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ISET Economist Blog

A blog about economics in the South Caucasus.
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Mar
17

Wood: Still the Most Affordable Fuel Option for Rural Households?

  Despite the fast pace of installing gas infrastructure throughout the country, wood remains a major household fuel in Georgia. According to Georgia’s energy balance1, in 2014, Georgian households consumed 19,131 Terajoules2 of bio fuel and waste (mainly wood). The share of wood in total energy consumed by households was 38%. Chart 1. Wood satisfies almost 40% of households’ demand on energy in Georgia According to the National Statistics Office of Georgia, in 2014, the total volume of logging in was 670,241 cubic meters of wood/timber. In additio...
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Feb
28

Access to Electricity: Is Off-the-Grid an Option?

Assuring access to modern energy services for the whole population is a crucial step to improve human well-being and stimulate economic and social development. The International Energy Agency (IEA) has identified the lack of access to modern energy services as one of the main obstacles to overcome in order to achieve the UN Millennium Development Goals. In its 2011 World Energy Outlook, the IEA argued forcefully about the need to find and mobilize the resources required to extend access to modern energy services to the poor around the world. Transition c...
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Jan
31

The Fight of the Century

Fight of the Century? Well, that was Joe Frazier against Muhammad Ali, New York 1971, right? Wrong! For an economist, the Fight of the Century refers to the intellectual debate between the illustrious economists John Maynard Keynes (1883-1946) and Friedrich August Hayek (1899-1992). A battle at least as hot as the boxing fight, if not even much hotter! What was this all about? And does it have to do anything with Georgia? It does… A LACK OF DEMAND… What are the causes of recessions and unemployment? Keynes had a very clear idea about this. During a slump...
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Sep
23

The Most Economical Economic Indicators

Measuring economic developments is often a laborious business. Consider, for example, the Consumer Price Index (CPI). One first has to define the so called consumption basket that contains the goods and services whose prices you want to track. These goods and services have to be represented in the basket in the right proportions, reflecting the consumption patterns of an average consumer. Unfortunately, consumption habits change over time, and product characteristics change even more. A personal computer 10 years ago is obviously a very different object ...
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Jul
22

The Strategic Dilemma of the Tbilisi Marshrutka Drivers

Everyone using the service of the Tbilisi marshrutkas experiences one of two extreme cases: the marshutka either moves tantalizingly slowly or excessively fast. How can this apparent paradox be explained? In search for an answer, let us turn to game theory, one of the appealing outgrows of mathematical economics. GAME THEORY IN ACTION A game is a situation in which different parties, usually called players, independently make decisions. Unlike in a unilateral decision problem, in a game the payoff of each player depends on the actions taken by himself an...
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Jul
15

The "Wizz Air Effect" or how Georgia Became Part of the Global Economy

On Monday evening I am taking the express train from Tbilisi to Samtredia with my wife and two kids (business class, 120GEL). We plan to stay overnight in a little family hotel (40GEL), and at 6.30am we’ll board the Wizz Air flight to Katowice, Poland, at the cost €40 a person and €35 per suitcase (one way). Seat reservations, luggage, train and guesthouse included, the roundtrip to Poland will cost my family around €700 compared to €1,500-2,000 using any other, conventional option. A real bargain! (even if we ignore the fact that my wife’s family is act...
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