John Kay on economic controversy

October 8th, 2015

I am a great fan of FT columnist John Kay, but his column this week is a profound disappointment. It has deservedly attracted a large number of negative comments. Mr Kay’s errors are serious – serious enough to warrant publication of a corrected version, for the benefit of readers who do not have access to (or the patience to read) online comments at Read the rest of this entry »

adblockers for smart phones

October 8th, 2015

Here is a follow-up to Monday’s post. The novelty of this new app is that the software company (Been Choice) plans to pay users a modest sum (US$20 a month) for allowing advertisements and cookies to reach their devices. Been Choice presumably will sell the collected user information and charge advertisers for the privilege of placing ads on selected smart phones.

Apple has approved an app that allows iPhone users to block advertisements in mobile apps for the first time, marking a new threat to internet companies such as Google and Facebook. ….

Been Choice is marketing its new service as a way for consumers to defend themselves against aggressive data collection by apps and advertisers. But it is likely to provoke fierce controversy among the owners of apps that depend on advertising.

“We’re getting into dangerous territory,” said Ciaran O’Kane, chief executive of Exchange Wire, a digital media analysis company. “If app developers can’t make money, there’s going to be a kick back.”

Software capable of blocking ads from appearing in web browsers has been available for years. …. However, mobile apps are unaffected by web-based blockers such as Adblock Plus, Crystal and Purify. ….

To make money, Been Choice plans to allow users to sell their data through the app. The company is offering to pay people $20 a month if they consent to being shown ads and allow Been Choice to collect information about how they use their devices.

Robert Cookson, “Apple approves first adblocker that works within mobile apps“, Financial Times, 6 October 2015 (metered paywall).

Paul Krugman on the TPP

October 8th, 2015

Over the weekend, leaders of a dozen Pacific Rim nations reached a final agreement on new rules for trade between nations covering approximately 40% of the world’s economy. Many on the political left, including economist Paul Krugman, have opposed the project, known as the Trans-Pacific Partnership (TPP). The final draft appears to be significantly different from what was initially promised, though, so Krugman now supports it.

I’ve described myself as a lukewarm opponent of the Trans-Pacific Partnership …. But the WH [White House] is telling me that the agreement just reached is significantly different from what we were hearing before ….

What I know so far: pharma is mad because the extension of property rights in biologics is much shorter than it wanted, tobacco is mad because it has been carved out of the dispute settlement deal, and Rs [Republicans?] in general are mad because the labor protection stuff is stronger than expected. All of these are good things from my point of view. …. The TPP looks better than it did, which infuriates much of Congress.

Paul Krugman, “TPP take Two, The Conscience of a Liberal“, New York Times blog, 6 October 2015.

The TPP is still not a done deal, since it will not go into effect until approved by legislatures of the participating countries.

the consequence of blocking ads

October 5th, 2015

Are you blocking those annoying pop-up ads that appear when you surf the internet? Providers who finance free sites by sale of advertising may soon have the ability to block access to content unless you disable the software that blocks ads. Be forewarned.

Digital advertising … is under attack from … software that enables viewers to block ads on their smartphones and computers ….

Bob Lord, president of AOL [America Online], believes the industry is heading into a “war of technology”. “Content is expensive to produce, so ultimately it is a consumer choice: do they want a subscription-based content model or an ad-supported model?” he says. “Technology will get to the point where those with an adblocker are not going to get free content.”

Matthew Garrahan, Hannah Kuchler and Robert Cookson, “Adblocking unleashes anxiety across the advertising industry“, Financial Times, 5 October 2015 (metered paywall).

reforming social pensions in Bangladesh

October 4th, 2015

This post, more accurately, is on the need for improvement of social pensions in Bangladesh. The policy recommendations, in the opinion of TdJ, are not helpful.

Most of the elderly people in Bangladesh suffer from basic human problems, such as poor financial support, chronic diseases and absence of proper health and medicine facilities, exclusion and negligence, deprivation and socio-economic insecurity. ….

The Old Age Allowance (OAA) is the most significant [pension] scheme, in terms of coverage, as it provides social protection in old age. The tax-funded OAA is a social pension paid to poor older people. The scheme … covers 30 percent of the population aged 60 and over with low monthly transfer amount of Tk. 500 [US$6.42] per beneficiary, requiring budgetary allocation of 0.14 percent of the GDP. This figure compares poorly with the pension scheme of Nepal – (expenditure of 0.35 percent of its GDP, covering over 70 percent of older population) and Lesotho (expenditure of 1 percent of its GDP covering over 70 percent of the older population). Furthermore, the majority of poor older people in Bangladesh miss out from the OAA benefits mainly due to targeting errors (over 50 percent of benefits go to non-poor older people and almost a third of the benefits go to those below the age of eligibility).[Emphasis added.]

