Trillions: Big Money Economics

An overview of money-world


(i.e. anything measured in trillions)


By the way, I am using the word to mean a thousand billion.

"A trillion can mean:

Either of the two numbers (see long and short scales for more detail):1,000,000,000,000 (one million million; 1012; SI prefix: tera-) - for all short scale countries - increasingly common meaning in English language usage.1,000,000,000,000,000,000 (one million million million; 1018; SI prefix: exa-) - for all long scale countries - increasingly rare meaning in English language usage but frequent in many other languages."


Before you read on: You MUST visit this link.

(A trillion seconds is 32,000 years). If all of the financial market interventions, loans, guarantees, bailouts and rescues are approved, they will total more than $7 trillion.


World GDP is an estimated 54.62T (2007)
US GDP was estimated as $13.8 trillion (2007)
1.149 trillion U.S. exports (2007)
1.985 trillion U.S. imports (2007)


As of June 2008, the gross U.S. external debt was over $13 trillion.

Public Finances
U.S. Expenses 2.696 trillion (2007)
U.S. Revenues 2.568 trillion (2007)

Apparently, the U.S. dept. of defense can't account for up to 25% of it's budget. That's 2.3T dollars, or 8k per u.s. citizen; LINK.

As of September 2008, the total U.S. federal debt was approximately $9.7 trillion, about $31,700 per capita (that is, per U.S. resident). Of this amount, debt held by the public was roughly $5.3 trillion. Adding unfunded Medicaid, Social Security, Medicare, and similar obligations, this figure rises to a total of $59.1 trillion, or $516,348 per household. In 2007, the public debt was 36.9 percent of GDP, with a total debt of 65.5 percent of GDP.

In Fall 2008, the debt is expected to reach the $10 trillion mark.
Further, benefits under entitlement programs will exceed government income by over $40 trillion over the next 75 years.

In September 2007, when the Congress raised the debt limit to $9.815 trillion. As of July, 2008, the recently passed "landmark housing bill" raises the current debt ceiling by US$ 800 billion to US$ 10.6 trillion to account for the potential bailout of the two mortgage giants Fannie Mae and Freddie Mac.

The on- or off-balance sheet obligations of those two independent GSEs (Gvt. sponsored enterprises) is just over $5 trillion.


The net exposure to taxpayers is difficult to determine at the time of the takeover and depends on several factors, such as declines in housing prices and losses on mortgage assets in the future. Over 98 percent of Fannie's loans were paying timely during 2008. Both Fannie and Freddie had positive net worth as of the date of the takeover, meaning the value of their assets exceeded their liabilities.

The global market capitalization for all stock markets was $43.6 trillion in March 2006.

Total third world debt was estimated to be $1.3 trillion in 1990.
Bribery is estimated to total 1 trillion dollars a year.

Sept. 29th's 777-point stock dive, "dark monday", the largest single point drop in history, was estimated to have been worth 1.2 trillion (upon the news of the bail-out bill not being passed). The tv said something like the stock market has lost 5000 points in the last 10 months, which can also be expressed as "4 trillion down the drain since last Oct."

I write (this) sentence Oct. 9, which has reached a new low today at the close at 4pm eastern, of 8,579.19, dropping 679 points, (compare to it's alltime high on this date a year ago, 10-9-07, of 14,164). How many trillion is that?

Besides Oct. 9 and Sept. 29, there was also Sept. 15 and Oct. 6 (all 2008):

On Sept. 15, also known as "Ugly Monday", the DJIA loses more than 500 points amid fears of bank failures, resulting in a permanent prohibition of naked short selling and a three-week temporary ban on all short selling of financial stocks. On Oct. 6, the DJIA closes at 9,955.50 after a 369.88 point drop, the first time the DJIA has been below 10,000 since December 2003


As of Dec. 31, 2006, the combined capitalization of all New York Stock Exchange listed companies was $25.0 trillion.

Total U.S. household debt, including mortgage loan and consumer debt, was $11.4 trillion in 2005. By comparison, total U.S. household assets, including real estate, equipment, and financial instruments such as mutual funds, was $62.5 trillion in 2005.

In 2003 $318 billion was spent on interest payments servicing the debt, out of a total tax revenue of $1.95 trillion.

There is an estimated 45-62 trillion dollars worth of CDS (Credit Default Swaps) on the market, as of 2007.

Credit default swaps are the most widely traded credit derivative product and the Bank for International Settlements reported the notional amount on outstanding OTC credit default swaps to be $42.6 trillion in June 2007, up from $28.9 trillion in December 2006 ($13.9 trillion in December 2005) and by the end of 2007 there were an estimated USD 45 to 62.2 trillion worth of Credit Default Swap contracts.

In the US, the Office of the Comptroller Agency reported the notional amount on outstanding credit derivatives from reporting banks to be $16.4 trillion at the end of March, 2008. Warren Buffett famously described derivatives bought speculatively as "financial weapons of mass destruction." In Berkshire Hathaway's annual report to shareholders in 2002, he said, "Unless derivatives contracts are collateralized or guaranteed, their ultimate value also depends on the creditworthiness of the counterparties to them. In the meantime, though, before a contract is settled, the counterparties record profits and losses--often huge in amount--in their current earnings statements without so much as a penny changing hands. The range of derivatives contracts is limited only by the imagination of man (or sometimes, so it seems, madmen)." Warren Buffett's Berkshire Hathaway has a market capitalization of $196 billion (chump change, lol).

Al Gore has a 5 Trillion dollar plan to save the world.


Al Gore challenged the United States to "produce every kilowatt of electricity through wind, sun, and other Earth-friendly energy sources within 10 years. "


Do it or Else..
"Gore's fantastic—in the truest sense of the word—proposal is almost unfathomably pricey and makes sense only if you think that not doing so almost immediately would result in an uninhabitable planet. Texas oilman T. Boone Pickens recently came out with a plan to generate 20 percent of America's power through wind. His estimate was that it would cost $1 trillion to build that capacity and another $200 billion to update our electrical grid to transmit that energy around the country. (And what would be the environmental impact of all those windmills dotting the countryside? Or solar panels covering our pristine deserts?)By my math, using Pickens's numbers, converting the whole economy to renewable energy in a short period of time might cost $5 trillion—and that is if you assume that government-led projects come in on budget. (Remember, the current U.S. gross domestic product is $12 trillion.) That would be like creating another Japan. Or fighting World War II all over again. The latter analogy is especially apt since the Gore Plan would effectively transform our free-market economy into a command-and-control war economy full of rationing and scarcity. Of course, there are many folks like Gore who view global warming as the moral equivalent of war. But Gore would extend the concept into the economic equivalent of war. Again, all this makes sense if you think we are doomed otherwise. "


I wouldn't say "doomed" exactly, but what do I know. Gore's worst case scenario should have us pretty worried, though. If we lost over 1T in a single day, then why not shell out 5T, right? Seriously, Obama should do something big. We should snowball our way through global problems, using cost-benefit analysis, and really make the world drastically better.

