Monday, January 9, 2006

Currency crises / Markets for status

I have two great articles from two great bloggers for you today. First, Tyler Cowen at Marginal Revolution has a sound theory on why third-world countries have currency crises, and why governments in the third-world have no interest in maintaining a sound currency :

The country as a whole is poorer, if only because the currency collapse disrupts economic activity. The first class of asset holders [representing the poor citizens of a third-world country] is much poorer and many are wiped out altogether. Non-tradeables are oriented ever more toward wealthy, sophisticated demanders. Culture will boom, non-shippable foods will improve in quality, and perhaps the women will become more beautiful. Relatively wealthy vacationers will find that this place is just right for them. Yet the streets will have more litter and there will be more beggars than before.

This is no conspiracy theory, but it does explain why we do not see greater domestic pressures for fiscal stability.

As I said before, so much for the "it's not their fault" theory of foreign aid. Also yet another way in which government hurts the poor.

Will Wilkinson, at the Fly Bottle, thinks that people's craving for status can co-exist with a peaceful society, as long as we get government out of it :

The obvious point to make about status, then, is that it is domain relative, and that the number of domains does not seem to be fixed. (My example may tempt you you to confuse status for fame. Don’t.) One of my favorite documentaries, Word Wars, goes inside the fascinating world of competitive Scrabble players. Naturally, this being a human endeavor, there is a ladder of status among Scrabble players, and for the people who devote their live and energy to the game, this is the kind of status that matters. Now, it may seem to you that Peyton Manning is a bigger deal than Joe Edley, but it doesn’t seem that way to Joe Edley.


So what to we do about the fact that people are status-seeking? What we do is encourage a decentralized entrepreneurial culture where status domains without number may bloom. Where the president of the Tuscon YMCA, the world’s Scrabble champion, Tony Hawk, the best fusion jazz guitarist in Miami, and the first and only audio/olfactory immersive ambient concept assemeblagist can sleep sweet dreams, secure in their well-deserved status.

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