Thailand: ATMS and price discrimination

Like Bali, Thailand’s economy is often associated with tourism. In actual fact, the sector makes up about 9.3% of Thailand’s GDP, with manufacturing eclipsing it by quite a bit, along with the financial services industry (Thailand is a stable Southeast Asian economy whose currency, and probably their banking system, is well-regarded regionally, possibly explaining why that sector is doing well). Still, Thailand knows that the travellers from Britain, Australia, Singapore, the US, and other East Asian countries are an important resource, and it’s developed a very decent infrastructure to welcome them. Getting around can either be very easy (for a price) or moderately easy (for very cheap).

One thing that does not come cheap, however, is money. I don’t mean in the traditional economic sense of opportunity cost (you have to give up time to get money), but in the literal sense, that if you want to get money from your bank or credit card, you will have to pay for the privilege. As of October 2017 the exchange rate is roughly 30 baht to the dollar. An ATM withdrawal at any ATM in Thailand, regardless of bank, will run you 220 baht, or about seven U.S dollars.

How do the Thais afford these ATM fees? 220 baht is the cost of four or five meals, seven rides in a songthaew (bus-taxi pickup truck that is actually a great idea), a motorbike rental for a day–it’s a fair bit, especially if you’re earning a median Thai income, which is about 237 USD, or about 8000 baht per month. Two withdrawals would be about 5.5% of your income.

The answer is simply that the Thais do not pay these ATM fees–extra fees are charged only for foreign cards–any nationality. My American and Korean cards were both met with the same charge, and the ATM openly tells you that the fee is for foreign cards. This is a perfect example of…

 

Price discrimination!

An economic phenomena where businesses charge customers different prices for the same good, dependent on their willingness to pay. Usually it’s hard to pull off, because supermarkets can’t ask for your tax return every time you enter the store and change all the price labels to the maximum they think someone of your income group would be willing to pay.

It’s getting easier of course–online retailers can profile you based on past purchases and other collected data, get an idea of what you’re willing to pay, and change the price on that copy of Capital in the Twenty-First Century all with an algorithm if they want to, and once we all get contact lenses with HUD screens projected in front of us that let us shop in augmented reality, supermarkets could do the same thing.

That’s all in the future though–for now, we’re stuck with price discrimination based on simpler types of profiling, which is where Thailand’s ATMs come in. Charging 7 USD for an ATM withdrawal from foreign accounts is a nearly foolproof means of price discrimination in the country. Here are a few reasons Thailand can pull it off.

First, barely anywhere in Thailand accepts credit cards, especially not at normal levels of buying things. 7-eleven stores have a minimum, I believe, of around 3-500 baht, or at least nine dollars. That sounds easy to meet, but in Thailand that’s four bags of chips, three beers, a coffee, and two or three candy bars–and that’s all for my lowball estimate of 300 baht. That’s not a normal amount to purchase at 7-eleven most of the time.

So because everything from street food to the post office is cash-only, you need it–and as a traveller, you typically run out faster than you think you will due to unexpected expenses or just saying “lets do this cool thing” one too many times. And the only way to get cash is ATMs.

Second, there is absolutely no competition–I’m not sure exactly why all the banks charge the same rate, but the two main possibilities are government regulation (basically a tourist tax) or price-fixing/collusion by cartelized banks. In any case, if you need cash, you’ve got a few banks to choose from and they’re all the same price. I always liked Siam Commerce Bank because it’s got a slick color scheme.

Third, tourists aren’t going to organize and get anything done about this–they’re here for a few weeks, and they want to see some cool temples. They’ll bite the bullet and pay, then forget it until the next time. Elasticity of demand for money among tourists in Thailand is pretty low.

Fourth, Thailand doesn’t need to see tax returns to know what price to charge you–if you come to Thailand, you’re already paying a significant amount for travel, signaling that you’re in a disposable income bracket that will absorb higher prices without a lot of hesitation. Thailand’s tourism sector has a less reputable part that basically makes their entire living off this assumption, and even the more reputable parts hike the official prices (for national parks, temples, museums, etc) way up for foreigners. And of course it’s true–even with the price hikes it’s very affordable for someone like me and my U.S dollars.

