Tuesday 30 October 2007

Business-trip index

Two cities in Canada prove the most attractive destinations for business travellers. Tehran is among the worst destinations! 119 among 127 destinations.The best cities to visit on business are those that combine good infrastructure with low prices. According to the Economist Intelligence Unit's World Business Trip Index, Canada and Australia present the best locations thanks to their highly developed transport networks. A weak dollar has also made American cities more tempting. Cost has been a factor in reducing the appeal of European destinations, with only Vienna featuring in the top ten. But low prices are not enough to raise the pulling power of less developed cities. Tehran, the cheapest city to visit, remains one of the least attractive.

Democracy index


Almost half of the world's countries can be considered democracies, but only 28 qualify as “full democracies”. North Korea is at the bottom of lits ( ranking 167 and Iran has categorized under Authoritarian regimes and ranking of 139, Afghanistan has ranking of 135! )

The underground economy



Oct 29th 2007
From Economist.com

MANY people have enjoyed the fruits of someone else's undeclared labour, whether buying a cheap DVD from a street-seller or paying the gardener in cash. In a poll of the EU's 27 member countries, Denmark and the Netherlands are the (self-confessed) biggest users of the underground economy. In both countries 27% of respondents said they had acquired goods or services in the past year which they thought involved undeclared work. Less than 10% of people in Germany and Britain admitted acquiring something on the sly, below the EU average of 11%. Cypriots are the most law-abiding.


Monday 29 October 2007

knowledge

Uncertain
knowledge
+
Knowledge of the
amount of
uncertainty in it
=
Usable
knowledge

Knowledge

Knowledge is what we know
Also, what we know we do not know.
We discover what we do not know
Essentially by what we know.
Thus knowledge expands.
With more knowledge we come to know
More of what we do not know.
Thus knowledge expands endlessly.
* * *
All knowledge is, in final analysis, history.
All sciences are, in the abstract, mathematics.
All judgements are, in their rationale, statistics.

Sunday 28 October 2007

Capital Punishment: A Global Mix Picture


Apr 30th 2007
From Economist.com

CHINA executes more people than all other countries combined: unofficially, as many as 8,000, according to Amnesty International, a human-rights group. While the annual estimated number of executions fluctuates (1,591 in 2006—some 40% higher than in 2003), Amnesty notes that there is a global shift away from the death penalty. The total number of countries carrying out executions has fallen from 40 to 25 in a decade, and 129 countries are abolitionist in practice. America is one of only five democracies still to use the death penalty.

Who is free at worship?


Jul 11th 2007
From Economist.com

ANY measure of freedom may be open to criticism, and combining three separate measures—religious, political and civil—may seem more arbitrary yet. But the efforts of the Hudson Institute's Centre for Religious Freedom, using rankings from other sources, provide some intriguing comparisons. It is no shock that the likes of North Korea and Iran are intolerant of all sorts of freedoms, while America is just as easy-going over religion as it is concerning political freedoms. But look at India, Indonesia and some European countries: tolerance of civil and political rights is not matched by quite the same freedom to worship.

Pricing Curse!


Jun 28th 2007
From Economist.com

THE street price of cocaine varies hugely across the world. No surprise that it is cheapest in Colombia, the world's biggest producer of coca: at $2, a gram costs less than a Big Mac. Geography is an obvious price factor. The farther away a country from the main producers in South and Central America, and the more isolated it is, the higher the cost to traffick there. In far-flung New Zealand, a gram costs a wallet-busting $714.30. But there are some pricing anomalies. Although the street price in Japan is several times higher than in Israel, Germany and Britain, the wholesale price in the countries is similar, around $46.40. In Canada the wholesale price is 50% more than in America, but Canadians pay 40% less on the street. It could be that policing is more zealous in some countries, or that there is less competition among suppliers.

