Hot Cuppa

Today I was reading a post by Don Boudreaux on the taxation of oil companies profits. He mentions that the arguements in favour of a tax on so-called "windfall profits" is so lame, so utterly gossamer, that pointing out its flaws seems to be an exercise in stating the obvious.

In reponse one of his readers commented that "It may be stating the obvious, but isn't that what economists are for? Stating and proving the obvious is what economists do best."

That is funny. So we are not the only economists who should explain their government and MPs some obvious issues like maintaining the interest rates above than inflation or the effects of monetary expansion on inflation rate. The American economists are also to teach their president and congress on the priniciples of taxation.

Posted by Hamed at 01:19 PM | Permalink | Comments (12)

The level of women’s participation in Iranian labor market is far below of its average in the OECD countries. According to the official statistics women's contribution accounts only for 14% of the whole labor market. There is no surprise that like many other counties the share of women in the middle and senior managerial positions is even quite lower than their average share in the market.

Nevertheless a new wave of entering into the market by women in the next few years would be expected. The wave is the result of rapid increase of women’s share in the higher education system. Since 2003 the girls outperformed boys in the tough entrance exams of the universities. The last year statistics says that 65% of the new enrollment in the universities made by women.

Well, such a trend will cause some important changes in the supply side of the labor market in terms of the quality and the quantity of labor force. Earning a university degree will increase the tendency of a woman to search for a job. This means that the number of job seekers will increase in upcoming years. This could be justified by considering the fact that the men in any case will participate in the market, no matter they go to the university or not, while for the women this is not the case. A fixed amount of supply of the male labour force and increased supply of the female ones simply means higher number of people volunteered to work. Having taken the number of jobs as an exogenous variable, at least in the short term, this will deepen the unemployment issue of the country. It also will shift the income distribution toward the middle class people, where both man and woman use to work and worsen it against the low skill workers class. In a country with current 16% rate of employment such a wave would be a new major challenge for the policy makers and social planners in the coming years.

Posted by Hamed at 04:16 AM | Permalink | Comments (2)

These days I am participating in a quite interesting workshop on the governance of transition held by Vienna Institute for International Economics and Joint Vienna Institute (The local agent of IMF).

A session in the workshop was devoted to competition policies and the role of supervisory institutions such as competition authorities. These authorities are to monitor the issues like mergers and market power and should prevent the actions which lead to the monopolistic position of a firm in the market. Of course such an important decision can not be made solely by a bureaucratic body and has to be addressed by a legal entity which is the "cartel count" in this case. The competition authority opens a case against the companies who are accused to violate competitive structure of the market and then the court will judge among the two parties based on the reports of the authorities and defends of the company.

We discussed the theoretical bases and some practical cases and at the end the lecturer asked the participants whether their country lacks an established competition policy? I was the only one who raised the hand. However I added that some years ago the anti trust regulation were studied in the IRPD (the Moassese) but has not been discussed in the parliament up to now. Obviously the political economy of the story is the main obstacle because should the antitrust regulation be in place the government has to leave its monopolistic position in many industries e.g. communication, sugar, tobacco and to some extend in banking, insurance, air crafting and steel. Losing the monopoly power brings lots of consequences for the government including missing of the chance of direct control over the market, financial resources coming from the companies and many money making job positions which could be gifted to its supporters.

Such a "conflict of interests" usually works very strongly to stop any government in Iran , no matter conservative or reformist, to run serious competition, privatization and market liberalization policies. I never forget the moment when a highly influential senior economic manager in Khatami's administration, who is still in power, told me that even if in theory we would support the mass privatization programmes and antitrust ideas but in practice we are reluctant to do so as we will lose our power.

Posted by Hamed at 09:06 AM | Permalink | Comments (6)

The longer I stay in the realm of economics the more confused I get about what should my future area of focus be. Initially I came to study economics to learn some applied stuff and take them with me to use in other fields such as public policy. I even was thinking about studying a master of economics to learn about the theoretical foundations and then moving to a Phd in sociology to use economic knowledge there. I talked about this idea to one of my Professors Dr M.Nili and in reaction he simply laughed at me and said "Once you get into the economics you can not take the other fields because the method is economics is completely different from them". He was completely right, I felled in love with the economics even with the mathematical part which I hated in the beginning and can’t really think about moving very far from it.

