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Friday, 25 July 2008

Rural - urban drift, revisted....

Internal Migration Flows , 1996 - 2006

Source : Living Conditions Monitoring Survey Report 2006 (CSO Draft)

An interesting chart from an elusive report. I managed to find this chart, as it is relevant to the discussion we had here, but bizarrely not the report itself (the CSO have stopped responding to my emails!). Its obvious that much of the internal migration is within urban and rural areas. Perhaps the rural-urban drift isn't as pronounced as we thought ? Could the poor conditions in urban areas and already high urbanisation (35%) have brought about a natural equilibrium?

Incidentally after reviewing
that discussion , it was interesting see how the discussion conflated two separate but closely related issues. The first is whether the rural-urban drift is good or bad. The second issue relates to uneven development - and whether that is good or bad. Much of the discussion from contributors seemed to automatically assume that because "rural urban drift" leads to "uneven development" it is bad! A wrong conclusion!

Rural urban drift by itself is neither good or bad. In fact, I would go as far as to agree with most urban economists that urbanization and economic development are intimately related, and the concentration of resources – labor and capital – in our cities is a part of this process. To the extent that people move from rural areas to urban areas in response to market signals, there is no reason for us to worry about the rural urban drift. However, the problem might be with respect to unpriced externalities e.g. pollution, road congestion and epidemics. The right policy response is therefore to price these things (through an appropriate urban tax), and allow the rural urban drift to flourish. The problem of course is how to set such a tax properly.

The issue of uneven development is really about "spatial inequality". The question is whether, having priced in urban externalities, should we still be worried about uneven development around the country? Presumably yes, for reasons the same reasons we care about
income inequality in general. Or is there something special about "spatial inequality"? I do accept that theoretically income inequality can increase without changes in urban-rural inequality. My question is whether spatial inequality is special.

Would be interested to hear what the contributors from the first rural-urban drift post think.

17 comments:

  1. Its obvious that much of the internal migration is within urban and rural areas. Perhaps the rural-urban drift isn't as pronounced as we thought ? Could the poor conditions in urban areas and already high urbanisation (35%) have brought about a natural equilibrium?

    May be not. In fact, it would be interesting to have more detailed data that would be borken down by threesholds.

    If much of the urban-urban migration is from small cities to Lusaka, you still have problems.

    To the extent that people move from rural areas to urban areas in response to market signals, there is no reason for us to worry about the rural urban drift.

    yeah but we know it's not totally the case.

    However, the problem might be with respect to unpriced externalities e.g. pollution, road congestion and epidemics. The right policy response is therefore to price these things (through an appropriate urban tax), and allow the rural urban drift to flourish.

    Aren't some of those things actually priced ? In land value, in transport costs etc..

    The question is whether, having priced in urban externalities, should we still be worried about uneven development around the country?

    Which kind of spatial inequality are we talking about though ? How does it materialize itself ? Is it underinvestment ? Is it under investment relative to needs ?

    ReplyDelete
  2. "May be not. In fact, it would be interesting to have more detailed data that would be borken down by threesholds. If much of the urban-urban migration is from small cities to Lusaka, you still have problems."

    Agreed. I am in search of the raw data. I'll keep chasing the CSO. But I thought it was interesting from your previous statement in the other post :

    That's odd. I remember reading somewhere that Zambia along with Ivory Coast was one of those countries where the rural exodus was reduced unintentionally by structural adjustment policies.
    This is what got me thinking about tracking down the current information. Which fits that hypothesis quite well.

    "To the extent that people move from rural areas to urban areas in response to market signals, there is no reason for us to worry about the rural urban drift. - yeah but we know it's not totally the case."

    What do you have in mind here? Forced migrations? Civil wars? Droughts? Floods? I think the last two only cause "rural-rural" movements. There has been plenty of these, which might explain the high rural movements. But forced migrations and civil wars are absent within the Zambian context, so you would have to accept than in so far as any rural-urban drift exist, it must be largely down to market forces.

    "Aren't some of those things actually priced ? In land value, in transport costs etc.."

    I doubt it, for several reasons.

    First, the transport costs really have not began to bite. Traffic is only a massive problem in Lusaka. So you could argue that its certainly priced in there, I don't think thats the case elsewhere.

    Secondly, the land values are not really priced in either due to a weak planning system. Because you can basically erect a shanty anywhere, it reduces the issue of land as a biting constraint.

    I do think that if you had a strong planning system in Zambia, the land and housing costs would be fully priced in and we would begin to see reversals (i.e. urban to rural). As I noted in the previous post : In developed countries, the rural urban drift is less of an issue because over time reversals occur. As cities reach their "optimal size", housing costs and increased commutting costs push people to relocate to rural areas. The problem in Zambia is instead of "reversals" we see more and more people living in the slums.