Military Spending


May 8th 2007
From Economist.com

SAUDI ARABIA'S military expenditure amounted to 8.8% of GDP in 2005, according to the International Institute for Strategic Studies, a think-tank. America spent 4% of GDP, though its total was $495.3 billion, compared with the Desert Kingdom's $25.4 billion. Saudi Arabia has expensive tastes, buying military hardware, such as jet fighters, from its British and American allies. China spends less, at 1.4% of GDP, but it has the second-biggest total expenditure after America, if exchange rates are calculated to reflect purchasing-power parity.


Death Penalty in USA


Sep 3rd 2007
From Economist.com

AMERICANS' support for the death penalty is waning, one state at a time. States have had jurisdiction over the issue since 1976 and so differences abound. Texas has executed most people; California has most death-row inmates but has executed only a small number. Since 2000, 12 states have suspended the death penalty, including New Jersey, which is moving towards formal abolition. Three have reversed the suspension this year. Last year two-thirds of states executed no one. Public opinion is also changing: a slim plurality of people said they would prefer to see prisoners locked up for life rather than executed, according to a recent poll.

GLOBAL OPIUM PRODUCTION


Aug 29th 2007
From Economist.com

AFGHANISTAN'S opium crop is set to hit a new high this year, according to the UN Office on Drugs and Crime. In its annual Afghanistan Opium Survey, published on Monday August 27th, it estimates that production will soar to 8,200 tonnes in 2007, a third more than in 2006. The whole country's share of global production has edged up to 93%. Prevention is a Sisyphean task; while the area from which opium poppies were eradicated increased by a quarter to 19,000 hectares, there are still 193,000 hectares under cultivation.

Risky Business


Aug 20th 2007
From Economist.com

SEX may be risky wherever you are. But those indulging in the riskiest behaviour often live in some of the world’s richest nations, according to Foreign Policy magazine, using data from the latest Durex Global Sex Survey—the world’s largest survey of sexual behaviour, with over 317,000 participants in 41 countries. They have sex at a younger age and sleep with more people, both indicators for contracting sexually transmitted infections. Each year, there are more than 340m new cases of such infections globally, excluding HIV.

Friday 26 October 2007

World Freedom Atlas: A Nice-Looking Tool to Visualize Good Governance Indexes

The time-series dataset (1990-2006) put together by the Quality of Government Institute of the Göteborg University (Sweden) is now available as an interactive mapping application in the World Freedom Atlas.

The World Freedom Atlas was programmed and designed by PhD candidate Zachary Johnson (zach.f.johnson@gmail.com) at the University of Wisconsin.

Tuesday 23 October 2007

Globalization with Arab Characteristics

by Marcus Noland, Peterson Institute
and Howard Pack, Wharton School

Article in YaleGlobal Online
October 17, 2007
==========================

The Arab world desperately needs jobs for its young adults, but foreign employers are afraid to commit in nations with authoritarian regimes, where regulation and the legal landscape remain shrouded in uncertainty. A lack of jobs, combined with no system for transfer-of-power and lack of trust in younger generations, could lead to a self-reinforcing downward spiral, both politically and economically.

Job creation is not only a political and demographic imperative for the Arab world, but also a security concern for the globe.

The Middle East has the world’s lowest rate of labor force participation among working-age adults. That rate has converged on the global norm, spurred by females entering the workforce. Despite strong growth, the region treads water in terms of employment. Job creation keeps pace with rising labor force participation, but hasn’t dented the region’s high unemployment rates, especially among the young.

With a few exceptions, employment grew in industries where productivity is increasing—that is, it does not appear to reflect an expansion of activity in rising dynamic sectors such as information technology–related services. In some Arab states—and not merely the oil exporters of the Persian Gulf—foreigners and not locals account for most new hires. This phenomenon is more acute in the private sector, since nationals disproportionately enter public-sector employment.

One method of rapidly creating a sustainable increase in employment is through an expansion of labor-intensive manufacturing or services exports. But manufacturing exports are modest, facing stiff competition from China and India. Foreign investment flows surged in recent years, but are largely the product of intraregional petrodollar recycling. It’s doubtful that these financial flows, unlike investment in factories undertaken by industrial firms, will convey new technology that would accelerate productivity growth.

