Monday, November 20, 2006

Milton Friedman Passed Away

He was a great economist and recipient of the 1976 Nobel Memorial Prize for economic science. See CATO

" Edward H. Crane, president of the Cato Institute, commented on Dr. Friedman's life and legacy: "Here's a guy who won the Nobel Prize in economics for his work in monetary theory and he was a great Chicagoan, a great empiricist and theoretician of economics. But ultimately, what Milton believed in was human liberty and he took great joy in trying to promote that concept...."

Here are a few of my favorite Milton Friedman's Quotes:

"The only way that has ever been discovered to have a lot of people cooperate together voluntarily is through the free market. And that's why it's so essential to preserving individual freedom. "

"Governments never learn. Only people learn. "

"Nobody spends somebody else's money as carefully as he spends his own. Nobody uses somebody else's resources as carefully as he uses his own. So if you want efficiency and effectiveness, if you want knowledge to be properly utilized, you have to do it through the means of private property. "

"Only government can take perfectly good paper, cover it with perfectly good ink and make the combination worthless. "

Wednesday, November 08, 2006

Dallas Historical Election and Spending Well

I am writing from Dallas, where yesterday elections created yet another surprise. Mr. Watkins has become the first African American Attorney General of Dallas country. He has defeated Republican Toby Shook. It is interesting to observe that Mr. Shook campaign has been much better funded than that of Mr. Watkins. As a matter of fact he spent 25 to 1 more than Mr. Watkins whose campaign raised a fraction of money Mr. Shook managed to have. From an economics point of view this is indeed interesting.

If we consider winning in an election the outcome determined by a production function, which is function of capital and labor, the question would be where the marginal gain of raised funds starts to diminish. Campaigns raise money in order to fund their activities in order to have the votes to win, thus the marginal benefit of each dollar raised is the number of votes that it adds to total existing votes. After a certain value of funds being raise the number of votes that an extra dollar brings in declines and diminishing returns begin. This continues until the number of vote stops increasing because of increasing funds and marginal benefit of a raised dollar becomes zero. Thus having access to large funds helps but does not guarantee the results I wonder what is in literature regarding this.

Tuesday, November 07, 2006

Sunday, November 05, 2006

Not Many Hail Privatization

Living in a foreign land as an Iranian obliges one to answer questions asked by curious people and to think about his or her identity as an Iranian and Iran even more. Those who ask questions often do so with innocence of naivety and no matter how awkward the question is one can always appreciate their effort to reach out to understand.

As a student of economics I have been asked several times about the reasons behind under-development of Iran and its economic problems. I often find that the questions are posed by those who already have assumed Iran’s economic problems are caused by its political structure and its ruling elite, like any other inexperienced observer would do.

The inexperienced foreign observer presumes that Iranian public and intellectuals are all for economic development of country. Indeed it is a rational assumption, since he already has assumed Iranian public and intellectuals to be freedom loving peaceful people. Although it might be rational, it is a very wrong and a very unrealistic assumption.

It is wrong to assume that public hail privatization policies or trade open door approaches. It also is very wrong to assume that Iranian intellectuals are supportive of such policies and consider them necessary. In reality such policies have been criticized by the very same presumably freedom loving intellectuals in no uncertain terms. When to these one adds government bureaucrats who are unwilling to let go their grip on industries and manufacturing, one hardly could be surprised by slow progress in privatization in Iran.

If Bureaucrats argue that for the good of people government is the best available candidate for ownership of industries, intellectuals argue that any policy that results in creating an industrialist cast, who could become rich, is against social justice and is an act of robbing nation out of its treasures and resources. Ironically pro-revolution extensive nationalization of industries was planned by Mr. Ezzatollah Sahabi then a liberal member of government and later a famous member of opposition. Not surprisingly he was among the first to criticize President Rafsanjani’s plans to privatize Iran’s public sector.

The truth is that privatization and other economic reform policies in Iran have been advocated by a small group of technocrats and leadership. Such policies have been executed by a leadership working with a reluctant bureaucracy, facing severe criticism from intellectuals. The reality is that in most cases Iran’s intellectuals do not want a free market, do not advocate a free trade policy and do not demand Iran’s inclusion in World Trade Organization.