    "Which kind of spatial inequality are we talking about though ? How does it materialize itself ? Is it underinvestment ? Is it under investment relative to needs ?"

    I think Kyambalesa's response in the last post explains this quite well:

    By and large, the problem relating to the migration of people from rural to urban areas is a result of what development economists have referred to as the "dual economy," that is, uneven development in the national economy between the agriculture-based rural sector and the manufacturing-based urban sector, whereby the latter sector is relatively more developed than the former. There are several situations which can lead to such uneven development in a country’s economy; they include the following:

    (a) The general lack of transportation, recreational facilities, decent housing, health care, educational institutions, and other basic facilities and services in the agriculture-based rural sector causes a drift of people to the relatively more developed manufacturing-based urban sector;

    (b) Distorted government policies and incentives that are more favorable to the manufacturing sector and less favorable to agricultural activities; and

    (c) Relatively higher wages in manufacturing facilitated largely by collective bargaining attract skilled people away from the generally non-unionized and low-wage agricultural sector.

    Larger populations in urban areas overwhelm existing public facilities in such areas, as well as diminish municipal authorities' ability to cater to the basic needs of communities in their areas of jurisdiction. Besides, the emigration makes the rural areas even more unattractive to private investment than before, and discourages local and national governments from providing educational, recreational, health care, and other essential public services and facilities in depopulated rural areas.

    The unsavory symptoms of uneven development are easy to notice: widespread unemployment, frequent outbreaks of communicable diseases, an increase in crime and social vices, and a mush-rooming of spontaneously created shanty townships in and/or around the towns and cities.


    The only obvious dimension he misses is the historical one. Uneven development in Zambia is a feature of the historical development of the mines. The colonial government clearly cared less about rural areas, and their rural policies were largely a response to the rise in the nationalist movement.

    So in short what we have is:

    1. Historical legacy
    2. Market forces - agglomeration economies, trade etc
    3. Poor government policies...

    Now on top of this we have basically a self reinforcing mechanism...rural councils are poor and have weak governance..the two normally go hand in hand, for reasons we all familiar with...what you then have is self reinforcing spatial inequality over time...DIVERGENCE not CONVERGENCE...

    ReplyDelete
  3. Cho,

    So in short what we have is:

    1. Historical legacy
    2. Market forces - agglomeration economies, trade etc
    3. Poor government policies...


    I would add point four:

    4. Aggregation of political power

    Without a conscious effort to support local government, and even with it, there will always be a concentration of central government in the capital. It is where the ministries are, and the closer a ministry is to State House the more power and influence the minister has. And that is apart from concentration of power in the office of the president itself.

    Levy Mwanawasa is on record of opposing any devolution of state revenues, even when arguing for a decentralisation of government functions. Even where state revenues are concerned, there is a desire hold on to it and not let go.

    What is needed is a good constitution that ensures the rights and obligations of local government, including it's share of national revenues.

    ReplyDelete
  4. What do you have in mind here? Forced migrations? Civil wars? Droughts? Floods? I think the last two only cause "rural-rural" movements. There has been plenty of these, which might explain the high rural movements. But forced migrations and civil wars are absent within the Zambian context, so you would have to accept than in so far as any rural-urban drift exist, it must be largely down to market forces.

    Well it depends on what we mean by market forces.

    Surely, people leave rurals areas for cities because they're attractive. And there are lots of reason why cities are attractive but some of them have little to do with "market forces".

    My thing is that people also move to the cities because there are more hospitals or more schools or government jobs or because food is subsidized while rural wages are depressed.. Those are policy decisions, not market forces.

    Secondly, the land values are not really priced in either due to a weak planning system. Because you can basically erect a shanty anywhere, it reduces the issue of land as a biting constraint. 

I do think that if you had a strong planning system in Zambia, the land and housing costs would be fully priced in and we would begin to see reversals (i.e. urban to rural). As I noted in the previous post : In developed countries, the rural urban drift is less of an issue because over time reversals occur. As cities reach their "optimal size", housing costs and increased commutting costs push people to relocate to rural areas. The problem in Zambia is instead of "reversals" we see more and more people living in the slums.

    First, unless Zambia cities are like Rio with plenty of unoccupied space close to the center, even with the possibility of erecting a shanty anywhere, there is a cost. Basically, the available spaces are further and further away or in not-safe area. That means increased transport costs (forget congestion, just think about pure cost or time) or less safety.

    Second, in which develloped country a reversal happens/happened ? Are we talking about suburbs ? Or the so-called trends the media likes to talk about ? I don't know, at the national level, even the most urbanized countries are urbanizing.

