Saturday, April 30, 2005

Kerak, Jordan Posted by Hello

Sign was not entirely accurate. The hotel was nice, especially considering the low low price. View was very good. Restaurant next door was very good, and provided free firewater to conclude the meal. Within steps is a fine Crusader era fort. (My visit was in February 2002.)
Landlords disconnecting vital services like water and power supply to tenants in case of rent dispute - Khaleej Times
If the disputes are over nonpayment, do landlords have any other leverage?

If the disputes are over increased rents, why don't landlords simply raise the rent? And if the tenant refuses to pay, then evict. Or is that a difficult and regulated process?

I suspect that what the government is seeking to do is prevent the landlord from raising the rent to the market level. Perhaps the government should examine whether it stands in the way of an increase in supply.
Government allows entry where previously it granted exclusive agency - Gulf News
Abu Dhabi: Consumer societies and establishments will be allowed to import commodities directly and will not have to buy from agencies, said Shaikh Hamed Bin Zayed Al Nahyan, Chairman of the Abu Dhabi Department of Planning and Economy.
Awesome. Government says you can bypass the very monopolies it created.

The Emirates Economist endorsed such a policy move recently.
Headline: 'Oasis diversifies to non-movable assets': Gulf News

Despite what you might think, the story is not about the demise of nomadism.
340 smuggled camel jockeys returned - Gulf News: "Many of children were smuggled out at the age of 4 and 5 years. He said the children who have been returned cannot identify their parents or families and they even don't know which area of pakistan they belong to."


Long absence has consequences - Gulf News

The man told the court that he wanted to remarry his former wife if she approved. The man was told that he could remarry her upon a new proposal and new dowry. Sources at the Dubai court said the man has not shown up since then.
It appears no mutually beneficial price could be agreed upon.

It also appears the former wife wasted no time in excercising her rights to a Sharia-endorsed divorce once the husband's absence crossed the critical point. And she wasted no effort in finding him.

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Ministry debars 799 from GSSC exams - Khaleej Times

Since they were external students, the ministry had formed committees, appointed invigilators and spent money on printing question papers, the sources said, adding that the students, however, failed to show up for the examinations. The ministry took a serious view of their conduct since it had spared no efforts to conduct the examinations, besides spending money.

In the past, the general practice was that the external students would, after registering for the examinations, take two weeks leave from work to appear for the exam. The ministry charged Dh500 as exam fees, but even then, some students failed to appear for the exam, arguing that the amount was nothing compared to 15 days pay. To curb such an attitude, the ministry decided to debar any boy or girl from taking the exam for five consecutive years if they failed to take the exam in the first attempt, the sources said.
I'm not sure what an "external candidate" is. Perhaps they completed school but did not pass the General Secondary School Certificate Examination on an earlier exam, or, perhaps they are dropouts. I take it that these are nationals, but I'm not sure of that either. Here's an earlier story about the GSSC.

Other questions: where are they working, and why is it that passing the exam doesn't seem to affect their pay and continuation?
Where current UAE labor law does not apply - Gulf News - SpecialReports
Employees in private sector establishments which are governed by the current labour law that was issued in 1980 say if such a generous work relations can be enforced in free zones and be good for both employees and employers, why not broaden the practice to cover the whole country?

As the UAE attracts international talent for its many diverse projects, employees are beginning to question the archaic rule of the six-month employment ban if you quit your job.
Long article: Read the whole thing.

UPDATE: Be sure to read the informative
comments (follow link and then scroll down) added by SecretDubai. SD gave the article a close reading, and adds valuable added information. Sign me "your mere theorist, JC."

One important point of clarification. The article states
The reasoning behind the ban was to protect the businessman or investor so that his workers would not steal secrets or clients and use them for the benefit of a competing company.
I disagree. The logic for the ban - other than as an inefficient barrier trade - is to protect businesses against opportunistic behavior by workers. In particular, the employer pays your move to the UAE so without the ban an employee could change jobs after arriving.

Of course there is no requirement that the employer pay the moving costs to begin with, although there may be good reason why they do (either employee liquidity constraints or that employees are averse to moving to region that is uncertain or only partly known to them).

Further, it is not so much specific knowledge of the company - its trade secrets - which makes an employee attractive to another employer in the UAE. It is the general local knowledge the employee picks up by working in UAE which makes them valuable. (As the article points out, in the developed world employers use private contracts to protect themselves against employees going to work for the competition. They rely upon the court system to enforce these contracts. Enforcement may not perfect, but private contracting appears preferable to one size fits all government regulation of labor relations.)

As long as employers are paying workers the value of their contribution to the output of the firm the employer will the same time be protecting itself against a raid on it employees. Because if pay matches contribution then the employee's wage rises as the value to the employer who brought her here rises as she gains general knowledge. The internal wage of the employee stays in line with her external market value.

See: general human capital.

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Friday, April 29, 2005

Move to lower employee monitoring costs is revealing - Khaleej Times

A circular issued by the Organisation and Management Department in Abu Dhabi prohibited women employees of all local government departments from wearing veil at their workplace. “This decision came to bridge the gap as regards the issue of discipline at the workplace. It aims to ensure that the employee will not leave her workplace during the working hours," the circular said. It added that the veil helped some employees to leave and return to their workplace without being noticed, even with the monitoring cameras.
Not all sections of the government agree with the move:

Shaikh Dr Mohammed Sulaiman Faraj, Senior Preacher at the Ministry of Justice, Islamic Affairs and Auqaf, said hijab is a protective shield for woman as well as men against fitna or seduction and should not be taken out without legal necessity. "It is a command by Allah the Almighty for women to cover the parts of their body. There are different opinions that if there is no fitna then the woman can take it out from the parts covering her palm and face but this is not a call to ask people to take hijab out," he said. He added: "No one has the right to prohibit women from wearing hijab unless there is a legal necessity".
Equal treatment sought by female employees:
S. Amantullah, a government employee, said this move would compromise women's freedom. "It will be like infringing on our rights. This is about our freedom. No one has the right to tell us to take it out," she said. She said there were a lot of national male employees who leave their workplace during working hours and nobody questions them. "A lot of them come and leave and nobody dares to ask where they are going. So why should it be women."
Technological solution recommended:
"This is the 21st century. They came up with robots to act as camel jockeys... so why don't they come up with another smart hi-tech idea to identify employees and avoid this hassle. This is a religious matter and we should not tamper with it," said S. Amantullah.

She said many of her female colleagues were worried now after hearing the news, adding that nobody expected this from a Muslim country. "This is a Muslim country and if the government is doing this at its departments, then it will be opening Pandora's box," she said.

She said even without any such a procedures, any head of department or section should be having a system to monitor his staff. "If you are in charge of an office, if a lady worker is missing, you should know and you don't need to check and match faces to do that," she said.
Maybe the circular reveals more about the monitoring than about the monitored. Why are cameras being used to begin with?


Change from ceiling to floor price?: Abras in Dubai - Gulf News

"It's been 50fils for at least 13 years. If you have 20 people on the boat that means you only earn Dh10. We have many costs to cover boat and engine repairing, diesel so I think Dh1 is a better price," he said.

Image source: datadubai

Product may change as well: If safety enters; will charm exit?
Steps to boost safety
o Possible improvements of the abra service include introducing smart cards for payment.
o The municipality wants to stop operators from collecting fares while the abras are in motion.
o It is also putting in safety rings and safety jackets for the abra operators and the passengers.
ILO wants parity between local and expat workforce - Khaleej Times Online

ABU DHABI — The International Labour Organisation (ILO) has called upon the UAE government to ensure equality between the national and expatriate labour force in the country.

"Equality at work simply means equal pay for equal jobs. Any discrimination in this regard is not tolerated at the international level. These are issues that the country will have to deal with," Dr Taleb Rifai, ILO Regional Director, told Khaleej Times in an exclusive interview yesterday.

