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Sunday, October 30, 2011

Voodoo Palestinian Arab economics and The Guardian (correction)

The Palestinian Authority came out with a paper last month that attempts to place a dollar value of how much the "occupation" costs the Palestinian Arab economy.

I haven't had time to go through the whole thing, but the one section I skipped to shows a serious mathematical error that results in an error of, oh, about 4400%.

Here is their entire chapter on fruit trees, with some very questionable assumptions to begin with:

The Urbanization Monitoring department at the Applied Research Institute of Jerusalem estimates that about 2.5 million trees have been uprooted since 1967. The Israeli policy of uprooting trees has been executed for a number of reasons, including the construction of Israeli settlements, the construction of the separation wall, and settlements infrastructure; all of which exclusively benefits the settler population.

Besides representing an irreparable loss to an inherent part of the Palestinians’ land, Israel’s policy of tree uprooting also creates a grave economic damage for the Palestinian people. The vast majority of the uprooted trees have been fruit bearing trees in their highly productive period of life; thus the uprooting has deprived Palestinians of a valuable source of income.

The annual loss for the Palestinian economy is given by the foregone value of the trees’ economic production. ARIJ estimates that around one third of the 2.5 million uprooted trees were olive trees and the remaining consist of other types of fruit trees, including around 34,000 palm trees.

The average annual productivity of one olive tree is about 70 kg (Agriculture department of ARIJ), with olive production being valued at ex farm price of USD 1.103 per kilo, which is an estimate on the basis of data from PCBS (2009b).

Therefore:
The cost of uprooted olive trees/year = 2.5 million x 0.33 x 70 kg /tree x $1.103/kg = USD 55,133,602

The other fruit trees are estimated to have an average annual production of around USD 50, with the exception of palm trees which yield an average production value of USD 70 (data from the Palestinian Ministry of Agriculture). Therefore the total production value of these trees is USD 85,713,333 million.

Considering that there is very little intermediate consumption in the production of rain-fed fruit trees, we estimate that the gross value added is around 98% of the production value, so the total forgone value added as a result of uprooted trees by the Israelis is equivalent to USD 138 million per year.
See the error?

Even if you believe the absurd number of 2.5 million trees destroyed, of which over 830,000 were being actively cultivated, and of which the "vast majority" are in their prime productive years...

And even if you ignore the trees that Israel has compensated Palestinian Arab farmers for under various circumstances....

And even if you ignore the new trees that have been planted, not all of which would have been planted had there been no "occupation" to begin with....

And even if the other assumptions given are 100% accurate (I confess I know nothing about the "gross value added" paragraph)....

The paper is taking the total number of 2.5 million trees allegedly destroyed since 1967 and calculating the cost as if it is an annual cost!

Which means that even if the other questionable assumptions are 100% true, you must divide the $138 million figure by the 44 years of Israeli control. the real annual cost of those missing trees is $3 million, not $138 million!

$3 million dollars a year is barely a blip even in the Palestinian Arab economy. They get more than that amount in international aid every day. Arafat used to send his wife over seven times that amount of money annually.

If this is the quality of statistics that the PA is pushing out into the world, then perhaps some people who really understand economics and accounting should be taking a second look at their other figures. It would be difficult to believe that this was a mere oversight; rather in the zeal to inflate the amount of money that Israel is supposedly costing the PA we can expect lots of "mistakes" like this - of course, in only one direction.

If I could find an error this egregious by only glancing at the report, imagine what a real auditor could do with it.

Oh, and I found this report from a link in an article by Harriet Sherwood in The Guardian. Obviously that newspaper does not have the ability to look at anything that is anti-Israel with a critical eye at all, no matter how obvious the errors.

UPDATE: Joe from Australia notes my own error. If the total number of trees destroyed is 2.5 million, and none of them have ever been replaced over the past 44 years, then the annual amount of the loss would be a large number annually this year and going forward. Again, the assumptions are ridiculous, but I made a mistake in my own calculations, which is why I am not an accountant :)