    And suburbization, rururbanisation, outer-city commuters and all that only exist because transport cost are not fully priced.

    The only obvious dimension he misses is the historical one. Uneven development in Zambia is a feature of the historical development of the mines. The colonial government clearly cared less about rural areas

    ALL governments care less about rural areas.
    Remember, they don't organize protests.

    So in short what we have is:

1. Historical legacy
2. Market forces - agglomeration economies, trade etc
3. Poor government policies...

Now on top of this we have basically a self reinforcing mechanism...rural councils are poor and have weak governance..the two normally go hand in hand, for reasons we all familiar with...what you then have is self reinforcing spatial inequality over time...DIVERGENCE not CONVERGENCE...

    Ok. And I agree with Kyambalesa's description.

    However, one issue is to separate what is "natural" and what is "policies".

    To a large extend, for economic reasons, spatial unequality will exist. Even in countries that have subsidized rural/suburban/smalltown living, cities remain atractive (like the US).
    However, the issue comes when policy creates the inequality or worsen it.. For instance 40% of the health spending in Mozambique is done in Maputo that has 10% of the population. (and they protested when the public transport prices went up, forcing the government to.. subsidize it).

    That's the extend to which it bothers me. When policies are to blame and not market forces.

    ReplyDelete
  5. Random,

    ”Well it depends on what we mean by market forces.”

    I actually define these later on in that response. I meant things like localization economies, agglomeration effects, trade, etc. Advantages that people see in the urban areas that induce them to move. In the words of Landsburg, “benefits of overcrowding”. So if people move to cities because they are “socially attractive” due to the presence of great multitudes, I put that down as the workings of the market.

    ”My thing is that people also move to the cities because there are more hospitals or more schools or government jobs or because food is subsidized while rural wages are depressed.. Those are policy decisions, not market forces.”

    Yes of course government decisions, outside market processes also have a role. But it should be noted that government’s decision also responds to those processes. So to illustrate – X would move from Kasama to Lusaka in search of government job, because he has heard government has decided to set up a new Ministry in Lusaka (an urban drift induced by government). But its also possible that government has decided to set up the new Ministry in Lusaka rather than Kasama because it believes in Lusaka it will get better pool of workers because of workers in Lusaka have high skills mix due to the agglomeration of various industries etc (its therefore responding to the state of the Lusaka labour market).

    ”First, unless Zambia cities are like Rio with plenty of unoccupied space close to the center, even with the possibility of erecting a shanty anywhere, there is a cost. “

    There’s no benefit without a cost. So my point is not that there’s no cost, it’s that cost is negligible to the benefit, hence the constant stream of people setting up shanties. I believe a more effective planning system would raise these costs sufficiently to offset the personal benefits.

    ”Basically, the available spaces are further and further away or in not-safe area. That means increased transport costs (forget congestion, just think about pure cost or time) or less safety. “

    Again, yes but people who live in shanties are poor and don’t drive. The cost is little to them.

    ”Second, in which developed country a reversal happens/happened ? Are we talking about suburbs ? Or the so-called trends the media likes to talk about ? I don't know, at the national level, even the most urbanized countries are urbanizing.”

    Not quite a reversal as such. I meant reaching some sort of city size equilibrium.

    ”ALL governments care less about rural areas. Remember, they don't organize protests.”

    Lol!

    ”However, one issue is to separate what is "natural" and what is "policies". To a large extend, for economic reasons, spatial unequality will exist. Even in countries that have subsidized rural /suburban /smalltown living, cities remain atractive (like the US). However, the issue comes when policy creates the inequality or worsen it.. For instance 40% of the health spending in Mozambique is done in Maputo that has 10% of the population. (and they protested when the public transport prices went up, forcing the government to.. subsidize it). That's the extend to which it bothers me. When policies are to blame and not market forces.”

    There’s certainly nothing worse than a government that exacerbates inequalities, without any meaning full gain in overall efficiency. I mean if the country as a whole was growing and making progress but inequality was worsening, you might forgive for a while. But if it is simply sheer politicking and without a rationale for intervention beyond immediate appeasement of urbanites, then you have problem.
    The urban dweller is certainly vocal!

    ReplyDelete
  6. ”Second, in which developed country a reversal happens/happened ? Are we talking about suburbs ? Or the so-called trends the media likes to talk about ? I don't know, at the national level, even the most urbanized countries are urbanizing.”

    Not quite a reversal as such. I meant reaching some sort of city size equilibrium.

    Interestingly, for centuries there has been a reversal from cities to countryside - by the very rich.

    In fact the more money people have, the farther away they can afford to live from the bustle of the city center.

    Within the cities, there is a drift from the usually poor centers to the suburbs when people can afford to do so.

