Economic Development and Political Stability: Africa Vs South East Asia

Why is Africa less developed than South East Asia?

Because it is less stable? (remmember both were colonies)

Fair enough, but why is South East Asia more stable?

Aha! That's where the crumbling of the cookie gets interesting...

Here's some food for thought:

Because ethnic tensions were stonger in a Africa as a result of the more artificial division of borders. By the way, South East Asia was pretty unstable in the early years of independence... China, Laos, Cambodja and Vietnam went at it pretty hard. There's always Myanmar (or Burma... how did that name change happen anyway?) and I don't know how developped these countries are. Hum...

Ok it seems I'm stuck in the typical Social Sciences conandrum... I'm stuck with more questions than answers and it's likely that my question might simply be fallacious and based on a wrong assumption. "Scientific methodology... Ah, What a pain you are!"

So ok... I guess that now I need to check if my basic assumption is correct and focus the analysis.

New question: "Is Africa more or less economically developed than South East Asia? , and if so why?"

Not that it wouldn't be interesting to check whether it is more or less legally, politically or socially developped, but one must start somewhere...

This should make my life easy. I pick a number of economic variables and then look at their determinants and understand what caused the differences in values between Africa and South East Asia.

Potential Variables:

1. GDP and its growth (Capital stock and its growth, Size of labour force and its growth, depreciation of capital stock and its growth and their productivity, for a Solow growth approach to the issue; or initial GDP, social and political stability measured as number of murders, terms of trade, and human capital for a New [ie endogenous] growth theory approach à la Barro; finally for just the GDP I may wanna compare the accounting variables: Y=C+I+G+X-M)
2. GDP per capita and its growth
3. Gini Index (for some idea of the income inequality) and its growth
4. Inflation and its growth
5. Unemployment and its growth

so I guess I'll have to look into it...

By the way, I should mention this all started because someone told me they had studied many things during their master's, one of which had been conflict resolution. The question seemed relevant at the time, but I feel like I'm not really running towards it... It seems as though the issue started as one of political stability and now, by refocusing the question I've completely removed it from its original purpose... Oh well! What are you gonna do?

But the original question is still relevant and probably easier to assess... "Is South East Asia more politically stable than Africa? If so why?"

Political stability

1. number wars in a certain period of time
2. number of governments in a certain period of time
3. level of control/authority projected by the government throughout its geographical jurisdiction
4. number of politically motivated aggressions (from the simple vandalism to political assassinations)

Causes

1. Heterogeneity of population (this kind of fits into the Cleavage structure)
2. Lack of functional institutions to mediate conflicts and legitimise decisions from the majority This is a huge heading: incorporates the recognition of specialization and sphere of influence of one institution by all the others (Executive, Legislative, Judicial, Military, Police, Central Bank), has to do with number of veto players (Horizontal executive power sharing through the electoral system and cleavage structure and vertical executive power sharing presidential vs parliamentarian and federal vs unitary), possibility of exit and of exercising voice, legitimation (input or output) processes,
3. External interference
4. Geography and the geographical organisation of resources/capital (physical and human)

Fortunately I don't have a dissertation to write...

Elasticity and the encyclopedic size of economic concepts

One of the things I found most difficult about economics was the jargon that came with the discipline. This was probably the result of not having any economics background at the secondary school level which meant I kind of parachuted myself into economics. This would be a typical excuse for being a bit thick, if it wasn't for the fact that I came across Robert H. Frank's the Economic Naturalist and his comment about how this difficulty in acquiring basic economic principles is a wide spread trend. In that spirit I'd like to start writing some of these down, so that if memory fails, this blog can help.

I guess that as I'll come across each and anyone of these, I'll come back to the blog and write them down. I have to say, embarrassingly that wikipedia is hugely helpful with this type of query and that I will find myself going back there for definitions.

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Today's concept is Elasticity of price, substitution, and wealth (income + whatever else fill your pockets):

In practice: "A good or service is considered to be highly elastic if a slight change in price leads to a sharp change in the quantity demanded or supplied. Usually these kinds of products are readily available in the market and a person may not necessarily need them in his or her daily life. On the other hand, an inelastic good or service is one in which changes in price witness only modest changes in the quantity demanded or supplied, if any at all."

Numerically:"In economics, elasticity is the ratio of the percent change in one variable to the percent change in another variable.(...).An "elastic" good is one whose price elasticity of demand has a magnitude greater than one. Similarly, "unit elastic" and "inelastic" describe goods with price elasticity having a magnitude of one and less than one respectively.

I always found it hilarious that I remembered the numerical difference between a normal, superior, inferior and even a Giffen good, but I never knew whether to call them elastic or inelastic... It's like having the cheese and a knife but not being able to explain to other people how to use each without maths...

FYI, every basic macro book has a definition of this!

Game Theory - Economics 159 Yale University

A third course from Yale University:

Game theory

1. Introduction

2. Putting yourself into other people's shoes

3. Iterative deletion and the median-voter theorem

4. Vest responses in soccer and business partnerships

5. Nash Equilibrium: Bad fashion and bank runs

6. Nash equilibrium: dating and Cournot

7. Nash Equilibrium: Shopping, standing and voting on a line

8. Nash Equilibrium: Location, segregation and randomization

9. Mixed Strategies in Theory and tennis

10.Mixed Strategies in Baseball, dating and paying your taxes

11. Evolutionary Stability: Cooperation, mutation and equilibrium

12. Evolutionary Stability: Social convention, aggression, and cycles

13. Sequential games: Moral Hazard, Incentives and Hungry Lions

14.Backward induction: Commitment, spies and first-mover advantage

15. Backward induction: Chess, strategies and credible threats

16. Backward induction: Reputation and duels

17. Backward induction: ultimatums and bargaining

18.Imperfect Information: Information sets and sub-game perfection

19.Subgame perfect Equilibrium: match,aking and strategic investments

20. Subgame perfect Equilibrium: Wars of attrition

21. Repeated games: Cooperation vs. the end game

22. Repeated games: cheating, punishment and outsourcing

23. Asymetric information: silence, signaling and suffering education

24. Asymmetric information: Auctions and winner's curse

EC252 - Financial Markets course at Yale University

Here's a series of great links, to different lecture videos in Financial Markets from Yale University.

They are very good. Check particularly lecture 7 and the last two(25 and 26).

1. Finance and Insurance as Powerful forces in our Economies and Societies (introduction)

2. The Universal Principle of Risk Management: Pooling and the Hedging of Risks

3.Technology and Invention in Finance

4. Portfolio Diversification and Supporting Financial Institutions (CAPM Model)

5.Insurance: The Archetypal Risk Management Institution

6.Efficient Markets vs Excess Volatility

7. Behavioural Finance: The Role of Psychology

8. Human Foibles, Fraud, Manipulation and Regulation

9. Investment and Portfolio Management - Guest Lecture by David Swensen

10. Debt Markets: Term Structure

11. Stocks

12. Real Estate Finance and its Vulnerability to Crisis

13. Banking: Successes and Failures

14. Guest Lecture by Andrew Redleaf

15. Guest Lecture by Carl Icahn

16. The Evolution and Perfection of Monetary Policy

17. Investment Banking and Secondary Markets

18. Professional Money Managers and their Influence

19. Brokerage, ECNs, etc

20.Guest Lecture by Stephen Schwarzman

21. Forwards and Futures

22. Stock Index, Oil, and other Futures Markets

23. Option Markets

24. Making it Work for Real People: The Democratization of Finance

25. Learning from and Responding to Financial Crisis I

26. Learning from and Responding to Financial Crisis II