The Arab countries score relatively poorly on a nexus of indicators relating to cross-border economic integration and the transfer, dissemination, and application of technological knowledge and innovation. Relatively weak intellectual property rights protection and state domination of many industries have retarded technology transfer and absorption. Local technical capacity, on which a dynamic industrial sector could be built, is uncertain. It is possible that with institutional or policy reform latent capabilities would manifest themselves, but under current conditions, evidence of industrial competence is muted.

This bleak situation may partly reflect the relative absence of outside catalysts. As a group, the Arab countries have weak linkages to the outside world, with the exceptions of extractive industries and tourism, where geology or special attractions like the Pyramids confer irreproducible advantages. In short, any links between the latent productive possibilities of the Arab people with goods and services demanded in the global market appear weak or nonexistent. The relative isolation from international technology inflows, whether in the form of foreign direct investment or technology licenses or the use of foreign consultants, has stunted productivity growth. Isolation inhibits the ability of firms, most locally owned, in Algeria, Egypt, and Morocco to enter international markets in new product areas, despite membership in the World Trade Organization and preferential market access through special trade agreements.

Building such links presents a formidable challenge. Addressing the institutional weaknesses requires a prolonged and uncertain slog including building a higher quality technically oriented education system and improving the intellectual property rights regime.

Under such circumstances the issues of setting priorities and linkage are nontrivial. Today’s success stories in East Asia, for example, did not get everything right from the start, maintaining economically questionable practices in some sectors for extended periods of time. In terms of corruption, all have not achieved Nordic levels of probity today, much less at the start of their periods of rapid growth. It may be that strong performance in some areas compensate for weakness in others.

The region’s reputation as a risky business environment certainly inhibits reform, in part due to deep uncertainty about the future of many political regimes. While the region’s contemporary economic performance may not be distinctive, its enduring political authoritarianism is. Some of the region’s governments rely on relatively narrow ethnic, religious, or tribal constituencies, contributing to fundamental uncertainty about political transition and the nature of successor regimes.

The region’s lack of political dynamism in the face of underlying social change, together with the increasingly religious orientation of the political opposition, paradoxically raises the possibility of abrupt transitions or regime changes. Intermittent terrorist incidents elevate the risk premium. Such deep political uncertainty discourages behavior that involves irreversibility—from physical investment to investing in education.

That said, one is struck by the degree of intraregional variation in the indicators such as the amount of time or number of approvals it takes to open a new business, as reported in our book The Arab Economies in a Changing World. This intragroup variation is important for two reasons: First, it suggests that whatever determines outcomes on these measures is not necessarily culturally or religiously determined. The influence of Islam or the anthropology of Arab culture may have many effects on local institutions and practices, but cannot explain why it takes nearly three times as long to enforce a contract in Egypt as it does in Jordan. Second, for some countries, there could be considerable gains associated with achieving “best-practice” as defined by colleagues in their region. They need not become Norway.

These issues are anything but value-free. Professional economists often focus on efficiency, but other values matter as well. In a poll recently conducted by Zogby International in Egypt, Jordan, Lebanon, Morocco, Saudi Arabia, and the United Arab Emirates, majorities in four of the six countries supported governing business by Sharia law, with pluralities in all six agreeing that Sharia required further interpretation to enable businesses in the Muslim world to integrate into the global economy.

The views elicited in the Zogby poll could be interpreted as forming a basis for adapting the demands of globalization to local values, and one can imagine an alternative set of institutions and practices that would deliver the benefits yielding reform with Arab characteristics, to paraphrase the Chinese experience. Islamic finance might be an example. But the Washington Consensus it is not.

Another poll conducted by the Pew Research Center found that while popular attitudes in the Middle East do not appear to be “antimarket,” as some have alleged, they are not particularly supportive of the process of globalization on existing terms. The issue is how to square efficiency with the values and aspirations of local communities.

The Middle East has long been a politically contested region of global significance. The demographic pressures the region faces to productively employ its young people raise the stakes even higher. It’s not difficult to envision the region caught in a downward spiral where impoverishment, discontent, militancy, and repression feed upon one another, deterring reform and impeding growth.