    In the developed world, often poor neighborhoods in the center of town stay poor forever. However, the people who live there change as they move out into the suburbs and new poor people take their place.

    What happens is that they hold manual jobs thaht are poorly paid. The state gives their children 'free' education, and their children end up with skilled jobs or lower management positions. Their children grow up in a lower middle class household, and do better at school, which means they get into higher levels of education which allows them to get jobs at managerial/university level.

    With every step, they earn more money, and move into higher value neighborhoods.

    Even back in the 16th century, the very rich had their country homes and estates, which recirculated them back to the countryside.

    ReplyDelete
  7. Yes of course government decisions, outside market processes also have a role. But it should be noted that government’s decision also responds to those processes. So to illustrate – X would move from Kasama to Lusaka in search of government job, because he has heard government has decided to set up a new Ministry in Lusaka (an urban drift induced by government). But its also possible that government has decided to set up the new Ministry in Lusaka rather than Kasama because it believes in Lusaka it will get better pool of workers because of workers in Lusaka have high skills mix due to the agglomeration of various industries etc (its therefore responding to the state of the Lusaka labour market).

    Well, yeah (although I think ministries are in capitals for other reasons). But my point was more about things like schools, hospitals or some policies that make food cheaper (that can depress rural wages). There are very few market reasons for those.

    As I said, I believe governments added their policies to the "natural" advantages of cities.

    There’s no benefit without a cost. So my point is not that there’s no cost, it’s that cost is negligible to the benefit, hence the constant stream of people setting up shanties. I believe a more effective planning system would raise these costs sufficiently to offset the personal benefits.

    An effective planning system is harder to set up than changing some of the government policies. Like using a bigger part of the education and health budgets outside of the cities.

    Again, yes but people who live in shanties are poor and don’t drive. The cost is little to them.

    They walk or they use public transportation. That's a cost, non-negligible too.

    Not quite a reversal as such. I meant reaching some sort of city size equilibrium.

    yeah a 80/20 equilibrium. And even then, many of the stats are skewed by the calibration of the data. If a city grows into rural land, it's often considered rural growth rather than city growth.
    Just take a look at this gapminder chart gapminder chart.

    There’s certainly nothing worse than a government that exacerbates inequalities, without any meaning full gain in overall efficiency. I mean if the country as a whole was growing and making progress but inequality was worsening, you might forgive for a while. But if it is simply sheer politicking and without a rationale for intervention beyond immediate appeasement of urbanites, then you have problem. 
The urban dweller is certainly vocal!

    Well yeah and that's the big issue.
    Mr K is certainly onto something when he argues for decentralization of some government functions. Although I tend to think that it would divide the problem (and do nothing for public finances), he has identified an important problem.

    ReplyDelete
  8. In fact the more money people have, the farther away they can afford to live from the bustle of the city center. 

Within the cities, there is a drift from the usually poor centers to the suburbs when people can afford to do so. 

In the developed world, often poor neighborhoods in the center of town stay poor forever. However, the people who live there change as they move out into the suburbs and new poor people take their place.

    That's in the US, not in the develloped world.

    The city center of Paris, Moscow, Berlin, London or even New York are in a far different situation than the ones in Detroit or Los Angeles.

    Interestingly, for centuries there has been a reversal from cities to countryside - by the very rich.

    Even back in the 16th century, the very rich had their country homes and estates, which recirculated them back to the countryside.


    Are you calling having rural secondary residences a reversal ? I mean, they're SECONDARY for a reason ! Having a weekend home in the Hampton doesn't change the fact that rich people live in Manhatan, not the Bronx.

    And in the 16th century, the very rich had country homes and estates because it was a feudal society and they were lords and most of their income came from those estates. That income was used to finance their city life.. Close to the kings, the theaters, the dance and everything that matters on earth.

    ReplyDelete
  9. Random,

    ”Well, yeah (although I think ministries are in capitals for other reasons). But my point was more about things like schools, hospitals or some policies that make food cheaper (that can depress rural wages). There are very few market reasons for those.”

    Of course the urbanites are louder and hence those services are easier to provide for them. But remember also that they may well be paying more taxes per capita than their rural counterparts. So on equity you might argue that they deserve those things.

    ”An effective planning system is harder to set up than changing some of the government policies. Like using a bigger part of the education and health budgets outside of the cities.”

    Certainly from the scratch it is difficult due to the historical legacy. But I still think that should be long term policy, especially with rising population in urban areas, let alone that induced by rural-urban migration effect.
    Whilst I agree that continous concentration of services in urban areas perpetuates inequalities, I think there’s an interesting question on whether those policies you have mentioned can reverse the inequalities. If you accept the “dual-economy hypothesis” then the key is to achieve balance between the agriculture and non-agriculture sectors. People leave the rural areas for urban areas, either due to increasing productive in agriculture which leads to less demand for farm workers (the double edge sword of mechanization) or due to a weak agriculture development as Kyambalesa noted. Obviously in Zambia it’s the latter. The question therefore is whether investment in education and health budgets would address the weak agriculture problem. Even if government spent more on those things, it might not have an influence.