Staying in economics I have to decide on a dichotomy. In the one hand I still have my constant and innate interest in very applied parts of the economics such as development, energy economics, urban economics so on or even in some adjacent fields such as public policy. These fields are mostly based on empirical data analysis and comparative studies and rely on simpler theoretical foundations and models. Nevertheless they may produce some immediate valuable impacts especially in a country like Iran. This is the direction which many of fiends believe that I am a man of it.

On the other hand I do love some issues in the theoretical parts of the microeconomics and game theory. I like thinking about the notion of "rationality" and the concepts connected to it. The whole story then would demand knowing about some other areas like psychology, linguistics and lots of things from the advanced math notably mathematical logic. Furthermore the epistemology or philosophy of economics is another area which brings my interests in both economics and philosophy together; obviously a very theoretical field. Despite the applied side an average theoretical work may generate some longer-terms effects mainly in the research world however it is more complicated and challenging than the applied stuff.

I understand that such dichotomy may be solvable of a sort. There are some very genius people like Stiglitz or Lucas who made a bridge between the theoretical and applied world but I am not sure that I would be as smart as them or I would have the same opportunities and chances. So I have to decide to locate myself professionally in one of these extremes. Of course I can learn about the other part by myself but it would hardly be a part of my future professional career as learning just one field in economics needs devoting whole of your time.

I have to make this decision in a few months as the time runs fast and this fall is the time to apply for my final stage of higher education. Now it is becoming really a complicated decision. Any Comments?

Posted by Hamed at 06:47 AM | Permalink | Comments (10)

The Citybike system of Vienna consists of a network of stations in all regions of the city. Once you have registered for the first time you can take your bicycle from any of these stations and leave it at any other. Looking into it combined with the city wide cycling roads one can realize that the authorities are offering the habitants an alternative for public transport system which indeed is in some sense healthier for both the user and the whole society.

One interesting part of the system is its pricing mechanism. You don't need to pay for the first hour but if you ride for two hours you have to pay one Euros for both. The price per hour goes up as you take it for longer periods. For the third hour you will pay 2 Euros per each and if you use it for more than 3 hours then you pay 4 Euros. So a simple calculation shows that if you take it for 5 hours for example you have to pay 20 Euros.

Some friends may see something strange there. Why you have to pay that large amount of money for renting a simple bicycle provided by the municipality? This is a usual objection people make facing similar situations. The people just see the money goes out of their packets and perhaps goes to the pockets of the authorities. But they usually forget the simple fact that in the absence of price a powerful coordination mechanism is gone.

This is why despite of such complains I believe that the pricing policy is quite fair and efficient. Obviously there is high demand for using the bicycles on the one hand and limited supply capacity on the other one. It is not possible to build let say 1000 stations with 50 bicycles in each. So there should be some sort of mechanisms to allocate the limited number of bicycles to its best use: traveling inside the city instead of taking the bus or subway. Higher prices for extra hours gives an strong signal and incentive to the users not waste this limited resource by simply forgetting to return it or leaving it idol somewhere.

Posted by Hamed at 10:22 AM | Permalink | Comments (4)

Today I was chatting with my Pakistani friend Aftab, who is doing his Phd in finance here. We were talking about the status of banking system here and there. Aftab told me that there are 900 different banks in Austria, a country with just 8 millions of the populations. On contrast in Pakistan where more than 100 million of people are living there are just 43 banks operating where half of them are foreigners and 3 of them are owned by the public sector. Compare it with the situation of Iran. We just have 17 banks and only 6 of them are privately owned. Of course there is no foreigner bank in the whole country. (To be more precise I should confess that I recently read that one branch of a foreigner bank was oppened in Kish Island)

When he asked me about the situations in Iran I had nothing to tell him apart from the new act proposed by Dr Ahmad Tavakkoli and passed by the parliament targeting lower interest rates and its effect on just recently formed and fragile private banks.

