Cost-benefit tradeoffs

The notion of cost is not well translated on social issues. How many times we have heard a politician promising one thing and almost doing the opposite once elected? In our times, despite all the communication medias, the notion of cost is still elusive. The cost is of course for the other guy to stand for if we even have the decency to admit that there is after all a cost attached to every benefit.
Peoples choose their representatives on a menu where policy benefits are underscored and the cost wrapped in a prosaic form. For instance, a politician directing attention on an immigrant will almost succeed to hide the true cost of a policy.
Do not ever ask a politician how a certain benefit will be achieved. He will rapidly diverge to identify areas where savings can be made. These areas are always where the most vulnerable in the society lives, gets her/his bread, and has her last treasure. It always she the bad girl. In countries where immigrants are visible, politicians are almost blessed. Lots to say about them.
Immigrants are by no means innocent. They are for the most opportunists. They should be as nothing has been prepared for them. They come to and live in countries where their presence is a disturbing factor. Politicians taking the opportunity to score political points will portray immigrants as the source of all ill in the country. People are literally flattered when a politician has the courage to speak out. It seems it requires many years of study to insult somebody. But as for the true cost, no one hear about it. If someone insists on how the benefit will be realized, the answer comes easily in the form of a tirade, not as an economic figure.
I always think that politicians are the lecturer of the society. They should explain until we understand why we cannot get it. They should tell us that the cause is just but too expensive. We cannot go there to colonize when on our planet we do not why we go to war. Unfortunately, the cost of a policy is never clearly stated in a language that it is understandable to all.
To my view politicians of these years are more like biased CEOs. They are proud to present figures in billion of dollars. What a billion? It is not a dollar multiply by 1000000000? No, politicians will not take the risk of stating it in a dollar terms. They cannot say that we have a dollar, but we spend 1.5 dollars. Since we do not have the 0.5 dollars, we have to borrow from the rich guy and pay back with interest. If we don't pay the 0.5 dollars soon we will need to borrow more to pay interests since the rich guy has agreed upon to keep his savings for ever. In the end we will be serving the rich guy as his saving will be growing faster than our dollar we start with. We will end up being slaves of an unknown citizen. May be we are about there. Our dollar has long ago been lost. We are in debt both to the planet and to some of our fellow citizens.
I came to realize that the awareness of a cost disappears the larger the economic figure. My students for example when asked to come up with an investment idea will almost automatically propose an idea requiring $1 million in investment. I will ask them if they do have $10,000 in savings. They will often admit that they do not have even a $1,000 in savings. Then I will add. If you invest $1 million, it means the cost is at least $1 million. Are you aware that the higher the investment, the more resources are engaged? Some of them understand that you cannot pretend have an investment idea when you need so much money. A person starting a business with million of dollars is not to my view an entrepreneur, he is a capitalist. Good ideas require relatively less investment.
In all these, the notion of true cost is often absent in the mind of a capitalist. For this category of people, only profit matters. If you invest billions of dollars, and you can generate a billion dollar, the project is worth undertaking. Here again the true cost will not be considered. Even when our planet is under pressure, some capitalists still consider that the current benefit economic model does more good than harm. While there is a stock market for the good stuffs, there is no market to trade the social cost of a planet in bad shape. With a suffocating planet, we need a cost economic model that considers the true cost of getting richer and richer. In stead of discounting future cash flows, we should discount future costs. If the discounted costs are greater than current benefits, the investment should be rejected. This is what I call the Net Present Cost (NPC) model.
The more you read, the more you realized the complexity of human brain.
I cannot help it, but wonder if we will ever be aware of something call the cost of living on a planet that is not ours since we find it with our birth. We go about our world's business as if there was not a cost tag to our lifestyle. We see things appearing, and other disappearing without reflecting on ourselves the ephemeral nature of our existence. If we were the owner of the earth it should have been known long ago. We could fix the fundamental problems of our planet. We are simply arrogant agents who went ahead of the true owner.
We spend each dollar of the nature without showing any form of gratitude. We consider nature to be in our services. Those insects working for us, get of course not pay. We could give them a year of reproduction. They could enjoy themselves for a decades without the need to stop their own natural cycle. But we want them to work to death. Can they speak these insects burgeoning for us? Can they contest these bees making our planet colorful? May be they do in their own ways. But the agent has not developed a language to understand them. He wants them if possible to speak his mother tongue, not the other way around. The agent  is literally cheating on the principal.
The true cost of our life is hidden. We live, we die, knowing all about what we want, but little on what we loose. Because the cost is latent. More true than the benefit. We may think there is no cost when in reality a cost is first engaged before any benefit appears. We cannot put a number on each cost, but we can at least be aware that such a cost exists. Economists talk about the social cost, which includes the explicit and the implicit costs.
The cost is there when we introduce a new policy. It is there when we remove a policy. It is about awareness that there is a trade-off. If our education was based on cost awareness, we would have lived in a better world. But since our education is about awareness on gain opportunities, we tend to desire more and more.
Finally, if we are people who elect with our brains, we should always vote for policies where costs are underscored. We should always talk about the cost of getting there. It can be even in extreme case where we want all the immigrants out. We should have the courage to state the costs of getting them out. How big is the benefit of being among ourselves? A politician claiming to do the right thing, but failing to state the nature of the cost must be taken as a meaningless talkative person. Only the awareness of the true cost will save the democratic system in which we are in this part of the world.
We may harm people, we may like them, we may hate them, and we may ignore them, but we should never forget about the cost. There is no benefit without cost.

