Sunday, September 30, 2007

GulfTalent.com’s latest salary survey

GulfTalent.com has released its latest survey of salaries in the Gulf. You can download a copy of Gulf Compensation Trends 2007 here.

Some excerpts from their press release for the UAE
GulfTalent.com revealed the following increases in basic salary by country, over the one-year period to August 2007:
Oman 11.0%
UAE 10.7%
Qatar 10.6%
Bahrain 8.1%
Kuwait 7.9%
Saudi Arabia 7.7%
Oman registered the biggest jump, from 5.6% last year to 11.0% this year, driven in part by a 15% pay rise for public sector employees. The government’s decision earlier this year to allow expatriates to change employers has dramatically increased staff attrition rates, further adding to the pressure on firms to increase salaries.
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[T]he UAE government’s decision earlier this year to tighten the rules on expatriates switching employers has helped companies reduce attrition rates, partially easing the upward pressure on pay levels, the report found.
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The UAE and Qatar, which are experiencing double-digit inflation this year, remain near the top of the rankings.
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[T]he HR function has recently been catapulted to the front line as Gulf-based employers grapple with the challenge of attracting, developing and retaining staff.
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The survey further revealed that, as the supply of skilled staff from traditional markets such as India and Egypt diminished, many employers were looking to new sources such as China, Eastern Europe and Latin America. At the same time, staff shortages were forcing companies to outsource more of their operations or to switch to other processes and technologies that are less manpower-intensive.
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The UAE saw a slight rise in its annual rate of salary increase from 10.3% to 10.7% this year. Inflation remains a key factor, forecast to reach 12.0% in 2007, largely on the back of rising rent levels. Government-introduced rent caps have partially been successful, reducing average rent rises from 31% in 2006 to 23% this year, although still far above the official 7% cap.

With the rising cost of living exceeding pay increases over the last few years, many expatriates have seen a fall in their net disposable incomes.
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At the same time, employers in the UAE, and Dubai in particular, still benefit from the relative popularity of the country with expatriates, thanks to attractive career opportunities, modern infrastructure and facilities, and a relatively liberal society.

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Saturday, September 29, 2007

Petrol price increase in the offing?

Unlike some of its other fuel-rich neighbors the UAE has a history allowing the price of petrol at the pump to track more closely the level and movement of the international price of oil. The price of oil has increased considerably. Based on that record, an increase in the retail price is overdue.

Gulf News
The sources said Dubai-based oil retailers - Emirates National Oil Company (Enoc), Emirates Petroleum Products Company (Eppco) and Emarat - which buy gasoline from several sources are more susceptible to spikes in crude prices than the Abu Dhabi-based Adnoc Distribution, which sells fuels sourced entirely from the Abu Dhabi National Oil Company (Adnoc), the main UAE crude oil producer and refiner.

Oil company executives would not confirm or deny whether they have gone with their requests to the government to be allowed to increase the fuel prices.

Though Enoc has a 120,000 barrels per day refinery at Jebel Ali, it does not produce any gasoline as of now, and the bulk of what it sells, it's widely believed, is sourced from Adnoc at prices which are government-determined. Enoc, Eppco and Emarat sell gasoline at prices that range between Dh6.25-Dh6.75 per gallon.
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The oil industry sources claimed Enoc and Eppco are losing up to Dh4.5 a gallon for every gallon of gasoline sold, which includes storage costs.
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An executive at Adnoc Distribution said that there's no indication from the government yet on whether there would at all be any increase in oil product prices in the foreseeable future.

"As the marketing arm of Adnoc, we are there to implement the strategies of the government and will follow exactly what we are told to do. Our main purpose is to serve customers at our service stations and that's precisely what we have been doing," said the executive, requesting anonymity.

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Scholars say stop wasting food

Gulf News
Al Ain: Religious scholars have advised people to stop wasting food by cooking huge amounts and discarding the surplus as it violates the spirit of Ramadan.

The scholars said people should be more careful about following the strictures of fasting. Ahmad Mustafa, an Egyptian prayer leader, said Muslims must make use of the benefits associated with fasting. "Other than the numerous health benefits, fasting teaches Muslims to feel and understand hunger, deprivation and the suffering of fellow human beings," he said.
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"There is a need to simplify the menu during the month," he said, adding that money spent lavishly on food should be donated to charities.
Instead, for many, meals become more lavish and a way to display plenty.

In economic terms is this a waste? Economics is about the management of resources. Are people mismanaging resources, or are they producing another good - lavishness - which they enjoy? Or is it simply more difficult to avoid having leftovers?

There is an increase in demand for food in Ramadan. See my earlier post, Ramadan demand.

Friday, September 28, 2007

Dilbert creator talks about economists

Scott Adams - who does the comic strip Dilbert - has some very nice things to say about economists.

