David R. Henderson  

Casey Mulligan Visits Cuba

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Last month, while on vacation, I missed an excellent trip report by University of Chicago economist Casey Mulligan. He reports the facts seen through the eyes of a first-rate microeconomist. He understands private property and related incentives and the damage done by restrictions on trade. Mulligan also knows how to look at data carefully.

Here are some highlights. I do highly recommend the whole thing, though.

On boats:

Government permission is needed to have a boat. The fishermen's boats are smaller than a normal rowboat and therefore too small to take far from shore (e.g., to another country). Most seafood has to be imported. This is a clear case where the regime has sacrificed productivity in order to exercise control over its people.

On labor:
Cubans own their labor in the sense that they get wages for most of their work. However, their employer is typically the government and those wages are far below their productivity (which is itself low). Government employees were paid about $20 per month in 2014, whereas national income per worker was $839, which suggests that government employees keep about five percent of the value of what they produce.

On health, health care, and life expectancy:
The usual calculations of average life expectancy put Cuba next to the United States (and Puerto Rico). This is touted - by the UN, the World Bank, the Kaiser Foundation, and others - as an example of how a socialist system can even make a poor country one of the healthiest in the world.

Based on what I saw, I am dubious that Cuban health is anywhere near what it is in developed countries. The people are short. I guessed that diabetes was high, and upon return home learned from the International Diabetes Federation web site that the prevalence of diabetes is high by worldwide standards.

Under the theory that health is a lifelong accumulation of experiences and investment - including experiences in the mother's womb, at birth, and early childhood - the official life expectancy statistics are dubious. World Bank data, sourced from individual-country governments on the basis of age-mortality profiles at the time of reporting, show Cuba's life expectancy catching up to the United States already by 1973. How could the post-Revolution Cuban system have that effect, when in 1973 the large majority of Cubans had lived the large majority of their lifetimes under pre-Revolution conditions? Why hasn't Cuban life expectancy far surpassed American, now that, in contrast to 1973, most Cubans have lived most of their lives post-Revolution? Perhaps the main effect of the Revolution was to change the way that Cuba reported life expectancy to international organizations.


On paper:
In order to make opposition more difficult, paper is scarce throughout the country. This is another clear case where the regime has sacrificed productivity in order to exercise control over its people.

The U.S. Embargo:
The U.S. embargo appears to have harmed the Cuban people. It has also allowed the Cuban government to blame the situation on something other than Communism. Perhaps it even increases the harm done by Communism, because property rights would be especially valuable for an economy that is prevented from specializing in a few tasks/products. I doubt that eliminating the embargo would be more helpful than eliminating Communism, because the later not only restricts international trade, but also intranational trade.

For my earlier writing on the Cuban embargo, see "End the Cuban Embargo," Antiwar.com, February 21, 2008.

HT2 David Levey.


Comments and Sharing






COMMENTS (11 to date)
Julien Couvreur writes:

The essay mentions the lack of internet connection. It is interesting that an alternative distribution system has been developed by entrepreneurs, a sneakernet based on USB drives which spreads news and movies.
Here's a short documentary from Vox.

BC writes:

Everytime I think about embargoes, economic sanctions, etc., I wonder what trade protectionists' explanation would be for why the targeted country --- Cuba in this case --- has not experienced a boom in high-wage manufacturing jobs. After all, the embargo protects all of their workers from foreign competition!

David R. Henderson writes:

@BC,
:-)
@Julien Couvreur,
Thanks.

john hare writes:

I missed something on the wage numbers. $20.00 a month is $240.00 a year which is almost 30% of the $839.00 of annual wages. I don't get the connection to them keeping 5% of their production.

Paul Bogle writes:

I guess I missed something too. Where does Mulligan say average annual wages are $839.00?
I see no units applied to the average figure so I assumed the same units as in the previous sentence (monthly) applied.
Is that correct?

David R. Henderson writes:

@john hare and Paul Bogle,
I took it, like Paul, that average income was $839 per month. Then I assumed that Casey took about 60% ($503.40) of that to be imputed to labor, as in the United States. Then $24 is about 5% of that $503.40. But I”m not sure.

john hare writes:

My mistake was in thinking the $839.00 was annual wages instead of monthly.

Brad D writes:

On the scarcity of paper: this immediately reminded me of George Orwell's book "1984." In the story, the act of writing was nearly impossible (no paper) but also a violation of thoughtcrime, punishable, in some cases, by death.

David R Henderson writes:

@john hare and Paul Bogle,
My response to you both was basically correct. I asked Casey Mulligan by email and this was his answer (reprinted with his permission):
Yes. I was reporting everything on a monthly basis. "[O]f what they produce" is interpreted as marginal product, and thereby 50-70 percent of average product ($839). Too bad for the Cuban people!

Charley Hooper writes:

Cuba has enviable infant mortality numbers, until you find out the true story. According to Yuri N. Maltsev:

In Cuba, which boasts a very low infant-mortality rate, infants are only registered when they are several months old, thereby leaving out of the official statistics all infant deaths that take place within the first several months of life.
Pajser writes:

Charley Hooper, Cuba has to conform to WHO standards. Some Cubans doctors claim they do. Fernando Dominguez, Cuban neonatologist, recently said

    A baby born with a single sign of life, even if it’s only a matter of seconds, is recorded as a live birth in Cuba. If there are no signs of life, it is registered as a fetal death. From the moment of birth to the baby’s first birthday is the period considered for infant mortality statistics.

http://www.scielosp.org/pdf/medicc/v17n1/1555-7960-medicc-17-01-0011.pdf

One should not take such claims as last word. However, it is unlikely that Maltsev knows more than CIA, WHO, Unicef or World Bank do.

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