Collective Action Problem in Krylov’s Fable

Here’s an excellent illustration of the collective action problem in one of my favorite fables by Russian writer Ivan Krylov. Like all Krylov’s works, this one is an ingenious satire of social faulty behavior.

Crab, the Pike, and the Swan

(by Ivan Krylov, 1768-1844)

Whenever companions don’t agree,

They work without accord;
And naught but trouble doth result,
Although they all work hard.

One day a swan, a pike, a crab,
Resolved a load to haul;

All three were harnessed to the cart,
And pulled together all.

But though they pulled with all their might,

The cart-load on the bank stuck tight.

The swan pulled upward to the skies;
The crab did backward crawl;
The pike made for the water straight —
It proved no use at all!

Now, which of them was most to blame
’Tis not for me to say;

But this I know: the load is there
Unto this very day!

Russian militia: between public and private interests

Message from the bottom of Russian Militia: 

Russian Police departments are all about rent-seeking - Russian policemen are doing their jobs NOT by serving the public interest, but by serving the private interest of the higher ranked in their bureaucracy; corruption, collecting premium bribes, protecting criminals, defying the rule of law, is their de facto job. There is no room for honest professionals like Aleksey Dymovsky.

Private police would be ideal, but probably not the most practical solution yet. A more interesting observation is that police corruption is not an unknown phenomenon to developed democracies like the US,  but there it is much, much less of a problem than it is in weaker democracies. What is the best approach to address this gap is one challenging question for Russian leaders in particular, and all market reformers in general.

More on this in international media:

I was glad to hear he got away with only being fired and not killed like most journalists reporting on corruption in this country do.

PS Note:

I don’t exclude the possibility of Dymovsky being part of some government-led masquerade. Having lived there and, at that time, having my father forced to resign his position because of corrupt pressures, plus just by looking at their GDP, I don’t need special proof of persisting corruption in this country’s institutions. But if they do plan a reform, I believe thorough investigations to assess the real effects must be carried out by local and international non-biased experts as well, on the ground, before and after implementation. How else do you think it will be possible to prove that this was more than a superficial attempt for the sake of improving Medvedev/Putin/Russian image, and that it did change de facto institutions?

Jelous Thoughts on a Rainy Veterans Day

Both of my grandfathers fought in WWII, both survived the horrible war. Sadly and ironically, they also died so young that I never got the chance to meet them. What killed my grandfathers were years of declining quality of life and exhausting physical work on Soviet collective farms (kolkhozy) that followed under Stalin’s plan, slavery in one word… They did not long survive the USSR, a much longer war on freedom.

I cannot help thinking about how, had they lived in a capitalist system, there could have been good odds that they made it to their 80’s, or even 90’s, like their Western peers who celebrate today did.

To my dear grandparents and to millions who had to put up with and fight socialism, I Salute You!

Cultural and Institutional reality

A tragicomic story on what’s essentially a result of bad institutions in Moldova.

I enjoy Igor Cobileanski’s works a great deal, but I think he misses the point when saying that he’s only illustrating a cultural reality specific to Moldovan people. The truth is that there wouldn’t be any “cultural reality” that he’s so fond of had there not been the corrupt institutional system guiding peoples’ incentives and behavior toward unproductive and destructive activities.  What Cobileanski should really be getting at is not a romantic view on Moldova’s cultural reality as he states, but rather a disturbing institutional reality which, I believe, is sadly the case for all of the “failed” ex-soviet democracies (Moldova, Ukraine, Kazakhstan, Russia, Belarus, Azerbaijan, Kyrgyzstan, Uzbekistan, Turkmenistan).

Measuring “Doing Business in 2010″ – World Bank vs. Reality

Doing Business - World Bank 2010

In newly released “Doing Business 2010” report, World Bank has very good news! In 2009, pro-enterprise reforms went 20% up; Eastern Europe, Central Asia, Middle East and Northern Africa are world regions with the most reforms implemented per country.

Between June 2008 and May 2009, 287 reforms were recorded in 131 economies, 20% more than the year before. Reformers focused on making it easier to start and operate a business, strengthening property rights and improving the efficiency of commercial dispute resolution and bankruptcy procedures.Two regions were particularly active this year: Eastern Europe and Central Asia and the Middle East and North Africa. In Eastern Europe and Central Asia, 26 of the region’s 27 economies reformed business regulation in at least one area covered by Doing Business. Governments in the Middle East and North Africa are reforming at a similar rate, with 17 of 19 reforming in 2008/09. In both cases, competition among neighbors helped inspire widespread reform.

I am in particular cheery for Moldova. As one of the top 10 performers in reforming business, Moldova’s 2010 regulations are supposedly making it easier for local entrepreneurs to start up a business (“offers an expedited, 24-hour company registration service for an additional fee”), to register property (number of days to register land went from 48 to 6 days), and paying taxes (employers’ payments to social security funds went down).