"Any difference in privileges, pay and treatment between a national and a foreigner holding similar jobs would automatically be deemed as a violation of international laws," Dr Rifai, who is visiting the country on the invitation of Dr Ali bin Abdullah Al Kaabi, Minister of Labour and Social Affairs, said.
He said he had been told by many authorities concerned he met here that at times, the privileges are not related to pay, but relate more to pension fund and insurance. "Our mandate is to ensure that when a worker goes to any country, he or she is fully respected and his or her rights are observed as equal to any other right at work," he said.
Note that the pension and insurance for nationals are government provided even if the national is employed in the private sector. It seems to be implied that government's subsidizing their own citizens is acceptable to the ILO. Another prominent subsidy is that the government pays employers to provide training to national employees.

What is more difficult to detect are differences is privileges and treatment. One hears plenty of stories that nationals and nonnationals receive different treatment with respect to hours of work, absenteeism, and termination.

Segregation seems, from this article, to be okay by the ILO:
Stating that the issue of foreign workers and their rights has always been the concern of both UAE as well as ILO officials, he said: "I am not sure if equality is absent, to be fair and objective. What is happening is that there are certain categories of work which have become the domain of foreign workers while the nationals find other categories attractive."
But is it discrimination by segregation? Or is the segregation merely the voluntary self-selection of workers into occupations? If it is the former shouldn't the ILO be equally concerned?

The ILO man remarks about the differences in foreign labor mobility in the UAE in comparison to the US and Europe:
Replying to a question on free movement of labourers in the country, the ILO official said the UAE had limitations on the intake of foreign labourers, noting that the movement was determined by actual needs of the country for development. "There is restricted movement and less flexibility in the local market. I would say it is easy and not complicated for a foreign worker to come to the UAE, but it is difficult for the worker to move from one job to another."

He observed that this was not the case with several other countries in Europe and North America, where it was far more complicated to enter the country, but once in the country, the worker enjoys higher degree of flexibility to move from one job to another. "The advantages of having free movement of labourers within the region are many, less problematic and helpful in striking a balance between supply and demand."
His synopsis of job mobility rules conforms to the description I have given in prior posts on the UAE labor market.

If the ILO gets all these things on its equal-treatment wish list what would happen?
o Firms would be even more reluctant to hire nationals at all, for once they hired one it would have to treat all workers in that job category the same.
o If firms were compelled to hire Emiratis in an occupation, and treat all workers the same, the firms would have no reason to favor one nationality over another: the workers would be homogenous and the firm would be indifferent as to percentage that are Emirati (I'm imagining that the quality of the workers is the same, they are subject to the contract conditions, and - again because of the ILO wish list - they have the same employment opportunities outside the firm.)
o We can expect that firms would react by making new job categories so as to create all-foreign job categories. And, similarly, move work from inside the firm to outside the firm: outsourcing.

Regarding worker-employer disputes:
On the increasing labour disputes in the country, Dr Rifai advised that with the growing number of labourers in the UAE, it would do well to have legal and judiciary systems with sufficient teeth to settle contractual and legal complications in a clear manner.
He also underlined that the status of the worker coming to the country was a critical factor, which influenced and promoted inequality. Unorganised or illegal labour market creates an opportunity for employers to take advantages like lower pays and denying workers their dues.
On the immigration policy in the country, he said: "The larger the segment of illegal workers, the larger the problem becomes. That is when more serious violations take place, in the absence of any documents," he said.
He said ILO was trying to help the government regulate the labour market and introduce systems to reduce the unorganised labour market.
What appears to be true is that in the UAE is that if an employer violates the contracts it has with low income workers those workers face tremendous difficulty enforcing the contract. Some firms do behave opportunistically. One reason there is scope for opportunism at all is this fact, stated earlier, that workers do not have the option of changing employers.

Take the example of the firm which stops paying its low income workers. The workers don't have the means to return to their home country for work, and they can't sell their services to other employers. The worker probably lacks the knowledge of what government authority to contact to seek enforcement of the contract let along the means of transport to reach the authorities. The goverment may not have clearly defined what assistance it provides in labor disputes. Often the workers' best means of expressing their claims is to refuse to work.

Thus, for example, when a major cleaning outsourcer's workers went on strike for back wages of several months, they put pressure on the company's customers to push the company to pay up.

Give workers the exit option - that is, remove the government rule against changing employers - and disputes would decrease because the scope for employer opportunism would diminish to something closer to European levels.

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Dubai Big Watch: Airport expansion project

The Big Dig, 27 Apr 05 Posted by Hello
For each light in the photo there is a crane. The photo capture perhaps 25% of the project site.

Thursday, April 28, 2005

American University of Sharjah supports research projects with over AED 1 million in grants
Winners of the Sharjah Islamic Bank Awards [for student research] are:
• 1st Place (AED 5,000): Ella van Wyk, for the project entitled “The Guardians in Dante’s Inferno: Illustrated and Critiqued.” – College of Arts and Science, faculty advisor: Dr. Judith Caesar.
• 2nd Place (AED 3,000): Yahia Al Tawil, for the project entitled “Automatic Face Recognition System.” – School of Engineering, faculty advisor: Dr. Khaled Assaleh.
• 3rd Place (AED 2,000): Abeer Abdel Raouf Fahim, for the project entitled “The Supernatural as Wuthering Heights: Challenging the Critics.” – College of Arts and Science, faculty advisor: Dr. Judith Caesar.

Wednesday, April 27, 2005

Demand curves almost always have some elasticity left - Division of Labour

When the price of this product approaches zero and it isn't rationed, it gets used in this wide variety of ways:
o sari makers uses its oil to speed the thread through their sewing machines
o it gets mixed into asphalt
o it serves as a disposable water container
o soldiers use them to keep dust out of gun barrels

What is this product? Click the link above.
Rise in expat workforce in UAE by 20 pc - Khaleej Times
Supposing that that number is correct that's a big number, because expatriates number 80 to 90 percent of the workforce to begin with. Have the number of expats that leave been accounted for?

Dr Al Khazraji, however, clarified that the Ministry would not contribute to, under any circumstance, bringing into the local labour market unwanted workers, while admitting that there was imperceptible unemployment amongst foreign workers.
"We are aware of this fact and the Ministry is playing its role in organising and controlling the labour market, saving no effort to achieve this goal," he said.
Aware of what fact? That there is virtually no unemployment amongst foreign workers? That's because foreigners and their families can't reside here except with an employer sponsoring the visa. Could he be referring to the problem of Emiratis not accepting terms and conditions of employment in the private sector?

The article continues.
In this context, Dr Al Khazraji pointed to a number of measures aimed at organising the labour market and stabilising it, including amendments to the existing Labour Law No. 8 of 1980, and the efforts to introduce a new law-allowing establishment of workers' organisations and unions.
Translation needed. Plain speaking needed. What is the disorganization? What is the instability?
Islamic studies requirement meets moral hazard - Gulf News
The curriculum of private schools, primary and secondary, in the UAE is regulated by the government. Schools that attract Muslim students are mandated to teach Islamic studies to their Muslim students. But it is difficult to monitor the quality of the education, Islamic or otherwise.

Ultimately, the most effective monitors are the parents who have chosen the school for their children. And if the parents are more concerned with the quality of, say, the math instruction than the instruction in Islamic studies, then the quality of Islamic studies will fall short of the government's expectations.

To the extent that schools are defeating the intent of the Islamic studies mandate the cause can be traced primarily to the parents' lack of willingness to pay for quality Islamic studies.
UAE undersecretary of Labour and Social Affairs: UAE 'may' get labor unions - Gulf News

Dr Taleb Al Rifa'i, Regional Director of the International Labour Organisation (ILO), meanwhile told Gulf News trade unions will be established in the UAE even though they may pose challenges to residents. The approval of trade unions has been delayed because the majority of workers are expatriates.

Dr Al Rifa'i said the establishment of trade unions is a fundamental international requirement that should be respected by all countries.