Neutrality

There is almost no good news being neutral. Nature does not make a difference. It hits blindly. It does not remember the neutral guy (the good guy). Almost in every catastrophic event,  nature fails to save the neutral guy, in particular. If it does, not in the name of neutrality. Anyway, even when we are neutral, we are not really neutral because we are part of a much bigger system of things and thoughts. We are as individuals too small to be really neutral in life. Many people suffer losses not because they have done something wrong.
A country like Switzerland is politically neutral on the international arena. However, if you consider the time when the world was clearly divided in two blocs, Switzerland did choose a bloc to belong to. Switzerland was not neutral by being in the middle of the two blocs. Switzerland was neutral in the Western bloc, which makes a difference. Neutrality in the case of Switzerland means that the country did not choose the most active role in its bloc of influence. Being neutral does not mean you do not belong somewhere, you do not share something, you do not take action of some sort, and you do not take part of something bigger than yourself.
People try also to be neutral economically. You hear people saying that they prefer to keep their savings under the madras than earning an interest on it. They are too afraid to lose their savings. They think they have a neutral investing position by keeping it home. Actually they have a negative investing position. A neutral investing position is only at the point where positive outcomes are counterbalanced by negative outcomes. Not investing is by no means safer.
Take a booming economy. People who chose to invest make up for possible past losses. They have the opportunity to put some money aside. With a booming economy, a larger number of projects are undertaken as the opportunity cost of capital is lower. If someone choose to be however neutral, he/she will not make any extra income. Nature will not recognize the person as being extra careful.
Now take an economy in recession. People who chose to invest may make some losses. The risk is higher, the opportunity cost of capital is higher, and fewer projects are undertaken. Unemployment is higher. Guess what? Neutral people are not better off. They are even worse off. Nature does not again reward them for being wiser. She hits them badly.
So, it does not pay being neutral. You can lose by investing, but the likelihood of losses are lower than the likelihood of not investing. If you do not invest, you are not making a wise decision. This goes beyond the simple fact that inflation eats away some of your idle savings. The dollar you make in good times should help you in bad times. This is the profound sense of being neutral. Neutralizing negative forces by positive forces. 

CableVision

I bought a satellite receiver (Strong, STR 4930) from CableVision the other day. I took the receiver home and went on the website of CableVision to learn how to scan channels under CableVision. The instructions are pretty straightforward. However, these instructions would be incomplete if among the list of the satellites there is no CableVision. Years ago, I was good at searching satellites and scanning channels. But since I moved to Canada I lost these skills.
I thought I could by myself scan channels, but great was my surprise not to be able. Actually, I could scan channels from a number of satellites, but not those that my card from CableVision could unscramble. An exception was 13.0E HOTBIRD 13ABC, where I did scan some channels, but not the channels of interest (beIN sports).
I went to the company and told people there that I could not find CableVision among satellites. The guy who I talk to was surprise that there was not CableVision (I know now that they did not set up the receiver). He tried my card and told me that it was fine. I thought my card from CableVision will unscramble channels regardless of the satellite where they are located. I was wrong. The card can only unscramble those channels under CableVision. Since the guy could not solve my problem, he called a technician to help me in this matter. The technician called me and tried with me to find the signals under CableVision. For some reason, he could not help. He promised to transfer my case to the company. A day after, the company called me to fix a rendez-vous and promised to send someone as soon as possible. Since then, two days have passed.
This evening I solved the problem by myself. I understood already that CableVision is not a Satellite by itself rather a set of frequencies allocated to CableVision. I also understood that it does not matter which satellite I choose as long as I give it another position on disqc. As long as the satellite has those frequencies I will be able to scan those channels. So the first thing I did is to search for a satellite that I know has those frequencies for Lebanon. So I choose NILESAT, which I renamed as CABLEVISION that appears in the list of satellites now as 7.0W CABLEVISION. Thereafter, I made sure that the position of CABLEVISION is number 2 on the disqc.
To rename a satellite, go to Dish setting, press the red button (rename), and use the keyboard to rename. After renaming, press exit.
To scan, move to "Manual scan", Press the green button or move to frequency and press 1 on the remote control and say yes to add TP. You will get the zeros (00.000).
Use the remote control to fill out the zeros.
The frequencies are 11.720, 11.760, 11.800, 11.840, 11.880, 11.920, 12.000, 12.040 and 12.080.
The symbol rate for each frequency is 30.000, and the polarization is H for all.
When you have filled 11.720, 30.000 and H, both the level and the signal should turn green and strong (97% in my case). If not you are on the wrong satellite or disqc position. You have to find the right satellite of your region. I did find the signals for all but 11.880.
To scan the channels, press OK after each frequency is saved. If you want you can exit and try if the channels are unscrambled. beIN sports are on 11.720.
I hope this helps. Good luck.  