The funny point was that he proposed if Iran is looking for the sources of modern banking technology Pakistan would be the best choice because they are close to us and also are quite experienced as they have already started deregulation and restructuring of this sector since 1985.

Overconfident, country lover Iranians who constantly assume that we are best should look at his proposal very carefully!

Posted by Hamed at 05:53 PM | Permalink | Comments (6)

In Austria everybody owning a TV set has to pay a fixed amount of tax as 40 Euros per month. Like many other forms of taxes this one is based on volunteered announcement and again like any such system there are random checks. The people who are called GIS agents knock the door suddenly and check whether you are using a TV set or a Radio without paying the relevant taxes. We are living in Vienna now for more than 19 months and didn't fill the tax form because we assumed that students are exempted to pay.

Just a few minutes ago was our turn! The man came and asked Maryam why she has not registered yet. Nevertheless he was so polite and caring that I, listening from another room, could not realize which kind of agent he might be. He carefully explained what the whole story is and what she has to do. He also discussed the cases where people are allowed not to pay. Thanks God we were included because I am receiving a scholarship and as a result am eligible of exemption. Knowing this he changed all the forms, filled some minutes ago, very patiently and explained us in details what to do. He even didn't forget to propose us the options to avoid paying some euros for postal costs.

I was really impressed by his style of behavior. At the beginning we could have been assumed as tax escapers, some sort of big sin in the western countries. But even in that case he treated Maryam very respectfully. We also received enough chance to explain our case and consult different possibilities of exemption with him. Just compare it with the behavior of public sector officials in Iran, especially the police forces. It does not matter if are guilty or not. Does not matter even whether you made the mistake or the government. In any case you have to be very humble in front of them and be really thankful if they do their own duties. Disgusting it is. However this could be changeable. I tried it in some occasions and asked the officer to do her/his job in a correct way. At the beginning he turned rude and even attempted to put some difficulties against my case but at the end I got the result. This is the strange psychology of people there. I don't know! May be they need some sort of esteem and regard which is not given in a natural form and therefore are being demanded from you as the client!

Posted by Hamed at 08:33 PM | Permalink | Comments (4)

Nowadays people are becoming more and more aware about the risks of getting infected by HIV virus. My father is one of those who really concerns about. Whenever I decide to cut my hairs he emphasizes me not to let the barber shave the hairs on the back of my neck using a razor. Getting infected through the blood drops remained from the previous customers is one of those ways elaborated by awareness building campaigns as one possible risky one which people should be cautious about.

Do you have any idea about the level of risk to get HIV through such an incident? I tried to calculate it:

1) According to the official stats, the total number of HIV positive people in Iran is 13000. Let say this is not a correct figure and we replace it with more realistic number of 35000. It means that 1 out of 2000 of all Iranians is a HIV infected guy.

2) The razor does not cut the skin all the time. It also has to cut both my skin and that one of the previous man to transfer the virus. The total possibility is something like (1/5)*(1/5)= 4%

3) Assuming that the person was HIV positive and the razor injured both of us, how much my chance of getting HIV is? Nobody knows for sure, but some papers report the possibility of 1/100 to get infected while your blood is exposed to the body liquids of an infected person carried on an injection needle.

4) HIV virus can not survive outside the body fluids. It will die immediately if the blood drops dry. If the barber shop works fully the average time between shaving the previous customer and the next one is usually 20-30 minutes. The literature says that a large part of the viruses will die in this time interval. Therefore it reduces the risk very significantly and in some case makes it close to zero. Let take 1/10 as an average reduced effectiveness factor.

So the total risk of getting infected is (1/2000)*(1/25)*(1/100)*(1/10)=1/50,000,000! Yes One over Fifty Millions! But I and probably everybody else will still be terrified by even such a tinny amount of risk. This is the behavior of human being. It could be justified somehow by multiplying it to its costs: Die in a few years! Extend it to case of a useless and aviodable war which we will talk about later.