Yet this is not the only possible future path. Over the past year, Egypt, for example, made prodigious advances in the World Bank’s ease-of-doing-business rankings. Dubai aims to become the Singapore of the Middle East. Abu Dhabi has contracted with the Singapore government to improve its educational system. If the governments can address their daunting employment challenge, the region’s demographics could turn from a potential burden to a valuable asset. The Arab world could reap a demographic dividend as the new generation enters its most productive working years—a phenomenon that contributed to the outstanding performance of East Asia over the past four decades or so. Growing prosperity, confidence, and optimism about the future could underpin movement toward greater political openness and social tolerance.


Op-ed

The Inward East

by Marcus Noland, Peterson Institute
and Howard Pack, Wharton School

Op-ed in Newsweek International
October 29, 2007
=====================================
Talk of a Middle East economic renaissance is running strong, even wild. With oil running at $80 a barrel, and petro-states investing the windfall more wisely than in the past (that is, not in offshore bank accounts), pundits have begun to speak of a “transformational moment” in the region. Stock markets have been booming—Saudi Arabia’s is up 200 percent over the last five years, while Egypt’s has risen a whopping 1,700 percent—and investors from Europe and the United States have begun to take notice.

Now let’s look at the reality. The oil boom is real, but two-thirds of all Arabs live in countries without major oil exports. And outside of oil and tourism, the Arab world is in a state of long-term deglobalization, more isolated today than it was 20, 30, or 40 years ago. The region’s shares of world trade and investment have fallen by half in the past 25 years, and though it has risen more recently, that’s almost entirely due to oil. Its slice of global manufacturing exports, never high, has dropped to less than 1 percent. Technology royalty payments—which show how quickly a society adopts new inventions—have stagnated while growing rapidly elsewhere.

So talk of an Arab spring may be premature. The Middle East already has the world’s lowest employment rate, a staggering 47 percent of the adult population. To keep pace with an exploding population of young job-seekers, the region will have to create 55 million jobs in the next 13 years—or 70 million if it hopes to bring unemployment down to the global norm, according to the World Bank. Only by engaging in global trade can Arab governments hope to hit those targets and ensure their own stability.

The problem is that recent economic progress hasn’t translated into jobs. While Egypt jumped up 39 places in the World Bank ranking of the best nations in which to do business last year, it fell two places (from 106th to 108th) in the “employing workers” category, while Saudi Arabia and Syria fell even further. In Jordan, Kuwait, and the United Arab Emirates (UAE), foreigners, not locals, have secured most of the new jobs, and unemployment among nationals has actually increased over the past five years. Employment growth has also stagnated in populous countries such as Morocco and Algeria, encouraging emigration (much of it illegal) to Europe.

Manufacturing, which probably has the best potential to create jobs, is lagging. In the early 1960s, Egypt—the Arab world’s most populous country—exported manufactured goods at roughly the same per capita level as South Korea and Taiwan. Now they export more in three days than Egypt does all year. The Philippines exports 10 times as many manufactured goods as does Egypt, and last year its increase alone was more than Egypt’s total figure. Then there’s Thailand, which by itself exports more manufactured goods than the entire Arab world, despite having only about a fourth of the population. And while Saudi Arabia, the UAE, and other oil exporters have modestly increased exports by getting into petroleum refining, petrochemicals, and aluminum smelting of late, these are capital-intensive industries that do little to create jobs.

The weakness in manufacturing owes to a host of factors: poor technical skills due to decrepit university systems (no Arab school ranks among the world’s best), weak protection for intellectual property rights, and continued state dominance of industry. Together, these factors retard the creation or adoption of new technologies that could boost productivity. The Philippines alone now spends more on foreign technology than does the entire Arab world.

Worse, some of the progress is a mirage. Foreign direct investment (FDI) in Arab nations has surged nearly $30 billion in the past five years, but most of it is from Gulf states spending their oil windfalls. Thus the money hasn’t brought in new ideas or technology. Though Egypt saw FDI rise twelvefold between 2001 and 2006, to $6.1 billion, that is still over $3 billion less than Sweden, which has just one-ninth Egypt’s population.

