Market Failure

I've reached that happy state where I have no idea what day of the week it is or what the date is—like a kid playing in the snow in the days before starting kindergarten.

Speaking of snow, it's summer here—I jumped from -3 degree snowstorms to 78 degree tropical happiness. Joburg isn't near the water—it's something like 40km from the nearest river, and a long way from the sea. Most cities are built around a good port, a bend in the river, or a tactical point in the defense of a nation. Johannesburg is in the midst of the jungle, away from life-giving water, mountain passes and other natural attractions. So what is it about this chunk of land that attracts 7 million people, and wars between the Dutch, French and British? (the locals never really had a chance against the guns and smallpox)

It's all about the gold. Gold mining accounts for no less than 20% of the economy, and until 2007, South Africa was the largest gold producer in the world.

The only thing in the region more influential than gold is diamonds. Cecil Rhodes (of the Rhodes Scholarship and Rhodesia—now zimbabwe—fame) made his fortune picking up the lovely stones. Oh, that and enslaving the local populace and forcing them to work in atrocious conditions deep in dangerous, dank and dingy mines.

Which raises the specter of something quite unsettling to me. Market failure. It's a terrible thing—the invisible hand pushes us all to be productive and innovative, yet pushes some people too hard. It only works if everyone plays by the rules, but there are a lot of people who don't.

They take advantage of others who were less fortunate than them—maybe they were born to the wrong family, or weren't as smart or as strong. Whatever happened, it's a mess. And that's often the problem in countries in Africa and South America. The patronage system prevents innovation, or gangs and lawlessness keep entrepreneurs and other solid businessmen from doing what they do best. People are afraid to invest—in physical or human capital—for fear that they won't be able to control their future. With tremendously high discount rates, it's no wonder they cannot save enough to improve their future.

So what can we do to fix it? I think a lot of it is fixing the system—getting the corruption, the violence and petty crime out of the way to begin true progress. Even so, the true end goal is to reduce discount rates. Make people see that they should live for their whole lives, not just for today.

That's the same problem a lot of Americans have—from high school dropouts to lazy bums in cushy jobs. Mind you, I'm neither saying that everyone in a good job is lazy nor that we should work all the time (anyone who's known me over the past two years would know better than that), but rather that people should work hard while they're on the clock and should try their best going forward to make their world a better place. That is, once there is a level / fair playing ground for everyone.

My mother posted a quote above our doorway when I was a child that said it all: "The chief cause of failure and unhappiness in the world is trading what we want most for what we want at the moment."