    ”They walk or they use public transportation. That's a cost, non-negligible too.”

    I just don’t see that as significant. Their value of time is low.

    ”Just take a look at this gapminder chart gapminder chart.”

    Interesting. I was taking a closer look at the Zambia trend. The share of the urban population has been falling since the 80s…along with the income per person. I am digging for more data.

    ”Mr K is certainly onto something when he argues for decentralization of some government functions. Although I tend to think that it would divide the problem (and do nothing for public finances), he has identified an important problem.”

    Agreed, and perhaps the message that it perpetuates inequalities, is part of the powerful armory for decentralization. But as you say, then the case is how best to reduce that problem, without introducing others.

    ReplyDelete
  10. Of course the urbanites are louder and hence those services are easier to provide for them. But remember also that they may well be paying more taxes per capita than their rural counterparts. So on equity you might argue that they deserve those things.

    Not necessarily. I'm pretty sure most of the income tax is collected in urban areas and probably among civil servants BUT let's not ignore indirect taxation.
    Marketing boards for agricultural exports were for a long time "taxing" the farmers by buying bellow market prices and selling at market prices. And that revenue was spent in the cities.
    Even the current export ban is supposed to prevent farmers for selling abroad at full market price just so maize can stay cheap in the cities (there's no taxation here but it's stilla wealth transfer)

    And beyond that, if equity is about everyone getting services proportionally to their taxes, why bother with taxes at all ? Why not cut it all off and let people keep their money and pay for services ?

    I think that when government decide to set up "universal" programs in health or education or in infrastructure, it has to be universal. period.


    Obviously in Zambia it’s the latter. The question therefore is whether investment in education and health budgets would address the weak agriculture problem. Even if government spent more on those things, it might not have an influence.

    Well, first of all, the policy-exarcebated inequalities may skew the incentives. It's unclear whether the urban poor really have more revenu than the rural poor. It's possible that the rural poor actually make more money but have a lower quality of life because of the lack of education and health facilities (not to mention that the absence of infrastructure depress their wages). I know for a fact that it is the case in my village. People who moved for the most part took a pay cut so their children can go to school.

    I also think that education and health can have a very significant impact on agricultural devellopment. In a labour intensive activity, deceases, deaths, time spent going to the clinic 50 miles away depress production. It's time NOT spent working. In another way, an educated agricultural work force has better access to a whole lot of things. They can read about new techniques, they can plan their production better etc..etc..

    But beyond that, I see it as a moral issue. There's no reason for governments to discriminate against their citizen. If health and education are free and universal, they have to be free and universal for everyone. And if they can't afford it, they ought to reduce the benefits for everyone and not pick and choose who gets it.

    ”They walk or they use public transportation. That's a cost, non-negligible too.”

I just don’t see that as significant. Their value of time is low.

    Sometimes you amaze me. And I have a reputation as the heartless liberal on this blog !

    But yeah, you're wrong. Sure, their value of time is low but don't you think the fact that their revenue is low has something to do with it ?
    I mean, they'r human beings, and nobody walks for an hour under the sun if they don't have to. It's not only the time, it's effort too. And furthermore, walking for an hour to get to work also turns into parents too tired or not having time to properly take care of their children. That turns into older girl-children cooking instead of going to school. It turns into homework not followed. it turns into absence of parental supervision which to an extend leads to crime. etc.. etc.. etc..

    All that is costly, may be not in a straight monetary way but still.

    Interesting. I was taking a closer look at the Zambia trend. The share of the urban population has been falling since the 80s…along with the income per person. I am digging for more data.

    public.service.jobs.

    The Zambia GDP is related to copper prices and translates into government revenue. Government revenue turns into government jobs.

    I said before that Ivory Coast experienced such a reversal too. Actually, it's one of the indirect causes of the civil war. In short, with cocoa revenues falling and then liberalization (and public spending cuts), a lot of younger people dropped on their government jobs dreams and decide to go back to their village to reclaim their "ancestral land". When they got there, they realize "foreigners" (northerners actually) had either bought or were using that land. That led to a growing resentment and clashes which in turn made the issue of land ownership and citizenship politically expedient.
    Politicians grabbed it of course, people were killed, northerners got tired of it and bam, civil war.


    Zambia is lucky, really.


    Agreed, and perhaps the message that it perpetuates inequalities, is part of the powerful armory for decentralization. But as you say, then the case is how best to reduce that problem, without introducing others.