 

Thailand: Guessing why there are so many pickup trucks here

(Correction: written while in Thailand, published significantly after writing :D)

I’ve been in Thailand a few days now, mostly in one southern region called Krabi Province. Yes, we felt crabby, no we didn’t eat crabs. It’s a bit south of Phuket, and while it has a fair bit to offer and caters extensively to tourists, the town is much quieter than its more famous neighbor and has a much slower pace. Staying there during rainy season meant that the town was even more peaceful than usual. It also gave me a chance to see a little more what the pace of life is like without the tourist industry in full swing.

I have plenty of things to say about Thailand already, but a few in particular stood out to me.

 

Pickup Trucks

This is my first mainland Southeast Asian country, so I’m not sure what the situation is elsewhere, but Thailand has a lot of pickup trucks. Sure, all Asian countries have pickup trucks–they’re very useful. But most that I’ve seen are different. In Asia, pickups to be smaller, less rugged, and much more street-ready than mud-ready. In Korea especially the most popular brand looks more like an oversized vehicle driven by a golf-course maintenance team than it does a typical American pickup.

But in Thailand, at least the south, it’s impossible to watch the street for more than a few minutes without sighting one or five real, 4-wheel-drive, mud-spattered, pickups. Some of them are clearly work vehicles, some of them are taxis–for real, some songthaews (taxi-like vehicles that get you where you need to go on the cheap) are actually modified pickup trucks with a shelter slapped on.

So what’s up? Frankly, I don’t know, because I didn’t take a poll. I have my suspicions though, and they start with infrastructure. Thailand is a wonderful places with plenty of roads–but a fair number of those roads happen to be dirt, and I’d bet that the ones I saw were the good dirt roads. It’s still very much a developing country, and nature is large and in charge. The Thais don’t have the luxury of cute little pickup trucks to the same extent that countries with a bit more asphalt do–they have to go onto some pretty rough roads every day, and if your business involves hauling things around–including people–you need to be pretty sure you can get where you’re going. Thai pickups are probably, in one sense, a symptom of an incomplete road system and a climate that can get very soggy.

Adding on to that, a lot of Thais are still employed in the agricultural sector, and manual labor is still more widespread than service jobs, trades, and professional occupations. Where do you find the pickup trucks? The farms and the worksites. Add to this that road conditions are likely to be a lot worse out in rural and developing areas and you’ve got a need for more muscle than you can get with what I’ve, perhaps unfairly, come to call the Asian pickup truck.

Are road conditions and economic sectors the reason for rate of big pickup ownership in Thailand? That’s a question for a masters’ thesis, but at a minimum, I can guarantee that pickups are common, roads can get rough; and the average employment of the Thai worker tends towards the manual.

Coming up: Thai music is mostly now acoustic covers of western top 40 hits (why?); ATM fees are price discriminating wonderfully; a coffee and a meal here are almost the same price (very cheap); and more!

Singapore: Free economy, flawed politics, and some interesting numbers

Singapore is exactly what you’d expect, but less so. Expensive? Yes, but you can be cheap. Clean? Yes, but not significantly more so than Japanese cities. Strict–draconian even? The signs telling you about fines are plentiful, but so are the people jaywalking and smoking in theoretical non-smoking areas. Efficient? Absolutely, but the bus stop didn’t have an electronic display and the subway made an unscheduled mid-ride stop; Korea had displays everywhere and 100% of my subway rides for the last three years have been uninterrupted. Polished and classy? Yes, but the good parts of the city are the more run-down, semi-gritty ones–and those do exist.

All that said, I enjoyed Singapore much more than I anticipated. I wouldn’t want to live there–I prefer a bit more personal freedom–but as a place to visit it offered a lot of budget-friendly, interesting options and a fairly painless experience getting around

Tangent: Singapore public wi-fi is a real pain

I’m going to get a bit more academic in a moment, but on a personal note I have to complain about the wi-fi situation in Singapore. I didn’t buy a SIM card for my two-day stay, thinking wi-fi would be ubiquitous. It is, somewhat, but only the city-run wi-fi hotspots are really ever open, and every time you want to connect you have to go through the multi-minute process of opening the login page on your browser, entering your foreign phone number (luckily I still had my Indonesian SIM card, or I would have been out of luck), getting a code via SMS, going back to the browser, entering the code, and then finally getting access to a fairly decent connection. You have to repeat this process every single time you want to connect, even if you’ve just moved to one down the street, unless you download the app–which I did, but couldn’t sign up for since I don’t have a Singaporean phone number. For a city called “the most tech-ready in the world” it has pretty horrible connectivity. I’ve had much better luck in most other Asian cities.