Posted by Hamed at 08:32 AM | Permalink | Comments (5)

If the situation does not go very harsh in Iran I still prefer to come back home after having finished my Phd. The only moments when I am tempted to deviate from my decision is the minutes of cycling in Vienna when travelling between my flat and the office or across the beautiful Danube together with Maryam.

This is the occasion when one truly enjoys a real pleasure and a healthy entertainment, breath clean air and feel safety and freedom all together. The sort of things quite rare in my homeland and notably in its noisy and polluted capital city Tehran. Listening to the music and smelling the odor of spring flowers I tell myself “you should be too silly to leave such a peaceful life and go back to the country where your wife even is not officially allowed to accompany you during the cycling if there is any possibility of cycling at all”.

What then? I can’t reach the final decision on the bicycle but there comes one strong reason which provokes me not to think about staying abroad: Remembering the conditions of old women and men who have to work at 80 just to be able to afford a basic livelihood for themselves. To the youth who sit around the squares looking forward to somebody hiring them for a day and finally return back home disappointed at the end of the day. The poverty is a constant nightmare for millions of people there. The country needs lots of real changes to get rid of such poverty. Some part of the changes has to happen in the minds of the people themselves.

Although I am only one average man without any affiliation to the power system but I think there is still some room for improvement and I can do a little bit even as somebody outside the government. I hope that the marginal productivity of my efforts would be much higher in my own country (not even in another poor country) and as a person enjoying changing his environment I prefer such chance to having a smooth living condition.

Posted by Hamed at 05:27 PM | Permalink | Comments (10)

Last week I came across an interesting column by Donald Boudreaux titled "less severe punishments deter murders"! In his article Donald introduces a concept which I refer to as “the substitution effect of punishment” or in an anothr words the effect of punishment for one crime on the tendency toward committing some other ones. Based on my experiences people are usually ignoring or underestimating such an important effect.

I think Donald's example is nice enough to take and follow. He is discussing the effect of intensifying the punishment for rraappping on murder rate! We already know that common people usually are in favor of more severe punishments for the rraapists when they read the everyday news about such cases. They would mainly be supporting the idea of executing rraapists to terrify potential criminals and to prevent them thinking about it. Indeed such a punishment is already an established one in Iran for hundreds of years. Therefore we are talking about a real case in the real world. According to Donald, which I also maintain the same idea, this policy is not neccessarily the optimal one for the society. But why?

Why one should be against executing the rraapists, those who are one of the most hideous criminals? The answer is justified by looking into the effects of such punishment on other related crimes, mainly murdering, which are more dangerous to the society. When a rraapist is expecting the same cost (death penalty) for either solely rraapping a woman or rraapping and murdering her, he would have higher incentive to kill her in order to keep his identity unknown. On contrast, if he knows that rraapping somebody would be punished by life imprisonment, for example, and killing her/him punished by being hanged then he would think more carefully about the consequences of his actions. In this case he would have higher incentive to let she go alive to save his life in case of being captured. Of course there is another side as well. If he leaves the victim alive then he may hope that she/he would remain silent to keep her/his dignity and won't tell it to anybody else but if he kills her/him then the police and the family will definitely start some investigations.

Apply this theorem for a recent case in Mashhad, Iran. Two young man rraapped a teenager boy and released him afterwards. They were arrested and hanged very quickly. This story is giving a clear signal to other criminals. It says if you rraapped somebody don't let your victim go alive because in any case you will be executed with only difference that in the second case (letting her/him go) the risk of being identified is much higher. As a result a "rational" criminal might have higher tendency toward choosing the first choice (killing the victim) rather than releasing her/him.

Note that I am telling the total social costs of not killing the rraappists is necessarily lower than executing them. There are two effects of death penalty against the rraapists at the same time, lowering the likelihood of rraapping on the one hand and increasing the tendency toward killing the victims on the other one and the total effect is not that much clear. Borrowing the idea from Donald I just wanted to elaborate the neglected part of the story.

