EclectEcon

Questions for Palestinians

Bryan Caplan poses a number of very provocative questions:

1. You're too weak to beat the Israelis.  Why don't you just submit?  (And if they responded, "Would you?," I'd say "I already do.  I think taxation is theft, but I also have the wisdom to realize that the IRS will make my life a living hell if I resist.")

EE: Why is "submission necessary? Why is some negotiated settlement (two-state solution? four-state solution?) not possible? Is it because the Palestinians have refused to acknowledge Israel's right to exist and consequently would view anything other than a one-state solution (ruled by them, not the Jews) as submission?

2. The Israelis could easily have killed or exiled every Palestinian.  Why didn't they?  What does that say about their objective function - and/or the objection functions of other Western countries that put pressure on Israel?

EE: To the best of my knowledge, no group (other than some possible fringes?) in Israel has written into its constitution or group charter that it wishes to annihilate the Palestinians or drive them all east of the Jordan River or deep into the Sinai. That fact, in contrast with the charter of Hamas, is very compelling.

3. Suppose all the Jews left Israel tomorrow.  What would greater Palestine's GDP per capita be ten years from now?  Want to bet on that?

EE: It is very tempting to generalize from what has happened in Gaza over the past three years --- tremendous theft of and cannibalization of the huge capital stock left in place when the Israelis left Gaza. Also, more scarce resources devoted to the economy of victimhood than to production and exchange. Take away foreign aid, and the place would likely be destitute. I would hope this projection is incorrect because it is such a gloomy prospect for any possible Palestinian state.

4. Suppose all the Jews left Israel tomorrow.  How many Palestinians would still die violent deaths during the next ten years?  How many political prisoners will there be in ten years?  Want to bet on that?

EE: I am guessing that Caplan is referring here to the violent political infighting that has been rife in Gaza especially. But it need not be that way. What are the numbers in, say, Jordan?

Twitter-isms from EclectEcon

• 22:28 UWO's grotesque financial mismanagement: www.eclectecon.net/2009/04/stupid-dumb-financial-management.html #

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Really Stupid Financial Management

Last week I posted about the financial woes here at The University of Western Ontario. A snippet for review:

The financial folks here gambled with our rent money: they invested huge chunks of the university's operating revenues AND endowment funds in equities. They looked like geniuses when stock prices were rising, but who is suffering now? Not them. In fact, they blame the market, not their own injudicious investment strategies.

Instead, the admin types here are reneging even on re-negotiated agreements. As a result, our department is losing a very dynamic and energetic chair and will likely lose other very creative economists.

In response to the resignation of the Economics Department Chair (and his straight-forward criticism of the financial mismanagement of the university), the university VP in charge of such things responded:

Gitta Kulczycki, Vice-President (Resources & Operations), disagrees with Sussman’s [i.e. Nathan Sussman, economics department chair] characterization of the investments.

 

For more than 20 years up until Dec. 31, 2008, the university’s investment strategy has generated an average return of 7.8 per cent, she says. The funds are invested in a broadly diversified portfolio which includes an asset mix of 35 per cent bonds, five per cent hedge funds and 60 per cent equities.

 

“The strategy of investing endowed funds, and that portion of non-endowed funds not required for short term purposes, has been in place since 1984,” she says...

So the fin-admins were merrily cruising along, earning 7.8% or more, investing zero in money markets or other low-risk assets, and were holding nothing back in reserve? Spending the entire proceeds like drunken sailors? Nothing to prepare in case there was a downturn? And counting on all the income and capital gains as continued growth in operating income? And they didn't adjust even a year ago when it was clear there were economic problems?

These folks should be fired without severance pay.

Obama, Israel, and Iran

Is Obama being two-faced or what? On the one had, he tells Israel that he and the US are committed to Israel's security.

The President congratulated the Prime Minister after his swearing-in and reaffirmed the U.S.' steadfast commitment to Israel and its security. The President said he looked forward to working closely with Prime Minister Netanyahu and his government to address issues of mutual concern, including Iran and Arab-Israeli peace.

At the same time, however, DebkaFile, a superb analyst of foreign affairs, especially in the middle east, is saying that the US is about to throw Israel under the bus:

Netanyahu is whistling in the dark when he pretends to see no American squeeze on the horizon of his government-in-waiting. One of the hardest long-term tasks ahead of him will be to rebuild Israel’s position as America’s needed and respected strategic ally, in the face of Barack Obama’s ardent courtship of Iran and the Muslim world.

The US president is willing to ditch Israel as a friend. This will be brought home to Jerusalem when he makes his big speech on April 7 appealing for a grand US-Muslim global reconciliation. The US president is preparing to tie a Palestinian-Israeli settlement - on Washington’s terms - to such unrelated issues as Afghanistan and Pakistan as the currency for purchasing Muslim and Arab backing for accommodations of these outstanding terrorist fronts.

Different forms of coercion, including the discrediting of the Netanyahu government if it fails to toe the Obama line, will follow. The incoming prime minister’s pretense that “all is well” between him and the US administration is pie in the sky, instead of the resolute, firm hand which Israel needs at the helm these days to recoup command over its basic policies and the international community’s faded respect. [emphasis in the original].

If the DebkaFile analysis is even close to correct, then when Obama says he is looking forward to working closely with Israel, he means he is looking forward to brow-beating Israel into submission.

Trying to be a friend to everyone is not necessarily good diplomacy. Trying to appease one's enemies is surely bad diplomacy. Let us hope that the apparent naivete of Obama and his administration do not sell out the only strong democracy in the middle east.

