The summary from Johannes Haushofer’s empirical paper on retaliation in the Palestine – Israel conflict (with all caveats of econometric limitations, particularly when dealing with political and historical matters):
“Ending violent international conflicts requires understanding the causal factors that perpetuate them. In the Israeli–Palestinian conflict, Israelis and Palestinians each tend to see themselves as victims, engaging in violence only in response to attacks initiated by a fundamentally and implacably violent foe bent on their destruction. Econometric techniques allow us to empirically test the degree to which violence on each side occurs in response to aggression by the other side.
Prior studies using these methods have argued that Israel reacts strongly to attacks by Palestinians, whereas Palestinian violence is random (i.e., not predicted by prior Israeli attacks). Here we replicate prior findings that Israeli killings of Palestinians increase after Palestinian killings of Israelis, but crucially show further that when nonlethal forms of violence are considered, and when a larger dataset is used, Palestinian violence also reveals a pattern of retaliation: (i) the firing of Palestinian rockets increases sharply after Israelis kill Palestinians, and (ii) the probability (although not the number) of killings of Israelis by Palestinians increases after killings of Palestinians by Israel.
These findings suggest that Israeli military actions against Palestinians lead to escalation rather than incapacitation. Further, they refute the view that Palestinians are uncontingently violent, showing instead that a significant proportion of Palestinian violence occurs in response to Israeli behavior. Well-established cognitive biases may lead participants on each side of the conflict to underappreciate the degree to which the other side’s violence is retaliatory, and hence to systematically underestimate their own role in perpetuating the conflict.”
Eric Hobsbawm passed away on the 1st of October, 2012. While we may not agree with all his ideas, he was undoubtedly an extraordinary historian and intellectual. Here’s Hobsbawm on the Hungarian revolution of 1956; on Britain’s inter-war experience; on meeting Gorbachev; on his fellow historian, Tony Judt, and on more recent, turbulent, affairs - the failure of ‘socialism’ and bankruptcy of capitalism. You can also read Edward Said’s review on his last major work, as well as the views of a diverse group of historians, including Niall Ferguson.
The northeastern Indian state of Assam has been witnessing large-scale violence since around a week. India’s northeastern regions are a highly diverse place, supporting around 200 ethnic and tribal groups. Nearly a 100 people have been killed, many more are missing, and around 400,000 people have been displaced and are now living in relief camps as the violence continues. Such violence between the the indigenous population and recent immigrants started in the 1970s, with massacres occurring at various times, and these tensions have risen once more.
But, the purpose of this piece is not to discuss this topical question, but to start exploring an even longer history of resistance and violence between the indigenous residents of Assam and the Indian state. This very violent past offers quite an interesting perspective on modern, democratic India. It would be instructive to understand what has happened in Assam since the British left the subcontinent as it shows the strengths and weaknesses of the current political structure in India, and sheds a light on other important conflicts, such as the one in Kashmir. The noted British historian, Perry Anderson, has written a series of very insightful, and thought-provoking articles on India in the London Review of Books. Below is one long excerpt from his article, ‘After Nehru’, which sheds some light on the Assam issue.
“On the symmetrical wing of the union to the east, matters were no better. There the British had conquered an area larger than UP, most of it composed of the far end of what James Scott has described as the Appalachia of South-East Asia: densely forested mountainous uplands inhabited by tribal peoples of Tibeto-Mongoloid origin untouched by Hinduism, with no historical connection to any subcontinental polity. In the valleys, three Hindu kingdoms had long existed, the oldest in Manipur, the largest in Assam. The region had lain outside the Maurya and Gupta Empires, and had resisted Mughal annexation. But by the early 19th century Assam had fallen to Burmese expansion, and when the British seized it from Burma they did not reinstate its dynasty, while leaving princely rule in the much smaller states of Manipur and Tripura in place. The spread of tea plantations and logging made Assam a valuable province of the Raj, but the colonial authorities took care to separate the tribal uplands from the valleys, demarcating large zones throughout the region with an ‘Inner Line’ and classifying them as ‘Excluded and Unadministered Areas’, which they made little effort to penetrate. So remote were these from anything to do with India, even as constituted by the Victorian Empire, that when Burma was detached from the Raj in 1935, officials came close to allocating them to Rangoon rather than Delhi.
