The large economies have each, in sequence, offered “models” that once seemed attractive to others but that eventually gave way to disillusionment. Small countries may have some answers. They are often better able to experiment with innovative policies and institutions and some of the results are worthy [...]]]> A new discussion paper by Jeffrey Frankel,  via Economic Logic:

The large economies have each, in sequence, offered “models” that once seemed attractive to others but that eventually gave way to disillusionment. Small countries may have some answers. They are often better able to experiment with innovative policies and institutions and some of the results are worthy of emulation. This article gives an array of examples. Some of them come from small advanced countries: New Zealand’s Inflation Targeting, Estonia’s flat tax, Switzerland’s debt brake, Ireland’s FDI policy, Canada’s banking structure, Sweden’s Nordic model, and the Netherlands’ labor market reforms. Some examples come from countries that were considered “developing” 40 years ago, but have since industrialized. Korea stands for education; among Singapore’s innovative polices were forced saving and traffic congestion pricing; Costa Rica and Mauritius outperformed their respective regions by, among other policies, foreswearing standing armies; and Mexico experimented successfully with the original Conditional Cash Transfers. A final set of examples come from countries that export mineral and agricultural commodities, historically vulnerable to the “resource curse,” but that have learned how to avoid the pitfalls: Chile’s structural budget rules, Mexico’s oil option hedging, and Botswana’s Pula Fund.

There is certainly no dearth of innovative policies and institutions in Georgia, from fighting corruption by firing the entire traffic police force to public service halls. Some of the reforms and institutions were inspired by other countries, but others were not. Which Georgian reform experiments are worth to be emulated by other countries? Which Georgian reform experiments are scalable and of relevance to larger countries?

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1.  Let’s keep the tradition and start with a link from Michael Fuenfzig – property rights and internal migration in Russia.

2.  Economics Blog tells us how austerity could be self-defeating.

3.  For any Star War fans out there – was Death Star really worth [...]]]> Another Friday – another post with interesting links on economics.

1.  Let’s keep the tradition and start with a link from Michael Fuenfzig – property rights and internal migration in Russia.

2.  Economics Blog tells us how austerity could be self-defeating.

3.  For any Star War fans out there – was Death Star really worth all the fuss?

4.  From The Atlantic – how being kidnapped by pirates is just something from game theory.

5.  Noah Smith has an interesting post on the essence of financial crisis.

6.  Again from Noah – structuralists vs. cyclicalists.

7.  Nick Rowe from Worthwhile Canadian Initiative has a couple of interesting posts. First – about forward and backward looking stuff. And second – about identity economics.

8.  The Economist’s Free Exchange blog talks about possible Greek exit from Eurozone.

9.  Paul Krugman has a quite pessimistic piece on economics and its usefulness.

10.  And finally – an interesting blog (the whole blog!) dedicated to why you shouldn’t get a PhD. Not willing to discourage ISET students from doing one, but just to list all the cons (and we all know about pros, don’t we?)

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You may think that the subject matter of economics is human behavior. Well, not so fast. There is a growing body of behavioral economics literature suggesting that the subject matter of mainstream economics has been behavior by “Econs”, not “Humans”. Consider this journalistic account of “Nudge”, an influential book by Richard Thaler and [...]]]>  

You may think that the subject matter of economics is human behavior. Well, not so fast. There is a growing body of behavioral economics literature suggesting that the subject matter of mainstream economics has been behavior by “Econs”, not “Humans”. Consider this journalistic account of “Nudge”, an influential book by Richard Thaler and Cass Sunstein:

Economics has traditionally ignored psychology. In NUDGE, Richard Thaler and Cass Sunstein take a step toward greater realism about it. […] The authors start off by differentiating “Econs” from “Humans.” The former are the efficient calculators imagined in economic theory, able to weigh multiple options, forecast all the consequences of each, and choose rationally. The latter are ordinary people, who, like the analysts on Wall Street, fall well short of homo economicus. Humans operate by rules of thumb that often lead them astray. They are too prone to generalize, biased in favor of the status quo, more concerned to avoid loss than make gains, among other shortcomings. So they often fail to manage their personal affairs to the best advantage.