However, I am skeptical about World Bank’s tools and methodology as far as measuring “de facto” versus “de jure” improvements in doing business over time in country X or Z.  Especially with respect to the rigid assumptions in their approach to target businesses: no corruption, no foreign trade, ltd. only, 100% local ownership, etc. Their narrow definitions of business assume away a lot of potential inhibiting factors ( increases in either formal, informal or both types of transaction costs) that could offset the new achievements in regulating business. A few new official business reforms, therefore, might not de facto translate into easier doing of business in Moldova or in any other country, just as it also might not say a lot about development.

Russian journalists – Enemies of the State?

Michael Specter, American journalist, talks about the series of murdered journalists since Putin became president.

13 Journalists have been killed since Vladimir Putin became president. They share a couple of chilling characteristics; one is ugly deaths, and the other one is that they were all opponents of the Kremlin.

In another more actualized article Jameson Berkow, a Canadian journalist, counts:

…21st to be killed since Putin became president in 2000, and the 44th since the fall of communism in Russia [...]

And here’s a comprehensive list of journalists killed in Russia. Tragic… think that these people lost the war for freedom – freedom from oppression, corruption, crimes, all injustices on the part of a violent state. And, if seeing how these murders still happen in the 21st century around the world doesn’t  infuriate you then sadly, if  all you feel is fear and hopelessness, you are a victim whose life and behavior have been altered as a results of years and years of living under a terror regime. But worse than all, if you don’t have these feelings, you might be “one of them” – one with power, one with no respect for human life, no respect for others’ freedom, no sense of morality, no conscience, and though you may hold vested power, nothing can justify your criminal actions.

In memory of my favorite  Russian TV anchor, murdered in 1995, Vladislav Listyev:

Gore Warming vs. Mother Nature

For the global warming skeptic/realists in you, here’s an excellent new cartoon by Glenn McCoy (copyright 2009 Universal Press Syndicate) to enjoy!

Trouble in the Silicon Valley. Blame USCIS

The US anti-immigration laws are bankrupting the Silicon Valley (Tech Crunch). H-1B – work visa – related costs and quotas impede American tech companies from employing foreign minds trained in American universities .

Running a business (profitably) is not easy; an economic crisis and the world wide competition in the industry will make sure you constantly optimize your costs and outputs. By all means, cutting back on costs is vital. In the tech industry’s case, firms look up cheaper yet highly skilled sources of labor – foreign labor. International students in US universities acquire virtually the same level of skills as their American colleagues, yet because of their lower opportunity costs in their home markets they will settle on mutually agreed lower wage rates with US employers. Cheaper yet equally or more productive labor will improve firms’ cost structure which in turn will lead to an increase in revenues, and maybe even profits!

Star gazing with NASA

Great picture of the Sun, Venus, Earth, Mars, Saturn, and our Moon. Which one is which is something that I will probably never be able to tell (except for Venus and the big ones) with naked eye.  Glad that folks at NASA can point them out.

Soviet (marginal) labor story

This is a page from a book of “Illustrated Russian language” which I often used at age 5-6 in my preparation for school, 1st grade, in the Soviet Russia.

We’re on page 59, and the new word to learn is “beet” (репқа). The 7-step beet  story  goes:

1. A peasant plants a seed. The second day finds a gigantic overgrown beet, big problem!

2. He tries and tries to get it out, all in vain. Calls he’s wife for help – nothing.

3. She calls their daughter for help – still not enough.

6. Dog comes – nothing.

5. Cat – nope.

6. Until finally, the mouse saved the day. Uraaa!

The moral of the soviet story was that the combined brute power of the family solved the difficult harvesting problem. The other hidden “moral” of the story was that the Soviet lands have the richest soils of all, things grow on it by themselves, just wait, the sole problem comes at harvest, the crops grow enormous, but of course, who would mind something like that;  in USSR there was no such thing as diminishing returns to labor.

The un-perverted moral of the story is that:

What makes soil a rich resource is its most valued use;  you can cultivate thousands of giant beets on your land, but if nobody wants beets, or if there are restrictions on how you could make use of it, than the whole agricultural dream is highly impoverishing. All in all, these sort of stories fooled people into dreaming and hoping for an overnight miracle that would pull them out of poverty. Unfortunately, the giant beet never came. Land plus labor and self sufficiency never was and never will be the key to prosperity no matter how fat the Soviet chernozem…

Finally, a call for a scary thought of brainwashing as education:

= besides seeing this story in my preschool books, I also had it printed on my toys. On cube games, the puzzle type of games when you have to rearrange the printed sides of cubes so that to reconstruct the whole picture.