November 10, 2009

ICA Newsletter – Week 6 Term 1

Internation Current Affairs Society

Meetings every Wednesday at 2pm in S0.18
Live at 5pm on RaW 1251AM every Friday

Below are the topics we'll be discussing at our weekly meeting. Come along for lively informal discussions on these issues and more.


An Iranian maths student has publicly criticised the country’s supreme leader, Ayatollah Ali Khamenei, in a twenty minute long tirade, even going so far as to call the leader an idiot. The student’s speech has helped stoke the fires of dissention in Iran, which has been prevalent since the controversial re-election of Mahmoud Ahmadinejad. Iranian state media only reported the protest after claims by opposition supporters that he had been arrested, something which is common for those who oppose the Iranian regime.

There are also claims of torture and widespread police brutality against protesters. Until recently protesters had not openly criticised the supreme leader, and so this could be a sign that his absolute rule is weakening, likely due to his controversial support for Ahmadinejad in the election. Will anything come of these protests? Or is regime change impossible in Iran?


The Russian government has admitted to the severe corruption of police forces across the country. A video has appeared online showing a Russian police officer shooting three people in a Moscow supermarket, apparently acting with impunity.

Police officers regularly accept bribes and act like criminal gangs in some areas of the country. Now a senior policeman has made a personal request to Vladimir Putin to tackle the problem, before it gets any worse. How could the problem have gotten so bad? And will anything be done to solve it?


Maj Hasan, a soldier at the US military base of Ford Hood, in Texas, has shot dead 13 people. It has been revealed that the soldier was in contact with a radical Muslim cleric, and that this was known by US military authorities. However, such accusations should not be made lightly, as many fear that Muslim Americans may be targeted if the shooter is shown to have acted based on faith, as opposed to as a lone gunman. What will this mean for US attitudes to Muslim soldiers in the army?

September 10, 2008

ICA Summer Newsletter (Part I)

Welcome to the ICA blog. For any of you who don’t know the International Current Affairs Society at Warwick University is a politically impartial forum for discussion on local and international issues in current affairs. The society holds weekly meetings, (and subsequent pub trips!), organises trips, and has a radio show on RaW student radio show, in addition to this blog.
If you have any opinions, especially if you disagree with me, then please comment on any article posted on the blog. All society members are eligable to post on the blog to encourage debate, and anyone can comment on any entry.

This week I take a look at the conflict in the Caucuses which has been one of the lead news stories over the summer._

Events in the Caucuses went further towards straining relations between the West and Russia this summer. The potential for conflict in the region has been brewing over the past year, with personal relations between Russian Prime Minister Vladimir Putin and Georgian President Mickael Saakishvilli being widely reported as particularly acrimonious.
Two versions of the conflict have been presented in the media, with Russian President Dmitry Medvedev giving interviews to Western journalists urging the public to ‘remember who started this war’. From the Russian point of view Saakishvilli is a dangerous Georgian nationalist, who’s rhetoric and subsequent attacks on villages in the separatist regions of South Ossetia and Abkhazia were a clear example of attempted ethnic cleansing in the region, which necessitated a movement of Russian ‘peace enforcement’ troops into the region to protect Russian citizens in the regions.

The first point to raise with this version of events is that the one reason for the large presence of Russian citizens in the two regions was that Russia had been in the regions over the past year handing out Russian passports to villagers. This along with Russia’s threat to recognise the regions in response to the recognition by many Western countries of Kosovan independence earlier in the year indicates that the Kremlin may have been preparing for potential conflict, rather than merely responding to events as they arose.
However, even if the Russian response was premeditated, can a military response be justified on the grounds of protecting South Ossetians, or on the grounds of ‘liberating’ them and allowing them independence and self-determination?
There is no doubt that the response of President Saakishvilli in attacking South Ossetia is open to criticism in that there was certainly harm caused to ordinary people in the area. However the Russian military presence clearly went much further in its aims than purely protecting citizens. The Russian military advanced into Georgia ‘proper’, taking the town of Grozny, torching crops and causing widespread damage to housing and civil buildings in a manner inconsistent with fighting purely against Georgian military forces. Also post-conflict the Russian military have begun construction of a number of bases well on the Georgian side of the ‘buffer zone’ set up under the treaty negotiated by President Sarkozy of France.
Again post-conflict Russia recognised Abkhazia and South Ossetia as independent states, a move which was rejected by Western powers as compromising Georgian ‘territorial integrity’. Here the Western view of the argument seems to hit problems in that governments were at pains to explain that the case of Kosovo, which was recognised by the major EU states and the US, was not a parallel to South Ossetia and Abkhazia. But on what basis can we decide which separatist causes have or do not have ‘merit’ to their cause?