The Quiet Coup: the Oligarchy that Destroyed the Economy

From The Atlantic (h/t to MA), an article decrying the two-way street between Wall St and Washington, DC. The summary:

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

It is a quite lengthy piece. Here is the conclusion:

In my view, the U.S. faces two plausible scenarios. The first involves complicated bank-by-bank deals and a continual drumbeat of (repeated) bailouts, like the ones we saw in February with Citigroup and AIG. The administration will try to muddle through, and confusion will reign.

Boris Fyodorov, the late finance minister of Russia, struggled for much of the past 20 years against oligarchs, corruption, and abuse of authority in all its forms. He liked to say that confusion and chaos were very much in the interests of the powerful—letting them take things, legally and illegally, with impunity. When inflation is high, who can say what a piece of property is really worth? When the credit system is supported by byzantine government arrangements and backroom deals, how do you know that you aren’t being fleeced?

Our future could be one in which continued tumult feeds the looting of the financial system, and we talk more and more about exactly how our oligarchs became bandits and how the economy just can’t seem to get into gear.

The second scenario begins more bleakly, and might end that way too. But it does provide at least some hope that we’ll be shaken out of our torpor. It goes like this: the global economy continues to deteriorate, the banking system in east-central Europe collapses, and—because eastern Europe’s banks are mostly owned by western European banks—justifiable fears of government insolvency spread throughout the Continent. Creditors take further hits and confidence falls further. The Asian economies that export manufactured goods are devastated, and the commodity producers in Latin America and Africa are not much better off. A dramatic worsening of the global environment forces the U.S. economy, already staggering, down onto both knees. The baseline growth rates used in the administration’s current budget are increasingly seen as unrealistic, and the rosy “stress scenario” that the U.S. Treasury is currently using to evaluate banks’ balance sheets becomes a source of great embarrassment.

Under this kind of pressure, and faced with the prospect of a national and global collapse, minds may become more concentrated.

The conventional wisdom among the elite is still that the current slump “cannot be as bad as the Great Depression.” This view is wrong. What we face now could, in fact, be worse than the Great Depression—because the world is now so much more interconnected and because the banking sector is now so big. We face a synchronized downturn in almost all countries, a weakening of confidence among individuals and firms, and major problems for government finances. If our leadership wakes up to the potential consequences, we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope it is not then too late.

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A Sitcom about Economists? Vote for some possibilities

Earlier I mentioned that EconPoint is soliciting entries in a contest for a proposed sitcom about economics and economists. To view the entries, click here.

And to vote on one of the entries, click here.

There have not been many votes, yet, but so far Hubert Turvy's submission: tax professor is in the lead:

Ironman - the economics of nothing
Amdahlj - Hadam's Myth
Hubert Turvy - tax professor
Lightsaber - other people's money
Lighsaber - Female Economists Murder Mystery Club

I sort of like the idea, though, of a Charlie's Angels of Economics.

How Much Hope for Peace Can There Be?

From ynet news,

Rival Palestinians factions Hamas and Fatah have agreed to suspend the reconciliation talks in Cairo for three weeks, a Fatah official said.

"When I'm [ranked only number] 64..."

Back in the early 1980s, Stan Liebowitz and I did a series of studies ranking economics journals according to citation rates (that study appeared in the Jl of Econ Lit and is still being cited). We then used those data to rank economics departments according to total weighted citations, per-capita weighted citations, total weighted publications, and per-capita weighted publications. Depending on the metric used, the University of Western Ontario's economics department ranked somewhere between 15th and 30th in the world. It was an excellent department (that study appeared in the Quarterly Jl of Econ and Bus).

Provincial budget cuts, coupled with some poorly managed destructive in-fighting, led to serious deterioration of the department's prestige and ranking in the early 1990s. We struggled, but recently people here have been working to rebuild the department. Nevertheless, a recent ranking has our department at 64th in the world. That is big drop from our glory days [h/t to co-blogger, Gabriel].

And very likely things will get worse.

The financial folks here gambled with our rent money: they invested huge chunks of the university's operating revenues AND endowment funds in equities. They looked like geniuses when stock prices were rising, but who is suffering now? Not them. In fact, they blame the market, not their own injudicious investment strategies.

Instead, the admin types here are reneging even on re-negotiated agreements. As a result, our department is losing a very dynamic and energetic chair and will likely lose other very creative economists.

There is a report that some of the senior admins here think that even having a ranking of 64 is too high for a university whose overall ranking in the world is somewhere between 100 and 150. They think this department is too good and commands too many of the university's resources. They see that top new PhDs in economics draw big salaries at top schools, and so they want us to hire lesser people and fall in the rankings.

For this and other personal reasons, I will be happy to be out of here in a few years.

Twitter-isms from EclectEcon

• 03:52 Econoland: New UK Theme Park? tinyurl.com/dxd7gg #
• 13:34 George Galloway barred from entering Canada. By the same logic, can we (PLEASE!) keep out Noam Chomsky? How about Finkelstein? Others? #

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Snopes: some background and history

An appropriate posting for April Fool's Day....

The Mikkelsons run Snopes, the first place I check when I suspect an e-mail might be a hoax. Here is an informative story about them, the beginnings of Snopes, and how they look into stories that might be hoaxes.

btw, I detest April Fool's Day. How did we ever formalize a practice whereby we get our jollies at the expense of others?

Addendum: I have to admit, though, that I really enjoy spoofs like the posting just below this one.