In Iceland, the fish are sure biting !

One thing is for sure - if the Warwick Economics Research Lounge becomes more and more interesting with every talk, people are going to be fighting for space in the PG Hub.

Today's presentation was by Konrad Gudjonsson, a person well suited for delivering a talk on the topic - "Fisheries Economics: How Iceland made Commercial Fisheries Profitable.

Before joining the MSc in Warwick, Konrad obtained a BSc in Economics from the University of Iceland. He was a Research Assistant at the Institute for Economic Studies (Reykjavik) for several months. He is very interested in fisheries economics, in which he did a module during his undergraduation.

The talk (fully focused on Iceland) began by just touching on the origin of fisheries economics and the "tragedy of commons" concept. Those of us who were listening in Abhinay's Microeconomics class would know what the second concept is, but I give a brief two-liner here anyway: the depletion of a shared resource by individuals, acting independently and rationally according to each one's self-interest, despite their understanding that depleting the common resource is contrary to the group's long-term best interests. (sounds familiar? I took it from Wikipedia).

Konrad then moved on to a bit of biology which he claimed was "boring", but he had the audience's attention. He explained the "basic static single species bio-economic model" (this is a simplified phrase :O), where he explained that the growth in the stock of fish may grow initially, but declines over time.

The biggest question at this point was how to reach optimality in the amount of fishing by firms. Konrad gave several answers to show that the best solution is to provide property rights for fishing. These generally take the form of "Individual Transferable Quotas" (ITQs), which put a limit on the total allowable catch per firm.

"The system works in a way that each firm gets a limited share of the fish in the sea - it doesn't allow for squabbles like 'I caught the fish first! It's mine!'" - Konrad. That had us catching our sides with laughter for the next few minutes! :D

He then went on to list the reasons for why ITQs will be a good way of achieving optimality. There are many: This system eliminates the "common property problem" and also gets rid of "Olympic fishing" (a term well known only in Iceland for the amount of fishing which is done there). ITQs also encourage investments, research & development and marketing. Unlike in the case of selecting optimal tax rates where  perfect information of fish stocks and firms is required, ITQs only require the estimation of the optimal catch (which is a VERY tough job in reality - it is easy in comparison).

Konrad then gave us a bit of background information on Iceland to present the effects of previous ITQs. Some interesting facts are: Iceland's population is 320,000 (quite close to Coventry's population!!!), and Iceland is not a part of the EU, but it is a part of the EA. Fisheries contribute to about 25% of the GDP.

The results of previous implementations of ITQs were pretty encouraging: greater profits, lesser, but bigger vessels in 2009 than in 1992, a massive jump in the TFP of fisheries, a huge increase in investment, a positive effect on the environment (e.g. less oil used per metric ton of catch),..........

If there are so many good things happening, there have to be some bad things as well. Bingo. There are. And here they are: ITQs might not provide an ideal system, as the time for which people have these property rights are not specified. Biologically, ITQs did not do as well as expected, and there was opposition to it. The initial allocation might have been unfair, but it is the only Pareto Efficient outcome.

But, overall, ITQs seem to have done well with regard to the results presented above. There ended a perfectly timed and wonderfully presented talk, followed by a few questions and comments from the other students. Oh, and, snacks and drinks were provided by the Department of Economics for all of us to feast on.

Some comments from the audience:

Kirti Gupta (a first timer in terms of being at the lounge) - "I really liked this talk and the informal atmosphere, which prevented us from being limited from asking questions due to inhibition. I now realise how much I have missed by not attending the previous discussions".

Claudia Riz: "Konrad is a really good orator. I thoroughly enjoyed today's talk".




 


 

This is China for you!

Well, this was one interesting talk, for sure. Read on to find out.

All of you may be familiar with the theme, but, I mention it here anyway.

"Modern China: A Comparitive Political and Economic Perspective"

This topic was handled ably by Huaqing Cao (Frank), whose impressive profile I had provided in the previous post.

The introductory part of the talk was devoted to understanding the basic aspects about China: its area, population, GDP, geography, and essentially the fundamental knowledge about a country that anyone should have. China is a pretty big country in terms of its population and area. More so, because of the recent spiral in its economic growth. China's GDP is 8.2 trillion USD!

Frank then took us through the political system of China (a topic which is a bit dry - yet, he managed to keep it interesting). The system follows the idea of scientific socialism, or a socialist market economy. As is known, the most prominent political party in China is the Communist Party of China (CPC). There are eight other minor parties, all of which are "decorations, but important decorations in the political system", according to Frank. There are other organisations like the National People's Congress, which is constitutional in nature.