T. Boone Pickens says, As imports grow and world prices rise, the amount of money we send to foreign nations every year is soaring. At current oil prices, we will send $700 billion dollars out of the country this year alone — that's four times the annual cost of the Iraq war. Projected over the next 10 years the cost will be $10 trillion — it will be the greatest transfer of wealth in the history of mankind.

Canada
“The Athabasca oil sands contain the equivalent of 1.7 trillion barrels of oil,” Mr. Hansen says. “About 20 percent of that total can be produced, using current technology” – namely, surface mining and steam extraction underground. At today’s prices, tens of trillions of dollars’ worth of oil are at stake. The oil sands have attracted more than 100B in investment, so far." -csmonitor


ghg (green house gas)"- "the price you pay for the life you choose"


At the same time, Syncrude – a joint venture that includes Canadian Oil Sands Ltd., Imperial Oil (an ExxonMobil subsidiary), Petro-Canada, Nexen, Conoco Phillips, and others – is Canada’s largest single emitter of greenhouse gas, since it must burn 750 cubic feet of natural gas to generate the steam needed to produce a barrel of bitumen. That’s the equivalent of burning one barrel of oil for every eight barrels produced. Steam extraction water settles in highly toxic tailings ponds, too. Aboriginal communities are worried about toxic drinking water and poisoned fish.


As for corporations,
ING has $1,918,969,700,000 (about 1.9T) in assets
Fortis has $1,273,716,800,000 (about 1.3T) in assets
Citigroup has $2,187,631,000,000 (about 2.2T) in assets


(As a direct result of the U.S. subprime crisis, Citi’s 2007 profits sank 83.2% to $3.62 billion.)


The Fortune 500 ranking (by revenue) lists


Walmart as number 1, with 378,799,000,000 (about 379B) -there are no Trillion dollar a year revenue companies.


Is your head spinning yet? Remember, it's only money.



Although, there have been trillionaires, quadrillionaires, and quintillionaires in Zimbabwe. There's even a hundred-billion dollar note. Zimbabwe is suffering from an acute economic crisis. The country has the world's highest rate of inflation and just one in five has an official job.


WASHINGTON - Americans' retirement plans have lost as much as $2 trillion in the past 15 months, Congress' top budget analyst, in the Congressional Budget Office, estimated Tuesday.


Here's a factoid of dubious authenticity, from rense.com:


Retired management consultant Gaylon Ross Sr, author of Who's Who of the Global Elite, has been tipped from a private source that the combined wealth of the Rockefeller family in 1998 was approx (US) $11 trillion and the Rothschilds (U.S.) $100 trillion.


The author goes on to say that the billionaires are actually bit-players.
One family, 100 TRILLION dollars?


Currency, checking accounts and traveler's checks with a statistic called the M1 money supply. Adding money in money market funds, savings accounts and small CDs gives us the M2 money supply. The U.S. M1 money supply was $1.182 trillion in May 2002, and the M2 money supply $5.543 trillion.


"high net worth" individuals are said to be worth $30.8 trillion, From the Wall Street Journal (Online). July 25, 2005


An interesting quote:"The whole financial system is a house of cards. . If everybody decided to take what they had coming out of their accounts and bury it in the garden, the financial system would collapse, civilization would end, and we'd all go back to being hunter-gatherers. (J/K?) The modern world is made possible by the trust and sheeplike predictability of millions of depositors. (Deposit insurance makes it less of a crapshoot than it once was.)"

European governments have injected around 2T dollars into their troubled banking system.

One discussion group has a comment with an ominous warning:"For broad categories of things that are moneylike, look up M1, M2, and M3. Each category moves farther away from hard currency, and more toward things that are 'moneylike'.The government is stopping publication of the M3 figures, if I remember correctly. That's a VERY bad sign. It means they need to hide something."

As for gold, According to the BBC there is only enough discovered gold in the world to fill your average football stadium to the brim.I love how so much of our economy isn't in the "real" sector, as they say. What's going on...a huge portion of our economy is fake, phony, false, unreal? GET REAL, economy.

I also love how they call it a "bail out", as if the financial system were a canoe. Makes it sound as if there were too much liquidity, instead of the other way around.

Value

Economics is predicated on value

-If an alien wanted to purchase everything on earth, what would it cost?

Maybe we'd give it to him/her for free, so he wouldn't blow us up...

Anyway,

I was reading the Wikipedia article on diamonds (Diamonds are carbon in an isometric-hexoctahedral crystal system, and the word derives from the greek for invincible/untamed; they are similar to graphite (used in pencils), but structured differently).   Anyway, they're just rocks.

BUT,

"According to the Rio Tinto Group, in 2002 the diamonds produced and released to the market were valued at US$9 billion as rough diamonds, US$14 billion after being cut and polished, US$28 billion in wholesale diamond jewelry, and retail sales of US$57 billion."

Approximately 130 million carats (26,000 kg (57,000 lb)) are mined annually.

Diamond production of primary deposits (kimberlites and lamproites) only started in the 1870s after the discovery of the Diamond fields in South Africa. Production has increased over time and now an accumulated total of 4.5 billion carats have been mined since that date.  Interestingly 20% of that amount has been mined in the last 5 years alone and during the last ten years 9 new mines have started production while 4 more are waiting to be opened soon. Most of these mines are located in Canada, Zimbabwe, Angola, and one in Russia. 

So if 130m carats are worth 57B, and there are 4.5B carats total, all the world's (gem-quality, not industrial) diamonds could be guestimated to be worth 1.973T dollars.   Why don't we bail out our economy with a bunch of rocks?

List of Famous Diamonds; LINK

Did you know that there is an estimated 45-62 TRILLION dollars worth of CDS (Credit Default Swaps) on the market, as of 2007?

The World GDP is, as of 2007, from the CIA world fact book, 54.62 T (on Wikipedia).   

What does the discrepancy between these two numbers mean? 

I'm not an economist, so I don't know where to begin to make sense of this, with some people making like two dollars a day.

Okay, what else do I know.  I know there are still slaves, and situations of squalor and dismal poverty.  I know, to prevent the threat of Iraq somehow getting a nuclear weapon on American soil, we invaded the country (which they didn't have -oops) which has cost us like a trillion bucks and destroyed a country in the process.  I know third parties aren't allowed into American debates, still.  I know there are problems and solutions and proposals and policies running willy-nilly everywhere, with what seems like no order or structure, on this silly warming ball we call earth, and there are food crises and monster storms and people arguing about gay marriage.

We all live in a yellow submarine.  Woo-hoo!  Want to buy some saltwater?

I'm at home with my dogs, trying to summarize the solutions to the world's biggest problems so anyone around the world with a computer who wants to read the summary can have access to it, before/if they buy it.

Someone else's blog post

I used the "next blog" function, and came across this, which I have cut and pasted, for you:

"I'm reading a book called Bowling Alone: The Collapse and Revival of American Community, by sociologist Robert Putnam. The gist of his book is that the social fabric of community in the U.S. has waxed and waned over our history, and that we're at a time where it's time to build up once again the social capital that makes for abundant living. Below is a excerpt from a review:

Putnam draws on evidence including nearly 500,000 interviews over the last quarter century to show that we sign fewer petitions, belong to fewer organizations that meet, know our neighbors less, meet with friends less frequently, and even socialize with our families less often. We're even bowling alone. More Americans are bowling than ever before, but they are not bowling in leagues.