The arrival of independence would, in its own way, make the links of the North-East to the rest of India even more tenuous. For after partition, only a thin corridor, at its narrowest some 12 miles wide, connected it to the body of the union. Just 2 per cent of its borders were now contiguous with India – 98 per cent with Bangladesh, Burma, China, Nepal and Bhutan. Manipur had no direct road connection to India at all. Confronted with difficulties like these, the Congress leaders did not stand on ceremony. The ruler of Manipur had not been rounded up along with his fellow princes by V.P. Menon in 1947, and by 1949 was resisting full integration. Briefed on the problem, Patel had just one short question: ‘Isn’t there a brigadier in Shillong?’ Within days, the maharajah was kidnapped in Shillong, cut off from the outside world and made at gunpoint to sign his kingdom into oblivion. With it went the elected assembly of the state, which for the next decade was ruled – like Tripura, brigaded into the union at the same time – with no pretence at popular consultation by a commissioner from Delhi.
Dispersed tribes in the uplands did not permit of this kind of coup de main, and there trouble started even before the departure of the British. In Assam, about half the Naga population of 1.5 million – some 15 major tribes, speaking thirty languages – had been converted to Christianity by Baptist missionaries, and acquired an educated leadership in the shape of a Naga National Council, which made clear it did not want to be impressed into any future Indian state. A month before independence, a delegation called on Gandhi in Delhi. ‘You can be independent,’ he told them, characteristically adding: ‘You are safe as far as India is concerned. India has shed her blood for freedom. Is she going to deprive others of their freedom? Personally, I believe you all belong to me, to India. But if you say you don’t, no one can force you.’ Congress was less emollient. Nehru dismissed the emergent Naga leader, Phizo, as a crank, and the idea of Naga independence as absurd.
Undeterred, the Naga leaders declared independence a day before Britain transferred power to India. Congress paid no attention. Phizo continued to tramp villages, increasing support among the tribes. In March 1952, he met Nehru in Delhi. Beside himself at Phizo’s positions, Nehru – ‘hammering the table with clenched fists’ – exclaimed: ‘Whether heavens fall or India goes into pieces and blood runs red in the country, whether I am here or anyone else, Nagas will not be allowed to be independent.’ A year later, accompanied by his daughter, he arrived on an official visit as prime minister at Kohima, in the centre of Naga country, in the company of the Burmese Premier U Nu. Petitioners were brushed aside. Whereupon, when he strode into the local stadium to address a public meeting, the audience got up and walked out, smacking their bottoms at him in a gesture of Naga contempt. This was an indignity worse even than he had suffered among the Pathans. The Naga National Council was de-recognised, police raids multiplied. An underground Naga army assembled in the hills.
By late 1955 a Naga Federal Government had been proclaimed, and a full-scale war for independence had broken out. Under its commander-in-chief, two divisions of the Indian Army and 35 battalions of the paramilitary Assam Rifles, a largely Gurkha force notorious for its cruelties, were dispatched to crush the uprising. As in Malaya and Vietnam, villagers were forcibly relocated to strategic hamlets to cut off support for ‘hostiles’ – Indian officialese banning even use of the term ‘rebels’. In 1958, Nehru’s regime enacted perhaps the most sanguinary single piece of repressive legislation in the annals of liberal democracy, the Armed Forces (Special Powers) Act, which authorised the killing out of hand of anyone observed in a group of five persons or more, if such were forbidden, and forbade any legal action at all against ‘any person in respect of anything done or purported to be done in exercise of the powers of this regulation’, unless the central government so consented. With this licence to murder, Indian troops and paramilitaries were guaranteed impunity for atrocities, and made ample use of it. The brutality of Delhi’s occupation of Nagaland far exceeded that in Kashmir. But as in Srinagar, so in Kohima pacification required the suborning of local notables to construct a compliant façade of voluntary integration, work that in Naga territory was entrusted to the Intelligence Bureau. Once assured of this, Nagaland was promoted to statehood within the union in 1963. Half a century later, the Armed Forces (Special Powers) Act is still required to hold the region down.”
Barclays Bank has been charged by Britain’s rejuvenated financial regulator, the Financial Services Authority, as well as the US regulator, Commodities Futures Trading Commission, for manipulating a key interest rate – the London Interbank Borrowing Rate (LIBOR).
This manipulation began around 2005 and continued for around five years. LIBOR indicates an average of borrowing rates for banks in all top currencies, and is used as the benchmark for financial contracts and interest rates around the world, which is a market worth £350 trillion.