Thaler and Sunstein’s “Humans” are different from “Econs” in that they lack infinite computing power and could therefore benefit from gentle (and not so gentle) nudges. Their “Human” is a “Homo Economicus Light”: an individual utility maximizer with “bounded rationality”.

If you think “Nudge” is a great step toward embracing psychology, consider this:

Most economic models are based on the self-interest hypothesis that assumes that material self-interest exclusively motivates all people. Experimental economists have gathered overwhelming evidence in recent years, however, that systematically refutes the self-interest hypothesis, suggesting that concerns for altruism, fairness, and reciprocity strongly motivate many people. Moreover, several theoretical papers demonstrate that the observed phenomena can be explained in a rigorous and tractable [emphasis mine, EL] manner. These theories then induced a first wave of experimental research which offered exciting insights into both the nature of preferences and the relative performance of competing fairness theories. […] We also discuss recent neuroeconomic evidence that is consistent with the view that many people have a taste for mutual cooperation and the punishment of norm violators. We further illustrate the powerful impact of fairness concerns on cooperation, competition, incentives, and contract design.

(from THE ECONOMICS OF FAIRNESS, RECIPROCITY AND ALTRUISM – EXPERIMENTAL EVIDENCE AND NEW THEORIES by Ernst Fehr, Klaus M Schmidt.)

By incorporating altruism, fairness and reciprocity, Fehr and Schmidt‘s strand of work represents a much more significant departure from standard microeconomics in the direction of realism (and psychology, and sociology). Fehr and Schmidt construct a “Human” that is a social animal, yet, they stay within the realm of economics because of their emphasis on “rigorous and tractable” mathematical modeling, i.e. maximization of “utility”. Of course, they use “utility” in a broader sense, including not only banal material utility but also emotional satisfaction (or dissatisfaction) from dealing with others.

For Fehr et al, the conclusion from the “spectacular failure” of standard economics in explaining observed behavior (in real life and in experiments) is that economists should use more complex models that incorporate e.g. other-regarding preferences into “Human” utility functions. Add to this behavioral economics mix Herbert Simon’s concept of “bounded rationality” (as done by Thaler and Sunstein) and here we have a real change of paradigm, a revolution in social sciences!

Now let’s look at the problem from a different point of view.

By incorporating certain aspects of psychology, behavioral economics may be able to explain certain non-intuitive results or “puzzles” in game theory and microeconomics. Yet, how does behavioral economics perform relative to, say, psychology? The fact that “Humans” are human is not even yesterdays’ news for psychologists. What exactly could behavioral economics contribute to psychology? What great insights into human behavior can psychology or sociology gain by incorporating the axioms of “utility maximization”? When “axiomatizing” real human behavior, such as care of the elderly and children, honesty, friendship, etc., what weights should psychologists attach to the pursuit of direct material benefits, as opposed to expectation of reciprocity, adherence to moral principles, biological instincts? How are they supposed to find out? How robust would be their findings? How good would be “economic psychology” in explaining or predicting actual behavior?

The same body of “overwhelming evidence” that motivates behavioral economics should serve as a reminder that economists should be better aware of the scope of their discipline. The economics paradigm of “optimizing individuals” can explain an awful lot, but it cannot explain everything. Moreover, it should not strive to do so. After all, what’s the “behavioral” or “neuroscientific” evidence on our actions always being a result of individual utility maximization?

While the contribution of economics to understanding human psyche is likely to remain very limited, let us not forget that economics can provide qualitative and, sometimes, quantitative answers to many useful policy questions concerning the real world. For instance, consider the following:

• How would a bad harvest of wheat impact prices and quantities consumed (of wheat itself, any final products that use wheat as an intermediate input, its complements and substitutes)?
• What would be the impact of a new licensing requirement on competition in the pharmaceuticals market (the number of firms operating in the market, the range of medicines available, prices, quality of service, corruption risks)?
• What would be the impact of tougher labor regulations on the job opportunities for women, disabled and ethnic minorities?
• How should an insurance contract be designed to overcome moral hazard and asymmetric information?
• How many firms can be expected to operate in a certain market given its size, the country’s trade regime and access to neighboring markets?