Full disclosure: Adams has a college degree in economics.

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Pork Surge in China

China has begun to release pigs from its strategic pork reserve. CNN reports on the, um, spare ribs:
China has begun releasing pigs from its central reserves into the domestic market to counter surging pork prices that have helped lift inflation to 11-year highs, according to a media report.

Prices for pork, China's staple meat, have soared due to shortages blamed on a decline in pig rearing, rising feed costs and an outbreak of a pig disease that killed more than 70,000 animals and infected 280,000 this year.

Under a plan issued jointly by the Ministry of Finance and the Ministry of Commerce, China is releasing 30,000 tons of live pigs from its central reserves between September 10 and October 15, a person who saw the government notice told Dow Jones Newswires Friday.
Read it all, including more about the government's attempts to curb inflation.

Thanks to Freakonomics for the link.

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The French Immigration Surge

The International Herald Tribune
The bill would allow consular officials at French embassies to request DNA tests from applicants seeking long-term visas to join their family members in France. The DNA tests would be voluntary.
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It is part of a broader immigration bill presented by Brice Hortefeux, a longtime friend of President Nicolas Sarkozy who heads the newly created Ministry of Immigration and National Identity.
Thanks to labor economist George Borjas for the link. Check out the Borjas blog here. His most recent posts are about the strike and settlement at GM.

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Wednesday, September 26, 2007

Vitamin W

Arab News out of Saudi of Arabia has a regular section "Local Press" which I find useful to follow. It gives some insight into what Arab language papers in KSA are saying.

Today there are two articles about wasta. The first is here and is titled "Graduates with 101%GPA" and first appeared in Al-Riyadh. It says in part,
Local newspapers reported that three sets of twins had graduated from high school with Grade Point Averages (GPA) of 96.97 percent, 97.33 percent and 99.55 percent respectively. Despite these impressive marks, they all failed to get admitted to a university. At the same time, local newspapers also joyfully announced that there were either 145,000 or 245,000 students enrolled at universities in the Kingdom.

In order to be somewhat closer to accuracy, we will rely on the smaller figure of 145,000 students being admitted to university. This in itself is a huge number and the lucky students must have surely obtained 100 percent GPAs, because the ones who managed to score 99.55 percent failed to get accepted by a university.

What I wonder is if it is possible for a student to have a GPA of 101 percent. I guess it is if one takes advantage of a “wasta,” which proves that the admission system of our universities, which is based on students’ total high school grades, is useless and unfair.
Then there is this story entitled "We Need More Vitamin 'W'." It first appeared in Al-Eqtisadiah. An extract:
Islam is against the concept of bribes, and wasta is not something different to bribery. Both accomplish the same — the giving of something to someone illegally and unjustly. Wasta has become part of our daily life and is something used in the slightest and smallest of tasks.
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Vitamin “W” is essential these days to successfully enroll at universities and colleges, and to secure jobs. This magical vitamin, which is derived from the concept of “wasta,” is something that is highly coveted in the Kingdom, where jobs and university places are scarce.

Vitamin W, which could also be described as “mediation,” is basically a method of depriving a youngster from his or her right and handing it to another undeserving individual.
Patronage destroys incentives to be productive and add to society's wealth, and creates bad incentives to direct effort to rearranging the slice of the pie you get. More meritocracy, please.

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Tuesday, September 25, 2007

Abu Dhabi in the Calgary oil patch

The Globe and Mail reports:
With oil revenues rolling in at a rate of $225-million (U.S.) a day, the United Arab Emirates has become a hotbed for outbound investment, and a Persian Gulf hub for finance, tourism and trade.

A government-owned energy company of one of those emirates, Abu Dhabi, said yesterday it has struck a $5-billon deal to take over Calgary-based PrimeWest Energy Trust. Abu Dhabi, the largest and wealthiest of the seven affiliated emirates, has the world's largest state-owned investment fund, and is flexing its financial muscles around the world, though its activities are cloaked in secrecy.

Abu Dhabi Investment Authority is estimated to have assets as high as $875-billion (U.S.), by far the world's largest government-controlled investment pool, in an emirate controlled by one man, Sheikh Khalifa bin Zayed Al Nahyan, on behalf of a population of fewer than two million.
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In Canada, the Conservative government has raised concerns about takeovers by state-owned companies that don't operate with transparency and according to market-based principles. The Foreign Investment Review Agency will review TAQA's bid for PrimeWest.

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Want more and safer roads?

Here's how you can contribute.

Okay, okay, here's what the link says,
Some transportation experts believe that [in the U.S.] mileage fees will replace the gas tax within the next 15-20 years. "At some point, in some metro areas, market-based pricing using the latest technology will supplant the fuel tax revenues," says Joseph Giglio, a professor at Northeastern University who has written extensively on transportation financing.

