[16:15] There’s a mosquito-net maker in Africa. He manufactures around 500 nets a week, employs ten people who as with many African countries each have to support upwards of 15 relatives. As someone that lives in West Africa, I can corroborate that however hard they work they can’t make enough nets to combat the malaria-carrying mosquitoes.
This is specifically the part that my understanding of Econ 101 fails to process.
There is this one guy and his 10 employees, and they can’t make enough nets for the whole Africa. Okay, that part is simple to imagine. But why doesn’t he employ more people and increase the production? Or why someone else doesn’t copy his business model?
If my memory serves me well, Econ 101 assumes that if there is an effective demand, sooner or later there will also be the supply to match it.
Should I assume that there is no effective demand to buy more nets? Like, perhaps people are not aware of the dangers of malaria-carrying mosquitoes, or they don’t believe the nets are helpful, or they simply do not have enough money to match the production costs of the nets: either because the nets are too expensive, or because they have to prioritize other necessities. But then, the problem is not that they “can’t make enough nets”, but rather that they “can’t sell enough nets”.
Another thing about Econ 101 is the principle of comparative advantage. According to this principle, trying to produce everything at home is worse than trading internationally. (Otherwise an embargo would be a blessing instead of a punishment.) But an international trade will inevitably put some of your local producers out of business. Is it possible that Africa has a comparative disadvantage at producing anti-malaria nets?
It seems to me that the author is pattern-matching food aid to nets aid. But that is a different situation. In a situation without foreign aid, you cannot have a long-term imbalance between local food production and local food needs… the starving people will die. But you can have a long-term imbalance between local anti-malaria net production and local anti-malaria net needs… people unprotected against malaria only get it with some probability, not certainty; some who get malaria will die but some will survive. In other words, the resulting balance can’t include people who don’t eat, but it can include people who are not protected against malaria but still some of them survive until they can reproduce. Foreign food aid tries to solve a temporary imbalance; and in the process perhaps introduces more harm than good. But foreign anti-malaria-net aid tries to change the long-term balance.
the problems caused by aid are extremely bad in some of the countries that are targets of aid (like, they essentially destroy people’s motivation to solve their community’s problems).
I understand how an intervention that puts half of your population out of business can have this effect. I find it less likely that an intervention that puts one person in a million out of business would have the same effect. That is why I asked how many people are employed in the anti-malaria-net industry, compared with agriculture.
This seems to me like a mistaken pattern-matching. Pretty much anything can make someone lose their job. But there is a difference between “save thousand people, destroy thousand jobs” (food aid) and “save thousand people, destroy one job” (anti-malaria nets).
Re the section you quoted: if you watched for 1 minute longer you would see that the issue is that the local net manufacturers can’t scale up because they would have to compete with free nets, so the local infrastructure atrophies. (Absent aid, they could scale up, it would just take longer; scaling up might require additional capital or training)
The issue isn’t number of jobs. The issue is (a) infrastructure to solve your own problems and (b) motivation to solve your own problems rather than waiting to have someone else solve them for you. This is all covered in the “Dependency” section of the video, which I am still not convinced you have watched.
This is specifically the part that my understanding of Econ 101 fails to process.
There is this one guy and his 10 employees, and they can’t make enough nets for the whole Africa. Okay, that part is simple to imagine. But why doesn’t he employ more people and increase the production? Or why someone else doesn’t copy his business model?
If my memory serves me well, Econ 101 assumes that if there is an effective demand, sooner or later there will also be the supply to match it.
Should I assume that there is no effective demand to buy more nets? Like, perhaps people are not aware of the dangers of malaria-carrying mosquitoes, or they don’t believe the nets are helpful, or they simply do not have enough money to match the production costs of the nets: either because the nets are too expensive, or because they have to prioritize other necessities. But then, the problem is not that they “can’t make enough nets”, but rather that they “can’t sell enough nets”.
Another thing about Econ 101 is the principle of comparative advantage. According to this principle, trying to produce everything at home is worse than trading internationally. (Otherwise an embargo would be a blessing instead of a punishment.) But an international trade will inevitably put some of your local producers out of business. Is it possible that Africa has a comparative disadvantage at producing anti-malaria nets?
It seems to me that the author is pattern-matching food aid to nets aid. But that is a different situation. In a situation without foreign aid, you cannot have a long-term imbalance between local food production and local food needs… the starving people will die. But you can have a long-term imbalance between local anti-malaria net production and local anti-malaria net needs… people unprotected against malaria only get it with some probability, not certainty; some who get malaria will die but some will survive. In other words, the resulting balance can’t include people who don’t eat, but it can include people who are not protected against malaria but still some of them survive until they can reproduce. Foreign food aid tries to solve a temporary imbalance; and in the process perhaps introduces more harm than good. But foreign anti-malaria-net aid tries to change the long-term balance.
I understand how an intervention that puts half of your population out of business can have this effect. I find it less likely that an intervention that puts one person in a million out of business would have the same effect. That is why I asked how many people are employed in the anti-malaria-net industry, compared with agriculture.
This seems to me like a mistaken pattern-matching. Pretty much anything can make someone lose their job. But there is a difference between “save thousand people, destroy thousand jobs” (food aid) and “save thousand people, destroy one job” (anti-malaria nets).
Re the section you quoted: if you watched for 1 minute longer you would see that the issue is that the local net manufacturers can’t scale up because they would have to compete with free nets, so the local infrastructure atrophies. (Absent aid, they could scale up, it would just take longer; scaling up might require additional capital or training)
The issue isn’t number of jobs. The issue is (a) infrastructure to solve your own problems and (b) motivation to solve your own problems rather than waiting to have someone else solve them for you. This is all covered in the “Dependency” section of the video, which I am still not convinced you have watched.