[emphasis added]

Unions will "pose challenges to" nationals "because the majority of workers are expatriates." Non tradeable labor intensive industries will pass along price increases if unions are able to increase wages.

At the same time, if unions drive up wages, this will close the gap between private sector wages and the wages Emiratis are willing to accept. More Emiratis will be attracted into private sector employment even if Emiratization quotas are not enforced.


UAE officials also asked for experts to look at the nation's policies and administration of its foreign labour force. "It's quite a difficult thing to find. I believe the ILO may know experts in Singapore or Malaysia, where there are also large foriegn labour populations."
So said Dr. Khalid Al Khazraji, undersecretary at the Ministry of Labour and Social Affairs.


Tuesday, April 26, 2005

Bach's Concerto in A Minor for Four Harpsichords and Strings - Cabell Hall, University of Virginia

Nice pictures, but no sound. Posted by personal privilege by proud dad.
Claiming property rights, Tunisian style Posted by Hello
Female computers - Bill Bryson

Bill Bryson's latest, A short history of nearly everything is a good read. Here's a passage that gives us insight into the paucity of top female scientists.

Hubble's luck was to come along soon after an ingenious woman named Henrietta Swan Leavitt had to [know how far away stars are to begin with]. Leavitt worked at the Harvard College Observatory as a computer, as they were known. Computers spent their lives studying photographic plates of stars and making computations - hence the name. It was little more than drudgery by another name, but it was as close as could get to real astronomy at Harvard....The system, however unfair, did have unexpected benefits: it meant that half the finest minds available were directed to work that would otherwise have attracted little reflective attention....

( the time Leavitt and Cannon [another female computer] were inferring fundamental properties of the cosmos from dim smudges on photographic plates, the Harvard astronomer William H. Pickering ... was developing his seminal theory that the dark patches on the Moon were caused by swarms of seasonally migrating insects.)

Muslim countries 'need unified approach to science' - SciDev.Net

Thanks to JK in the university research office for passing this along.

Muslim countries may gain by a 'unified approach to science':
Participants agreed that since OIC [Organization of the Islamic Conference] member countries have much in common — such as socioeconomic status and cultural traditions — they should also use a common strategy to solve problems related to science and technology.
But there is science, not Muslim science or Christian science. Science. Basic knowledge that can be used by anyone, anywhere.

And if you've lost your science tradition, your Al Andulus, there is a benefit of reaching across to those who recovered that science. The West.

There are those who believe that the glory days of the Muslim World can be restored by going back to a true Islam lost in the past. These folks tend to be fundamentalist. A small subset of this group are the terrorists. But nothing can be recovered by force or edict. True Islam is within today's Muslim community. It 'simply' needs to be drawn out and fostered.

Part of that fostering might even include scientific partnerships with universities in the west.

The Muslim world and the western world have much to learn from each other and about each other. Scientist to scientist relationships could probably bridge our alienation faster than a dozen East-West institutes. Knowledge transfer happen through human interaction.

And, yes, it requires investment: Atta-ur-Rahman, chair of the Network of Academies of Sciences in Islamic Countries and head of Pakistan's Higher Education Commission
that Muslim countries spend just 0.2 per cent of their gross domestic product on scientific research and development. Despite this gap, he hoped that Muslim countries would recognise the pivotal role of science and technology in their development and in programmes to eradicate poverty.
And, yes, introducing children at an early age to joys and risks of exploring for truth is vital:

Though the conference focused primarily on higher education and scientific research, it also discussed plans to launch a popular science magazine and improve science education for schoolchildren.

"Without lower education, there is no higher education," says Anwar Nasim, chair of Pakistan's National Commission on Biotechnology (NCB).

Nasim says it is important to popularise science in OIC countries, emphasising that socioeconomic prosperity would never be achieved unless these countries pay proper attention to their children's scientific education.

Nasim says a passion for science at a young age creates a more capable scientist, adding that Muslim countries should focus on understanding science rather than just memorising it.
Switching costs. One of the fundamental problems with many school systems in the Middle East is the emphasis on memorization and the crowding out of understanding. Many of our students arrive at university handicapped because they've never before been encouraged to approach learning any other way. Our job is to move them out of their comfort zone of memorization. The students find the switching costs high, and at least they imagine they are high.

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Mixed messages Posted by Hello

Click on photo (goes to larger version) to read the message.
Desecrating the desert - Secret Dubai

And the wadis.

At Hatta Pools, the litter after a Friday is appalling. Cans, bottles, plastic bags, even unfinished food left unwrapped on the ground, swarming with flies. One can even find used children's nappies strewn around the rocks near the water.
It is quite true what Secret Dubai says about the desecration of the Hatta Pools. That Hatta Pools may be the best of natural beauty in the UAE. Or is it in Oman? Most of the visitors come from the UAE side, but it's located across the border in Oman. I suspect the pools would be better cared for if the economic benefits from them and their location lay on the same side of the border.

No one on the pools and the governments have not taken up the role of ensuring they are not abused. I imagine that before the car there was no problem, and the people of the village adjacent to the pools took care of them. But not anymore. The easy access by outsiders has shattered that mechanism.

UAE Off-Road Explorer writes this: "The Hatta Pools are well known and visited, so unfortunately they suffer from the same fate as other popular spots - litter and graffiti. [And trampled flora.] The local authorities clean the area from time to time and you can, of course, do your part by leaving with everything, or even more than you arrived with." Even if your vehicle is only 2 wheel drive, the Explorer is a great guide to own. It's available in many hotel shops and book shops in Dubai.

My photos posted throughout this blog are edited for content. That is, I frame the photo to leave out any trash. Occasionally I resort to Photoshopping out the trash - though I've not shared any of my Photoshopped efforts on this blog.

Thanks to The Eclectic Econoclast for the pointer.


Monday, April 25, 2005

NetSkool - Eclectic Econoclast

Can't help your kid with his math homework? Send the problem to Netskool. They'll reply if they have the answer, and tell you what they'll charge to provide it.
How to prepare for college - Peter Gordon's

And solve "the foremost economic and social problem of our time." And in the UAE.

I join Newmark's Door's endorsement: "a short but powerful post."
Egg blogging economists

Item: Over at Newmark's Door we find a mention of eggs and bacon ice cream. Yum! A real life extender.

Item: Over at The Eclectic Econoclast we see a papal version of eggs Benedict. Divine?
Minister: UAE should fund basic research - Gulf News

Sustainable research is a vital element in the process of developing national priorities, Shaikh Nahyan said at the opening of the sixth Annual Research Conference at UAE University here at the Al Ain Rotana Hotel.

The research culture, he said, will encourage critical thinking and creativity, promote innovation and allow researchers to pursue promising ideas.

"Research should not only enrich education at the university, but also involve students and train them to be future researchers," he said.

Professor Dennis O'Connor, a prominent American scientist and former US undersecretary of science, highlighted the need for greater federal funding for research and development activities.

In his keynote address on the value of university research to multiple constituencies, he said the US Government spent $50 billion on research activities last year, representing about 60 per cent of the total research funding in the country.

Prof O'Connor, who is Professor of Biology at the University of Maryland, said research should be curiosity and need driven, benefiting the individuals and the involved institution along with the society.

"Priorities should be tailored according to the strengths and circumstances, strong links to be formed with government and the private sector, and administrative structure and processes need to be adaptable," he said.

The basic research, he said, has to be done at the universities and not in the government laboratories. "Researches to be funded by the federal government and research budgets should be provided to individual investigators after peer review," he said.


Non tariff barriers to inter-emirate trade

Yesterday's labor roundup post pointed to an article saying that companies that use expatriate labor cannot sponsor a worker in one emirate and employ that worker in another. If the employees are assigned to work in another emirate, then the employer must gain that emirate's permission. Companies owned by nationals are exempt from the regulation.