That said, here are some stats:

Population 5,600,000
GDP (nominal, 2017) $304 billion USD (37th largest; 39th in PPP terms)
GNI per capita nominal/PPP 2017 $52,000 USD/85,080 (3rd-highest)
Major sectors Manufacturing, business services, trade, finance
Unemployment (2016) 2.1% (not a typo, not an outlier)

Data from the World Bank and SingStat.gov–which is an amazing statistical resource that I wish more countries had something like.

I’ll break down those numbers really quick, because they do get interesting. Nominal GDP just means straight-up how much money the goods and services produced in Singapore are worth. Given that Singapore is only 2/3 the size of New York City, it is fairly impressive that it ranks 37th overall–though it is worth nothing that NYC’s GMP (Gross Metropolitan Product) is 1.55 trillion USD–about that of South Korea. Though if you read carefully into that report you’ll notice that this number includes some areas of New Jersey in the NYC metro area–fair enough, but a bit tricky.

The good stuff comes when you see the GNI (Gross National Income) per capita (per person). In nominal terms (how much money a Singaporean citizen earns in U.S dollars), the average Singaporean income is nice and middle-class. In terms of PPP (Purchasing Power Parity, or how much stuff they can buy compared to the rest of us), they’re sitting at a very respectable 85,000 USD, which means your average Singaporean citizen is U.S upper-middle class, right?

Well, we’ll get into inequality later; for now, suffice it to say that GNI per capita is calculated by taking the average of all citizens’ incomes, and Singapore has some rich, rich people. Median income, a more accurate picture of typical incomes calculated by looking at the middle of the distribution, is about 36,000 USD–though this is still hardly anything to sneeze at, and adjusted up for PPP is still excellent. Though you also have to shave off about 20% for CPF, Singapore’s social security program.

In plain words, the average person in Singapore is doing really well, and they can get more with their money than Americans can. Why do bars exist in Singapore when drink prices average 8-20 USD? Because, while it’s still expensive for them, Singaporeans can in general afford those prices.

Finally, unemployment is 2.1%, and that’s been pretty steady for at least a decade–that is insanely low (lowest in the world), and I’ll get to that around the end of the post. For now, here are a few ramblings to break up the numbers stuff.

Strangely Free

As I mentioned in the introduction, Singapore has a reputation for being a bit strict. You’re technically not allowed to bring chewing gum into the country because they don’t want it on the sidewalks. The subway specifically disallows durians (a particularly pungent fruit popular in Singapore). You can’t even buy a beer in a convenience store after 10:30pm,and the laws governing the sale of alcohol on and around public holidays are undoubtedly as irritating to locals as they seem confusing to visitors.

Of course, Singapore’s massive alcohol taxes (a trait it shares with neighboring Malaysia and its neighbor, Indonesia) make buying alcohol a bit unpleasant anyway.

But despite having sin taxes through the roof, Singapore is actually one of the most economically free countries in the world, as ranked by The Economist, Freedom House, and others. Income and corporate tax rates are quite low (someone earning $30,000 USD pays about 2%), and Singapore, being essentially a nation in a single city, doesn’t impose many import duties. Actually, about 99% of all imports enter tariff-free, with the exception of tobacco and alcohol (the fun stuff, of course).

My personal stereotype before learning about it was that Singapore must tax pretty heavily in order to maintain the infrastructure it’s famous for, but oddly enough, it turns out that government spending is about on par with taxes collected. That is to say, Singapore’s government is fairly frugal. So where does all the good stuff come from?

One answer is that a tiny but wealthy nation is a lot easier to manage well than a big wealthy one. They have to manage exactly one subway system, one set of building codes, one police force, et cetera. This enables them to really cut down on budget leakage and misuse and limits administrative gridlock. Centralization does its best work in homogeneous environments.

Singapore is also still fairly young demographically, so it has a low dependency ratio (ratio of people draining the social safety net versus contributing), and high immigration is sustaining that demographic advantage.

State-owned enterprises (the government profits off of shares and ownership in several industries) also bring in a decent profit that add to tax revenue.

And then there’s also the fact that low tax rates still bring in a lot of money when you have a very wealthy population. So overall, it looks like Singapore’s government is having its cake and eating it too, because they only had to make a small, excellent cake, and they had some excellent ingredients to work with.