Privacy advocates worry about the use of satellite navigation technology to track drivers' movements. "Where you go is something that, for the most part, people consider private," says Lee Tien, an attorney who specializes in privacy issues for the San Francisco-based Electronic Frontier Foundation. "The second point is, it's the sort of thing we do to the bad guys. Where do you hear a lot about GPS tracking? It's for prisoners or people who are out on probation."
With GPS it would also be feasible to introduce congestion pricing.

Billing could be done to your mobile phone account.

Wow. With GPS your speed could also be monitored. No more need for traffic cameras.

Would you like your insurance company to have access to the information and charge you according your driving behavior, including the time of day you chose to drive and the routes you chose?

No more off roading in my rental car.

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Monday, September 24, 2007

Dictators and unintended consequences

When did Mugabe become his most destructive? Did he dig in his heels when he saw what happened to Pinochet?

Perhaps a golden parachute would be a better solution -- a la Charles Taylor or Idi Amin. Or is it their example that Mugabe is following? The crazier I become the bigger the payoff?

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Prostitution in Dubai

Human trafficking or voluntary exchange? There's some of both. And the lines are blurry.

Read it here at PBS. The comments are also informative.

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Sunday, September 23, 2007

The Gulf on a Spree

The Wall Street Journal dated September 21th has a page one story the cash the Gulf states are collecting due to high oil prices, and what they're doing with the cash. (Link: $ subscription)

Quoting:
Yesterday saw a burst of activity involving Mideast governments, including a battle between two Persian Gulf emirates over stakes in the London Stock Exchange and a bid by one of them for a stake in Nasdaq Stock Market Inc. A third emirate announced an investment in Carlyle Group, a Washington-based private-equity firm known for ties to political heavy hitters such as former President Bush.
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Four of the eight largest government-controlled investment authorities are from the Gulf, and the Abu Dhabi Investment Authority tops the list with assets estimated at $875 billion, according to Morgan Stanley. That's more than triple the size of Calpers, the California pension fund.

Middle Eastern firms and funds shopping around the globe have spent $64 billion so far this year, compared with $30.8 billion in all of last year and $4.5 billion in 2004, according to Dealogic. Acquisitions in the U.S. and Britain account for slightly more than half of the total this year.
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Dubai, which is seeking a minority stake in Nasdaq, asked the Bush administration to vet the deal upfront for potential national-security issues. It hired a team of Washington lobbyists and strategists to reach out to officials in the administration and Capitol Hill a day before the proposed deal became public, according to people familiar with the situation.

While President Bush promised a careful review of the deal, a key legislator, Democrat Barney Frank, said it "doesn't raise any alarm bells to me." Rep. Frank, who is chairman of the House Financial Services Committee, noted Nasdaq is a highly regulated entity and "there's no physical transfer of property" in the proposed deal.

The Nasdaq deal is part of a larger battle between Dubai and Qatar for control over parts of world stock exchanges. Dubai, part of the United Arab Emirates, is the flashier of the two. Nearby Qatar is a tiny country that controls the world's third-largest gas reserves.

Saturday, September 15, 2007

Currency appreciation and the UAE

Economist Hugo Toledo offers an analysis in the Gulf News. Is inflation imported due to the fixed rate with the dollar? Or is it due to import controls, intended or not?

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Alan Greenspan's book

It's been released. The Wall Street Journal discusses it.

Friday, September 14, 2007

Who is eating all the UAE's dates?

Gulf News
The country ranked fourth in the value of dates produced for the global market in 2005, accounting for a 37 per cent share, according to a study released yesterday by the DCCI.

But its share of date exports as a proportion of the total date trade was just five per cent, leading to demands for a clear export strategy.
And the UAE imports dates as well.

In a country of 5 million people (and 40 million date trees), that means an extremely heavy per capita date consumption. Or are dates doing to waste?

Is the imbalance due to the government's date purchase policy?

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Thursday, September 13, 2007

Employers, are you in the IQ business?

Hiring college graduates and looking for someone with brains? Hire an economics major.

From The American, a new business magazine:
Rich Karlgaard, the technology entrepreneur who is publisher of Forbes, tells the story of a trip he took with Microsoft’s Bill Gates in the early 1990s. On the flight, he asked Gates, “Who is your chief competitor?”

“Goldman Sachs” was Gates’s surprising reply.

Gates went on to explain that he was in the “IQ business.” Microsoft needed the best brains available to make top-shelf software. His primary rivals for the smartest kids in America were elite investment banks such as Goldman or Morgan Stanley.

“Microsoft must win the IQ war,” Gates said, “or we won’t have a future.”