These problems are often blamed on Arab culture—or on Islam. But neither Islam nor culture alone can explain the big differences between Arab nations. It takes three times as long to start a business in Saudi Arabia as it does in Morocco, or nearly three times as long to enforce a contract in Egypt as it does in Jordan. Some Arab countries have made progress, so why can’t others?

In fact, certain Arab governments are making impressive attempts to join the world economy. Dubai now aims to turn itself into the Singapore of the Middle East, a secure and efficient transportation hub and base for international corporations. Even Syria and Libya have climbed on the reform bus, hoping to boost growth and employment.

Of course, reforming intentions may not be enough in the Middle East. The conflicts in the Palestinian territories and Iraq and the risks of terrorism and assassinations will continue to discourage outsiders from investing in the region. (Our research shows that merely reducing the business costs associated with terrorism could boost foreign investment by 20 to 30 percent.) Repression stifles growth in places like Syria, where per capita income has grown only half a percent annually over the past four years. Yet the Arab dictatorships are brittle, and when they fall, the Islamists who might replace them could turn out to be effective reformers along the lines of the governing AK Party in Turkey.

There’s reason to think reform would be popular. A recent Zogby International poll in Egypt, Jordan, Lebanon, Morocco, Saudi Arabia, and the UAE showed strong support for governing business by Sharia, but a version of Sharia that would allow Muslim businesses to integrate into the global economy. Even Syria's Muslim Brotherhood supports what its leader has called “the gradual and calm transformation of the public-sector economy to a free-market economy.”

If the region can figure out how to reconnect to the outside world, the Arab demographic explosion could turn into an asset. A number of East Asian countries have shown how large populations of young workers can fuel an economic boom if channeled in the right directions. The problem is that the time for reform is now, and no major Arab state is moving fast enough.

Friday 19 October 2007

Some Photos from Economics of Corruption Workshop in Passau 2007



Nobel Economics Prize 2007 – Research is relevant to practice

The 2007 Sveriges Riksbank Prize in Economic Sciences has been awarded to Leonid Hurwicz, Erik Maskin and Roger Myerson “for having laid the foundations of mechanism design”. Mechanism design theory was initiated by Professor Hurwicz in the 1960s and developed separately by Professor Maskin and Professor Myerson in the 1970s and 1980s.

Mechanism design is a subfield of microeconomics and game theory, which analyses how to implement good system-wide solutions to problems that involve multiple self-interested agents, each with private information about their preferences. Whilst game theory provides methods to predict the outcome of a given game, mechanism design thus concerns the reverse question: given some desirable outcome, can we design a game which produces it? The “designer” of such a game could for example be the government or an institution.

Mechanism design theory is highly abstract and theoretical. Nevertheless, the basic intuition behind the mechanism design theory is quite simple: the theory tries to provide us with the tools to find an optimal mechanism to allocate scarce resources efficiently. When agents have private information, the final outcome of a transaction between economic agents may not be efficient for the economy as a whole. An example of this is the provision of a public good, such as street lighting. If market agents have private information about how much they value this public good, they have an incentive to pretend to be relatively uninterested in order to reduce their own share of the provision cost (the so-called free-rider problem). In this case there may be no provision of the public good at all because the required revenues cannot be raised.

Mechanism design tries to overcome these breakdowns of the market mechanism. The art of mechanism design theory is therefore to make the revelation of private information incentive compatible, which means that market agents are strictly better off if they reveal their true preferences. In case of street lighting such a mechanism could look as follows: each person should be asked to report his own willingness to pay for the project and the project will be undertaken if and only if the aggregate willingness to pay exceeds the cost of the project. If the project is undertaken those individuals that are pivotal, i.e. can influence the overall decision, pay the difference between everyone else’s reported willingness to pay and their contributions to the project. It can be shown that truth-telling is optimal for agents in this framework.