The standard definition of a state is as agreed under the 1933 Montevideo Convention, which defines a state as an entity with defined borders and a functioning government with ‘effective control’ over a permanent population. My personal definition of a ‘justified’ state would be one that as closely as possible meets the preferences of the population under its control, in terms of institutions and by not violating any of the natural rights of its citizens. In that sense, given that the citizens of the South Ossetian and Abkhazian regions appear to want independence and even in some cases to have openly hostile views towards the Georgian central government, an independent state or significant regional autonomy may well be justified.
However in the set of circumstances under consideration military intervention is surely not justified, the German foreign minister Frank-Walter Steinmeier had suggested talks on the future of the two regions, which the Russians had rejected. Therefore the only conclusion we can draw is that Russia is not as it has stated seeking to act in the best interests of the South Ossetians, but purely seeking to expand their sphere of political influence among the new nations of its former Empire.

March 25, 2008

Nature of the firm: A historical example.

Listening to this Podcast today I heard of a fascinating historical fact, cited from the paper by Chenung (1983): ‘The Contractual Nature of the Firm’, Journal of Law and Economics.

In old China (few hundred years ago) people use to transport things via the Yangtze River, using labourers (coolies) to pull the barge up the river. These barges were large, and so needed 10-15 people. These group of men acted like independent firms.

However there was a moral hazard problem. When pulling a barge with 14 other men it’s in your best interest to shirk, and only pretend that you are pulling the barge. The other men wouldn’t notice that you are shirking, the barged is still being pulled.

To counter this problem these ‘firms’ would hire a 16th man, who would typically be paid more then the others. His job was to monitor everyone else’s work and whip them if he saw anyone shirking. Just the presence of having him there got rid of the moral hazard problem, thus he didn’t even need to whip people normally.

What we saw hence, merely as a result of free market competition, was a situation where the typically transportation firm consisted of a hierarchical structure. One where at the bottom was 15 low-paid labourers who did all the work, and at the top was a well-paid manager who didn’t actually do anything, except perhaps once in a while use his whip to discipline his subordinates.

March 22, 2008

Cameron breaks law while riding bike.

From the BBC website:

Conservative leader David Cameron has apologised after being photographed ignoring red lights and cycling the wrong way up a one-way street. Pictures in the Daily Mirror newspaper showed the politician breaching traffic rules as he cycled to work.

“I know it is important to obey traffic laws – but I have obviously made mistakes on this occasion and I am sorry,” Mr Cameron said in a statement.

February 11, 2008

John Gray on nationalised industries.

Reading the Adam Smith Institute’s blog came accross this quote from the philosopher John Gray:

We should junk the idea that state services should always be run as businesses; this has left public services struggling with debt and fixated on targets. It would be better to hive off some functions from the state altogether while accepting that others should be managed on non-market lines. We should be ready to give back autonomy to institutions. Devolving power has become the catchword of the hour for the opposition parties, but it involves more than giving schools and hospitals more discretion to decide their budgets. It means leaving them free to manage themselves whether or not the result is efficient.

Its that second sentance, in bold, that caught my attention. In the last couple of decades we have seem many nationalised industries turn into quasi public firms with market elements (e.g. rail industry). The result has been for firms to lack the accountability of either the marketplace or parliment.

February 10, 2008

Poverty Trap.

