Welfare Economics

The World is full of drugs, some of which are good and some of which are bad. What they all have in common is that they create addiction (a craving for more).

One of the first drugs you get exposed to in your life is the casomorphine in breast milk. This is a very useful drug that helps stimulate the mother-infant bond and helps secure that the infant gets all the nutrients it needs. It also exists in cow’s milk, and thus in all the dairy products we consume. It gets very concentrated in cheese, which helps explain why cheese is one of my favorite foods.

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By Stanislaw Czaplick

Bolivia has an enormous natural resource potential that properly managed could promote economic development and address the pressing need for poverty reduction.

There is a relatively new development policy approach, which combines environmental conservation and poverty reduction and which is based on the existence of a “Poverty-Environmental Degradation” nexus (P-ED nexus), resulting in “win-win opportunities”.

Acknowledging a variety of different relations between those two development issues there is a big debate (1) concerning the nexus nature, the conditions under which it applies and the intensity of its application. Nevertheless, academics (2) seem to agree on its general nature, concurring on the dual causal relation between environmental degradation and poverty.

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Every 1st of May the day of the worker is celebrated in many parts of the world, and in Bolivia it has become a custom for the government to give certain benefits to the workers on that day. This year was not the exception and the government promulgated 5 Supreme Decrees benefiting workers. The highlight of these 5 Decrees is Decree 1107 because it recognizes the labor rights for the provisional workers of the companies. That is to say, those workers that are under short-term contract will be able to receive social benefits.

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By Natasha Morales

Social policy in Bolivia has changed substantially since the increase in world oil prices. According to the Supreme Decree 29565 enacted in May 2008, the increase of revenues coming from the direct hydrocarbon taxes (IDH) should be used, among others, for social protection programs. However, there is not a clear relationship between the logic of the intervention of social programs and the allocation of IDH resources.

As of two years ago, Bolivia was considered a low income country. During 2008, however, the high commodity prices (especially oil, minerals and soy beans) gave the country a strong comparative advantage, and the resulting GDP growth has caused Bolivia to shift to the medium income group.

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Due to an excessive work load, this weeks’ newsletter will highlight a collection of earlier articles on the topic of Poverty.

Bolivians feel poor, but not that poor(L. E. Andersen)

According to official estimates, there are at least 3 million extremely poor people in Bolivia (about 38% of the total population). Judging from their very low incomes, they shouldn’t be able to buy even the minimum basket of subsistence goods. The majority of people in this group does not have electricity in the house, and thus none of the convenient inventions that run on electricity. Still, only a minority of them (18.5%) actually feel extremely poor (Continue reading…)

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By Gonzalo Forgues-Puccio

“Very few established institutions, governments and constitutions…are ever destroyed
by their enemies until they have been corrupted and weakened by their friends.”
Walter Lippmann

Assume that it is the middle of the summer and that you just bought your favourite ice cream from a shop. You remove the wrapping but there is no bin in sight. Hence, you have two options: you either look for a bin or just “accidentally drop” (throw) the ice cream’s wrapping on the pavement.

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Ants are among the most numerous and versatile animals on Earth. They prefer tropical rainforests, but they also manage to survive in scorching deserts, and they survive long, cold winters by hibernating and huddling together in the millions. They don’t have any problems with landscapes altered for human purposes. Indeed, my house appears to be an ant-paradise (probably due to my three kids inadvertently leaving ant-goodies everywhere).

Like us, ants have developed and refined agriculture. They cultivate hundreds of different species of fungus, which are fertilized, weeded, pruned and propagated. They even apply antibiotics to keep unwanted fungus away from their crops. They have also domesticated animals (especially aphids and caterpillars), which are milked systematically for their nutritious excretions (1).

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By: Lykke E. Andersen* 

“In the last 200 years the population of our planet has grown exponentially,
at a rate of 1.9% per year. If it continued at this rate, with the population
doubling every 40 years,by 2600 we would all be standing literally
shoulder to shoulder.”
Stephen Hawking

To most people, the World feels rather crowded, and many people are worried about the impacts that all we humans have on the environment. In this newsletter, however, I will argue that the perceptions of crowdedness are biased – due to crowding.

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If people married each other more randomly, poverty levels would be considerably lower than they are now. If we abandoned all current family arrangements and randomly grouped all Bolivians into new families of 5 persons, poverty levels would fall by about 15 percentage points (from the current level of 55% of all households to about 40% of all households). The Gini coefficient measuring inequality would also fall from about 0.70 to 0.55 (1).

But Bolivians do not mix much in marriage. The correlation between partners’ education levels is extremely high at about 0.77, with no signs of falling (2). For comparison, the corresponding number for Germany is 0.52 and for Britain it is 0.41 (3).

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One of the newsletters last month (How unequal is Bolivia really?) argued that it is better to measure inequality on consumption than on income, as income is very imperfectly measured, especially in poor countries with a large share of self-employment. The newsletter also suggested that when measuring inequality on consumption, United States is probably more unequal than Bolivia. The latter appears to be incorrect, as one careful reader kindly pointed out.

The study by Krueger & Perri (2006) investigates the relationship between income inequality and consumption inequality in United States and find that the consumption based GINI coefficient is about 11 percentage points lower than the income based GINI coefficient (1), which would bring consumption inequality in the US much below consumption inequality in Bolivia.

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