[note the absence of any macroeconomics questions, reflecting a personal bias].

Economists should take pride in being able to answer these very important questions, however, they also should develop a sense of humility. Economists make many simplifying assumptions about “Humans”, and populate their models with straightforward utility maximizers, namely “Econs”. Their predictions are more or less accurate when they apply their tools of analysis to situations in which “real” human qualities play a relatively minor role. “Humans” and “Econs” should not be mistaken for each other. “Humans”, as opposed to “Econs”, are just too subtle and complex for their behavior to be “axiomatized”. For instance, I would not use economics axioms to analyze or predict “transactions” within my family precisely because I love my wife and children, and they love me. I would much rather consult a therapist or psychologist to understand what’s going wrong in the family.

Abraham Maslow wrote in “The Psychology of Science” (1964) – “if all you have is a hammer, everything looks like a nail to you”. Substitute “utility maximization” for “hammer” and you get my idea. As much as economists would like to use their toolbox to help open up the mysterious black box of human psyche, something must be left to other sciences and … God.

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1.  Let’s keep the tradition and start with two links from Michael Fuenfzig. First – a small post on identity in Georgia.

2.  And second – projects like Lazika seem to gain popularity in the world. [...]]]> It’s Friday – best day of the week and day of best links from around the world of econobloggers!

1.  Let’s keep the tradition and start with two links from Michael Fuenfzig. First – a small post on identity in Georgia.

2.  And second – projects like Lazika seem to gain popularity in the world. And this post argues that it’s not finances, that the developed countries should provide to such projects. (And also have a look at Michael’s last week post on our blog).

3.  Calculated Risk blog has some nice graphs on US population distribution by age. Do we all see the problem by 2035?

4.  Why will and why won’t Eurozone break up – from Economics Help. What do you think?

5.  And from the same blog – something useful for our students.

6.  The Economist’s Free Exchange blog has a nice post on trading myths.

7.  Same blog has a post on migration in Europe, which is worth reading just because a wonderful headline. Mr. Shaw would’ve been proud!

8.  An interesting article from The Atlantic on what the Fed should do and why it isn’t doing it.

9.  Paul Krugman talks (extensively, may I say) on how Ben Bernanke of today is different from Ben Bernanke of a dozen years ago.

10.  And finally, one of my favourite bloggers, Noah Smith, has a very intuitive post. On intuition.

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Productivity levels on the horizontal axis, productivity growth rates on the vertical axis. (Source: Dani Rodrik, “Unconditional Convergence”, NBER Working Paper 17546, October 2011.)

A recent paper by Dani Rodrik has an interesting observation about Georgia. The paper itself estimates the productivity growth rates of manufacturing firms, based on a UNIDO dataset covering [...]]]>

Productivity levels on the horizontal axis, productivity growth rates on the vertical axis. (Source: Dani Rodrik, “Unconditional Convergence”, NBER Working Paper 17546, October 2011.)

A recent paper by Dani Rodrik has an interesting observation about Georgia. The paper itself estimates the productivity growth rates of manufacturing firms, based on a UNIDO dataset covering 72 countries. What would we expect? We could believe that it is hard to innovate, but easy to copy and emulate the productivity leaders in the industry. In this case the most unproductive firms are the ones with the highest productivity growth, and the most productive firms the ones with the lowest productivity growth. Or we believe that productivity growth is driven by other, firm-specific factors. In this case we would expect that there is no or a positive relationship between productivity levels and growth rates.

It turns out that the former is what is happening. Low productivity firms feature high productivity growth rates, and high productivity firms feature low productivity growth rates. This is an important finding as it implies that low productivity firms catch up with high productivity firms. There is a catch though: This finding only holds for manufacturing industries. Not for agriculture and not for non-tradable services. Given this, what should you do as a poor country? You should move into those industries that offer you high productivity growth rates – manufacturing essentially. Rodrik calls these industries escalator activities – you step on the escalator and start at a low productivity level, but then you quickly and almost automatically move up.

