It is of passing interest to those interested in karmic events that both Burma and China have experienced cataclysmic disasters within a week of each other. Does repression carry its own energy?

I’ve talked about Burma but for China this is becoming a very difficult year. It was supposed to be a huge celebration, the coming out party for the slightly post-communist leviathan and a party to show the world what an amazing country it was. Alas the Tibet demonstrations rained on that parade and now the earthquake has really taken away the focus. Indeed many Chinese were unhappy that the Olympic torch procession was carrying on as normal and this saw an immediate response by the authorities who scaled back the daily relay.

This shows that the Chinese government is very senstive to public feeling within China and is keen to always be on the right side of its citizens if not those who live outisde its borders. This sensitivity has been increasing over the last 10 years and with the Olympics putting China centre stage, the rallying call for a strong sense of nationhood has been blasted out from all points. From all accounts it seems to be working.

It’s nearly 20 years since the Tiananmen Square massacre. It holds memories for me because I was in Northern Pakistan at the time, coming to the end of nearly 2 years away backpacking and working during my OE from London, and getting ready to cross the Khunjerab Pass into Western China. The idea was to head across China and catch the Trans Siberian home. It didn’t happen. I was with my Kiwi girlfriend (now my wife!) and we met an English guy who had just crossed over from China and told us the news. We were completely cut off and had no idea what ws going on. This was from the days of getting your post from the GPO Poste Restante service. Oh for an internet cafe. It was clear then that it wasn’t a good idea to cross over so we abandoned that idea and headed back down.

China has come a long way in 20 years. Sure it still is pretty ruthless when it comes to repressing dissent or “dangerous groups” like Falun Gong. And yes it still executes a lot of criminals though they say that rate is falling. It has built an enormous economy with a massive trade surplus which has enabled it to move overseas to secure resources and assets. It is however still unsure of its rightful place in the world. It’s military continues to expand posing a threat to Taiwan as well as giving itself plenty of muscle in the worlds’ oceans historically the preserve of the US Navy and before that the Royal Navy.

2008 is a big year for China. How it handles it should give us some idea of how it will turn out in the years ahead. Can it open itself up and with that accept the good and the bad, the praise and the criticism or will it revert to control and repression. Let’s hope its the former.

So New Zealand have signed the first Free Trade Agreement with China. It’s quite a big deal really and there is no doubt New Zealand has been chosen by China as an easy country to do business with and there is a fairly long and open history between the two countries.

There’s been a bit of concern over the human rights aspects of the deal and what it means for workers conditions but it’s really simple to deal with that if it is a concern of yours:

Buy goods that you are happy to buy. Buy Kiwi made or buy ethically certified. But ultimately as a consumer you have the final say on what you purchase. So ask more questions and you’ll find your enquiries work their way up the chain. Business is business and the customer is always right. Over time wokplace conditions will improve and as China becomes more wealthy they will be able to move towards standards we take for granted here.

Lance, Jim and the NBR have all commented on the ins and outs of the deal but I think it’s a positive step to open up markets as it breaks down barriers.

However consumers will always have the final word so we’ll wait and see what the actual impact is.

From the Rt Hon Balneus comes an interesting proposition to reduce teenage pregnancies: simply offer a cash incentive for not getting pregnant.

This came about from a post about population reduction being the answer to reducing carbon emissions. As i noted in my previous post population growth, especially in developing countries, is putting severe pressure on all resources.

China has been on to this well in advance with its one child per couple policy.  For developed countries teenage pregnancies have been a bit of a problem and something that has not been adequately addressed. This idea fits in neatly with the premise of the “Logic of Life” by Tim Harford.

Tim notes that people make complicated  calculations about potential trade offs every day whether its to have unprotected sex or park illegally. He argues cogently that we do respond to incentives and change behaviour when the pay offs look in our favour.

For example he notes research which showed juvenile crime lower or falling in US states where the age for adult criminality was lower than in states where it was higher. The reason was simple: the payoffs were worse for juvenile criminals in states where they would be tried in the adult system. Juveniles were simply responding to the market.

So for teenage pregnancies it is a similar story. Where welfare benefits are good for both mother and baby, there is no disincentive to get pregnant. So the payoffs for riskier behaviour are ok. That’s because as a society we value the rights of the baby and choose to provide for it regardless of how it arrived.

Now imagine we said to all teenage girls that for every year until a certain age (whether 18 or 21) they would receive $200 in a savings account for not getting pregnant. That would be an interesting idea to model.

Now I am sure there are many pros and cons to this but I like the idea of policymaking taking into account how people behave rather than what officials deem to be a good or right thing to do.

I’ve mentioned Agflation previously and we’re starting to see more concern expressed at the official level. The UK Government’s Chief Scientific Adviser, Professor John Beddington, has weighed into the debate calling food shortages a problem that was as immediate as climate change. The driver of agflation is two fold: increased demand driven by population growth and increasing development and supply shortages caused by deforestation to grow biofuels.

These two drivers are causing major price rises in all food groups. This creates what might be called “real” inflation, a price rise in the cost of real goods as opposed to asset inflation which is more of a monetary phenomenon.

This is a real problem because it can’t be solved by the hammer of monetary policy though the myopists in their central bank ivory towers seem to think so.

I can imagine their conversation: “let’s raise interest rates so people eat less”.

In many countries people are exhorted to have more children especially in developed economies where birth rates among the middle classes have fallen. So how can we stop the population expanding and how are we going to feed all these people and do it in a manner than the ecosystem can cope with.

It’s a tricky question. One could argue that food shortages, famine, disease and natural disasters regulate populations. That may still be the case. But can we rely on that and should we given we are more enlightened, well supposedly.

Population growth was for a long time a favourite topic for policymakers but has only recently come back onto the mainstream agenda. There is no doubt that the growth in biofuels has played a major part in this and that governments who have set targets for biofuel supply may well need to go back and think more carefully about how the unintended consequences of this feel good policy will play out.

I’ve finally finished Tim Harford’s book “The Undercover Economist”. I highly recommend it to anyone who wants to gain some insight into the economic questions that really effect us.

Forget about the behaviour of small firms or the slope of the IS/LM curve. Think about why people get out of bed in the morning, pay silly prices for a cup of coffee and can’t build a business on Cameroon. Think about how China has grown so fast. How did it happen? Why?

I was lucky enough to attend a lunch last Friday in Wellington (thanks Jim for the head’s up) and hear Tim talk about his new book “The Logic of Life”. I’m looking forward to reading it. It crosses back and forth across the social science spectrum which i believe is incredibly important for an economist to do.

It’s not just about numbers and graphs. As Tim says, it’s about people and the things they do, resources they use and how and why they do it. When I studied economics (University of Manchester 1987!) we lived in a faculty of social science with the option to major in one of 11 different topics as diverse as social anthropology to accounting and finance. These days you’re likely to find economics buried in the commerce faculty.

This approach has failed the student as it presents economics as being about business and numbers. It isn’t at all. Those are merely outcomes and outputs. How people allocate scare resources is a combination of anthropology, psychology, politics, finance, geography , history and so on.

The silo approach that many universities have taken goes counter to the understanding we have developed of systems and the extra efficiencies that coherence or consilience brings.

Economists like Tim Harford will bring new interest to this critical subject and hopefully widen the lens that it is viewed through. After all any economist who can discuss the market for blow jobs with a straight face has to be on to something