Day: May 2, 2006

Democratic enlargement… meet the PRC

Peter Howard writes an interesting composite post on the nexus of energy politics, China’s rise, and US policy objectives.

The core of the issue: when we move out, China moves in. Scratch the negative diplomatic externalities for regimes intent on brutalizing their populations.

Solutions? Liberal hegemony types would argue China needs to be better socialized into the international system. Realists say “Good luck” and “I told you so.” Such developments, from my perspective, demonstrate how “exit options” for small states enhance their leverage against particular great–and even militarily hegemonic–powers.

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What does this mean?

All but one of my published journal articles have question marks in their titles.

How’d that happen? And what do I do with my current “revise and resubmit”?

Should I change the title to something without a question mark to stop the trend?

Or would that be just begging for some sort of cosmic retribution in the form of a rejection?

Or would elimating the question mark in the title increase its chances of eventual publication by balancing out my interrogative-declarative karma?

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Lemony Smarket

In a strange bit of synergy, Tim Harford writes a column on George Akerlof’s famous paper on used cars:

In 1966 an assistant economics professor, George Akerlof, tried to explain why this is so in a working paper called “The Market for ‘Lemons.’ ” His basic insight was simple: If somebody who has plenty of experience driving a particular car is keen to sell it to you, why should you be so keen to buy it?

Akerlof showed that insight could have dramatic consequences. Buyers’ perfectly sensible fears of being ripped off could, in principle, wipe out the entire used-car market: There would be no price that a rational seller would offer that was low enough to make the sale. The deeper the discount, the more the buyer would be sure that the car was a terrible lemon.


Many people recognize that they are reluctant to sell their own car if it’s running well. That is informal evidence for Akerlof’s thesis, since if buyers were able to appreciate the qualities of each car, good cars would fetch more money and it should be no more attractive to sell a cheap lemon than an expensive peach.

But the used-car market hasn’t disappeared, and so economists have debated how much Akerlof’s model really explains the market. For instance, there’s been a lively controversy as to whether pickup trucks that are sold secondhand have higher maintenance bills than pickup trucks of the same age that are not sold. (If they do, that’s evidence in favor of Akerlof’s “lemons” model.)

More or less concurrently, Crooked Timberites debate the influence of advertising on consumer behavior–does it provide information to rational agents, manufacture demand, or a bit of both?

Galbraith’s ideas about advertising might solve the used-car market problem by explaining why people might get rid of perfectly good cars they’ve bought… or (to drive the point home) leased. If they do, is this because advertising provides us with mportant information about snazzy new automobile features that should compel us to get rid of otherwise perfectly good automobiles? Or because it helps convince us that owning a new car makes us sexier, more successful, and otherwise status-worthy and complete people?

And how does this tie into the marketization of academia?

I swear I only want to trade in my ’98 Honda Civic for a shiny new or off-lease Volkswagen, Subaru, or Volvo wagon because we really need more space to transport our toddler’s paraphernalia. Really.

And yes, most of colleagues do seem to drive Volvos, Saabs, or Subarus.

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A new rentier state is born?

Bolivia’s government just seized the country’s natual gas industry.

The measure is expected to affect about 20 foreign oil companies, including Spain’s Repsol, Petrobras of Brazil, Britain’s BP and British Gas, US-based ExxonMobil and French group Total.

Although the move was expected to have little impact on global energy supplies, financial markets reacted by pushing prices higher.

“It’s part of a trend of governments taking strident action to protect either national resources or to nationalize formerly privately owned oil resources amid the environment of very high oil prices,” said Bill Farren-Price, deputy editor of the Cyprus-based Middle East Economic Survey.

“High oil prices have emboldened resource-rich governments to act in the same way that we have seen Iran challenging the West over its nuclear program and Venezuela’s President Hugo Chavez carrying out a very similar maneuver regarding international oil companies there. It’s part of the same trend.”

I’m entirely sympathetic to arguments to the effect that “all the citizens of countries with vast energy deposits should reap real benefits from them,” but the impact of nationalized energy resources in developing states over the long-haul is not encouraging. Analysis of rentier states–whether they derive their profits from foreign companies or state-owned ones–suggests that windfall natural-resource profits paralyze state building and lead to political troubles down the road. I imagine (in the “I’m not a political economist” way) that state-owned gas and petroleum production makes things worse–it makes energy reserves that much more of an apparently endless “slush fund” for state subsidies and payoffs to interest groups.


UPDATES: I’ve cleaned up my use of the terms “gas,” “oil,” and “petrolem.” Interesting discussion and good linkage can be found at Ciao!. You can also go there for a better explanation of rentier states (I need to learn to be less elliptical in my use of academic jargon).

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