Among the effects of this regulation is that it the companies less burdened by regulation (the companies owned by nationals) will gain a cost advantage over their competitors. This is one constituency that favors the regulation.

More broadly, the regulation is creating a non-tariff barrier to trade between emirates. Thus, single-location companies, whether owned by nationals or not, would like protection from companies that want to operate in several emirates.

Small emirates like Ajman may believe these sponsorship rules benefit their local companies. But in fact, the effect may be just the opposite. If the Ajman market is not large enough to support a company, then the application of these rules makes it likely that companies will not locate in Ajman. In any event, rather than encouraging direct investment in the U.A.E. the rule surely discourages it and distorts it.

I wonder if the rule applies to construction companies. Or to, say, catering companies who may want to compete for business in several emirates but have only one office.

Individual emirates may want to pursue independent immigration policies for other reasons besides trade. In particular, in a country that is 80% expatriate, some emirates may be more culturally sensitized than others to controlling expatriate numbers.

But it seems difficult to deny that a motive is the creation of barriers to trade. Some other examples non-tariff barriers to inter-emirate trade:

1. Taxis licensed in one emirate can drop off passengers in another emirate, but have to return empty. The twin cities of Sharjah and Dubai have discussed reciprocity eliminating this barrier to trade, but those talks have not resulted in agreement.

2. Major dumps exist on both sides of the Sharjah-Dubai city border. In addition to externalizing externalities, they stand in the way of adding more inter-emirate roads.

3. Some of the most significant traffic congestion in Sharjah or Dubai occurs at the Sharjah-Dubai border.

4. Where additional connecting roads could be built they have not been built. An additional belt road has been constructed, but it is sufficiently far out from developed areas that few people use it.

5. Additional industrial development is occurring on both side of this border that will be in the way of any inter-emirate exchange.

As I stated in one of my very first posts, the U.A.E. suffers from same weaknesses the U.S. did under the Articles of Confederation. These weaknesses drove the design and adoption of the U.S. Constitution, especially the commerce clause.

This Andrew Coyne article from 1990 gives a nice brief, from a Canadian perspective, of the problems of federations, and the lessons that can be drawn from the design of the U.S. Constitution.

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$190m RAK specialist hospital - WAM
Spreading the wealth from richer emirates to poorer emirates. This is essentially a transfer in kind from Abu Dhabi to Ras Al Khaimah.

Another example: Khalifa allocates Dh50m for housing in RAK....President His Highness Shaikh Khalifa Bin Zayed Al Nahyan continued his nationwide tour with a visit to Ras Al Khaimah yesterday. The move was aimed at getting a first-hand information about the situation of the people in the emirate.

Sunday, April 24, 2005

Just my imagination - Empty Quarter Posted by Hello
Bloggers: The light at the end of the newspaper's tunnel - Masthead
Where would I be without Gulf News and Khaleej Times? I need grist for my mill. Without their anecdotes and reports on government statements I'd not have much to contribute. When it comes to numbers they're challenged, but aren't we all in this environment? I complement them, and I certainly don't substitute for them. I presume in my little way I'm bringing them more readers and a wider readership.

I'm not the light at the end of the tunnel. Nor Instapundit the light at the end of the NYT's tunnel. But Powerline might, just might, be the light at the end of the tunnel of Minneapolis Star Tribune.
Emiratization is a game. It is a game of numbers -NAFN & Daily Star
Longish article. Worth reading if you are following Emiratization. Click on the link above. If it goes bad, I've archived the article here.


UAE Labor Roundup - Khaleej Times

[Emphasis added.]

Item 1a: Labor Minister: UAE "heading for a demographic collapse" as the expat labour force continues to balloon leaving UAE nationals far behind is to be taken seriously. A team of experts must be formed to study this peculiar and dangerous problem confronting the country and draw up a strategy that will ensure a slow but steady reduction in the growing foreign blue collar workforce.

Item 1b: The Ministry of Labour and Social Affairs will soon come up with a mechanism which would facilitate smooth labour transaction and cut down on procedural delays involving Immigration and Residence authorities.

Item 2a: Health authorities in Abu Dhabi came under fire by employees of a government department who accused them of discriminating between national and non-national employees in rendering health services. The employees were angered by the authorities’ decision to exclude expatriate employees from a free cholesterol testing offered only to nationals. The medical check-up included blood pressure, diabetes and cholesterol testing. While expatriates were entitled to undergo testing for blood pressure and diabetes only, national employees were allowed to avail of all three tests.

Whew. Give one group a 25% pay increase and another group 15% based on nationality, and you stir up some anger.

Item 2b: Labour authorities here have warned foreign companies that transferring staff from one branch to another in a different emirate was not permissible unless certain conditions were complied with. “Shifting employees from one branch of a foreign company to another will not be considered as an internal procedure. It requires sponsorship transfer or temporary work permit,” source in the Ministry of Labour and Social Affairs told Khaleej Times yesterday. “If a Ministry Inspector arrests an employee whose visa is for a branch in an emirate other than the one he is working for, he will charged with violating Labour Laws and will be held accountable for working with sponsors other than his,” the official warned. The official clarified that transfer of staff would be dealt with as an internal administrative procedure only in cases where the company is owned by a national.

Thus, not only are there interfirm job mobility restrictions for non nationals, we now learn there are intrafirm job mobility restrictions. I wonder if these restrictions reveal a lot about local politics, and the kind of confederation the United Arab Emirates are living into.

Item 3a: Labour disputes between locals ‘rare’.

Disputes between nationals are probably rare because if contracts are violated, nationals can more readily and costlessly pursue enforcement. Thus, their contracts are less likely to be violated in the first instance.

Item 3b: A group of 49 labourers from a construction company staged a sit-in strike at RAK Labour Department (RLD) yesterday, complaining against pending salaries and other accumulated dues over the last several months. The workers alleged that the company did not pay them their salaries for several months, besides forcing them, in blatant violation of labour laws and regulations, to pay residency and work permit fees.

Searching for price and quality in an inflationary environment - Gulf News

A resident for 18 years in the country said authorities should force retailers to declare any rise in prices for a certain period and let consumers decide whether to buy or not. "Why are the retailers not asked to announce the rise in prices along with the regular prices as they do at the time of sales when they declare the regular prices along with the reduced ones," he said. He complained about deceptive pricing and advertising in the market such as making incorrect price comparisons with their regular prices, or offering something that is supposedly free but in fact has a cost.

Ebrahim K. Ahmad, an engineer, echoed the view and said consumers cannot easily track changes in prices. But, with the retailers announcing the regular and the increased prices, consumers will not be misled.
Speaking of other market malpractices, Ahmad said sale price is also misleading unless the former price is the actual one at which the trader offered the commodity.

"Sometimes unscrupulous retailers buy special consignments of substandard goods especially for a sale. They also buy a discontinued product-line at a deep discount and pretend customers are getting a bargain. Other retailers offer free products or services, but they are not really free because retailers normally charge less for such type of products or services. Besides, when customers get free products, some of the perks that go with the products are cut."

Ahmad said consumers, who buy a product following a deceptive advertisement, should have the right to sue the advertisers demanding a refund and damages.
These are thoughtful and observant remarks. However, the gentlemen should be careful what they wish for.

If we make the government our agent to police price changes there can be loads of adverse unintended consequences. I will highlight just one. It is likely that we are all better off if each buyer operates by the rule "buyer beware." If we all stake our lives on government watching price and quality, then sellers will likely be able to engage in more fraud and deception, not less. Think about it.
Exclusive Agents: Consumer interests hurt by monopolies in market - Gulf News

Mohammad Ebrahim Al Shaiba, a UAE national lawyer, said fair pricing can be realised by maintaining competition in the market and abolishing the system of sole agents or suppliers of certain goods.

"The Ministry of Economy and Planning must cancel the system of sole agents who have exclusive rights to import certain commodities.

