 2009 at 2:22 pm

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Canada’s Chopping its Foreign Presence

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An article today has got me thinking about Canadian foreign policy.  From the Embassy Mag.,  More Canadian Missions on the chopping block.

The Conservative government is continuing to quietly close Canadian missions abroad, with the latest casualty the resident consulate in Hamburg, Germany, which will shut down this coming Saturday.  Foreign Affairs officials have defended the moves— which will include South Africa, Malawi, Bosnia-Herzegovina and Cambodia this year alone—as an attempt to increase the cost-effectiveness of the department’s resources abroad…

According to figures provided to Embassy by DFAIT, Canada has opened 22 new missions since 2000. These included eight new missions to the United States in 2004, offices in Sudan and Afghanistan in 2003 and several in the Balkans in 2000.  However, only five of those have been since the Conservatives came to power in January 2006. All of those were opened last year in Asia and appear to have been driven primarily by trade interests…  However, the Conservative government has shuttered 10 Canadian missions abroad since taking office, primarily in Africa and Europe.

It appears today’s government is more interested in promoting trade and business relations through our international agencies, while axeing those which have more of a cultural and humanitarian orientation.  This falls in line with the recent CIDA  announcement that Canadian aid was shifting away from Africa towards Latin America.  Why the changes?  It appears that Harper is using his economic training to make his decisions based on good old-fashioned Cost-Benefit analysis.

Natalie Sarafian, a spokeswoman for Foreign Affairs Minister Lawrence Cannon, defended the moves…”the government is “making diplomacy abroad more efficient.  We are rebalancing our presence/resources where Canadian diplomatic and commercial interests and demand for services can be met through alternative, more cost-effective means (i.e., can be provided by a mission in a nearby city or country),” she said. “This is the reality of an ever-changing world.”

Is this the right approach for Canada to take?  The benefits of supporting relations with larger countries and trading partners are easily traced.  They wind up on Canadian accounting ledgers and in bank accounts.  However, what about the intangible benefits, like reputation and exposure?  How do we measure the value these elements bring to Canadians?  Are the Conservatives even considering them?    From the NDP foreign affairs critic Paul Dewar:

“Cost effectiveness has the feel of it that, ‘Well we don’t really want to spend that much money because it’s too expensive,'” he said. “If it’s just a paper exercise that this is how much it costs, we’ll get rid of it, but that doesn’t take into account what is Canada’s foreign policy goals, what is our attempt have an influence on the world stage.”

And from the Liberal side, Bob Rae:

“The government has put the department in the ridiculous position basically where if they want to open anywhere, they have to close somewhere,” he said. “We’re trying to do foreign policy on the cheap, and we are paying a price for it in terms of our international reputation.”

In my opinion, the government should be pushing more resources towards promoting our foreign affairs, and not just in connection to trade.   So many issues today appear to need supranational forces to guide their implemenation.  Think environmental policy, food security, financial coordination and aid initiatives.  When Canada sits across from the negotiating table in coming years to iron out global policy, reputation and the intangibles become vastly more important to promoting our interests.    If you are in a group discussion, whose opinion and interests do you value and listen to more – a friend who you see and speak with regularly or an acquaintance you only see when they want something?

Perhaps a good metric to judge the appropriateness of our international budget whould be a statistic measuring the extent of Globalization; a more gloablized world should equal a larger budget for foreign affairs.

Written by jk

May 27, 2009 at 2:21 pm

Some more interesting stuff

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Written by Alex

May 27, 2009 at 12:07 pm

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Rational Choice and Addiction

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Here is an interesting interview with psychologist Gene Heyman, who argues that drug addiction is a matter of choice and not of illness.  His reading of the epidemiological literature on addiction suggests that there is a lot of economics underlying the issue.

I began looking at the epidemiological data. . . .  A huge percentage of people who had at some point met the criteria for lifetime substance dependence no longer did so by the time they were in their 30s. It varied from 60 to 80 per cent.

. . .

It’s this problem we have with the idea that individuals can voluntarily do themselves harm. It just doesn’t make sense to us. Why wouldn’t you stop?

. . .

60 to 70 per cent of the time, [addicts who end up in rehab clinics and get studied] have additional psychiatric disorders. And those disorders interfere with their capacity to engage in activities that would compete with the drugs—jobs, family, other activities. So the people the clinicians see, and the people the researchers study, are those who keep using drugs and don’t stop right into their 40s. That’s maybe 15 to 20 per cent of [addicts], and they have greatly skewed our picture of the natural history of addiction.

. . .

[W]hen people are choosing the drug, they’re thinking that moment, or that particular day, would be better if they did. A chronic smoker will think that the next three minutes would be better with a cigarette than without. But after a year of smoking 20 cigarettes per day, adding up to 60 minutes each day, you might think, ‘I’d rather have the 60 minutes of not smoking each day.’ Unfortunately, you don’t choose 60 minutes at a time. You decide one cigarette—or three minutes—at a time, and that’s what makes this so difficult.

If Heyman is right, the choice to use drugs is the same as any other choice in a rational choice framework; it depends on the benefits and costs, including opportunity cost, now and in the discounted future.  Is a high intertemporal discount rate a psychological illness?

Note that Heyman’s point is not that addicts are weak and pathetic people.  The point is simply that addiction does not seem to exist outside of the usual framework of cost-benefit decision-making.

At the heart of the notion of behavioural disease is the idea of compulsivity, by which people mean it’s beyond the influence of reward, punishment, expectations, cultural values, personal values. Alan Leshner [the former head of the National Institute on Drug Abuse] says drug use starts off as voluntary and becomes involuntary. But the epidemiological evidence suggests otherwise.

. . .

That you’re making these choices one day at a time. What you’re choosing is to take heroin that day. You’re not choosing to have a miserable life. Eventually, you become stuck, though, where you don’t know what else to do but choose heroin each day, even though you wish it didn’t lead to a miserable life. You know, I’ve always thought it strange that people would think we should not have sympathy for those kinds of situations.

Written by Alex

May 26, 2009 at 4:08 pm

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She ate the raw heart of a seal she gutted

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Best Governor General ever?

Hundreds of Inuit at a community festival gathered around as the Governor-General knelt above the carcass and used a traditional blade to slice the meat off the skin. After repeated, vigorous slices at the flesh, the Queen’s representative turned to the woman beside her with an enthusiastic query: “Could I try the heart?” Ms. Jean then grabbed a tissue to wipe clean her blood-soaked fingers, and explained her gesture of solidarity with the region’s Inuit hunters.

Written by Alex

May 25, 2009 at 11:30 pm

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