Posted by Hamed at 01:13 PM | Permalink | Comments (7)

One smart explanation for the existence of persistent unemployement in the industrial societies, which I beleive is a true one, is the idea of mismatch between the quality of labour supply and the demand by the firms. The theory says that the labour force in modern world needs lots of education and can not adapt herself very quickly to the requirements of the market.

Think about current situation, there are thousands of unemployed IT professionals in the Europe while there is high demand for jobs like nursing at the same time. An IT technician is not able to learn the practice of nursing in a short period of time and therefore she can't take of jobs offered in the other sectors. As a result we see the extra supply of labour in one segment of the market (IT) and the shortage in the other one (Nursing).

This is a structural problem caused by the information lag and delays in the system and seems not to be easily removable. The reason is simple: when one sector is growing it takes time for the educational institutions and the future job seekers to realize it and therefore the familier cycles of supply happens, this time in labour market.

In Iran we are facing almost the same issue: There are many people with higher education degrees who are not effective or qualified enough in one hand and lots of unresponded requirements from the firms especially in the high-tech and oil/gas sectors on the other hand. It explains to some extend the huge wage gap in diffrenent sectors.

Posted by Hamed at 01:10 PM | Permalink | Comments (11)

What is this Weblog About?

I hope to write here on mainly three major themes: Iran, Economics and Religion. Hum! a quite well matched triangle.
Let me first tell you about my motives. As a young Iranian living abroad I am monitoring the events related to my country very carefully. My perception is that the current picture of Iran in the media is not that much realistic or may be better to say is mainly biased toward some aspects while the other aspects are usually neglected. As a reaction to it my main goal is to report what I call “the real face of Iran” through looking into the day to day life of the people, the institutions, the policies and the structure of the power system. Beside that I may write some posts on Islam and the debates around it in the Muslim societies to give you a better and more detailed knowledge of. Finally the Economics is one of my major intellectual concerns and I can not stop myself going into that from time to time.

About Me:
I am Hamed, 28, and I am living along with my sweet partner Maryam ,26, in the beatiful city of Vienna. We moved here when I got a job offer at the HQ of a UN affiliated organization and afterwards decided to stay longer for a couple of years to finish some university educations. At the moment I am studying a post-graduate programme of economics in the Institute for Advanced Studies (IHS) and Maryam is doing her "Magister" (MA) , as it is called in German, in English and American studies in Vienna University.

The History of Blogging:
Actually this is the third time I have started writing a weblog. The first two were in Farsi and the later one succeeded to become somehow popular among Iranian readers with an average record of 600 visitors per day. It was focused mainly on the economic issues and envisaged to provide the readers with some simple explanations for the phenomena around them with an economic logic. Add to that some personal posts and occasionaly something on religion or to be more precise on the philosophy of religion.

Why This Weblog?
Having written the previous weblog for more than 18 months and looking into its effects and the feedbacks from the readers it turned out that I would better switch to, or at least start in a parallel way, a new one for a different group of audiences and in a more global fashion. As a consequence of such decision I stopped the Farsi one for the time being and opened this one. This is mainly to practice writing in a language which is not my mother tongue and to write for the readers coming from a different background than me.

What does the "Hot Cuppa" Imply?
Cuppa is the short from for “Cup of Tea” and tea , as you may know, is the most popular beverage among Iranians. Although I have got used to drink lots of coffee in the Europe nevertheless tea is still my highly preferred drink. My friends usually are surprised seeing the special big bowl, yes bowl not a cup, which I drink the tea in. This blue clay bowl proves that I am absolutely dependent on consuming lots of Tea. In fact tea is one driving force of writing for me and therefore I named the weblog "Hot Cuppa" to emphasize its oriental roots in one hand and the way me and perhaps some readers would write and read it on the other hand! So please help yourself with a Cup of Iranian Hot Tea!

PS: I would be gratefull if you comment me on the style of writing in English. It is not embarassing at all rather would be highly appreciated.

Posted by Hamed at 07:30 AM | Permalink | Comments (16)