Where does Georgia stand? The figure above from Dani Rodrik’s paper has Georgia in an interesting position. The productivity of Georgian manufacturing firms is the lowest or one of the lowest among the 72 countries. At the same time productivity growth rates in Georgian manufacturing are among the highest if not the highest compared to all other 72 countries.

This is of course fully in line with the first theory, that it is easier to copy and emulate than to innovate. Even better, Georgia is far above the regression line, indicating that more is going on than just what this simple theory can explain. A potential explanation are the significant reforms after the Rose Revolution. With less corruption and bureaucracy, a simplified tax regime and more reliable electricity it is no wonder that firms experience a productivity boost. A boost so large that at least according to this figure Georgia appears to be not only the World’s number one reformer, but also the World’s number one manufacturing firm productivity growth performer.

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It is a very interesting discussion. Possibly I can contribute somewhat as I am a grown up farm boy, a ‘skilled agricultural worker with exam’ and an agricultural economist [...]]]> A recent blogpost on tractor service stations generated an interesting discussion in the comment section. Well worth a read, in particular this insightful comment by Ulrich Koester:

It is a very interesting discussion. Possibly I can contribute somewhat as I am a grown up farm boy, a ‘skilled agricultural worker with exam’ and an agricultural economist and a general economist.

To clarify the issue it might be helpful to look at the experience of other countries, such as Germany. We have small farms in some regions which could be much better of either buying machinery services from machinery contractors, forming a machinery ring with individual ownership of the machines but renting the free capacity to other members of the ring, or even setting up partnerships with joint ownership of the machines. All alternatives had the potential to improve the well-being of many individual farmers. The actual situation shows that many of the farmers suffer from unused capacity of machinery and labor. There is disguised unemployment on many farms and inefficient use of machinery. There are even 30 to 40 percent of full-time farms which make a loss from year to year, indication that they eat up their equity. Hence, these farms would have been better off renting out the land and doing nothing. Of course, there were many extension worker and agricultural economists who tried to convince farmers to join a machinery ring or even to set up a partnership. The breakthrough came only during the last two decades. Note: The use of machineries would have been profitable before! What are the reasons for the delay? Expected profitability is certainly a necessary condition for setting up a private enterprise, but is not a sufficient condition. Uncertainty and risk may be against it.

First, machinery contractors were not at sure that offering the service would have been profitable for them. They have to know whether farmers will actually buy and will actually pay on time (this might be a big problem in Georgia). The contractor has to guess how many hours per year he will be able to sell the service. That depends very much of the cropping pattern in the region and the annual weather conditions. Most likely the contractor will not be able to get agreements on forward contracts and if so he can hardly enforce them. Moreover, he needs specific knowledge how to handle the machineries, including repairing them, and acting as a business man who knows business economics and who can deal with farmers personally. One can imagine that there are few people who are competent in all of these fields.

First conclusion: Even if more use of machinery in Georgian agriculture could be profitable from a macro-economic point of view machinery contractors may not start a business because of lack of know -how and experience, uncertainty about market demand, uncertainty about payment on time of customers.

Second, formation of associations or cooperatives: Whether membership of a coop will pay for the individual farmer largely depends on two aspects: First, how much the individual farmer has to pay at the inception of the coop for the purchase of machinery and for the management of the coop and second, how certain he is about the benefits. The second point bears a significant level of risk. It depends first of all on the rules of the coop and how these are enforced. Moreover, the benefit in individual years can vary significantly depending on the weather and the point of time the individual farmer gets access to the machinery. If famers are not certain that the coop or association will be managed efficiently and in a transparent way, they may not be willing to become member. The trustworthiness of the management is of most importance.