    Part of it starts with recognizing trade-offs in my opinion.
    I started reading the Agenda for Change manifesto and they're very contradictory about it, so is Mr K (to a lesser extend) or so was the article on cashew in Mozambique. There's no free lunch and there will be loosers. Starting by recongnizing it and defending and explaning it would be a good start.

    ReplyDelete
  11. Random,

    ”Not necessarily. I'm pretty sure most of the income tax is collected in urban areas and probably among civil servants BUT let's not ignore indirect taxation.”

    Good point.

    ” And beyond that, if equity is about everyone getting services proportionally to their taxes, why bother with taxes at all ? Why not cut it all off and let people keep their money and pay for services ? “

    There’s always a role for government in terms of coordination and achieving superior gains for society. I do think “reward” and “compensation” are crucial part of “equity”, but of course there other aspects of equity we also have to consider.

    Personally, I think government should strive for “minimum” provision of certain things and then beyond that it should allow for an element of “reward”. It’s the only way higher taxes can be sustainable.

    ”It's possible that the rural poor actually make more money but have a lower quality of life because of the lack of education and health facilities (not to mention that the absence of infrastructure depress their wages). “

    You mean their real wages are higher?
    That’s possible – living in the rural would require some compensation from the employer and rural prices are generally lower.

    ”But beyond that, I see it as a moral issue. There's no reason for governments to discriminate against their citizen. If health and education are free and universal, they have to be free and universal for everyone. And if they can't afford it, they ought to reduce the benefits for everyone and not pick and choose who gets it.”

    I think you are right. If something has been declared as “universal” then it has to be universal.


    ”Sometimes you amaze me. And I have a reputation as the heartless liberal on this blog ! But yeah, you're wrong. Sure, their value of time is low but don't you think the fact that their revenue is low has something to do with it ?”

    Lol! No am not being heartless, I am simply stating a fact! Remember, the question is whether these people fully internalise their costs and then beyond explaining why they still come to live in shanties. I suggested to you that the reason why do that is that they have lower cost to themselves. Because they are poor, they attach little cost to things like congestion and other costs. Hence, at the margin, they keeping coming to the towns because its always attractive for them.

    Of course the flip side is that because they are so poor they cannot live. May be when they get to town, and face all these costs, they are simply unable to go back to the villages. So I am willing to accept that just as they are so poor that their costs are always lower than their benefits, they may also be too poor to be mobile. After all getting a bus and reallocating back to the village has some costs.

    May be the an additional policy intervention is to put on free buses to the village??

    Lol!

    ”I mean, they'r human beings, and nobody walks for an hour under the sun if they don't have to. It's not only the time, it's effort too. And furthermore, walking for an hour to get to work also turns into parents too tired or not having time to properly take care of their children. That turns into older girl-children cooking instead of going to school. It turns into homework not followed. it turns into absence of parental supervision which to an extend leads to crime. etc.. etc.. etc…

    All that is costly, may be not in a straight monetary way but still. ”


    Of course, but these costs to them are not too great to induce them to go back to the village where costs are lower. So on the margin they still prefer to be in touch, all things being equal.


    ”Part of it starts with recognizing trade-offs in my opinion.”

    Always.
    But that’s actually the skill of very good economists…even prominent academics ignore the wisdom of recognising trade-offs…
    Crucially I believe that as economists we probably should stay away from making judgements about net impacts ...very difficult, and I do its sometimes, but really it’s a practice best avoided …

    The conditions under which something is achievable is also important…often economists have not always been honest in explaining some of the heroic assumptions they make.

    ”I started reading the Agenda for Change manifesto and they're very contradictory about it….”

    that’s Kyambalesa’s party…..he’s done a couple of blogs here…..

    ReplyDelete
  12. Personally, I think government should strive for “minimum” provision of certain things and then beyond that it should allow for an element of “reward”. It’s the only way higher taxes can be sustainable.

    I actually agree but it doesn't change the problem.
    Why take people money if it's gonna redistributed proportiannally to how much is taken ?

    I mean coordination can be achieved through over means than taxes. And I'm not sure what you mean by superior gains in this context.

    You mean their real wages are higher? 
That’s possible – living in the rural would require some compensation from the employer and rural prices are generally lower.

    No, I mean comparing a farmer to the urban poor (the under-employed, the ones in the informal economy).
    No wages in the equation.

    I think you are right. If something has been declared as “universal” then it has to be universal.

    Yup.

    Lol! No am not being heartless, I am simply stating a fact! Remember, the question is whether these people fully internalise their costs and then beyond explaining why they still come to live in shanties. I suggested to you that the reason why do that is that they have lower cost to themselves. Because they are poor, they attach little cost to things like congestion and other costs. Hence, at the margin, they keeping coming to the towns because its always attractive for them.