"These agents control supply of goods and fix prices to make unreasonable profits. Why should the law leave the fate of society in the hands of an agent or two?"
Give the man an A in economics!
Emirates Economist search referrals leaderboard - Site Meter
Most frequent search engine referrals to this blog continue to be about expat employment in the Gulf, the mother of the Emirates, and spinsterhood amongst UAE national women.

Saturday, April 23, 2005

My Spring Break (UAE, near Moreeb Hill, Liwa) Posted by Hello
US-UAE FTA - Emergency Committee For American Trade: "As discussed above with respect to investment, UAE maintains non-tariff barriers through agency-sponsor-distributors requirements that reduce opportunities not only for investment, but for the distribution and sale of U.S. agricultural and manufactured exports. In particular, the UAE Commercial Agencies law requires that agents must be UAE nationals or companies incorporated in the UAE and entirely owned by UAE nationals; these agents are also given rights that severely impede the ability of foreign-based companies to distribute and service their products (i.e., agents have the ability to stop arbitrarily imports, and it is difficult to terminate non-performing agents). Such restrictions should be eliminated during the course of the FTA negotiations and, to the extent applicable, U.S. negotiators should seek to fix agency issues in a manner similar to that accomplished in the US.-Central America-Dominican Republic FTA." (Seems to be dated 2002, but argument and perspective is still useful to have.)
UAE Agency Law under pressure - Dubai Economic Report
A Half Yearly Publication of National Bank of Dubai - Dec 2003

In the Emirates the principal barriers to foreign investment have been two pieces of legislation - the Commercial Companies Law and the Commercial Agencies Law. The first of these includes the regulations that oblige foreign companies to have local sponsors or partners holding 51 per cent of their equity. This does not suit large corporations that are likely to make substantial investments and want to have complete management control over their operations.

The second law states that foreign - nonresident- companies must have a local agent to sell their products. It contains provisions for exclusivity - foreign companies may not have more than one agent in one territory, though they can have different agents for different lines of products. It also makes it very difficult for a company to change its agent.
Within WTO there are always “rounds” of negotiations in progress, intended to make trade between members ever more free, and the current round is supposed to reach completion in 2005. In the negotiations the UAE is under pressure to reform the Commercial Agencies Law - but it is not thought very likely that agreement will be reached on this in the time available.
Dubai is probably more pro-change than its partners in the federation.

Change is most likely to be brought about by a later round of negotiations, following a legal challenge. It may well be that a foreign company experiencing difficulties in changing an agent will challenge the Commercial Agencies Law before the WTO tribunal. This body, of course, cannot rewrite a country’s legislation, but if its mechanism for the resolution of a dispute does not work, it can give a trading partner - the country of the company issuing the challenge - the right to retaliate against the country refusing to change. At this point negotiations generally begin again.
It may well be that change in the UAE legislation will come initially through an amendment which will remove the exclusivity of agencies. This would have almost the same effect as legislation making it easier to change agents.
In changing UAE commercial legislation there is a social cost. The legislation of all the Gulf oil states, as it evolved from the early 1970s, has been geared to funnelling as much as possible of each country’s oil wealth to its own nationals - and in the context of 1970s oil prices and the stage of development the states had reached then, this was the right and logical thing to do.
The fact that the legislation now puts a brake on these countries’ growth does not make it any easier to change.

Even in Dubai, which is much less of a classic oil state than its neighbours, it is estimated that about half of the income of “nationals”, as opposed to expatriates, is derived from rents, sponsorship and agencies. Liberalisation of these areas of the economy may produce faster and more balanced growth in the long term, for the benefit of all, but in the short term it will have a negative impact on the incomes of an important part of the population.
UAE Commercial Agency - UAEinteract

The following conditions apply to commercial agencies:
o Commercial agents must be UAE nationals or companies incorporated in the UAE and owned entirely by UAE nationals.
o Commercial agents must be registered with the UAE Ministry of Economy and Commerce to engage in commercial agency activities.
o The agency agreement must be registered in order for the agent to avail himself of the protections afforded under the law and to have the agency relationship recognized under UAE law.
o Commercial agents are entitled to an exclusive territory encompassing at least one emirate for the specified products. (Article 5(1) of the Commercial Agencies Law)
o Unless otherwise agreed, commercial agents are entitled to receive commissions on sales of the products in their designated territory irrespective of whether such sales are made by or through the agent. (Article 7 of the Commercial Agencies Law)
o Commercial agents are entitled to prevent products subject to their agency from being imported into the UAE if the agent is not the consignee.
o Commercial agents are entitled to receive compensation from the principal if the agency is terminated without substantial justification or if the agency is not renewed by the foreign principal, and the agent may be able to preclude the foreign party from appointing a replacement agent in such circumstance.
o The Commercial Agency Law provides for compensation of the agents terminated without due cause only if the agency agreement has been registered with the federal Ministry of Economy and Commerce (MOEC). Many UAE commercial agents will insist on a registered arrangement in order to avail themselves of the protection of the Commercial Agencies Law.


Follow the link to find out more about business law in the UAE.
Crisis of Islamic Studies in US and of US - Arab View
Alas, the list of writers who have had the astuteness to enlarge for their fellow Americans the compass of intellectual awareness of what the Islamic, including the Arab, world is all about — who have introduced a new or novel focus to the study of the Middle East — is very small.

Fine, that is now off my chest. But what of the unutterable monotony of the debate by Arab critics about the Euro-American world? We complain, often bitterly, as I have just done, about how little Westerners know about our societies. But in the end, I have to say this: Despite their at times inescapable sense of triviality and dissimulation, American commentators, analysts and academics still know more about the Arab world than their counterparts there know about the United States.

How many think-tanks are there in the Arab world that devotes themselves to the study of the American world? How many Arab universities are there with American Studies departments? How many Arab researchers have written about the United States — its foreign policy, its social life, its popular culture, its history, its political system — with penetrative grasp, with resolute objectivity, a genuine focus on facts untainted by conspiracy theories and the rhetoric of the 1950s and 60s about darn American imperialists lurking behind every single one of our lampposts?

3 Saudi women 'defy' tradition - Khaleej Times
Three Saudi women — Ameera, Awatef and Amna — have valiantly withstood social stigmas and defied Saudi traditions to become waitresses in a five-star hotel in Jeddah. They are the first Saudi waitresses.

All three were students at Abdul Lateef Jameel (ALJ) Fund for Training and Development majoring in accommodation preparation.
They work on shifts for nine hours a day and have one day off. They have a good salary, health assurance, transportation and housing allowance, according to Arab News which interviewed the women.

Ameera has only completed intermediate school but took several English and computer courses.
"I have been looking for a job for seven years. Because I don't have a high school degree it was difficult for me to find a job. Even though I had an English and a computer diploma from a well-known learning centre, NewHorizen, but the diplomas were never taken into consideration when I applied for a job. I then heard of ALJ and enrolled in the accommodation training course."

"My father passed away when I was very young. My older brother raised me and has been a father to me since. He and my mom were very supportive and trusted that I would stick to my Islamic values no matter where I worked. This job is not considered a disgrace. A disgrace is when a family is poor and in need and the girl is a burden to her family."

Awatef graduated from high school and was unable to continue her university studies. "I am more entitled to serve my country than a foreigner," Awatef said with pride. "I accepted the challenge and faced all obstacles. We were irritated in the beginning by some comments from our relatives. Some did not approve of us working as waitresses. We now managed to impose ourselves on society. We are respected and appreciated as hard working women. The most important factor is that we are not violating our Islamic and moral values."
Some members of the public expressed their acceptance to the idea of Saudi women working as waitresses whereas others made it clear that they were against the idea.


Saudis arrest Star Academy2 star - Khaleej Times
JEDDAH — Star Academy2 winner Hisham Abdul Rahman was arrested on Thursday by the Commission for the Promotion of Virtue and Prevention of Vice, locally known as Mutawas, for creating what they called indecent gathering in the Kingdom Tower in Riyadh.