Risk-free rate of return

There is nothing in nature called risk-free rate of return. First, a risk-free asset can be formed by holding a portfolio of assets that is perfectly negative correlated with another portfolio of assets. Second, a risk-free asset can be a result of a country's economic policy. While a combination of portfolio resulting in a risk-free position is on solid economic premises, a risk-free asset stemming from a policy is difficult to swallow. Many governments around the globe have issued their versions of risk-free asset with outcomes that are mixed. Yes every government has the monopoly to print money, but not every government can print money without triggering inflation upwards. Therefore, a credible policy for a risk-free asset must meet the premises of perfect correlation in negative and positive movements. Clearly, the government overpays when the economy is on its fall, but underpays when the economy is on its rise. A declining economy kills the risk-free asset. So, the risk-free asset as an a policy is an expression for an economy that is solid on its fundamentals. 

Virtual burden

Greece has at least the merit of admitting that it is dying as a country. Somebody may ignore the cry, but those are true tears. We are living in a strange world where it is defended to admit that the impossible is not possible.
At this point, it does not matter if Greece wrote its own drama by joining the Euro. What matter is to give some hope to Greece.
Opting the Euro out is not the solution. This should be done when the economy will stabilize. But which government will opt the Euro out when things will start falling in place. I doubt this will ever happen. To my view, Greece should stick to the Euro independently of the economic situation. The Euro is the future, the drachma is gone.
Somebody has said that if Greece abandoned the Euro it will cause a global crisis. This cannot be true. It will not even cause a major crisis in Europe. How much was the lost in 2008 at the worst of the sub-prime crisis? Much more.
It will be unpleasant for the lenders to write off a part of the debt, but in the end everybody will be better off, if a part of the virtual burden is lifted off. Maintaining the principal of debt at its current notional level is only a psychological burden, as everybody knows that Greece will never pay its debt in our life time.
For generation the debt will be overhanging. If Greece must pay off its debt in 1,000 year, it does not matter if the EU spreads the burden across 1,500 years.
The most important thing is that Greece will economically breath, and the bondholders will continue receiving their interests. 