    But the attractivity on the margin can exist without the internalized cost.
    May be they do internatize those cost and it's still a better option, at the margin.

    Of course the flip side is that because they are so poor they cannot live. May be when they get to town, and face all these costs, they are simply unable to go back to the villages. So I am willing to accept that just as they are so poor that their costs are always lower than their benefits, they may also be too poor to be mobile. After all getting a bus and reallocating back to the village has some costs.

    It goes beyond visible monetary costs.
    Think about poor, dirt poor immigrants in the West.
    Admitting failure is hard.

    May be the an additional policy intervention is to put on free buses to the village??

    LOL.

    Of course, but these costs to them are not too great to induce them to go back to the village where costs are lower. So on the margin they still prefer to be in touch, all things being equal.

    Who says costs are lower in the village. They're different.
    It's walking 5 miles to go to work or living 50 miles away from an hospital.

    But that’s actually the skill of very good economists…even prominent academics ignore the wisdom of recognising trade-offs… 
Crucially I believe that as economists we probably should stay away from making judgements about net impacts ...very difficult, and I do its sometimes, but really it’s a practice best avoided …

The conditions under which something is achievable is also important…often economists have not always been honest in explaining some of the heroic assumptions they make.

    At least economists try.
    Politicians ? They'll spend months talking about the benefits without mentionning the costs !

    that’s Kyambalesa’s party…..he’s done a couple of blogs here…..

    Interesting.
    But yeah, I don't understand how "more devolution" stand along "national legislation only".

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  13. ”I actually agree but it doesn't change the problem. Why take people money if it's gonna redistributed proportionally to how much is taken ? I mean coordination can be achieved through over means than taxes. And I'm not sure what you mean by superior gains in this context.”

    I think the challenge for governments is basically to find ways in which individuals can coordinate to effect change, but also to ensure that is done in a fair way. Now taxation is the “coordinating” mechanism…but in then spending the amount it has to try and reflect all other elements of what “fairness” means. I happen to think “reward” or “proportionality” is a crucial aspect of fairness, as is other elements - “fitness, compensation and exogenous rights”. I think simply relying on the principle of “compensation” ignores other elements.


    ”Lol! No am not being heartless, I am simply stating a fact! Remember, the question is whether these people fully internalise their costs and then beyond explaining why they still come to live in shanties. I suggested to you that the reason why do that is that they have lower cost to themselves. Because they are poor, they attach little cost to things like congestion and other costs. Hence, at the margin, they keeping coming to the towns because its always attractive for them. “ But the attractiveness on the margin can exist without the internalized cost. May be they do internatize those cost and it's still a better option, at the margin.

    I don’t follow you here. Its either they don’t internalize the external costs they impose, and government should do all it can to ensure they do. All they do internalize all their costs and we have nothing to worry about (apart from spatial inequality problems). My point is that they don’t internalise their external costs because the planning system is not binding enough. If you like, the thing they value most is space, and it towns to be the only thing we have not made sure that users of space fully internalize their external costs!

    ”It goes beyond visible monetary costs. Think about poor, dirt poor immigrants in the West. Admitting failure is hard.”

    lol! I have no answer to that!

    ”Who says costs are lower in the village. They're different. It's walking 5 miles to go to work or living 50 miles away from an hospital.”

    I was talking about “relative costs”. Of course their costs in the village, but its about whether relatively they are lower than staying in town.

    ”Politicians ? They'll spend months talking about the benefits without mentioning the costs !”
    I suppose one could argue that benefits of policy interventions are more difficult to explain. I don’t know about you by I often find when giving economic advice that non economists easily understand the costs, no matter how bizarre. But benefits always appear that much more difficult mentally, I think unless they come shaped as money.

    ”I don't understand how "more devolution" stand along "national legislation only".”

    I think I need to read it..actually I’ll ask him to take us through it or may be we just wait for MrK’s review.

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  14. I think the challenge for governments is basically to find ways in which individuals can coordinate to effect change, but also to ensure that is done in a fair way. Now taxation is the “coordinating” mechanism…

    I don't think I agree. Taxation is a redistribution mechanism. Cordination, which can be done in a whole lot of different ways (legislation, specific deals and yes taxation) is another animal.

    but in then spending the amount it has to try and reflect all other elements of what “fairness” means. I happen to think “reward” or “proportionality” is a crucial aspect of fairness, as is other elements - “fitness, compensation and exogenous rights”. I think simply relying on the principle of “compensation” ignores other elements.

    Of course, the fairness of redistribution is a complicated subject. When Mr K brings up, devolution for local governments, I always ask him about the distributing formula he has in mind. And they're all fair (the different possible formulas) in a way and unfair in others.