Hisham was surrounded by both male and female teenage fans who were shaking hands with him and kissing him, congratulating him on his new stardom. Members of the commission then moved in and asked Hisham to leave the tower due to the chaos and “immoral” — as they called it — acts that he was doing. A wordy duel ensued with Hisham calling the Mutawas names and threatening to harm them if they did not leave the place.

Arab News reported Members of the commission tried to pull Hisham by his hand out of the crowd. The crowd tried to pull the new singer back until his clothes were torn. A member of the commission then managed to drag Hisham out by force and pushed him into their van. He was then taken to the commission’s office in Olaiya where he was questioned and held under custody.

The commission then received a direct order from a high official of the Riyadh governor’s office to send the singer out of Riyadh immediately. Hisham was then escorted by the commission’s head to the airport and put on a plane to Jeddah.

Bander Al Mutairy, the head of Commission’s Olaya centre said that they had nothing personal against Hisham but he violated a rule and created an indecent crowd in the Tower Mall where young men and women gathered in an objectionable way and that had to stop.
Hisham’s victory brought joy to Saudis, who had focused all their attention on the show and kept voting for Hisham via mobile messages and over the Internet to ensure that the title would be won by him, despite the opposition of some Saudis regarding the nature of the show, which they feel is inappropriate for Arabs.


Books: The Modern Firm by John Roberts

I'm thinking of using this text for senior level Managerial Economics. The Economist says "Nobody, it can now be said, is fully fit to run a modern firm until they have read “The Modern Firm.""

The book's Amazon readability text stats are a bit daunting though,

Fog Index: 18.4
Flesch Index: 30.4
Flesch-Kincaid Index: 15.1

About these indices, Amazon says:
The Fog Index was developed by Robert Gunning. It indicates the number of years of formal education required to read and understand a passage of text. A score between 7 and 8 is considered ideal, while a score above 12 is considered difficult to read.
The Flesch Index, developed in 1940 by Dr. Rudolph Flesch, is another indicator of reading ease. The score returned is based on a 100 point scale, with 100 being easiest to read. Scores between 90 and 100 are appropriate for 5th and 6th graders, while a college degree is considered necessary to understand text with a score between 0 and 30.
The Flesch-Kincaid Index is a refinement to the Flesch Index that tries to relate the score to a U.S. grade level. For example, text with a Flesch-Kincaid score of 10.1 would be considered suitable for someone with a 10th grade or higher reading level.
If it's not obvious, this is my first encounter with these Amazon features. Also interesting is the way Amazon presents the concordance of the book's 100 most used words.
Moral hazards make moral-hazarders better off?
Not always.

Suppose you're a teacher. Suppose there is a change in policy and your students are graded for the course based on how they perform on a standardized exam. Nothing is said, but being a wise teacher, you anticipate that the administration (or a new administration) will later (1) come to the realization that how your students do on the standardized exam says something about your teaching performance, and (2) use these results to rank you and your fellow teachers for merit pay or promotion.

We are in a setting where there will be "post contractual opportunism." Recognizing your incentives, you begin to do what it takes for your students to do well on the standardized exam. This is unlikely to be in line with what is best for learning. Indeed, it may be worse for learning than the environment where there is no standardized testing.

And you, too, would likely be worse off than if the moral hazard had never been created by the administration. Because teaching the to the test is no fun and does not call upon your inspiration and creativity. Except the pedestrian inspiration and creativity of beating the rules.
Arab Human Development Report politicized - Gulf News
By As'ad Abdul Rahman, Special to Gulf News
In Washington, Richard Boucher, the State Department spokesman, said that "our overall appraisal of the report is it fits in the pattern of the previous two reports that focused on the need for reforms within the region. "It is not even so much that we disagree with the problems. We tend to disagree with these sorts of gratuitous statements about where they come from."
But in a departure from the two earlier reports on Arab society in which the group focused almost exclusively on problems within the Arab world, this study says the United States and Israel have also played an important part in suppressing Arab freedoms.

The Bush Administration had objected to language in early drafts that said Israeli occupation of the Palestinian territories and the American occupation of Iraq only served to impede Arab human development.
The report also said that one result of the American invasion of Iraq was that "the Iraqi people have emerged from the grip of a despotic regime that violated their basic rights and freedoms only to fall under a foreign occupation that increased human suffering".

The Bush Administration reportedly threatened to reduce financing for the development programme if such language was not removed from the text. To avoid such an outcome, the development agency released the report under its own name, but with a disclaimer in the preface.

"The Arab development crisis has widened, deepened and grown more complex to a degree that demands the full engagement of all Arab citizens in comprehensive reform. Partial reforms, no matter how varied, are no longer effective or even possible."

In part, the study blames the demise of democracy and freedom in the region on the structure of Arab states, which have become highly centralised, mostly offering their citizens only a small margin of freedom. Even in the region's limited democracies, the report says "societies and economies are organised in a way that prevents growth of an effective opposition".

The report argues that the global war on terror "has made the abuses worse and has given governments an excuse (which was, in any case, hardly lacking in the past) to arrest, torture and ignore rules on fair trials." The report further noted that "in few Arab countries are presidents elected with more than one candidate and with term limits".

The report dismisses the notion that "Arabs do not want democracy or are not properly suited for it". It bluntly blames their leaders for withholding it. "The leaders permit corruption and then use the threat of arrest, and intelligence services to ensure loyalty. Corruption spreads through all parts of political and economic life and chokes off the chance of growth. If the repressive situation in Arab countries today continues, intensified societal conflict is likely to follow. Nor would a transfer of power through violence guarantee that successor regimes would be any more desirable."


Read the whole article.

My take. It was a mistake for the Bush administration to block the report. The fact of the matter is that US policy past and present is part of the problem. It was a masterstroke for the Bush administration to draw so much attention to the report. Bush's attacks can only enhance the credibility of the report.

The report lays blame where it needs to be, and sets the groundwork for Arabs to take charge of the democracy project. You cannot take in the report and come away with the conclusion that the fate of the Arab world is not in its hands. The US simply is not that powerful even if you believe that it plays a large and damaging role.

AHDR 2004 can be downloaded here.


Friday, April 22, 2005

Maktoum Sailing Trophy - International Sailing Federation: "Having already clinched the Maktoum Trophy, Horizon, owned by Sheikh KHALED BIN ZAYED AL NAHYAN, was not content to take things easy in the final round and won it by the narrowest of margins from Serdal. The result underlined Horizon’s supremacy in a series, which now looks certain to go from strength to strength."

Galvacoat, Abu Dhabi - Steel Mills of the World

Perhaps Galvacoat benefits from the tariff on the export of scrap iron.
Dubai BIG Watch: International City

Basically it's a self-contained community, covering an area of 800 hectares which is equal to eight million square metres or 1,976 acres.

The Residential District of International City is one of its kind in that the buildings will be based on the architecture and themes of several countries. There are the large neighbourhoods of Russia, Italy, Spain, England, and France; the medium neighbourhoods of Morocco, Persia, Greece and China; and the lakeside neighbourhoods of Indonesia and Thailand.

Each country is split into between one and five clusters, Italy being the smallest with only one cluster and China the largest with five clusters. Each cluster comprises numerous buildings of between three to five floors. Each building is composed of studios, and one-bedroom apartments with some buildings have retail space on the ground floor as well.

The original price per square foot from Nakheel was Dh225. Buildings have changed hands at up to Dh350 per square foot since then. The most sought after areas being England and China, in which there was frantic activity at the beginning of the year.


