Wednesday, 30 April 2008

Great Work On Nationality Conflict and Border Effects

I went to an excellent presentation of my supervisor Max –Stephan Schulze today. Max (with co-author Nikolaus Wolf) is using solid quantitative economics to show that the rising nationalistic tensions in the Austro-Hungarian empire seem to create a border effect – even before the post WWI borders were in place. He attributes this mainly due to the ethnic tensions within the empire, and tests for that hypothesis using language parameters. It is great work since it uses quantitative tools adeptly and matching it to historical qualitative knowledge of ethnic tensions within the Empire.
One of the most interesting side issues is that it seems that the 1920 border of the treaty of Trianon was well thought out – it seemed to follow the lines of the border effect causes by ethnic tensions. I would love to see that exercise repeated for failed treaties such as the treaty of Sevres in 1920, to see if a border effect was there. Most interestingly in the case of Cyprus is too see if there was such an effect before the inter-communal violence in Cyprus.http://www.lse.ac.uk/collections/economicHistory/seminars/NationalityConflictBorderEffects.pdf

Tuesday, 29 April 2008

A very confusing statement.

The highly competent minister of economics held a press conference on the health of the economy today. This is odd; you only have a press conference to tell people that the economy is sound if:

1) You are worried of a speculative attack on your currency (not the case due to the euro)

2) You have elections coming up (we just had elections)

3) You know that the economy is showing signs of weakness and you are trying to shore up business confidence.

I found the whole press clip confusing: unless we are talking about real growth rates (which is probably the case) the rate of inflation is higher than the nominal rate growth – so we are not growing at all. But probably the rate of growth of ~ 3% is correct. The funny thing is that historically a 3.5% growth rate is much closer to the trend of the economy from the 1950s onwards. So I would not celebrate yet: we are just getting back to our trend rate of growth and it will still take around 40 years to reach German GDP levels at the present growth differential.

But I think the press conference was a bit dishonest – the interest rate dropped with out entry to the Euro just four months ago. This resulted to higher liquidity based on new loans that is creating an upward surge of business activity. The interest rate fall is the reason behind the property proto-bubble we are seeing in the house market. So it easy to say that the economy is doing well today: but the experience of Spain shows that if mismanaged the building boom can have severe repercussions on the economy in the future.

Thursday, 24 April 2008

Incentives – Taxis in Cyprus Need a bit of Freakonomics

An article today mentioned the new plan by the Ministry of Transport. The Ministry is considering changing the way taxis can charge their fares. It is planning to place a legal maximum and believes that competition between the numerous cab companies will drive the prices down.


Although I found it a hard book to read Levit’s and Dubner’s Freakonomics has managed to put their main message across : if you want a system to work you need to align the incentives of the actors concerned correctly. If this attempt goes through the prices will be driven up and not down.


The ministry’s plan is sure to backfire because of the nature of a taxi ride: although you can choose from many taxi companies to go from A to B, the taxi driver is in a monopolistic position from the moment you sit in the car and he drives off. Such a maximum ceiling will result to abuses: from the moment you sit in the car you have no choice but to pay what the driver asks, and since you will not get to your destination in time unless the taxi driver takes you. The Maximum price will become the normal price.


Four years ago I learnt the hard way that if one wants to travel a long way by cab in
Morocco one needs to haggle the price in front of many cab drivers in order to get competition working to your advantage: usually bargaining results in a price that is mutually beneficial. Get in the car prior to the price being arranged however and you will see that haggling is not tolerated because as passenger you have lost your bargaining power over the driver. Another example is in Greece: the taxi driver will pick up other people only after he is on his way even if he promised you when boarded his taxi that he will not pick up other people - you cant just leave as the car is moving!.


I hope this plan is changed and not enforced – because misaligned incentives will lead to even higher taxi fares that the ones we have today.

Monday, 21 April 2008

Defending the Central Bank of Cyprus – Don’t Shoot the Messenger!

There has been a rising storm against the Governor of the Central Bank of Cyprus. Dr. Orphanides was by far the most qualified choice as a central banker, being a technocratic banker par excellence. As I warned in a previous article inflation was bound to be an issue for the new government and their reaction up to know has been to shoot the bearer of bad news.

Not all economists agree: people that i admire who know the economics of Cyprus better than myself think the Governor's comments were missplaced. But I dissagree. I believe that this government has been very successful its first few months at office. But AKEL is now attacking Dr. Orphanines for warning about the automatic inflationary mechanism that is the cost of living wage adjustment is exactly the sort of thing that makes me worry about inflation in Cyprus.

The adjustment created a mechanism to inject the increase prices of oil and foodstuff to the wages and thus to the economy as a whole, leading to enough additional inflation to make us all worse off. One needs to be a very brave politician to admit this. Looking at Italy today it is clear that bad ideas, undertaken to help the “common man”, hurt the economy as a whole, and make the less privileged even more dependent on government payouts.