My friend Colin and I talk often about the presence and deterioration of the "Third Spaces" in the US. The First Space is the home, the Second is the workplace, and the Third is that place where people bond in a social space out in the community. Churches, Elks Clubs, VFW Halls, Bowling and Pool Leagues are all examples of these Third Spaces. For instance, Colin plays in a pool league and plays hostess to numerous gatherings at her house; I play in a softball league and attend a weekly interfaith worship service.

Putnam says that many of these Third Spaces are dying, if they're not already dead. When these spaces die, depression goes up, crime goes up, addictive behaviors go up, and also home values go down, participation in democracy goes down, trust goes down. Putnam suggests that the nature or purpose of the group doesn't matter nearly as much as the fact that people are together, getting to know each other, connecting, dispelling stereotypes, and merely communing together.

Well, I am buoyed by the knowledge that kickball leagues in the UShave exploded over the past decade! Grown adults get together for no other reason than to be together, have fun, compete, (drink beer, probably), kick a neon rubber ball around, and try not to get hit in the head! So community might be on the ropes, but we're not down for the count! And kickball is one of them! Check out some kickball resources in Atlanta!"

I, (Jesse) wanted to include this guy's message.   I think it's just Godly!

Interfaith worship, I approve.

Hardcore Nader intensity

We need more Ralph Naders 

He is proof, to me, that there need not be a dichotomy between "society" and "government".   People can become politicians, and, if not, change society in their daily life, perhaps to an even greater extent than had they entered government.  If the people lead, the leaders will follow, right?   I saw the Ralph Nader documentary from my local video store, and was highly impressed.  How could anyone not be?  We need more intense people, social activists who are really hardcore.  He inspires me.

I've been reading a Clifford Pickover book, Archimedes to Hawking, from the library (maybe I should see this original project through to completion -I have a tendency to diffuse and scatter).   It seems like I need to get hardcore.   People are basically saying the sky is falling, and maybe we really ARE about to experience a "global financial meltdown".  If the gvt. is going to pay for my medications, and allow me not to have to work, (a doctor told me I shouldn't, to boot), I should work on doing my part to repay society with making my blog a hardcore force for good, right?   As Ralph Nader said, I think, you're married core or you're hardcore.   I'm in the unique position, at the moment, of being able to be both.  There are trade-offs, though.  Nader, by the way, supports NOW, which is not pro-life, to say the least, so unfortunately he doesn't mesh with my values, either.   Honestly, I have no idea who to vote for.  Barack seems to embody a revival of activist spirit, so I'm going with him, even if I disagree with him personally.

I think America has too many apathetic people who watch far too much tv and eat too much, living lives of quiet desperation, frivolousness, and who embody, if not a lack of values, a lack of willingness to act on them.

There's nothing like a crisis to focus your powers of concentration and effort, and I really think more people need to hunker down and take action to help solve the myriad of big problems that face us, perhaps in a hardcore way.  I like saying hardcore.  It evokes "solid", a term for having integrity, I think, as well as intense and driven.   We need to move from sexual hardcore to social activism hardcore.   We're a global community, and there are amazing opportunities in the world to make it better, and to consequently make your life meaningful and happy.

So, although I'm not voting for him, I am appreciative beyond words for the example Ralph Nader has given us.    He's an example of  the immense good people can do, the potential for real change in all of us.

Politicians, TELL THE TRUTH!

I'm at the point where maybe I don't want to vote for anybody.

Still, may the best man win.  Maybe I should vote out of pure trustworthiness, instead of policies. By this, I mean the percentage of statements they make that are true, relative to the total number of allegations/lies.   Keep it realz, dawg!

Falsehoods are MAYBE acceptable, if unintended...but INTENTIONAL lies and misrepresentations should be strictly off-limits.    Lies are legal, of course, but I think a certain standard of truth should be enforceable for politicians who might change the course of policies that affect us all, and use our money, and influence the entire world.   Maybe a new law should be passed.

What am I talking about?

There are several sites that keep tabs on the truth of political ads and statements by politicians; these are:

1. factcheck.org

2. politifact.com

I read politifact today, and the main point I want to share with the world is this:  

Out of 113 McCain statements,   

True......25

Mostly True.....20

Half True.....19

Barely True....21

False.........22

Outrageous.....6

Out of 114 Obama statements,

True.....39

Mostly True....24

Half True......21

Barely True....12

False......18

Outrageous....0

According to my STRICT level of accountability, in which anything that is not true is a lie, this means that McCain lied 88 times, and Obama lied 75 times.   This is unacceptable, although Obama is clearly trying harder, I would say, to be straight with the American people. 

48 Laws of Power

Obey these, and you'll be omnipotent, my son

(Copied from Wikipedia

• The 48 Laws of Power is an abridged online version of the book.

The Laws

• Law 1 Never Outshine the Master
• Law 2 Never put too Much Trust in Friends, Learn how to use Enemies
• Law 3 Conceal your Intentions
• Law 4 Always Say Less than Necessary
• Law 5 So Much Depends on Reputation – Guard it with your Life
• Law 6 Court Attention at all Cost
• Law 7 Get others to do the Work for you, but Always Take the Credit
• Law 8 Make other People come to you – use Bait if Necessary
• Law 9 Win through your Actions, Never through Argument
• Law 10 Infection: Avoid the Unhappy and Unlucky
• Law 11 Learn to Keep People Dependent on You
• Law 12 Use Selective Honesty and Generosity to Disarm your Victim
• Law 13 When Asking for Help, Appeal to People’s Self-Interest, Never to their Mercy or Gratitude
• Law 14 Pose as a Friend, Work as a Spy
• Law 15 Crush your Enemy Totally
• Law 16 Use Absence to Increase Respect and Honor
• Law 17 Keep Others in Suspended Terror: Cultivate an Air of Unpredictability
• Law 18 Do Not Build Fortresses to Protect Yourself – Isolation is Dangerous
• Law 19 Know Who You’re Dealing with – Do Not Offend the Wrong Person
• Law 20 Do Not Commit to Anyone
• Law 21 Play a Sucker to Catch a Sucker – Seem Dumber than your Mark
• Law 22 Use the Surrender Tactic: Transform Weakness into Power
• Law 23 Concentrate Your Forces
• Law 24 Play the Perfect Courtier
• Law 25 Re-Create Yourself
• Law 26 Keep Your Hands Clean
• Law 27 Play on People’s Need to Believe to Create a Cultlike Following
• Law 28 Enter Action with Boldness
• Law 29 Plan All the Way to the End
• Law 30 Make your Accomplishments Seem Effortless
• Law 31 Control the Options: Get Others to Play with the Cards you Deal
• Law 32 Play to People’s Fantasies
• Law 33 Discover Each Man’s Thumbscrew
• Law 34 Be Royal in your Own Fashion: Act like a King to be treated like one
• Law 35 Master the Art of Timing
• Law 36 Disdain Things you cannot have: Ignoring them is the best Revenge
• Law 37 Create Compelling Spectacles
• Law 38 Think as you like but Behave like others
• Law 39 Stir up Waters to Catch Fish
• Law 40 Despise the Free Lunch
• Law 41 Avoid Stepping into a Great Man’s Shoes
• Law 42 Strike the Shepherd and the Sheep will Scatter
• Law 43 Work on the Hearts and Minds of Others
• Law 44 Disarm and Infuriate with the Mirror Effect
• Law 45 Preach the Need for Change, but Never Reform too much at Once
• Law 46 Never appear too Perfect
• Law 47 Do not go Past the Mark you Aimed for; In Victory, Learn when to Stop
• Law 48 Assume Formlessness