So why do I say it feels “strangely free?” Well, the overbearing rules that haunt your daily life in Singapore are a symptom of a political system that Freedom House and most other indexes rate “partly free” or “flawed democracy.” You are generally free to do whatever you want in a financial sense, but not necessarily to participate in the political process. Singapore is currently on its third prime minister. Number three. That wouldn’t be so bad if Singapore had begun a decade or two ago, but the history buff will have already remembered that the city-state gained independence from Malaysia in 1965.

One man, Lee Kuan Yew, held the post of prime minister for over thirty years. The new one, Goh Chok Tong, was chosen to succeed Yew and became prime minister in 1990 without a vote, though the one-party system slipped a bit in the parliamentary election in 1991. The third PM, Lee Hsien Loong, is currently in office after being made deputy prime minister simultaneously with Tong ascending to PM. Loong also happens to be Lee Kuan Yew’s son.

Citizens have more say at the parliamentary level but even so, the centralization that makes Singapore such an economically free place still serves to limit how much can be accomplished politically, and how many things can really be changed. Electoral manipulation and political suppression are both still present, and free speech is not guaranteed.

Ethnicities and enclaves/Workers and wages

My absolute favorite parts about Singapore were not the most-photographed ones. Yes, the fancy buildings and harbor views were spectacular, but much more interesting at a human level were the districts of Little India and Chinatown–which are genuinely populated by people from these countries and with these backgrounds, and which exude their own unique vibes at stark odds with the neatly administrated neighborhoods surrounding them.

Singapore has a very large migrant population–Indians, Malays, Chinese, and many more. Some migrated several generations ago and are now full Singaporeans; some are here on migrant worker visas. Currently about 15% of Singapore’s residents are migrants.

70% of Singapore is ethnically Chinese, but unlike China, there really is no obstacle to becoming a citizen provided you meet the other requirements. This is perhaps one of the only Asian countries I know of that is so: it would be laughably difficult for a non-Korean to gain Korean citizenship; likewise in Japan, China, etc. And even if they did–and some have–there is a very strong sense that you are never Korean/Japanese/Chinese if you lack the ethnic aspect.

The official language being English also gives it quite an international feel and makes it far easier for migrants to settle here, as English is widely spoken and practiced by those anticipating a career abroad.

For all their charm and melting-pot sensibilities, however, the ethnic enclaves can put on display some of Singapore’s high economic inequality. They score 49.3 on the GINI coefficient (a 1-100 measure of economic equality, with 0 being exactly even distribution and 100 being “one person has it all”).Of course, the GINI coefficient is flawed as it is highly susceptible to outliers–the more rich people move to Singapore, the higher the coefficient gets because more income is technically now going to the top, and Singapore has an especially high level of super-wealthy people in its population.

This last explanation does tend to be the state’s defense of their GINI score, but it hardly explains away everything. Especially among the migrant worker populations there are high rates of poverty which tend to be ignored. Given that Singapore’s economy benefits quite a bit from these non-citizen workers, perhaps they should be acknowledged a bit more.

That said, inequality is by no means automatically a bad thing, and the fact that people migrate to Singapore for work means that they tend to view it as a step up. The fact is, Singapore’s median income is excellent, and the standard of living there tends to be very high; both ends of the spectrum exist, but on the whole the average Singaporean is doing well enough.

Unemployment? What’s that?

Perhaps one of the most interesting aspects of Singapore is its freakishly low unemployment rates–they’ve hovered around two percent for quite a long time, which is far below the roughly five percent that most health economies tend to be at. Frankly, if you get too far below five percent for too long you end up, among other things, not having enough qualified workers available to fill open positions, leading to economic slowdowns as firms struggle to grow or even maintain their labor force.

So how’s Singapore, this crazy economic outlier, actually doing it?

One reason is already listed above–immigraton. Singapore has a fairly flexible workforce, and in fact the unemployment rate for residents only tends to be higher than that of the entire population, since temporary/non-resident workers tend to leave altogether if they lose their job.

They have also experienced pretty much non-stop economic growth, and with economic growth comes jobs.

So no extremely well-organized central planning committee or cultural work ethic necessarily–just immigrants and growth.

Conclusion

My advice for those visiting Singapore: eat at the hawker centers (it’s so much cheaper), take a break from the alcohol, visit the photo spots, and make sure you check out the parts of Singapore that don’t match up with the myth. And while you’re there, go ahead and contemplate the successes and paradoxes that underlie Singapore’s safe, smooth exterior.

