A Few Recommended Readings:

1. Electrifying India, With the Sun and Small Loans – Micro-lending and pay-as-you-go plans create a pathway for those without electricity in rural India the opportunity to gain access to a clean, renewable energy source.

“The idea behind Selco, and other companies like it, is to create a business model that will help some of the 1.2 billion people in the world who don’t have electricity to leapfrog the coal-dependent grid straight to renewable energy sources.”

2. Where Is All the World’s Money Going? – A new Oxfam International study provides further evidence that wealth inequality continues to grow globally.

“To build an economy that distributes its wealth more evenly, the researchers suggest creating a stronger system of taxation that prevents trillions of dollars from being pulled out of circulation via offshore accounts and allows companies to reduce their tax liabilities via loopholes. The report also suggests that politics needs to change, diminishing the power that companies exercise through tools like lobbying and patents, which can decrease competition and raise prices.”

Also, while we’re on the subject, you can learn more about what caused the rise of wealth inequality and policy solutions via economists  Joseph Stiglitz and Thomas Piketty (see TED Talk below).

3. The Lawyer Who Became DuPont’s Worst Nightmare – Among the most terrifying pieces of journalism I’ve encountered in recent memory, focusing on the dangerous results of unregulated substances and improper, unethical chemical waste management.

The story began in 1951, when DuPont started purchasing PFOA (which the company refers to as C8) from 3M for use in the manufacturing of Teflon. 3M invented PFOA just four years earlier; it was used to keep coatings like Teflon from clumping during production. Though PFOA was not classified by the government as a hazardous substance, 3M sent DuPont recommendations on how to dispose of it. It was to be incinerated or sent to chemical-waste facilities. DuPont’s own instructions specified that it was not to be flushed into surface water or sewers. But over the decades that followed, DuPont pumped hundreds of thousands of pounds of PFOA powder through the outfall pipes of the Parkersburg facility into the Ohio River. The company dumped 7,100 tons of PFOA-laced sludge into ‘‘digestion ponds’’: open, unlined pits on the Washington Works property, from which the chemical could seep straight into the ground. PFOA entered the local water table, which supplied drinking water to the communities of Parkersburg, Vienna, Little Hocking and Lubeck — more than 100,000 people in all.”

Poverty = Hunger?

Generally, when people discuss poverty, hunger enters the conversation–it’s natural to think that if people are poor they are likely struggling to adequately meet their nutritional needs. However, through research and experiments, what scientists and economists have found is that most people, even the extremely poor, can afford to purchase enough calories to live and be productive. If this is the case, why are there still people who aren’t getting enough to eat? The answer, of course, is complex and multifaceted.

In their text Poor Economics, Abhijit Banergee and Esther Duflo examine how foreign aid policy has failed due to deep misunderstandings about poverty, and call for more careful planning and greater reliance on scientific evidence to steer policy decisions aimed at eradicating poverty. A portion of Poor Economics focuses on dis/proving the nutrition-based poverty trap, the idea that “there exists a critical level of nutrition, above or below which dynamic forces push people either further down into poverty and hunger or further up into better-paying jobs and higher-calorie diets.” They turned to places like India, where in 2004 only 2% of people surveyed stated they did not have enough to eat (that’s down from 17% in 1983), the Philippines, China and Morocco to research, among other objectives, the effects of food subsidies and determine how much of a person’s income is spent on food. Their research turned up some startling results.

“…if calories are the main driver of poverty, then we should expect people to spend every extra cent on the cheapest calories. What we see instead is people opting to consume tastier, more expensive food when they get the chance.” –Poor Economics

In the Philippines, a person can consume 2,400 calories a day for 21 cents PPP, but they would be limited to consuming mainly bananas and eggs. Despite this available access to calories, the poor tend not to purchase the quality food that would benefit them calorically and food aid programs generally emphasize quantity over quality.

While in Morocco, Esther and her research partners found that in some of the very poor villages they visited, people had cell phones, televisions, and even DVD players, but survived off of a very modest diet (leaving some unable to work due to insufficient calories). Any extra income people had tended not to go towards obtaining better quality, calorie rich food; instead, extra income was saved for small luxuries or, if food was acquired, better tasting food, not food that was actually better for a person to improve their work capacity. Though it may be obvious that the benefits of a nutritious diet are significant, for some, the need to momentarily escape the doldrums of poverty through entertainment outweighs the need for a nutrition upgrade.

Of the research shared in Poor Economics, what I found most fascinating was an experiment conducted in China seeking to analyze the impact of food subsidies on food purchasing decisions. This experiment was conducted by two economists, Robert Jensen and Nolan Miller, who were in search of an ever-elusive Giffen good–a good that people consume more of as the price increases, thus violating the Law of Demand.

Jensen and Miller found that rice (and wheat, though I’ll only address the former for the sake of brevity) in China fit the parameters for a Giffen good and decided to test their hypothesis by providing a random selection of families in the southern province of Hunan a six-month subsidy for rice. They collected data on family purchases during the subsidy period and afterward. In the end, the results found that when rice was subsidized, families actually bought less of it and instead used the extra income to purchase more expensive foods, mainly purchasing more meat and shrimp. These families were actually consuming less calories when their food was subsidized. When the subsidy period was over and the price of rice increased, families purchased more rice and thus violated the Law of Demand, proving rice to indeed be in this instance a Giffen good.

The important point this particular example illustrates is that food subsidies and food aid policy don’t always have the intended or expected outcome and can, in fact, result in the populations most in need making decisions that are counterproductive. Current food aid policy requires some rethinking. Not only is there a ton of money, and food, being wasted in the way food aid is currently being handled, but it’s also not as effective as other means of helping those in poverty. Esther Duflo cites two different programs with promising results–in Colombia school lunches are being sprinkled with micronutrient packets and deworming programs at schools in Kenya are not only improving the health condition of children, but also helping to improve their future income by keeping children in school for longer.

I’ll leave you with this:

“If we don’t know whether aid is doing any good, we are not any better than the medieval doctors and their leeches.” -Esther Duflo

The Big Mac Index

Things I’ve learned: A Big Mac is only $1.36 in Russia right now!

Back in 2012, I spent a month traveling throughout Russia on the Trans-Siberian Railroad and once I made it to Moscow, the only place I could afford to get my caffeine fix was at the golden arches of McDonald’s. At the time, a McD’s coffee cost about $3 or 90 ruble. Today that same cup of coffee would only be about a $1.25.

Created back in 1986 by the folks at The Economist, The Big Mac Index has become a common economic means  for determining if currencies are at their proper level. Relying on the economic theory of purchasing power parity (PPP), The Big Mac Index assumes that the same basket of goods and services purchased in two different countries should end up costing an equal amount of money–that is to say that over time the exchange rates would equalize the price. Below is a world map depicting  current world currency valuations. To play with the interactive graph of the Big Mac Index as well as currency valuation charts over time, visit The Economist.