What do goat grazing and mango farming have in common?

Grameenphone is bringing f-commerce to mango farmers in Bangladesh.

To which one possible reaction is well, that’s nice, now, what’s on the TV?

It’s also possible for us to use this as an example of why mobile telecoms — which includes the mobile internet and access to Facebook on it — are making the world so much richer.

There’s actually an argument out there which claims that this boom, which resulted in the growth of poor countries in the past two decades, has really been all about this one single technology.

That claim is indeed made even if it doesn’t quite stand up to detailed scrutiny.

But the underlying point does have a great strength to it. It allows markets to complete.

Markets competing are just another bit of the economists’ jargon but it does, hugely, matter.

The idea is that there are many transactions that could happen, many things that could be done, if only the various people involved actually knew about each other.

The example often used in the literature is of goat grazing in Kenya — no, there’s no particular reason for that activity and place, that’s just the example that has become common place.

Imagine a guy with a couple of empty fields. Imagine also a guy a few miles away with some hungry goats.

If they can’t communicate, if there’s no information system between them, then they can’t put the goats on the land simply because they don’t know about each other.

Now add in that ability to communicate.

Say, given our example at the top, mutual access to Facebook and the vital local “goat feed” pages.

The two assets can now be better employed, the goats feed, presumably some milk and meat from the new excess gets paid to the field owner and everyone’s richer.

Yes, obviously, rises in goat production are not the things which modern economies are made of.

Nor is it the creation of great riches of any kind.

But an observation often made about poor economies is that there are not hundreds, nor thousands, but hundreds of thousands of such small and marginal gains can be made if only markets could complete.

If the holders of one asset could know of those with others, so that a market transaction to mutual benefit could be completed.

The effect of enabling these transactions to happen is, in aggregate, and — when we add them all together — substantial.

Long before the mobile internet was even a thing one estimate had that just mobile phones increased GDP by half a percent.

More than that in fact — for every 10% of the population that had a mobile GDP increased by half a percent each year.

Perhaps not that if everyone had one then the economy grows by 5% each year but also, well, why not?

For, in many countries, the landline network was between pitiful and almost non-existent.

So, mobiles enabled exactly those transactions which rich countries — with their landline networks that reach everywhere — have been doing for half a century and more.

It’s also possible to run this same observation back the other way.

We think of new technology as being economic growth; and to some extent of course it is. The factories that make the phones, building the towers that make the transmissions work, they are the growth.

But the real benefit of any new tech comes from what people use it to do.

Perhaps it will be new things entirely.

But the real boost comes from when people are able to use the new tech to do the old things in more efficient ways.

We might here be talking about f-commerce, so Facebook, which sits on the internet part of mobiles, but the technology stack enables mango farming to become more efficient. We may have more mangoes, or fresher ones, or better distributed — but a more efficient mango industry is still missing.

In a small way, of course, mangoes are not a major part of any national economy.

But add up all the small ways and that is how we all get richer.

The efficiency of the mango market is one of the things that we didn’t focus on before because we just didn’t have the information of who wanted to do this; but we do now.

This is also why the best reaction to a new technology’s uses is simply to stand back and watch.

We might indeed need state planning to enable things — we certainly do with mobiles, if only over who gets to use which parts of the electromagnetic spectrum to provide them.

But the planning of who is going to do what with the shiny new tech, no, that’s better left to markets.

Because no government planning system is going to be detailed enough to deal with goat grazing now, is it?

And if one was we’d almost certainly not want to live under such a detailed government.

Tim Worstall is a senior fellow at the Adam Smith Institute in London

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