Bali, Indonesia: developed tourist sector; developing economy

The island of Bali, Indonesia, is well-known for being the “love” section of the book/movie Eat, Pray, Love. As a tourist destination, though, it has a history that goes way back past the 2010 movie. Actually, in 1932 there was another film, The Virgins of Bali, popular for its numerous images of bare-breasted Balinese women (courteously allowed to remain so by the Dutch, who, in the spirit of colonialist cultural sensitivity, legalized nudity by uncivilized women, but not civilized women; draw your own conclusions). This film sparked a purely academic interest in visiting the island, and Bali’s tropical climate, striking natural beauty, and laid-back culture has kept the tourist industry going strong since. Even a volcanic eruption, violent political unrest, two terrorist bombings, and “Bali Belly” have been unsuccessful in discouraging visitors.

Here are a few stats:

Population (2014) 4,255, 341
Nominal Gross Regional Product (GRP) 12.84 billion USD (PPP adjusted: 49.59 billion)
Nominal GRP Per Capita 3,210 USD (PPP adjusted: 10,804 USD)
Major economic sectors Tourism (70-80%), Agriculture/Fishing (~20%)

All statistics from Wikipedia, which draws on Indonesian publications; as far as I can ascertain much of this data is not readily available in English, or I would have cited more rigorously.

As it was my first time in Indonesia–and only five days–I didn’t have a lot of time to get out of the heavily commercialized Kuta and Ubud areas, except taking an excursion to the even more commercialized Gili Islands. That said, the entire island of Bali is tourist-oriented to some extent, making the popular areas not-unhelpful in understanding the way its economy and culture operates.

While I may go more in-depth on some specifics in future posts, for now I’m going to stick with some of the highlights of my time on Bali.

The Airport
First, the airport is nice. Not just, “not a bad airport for a developing country” nice, but “the airport actually feels like you’ve arrived in a tropical resort” nice. The interior architecture, lighting, and general ambience are above standard, and the plant-covered, softly-lit exterior makes it even better from the outside. You can tell they put money into making a good first impression on the arriving tourists. I’ve been in South Korea’s Incheon a few times and Singapore’s Changi twice, two of the “best airports in the world,” and Bali’s has a vibe that easily competes, though perhaps not the endless list of amenities that the other two offer. Given that tourism is the dominant sector of the Balinese economy, and that Bali’s GRP has grown faster than the Indonesian regional average pretty consistently (6.24% in 2016, as opposed to Indonesia’s 5.0%), this makes sense as a capital investment.

The English
Second, the level of English spoken there is a little eerie. The first day, we got SIM cards at a local shop–the attendants were completely conversational. Our taxi driver, whose son had just left for a cruise ship job in America, was also quite a talker. During the conversation, he revealed that his highest education level was elementary school, and he had spent most of his career in construction. These were not exceptions–they were certainly the rule.

So let’s put that in context: I just spent three years in South Korea, one of the world’s most developed nations with a high level of interest in learning English and an effective (almost too effective) education system. There, the average person speaks a few words and is familiar with the loanwords that make up 20-30% of the South Korean language. Still, making yourself understood or finding your way around without some command of Korean is fairly difficult. In Bali, where the average education is somewhere between elementary and middle school, almost everyone we met spoke very decent English.

The disparity has its roots in basic economics. I would lay money that if you were to go to one of Indonesia’s similarly well-developed, but less-touristy regions, you would find a lot less English. Australians and Americans are two of the main nationalities travelling to Bali, and English is essentially a universal tourism language for most other countries as well. The Balinese probably learn very little English in schools, but they learn it even more effectively than the Koreans because they have frequent occasions to use it. The agricultural sector in Bali, which still employs many, though it contributes disproportionately less to GDP, probably has lower levels of English as well. But essentially anyone in a city or popular town in Bali will have English communication skills, from the hawkers to the convenience store clerks to the tour guides. Most of their jobs, and thus a large part of their economy, depends on them being able to communicate with tourists; their incentive to be good at English is high, and they respond accordingly.

Work and Savings
Third, they are absolutely still a developing economy. Like the rest of Indonesia, Bali enjoys a fairly high standard of living relative to many places, but is still plagued by governance problems, economic instability, infrastructure shortfalls, and any number of other things.