This is how LIBOR is calculated: the British Bankers’ Association (BBA) asks each bank what rate it expects to pay to borrow from other banks for relatively short time periods – from overnight loans to 12 months in a range of currencies. It is important to note that such short-term borrowing was the primary source of funding for a lot of banks. Before the financial crisis, this rate used to be quite low, because banks didn’t see much risk in lending to each other as they were all profitable, and the markets were functioning perfectly. However, when the subprime crisis exploded, it became clear that many of the assets that banks held on their balance sheets may be worth much less than thought, all banks panicked, LIBOR shot up, and banks stopped lending to each other. Nobody was willing to trust anyone. How could they know that the bank they were lending to was fundamentally sound, and wouldn’t be bankrupt in the future?
It was in this environment that Barclays, and other involved banks, made the most by manipulating the rate. It was certainly used to boost profits, but more importantly, the banks manipulated to rate and pushed it lower during the financial crisis. This was done to convey the false signal that the banks were sound, that their borrowing costs weren’t too high, and that they didn’t need any help. Thus, Barclays was able to dupe foreign investors, mostly cash rich, but risk-averse sovereign funds, during the panicky period of 2008. Barclays, unlike RBS, said no to UK government funding, and instead asked sovereign funds to invest in the bank.
For such an important interest rate to be calculated in such a manner seems cavalier. The calculations are done in such a manner that outliers are eliminated so that one bank cannot really influence the rate, but in this episode, while only Barclays has been fined yet on this matter, others like the Royal Bank of Scotland, UBS, Bank of America, Citigroup and a dozen other banks (spanning 3 continents) are being investigated as well. Hence, this was most probably an industry-wide practice, and wasn’t solely limited to Barclays.
You can see the flaw in the above method: the BBA asks banks to supply them with their borrowing rate. What happened at Barclays was that its traders had some positions in the market – they had bought an asset, or promised to purchase it, or they had some other financial position, and a change in this crucial interest rate would benefit their trades. Thus, the traders colluded with the treasury department (which sends this information to the BBA) to supply incorrect rates and thus manipulate them. It must be noted that normally there is supposed to be no communication whatsoever between these two parties.
Here are some useful readings on this issue:
Pakistan’s extremely low tax to GDP ratio (between 10 and 15 percent, depending on what revenue is measured) has been cited by many inside and outside the country as one of the main problems of the country. With low tax collection, and thus low tax revenue, the government is forced to borrow too much, look abroad for aid, force its central bank to print too much money, and forced to reduce spending on development and reduce the quantity of public goods provided to the public.
Pakistan Tehreek-e-Insaf’s (PTI) leader, Imran Khan, has made this a central plank of his economic policy. Many feel that such reforms are impossible in a country like Pakistan, and historically, many governments have indeed failed at such reforms. However, I believe that this task is most certainly within the realms of the possible, and will explain below various, relatively simple steps that can be taken to achieve this goal.
When approaching this issue, the first question we need to ask is: why do Pakistanis not pay taxes?
First, there is a strong, and quite well-founded belief, that a large part of the tax collected will not be spent on the welfare of the public at large, but rather on the politicians’ personal needs/wants, or the needs/wants of these politicians’ favourites.
Second, due to the above problem, people simply do not expect that paying taxes will lead to any increase in the quantity and quality of public goods and services provided by the state. Hence, they have nothing to gain from paying taxes.
The solution to this problem, while obviously not easy, does not require any new fundamental breakthrough in technology or human thinking in general. Decent governance, careful planning, and honest work are all that’s needed. While one has to admit that even these relatively basic changes will take time in Pakistan, it’s nevertheless nothing that cannot be done. It’s simply a matter of will, and time.
What must a government do to achieve this goal?
First, make clear, credible promises for improvements and increases in public goods and services: infrastructure, public transportation, education, health, social security. If people see improvements in their standard of living by paying taxes, they’ll be more inclined to pay.
Governments should show people that if they pay more through taxation, then their expenses will be reduced by the state, in some way, through cheaper education or healthcare, for example. Hence, taxes won’t simply be reducing the disposable incomes of people, but also a way of increasing the disposable incomes, through a reduction in expenditures on private purchases of traditionally public goods and services. This is directly linked to the above point on higher, better provision of public goods and services.