Third, the setting up of machinery rings: There are many machinery rings in Germany nowadays, but it took long to convince farmers. Most important is that the ring is diversified in machineries and faces diversified demands of services and above all has a professional management. It is difficult to start on large-scale in a country which has no experience with these schemes. Note: It may be argued that there are many people in Georgia who can build on their experience in former times where they worked with machineries. However, a contractor or a leader of a coop or a machinery ring has to be not only an expert in technical matters, but also in leading a company. He has to know how to extend the market, increase the use of available capacity, calculate the charges, find out the trustworthiness of client, and make sure that clients pay and so on.

Second conclusion: It is nearly impossible for a founder of a coop or a machinery ring to guaranty that the undertaking will be profitable. There are many uncertainties. No wonder that even clever business men who even would get access to credit have been reluctant to set up respective activities. It should be noted, that the EU Commission is willing to support financially the setting up of producer associations for the first couple of years. The subsidy allows hiring qualified staff. Some of the supported association survived after the gestation period but not all of them.

Is the creation of machinery stations a real alternative?

First, what is the alternative? Continuation as it is? Supporting the alternatives? Continuation as it is seems to be the worst alternative. Setting up a MS would lead to an improvement however as mentioned by some discussants it may undermine the evolution of a private market. To minimize the danger one could foresee the following: MS could be considered as an interim solution. They have to be privatized within a given period of time, say five years. The justification of MS is that they prepare the market for private agents. Farmers learn that machinery rings or machinery contractors or associations or even partnerships can be good for them. In order to maximize these effects MS have to run the business in full transparency. They should have a Supervisory Board with Honorary members of farmers and civil servants. One main task of MS should be that they train young people in the all the wide ranging types of running such an enterprise. It should be clear that the success of the MS largely depends on the management. It might be advisable to send potential would-be leaders of MS and of coops and of associations to foreign countries for some weeks in order to gain experience.

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1.  A good tradition is to start with links from Michael Fuenfzig – today we have two of them. First, a well-known North Korea specialist Andrei Lankov talks on the evolution of the personal income in DPRK.

2.  And second, NY Times reports [...]]]> Another Friday – another post full of interesting links for our readers!

1.  A good tradition is to start with links from Michael Fuenfzig – today we have two of them. First, a well-known North Korea specialist Andrei Lankov talks on the evolution of the personal income in DPRK.

2.  And second, NY Times reports a new problem in Zimbabwe – no pocket change.

3.  Interesting fact from Mark Perry for those who think that American manufacture is in decline. Impressive, though not very flattering for Russia and Canada.

4.  From him again – what can onion prices teach us about oil speculation? What, indeed?

5.  Economics Blog has a short cost-benefit analysis of Scottish Independence. Paraphrasing recent article in The Economist – does Edinburgh really want to become “New Athens” again – but for completely different reasons?

6.  Alphaville blog on FT has answers to seven questions about global markets.

7.  Cheaptalk has an excellent example of how game theory works in real life. And a great strategy, too. Also be sure to read the discussion of the strategy here.

8.  In the previous post we had Roger Farmer talking about equilibria. Here’s Slackwire’s response.

9.  Joseph Stiglitz’s interesting interview to The European is certainly worth reading.

10.  An interesting, although controversial view on economic models from the biologist. The mad biologist, to be precise.

11.  Noah Smith has a dig at (not) Real (not) Business (not) Cycle models.

12.  And finally, some wisdom from late great George Carlin about the conceit of human kind. It was the “Earth Day” last week, after all.

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The New York Times ran an article about Lazika, the planned city near Zugdidi, on the Black Sea coast. It’s not the only attempt to build a new city from the scratch in the South Caucasus, as Azerbaijan has similar plans. While these plans sound like pipe dreams of overambitious and overconfident [...]]]>

The New York Times ran an article about Lazika, the planned city near Zugdidi, on the Black Sea coast. It’s not the only attempt to build a new city from the scratch in the South Caucasus, as Azerbaijan has similar plans. While these plans sound like pipe dreams of overambitious and overconfident politicans and planners a few positive things can be said about Lazika. Maybe, after all it is not such a crazy idea. In particular, this quote in the New York Times caught my attention (and I have to admit, it speaks for Mr Vashadze to be open to new ideas, even if they are not well-thought out in the end):

“Mr. Vashadze said he was browsing on the Internet when he came across the idea of a charter city, with distinct regulatory and judicial systems that could attract foreign investors to build factories.”