SWBP: Corruption

Solutions for the World's Biggest Problems, 2007

a book I'm reading, edited by Bjorn Lomborg,

Director of the Copenhagen Consensus Center

Chapter 13, Corruption, by Susan Rose Ackerman, Yale

(only 10 chapters to go!) Commentary and Summary

Aside:

Wikipedia, to deviate from SWBP, defines corruption as, "An "impairment of integrity, virtue or moral principle; depravity, decay, and/or an inducement to wrong by improper or unlawful means, a departure from the original or from what is pure or correct, and/or an agency or influence that corrupts." It goes on to define institutional and political corruption as,

a."Institutional corruption, as corrupt actions or policies within an organization that break the law, serve to subjugate humans in unlawful manners, discriminate against humans based upon race, ethnicity, culture, or orientation, or serve to degrade other humans or groups for that institution's own profit.

b. Political corruption, as the dysfunction of a political system or institution in which government officials, political officials or employees seek illegitimate personal gain through actions such as bribery, extortion, cronyism, nepotism, patronage, graft, and embezzlement. Political corruption is a specific form of rent seeking, where access to politics is organized with limited transparency, limited competition and directed towards promoting narrow interests (rent seeking is not to be confused with property rental).

Anyway,

Corruption is a big problem (all 23 of the problems addressed in this book were deemed, collectively, the "biggest"). Specifically, bribery is estimated to total 1 Trillion dollars a year by researchers at the World Bank Institute. (Political corruption is the topic of this chapter)

(There's a lot of Trillions floating around these days...a 47T world economy...a 1T Iraq war...a 1 T sub-prime mortgage bailout mess...geez, it's like mind-blowing. A TRILLION dollars is 1 billion dollars more than 999 Billion dollars, allright? One BILLION is 1m more than 999 MILLION dollars. There are people out there begging for change, alright? Like half the world lives on 2 dollars a day...Ugh)

Sorry.

Sidenote: As the scientologists say, aren't we being REACTIVE? Iraq and the bailout are Responses to problems that could have been prevented earlier. We need to do the right thing now, to prevent big problems in the future. We need to be PROACTIVE.

Good job, FBI, on the Blagojevich thing, I think. (pronounced Blah-goy-uh-vitch)

In any case, bribery is estimated to cost 3% of world income a year (that 1T I mentioned). This doesn't measure the total impact of corruption, however. The costs "may be many orders of magnitude higher than the volume of bribes themselves."

Ms. Ackerman differentiates between the low-level corruption of opportunistic payoffs and the systemic corruption which implicates an entire bureaucratic hierarchy, electoral system, or governmental structure from top to bottom. She says, "corruption is a symptom of dysfunctionl state-society relations."

Low-level corruption has 5 generic situations:

1. a scarce benefit, where officials have discretion to assign it to applicants.

2. officials selecting only qualified applicants.

3. a difficult to evaluate benefit, such as substandard pharmaceuticals

4. bureaucratic process as a source of delay, creating corrupt incentives

5. costs imposed by government programs, (such as the possibility of arrest or tax and customs collection).

Grand corruption has 3 varieties:

1. A branch of the public sector may be organized around bribe-generating.

2. A nominal democracy may have a corrupt electoral system.

3. Influence of the award of contracts (for construction projects, the allocation of natural resource concessions, and the privatization of state-owned firms).

Specific examples of the above are (LL1-5 &G1-3):

ll1) Despite the obvious solution of simply selling the benefit legally, officials may pocket the pocket (some or all of) the proceeds, or steal the goods outright. In Brazil, for example, federal police authorities estimate that embezzlement in the pharmaceutical sector totals $637 million/year (Colitt 2004).

ll2) officials frequently collect bribes from both the qualified and unqualified. Publicly-provided healthcare, supposedly free to the needy, may be rationed by ability to pay. Theft, too. 43% of food aid rice disappeared in one-third of Indonesian villages in one program.

ll3) Those in charge of distribution may provide substandard goods, and keep the higher quality for themselves or resale. 25% of pharmaceuticals, according to one estimate, consumed in poor countries are counterfeit or substandard.

ll4) delay may be created as a means of extracting more bribes. Survey evidence shows that businesses spend more, not less, time dealing with gvt. officials when corruption is common.

ll5) Officials get paid in return for tolerating illegal activities; at least half of tax collections are lost to corruption in some countries. As an example of reform, in Angola, reform cost $84 million over 2 years, and revenues increased from $230million to $345 million.

g1) Top police officials may organize corrupt syustems in collaboration with corrupt crime groups. Gvt. positions can be sold. Those "employed" may never show up and simply collect paychecks. In education, this can be harmful: teacher absenteism rates are high in some countries.

g2) spending limits can be undermined, the limits on types of spending permitted can be undermined, and controls on the sources of funds can be subverted. (from where, on what, and how much).

g3) The World Bank estimates, for example, that in the forestry sector, illegal logging costs at least 10B a year, mostly facilitated by corruption.

Cause: greed

Consequences

-The author considers it likely that corruption is both a cause and a consequence of lower levels of investment, income, and growth. "The causal arrow probably runs both ways, creating vicious and virtuous spirals."

(Speaking of virtuous spirals, my mother-in-law has a postcard of a church in x that has a spiral wooden staircase built without the use of nails in x, by an itinerant carpenter, reputed to have been the living Jesus himself).

Facts

Investment, as I said, is affected by corruption-both domestic and foreign. It -corruption- is associated with lower levels of direct foreign investment and capital inflows. Comparing a relatively clean Singapore to a relatively corrupt Mexico is the equivalent of adding 20 percentage points to the tax rate. It lowers productivity, reduces the effectiveness of policies, and encourages businesses to operate in the unofficial sector. Highly corrupt countries tend to spend less on education, to over-invest in public infrastructure, and to have lower environmental quality levels. Income inequality is produced by corruption, perhaps making the rich richer...and corruption may undermine programs designed to help the poor. Inequality has a negative effect on growth, which may be the result of its impact on corruption. What is inequality's effect on corruption? She doesn't say. Corrupt links between wealthy elites and the state may perpetuate an unequal system. Corrupt gvts. lack legitimacy. Tax evasion is associated with high levels of perceived corruption. Trade openness appears to reduce corruption, and weak law and order and insecure property rights increase it.