Second, governments should be more transparent about how much tax is collected, from whom it is collected (geography, profession-wise), and where it is eventually spent. This will instill greater confidence among the public in the government’s initiatives, such as the ones listed above. It can also be useful in ensuring greater equality in terms of the tax burden, so that one powerful group does not evade taxation easily, while the less resourceful continue to pay fully. This is in fact the situation right now.
Third, ensure that filing in taxes is easy, and that help is available for those finding it difficult. Make tax evasion hard in the first place. This is can be done by ensuring cross-checks between various data between agencies, and different levels of administrative (local, provincial, federal, etc). Penalties for tax evasion must be swiftly implemented without fear or favour. An honest, competent bureaucracy, including the police service, would be a great help here.
Currently, the penalty for not paying tax is not high. Some groups simply aren’t touched as they are seen as too close to those in power, and others as being too powerful in themselves (some professional groups with strong unions, for example). Otherwise, you simply pay a bribe to get out of paying taxes.
Fourth, reduce the tax burden on the lower and middle classes. This can obviously be done by lowering the income tax rate, but also by shifting the focus of taxation from indirect, consumption taxes to wealth taxes. Such a reduction, from a pure tax collection perspective, can be beneficial by giving people a much greater incentive to pay tax, instead of trying to evade it. It’s very much possible that the government may collect more tax revenue at lower rates but higher compliance, as compared to higher tax rates, but higher evasion as well. If all imposed taxes are paid, the result will also be a more equitable situation, as the ‘resourceful’ won’t be able to dodge the taxes at the expense of the ‘poor’.
Fifth, increase the tax net to include untaxed and low taxed activity, such as agriculture.
Apart from the above measures, the government can sell these reforms by explaining to the people that the high rate of inflation is due to some fundamental issues in the agriculture market, some malfunction markets (cartels) and the state bank printing too much money. The last problem can be dealt with by reducing money printing through higher tax revenue and a reduction in borrowing needs. A major problem of the government and the public will be solved this way. This will provide yet another boost to the purses of ordinary Pakistanis.
On a more purely political front, this initiative can be linked to ensuring that Pakistan is sovereign, that it can pursue its own interests domestically and internationally without fear that its arm can be twisted by countries providing any aid. These measures, if carefully, clearly and systematically implemented should most certainly ensure that Pakistan collects more tax and governments are truly able to serve the people. It is simply a matter of will. One simply requires optimism of the will.
The article was published here.
Below are some of the clearest, most insightful and thought-provoking articles, essays and lectures on the economic and financial crisis that began in 2007.
The Real Solution is Growth - Daron Acemoglu
Rethinking Macroeconomics - Jeffery Sachs
How Did Economists Get It So Wrong? - Paul Krugman
The Crisis on 2008: Structural Lessons for and from Economists - Daron Acemoglu
An Agenda for reforming economic theory - Joseph Stiglitz
Has financial development made world riskier? - Raghuram Rajan
“In a survey of wealthy people (in 2005), those with net worth of over $1 million said that they needed $2.4 million to live comfortably, those with at least $5 million in net worth said that they needed $10.4 million, and those with at least $10 million wanted $18.1 million.”
Apparently, you can never have enough…
HT to Professor Perloff.
This fascinating insight from Daniel Kahneman has seemingly solved one of the mysteries, relating to meals in general, of my stay (without my family) in Tilburg. However unappealing it may be, it nevertheless remains possible that I simply cooked much worse than others…
“When you make your own sandwich, you anticipate its taste as you’re working on it. And when you think of a particular food for a while, you become less hungry for it later. Researchers at Carnegie Mellon University, for example, found that imagining eating M&Ms makes you eat fewer of them. It’s a kind of specific satiation, just as most people find room for dessert when they couldn’t have another bite of their steak. The sandwich that another person prepares is not “preconsumed” in the same way.”
“The time has come for our men, women and children to live normal lives, for them to be able to sleep without waiting for the worst that the next day will bring; for mothers to be assured that their children will return home without fear of suffering killing, arrest or humiliation; for students to be able to go to their schools and universities without checkpoints obstructing them.
The time has come for sick people to be able to reach hospitals normally, and for our farmers to be able to take care of their good land without fear of the occupation seizing the land and its water, which the wall prevents access to, or fear of the settlers, for whom settlements are being built on our land and who are uprooting and burning the olive trees that have existed for hundreds of years.
The time has come for the thousands of prisoners to be released from the prisons to return to their families and their children to become a part of building their homeland, for the freedom of which they have sacrificed.“