Instead of the currently pursued piecemeal approaches, Bangladesh needs to adopt a comprehensive plan of action to tackle this issue. The plan of action may include redesigning the existing Old Age Allowance system by introducing a comprehensive pension under a three-tiered system {Tier 1: a tax-financed benefit that provides less well off older people with a minimum income guarantee; Tier 2: a mandatory contributory pension scheme for the formal sector workers; and Tier 3: voluntary pension schemes – managed by the private sector (often employment-based schemes), which people can opt for if they desire an additional income in old age}. A care system can also be implemented and a number of economic and non-economic entitlements for elderly people also need to be introduced, as recognised in the recently cleared policy on ageing population in Bangladesh.

Bazlul Khondker, “Taking care of our senior citizens“, The Daily Star, 4 October 2015.

Bazlul Haque Khondker (PhD University of Warwick) is Professor of Economics at Dhaka University.

For more information, click on the link above, and download previous TdJ posts here and here.

The writer provides an excellent description of the shortcomings of the current system, then, surprisingly, recommends expansion of the same failed policy of targeting: a means-tested guaranteed income for “less well off older people”, supplemented by introduction of “a care system … and a number of economic and non-economic entitlements”.

This newspaper column illustrates the all-too-common triumph of hope over reason.

towards universal pensions in the Philippines

October 3rd, 2015

[O]nly about a third of seniors currently receive pension. Eighteen percent receives a contributory pension …, while 15% benefit from the … [the] social pension program for indigent senior citizens. ….

The scheme should cover all 1.2 million indigent senior citizens who are 60 years old and above, as … mandated by … the Expanded Senior Citizens Act of 2010.

This budget was, however, limited to only cover those age 77 and above. ….

“Other countries like Thailand, has recognized already the limitations and challenges of targeting, that’s why they opted for universal,” said Emily Beridico, COSE executive director.

A central question is, of course, whether the government could fund such a commitment.

The price tag, however, is lower than people might think. For example, a universal pension of P750 [US$16] for all Filipinos aged 60 and over would cost P69 billion or 0.5% of the GDP. Put in context, this is only a little more than the P56 billion government subsidy to only about 500,000 of military and uniformed pensioners ….

“We are aware there is money for fully covering the 60 years old indigent and expanding it further to all older Filipinos,” said Dioscorro Benalla, president of COPAP [Confederation of Older Person Associations of the Philippines]. “If government has allotted 56 billion pesos for a minuscule population of pensioners, we find no reason to deny … [benefits to any portion of] the entire older people population. Besides, who paid taxes?”

“We have been paying taxes since we were born and has been contributing to pension. We deserve every cents of it from the moment we turn 60 until we die,” Benalla stressed.

Coalition of Services of the Elderly (COSE),”Advocates call for improved senior pension for Pinoys“,, 2 October 2015.

According to HelpAge International, the Philippines’ means-tested 500 peso (US$11) social pension reaches only 4% of Filipinos aged 60 or older, at a fiscal cost of 0.03% of the country’s gross domestic product (GDP). I don’t know what accounts for the difference between HA’s estimate of 4% coverage and COSE’s higher estimate of 15% coverage. In any case, it is clear that the vast majority of older Filipinos have no access to pension income – contributory or non-contributory.

Previous TdJ posts on this topic can be accessed here and here.

promoting universal pensions in Vietnam

October 2nd, 2015

In 2014, here in Vietnam only 2 million older people received [employment-related] pensions, and around 2.9 million older people received allowances from social assistance programs [i.e. social pensions]. This left some 4.6 million people aged 60 and above uncovered by any social protection scheme ….

Social, public and private pensions must be expanded to increase coverage to the vital informal sector. ….

Not only would a sustainable pension system provide the means for millions of older people to attain a better quality of life, but it would also help ensure their dignity. …. Providing a social pension of US$15 per month for all people aged 65 and above would cost only 0.3% to 0.5% of GDP, which is a very small fraction of Government spending but could have a huge impact on the lives of older people.

Vietnam has worked very hard to increase life expectancy. But this achievement is surely wasted if Vietnamese citizens cannot live these additional years in comfort and in dignity. …. By taking action now we can ensure that retirement is the best, and not the worst years of our lives.

Ritsu Nacken,”The worst of times, or the best?“, Than Nien News, 1 October 2015.

Ms Ritsu Nacken is Acting Representative of the United Nations Population Fund (UNFPA) in Vietnam.

According to HelpAge International, the government of Vietnam provides social pensions of 180000 Dong (US$8) to 14% of the population aged 60 and older. Six of every seven of these social pensions are given to  residents aged 80 years and older who receive no other pension income. One in seven social pensions go to residents aged 60 to 79 years who live in poverty and are willing and able to pass a means test. Total government expenditure on social pensions amounts to a tiny sum: only 0.01% of gross domestic product (GDP).