On our friday radio one of the issues we discussed was the poverty trap. In particular was cited one example of a man with a physical disability. He was given benefits in compensation of it. But after he did some event (I think it was a walk) to raise money for a charity the government decided he wasnt disabled anymore and so took away his benefits. This is the case of the poverty trap. Another lucid example if given today in Greg Mankiw’s blog:

the poverty trap is still very much a reality in the U.S. A woman called me out of the blue last week and told me her self-sufficiency counselor had suggested she get in touch with me. She had moved from a $25,000 a year job to a $35,000 a year job, and suddenly she couldn’t make ends meet any more. I told her I didn’t know what I could do for her, but agreed to meet with her. She showed me all her pay stubs etc. She really did come out behind by several hundred dollars a month. She lost free health insurance and instead had to pay $230 a month for her employer-provided health insurance. Her rent associated with her section 8 voucher went up by 30% of the income gain (which is the rule). She lost the ($280 a month) subsidized child care voucher she had for after-school care for her child. She lost around $1600 a year of the EITC. She paid payroll tax on the additional income. Finally, the new job was in Boston, and she lived in a suburb. So now she has $300 a month of additional gas and parking charges. She asked me if she should go back to earning $25,000.

January 23, 2008

Free to choose.

In 1980 Milton Friedman (the Chicago school economist, famous for his promotion of laissez faire economics and winner of the 1976 Nobel prize) made the popular 10-part documentary ‘free to choose’, here I have linked to a website which shows all the episodes for free.

Each episode is divided into two parts. The first 30 minutes consists of examples of free market success or government failure, which Friedman narrating. This bit tends to be a little simplistic, and quite frankly not that interesting.

That second half however consists of a spontaneous debate between about 6 different people from a broad spectrum (e.g. businessman, academic, trade unionist) as they discuss the pros and cons of the free market. While these debates tend to be incoherent and fragmented, it naturally engages you due to the lack of a script sterilising the situation. One nice quote from one of the debaters is shown below:

“ I don’t care about good intentions, brains, integrity. The fact of the matter is that they [the government] aren’t smart enough to manage the wages and prices of every American. They don’t do it well” (Donald Rumsfeld, 2nd episode).

January 11, 2008

New Hampshire and the Stock market.

The result New-Hampshire election results seems to imply quite a criticism of the efficiency of the stock market. In particular it affirms Keynes’s speculation that they were controlled by ‘animal spirits’.

What is in-trade?
The in-trade website is basically a political betting website. There are bonds that pay out, say, $100 if Clinton wins the 2008 election and $0 if she doesn’t. These bonds are then traded among market players (with there typically being a volume of thousands in each market). Therefore if the market price for this bond is $23 then this implies that the market believes that Clinton will win the 2008 election with a probability of 23%.

Total Predictive Failure:
In the new Hampshire elections McCain won for the republicans and Clinton won for the democrats. But looking at the history of in-trade market prices for the ‘McCain to win New Hampshire’ and ‘Clinton to win New Hampshire’ shows that these totally shocked the market.
A little more then a month ago the market predicted McCain to win the election with a probability little more then zero. While a week ago the market was clueless over whether Clinton or Obama would win (hence giving them both a 50% rating), and then totally misinterpret the Iowa result and thus leading them to place nearly a zero probability on her winning just days before she won.

McCain’s price history:
Clinton’s price history:

January 06, 2008

MP political diversity.

Browsing on the Internet I found a cluster diagram on Public Whip which spatially displays MPs political locations with respect to how they vote, and this is done for the 1997, 2001, and 2005 parliments.

Below is the diagram for the 2005 parliment. A red dot represents a labour MP, blue for conservative, etc. If two MPs always voted the same way then their dots would be on the same point. Thus the greater the distance between the two MPs, the more different they are.

Parliment 2005

December 30, 2007

Homework assignment for economists.

The following is from Greg Mankiw’s blog:

China, the world’s biggest grain producer, will tax exports of wheat, corn and rice to increase domestic supply and control rising food prices. Exporters of wheat will start paying a 20 percent tax on Jan. 1, while the tax for corn and rice was set at 5 percent, the Finance Ministry said.

Draw the graph that describes the market for grain in an exporting country. Use your graph to answer the following questions.

1) How does an export tax affect domestic grain prices?
2) How does it affect the welfare of domestic consumers?
3) How does it affect the welfare of domestic producers?
4) How does it affect government revenue?
5) What happens to total welfare in China, as measured by the sum of consumer surplus, producer surplus, and tax revenue?

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