Low percentage of Qataris working in private sector - Gulf News

Doha : Qatari nationals are reluctant to take up jobs in the private sector, leading to a rise in the country's unemployment rate, according to a local survey. The study conducted by the Supreme Council for Family Affairs, in co-ordination with the Ministry of Civil Service Affairs and Housing, found that unemployment in Qatar is not due to a lack of opportunities but to the reluctance of most nationals to take up jobs in the private sector.
+"We suffer from very little unemployment if compared to international standards," said Hadi Al Khayarin, assistant undersecretary at the ministry.
+"Nevertheless, this percentage is made up of those unemployed who refuse to work in the private sector and wait for a chance in a government department."
+Representatives of the two institutions discussed employment patterns among Qatari graduates at a recent meeting. They said one of the main reasons why Qataris were reluctant to join private companies was the working hours, usually longer than in governmental departments. "Working hours in the private sector are longer than at government departments and many prefer to go for a job where they have to work less," said the official.
Emphasis added.
World Bank praises UAE diversification - Gulf News

Non-oil exports were as low as 5.7 per cent of GDP in 1975, but have subsequently risen to about 37 per cent.

"Although there is ample room for improvement to raise the ratio in the UAE, this is relatively high compared to other Mena oil exporters, such as Algeria, Kuwait and Saudi Arabia," the report said.

"The UAE has pursued diversification in a number of areas, including aviation, port facilities, tourism, finance and telecommunications," it added.

"The Emirates have also increased integration through the pursuit of various trade and investment agreements within the Gulf region and with the rest of the world.

"In addition, they have established free trade zones, where foreign companies are allowed 100 per cent ownership.
I thought trade gains came from specialization according to comparative advantage, not through diversification. Is the World Bank confused? Or is it using confusing language? What is it praising, really? Is diversification what it is praising? And if it is, what's good about domestic product diversification that cannot be better achieved with a diverified portfolio of foreign investments?

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UAE miracle: oil into water? - Khaleej Times

Story received via email from The Eclectic Econoclast who enclosed this thought: "What happens to the oil revenues? The revenues are used for water."

Having spent my meagre Spring Break in Liwa I can attest that there is an awe full amount landscape watering going down from Sharjah to Dubai to Abu Dhabi to Hameem to Liwa. The massive and color full dunes in Liwa are spectacular. A few have been turned green by enterprising humans.
Plan, the future is uncertain - Knowledge Problem
"Apparently, the Washington Post thinks is it newsworthy that economists can’t foretell the future."

Wednesday, April 20, 2005

The Eclectic Econoclast is on a roll
Snails, hate speech, and employer-paid health insurance

It will be worth your while to pay the Eclectic Econoclast a visit over the next few days. The 13 week Canadian semester is over and he's knee deep in grading papers. This has driven him into diversionary tactics as revealed by greater output and profundity in his blog.

I've already linked to several of his posts, but the hits just keep coming. A sampler:

1. A relection on snails, Bosnia, factor prices and endowments.

2. If I quote something you said, is that "hate speech"?

3. Quoting Kevin at Always Low Prices: "... why should employers be involved in the financing of their employees' healthcare at all? Private employers don't pay for employees' housing, education, food or recreation, so why healthcare?"

4. In the same post (brilliant segue) coming up with line, "Would anyone like to make book on whether the U.S. gubmnt will bail out the GM workers' health care plan if necessary?" about the story on whether GM will be able to fulfill its commitments to pay health insurance for its retirees.

Before asking that question he stated
if I were retired from General Motors, I might have preferred to be paid more and to choose my own health-care provider rather than be worried about whether my health care would be covered in the future.
Chilton's reply: GM and Auto Workers conspired against the American people. They took a gamble the GM could survive despite making these heavy delayed compensation commitments to the Auto Workers. They calculated that Americans would bail them out if things went sore. That's opportunism based on an implicit contract. The good hearts of the American people created the moral hazard. They were taken advantage of by GM and the Auto Workers. I use the loaded term moral hazard because I'm feeling judgmental this morning. I'd use adverse incentives if I was feeling more even handed.

Why use delayed compensation? The American people have not shown they are inclined to pay Wal-Mart workers health insurance (although they have shown themselves prone to punish Wal-Mart workers by boycotting Wal-Mart because it doesn't pay health insurance to its workers). But when it comes to retirees and commitments made by a company's management 20 years ago, they have shown themselves willing to fulfill promises a company now can no longer keep.

P.S. - Employer-paid health insurance is like saying the party on which a tax is levied pays all the burden. Things don't work that way. To the extent that state-mandated employer-paid health insurance is binding it makes the worker pay for something she would not purchase if she had sovereignty over how she spends her compensation package.


Tuesday, April 19, 2005

Hate speech at Stanford - Hit and Run

Anyone who blamed African-Americans as a group for violent crimes committed by black perpetrators, or Arabs or Muslims as a group for radical Islamic terrorism, would be branded a bigot -- and rightly so. Yet MacKinnon can say things like, "half of society is attacking the other half" -- and it's "incisive" and "thought-provoking," according to one female law student who attended the talk.
FTA Round-Table - Al Tamimi Law Update

On 23 February 2005, Al Tamimi & Company hosted an exclusive Round Table Discussion on the Free Trade Agreement expected to be negotiated between the United Arab Emirates and the United States of America.
General comments in favor (my selection)

1. "It provides more labour rights for the workers such as minimum wages and labour unions." Not sure why this is part of a trade agreement. With French maybe, but why would the U.S. incorporate these as conditions? Domestic politics?

2. "It aims at fighting terrorism and promoting democracy."

3. "It will encourage competitiveness in producing goods." Yes.

4. "It will eliminate the problem of the agency agreements within the UAE." Would like to know what that means. Would like to know.

General comments in opposition (my selection)

1. "It will negatively effect the local products which would not be able to compete." Were consumers represented?

2. "The greater labour rights would entail higher overheads."

3. "The labour unions have a problematic side since it will lead to strikes." If that happens it will be interesting to watch. Strikes by guest workers?

4. "The interests of establishing Free Zone companies would decline, which negatively affect the Free Zone's businesses." Free Zones are legalized smuggling for a select few. Free trade opens smuggling to all.
Don't vote blindly if you can help it - Arab News

Evidently in the run-up to the elections in Riyadh, some candidates formed a group supported by a number of self-appointed, self-styled religious scholars. Instead of projecting the candidates’ views, giving us an idea of their future plans for the municipality and allowing us to do a thorough check into their experience and qualifications — which would surely indicate their ability to do the job — the group took the easy route and, using the scholars’ endorsement, made it plain that it was every citizen’s duty, and even religious obligation, to support them.
This in itself may not matter because in a democratic election, anyone can be a candidate and no one should question the sincerity of those aspiring to office. What is disturbing, however, is that the group, instead of canvassing and making their views and stances known to the public, has taken refuge in the statements of a group of scholars whom we do not know and are unfamiliar with.

I say in all frankness and honesty, as someone who loves his country, that this kind of behavior is wrong and will do nothing to help in the development of a society in which diverse opinions are not only needed but also should be encouraged.
The thing I learned today from the Eclectic Economist

There are click fraud experts.

And from Tom Hanna's comment: "I use my blog for testing new features that I'm going to use on more important sites and so I've fiddled with Adsense a bit. Blog revenue is considerably lower for the same amount of traffic than non-blog webpages no matter what I do, but I get three to four times the revenue out of running a 468x60 banner at the bottom of each post compared to running ads in the sidebar. I think you can modify your template on Blogger to allow you to do the same thing. A blog still isn't going to get anybody rich, but 3x the cash is a few Big Macs anyway."
Coverup? - Gulf News

Ban on Arab dress at nightclubs 'creates divisions among people'
In other local fashion news,

Thanks to HT for the pointer.

Counterfeit City - Gulf News: "In what is believed to be the biggest counterfeit auto-parts raid in the Gulf, police recently confiscated Dh36.7 million [$10 million] worth of fakes. The counterfeit products included fake General Motors & Daewoo Motor goods worth Dh3.57 million. The counterfeit products - including Dh3.67 million worth of fake General Motors goods - were stored in an Umm Al Quwain warehouse."
The Panopticon and monitoring costs

The concept of the Panopticon is associated with names of two major personalities, Michel Foucault and the English economist Jeremy Bentham.

