Let the market do the work

There are lots of claims that we are too dependent on oil as an energy source, and that the government should step in and tax gasoline to fund research into alternative energy. For an example of this line of thinking, the New York Times today has an editorial calling for a "windfall profits tax" on oil companies used to fund alternative energy. There is also a lot of controversy lately over "price gouging" by the oil companies, as evidenced by the current Senate hearing on the profits of the big oil companies.

The useful thing about markets, though, is that high prices are a signal of the degree of scarcity in the market. High prices of gasoline have decreased the quantity of gasoline demanded by US consumers over the past months. Further, high prices of gasoline spur investment into other energy sources (since the potential profits from alternative energy sources are much higher). In an article in this week's Economist (subscription required), they confirm that the recent high oil prices have led to more investment in alternative energy sources:

GE's wind-turbine business, which was inconsequential a few years ago, made over $2 billion in sales this year. Ethanol, a costly green fuel which in America is usually made from corn, now looks a better buy. And wind and solar power are also back in fashion.

Industry sources reckon that global sales of solar panels this year will reach $11 billion, up from $7 billion last year. America's Energy Conversion Devices, a pioneer in hydrogen storage and solar cells, has seen its shares soar by 50% this year and venture-capitalists are taking an increasing interest in the industry.

All told, reckons Christopher Flavin of the Worldwatch Institute, a green think-tank, investments in “new renewables” (not including big dams, which nobody likes anymore) grew from $24 billion globally in 2003 to $29 billion in 2004—and, he thinks, the pace of growth is even faster this year.

The article goes on to discuss that high oil prices are not only increasing environmentally friendly energy sources, but also alternative sources that are not so "green," like coal.

Overall, the point is that even though high prices of gasoline are painful to pay, those same high prices will help reduce reliance on oil more efficiently than any reasonable government plan could.

Don't be grumpy, ja!

A German company has banned grumpiness at work, according to this article:

After one female employee refused to smile all day at work, a German IT company banned grumpiness in an effort to promote a more congenial atmosphere, according to The Australian.

The new policy requires employees at Nuzwerk, in the German town of Leipzig, to sign a contract requiring them to remain in a good mood all day at the office and leave complaints and gripes about co-workers and work conditions at home.

"We made the ban on moaning and grumpiness at work official after one female employee refused to subscribe to the company's philosophy of always smiling," office manager Thomas Kuwatsch told TheAustralian.

(Source: Marginal Revolution)

Sponsoring an African business

You are probably well-acquainted with the commercials that offer a chance to sponsor an African child. There is a new site called Kiva.org, that offers the opportunity to sponsor an African business through a small loan (as little as $25).

By choosing a business on our website and then lending money online to that enterprise, you can "sponsor a business" and help the world's working poor make great strides towards economic independence. Throughout the course of the loan usually 6-12 months), you can receive monthly email updates that let you know about the progress being made by the small business you've sponsored. These updates include reports on loan repayment progress, photos of new capital equipment, narratives on business growth and standard of living improvements, and more. As loans are repaid, you will get your original loan money back.

It is currently being offered just in Uganda and because of the publicity they have been receiving, they are currently out of businesses to sponsor. Apparently if the company defaults on the loan, your loan becomes a donation, but none of the companies have defaulted yet.

You can see the businesses that are being sponsored here.

What do you guys think of this strategy for helping people in developing nations? What are the advantages of this over traditional aid that are pure donations?

(Source: Private Sector Development Blog)

Which disasters do people donate aid to?

An interesting article in the Washington Post looks at which disasters compel Americans to donate aid. There are a lot of disasters that happen around the world (Katrina, the Pakistan earthquake, civil war in Sudan), and some receive a lot more donations from private American citizens than others. It is not surprising that US disasters get more donations than non-US, but some are more puzzling (the immense giving for tsunami aid last year). The author has a few rules for the disasters that provoke the most giving:

• Natural disasters beat manmade disasters (e.g. victims of hurricanes and tsunamis generally attract more donations than victims of war and other politically caused crises like Sudan & Uganda)
• Sudden disasters beat slow-moving crises (a sense of urgency mobilizes donors in a case like Katrina, whereas the devastation of a famine is so gradual)
• TV counts (e.g. videos that allow viewers to imagine themselves at the scene make a huge difference)
• Drama and timing play an important role (e.g. the Southeast Asia Tsunami occurred during the US holiday season)
• Ease of giving makes a big difference (i.e. over a fourth of the dollars received by the Red Cross following Katrina came in through its Web site.)
• Personal experience helps (people have visited New Orleans but have a hard time picturing a Pakistani village)
• Disaster giving doesn't supplant donations to other causes (just because people give to disaster relief does not mean they give less to their regular charities)

(Source: Private Sector Development Blog)

Voting and Rational Ignorance

Here is a seemingly simple question:

Why do people vote?

Voter turnout has been decreasing over the past decades (a little more than half of eligible voters voted in the most recent Presidential election), and one reasonable explanation is from the first chapter in Friedman: rational ignorance. The basic idea is the following: Voting is costly in terms of time. It takes time to actually go out and vote, and it takes even more time if you plan on actually finding out about the candidates. Then combine that with the fact that the probability that your vote will influence the outcome of an election is essentially zero. In fact, according to an article from the guys who wrote Freakonomics,

Of the more than 16,000 Congressional elections...only one election in the past 100 years - a 1910 race in Buffalo - was decided by a single vote.

So as opposed to asking why people are not voting, the better question becomes: why do people vote?

(by no means am I saying that people should not vote, I am just asking what I think is an interesting question that could help reaffirm the choice to vote anyway)