The centralised political superpower rules using a variety of tools:

> The political ranking system: Apparently, every single institution in the Chinese economy has a political ranking - even universities!
> Elections - Though they are present, all people do not vote, because they either think their vote will not make a difference, or they don't much care about the political system.
> A structured legislature and a legal system
> Military - China has the second largest defence budget following the U.S.!
> Culture and Education - An interesting piece of information: cultural events are funded by the government.
> All of these, of course, lead to the shaping of the economy which is posited to be one of the biggest economies, or even the biggest economy in the world in the near future.

Is China a country of despotism? (despotism: the act of showing absolute power or authority)

Well, here are the facts, from which you can make your inferences -

> China has a tremendous need for a strong, united nation - this has been like a norm for the people since ancient days.
> Frank used the quote "Distance makes the heart grow fonder" (true, that :P), to explain the concept that the people of China view the Central Government as a "patient, gentle" entity while they blame the local governments for eveything.

He then asked the million dollar question (oh, wait, rhetorical question ;)) - "What are the top leaders thinking about?". We can guess the answer (actually, also a rhetorical question). "Who the hell knows?", is what Frank said. Good one, Frank. *Thumbs up*.

> There are other facts like the self-anti despotic size of the CPC, the unseparable past achievements and success, the improving reality and the promising future, and of course, the role of globalisation and media.

We, of course. had picture representations of the path of the Chinese economy through the years (graphs :P) which showed the steady rise in GDP, and the maintenance of a stable inflation rate by China in the past few years.

There are a few political reforms which can be associated with a boost for the Chinese economy: for example, the opening up of the economy to foreign trade in 1982, and the four trillion yuan Stimulus programme in the wake of the 2008 recession.

China's economy (in the future) is characterised by many challenges, the most worrisome of which is the aging population. The One-Child Policy introduced by the country is partly the reason for it. The government is very strict in this respect, charging parents who have a second child a heavy fine.

"What if you are a rich Chinese citizen and you can afford to have a second child?", asked a person in the audience.
 
"Pay a fine, have a baby", was the answer, given by Andy, another Chinese student present at the talk. Now that is a catchphrase which is bound to become more popular than 'Gangnam Style'. :P

Frank ended his talk by asking opinions of others about the Chinese economy, and of course, with a question-answer session. Nice strategy!

All the attendees had a good time participating in the talk, and the drinks and snacks session after that. Leslie (who gave the talk last time) gave a positive review for Frank's talk - "I didn't realise that there was so much about China that I didn't know". Those of you who missed the talk, hope you got the message - be there next time!

An Introduction to the Research Lounge

Hi everyone,

 

First of all, thanks to Lukas, Carsten and Tomas for initiating the idea of an M.Sc Economics Research Lounge. The Lounge basically aims at creating a platform to discuss the ideas of Economics students on current economic issues of importance. According to Lukas, "in a nutshell, it is an "open space" for MSc students to talk about things they are interested in". Based on the concept of "by the students, for the students and of the students", this initiative is already proving to be a success (the response to the first two meetings is testimony).

 

The lounge is also an opportunity to catch up with your classmates, most of whom you might not have had a chance to talk to. This is the perfect opportunity to do so, given the fact that we hardly have time to talk during lectures or seminars.

 

This blog endeavours to provide succinct summaries of the contents of every meeting, so that those who cannot attend them can use this as a ready reckoner to keep up with what happens. Those who haven't attended the meetings till date will also hopefully be motivated to do so after reading these posts!

 

As you may have heard from Tomas already, today's meeting will take the form of a talk by Huaqing (Frank) Cao on "Modern China: A Comparative Political and Economic Perspective". There was also a "homework video" which I guess all of you have already had a look at. Frank has a B.Mgt. in Business Administration and a LL.B. in Law from Chongqing University (China). He has participated a lot in social activities and gained his authentic perspective on modern China. He has taken several presidential positions in different student organisations and received notable honours such as the torchbearership of Beijing 2008 Olympic Games. (now that's super cool ;)).

 Having said all that, hope you all turn up for today's session: 6.30 p.m. to 7.30 p.m., Postgraduate Hub (it is opposite Costcutter, inside the Senate House. You need your student card to get in - otherwise, you have to wait outside in the cold until someone opens the door for you).

Oh, and more importantly, snacks and drinks will be available, courtesy the Department of Economics.

 

See you there!