Austerity

A strange feeling born in me when I connect whatever word with a being living. As long as the word expresses a general idea, it is there inoffensive. But once the junction between a word and a being is made, it puts me sometime in despair. Take the case of the word "austerity" that is much used these days in continental Europe. It means the state or quality of being austere. In the ancient world, being austere was a spiritual exercise. People who chose to be austere lived and moved with very little. They traveled light. They will often go to and live at a place where they could be alone with their own mind. I guess austerity was a way up, not a way down.
Austerity in economics means a drastic reduction of the budget allocated to some social expenses. Such a reduction is often operated to reduce the debt burden of the state or worse to pay interests on the accumulated debt. Paying its debt send a positive signal to capitalists who may lend more to the unfortunate victim. It is a vicious circle in a situation where there is no growth. More debt will be contracted to pay more interests.
There is no social justice in this word. The poorest who cannot pay and the richest who want not to pay are the only beneficiaries of an austere economy. Those in the middle suffered most as the burden of the debt is on their shoulders. I understand why it does not feel right to pay off a debt when you are completely broke. First, you borrow to pay the interest on the debt. Second, you are asked to continue borrowing in order to be able to pay in order to be able to borrow. And the story goes on. It is a huge credit card. A revolving debt without an end. You pay your debt generation after generation until someday the world enters in a new revolutionary era.
Let me give an example. Suppose a budget of a country is $1,000. Remember a budget is just a projection of expenses and revenues. Nothing guarantees that revenues will match expenses dollar for dollar, and period for period. It happens most of time that expenses are engaged first, and revenues follow suit. There is a delay between the moment a dollar is spent, and the moment a dollar is collected. Government must cover imbalances by borrowing.
If the government is efficient at collecting taxes and other revenues it may by the end of the year balances its budget. If the government is inefficient, the deficit will grow. Suppose that revenues are only $800 when expenses are $1000. The difference $200 will be covered up by borrowing at a positive interest rate. If there is a functioning internal financial market, the $200 will be obtained domestically. If there is not an internal financial market, the $200 will be borrowed internationally.
The $200 is the principal. In order to pay off the $200, the government must borrow next year at least $400, holding everything else constant. If the situation in the country is such that the population grows, but there is not economic growth, the government will borrow a year after at least $800. At one point in time, the government will exhaust the internal market. It will go international, if only possible. In fact, if nothing positive occurs, the debt will accumulated to $1600 in the 4th year, which indeed is greater than the budget of $1,000.

Back to Beirut

I spent a sabbatical semester in Montreal at HEC. Now I am back in Beirut at the Lebanese American University (LAU) for about three months of teaching before going back to Montreal for a summer break.
What a contrast being in Beirut and Montreal? Not much for what they stand for as city of old and new. Yeah Beirut is an old city compared to Montreal. Here modern history has its philosophical and scientific roots.
I am less stressed arriving at Rafic Hariri international airport than at Pierre-Trudeau international airport. Surely officers at Trudeau know what they do, but sometime I wonder for what purpose they do the little extra that make you feel that you are suspected for something they cannot name. I guess for a first time at Trudeau, it must be a whole experience. At Rafic Hariri airport, nobody asks me questions for which answers are already provided on the customs card. I hand in my passport and residence card to the officer behind a box, the officer check something on his computer, look at me, stamp my passport, and give back my documents except the stamped customs card. The customs x-ray my suitcases from time to time. This time it took me in total 15 minutes to get out of the airport.
The time the taxi-drivers at the Hariri airport reaped me off is gone. On my arrival I call Allo Taxi (1213), and order a taxi that arrives in the 5 or 10 minutes. I pay $20 maximum for a trip to Hamra or Raouche. I think the official rate must be 20,000 LBP.
It can be difficult for a foreigner to settle in Beirut in her/his first year. Last year I was paying $650 for a room plus a toilette and a balcony in Hamra. I liked the place. The manager of the place is honest and very helpful. Unfortunately, I could not move back there. The room was taken. In Hamra such a room cannot be empty for long. So I went back to my old place in Raouche at Universal Residence. The manager wanted me to pay $1,200, I refused. Since I promise to stay longer, we settled for $1,000 for a studio having in it a living room combined with a bedroom, a kitchen, a bathroom, and a huge balcony giving on Australia street. From the balcony I can see the former Saudi Embassy, and the burn-down Future TV. From my Kitchen, I have a partial view of the Mediterranean sea. If you compare what I was paying and what I am paying now, the $350 difference is somehow covered up. I have more space, I have a better view, I have large windows giving me plenty of daily light, and I have house helpers.
Settling down means being connected. The university offers Internet but I cannot be satisfied with that. Some year ago, I will stay at campus longer than I should, but because I have to Skype my family back in Montreal, Internet is a must. Last year I was using a very slow Internet that was provided by one of the mysterious Internet providers in Beirut. I could not use my Cyberia Box as the signals was too low. So this time I decided to acquire a Touch dongle (a kind of USB key charged with Internet data). I really thought it was all easy to get one, but it is not as everything else in Beirut. Touch gives on its webpage representatives but some of them do not sell the dongle. I went to the one in Raouche (Talaco) on the same street where I am staying. First I bought a dongle for 45,000 LBP ($30). Second, I have to acquire a SIM card for data (my passport was needed for that and having a line already was a must). The SIM card comes with 1.5 GB. I did pay another $10 dollars to have 5 GB. In total it costed me as much as announced on the website. The guy at Talaco did activate for me the SIM card. Back home, I plug into my computer. I thought it would be direct. No. You have to install the software, restart your computer, and on the dialog box click on an Internet icon. Let see how long the 5 GB will last. May be I need 10 GB for a month as I am not a heavy user of the Internet. That is for this first week in Beirut.