A simple example can illustrate the so-called Groves-Clark mechanism. Suppose there are three individuals, A, B and C deciding whether they want to finance street lighting. The total cost of the project is EUR 3000 and the individuals are willing to pay EUR 500, EUR 500 and EUR 2500 respectively. It is hence efficient to introduce the project. The social planner (e.g. the government) might ask everyone to contribute EUR 1000 to the project. If the individuals report their true willingness to pay, only C is pivotal, that is, with C in the process the project goes ahead, with C out of the process the project does not go ahead. C hence pays a tax of EUR 1000. Individuals A or B have no incentive to understate their willingness to pay (in order to prevent the introduction of street lighting in this case, A would have to report a willingness to pay of EUR -500. Individual A would then be pivotal and pay a tax of EUR 1000). Individual C also has the incentive to report his true willingness to pay as over- or understating the true willingness to pay leaves the tax that he needs to pay unchanged.

Mechanism design hence examines how one can extract the private information of market agents, which often prevents the efficient functioning of markets and institutions. The influence of mechanism design theory can be seen in the structure of auctions, such as the UK government’s sale of four 3G mobile phone licenses in 2000. The auction employed an Anglo-Dutch design in which the price rose until all but five bidders had quit and the last five bidders then made ‘‘best and final’’ sealed bids with the winner paying the price of the fourth-highest winning bid. It can be shown that such an auction promotes efficiency, in terms of inducing bidders to reveal their true valuations.

e-Bay is another example, where basic mechanism design theory has been used to design a second-price sealed-bid auction, in which the highest bidder wins but pays the price of the second highest bidder. The second-price sealed bid auction is efficient in that the winner is the bidder with the highest valuation and it induces buyers to reveal their true valuations. The theory of mechanism design has also been used by e-Bay to implement a quality rating system, which allows honest sellers and buyers to build up a good reputation and which tries to prevent the breakdown of transactions due to uncertainty about the quality of the good that is being sold.

But the applications of mechanism design theory go beyond the design of auctions. Another important practical area is the economic regulation of industry. The uncertainties the regulator faces about the firm’s inherent costs and managerial effort gives the regulated firm a strategic advantage. The firm would like to convince the regulator that it is a “higher cost” firm than it actually is, in the belief that the regulator will then set higher prices for the services it provides. This increases the regulated firm’s profits allowing the firm to capture parts of the consumer surplus. The mechanism design theory provides a solid theoretical framework in which one can analyse different regulatory mechanisms to deal with these problems. One example of such a regulatory mechanism is setting a price cap. This induces managers to increase efficiency and to reduce costs so as to make higher profits.

In fact, any situation in which decisions have to be taken under imperfect information about the private information of economic agents can be thought of as a mechanism design problem. How to raise taxes, regulate a monopolist, allocate emission permits, split common costs or even allocate organs– for all of these questions, the theories developed by Hurwicz, Myerson and Maskin can provide useful guidance. Whilst mechanism design theory is an essential element of graduate economics courses in the US and UK, it has been somewhat neglected by German universities. It is to be hoped that as a result of this year’s Nobel Prize, universities in Germany will put more emphasis on mechanism design in their microeconomics courses.

Source: Deutsche Bank ,Talking point October 19, 2007

Thursday 4 October 2007

Iran: Another Perspective A Photo Tour

Thanks to Bizzbloger

Iran: Another Perspective A Photo Tour can be seen from here!

Tuesday 2 October 2007

5 proven ways to reduce your back pain

I have found this short but effective advices for reducing the back pain which is common among people. For reading this article click here.

Monday 1 October 2007

Return from Italy

I am now returned to Dresden after a 3 days in Italy. That was an international confrence on political economy and experimental economics in Siena. The experimental economics is a new topic, focusing on testing behaviour of people as an economic agents in Labs on the base of theoritical models. The major attention devoted to applications of game theories. I had also presented a paper on corruption panel about estimation of smuggling as a latent variable for the case of Iran.

Interesting point for me also was meeting Dr.Nili from Sharif University who I found him open-mind and informative economist. Next week, I will go to Passau for a workshop on economics of corruption organized by Passau University. I will give some updates about it later.