Tag Archives: economics

Prostitution laws and sex trafficking in the European Union

The following graph shows the average number of identified and presumed sex trafficking victims per million people in the European Union’s (EU) 28 member states in 2008, 2009, and 2010, sorted by the type of prostitution laws each country had. The countries have been divided into four groups depending on whether their prostitution laws punish only those who sell sex, neither sellers nor buyers, both sellers and buyers, or only those who buy sex. Data on sex trafficking is from the EU’s own harmonized dataset on trafficking and data on prostitution laws is based on the US Department of State’s Human Rights Reports.

ImageAs can be seen in the chart, countries who only punish sex buyers had, on average, lower prevalence of sex trafficking than countries with any other type of prostitution laws. Those who punish only those who sell sexual services (which morally, of course, is wicked since one then risks ending up de facto prosecuting the trafficking victims for selling, but not their buyers for buying) have, on average, the highest trafficking prevalence.

The descriptive results in this chart are in line with the so-called “demand model” that draws on basic microeconomic lessons and predicts lower prevalence of sex trafficking when sex buyers are targeted because that approach supposedly pushes down demand for purchased sex and makes trafficking less profitable.

Simon Hedlin

Rogoff on BP oil spill and international regulation

An economist’s nuanced and well-balanced thoughts about technology, energy “consumption” and economic growth is found on Project Syndicate’s webpage. The author of the article is former IMF chief economist Kenneth Rogoff. One might not necessarily agree, but the article is still interesting to read:

If ever there were a wake-up call for Western society to rethink its dependence on ever-accelerating technological innovation for ever-expanding fuel consumption, surely the BP oil spill should be it. Even China, with its “boom now, deal with the environment later” strategy should be taking a hard look at the Gulf of Mexico.

Economics teaches us that when there is huge uncertainty about catastrophic risks, it is dangerous to rely too much on the price mechanism to get incentives right. Unfortunately, economists know much less about how to adapt regulation over time to complex systems with constantly evolving risks, much less how to design regulatory resilient institutions. Until these problems are better understood, we may be doomed to a world of regulation that perpetually overshoots or undershoots its goals.

The finance industry already is warning that new regulation may overshoot – that is, have the unintended effect of sharply impeding growth. Now, we may soon face the same concerns over energy policy, and not just for oil.

Given the huge financial stakes involved, achieving global consensus will be difficult, as the Copenhagen climate-change fiasco proved. The advanced countries, which can best afford to restrain long-term growth, must lead by example. The balance of technology, complexity, and regulation is without doubt one of the greatest challenges that the world must face in twenty-first century. We can ill afford to keep getting it wrong.

Planning equals success?

Sometimes people sound like they think success is much a result of effecient planning and time management. If one wants to become a professional football player or a software developer, one should really have planned it from early stages in one’s life. And to some extent, those who believe in this statement are correct; if a person focuses on something it has a better chance of improving and thus getting better than its competitors. However, more often than not, things in life do not turn out as planned. And one might still end up being successful. One example is the famous economist Robert M. Solow, who was cited in a previous blog post (in Swedish) about a month ago. In an anthology he writes:

The point is that I had no feeling that economic analysis could penetrate to the heart of what was going on in the world. I certainly hadn’t made up my mind to major in economics or to become an economist. What I did instead was to volunteer for the army. It seemed more constructive than what I was doing.

Three years later I came back, and almost without thinking about it, signed up to finish my undergraduate degree as an economics major. The timing was such that I had to make a decision in a hurry. No doubt I acted as if I were maximizing an infinite discounted sum of one-period utilitiles, but you couldn’t prove it by me. To me it felt as if I were saying to myself: “What the hell.” (William Breit and Barry T. Hirsch (2009), Lives of the Laureates, p. 156.)

Economists’ loftiness

Hal R. Varian, professor in Economics at University of California at Berkeley, explains the irrationality of common people (i.e. non-economists):

“The Rubinstein bargaining model is so elegant that economists rushed to test it in the laboratory. They found, alas, that elegance does not imply accuracy. Naive subjects (i.e., noneconomics majors) aren’t very good at looking ahead more than one or two steps, if that” (2006, Intermediate Micreconomics (W. W. Norton & Company: New York): p. 545).

Big words from a person who represents the increasingly questioned discipline of Economics.

Simon Hedlin Larsson

Chinese English decoded

I am not a very big fan of spelling mistakes and bad grammar, which is especially the case when it comes to lectures and seminars. I know my English is miles from being perfect, but that is my problem, right? The issue, I believe, is when the lecturer or the seminar teacher have problems to communicate with the students, because that will affect everybody, even those who are native speakers.

Obviously, teachers from old colonial states like Australia, New Zealand, South Africa and so on have no problems at all to communicate in English. People from small countries in Europe, like Scandinavia, speak fairly proper English as well. The problem is foremost PhD students from Southeast Asia who have been living in the UK for only a few years. They speak some sort of Chinese English, which is sometimes very hard to understand.

It is very understandable why it is so difficult for, say a Chinese, to learn English. I mean, look at it the other way around. Everybody from the Western part of the world who has studied Chinese know all the complications with learning Asian tonal languages. Take for example the sound “ma” which in Chinese means either “mother”, “hemp”, “horse” or “scold”, depending on if you say it with either a high pitch, rising, falling and then rising, or falling voice.

Anyway, in case you will talk economics with a Chinese in the future, I am going to decode some of the Chinese English terms. I will start with three of them:

economic gross =economic growth

money surprise = money supply

macroeconomic police = macroeconomic policy

These kind of speaking errors are mostly irritating, in the same way as if the reading material were full of grammatical errors. But sometimes it is actually quite funny. Take for instance a boring lecture about how the Bank of England buys and sells bonds to adjust the supply of money:

“Okay. So. When the economy is bad and GDP is falling, the Bank of England must change its macroeconomic police.”

“And how are they going to do that?” asks one of the students.

“For example, they could increase the money surprise.”

“Sorry, I just have a question. What is that horizontal line on the curve you have drawn?” interrupts another student.

“Oh, that is gross!”

Simon Hedlin Larsson