Thursday, 17 April 2008

New Academics: Introducing Elena Papamichael

Elena Papamichael is a PhD student at the Institute of Education, University of London. She is specializing in the field of intercultural education, with a focus on the teachers' role in primary schools of Cyprus. Elena is particularly well placed to research issues of education teaching in Cyprus having received a master's degree in Education from the University of London and her BA in Primary Education from the University of Cyprus. Elena has also worked as a as a primary school teacher in Cyprus and as a headmistress at Greek community schools in London.

Elena is keen to provide more information over issues of racism and nationalism in Cyprus within the framework of the education system. In particular she focuses on the theories, policies and practices of intercultural education, teacher education, and provides qualitative research on these subjects. In the course of her studies up to now, Elena has also been a research officer for the European INTERACT project, for the University of London and a Conference Officer for the 5th Pan Commonwealth Forum at the University of London.



The area that Elena is exploring is under investigated; however, the few studies in the field of education and diversity identify nationalism, exclusion, racism and discrimination as key issues in the Cypriot educational system, and as problematic areas in need of research. Such research points to the responsibilities of the current policy for education and diversity in Cyprus, which is promoting assimilatory practices for diverse pupils. It also acknowledges the role of teachers and teacher educators as crucial and problematic since, at the moment, teachers are not equipped with the knowledge and strategies to work in multicultural environments. However, the role of teachers and their perceptions of diversity have not been extensively explored at a substantial level. This is where Elena's research is situated: it puts the role of teachers in the centre of its focus. The teachers are the ones working in the grassroots levels; apart from the policy level, we also need to work from below. We need deeper understandings of the teachers' perceptions of their everyday realities at the schools, and we need to gain insights into what actually happens when the classroom door closes, or after the bell rings at the corners of a schoolyard.

Wednesday, 2 April 2008

Malta and The Royal Navy

Looking at the current developments in Zimbabwe and listening to the news here in Britain, one realised how short the collective memory of a nation's printed media can be. I am not defending the current government of Zimbabwe; I just mentioning that Britain used to have a certain policy towards Rhodesia that should have made it difficult for the not to feel a bit guilty today.

Trawling through the archives I found what was a typical example of Colonial Condescending Attitude and Racism: not against Africans but against Maltese. With the threat of War with Italy serious and the re-armament of Britain there was a suggestion that the Royal Navy (R.N) should offer the ability to Maltese to enlist since:

· The Royal Navy Dockyard was the main economic activity on the island and Maltese

· The Economy of the Island was affected by the decision of the R.N to abandon Malta as the main base of the Mediterranean Fleet

· There were already substantial number of Maltese in the R.Non non-permanent contracts as seamen of stokemen

This made sense to all: several Maltese needed work, and the R.N. needed bodies. All the R.N. needed to do was to allow permanent employment of Maltese in all occupations.

Unfortunately the racism of the R.N. officers would not allow such a win / win solution to take place. The late Admiral of the Fleet John D. Kelly, vehemently opposed the plan (any emphasis in the original):

“lower classes of Malta are not white men and as for the possibility… of putting them in position of command over bluejackets [British sailors], any officer who has had management of a mess of the Mediterranean station could testify as to the endless friction which exists between the war room servants and the Maltese messmen.”

Not only that the Admiral also rejected the proposal arguing that the Maltese were not to be relied in combat:

“They lack “guts” and initiative. They are steady, sober, docile and not perceptive lazier than the average white man in the same climate. Their virtues, however, fade into nothingness the moment their skins are in danger, or worse, the moment they think their skins are in danger.”

He goes on to provide personal experiences of the Maltese cowardly under combat. Sadly even figures such as the Vice Admiral of Malta W.T.R. Ford, who had a great experience with working with Maltese men as the superintendent of the Dockyard in the Grand Harbour argued meekly that the views expressed over the Maltese work ethic:

“Are not the shared by myself… however the Maltese “are not endowed with the qualities of courage or coolness in danger, and recently on the occasion of the mining of “Hunter” some Maltese stewards or cooks did hump overboard without order and without necessity.

The idea was dropped.

What saddened me reading such comments is not so much the arrogance and the painting of a whole nation with a single derogatory brushstroke; what saddens me is the realisation of how ingrained was the feeling of superiority within the British Colonial system. With the exception of newly colonised territories, Britain could have so easily turned the Maltese into being more grateful by simply accepting their services that Britain needed.

But they could not do it – the real problem was not the fighting qualities of the Maltese (who I don’t blame for not wanting to die fighting a war they did not understand): it was that the British admirals simply refused to accept that a British man or the lower ranks, could at one day ordered by a person from the colonies.


Seven years later King George V presented the St. Georges cross to the whole island of Malta to 'bear witness to the heroism and devotion of its people' during the great siege it underwent in the early parts of World War Two. It took the necessity of the Second World War for British officers to break their iron wall of prejudice.