I do not understand why Ritsu Nacken provides such a wide range of estimates (0.3% to 0.5% of GDP) for a universal pension from age 65. I suspect that the 0.5% estimate might be for the cost a universal pension from age 60, but have not checked the numbers. The high figure could also refer to the projected cost of pensions from age 65 at some point in the future.

the subprime student loan crisis

October 1st, 2015

FT blogger Matthew Klein writes that the student loan crisis is very similar the earlier subprime mortgage crisis. The main difference is that owners (at least in the United States!) are able to walk away from homes once the size of the mortgage exceeds the value of the home. With student loans, that is not legally possible, and “the government has gotten very good at extracting its pound of flesh by garnishing wages and benefits”.

Why, then, did government promote student lending programmes, and why were the hoped-for results not achieved? Matthew Klein explains:

People with college degrees — and beyond — are much more likely to have jobs than people who don’t, and those jobs tend to pay better than average. So the conventional wisdom has long held that those without degrees should get them.

However, researchers have consistently found that where you go to university is, by itself, irrelevant for lifetime earnings. Credentials are far less important than the intelligence, ambition, and conscientiousness required to obtain them. ….

[Because of easy access to student loans,] much of the rise in the share of Americans going to college in the past few decades has come from high school students with significantly worse qualifications and preparation than the average. When they once might have gone straight into the low-paid workforce, they instead enrolled in college. (This could explain why so many college graduates work in positions that don’t require degrees.)

Matthew C Klein, “Student debt’s subprime problem“, FT Alphaville blog, 29 September 2015 (unlimited downloads, but free registration is required).

There is much, much more in the full post, available at the link above.

Mr Klein draws on a recent Brookings working paper co-authored by two economists, one from the US Treasury Department and another from Stanford University:

Adam Looney and Constantine Yannelis, “A Crisis in Student Loans? How Changes in the Characteristics of Borrowers and in the Institutions they Attended Contributed to Rising Loan Defaults“, Brookings Papers on Economic Activity, Conference Draft, September 2015.


the Syrian refugee crisis

September 30th, 2015

President Bashar Assad’s brutality is the main reason large numbers of refugees are fleeing Syria. He is the principle source of the problem, and will never be part of the solution so long as he remains in power.

[Brookings] Editors’ Note: The vast majority of Syrians now fleeing their country are seeking to escape the brutality of the Bashar Assad regime, not ISIS or al-Qaida. Charles Lister argues that Assad is not and should never be seen as a better alternative to ISIS. This post was originally published by the BBC.

Bashar Assad has professionalized and industrialized the use of detention and torture to “cleanse” his own population, while imposing dozens of medieval-style sieges on vulnerable populations. He has consistently flouted UN Security Council resolutions and according to some sources, has been responsible for 95 percent of all 111,000 civilian deaths since 2011.

ISIS remains a potent force in Syria and must be countered, but it will not be marching on Damascus anytime soon, contrary to some uninformed fear mongering. Al-Qaida also poses a pressing and more long-term threat, perhaps more so than has been acknowledged. But at the end of the day, the root cause of the entire Syrian crisis is Assad and his regime. ….

While accommodating Russian and Iranian demands for Assad’s survival and potentially even a de facto partition of the country may seem like an attainable objective, this will only prolong and intensify the conflict and will almost certainly spark a jihadist mobilization the like of which the world has never seen.

Charles Lister, “The West is walking into the abyss on Syria“, Brookings blog, 28 September 2015.

Mr Lister is a Visiting Fellow at Brookings and author of a forthcoming book  The Syrian Jihad: Al-Qaeda, the Islamic State and the Evolution of an Insurgency (Hurst & Oxford University Press).

German politics and Europe’s refugee crisis

September 21st, 2015

Why are EU countries debating allocation of refugees to member countries, a policy that is difficult if not impossible to enforce? The reason, reports FT correspondent Peter Spiegel, has everything to do with German politics, and nothing to do with practical solutions for the refugee crisis.

Most experts believe that if tens of thousands of refugees are moved to EU countries where they do not want to be, they will simply hop on a train to Germany.

While all this political capital is being spent on a plan most think will not have any real impact, scant attention is being paid to addressing the problem at the source. The UN has for months been warning anyone who will listen that its refugee food programme in Jordan, Lebanon and Turkey has run out of money. Officials who work in the region describe scenes of squalor and despair, providing the “push” for migrants that is at least as powerful as the “pull” of Europe’s promise. ….

Forcing other countries to agree to take in thousands of refugees is a symbolic gesture intended to reassure the German public that the EU is ready to share the burden, even if it has little practical effect. [Emphasis added.]

Peter Spiegel, “Berlin arm-twisting adds to unease over EU’s refugee crisis“, Financial Times, 21 September 2015 (metered paywall).