Wednesday, January 28, 2009

Subtle Differences among the third world

So I was tuned into a nytimes article earlier today on rice market betting in Senegal.

Here is a key phrase to look out for:

In countries like Senegal, which, with a population of 13 million, consumes about 600,000 tons of rice a year, cheap imports of staples like rice and wheat from farms in Asia that are vastly more efficient, and often government-subsidized, typically flood local markets. The imports drive out more expensive locally produced rice.
Rice is the staple of the Senegalese diet — the national dish, thieboudienne, consists of fish and broken rice grains cooked in a thick and spicy tomato sauce.

But the price of producing rice locally made it more expensive than imports, and as a result, Senegalese farmers produce on average only about 80,000 tons of rice a year, and often struggle to sell that much, according to farming experts here.

The question is why. Why, in a country like Senegal, with a per capita income of 1,800, unable to compete in prices with a big rice exporter like Thailand, with a per capita income of 8,700?

Shouldn't the low wages of the Senegalese workers make it cheap to produce a given quantity of rice in Senegal vs. Thailand?

I have the answer.

Human capital.

In economic terms, we view things simply


Production is a function of labor and capital.

But, what if human capital isn't equal? What if for the same level of capital and labor two groups produce difference products?

HC2>HC1 as the IQ of human capital group 2 is higher than 1.

F(L,C,HC1) < F(L,C,HC2) becomes the only logical conclusion.

You wonder why the Senegalese can't compete? THIS is why.

Read it and weep. Read between the lines. IQ is everywhere. The fall will come one day. It may be sudden, it may be gradual. It may come after genetic engineering makes it irrelevant. But it will come. And we will be vindicated.


Alex L. said...

How much intelligence does it really take to grow rice? Can intelligence differences really justify a 300% difference in salary?

I'd argue that the average farmer from Senegal is being driven out of business not because they have inferior human capital, but because they have less technology for growing rice efficiently.

If it were an intellectually demanding task like nuclear physics, I would be inclined to think that human capital played a significant role.

Johnson said...

But human capital determines how effectively they can use the technology. If the rice plower breaks and no one can fix it then intelligence matters. If people are too dumb to cut costs and manage their business then intelligence matters.