Popularized by Paul Romer, charter cities are special reform zones that try to overcome the pervasive problem of weak institutions in developing countries. The developing country provides the land for the charter city but not the institutions. Instead, the institutions will be guaranteed by a third country. Typically this is a developed country with strong and credible institutions as for example Norway or Canada.

Is this what Georgia needs? It is unclear. Arguably Georgia is not suffering from too much bureaucracy or too much regulation. On the other side the rule of law and property rights are not yet highly developed in Georgia.  A credible guarantor third country for Lazika might help overcome foreign and domestic investor and worker’s doubts about the rule of law and property rights in Georgia. But likewise, one can have doubts that a charter city that ultimately is on Georgian land will be truly immune to these doubts.

This is not all we can say about Lazika and Azerbaijan’s new town. Both countries have an unusually large share of their population living in rural areas. At the same time there is strong relationship between economic growth and urbanization, and a negative relationship between poverty and urbanization. While the causality runs in both directions a policy of promoting urbanization has a good chance to contribute to economic growth and poverty reduction. But whether this is best achieved by investing into existing or by building new cities is an open question, with no simple answers.

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In recent years, many countries in Europe and the former Soviet Union have seen an explosion in university enrollment. During approximately 10 years (from 1999 until 2010) higher education enrollment increased by 64% in Central and Eastern Europe, 27% in Central Asia and South Caucasus, and 19% in Western Europe and North America (see UNESCO).

In recent years, many countries in Europe and the former Soviet Union have seen an explosion in university enrollment. During approximately 10 years (from 1999 until 2010) higher education enrollment increased by 64% in Central and Eastern Europe, 27% in Central Asia and South Caucasus, and 19% in Western Europe and North America (see UNESCO).

Several tendencies are evident in the data:

• Over 10 years, enrollment has increased the most in those Eastern European countries that had relatively low enrollment rates (20-25%) at the outset of the period. For instance, the Czech Republic, Slovakia and Romania have more than doubled enrollments, catching up with the established EU member states. Another country that has more than doubled student enrollment is Armenia.
• Enrollments have grown at a relatively modest pace (or not at all) in Central Asian countries that had very low enrollment rates at the outset of the period, such as Uzbekistan, Azerbaijan and Tajikistan, and in Georgia after 2005.
• Enrollments grew much faster in the first half of the period (1999-2005) throughout the transition region. By 2005, many countries appear to have exhausted their higher education potential because of a combination of reasons including the availability of cheap (or free) study abroad opportunities, especially for new EU member states, stronger labor markets (affecting the opportunity cost of further education), and education system reforms that placed greater emphasis on the quality of students (through national exams, and of universities (by having licenses revoked).

Now, there is no arguing that increasing higher educational enrollments may be a very positive development for most transition countries aiming for the “knowledge era”. However, the sheer pace and extent of higher education expansion in many transition nations is suggestive of an uncontrolled explosion bringing about great efficiency losses and costs for the societies involved. Here are two reasons:

• How can a country (almost) instantly increase enrollment in a field of education in which it had no prior expertise? Only by lowering the standards.
• How can a country instantly double student enrollment? Only by allowing very weak students to buy diplomas of “higher education” from pseudo universities. In many (documented) cases, diplomas exchanged hands for a modest price equal to the marginal cost of printing and “normal” profit for “university” owners. No requirement to attend lectures or pass exams. No questions asked.

Interestingly enough, an uncontrolled expansion of undergraduate education creates demand for further (Master’s level) studies, often of very low quality, in order for the better students to differentiate themselves from other diploma holders (and to “signal” higher quality in the labor market).

As a result, many transition nations now find themselves in an over-education “trap”.  How does it work?