Bentham's Panopticon

incorporates a tower central to an annular building that is divided into cells, each cell extending the entire thickness of the building to allow inner and outer windows. The occupants of the cells . . . are thus backlit, isolated from one another by walls, and subject to scrutiny both collectively and individually by an observer in the tower who remains unseen. Toward this end, Bentham envisioned not only venetian blinds on the tower observation ports but also mazelike connections among tower rooms to avoid glints of light or noise that might betray the presence of an observer.

(Description by Barton and Barton as quoted here.)

That is a vivid description. Together with a picture you can see what being in the Panopticon would be like both from the perspective of a cell occupant and as a tower observer.

Bentham's Panopticon
Bentham's argument is that the Panopticon would lower monitoring costs substantially and when coupled with enforced penalties would control individual behavior.

Potential applications include the design of university examination rooms, faculty office buildings and prisons. Or, as it says on the cover page to Bentham's Panopticon Letters,




US-Islamic World Forum - Hitchens at Slate

On one small peninsula on the forbidding coast of Saudi Arabia, a tiny emirate plays host to Al Jazeera and to the key U.S. base in the region. Both the network and the base used to be on Saudi soil until they were, in different ways, asked to move. Qatar itself is also a hereditary Wahabbist monarchy, but several years ago the current emir decided to depose his autocratic father, to abolish censorship, to allow women to drive and to vote and to run for office, and to invite critical Arab intellectuals to come and call upon him.
Could Qatar be serving as a laboratory for liberalization in Saudi Arabia?

Thanks to JP of The Eclectic Econoclast for the pointing out this article.


'Free' parking is valuable, very valuable - Khaleej Times

“We cannot rush with the shifting since we are looking out for a fully equipped building with ample parking space to save our employees from the additional financial burden. As soon as we find the ideal premises, we will move out,” Al Eter pointed out.

He noted that the Dubai Municipality has allocated a plot of land to the ministry for construction of an independent building near the Etisalat Academy on Emirates Road. But, that will take time.

Al Eter agrees that the parking menace has had a psychological impact on the minds of the employees who are forever worried about renewing their parking tickets on an hourly basis. Their output has been affected since the parking problem is playing all the time at the back of the minds of most employees.
Substitution had its possibilities - Khaleej Times

DUBAI — Land owners in Dubai using their plots as parking lots without obtaining a licence are liable to be fined by the department concerned at Dubai Municipality. An administrative order concerning this was issued by Qassim Sultan, Director-General of Dubai Municipality, yesterday.
Action against price hikes - Khaleej Times

DUBAI - Cooperative societies here have warned 83 suppliers, who had hiked prices of their goods by 20 per cent to 30 per cent, that the issue would be taken up with the Consumer Cooperative Union (CCU) if they continued to pressurise the societies with the new rates and continued suspension of supplies.
+Marwan Al Thani, Director of Union Cooperative Society said they will take strict measures if the suppliers tried to exploit the situation arising out of the salary hike for government employees announced by the President, His Highness Shaikh Khalifa bin Zayed Al Nahyan.

SHARJAH - Warning traders and producers against price hike on the heels of the recent government staff’s salary increase, the Emirates Consumer Protection Society has urged public to contact the society if they noticed price hike.
+The Society would act on any complaint from the public, Khalifa Al Muhrizi, the temporary Secretary General of the Society, stated here on Monday.
World Luxury Council -

“Without a doubt, the Middle East is a fantastic market for the World Luxury Council to enter and develop,” said Emma Vague. “The next year will allow us to firmly establish a prolific data-base of new members and contacts positioning us as the number one representative of luxury industry interests.”
What's the product? Not sure. Ms. Vague was featured in an earlier post about the Dubai World Cup.

Monday, April 18, 2005

Moral hazard is a loaded term

I prefer the term adverse incentives to the term moral hazard.

They mean the same thing but adverse incentives is clinical whereas moral hazard carries emotional, judgmental baggage. Further, using the terminology adverse incentives sets up the parallel with its twin, adverse selection. Adverse selection refers to the problem which exists when you do not know the characteristics of the product or trading partner you are choosing. Adverse incentives exist when the actions do not maximize joint value.

Here I am concentrating on adverse incentives.

Sometimes adverse incentives exist under one mechanism, but not another. If this is the case, and the mechanism is a matter of choice, then the adverse incentives are not intrinsic. Sometimes when we say we have a problem of adverse incentives we mean they are intrinsic, usually due to informational asymmetries. I will use the term in the broader sense to mean actions that do not maximize joint value taking the mechanism as given.

Consider the following local examples which you may find relevant and engaging:

1. I know a student who grew up in an established Dubai neighborhood. On her street was an empty lot with a wall around it. As a result of the wall the lot was spookey. And a wall with no house within it was worse for the neighborhood than for the lot to have been left natural. What purpose did the wall serve? Only one. The land had been given to the landholder with the proviso that he or she build on it in three years. The wall was built to satisfy that requirement and lay permanent claim to the land. The giver subsequently decided to be more specific about land giveaways and to say if "I give you land then you must live on it within three years, in a house and so on and so on:. That is, the original mechanism was reengineered but the adverse incentives were not irradicated; receipients continued to find ways to satisfy the requirements in ways that benefited them less than it hurt the neighbors.

2. A faculty member asks what it will take to receive a substantial pay raise. She is told a publication in a top ten journal. She turns around and gets a publication in a top ten journal. The article is 3 pages long and has 3 co authors. Do we blame the dean for not being specific? Or should we expect that it was understood what the dean was meant by a publication in a top ten journal, and that the dean will enforce that understanding and deny the pay raise?

3. OPEC. Members cheat and produce more than the quota amount. There is no incentive not to cheat; perhaps monitoring costs are too high or the cartel has no will to mete out punishment. With respect to the joint value of OPEC these actions reduce total joint value. If we are concerned with the joint value of OPEC plus the rest of the world, then the cheaters have good incentives. But, there again, long term global perspective it could be that carbon emissions are so hazardous that we would say cartel cheaters have adverse incentives.

4. Teaching evaluations by students. Teaching evaluations are one instrument that deans can use to assess teaching performance. But teaching evaluations may be subject to manipulation by the instructor if expected grades (or course demands) influence the ratings students award. It is never possible for a dean or chair to monitor closely enough to ensure that this does not occur. (And if they could the one shot evaluation by students would be redundant.) But the dean can also compare grade distributions between instructors, or the GPA in the instructors' courses relative to the GPA of the same students in all their courses. And the dean and chair can examine other instruments like the quality of the examinations, and the instructor's faithfulness to office hours. The chair is closer to the instructor and can provide more local information. At the same time, the chair may be less objective and want to protect a valued research partner who shirks in the classroom. Thus, another reason for both the dean and chair to evaluate is that they may keep each other honest. And the chair may wish to preserve a reputation for honesty so that the dean remains open to arguments which promote the interests of the department.

The upshot is that assessment of teaching can never irradicate the possibility of adverse incentives; all systems will be imperfect with respect to an unattainable, and therefore irrelevant standard. We may judge that the institution is doing a poor job of assessing teaching if it relies, say, only on teaching evaluations - in which case we have a moral hazard at a higher level. (Who monitors the monitors?) But it is not a failure not to do something that is impossible.

5. Bailout insurance. Consider land that floods once a year. There is no purpose to flood insurance for shifting risk because it is known that the flooding is entirely predictably. So why do we see people building there? Because they know that good-hearted people will find it impossible to deny victims aid even when the victims are at fault.

More generally, governments subsidize flood insurance. Adverse incentives are created because the subsidy causes more people to build in riskier areas. There may also be adverse selection if, say, there are existing buildings that would not be insured except for the subsidy.

The lively discussion we had yesterday in the departmental seminar was the catylst for this post. I am grateful to my colleagues and our presenter for the inspiration.

UPDATE: The Economist En Su Laberinto says no.