ISET

ISET Economist Blog

A blog about economics in the South Caucasus.
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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Guest — Eric
Leqso, you may enjoy reading some of the 20th century Marxists, e.g. Rosa Luxembourg, whose analysis of capitalism going global (a... Read More
Saturday, 01 February 2014 10:10 AM
Guest — Eric
LSE is now offering an interdisciplinary MA in economics and philosophy http://www.lse.ac.uk/philosophy/degrees/mscep.aspx?revolut... Read More
Saturday, 01 February 2014 10:10 AM
Guest — Florian
Leqso, you say that capital outflows are not the reason for the lari depreciation. Did the imports increase also when measured in ... Read More
Monday, 03 February 2014 9:09 AM
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Jan
26

Towards a More Equitable Georgia

Last week I discussed the economic consequences of inequality. Contrary to a traditional tenet of economics, empirical research has shown that inequality may have adverse economic consequences. Inequality increases the risk of political instability in a country, posing a threat to investments due to the fact that political unrest is highly detrimental to the profits made from any economic activity. Therefore, foreigners will bring less capital into a country when the risk of instability goes up, and even local investors will move their money over the bor...
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Guest — Eric
A very interesting piece. Well done, Nino! Seems like somebody in the Georgian government has read your analysis about a year ago.... Read More
Monday, 27 January 2014 5:05 PM
Guest — Eric
Reducing inequality and promoting inclusive growth are certainly targeted if one judges by the observed actions or reads the recen... Read More
Tuesday, 28 January 2014 8:08 PM
Guest — RT
> If the in-kind income generated through smallholder farming would increase in value, inequality would go down more than proport... Read More
Tuesday, 28 January 2014 5:05 PM
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Jan
20

Beyond Fairness and Envy: The Economic Effects of Income Inequality

Why should we care about income inequality? According to Nobel Prize laureate Joseph Stiglitz and Harvard economist Jason Furman, “greater inequality leads to more political instability, and greater political instability leads to lower growth” (“Economic Consequences of Income Inequality”, Federal Reserve Bank of Kansas: Journal Proceedings, 1998, pp. 221-232). Consequently, even if one does not care about income inequality directly, there may be reason to care about its indirect effects. In their article "Income Distribution, Political Instability, and ...
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Guest — NP
Any information about: 1) the average income of the top 1% of the population? ; 2) the distribution of Wealth (stock) rather than ... Read More
Tuesday, 04 February 2014 9:09 AM
Guest — NP
P.S: I think a pie chart showing the share in total Income of the different deciles would have been more telling (It would appear... Read More
Tuesday, 04 February 2014 9:09 AM
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Dec
13

On Imitation, Forbidden Fruits, and Sour Grapes

For many observers, the Georgian job market is a mystery. Companies are bitterly complaining about a lack of engineers, forcing them to withhold the expansion of production capacities and to cut down investments. Yet Georgian young people, who could make good fortunes by studying technical subjects, prefer to learn law, business administration and the like, qualifications that are oversupplied in the market and on average do not yield high salaries. Young Georgians, lacking information on what sells well in the job market, apply a simple decision rule ca...
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Guest — Jeff
Have you read Thinking Fast and Slow?
Friday, 13 December 2013 8:08 AM
Guest — Zak
Interesting, especially the visualization. The argument has been round for quite some time now, however, what I have not thought a... Read More
Friday, 13 December 2013 9:09 AM
Guest — Florian Biermann
One should not take the graph too seriously. It is obviously not a scientific article and not a scientifc diagram. Our diagram is ... Read More
Friday, 13 December 2013 2:02 PM
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Dec
06

Location Games

One or two years ago, a Lavazza’s take-away coffee shop opened on the side of Georgia’s east-west highway in the area of Zestaponi. You always could find plenty of coffee shops in Tbilisi, but it was a novelty to have them next to the highway. Soon afterwards, another coffee bar opened along the road, and surprisingly, it was again set up close to Zestaponi. And today, there are even more take-away coffee points along that road, and they all cluster at Zestaponi. Travelling from Tbilisi to Kutaisi or Batumi, you will notice other such clusters. You can b...
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Guest — Florian Biermann
Indeed, in this article we abstract away the price as a decision variable. In that way, we arrive at Black's Median Voter model, a... Read More
Friday, 13 December 2013 6:06 PM
Guest — M
Yes, they still go to the closest vendor. But that doesn't mean that the two vendors are at the same location. Bit puzzled that Ho... Read More
Friday, 13 December 2013 5:05 PM
Guest — Florian
As long as the customers buy at the vendor who is closest, the result does not change. When the "transportation cost" are quadrati... Read More
Saturday, 07 December 2013 4:04 PM
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Dec
02

Language and Economics

In the 1930s, the American linguist Benjamin Lee Whorf put forward the hypothesis that people of different mother tongues perceive the world differently. According to linguistic relativity or Whorfianism, both the grammatical structure and the vocabulary of a language influence the way how people think. Proponents of political correctness, aiming to ban the usage of certain words that are considered to be derogatory or discriminatory, ultimately base their ideas on Whorfianism. Saying “little person” instead of “midget” may have an impact on how one thin...
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Guest — RT
I speak that way too. Nevertheless, if you Google "მანქანა მყავს", you will see that some people argue differently.
Monday, 02 December 2013 5:05 PM
Guest — Sandro Ma
“მანქანა მყავს” (I own a car) - that's how Georgians speak. It can be explained why is that so. A car being a susbtitution to a ho... Read More
Monday, 02 December 2013 4:04 PM
Guest — RT
That norm seems to be changing. I heard once a student of mine claiming to never (!) have heard "მანქანა მყავს"
Monday, 02 December 2013 3:03 PM
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