Out of the fairly small sample size of Balinese people I had conversations with, two of them (our AirBnB host and our taxi driver) had relatives working abroad on cruise ships. Our host described her husband’s work as long days, leading into long months away from home, with visits back to his family few and far between. He had spent time on European, Asian, and American cruises, but hoped to retire soon–it’s not so much of a vacation for the workers. Despite their distaste for this job, however, it remains such an attractive position monetarily that our taxi driver’s son, with his own wife and child in Bali, had just flown to America for the third time to get a cruise ship job (having done so twice before but having had his job cancelled when he arrived, which seems like a very low move on that company’s part).

Employment opportunities on Bali are certainly a bit limited, and wages fairly low. The living standard is still in line with what you would expect in a developing nation, and overall Bali, while undoubtedly a pleasant place to live due to the climate and atmosphere, is susceptible to the same money worries that much of the world deals with.

Further impeding savings on Bali, apparently, is the plethora of expensive rituals that families must regularly perform. Our AirBnB host described to us the regularly occurring religions festivals, as well as multiple celebrations held each year for occasions such as birth, death, and marriage. These are not uncommon in most countries, to be sure, but from her description, it came out that many things on Bali merit not just one celebration, but several, each one marking a different stage in, say, a baby’s life. Religious/cultural ceremonies are also common and also require fairly significant donations.

These are just a few of the things I gleaned from Bali; time allowing, I will be writing more soon.

 

Sources

Wikipedia

CIA World Factbook

OECD Structural Policy Country Notes Indonesia

Article on Bali’s agricultural sector

Asian Development Bank: Indonesia

Southeast Asia: My effort at scraping some social science out of a backpacking trip [SE Asia 1]

Introduction

I just recently wrapped up a multi-year stint teaching EFL in South Korea–an up and down experience I honestly wouldn’t trade for anything smoother. My time abroad has already been an exercise in mind-expansion, and that will hopefully continue as I visit (roughly in this order): Indonesia, Singapore, Thailand, Laos, Cambodia, and Vietnam.

This is a famous backpacker area of course, and there’s no shortage of blogs on the region from that perspective. Rather than narrative travel or “tips,” I will focus on digging a little beyond the vacation lens and provide some insight into economic, social, and political realities as they seem to play out on the ground. Where possible, I will pursue conversations and experiences that give me a personal sense of some aspect of life in these countries, which I will then augment with data (not the plural of anecdote, but a very helpful companion).

In reality what will probably happen is: I see something that provokes a question, I research it, and a few paragraphs result. For instance, I have a particular fascination with what Tyler Cowen calls “GDP tourism.” Directly encountering the fuel that drives the country forward is an exhilarating experience. One question I ask when I’m in a new place is generally “Where is the money made here, and what does that look like?”

 

GDP tourism: South Korea

In the city of Ulsan, where I lived in Korea, the GDP was more obvious than most; you can ride your bike right past the biggest car plant in the world (Hyundai), or take a peek at the world’s biggest shipyard (also Hyundai, I believe). You could go and see the fields upon fields of cars being driven one by one onto massive ships, ready to be shipped along the veins of worldwide trade until they reach their ultimate owner, in some small town you’ve never heard of but where someone produces enough value that they can, through a spiderweb of transactions and networks, trade their skills as a plumber to Hyundai for a car that came from a country they had never been to, yet which built and shipped a car halfway around the world in the anticipation that someone like that plumber would choose to buy a Hyundai.

 

Grocery store tourism: South Korea

I also have a hobby of checking out grocery stores wherever I go. Preferably a supermarket chain, multinational or no, but traditional markets, convenience stores, or local marts are also objects of interest. You can learn a lot about a culture by looking at what the supermarket carries, and how much it costs. Korea, for example, has a love affair with Spam dating back to the Korean War. Today, if you walk through a typical store you’ll find more varieties of the canned meat than you ever wanted, and around the holidays you shouldn’t be surprised if you receive a few cans of delightful mystery meat and some cooking oil wrapped up in an attractive gift box which, in America, might contain some sort of holiday sweets.

In Korea, brand-name Spam is “fancy” because in the aftermath of the Korean War, when it was the poorest country on Earth, American soldiers had it in their rations, and due to its portability and preservation, it was easily used as a trading good and included in aid packages. Korea’s current love affair with meat (it’s in everything) comes from this period where meat was an occasional luxury, which usually arrived in the form of Spam.

You can also ponder the mysteries of why watermelons cost $20.00 USD, while bananas barely register on your receipt at $0.15-$0.25 USD per banana.