Not having a college degree in a society that does not provide reputable vocational training (as in Germany) and where more than 60 or 70% of the population do have college degrees carries a stigma. To avoid it, everyone is trapped into getting a college degree, regardless of its quality and relevance for future occupation. The more people get trapped, the more “costly” it is to opt out.

The over-education trap is not unique to transition nations. Economists are pointing out to the massive accumulation of debt by US college students as potentially the next asset bubble. US college enrollment has surpassed 70% in 2010. Prices for college degrees continue to rise, and so does demand. No parents want their children to be left behind.

The social and individual inefficiency associated with the over-education trap is hard to quantify, but here is a short list of what it might comprise, at the minimum:

• Earnings of young adults who could have used 3-4 years of their life for work or vocational training that would help them avoid unemployment and increase productivity.
• Earnings of excess university teaching personnel who have the potential to produce social value added in other sectors of the economy (including secondary education).
• The cost of creating and maintaining excess physical infrastructure in higher education.

The over-education trap is by definition producing a “skills mismatch” in the labor markets of affected countries, i.e. a situation when an economy has a surplus of workers with tertiary and secondary general education, and a shortage of workers with technical qualifications. Common symptoms of this decease are high unemployment and employment in low skilled jobs among college graduates, and low monetary returns to tertiary education.

These symptoms are present in most countries of the transition region, including Georgia. Thousands of students still go every year into general economics, management, and legal studies that bring them not an inch closer to productive employment. Still, Georgia is a huge exception. In fact, it is unique among all transition countries in that, beginning in 2004-5, it had the political will to combat corruption in higher education and to set a high quality bar for both students and universities. As a direct consequence of its education policies, Georgia is the only country in the “high initial enrollment” group (above 30% in 1999) that managed to bring higher education enrollment from the peak of almost 47% in 2004 down to below the 1999 level of 35%.

Of course, weeding out weak universities solves only a part of the problem. Georgia has yet to offer its young generation a viable option of high quality vocation training and productive jobs.

QUESTIONS FOR RECENT UNIVERSITY GRADUATES:

• How many of you have completed a full course of study at a university without acquiring any practical skills or getting an “education”?
• How many of you felt that your studies in an MA, MBA or MSc program did not equip you with any knowledge beyond what you have already acquired in your baccalaureate studies?
• How many of you have had the experience of having your job application rejected because you were, supposedly, “overqualified”? Or of taking jobs below your level of qualification?

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1.  Our own Michael Fuenfzig suggests visiting Investor.ge, not least for these two contributions from our ISET colleagues – Monica Ellena and Michael himself.

2.  Ever wonder who has the most natural resources in the world? Here’s the answer. Not quite surprising, is [...]]]> Another Friday – another post full of interesting links for our readers!

1.  Our own Michael Fuenfzig suggests visiting Investor.ge, not least for these two contributions from our ISET colleagues – Monica Ellena and Michael himself.

2.  Ever wonder who has the most natural resources in the world? Here’s the answer. Not quite surprising, is it?

3.  If you live in a poor country, let it at least be sunny – that’s what this story about solar energy teaches us. Oh, if Georgian readers are interested in how much an average resident of Manhattan pays for electricity – it’s somewhere in the middle of the article.

4.  An excellent – and I can’t emphasize it enough – piece from physicist Tom Murphy, about an argument between a physicist and an economist. And I certainly agree with the physicist on this one! Do you?

5.  Why is the US richer than Europe? The author of this article points, in essence, to urbanization.

6.  The Free Exchange blog has an interesting piece which discusses whether a cashless economy is more easily manageable.

7.  Nice article by Stephen Williamson on monetary policy and what Bernanke should really be doing.

8.  Roger Farmer is a guest on Noah Smith’s blog, where he provides interesting view on equilibrium in macroeconomics. Or, rather, equilibria (or is it  -ums?). And I know who will like and comment on this one! Btw, make sure to read Noah’s post to which this one is an answer.

9.  Finally, Acemoglu and Robinson clearly haven’t heard of Godwin’s Law when they discuss whether Keynesian economics is “left” or “right”. Still, interesting to read.

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