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ISET Economist Blog

A blog about economics in the South Caucasus by ISET
May
23

Georgia’s Revolutions and Economic Development: from 2004 to Present Time

Following the collapse of the Soviet Union, the Georgian nation went through a process of rapid dis-investment and de-industrialization. It was forced to shut down industrial plants, sending scrap metal abroad, and workers into subsistence farming. Hunger has never become an issue thanks to the country’s moderate climate and good soil conditions, yet inequality and associated political pressures rapidly reached catastrophic dimensions, unleashing cycles of violence, undermining the political order and inhibiting prospects of economic growth. *   &nb...
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May
22

On Rational Procrastination

One of the most fundamental assumptions in mainstream economics is the rationality of humans. Yet, as argued by Timothy A. Pychyl, professor of psychology at Carleton University in Canada, frequently observed procrastinating behavior, i.e. the “needless voluntary delay” (Pychyl), cannot be reconciled with the rational man paradigm.  Pychyl claims in his book The Procrastinator’s Digest that procrastinators violate a most fundamental axiom of rationality, namely the so-called transitivity of preferences. If a person prefers dogs to cats and cats to h...
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May
16

Georgia’s Revolutions and Economic Development: From Independence to Rose Revolution

Having just celebrated its 25th anniversary as an independent state, Georgia remains in a state of revolutionary flux. Just like a box of chocolate, this beautiful country is full of contrasting flavors, never losing the ability to surprise and fascinate at every twist and turn of its history.  Most paradoxically, while Georgia’s unprecedented reforms have become an export commodity, many Georgian reformers and revolutionaries are wanted at home for abusing the power of their office. Georgia’s laws and institutions continue to be constantly remodele...
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May
15

Deposit Insurance – a New Reality for Georgia

More than three years ago the ISET Economist blog discussed the idea of deposit insurance and how this idea may apply to Georgia. Today, the deposit insurance scheme is not merely an abstract idea, but a fast approaching reality. Recently, the Ministry of Finance of Georgia discussed a draft law on implementing the deposit insurance system in the country. According to the draft, all bank deposits in Georgia will be insured for up 5,000 GEL.  The deposit insurance program comes at a cost for banks. Each commercial bank will be obliged to pa...
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May
08

No Price Caps in the Electricity Wholesale Market!

This article is about a highly technical matter. To avoid losing all our readers in the very beginning, let us start with a famous doctrine by Montesquieu: Les lois inutiles affaiblissent les lois nécessaires. This principle, literally meaning “useless laws weaken the necessary laws”, should always be kept in mind by lawmakers and politicians. If a regulation is not beneficial, then it is almost surely beneficial to get rid of the regulation. Some great Georgians endorsed this principle, like Kakha Bendukidze, who is widely praised for having erased many...
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May
02

Will Georgia Be Able to Benefit from Bilateral Free Trade Agreements?

The Deep and Comprehensive Free Trade Agreement between Georgia and the EU, brought into effect in 2014, was hailed at the time by many as being of great importance to Georgian manufacturers and food/beverage producers. Yet, skeptics commented that 1) Georgia had already have more than 7000 articles duty-free and quota-free under the pre-existing GSP+ trade terms granted by the EU for many years, and 2) very few exporters had been able to take advantage of these concessions. Georgia’s wine and spirits exports are an excellent case in point. While constit...
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