PSD Blog - The World Bank Group

What can the Aswan Dam teach us about building a safe financial system?

Back in grade school, I was the kind of kid who got excited about things like fractal geometry. I even went so far as to attend math camp one summer on the Eastern Shore. I learned back then about what is still a relatively unknown branch of mathematics. 

Everyone in school learns about Euclidean geometry, which describes perfect shapes that are never actually observed in nature. Yet few learn about fractal geometry, even though it is the best tool we have to describe many types of complex natural phenomena, e.g. weather patterns, turbulence, the location of oil and other natural deposits in the earth, irregularity in the rhythm of heartbeats, etc. (With a very simple formula, it also produces the infinitely complex object pictured above known as the Mandelbrot set.)

Until a few weeks ago, I hadn't given much thought to these ideas for many years. However, I stumbled on a book by the man who discovered fractal geometry, Benoit Mandelbrot, while browsing through the section of the store devoted to finance. I was surprised to see that Mandelbrot had applied this new branch of mathematics not just to purely natural phenomena, but also to the world of finance. After reading The (Mis)behavior of Markets, I also discovered that Mandelbrot was—perhaps ironically—the dissertation advisor of Eugene Fama, the father of the now much disputed efficient markets hypothesis.

Weekend Reading

Zimbabwe's inflation ranks as the second worst in history. Who's first?

Cool graph on the commitment to development of specific countries. Sweden comes on top.

The two Koreas.

Rural to urban migration in China has reached 1.5 million people per month.

Happy Halloween.

The Obstacle to Renewable Energy (hint: it isn't about costs)

Columbia University's Geoffrey Heal asks, "can renewable energy save the world?". The answer is dependent on infrastructure and technology, rather than cost:

Where does this leave us with renewables as a solution to the problem of climate change? We can replace some fossil fuel power with renewable power without a major cost increase, but we cannot hope to replace a major fraction of our fossil power with intermittent power sources such as wind and solar – unless we can develop storage technologies. Being able to store power and smooth the output of intermittent power sources would greatly enhance the attractions of renewable power.

The bottom line is that neither costs nor capital requirement will prevent us from decarbonising the electricity supply. The real obstacle to doing this largely with renewables is our current inability to store power, and as long as we cannot store power we will need to use non-renewable sources like nuclear and coal with carbon capture and storage.

Probably a good place to invest some stimulus money.

The day you’ll be able to stumble upon development funds

Quite literally…

Imagine walking around the streets of DC with your mobile phone in hand. You "point" to, say, a building or a bridge and an application on the phone allows you to detect whether the project is a beneficiary of some of the $787 billion allocated by the US Government American Recovery and Reinvestment Act. The amount of money spent for the building and the name of the beneficiary are also displayed. Public spending could not get more transparent – and tangible – than this. Science fiction? Not anymore, thanks to the augmented reality mash-up just released by the ever inspiring folks at Sunlightlabs (hat tip: David Osimo).

 

Resources 101

The World Bank's East Asia blog links to a fantastic graphic of the world's resources by country. There is a clear correlation between size and supply: the United States, Canada, Russia, China and Brazil dominate the list. In many categories, such as soy, uranium, rice, natural gas, cotton, and corn, over half of the world's supply is controlled by three countries or fewer.

Another interesting observation is that Brazil has almost 20 percent of the world's water resources (roughly on par with Saudi Arabia's share of oil reserves). Perhaps another reason to study Portuguese? 

Financial crisis lab rats

This year's Nobel prize for economics went to Oliver Williamson and Einor Ostrom - both known for grounding their work in the real world. The committee perhaps wisely shunned researchers in finance or macroeconomics who are still coming to terms with the financial crisis and global recession. No such shyness from the judges for the Ig Nobel Prizes - committed to showcasing improbable research that makes you laugh and think. They found a way to reward those who have tested financial market models through all too real experience, giving their economics prize to the management and auditors of four Icelandic banks for demonstrating that "tiny banks can be rapidly transformed into huge banks, and vice versa - and for demonstrating that similar things can be done to an entire national economy."

The Ig® Nobel Prizes - now in their 19th year - make for entertaining reading. Where else can you see 3 true Nobel Laureates, including Paul Krugman, wearing brassieres that convert to face masks? Yet they provoke discussion about the purpose of research and the value of unpredictable, unintended results. Could we champion an award to highlight improbable research and projects in the World Bank Group? I welcome nominations.

From Development 2.0 to Development Squared: what skills for the aid sector of the future?

It was O’Reilly’s seminal article on “What is web2.0?” that inspired my first Development 2.0 article and the subsequent Development 2.0 manifesto.

So it was with great interest that I read O’Reilly’s follow-up thinkpiece in preparation to the upcoming Web2 summit. The paper tries to anticipate what will be next in the evolution of the web (the era he dubs “Web Squared”). Once again, there are lots of interesting implications to be drawn for the development sector

To summarize, the key tenet of the Web Squared era is: “the web is now the world”. Thanks to the increased ability to process ever growing amounts of digital data that have a relationship to real world objects (the world’s “information shadow”), the web is “in a collision course with the physical world”: our cameras, and microphones are becoming “the eyes and ears of the web”, our GPS its sense of location and our sensors its sense of position. The web is a baby that is growing up and becoming increasingly sophisticated in its understanding of the various inputs provided by humans: as a result “we are all its collective parents”.

Interestingly, it is O’Reilly himself who now calls for applications of Web Squared to solve real-world problems: from energy to health care. So, here’s an initial attempt at looking through the crystal ball and anticipate what a Development Squared world might look like:

Weekend Links

A new look at the tragedy of the commons.

The Halo Effect, explained.

Mongolia is in the news this week.

A societal preference for boys has become an unlikely source of power for Indian women.

Consumption versus Income Inequality.

What triggers reforms?

A previous post by Pablo on the political cost of market reforms suggests that the incentive to reform depends on the impact of such reforms on the re-election chances of the incumbent government, and how much the president or party in power cares about re-election relative to other (enlightened) objectives.

While these are important factors, existing studies show that they are not the only ones as far as the incentive to reform is concerned. Below, I report the list of possible reform triggers compiled by Williamson (1994, The Political Economy of Policy Reform) and based on various case studies and anecdotal evidence. Note that the list is not the final word on the determinants of reforms. Rather, it is more in the nature of popular beliefs with some supporting evidence. Williamson himself rejects some of the listed factors as true determinants of reforms, beyond a few specific cases.

Hackers to help the World Bank manage natural disasters

Though "hackers" and "World Bank" in the same sentence might look like odd bedfellows, the term "hack" originally indicated a clever solution to a technical problem. Hackathons are becoming an increasingly popular way for organizations with a public remit to crowdsource the solution to technical problems that they might not be equipped to solve internally. My favourite example is the UK’s National Hack the Government Day: in 8 hours, 3 developers created "a much better website that cost the government over £5m to build, and added accessibility and mobile support" - and much more.

Not to be left behind, The World Bank, together with powerhouses Yahoo, Google, Microsoft, and Nasa will sponsor the Random Hacks of Kindness hackathon on November 12-14. The event will gather 150 top volunteer programmers from Silicon Valley and around the globe. For 2-3 days they will develop software solutions to the various challenges of natural disaster response. Technologists and disaster relief workers will jointly develop technologies that enable disaster victims to help themselves and help first responders/aid workers help victims--to reduce loss of life and to speed recovery. A long time dream of mine come true – kudos to the colleagues who made this happen!