If 30 percent of the funds allocated to fulfill the MDG's in water and sanitation in Sub-Saharan Africa in the next decade, the excess costs would total $20B. Other interventions, with lower cost:benefit ratios, such as reducing low birthweight babies, can only be "worthwhile" if corruption can be controlled.

Solutions

caveat: "reforms must be accomplished inside particular countries, each with its own economic, political, and social realities."

She recommends 4 policies:

1. An international effort to help countries streamline gvt. operations.

-Excess regulation, which requires the tedium and expense of complying with the law, push people into corruption, she says. For example, if (over-regulated, presumably) Calcutta had the investment climate of Shanghai, the share of firms exporting would nearly double from 24% to 47% and the share of foreign-invested firms would increase frm 2.5 to 3.9%.

2. Efforts to encourage the ratification and enforcement of international treaties.

-Several treaties exist, such as at the OECD and UN, reflecting the salience of the issue. Getting ratification would change the discourse, but only have an impact to the extent that it changes behavior. Monitoring and compliance should get more resources, she says. "Transparency International is engaged in this effort, but more should be done."

caveat: the treaties won't solve the problem, but an effort to publicize them could bring benefits with little expenditure.

3. Multinational investments to control corruption

-An investment of 1.25B might mean that just 10% of the $200B in oil and gas exploration receipts expected to accrue to the the handful of states, many poor and with weak gvts., over the next decade, would flow to the poor citizens of those countries. This $20B is a likely underestimation, she says. The Chad-Cameroon pipeline, construction funds for which were negotiated in a World Bank agreement, requires 70% of revenues to go to poverty reduction, and should be studied for lessons, she says.

-Also, export credits, such as those in the OECD, can be awarded or limited on the basis of agreeing with (anti-)corruption rules. For example, member countries can impose and exercise "due diligence" when dealing with exporters who are on a debarment list of a multilateral financial institution (I admit I don't know what this means), under charge in a national court, or convicted for violation of laws against bribery of foreign public official within the last 5 years.

4. Controlling money-laundering

-The Financial Action Task Force (FATF) has 49 recommendations, adopted by over 100 countries in '89. In 2000, The Wolfsberg Principles were developed. More study is necesssary (for example, on the impact of different anti-money laundering systems on the amount of funds laundered, or on the link between money-laundering and the level of predicate offenses, such as corruption), and cross-border cooperation is necessary, and protection of reporters and investigators. Both the formal law and its enforcement need to be strengthened.

Do Pigs Even HAVE lips?

SWBP: Conflicts

SWBP: Solutions for the World's Biggest Problems

a book I'm reading, 2007, edited by Bjorn Lomborg,
Director of the Copenhagen Consensus Center,
Chapter 12, Conflicts, by Paul Collier, Oxford University
Summary and Commentary

You wanna that I should whack the guy, boss?

Motivated! Dedicated! Ooh Rah!

Rich countries and poor countries face differing security challenges. This chapter deals with poor countries (whose challenges are low-pro). Poor countries mainly face civil wars and coups. Security has received less attention than health and education, for these countries. The risks and responses to civil wars and coups are highly costly. New advances in 'defense economics' , employing cost-benefit analysis, offer promise to organizations like the permanent UN Peacebuilding Commission. Cost-effective international interventions could have enormous payoffs.

The author recommends 5 interventions:

1. increasing aid

2. making aid conditional upon limits to military spending

3. expanding peacekeeping forces &

4. guaranteeing security using 'over the horizon' measures

5. all of the above (packages of some or all of 1-4 -as reinforcing complementarities- to meet the specific needs of countries)

as solutions to the 3 'scourges' faced by poor countries experiencing conflict:

1.civil war

2.coups

3.military spending

1.Civil War

In poor countries, as I said, civil war is more likely. They also last longer and are more likely to recur. The economy can be devastated and large populations displaced. A typical civil war in a poor country costs around $64B USD.

3 recent developments have raised the risk for new outbreaks of civil war:

1. the discovery of oil in fragile states (like Chad)

2. the high price of primary commodities, and

3. fragile settlements that ended a number of recent civil wars

Mineral/oil resources may not benefit the local population, or primarily anyway, and add ethnic differences to the mix, and militias or guerilla groups secede from the state or try to take over.

Fragile settlements need real incentives for the combatants to maintain the peace, and effective sanctions against those who break agreements. Basic carrot and stick stuff. The continued presence of poor and brutalized sectors, inured to violence, in conditions that led to the conflict which are rarely more than suppressed by one side's victory, requires the building of a prosperous and stable state.

Gvt. expenditure, after war, becomes skewed toward military spending. This is in a context of many lives lost, disease, and population movements which can have a destabilizing effect on neighbors.

Internationally, civil wars can influence drugs, AIDS, and terrorism, too. There is credible though not decisive evidence that AIDS originated in an African civil war due to the dangerous conjunction of mass rape and mass migration.

2.Coups

They are far more likely in poor countries. In the past 30 years, there have been over 200 coup attempts (in Africa alone). Quantitative economic research has been done. Coups reduce growth by around 3% of GDP during the first year of the coup, and it lasts awhile, so they're costly. The mere threat of a coup inflicts costs, with gvts. pre-emptively making military expenditures. And get this: aid 'significantly and substantially' increases the risk of one taking place.

The root causes are similar to civil war: instability, poverty, and disaffection (plus arms). And they can lead to continuing conflict; still, there's quite a difference between a drawn-out civil war and a (mere, relatively speaking) coup.

3. Military Spending

Also the subject of quantitative research (and thus meriting mention in this mighty book), military spending does not reduce the risk of civil war, AND, in post-conflict situations, sharply increases the risk. Spending by one country results in spending by neigbors, which spreads to entire regions. About 11% of aid 'inadvertently leaks' into military budgets, which makes aid interventions problematic. Aid, military spending, coups, and civil wars are thus interconnected.

I'm going to quote an entire paragraph:

"Military spending in countries where civil war has broken out is typically increased by 1.8% of GDP. At the end of the war, expenditure drops in general by only 0.5%. At a time when a country needs all possible resources to rebuild itself, an increased proportion of the national income is spent in ways that do nothing to raise the welfare level of the population. Since poor countries are far more prone to civil conflict than rich ones, anything that depresses development and income becomes a risk factor for further violence. Little wonder, then, that in post-conflict nations, there is a much greater risk of a new war breaking out."

INTERVENTIONS

1.Increasing aid

Economic recovery is the surest way of reducing the risk of further conflict. Aid, unfortunately, finances additional military spending and increases the threat of a coup (unless it is made conditional, or paired with other interventions). Beyond the early post-conflict years, when institutions are weak and money is likely to go to unintended purposes (requiring oversight), post-conflict aid is normally unusually productive.

2. Introducing new conditions for aid

Conditions, such as not exceeding a particular level of military spending, or allowing practical intervention to maintain stability. The cost:benefit ration is estimated at better than 1:2 for eliminating increased military spending, and it's associated reduction in security risk.