    But my point was that if the principle is that "you'll public spending in proportion of your tax contribution", you may as well not tax, and privatize those services since it wouldn't change anything for anybody.

    I don’t follow you here.

    I misspelled.
    I meant "it's not because there is attractiveness that they don't internalize those cost. May be they do internalize those costs and yet, at the margin, moving to the shanties is more attractive"

    ts either they don’t internalize the external costs they impose, and government should do all it can to ensure they do. All they do internalize all their costs and we have nothing to worry about (apart from spatial inequality problems). My point is that they don’t internalise their external costs because the planning system is not binding enough. If you like, the thing they value most is space, and it towns to be the only thing we have not made sure that users of space fully internalize their external costs! 


    Internalized externalities are not the only problem. I brought up the services unequality too, right ?

    As far as the planning system, I don't know. The lack of it, usually pushes more costs on the individuals. And costs are internalized through proxys (commute time, transport prices, living conditions etc..). People may not pay for them but people pay to avoid paying costs in a different way (by moving closer to the center).

    I was talking about “relative costs”. Of course their costs in the village, but its about whether relatively they are lower than staying in town.

    Why don't you make this the subject of a paper ?
    I mean, so far, we're shooting in the dark, mentionning ways in which one or the other have costs. But we don't know how much either represent.

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  15. ”Think the challenge for governments is basically to find ways in which individuals can coordinate to effect change, but also to ensure that is done in a fair way. Now taxation is the “coordinating” mechanism…

    I don't think I agree. Taxation is a redistribution mechanism. Cordination, which can be done in a whole lot of different ways (legislation, specific deals and yes taxation) is another animal.


    In the sense that taxation takes money away from people to the state…it is redistributive…(and even later to other people)

    To the extent that taxation is used to deliver public goods, it acts as coordinating device among different agents…

    ”But my point was that if the principle is that "you'll public spending in proportion of your tax contribution", you may as well not tax, and privatize those services since it wouldn't change anything for anybody.”

    I think I had a proviso of “minimums”…and then proportionality beyond that. But of course I would rather government only funded enough and society was able to coordinate itself without government gains to deliver any superior gains beyond the “minimums”…but even where people can do what you suggest (privatise services), some element of coordination may be necessary.

    ”Internalized externalities are not the only problem. I brought up the services unequality too, right ?”

    Indeed. On inequality grounds it’s a never ending problem. Lol!

    ”As far as the planning system, I don't know. The lack of it, usually pushes more costs on the individuals. And costs are internalized through proxys (commute time, transport prices, living conditions etc..). People may not pay for them but people pay to avoid paying costs in a different way (by moving closer to the center).”

    An effective planning system reduces externalities costs by either preventing external costs from occurring in the first place (e.g. through land use laws) or by realigning the marginal private costs with the marginal social costs – in the same way that tax has (e.g. restricting space). On top of that an effective planning system can also lead to external social benefits.

    ”Why don't you make this the subject of a paper ?
    I mean, so far, we're shooting in the dark, mentionning ways in which one or the other have costs. But we don't know how much either represent.”


    Yeah..definitely something worth looking into…

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  16. In the sense that taxation takes money away from people to the state…it is redistributive…(and even later to other people)

To the extent that taxation is used to deliver public goods, it acts as coordinating device among different agents…

    The deliverance of public goods is redistributive !

    I think I had a proviso of “minimums”…and then proportionality beyond that. But of course I would rather government only funded enough and society was able to coordinate itself without government gains to deliver any superior gains beyond the “minimums”…

    But even then, why not limit the taxation to fund that "minimum" and let people spend their money according to their needs ? Why have deliverance of services proportional to taxation at all ?

    but even where people can do what you suggest (privatise services), some element of coordination may be necessary.

    Some. And the coordination doesn't have to be through taxation and delivery of public services.

    An effective planning system reduces externalities costs by either preventing external costs from occurring in the first place (e.g. through land use laws) or by realigning the marginal private costs with the marginal social costs – in the same way that tax has (e.g. restricting space). On top of that an effective planning system can also lead to external social benefits.

    Well yeah. But nothing says that the planning system will be effective or won't strive to reduce private costs vis à vis private benefits.
    Land use laws can really go both ways, their mere existence won't result in an externality being priced.

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  17. "Well yeah. But nothing says that the planning system will be effective or won't strive to reduce private costs vis à vis private benefits.
    Land use laws can really go both ways, their mere existence won't result in an externality being priced."


    But that can be said for any policy. Execution is critical and of course planning carries a cost to society as well...its not cheap...but neither are police officers who man our streets to keep external costs of crime to a minimum...

    ReplyDelete

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