Given that I am spending 1-2 weeks in most of these countries, I will develop at best a tenuous grasp on the realities that shape them–but it should always be interesting, and hopefully factual!

MIT, micromasters, and disrupting higher ed

For the past few months I’ve been taking courses with MIT’s Data, Economics, and Development micromasters program. After having completed 2/5 courses I’ve absorbed a lot of very interesting material, some of which will almost certainly be making it onto this page in the future.

Beyond the content, though, what impresses me most is that MIT is offering these courses on an audit basis to anyone who wants to try them, with a potential path to actually attending the school and earning a full masters. Even more fascinating is that there are no set academic prerequisites for entering the full masters program beyond completing the micromasters online. Of course, not all applicants who go through the MM will be accepted, but the raw idea is worth digging into.

MOOCs are edging us towards a path to college admissions that removes significant guesswork from both sides of the equation. On the institution’s side the need for credentials to enter universities is based on the idea that past performance is a reliable indicator of future results; on the student’s side, the assumption is that acceptance is a fairly reliable indicator that the university approximately matches their capabilities. Students may also operate under the assumption that they will find the coursework useful in some way, that they will be interested in their chosen field, and that they won’t for some reason be inspired to drop out.

Of course, past performance is never a guarantee (thanks, Nassim Taleb), but past performance in a different environment is still less of a guarantee. People drop out or fail because they are either poorly matched or because the reality did not meet their expectations in some way. Under MITs system, presenting the material at the actual level of difficulty a student would encounter in the full program, and with some financial commitment (100-1000 dollars, dependent on income, if you choose to take the micromasters track rather than simply auditing, which is free) essentially corrects the information asymmetry.

On the university side, it gets a lot easier to select students that you know will fit you at an academic, and to some extent, a cultural level, without doing a lot of research into their performance in regional spelling bees. This could serve to significantly reduce the time spent per student in the admissions office. In short, MIT knows how you’re doing in their course, regardless of past performance, and the student has a fairly good idea of what they’re getting into.

In the rosiest view, I could see this system correcting for a lot of issues that currently plague higher education. Low to no cost auditing with light credentialling attached would be a way to admit students with real ability who don’t have the formal paperwork in hand. It might improve dropout rates by exposing students to the product before they make the decision to invest. It would certainly help universities by creating a self-selection process based on actual observed performance rather than educated guesswork, making admissions into less of a bureaucratic necessity and more of a competitive process. It could reduce administrative overhead in the long run, create richer technological integration in a stubbornly old-fashioned higher education system, and possibly create a clearer market for universities based on instruction and utility rather than experiences and amenities, which tend to be pushed in promotional materials.

Nonetheless, as Tyler Cown laments in The Complacent Class, universities are already bubbles of like-minded, like-backgrounded individuals. This could get better with self-selection opening up admissions to students who would not traditionally be able to enter, but it might also become worse as the courses will perhaps tend to promote over-matching, appealing to those with a certain worldview and background. Something like Jonathan Haidt’s Heterodox Academy project would have to figure into the creation of these courses in order to ensure that diversity in all respects would continue to thrive and that we wouldn’t self-select into even more polarized groups than we already do.

Additionally, those without the time or access to participate would be at a disadvantage, as they wouldn’t be able to rely on the relatively less labor-intensive traditional admissions process to make their transition at the speed they need to. Of course, optimizing for university admissions already tends to be a process that starts around middle school and intensifies throughout high school. Optimistically, self-selection playing a role in the admission process would enable those without the resources to invest in resume-building activities to prove their skills; pessimistically, it would become one more hoop for already-disadvantaged students to jump through. That’s why if this was to be implemented in any form it would need to be clearly separated from other criteria, or even, in a very libertarian implementation of the idea, used as the only criteria to ensure that it didn’t become simply another time suck or long-form standardized test weighing down admissions even more.

A host of other pros and cons exist–I am inclined to lean strongly towards the pros; done right, this could reduce a lot of costs, both financial and social, on both sides. I think in the future we will be seeing a lot more of this trend being built into MOOCs; I doubt they will continue to exist solely as nice, cheap ways for smart people to get smarter. They’ll be turned towards credentialling and program integration eventually, which I think will vastly improve the quality of the market. And of course, at this stage in the existence of the traditional university, disruption in any form that raises efficiency and lowers costs is welcome.