3. Expanding the role of peacekeeping forces

An international peacekeeping force is the most useful replacement for increased military spending. Professional soldiers, with no allegiance to any warring faction, bring stability without the destabilizing downside of armed partisans. The more that is spent on peacekeeping forces, the lower the risk of further conflict, the Copenhagen Consensus is proud to be the first to report. The numbers? Doubling expenditure per inhabitant per year over a decade from 5 to 10 bucks reduces the risk/likelihood/probability of conflict by around 15 percentage points. The cost of a typical post-conflict civil war is $8B USD, but the cost of peacekeeping is 1.1B, so the ratio is around 1:7. Wars make the news more than successful peacekeeping, but the investment is easily justifiable. Peacekeepers must be of sufficient size and capability.

4. Security-Guarantees: Guaranteeing security (from 'over-the-horizon')

Okay, this phrase is a bit weird. It's troops at the ready in their home countries for rapid intervention, should there be any flare-ups. France did this for it's territories in Africa between 1965-2005. Their risk of conflict was only one quarter what it would have been otherwise.This reduction in risk was worth about 5 billion, across 13 countries, for a cost-benefit ratio of about 1:5. Let's hear it for the bean-counting statisticians and economists who calculated this stuff!

(To tell you the truth, I don't actually understand it, but I'm taking P.C.'s word for it) It worked for the UK in Sierra Leone, too.

5. Packages

Hopefully war torn countries will say, "I like your package!", lol. Sorry, couldn't resist. Anyway, -peacekeeping and aid complement each other.

-Aid and ceilings on military spending complement each other.

-Security guarantees and aid complement each other. (Complement is different from compliment). Security guarantees eventually replace peacekeeping, for less money.

-Peacekeeping + security guarantees complement ceilings.

These complementarities can be quantified and subjected to CBA (cost benefit analysis). He says there is a strong economic case for them. (Nike says Just Do It)

SWBP: Arms Proliferation

Solutions for the World's Biggest Problems, 2007
a book I'm reading, Edited by Bjorn Lomborg,
Director of the Copenhagen Consensus Center
Ch. 11, Arms Proliferation, by J. Paul Dunne, U of W. England
Summary and Commentary

Kali has lots of arms....

I already wrote about this, in the SALW post. But this is even better, maybe.
I find it interesting that you can't spell 'proliferation' without 'pro-life'.
Weird.

Anyway, proliferation usually has related to nuclear arms, and it does in this chapter, too, but it also refers to biological and chemical weapons, and technologies, systems, and weapons, of any kind. It can be in quantity or quality, in the sense of more arms or more advanced arms.

The results of it can be increased probability of conflict, greater potential lethality and duration of that conflict, and an increased economic burden on countries, esp. developing ones.

It's hard to measure. There are illicit and small arms sales which go unrecorded, and the technology may be of more concern than the actual weapons. Lethality may not be reflected in price. Transparency is reduced due to the increasing internationalization of the industry. It's not just goods, but also services. Mercenary enterprise has corporatized into the Blackwater type stuff. Terrorists with i.e.d's (improvised explosive devices) and suicide bombers inflict asymmetric damages. Speaking of arms, a karate chop can be lethal. It's nuts.

Proliferation cost is a subset of military spending is a subset of total arms trade, just so that's clear.

There are 3 categories of weaponry: non-conventional, conventional, and SALW (small arms and light weapons).
1. Non-conventional is the big stuff, the WMD: ABC (atomic, bio, chem). Now, there's those airburst weapons, which are like small nukes, too. (It could be NBC, too, if you want to get crazy with the TV). Countries that have them pay minor costs, but the treaties, policing, and incentives to counter proliferation are expensive; then measures, if necessary, maybe military action, can result in catastrophe.
2. conventional weapons systems, like tanks, planes, ships, subs. The main suppliers are Russia and the USA. They provide defense, but also can give an advantage, which might start or escalate conflict. Arms races, and associated wasted expenditure, can also result.
3. these kill most people, unlike the larger categories which are used to project power. They're the main security concern in the developing world. 500,000 people a year, snuffed.

Costs of proliferation
a)Proliferation cost is a subset of military spending is a subset of total arms trade, just so that's clear.

b)Other costs of proliferation are the indirect economic effects on the economy, such as the opportunity cost of producing arms, or spending valuable capital on them. After the Cold War, military spending went down, and was there a cost to arms producers like us? There was local dependence, which research suggests will not be problematic, and indeed, with reallocation of gvt. resources, there is a 'peace dividend.'

c)Also, proliferation upsets strategic balances, which can create an increased probability of more lethal conflict, with domestic, neighbor, and wider international problems. Arms races increase conflict probability, and increase neighbor country arms expenditure.

Benefits
Security, prestige, an attempt at influence with exporters, money for corrupt elites. There are expectations for benefits to local industry from offset agreements that provide investment and technology transfer. (What is an offset agreement?)

Guess what? He says, and I quote, "There is also the issue of whether military security actually works, especially in the developing world."

I know I've got the plan the works. Keep reading my blog, folks.

His 5 solutions:
1. Nuke disarmament, and WMD non-proliferation programs

2. Conflict prevention measures (like economic sanctions and better resourced UN troops)
He sites Cranna, 1994 as having a useful package of conflict prevention policy initiatives.
He also sites Chalmers, 2004, which evaluates the cost effectiveness of different measures, and gives the number of 139.4B USD to resolve the conflict in Afghanistan.
The costs of this has a low of 2B USD and a high benefit of 1875B USD. Pretty cool, huh?
Maybe war isn't where the money's at, eh?

3. Counter arms-proliferation measures (dampen, or nullify, their impact)
This happens through diplomacy, sanctions, threats, and military action, (or a mix).
This would act as a deterrent, so the cost would decrease over time.
This one has a low cost of 10B USD and a high benefit of 1795B USD. Yes, it's cool.

4. Control the trade in conventional arms
There is a system, but it can be a lot better. Proposals already exist, of course. To make it more rigorous, an 'arms trade treaty' would determine the nature and degree of the arms trade, and assist in policing/enforcing arms export control policies. This would curtail the arms trade, get all countries to adopt a code of conduct, create greater transparency, reduce the use of landmines, and include a commitment to uphold human rights.

5. Tax arms transfers
The money from taxed arms exports would go to a development fund that reduces poverty and inequality.

SWBP: Vulnerability to Natural Disasters

SWBP is Solutions for the World's Biggest Problems, a book I'm reading
2007, edited by Bjorn Lomborg, Director of the Copenhagen Consensus Center
Ch. 10, Vulnerability to Natural Disasters, by Roger A. Pielke, Jr., University of Colorado
Summary and commentary

Can you protect me? I feel so vulnerable...

The main point the author makes, it seems to me, is that "the impacts of climate on society result fromthe interaction of the climate event and societal vulnerability to experiencing impacts." Reducing vulnerability has been ignored or underemphasized. Many cost-effective solutions have remained unimplemented, in developed and developing countries, alike.

In other words, when Al Gore puts up a picture of a hurricane and links it to global warming and says we should go to his site and learn about solutions, and then do things like buy the better lightbulbs and buy energy-star products and drive less, well that's all well and good, but totally off-mark: The best response to hurricanes is not to focus on Energy policy and the mitigation of greenhouse gases (although still good, of course), but rather to prepare and adapt to future natural disasters.

It's not one or the other; we should do both. It's just that, by the numbers, preparation is far more effective. Emissions reduction policy would only address a subset of the many causes of climate change, and a policy 5 times as effective as fully implementing Kyoto would only do 4.5% as much as building societal resilience. There's just no comparison.

The ratios he calculates for the difference in effectiveness of reducing the increases in ghg concentration vs. adaptation, under varying conditions, ranges between 5:1 to 22:1.

The skew in current priorities is reflected in a recent RAND study that US funding for disaster loss-reduction research in '05 was $127 million, only 7 percent of the amount invested in climate change research that year.

An example of how effective policies like risk assessment techniques, better building codes, code enforcement, land-use standards, and emergency-preparedness plans can be is the difference between Haiti and the Dominican Republic (on the same island) in 2004, when Haiti lost 2 thousand people and the D.R. lost only ten, due to their investment in shelters and emergency evacuation networks.

For disaster-preparedness/adaptation to happen, the author believes the issues of climate change and disaster vulnerability need to be clearly separated in the eyes of the media, the public, environmental activists, scientists, and policymakers. Changing (and current) weather-patterns demand it.

But let's get away from hurricanes. In addition to wind storms, earthquakes and floods are also the other 2 main categories of natural disaster. Other forms are droughts, epidemics, extreme temperatures, forest/scrub fires, volcanoes, and avalanches/landslides. The chapter has pie charts showing each category by number of deaths, amount of "losses" (does that include deaths?). Did they miss any?

Disaster losses have been increasing rapidly in increasing decades. But there are some important points to be made: 1) The Indian Ocean Tsunami killed more than 275,000 people while Katrina killed fewer than 1500, showing that much of the human toll takes place in developing countries. 2) Like Jesus said with the poor woman who gave all she had, the cost of disasters might not be measured best in the sum of economic losses, but what proportion of the country's overall economic activity was hit, and 3) disaster vulnerability response should be made a priority for the international community. It's a low global development priority, for some reason.

For effective action to take place, the author recommends:
1) getting the concept on the map by separating it from global-warming/energy-policy.
GHG emissions reduction, it is noted, does not have an effect for several decades on hazard risk.

2) Agreed upon globally-accepted standards:
-creating a globally accepted standard of acceptable disaster vulnerability, so countries' status and progress can be measured and compared.
-the creation of an open-source disaster database according to agreed upon standards.
-agreed-upon peer-reviewed procedures for normalizing economic loss data.

So sensible, anyone could have written it, in my opinion. Good stuff.

SWBP: The Economics of Biodiversity Loss

SWBP: Solutions for the World's Biggest Problems, a book I'm reading,
2007, edited by Bjorn Lomborg, director of the Copenhagen Consensus Center
Chapter 9, The Economics of Biodiversity Loss, by Dan Biller
Part of my ongoing series of "book reports" (lol)
A synopsis, a summary, and commentary

The Grim Reaper morphs into a frog, sometimes...(like a lion in Zion?)

I read this chapter outdoors on a sunny day, on the shaded deck of our house on Cobb mountain, as birds visited the water hole and hummingbird feeder...
Really, no topic is closer to my heart.

I know, it's a far cry from fishery stocks and genetic resources, but the principle is the same: nature is dying. In fact, the chapter says the rate of extinction is between 100 and TEN THOUSAND times more than the natural rate of extinction would be, without "human intervention."

Honestly, I know everything is in fact natural, as human beings are a part of nature, but still.
I don't want the natural world to be destroyed by our species' immature need to pave everything and show off status in a new maserati, ETC. (perhaps eating burgers is a better example). I have a thing against status symbols. Grow up, people. Wouldn't you feel better if you bought a simple, reliable car and gave all the extra money to any of the zillions of worth(ier) causes? I think you should. Be a part of the solution. Be good.

Also, you can say, well, everything dies eventually. Well, that's true, but let's postpone the deal for as many of us who enjoy life as possible for as long as possible, okay?

ANYway. "Only a few ecosystems around the world have not suffered from human intervention, but the full consequences of this intervention are minimally understood." Basically, we think we're smart, but we really don't have a clue, and can barely scratch the surface of the interdependence that we perceive in the web of nature, I think is the understanding, here.

Habitats and ecosystems (coral reefs, rainforests, fisheries, etc. ) are threatened, and "it is difficult to conceive a world without biodiversity that can sustain human life." Who can say how it all plays out. Maybe it's like the butterfly effect. With the loss of species x (say, the cuban metallic-gold colored ant), we could all be f---ed. I dunno. I'm not an ecologist. We like to say "God only knows", but I really don't. I say we prevent as much biodiversity loss as possible. Life is good, right?

What we do know is that nature can be immensely enjoyable, and, for me, at least, of incalculable value, even when "red in tooth and claw" (perhaps especially so). Biodiversity is under threat due to pressures, often anthropogenic, outside of the purview of policy, such as "destruction and degradation of natural habitat (through land use changes, urban expansion, deforestation, changes of use in the coastal zone, overuse of marine and riverine ecosystems), the introduction of non-indigenous species, overhunting/fishing, pollution (e.g. industrial, human, and animal waste discharges), and climate change.

Biodiversity is shorthand for all the world's biological resources, whether we currently use them or not.

The main point for policy-makers is "the consequences of losing even modest ecosystem areas could be large" so biodiversity loss has a potential large scale effect. We're dealing with uncertainty and irreversibility, so there is the utmost need to adopt the precautionary principle, and not relegate biodiversity concern to low/er or no priority simply because of lack of information or because it is a newer concern among development issues.

Mr. Biller proposes 4 solutions:
1. A certain minimum level of biodiversity needs to be recognized as necessary, as information is attained on the benefits of biodiversity conservation, and perhaps values can be assigned to areas of biodiversity for CBA (cost-benefit analysis).

Species and ecosystems need to be preserved. "The information stored over millions of years of evolution is at risk."

The argument for a moral duty to preserve species (how would we like it if aliens blew up the earth to make room for a space highway, like in Douglas Adams' Hitchiker's Guide to the Universe?) and the beauty of the richness of life clearly trumps, for me, this argument to preserve "information." But my life may depend on this information in the future, so what do I know.

2. Um, I don't actually know what he's saying on this one. He uses economic jargon, that while I understood the explanatory footnote, I can't and don't want to decipher his econo-speak, which says, "Bundle non-excludable attributes of biodiversity with its private goods and club goods and design economic instruments that take advantage of markets to deliver these attributes."

The only examples he gave were tradable fishing quotas, tradable hunting quotas, and subsidies (which unfortunately have the potential for rent-seeking). This guy works at the World Bank, not at the local high school, so I'll give him a break. Maybe it has something to do with privatized conservation, such as in the form of game parks, or like when Mexico paid an indigenous community to conserve a watershed.

3. No, that's option 3 (privatize the biodiversity that is feasible, and involve local communities).

4. Eliminate perverse incentives. 'Perverse' means environmentally harmful, in that they encourage environmental damage and biodiversity loss, such as pollution, urban sprawl, road infrastructure, and consumption of natural-resource intensive goods.

He says perverse incentives like direct subsidies to agriculture, govt. support for marine capture fisheries, and for coal production, deplete scarce government budgets, can be regressive in income (affecting the poor more than the rich), and discourage efficient markets through rent-seeking behavior (uncompensated transfer of goods/services as a result of a 'favorable' policy).

I think Dan Biller may have done this cause a disservice. Rent-seeking excludable club goods just doesn't get me like maybe a trip to the rainforest would, know what I mean?

SWBP: Land Degradation

SWBP is Solutions for the World's Biggest Problems;
a 2007 book I'm reading, edited by Bjorn Lomborg, of the Copenhagen Consensus Center
Ch. 8, Land Degradation, by Ian Coxhead and Ragnar Oygard
pp. 146-159

Stop treating dirt like dirt

There's a big long definition: in short, it's reduction in in soil quantity and quality as an input to agricultural crops. Watershed function and other off-site effects figure into it, though, too.

It's measured by pH, organic matter content, plant-available nutrients, porosity, grain size distribution, water permeability and retention capacity, topsoil depth, presence of toxic chemicals (to plants or plant consumers), etc. -which varies with depth and horizontally, as well. All these characteristics interact. I'm no soil scientist, but my alma mater,UCD, I know has a pretty good program in it.

This chapter begins with a crash course in farming:
Crop yields depend on water, fertilizer, seed variety, and crop mgmt. practices, in addition to soil quality. (I think they forgot weather; i.e. sunshine, lol) In other words, it's not a good proxy for measuring degradation, but trends can still be seen.

Nutrient levels are improved by adding manure or fertilizer; acidity is countered with lime; and drainage and irrigation improve water availability.

Likewise, degradation (loss of topsoil and nutrients) occurs through: 1. soil erosion through seedbed preparation leaving the soil vulnerable to wind, rain impact, and surface water flows. Or, through intensive grazing that also lowers the amount of protective vegetation. 2. "soil compaction and crusting" 3. nutrient mining by removal of crops without replacing it with manure, fertilizer, or plant residue. 4. salinization under arid conditions, when salts are not washed away. 5. waterlogging from poorly-controlled irrigation. 6. there's also pollution and alkalization.

Characteristics such as slope, soil texture, climate, and cropping pattern affect soil resilience. Some of the above problems are less irreversible than others.

Off-site effects include siltation of dams and waterways, nutrient runoff causing eutrophication, pesticide runoff, windblown soils, and released CO2 and CH4 (contributing to global warming).

FACT: No developing country has installed a system for monitoring soil quality at a national scale. Little is known about status, and even less about trends, or what extent the degradation is human-caused.

What is known is that some environments have experienced a 50% or higher reduction in crop yields. Experimental plots have yielded data, but the basis for extrapolation to farmer's fields is weak. One study, with contributions by 250 experts, estimated that 560 million hectares of land had been degraded since the 1940's, or 38% of the total. A review of 16 studies shows that soil quality has remained fairly stable for 75% of the world's arable land, but widespread and accelerating on the rest. Specifically, 5-8 million hectares (ha's) have gone out of production each year (since?). These are primarily lands on the margin of cultivation, such as at the edge of deserts, or steeply-sloping or high-altitude areas.

Temperate lands are more resilient, so the problem exists primarily in poorer societies of tropical and sub-tropical areas where property rights are weakly defined, information systems are weak, and managerial capacity is low. Income from the land accounts for a greater share, making them more vulnerable to this problem, as they have fewer resources to combat it. Land tenure insecurity and credit market failures lead to faster soil mining.

The FAO predicts an increase in farmland area over the next 25 years of 8%, much from the clearing of tropical forests, which will have high local costs but will not threaten food supply or agricultural commodity prices.

The solution, in basic terms, is to maximize vegetation cover to prevent erosion; replace the removed nutrients; prevent the accumulation of harmful substances; and put in structures to reduce the speed and volume of water flow over the soil (i.e. terraces, bunds, vegetation strips).

5 market-based policies that offer economic incentives to achieve this are as follows:
1. Price and Trade policy reforms. E.g., no explicit or implicit subsidies on practices that increase land degradation, or taxes on activities that tend to reduce it. Abandoning or reducing protectionism is good, too, despite the short-run costs of policy implementation, market-adjustment, and revenue-losses to governments. They are minuscule in relation to the long-run benefit streams.

Crops that contribute to land degradation will be grown in countries and environments with lower environmental costs, say Ian and Ragnar.

2. Poor rural households "face severe liquidity constraints and have very high discount rates." This book mentions discount rates in every single chapter; I still can't definitively say what they are, although I can say it has to do with expectation for the future. It's an important concept, obviously, but I just didn't get it, earlier. The whole book is premised around benefits and cost ratios at discount rates of either 3 or 6 percent. Hmm. It's just this kind of ambiguity that makes an exciting excercise more "dismal." My fault?

Anyway, the improved functioning of imperfect credit/financial markets will facilitate land-conserving investments, while also probably increasing the land area to be cultivated, leaving the overall picture ambiguous. It's a solution, with a caveat.

3. The solution has to be culture-specific. In areas of low population density, they use up the land, and move on to a new plot. In Ethiopia, secure land rights might induce investments, such as in terracing. Elsewhere, investments can be a means of obtaining permanent land use rights. In Ghana, women, who have less rank, leave the land that they farm fallow for less time, based on the assumption that land which is actively cropped is less likely to be reallocated. Entire communities can be empowered to manage something like a rangelands as a commons, to reduce grazing intensity. Legal systems need to work, to give certificates of land title meaning. Soil qualilty is hard to observe, and be poorly captured in land transactions.

4. Technology. Nutrient replacement costs, for example, can be reduced, and returns to nutrient inputs (yields) can be raised. Less land is thus necessary for the same output. Marginal agricultural land can also be retired by migration from farming to industry, like what happened between '85-'95 in Thailand.

5. Direct land use interventions, such as conservation areas, land-use zoning, or public reforestation projects. China, for example, is spending 40B USD on almost 15 million hectares. Some countries pay farmers to desist. Bribery is messy, though (cost of monitoring and enforcement). Improved water management and installation of drainage systems, ending water and energy subsidies that encourage water wasting, are all good.

Attempting a benefit:cost analysis, they say, is futile, due to the heterogeneity of the projects, but rates of return can be presented. I'll give 'em to you if you ask. I'm tired.

By the way, Eutrophication is:

noun
Excessive nutrients in a lake or other body of water, usually caused by runoff of nutrients (animal waste, fertilizers, sewage) from the land, which causes a dense growth of plant life; the decomposition of the plants depletes the supply of oxygen, leading to the death of animal life; "he argued that the controlling factor in eutrophication is not nitrate but phosphate"

You're welcome, lol.