If trends hold, then Microsoft’s future in the war for IQ looks bleak. The brightest students these days are headed into finance, but Microsoft is fighting back, targeting colleges with an innovative strategy. The answer may be a little robot.

First, what do the trends say? Recent enrollment figures are ominous. The number of smart kids studying computer science peaked a few years ago and has dropped dramatically since. The number of new computer science majors today has fallen by half since 2000, according to the Higher Education Research Institute at UCLA. Merrilea Mayo, director of the Government-University-Industry Research Roundtable at the National Academies, says the drop-off was particularly pronounced among women.

Meanwhile, elite schools are reporting that the number of economics majors is exploding. For the 2003–2004 academic year, the number of economics degrees granted by U.S. colleges and universities increased 40 percent from five years previously. Economics is seen by bright undergraduates as the path to a high-paying job on Wall Street or at a major corporation.
Read it all here. Emphasis added.

Want to prove to employers that you are intelligent? Pursue an economics degree.

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Ramadan demand

Khaleej Times:
DUBAI/ABU DHABI — Even though the prices of essential commodities went up during the past few days, heavy rush of shoppers was witnessed in retail outlets in the country yesterday as the residents started preparation for the holy month of Ramadan.

As in past years, according to retailers, the trend of increasing the prices of essential commodities during Ramadan continued this year also.
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The prices of vegetable, fruit and meat have been gone up in the capital but shoppers thronged the market to shop in preparation of the first day of Ramadan. Price increase varies from fruit to fruit and vegetable to vegetable. The prices have gone up just three or four days ago. The prices of vegetables went up by Dh3 whereas the fruits prices are up by Dh5 to Dh10.
"Even though". "But." These suggest that there is some sort of paradox. Why are consumers buying more even though price has increased?

Actually, the cause of the price increases is the increase in demand during Ramadan. If prices did not adjust there would be a shortage. The increase in the prices encourages suppliers to put more on the market. Hence, quantity increases. Price and quantity are above pre-Ramadan levels.

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Wednesday, September 12, 2007

5 Economic Nobel Laureates Establish Ties with KSU

Arab News:
JEDDAH, 11 September 2007 — Eleven Nobel Prize laureates including scientists and economists have agreed to offer their services to King Saud University (KSU) in Riyadh under a program aimed at strengthening Saudi Arabia’s position in the fast developing science and technology sector.

The 11 are: Dr. Louis Ignarro (Medicine 1998), Dr. Robert Mundell (Economics 1999), Dr. Gunter Blobel (Medicine 1999), Dr. James Heckman (Economics 2000), Dr. Antony Leggett (Physics 2003), Dr. Finn Kydland (Economics 2004), Dr. David Gross (Physics 2004), Dr. Richard Schrock (Chemistry 2005), Dr. Thomas Schelling (Economics 2005), Dr. Muhammad Yunus (Peace 2006), and Dr. Edmund Phelps (Economics 2006).

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Ramadan Demand

During the fasting month the demand for food actually rises. Fasting takes place during the daylight hours. Iftar, the daily breaking of the fast at sundown, is a festive event. In homes families gather for large meals that have been under preparation all day. Restaurants offer buffets to serve the crowds at Iftar. I'm speculating, but my guess is that demand rises through a combination of celebration and the inevitable waste of dealing with feeding a crowd all at once.

We see signs of the increase in demand through the government appeals to food retailers and wholesalers to not increase prices. Some examples in today's news:

Gulf News:
Oman's Minister of Commerce and Industry Maqbool Bin Ali Sultan on Sunday exhorted traders in the country to control spiralling prices of essential commodities, especially in light of advent of the holy month of Ramadan.

During a meeting with the suppliers, traders and shop owners, the Minister explored means to controlling the price rise.

"Refrain from increasing prices of essentials during Ramadan," he told the gathering at the Ministry of Commerce and Industry auditorium.
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He said there was no need for prior approval from the ministry for offering discounts at supermarkets and hypermarkets during the Holy Month of Ramadan.
Just why you would have to seek prior approval to cut prices at other times? My guess is this is a way of protecting locally-owned shops. [Update - Muscati offers another explanation based on observation rather than guess. See the comments.]

Gulf News:
Abu Dhabi: The Ministry of Economy has taken a number of steps to rein in prices during Ramadan, an official statement said yesterday.

The ministry will tighten its control and intensify campaigns to curb shop owners from exploiting the demand during the fasting month, said the statement, carried by WAM.

The ministry's Consumer Protection Department held meetings to discuss measures "to prevent the manipulation of prices and curb unjustified increase in the prices of basic commodities and foodstuff," it said.
Arab News:
The price hikes come with the advent of Ramadan when Saudis and expatriates purchase large quantities of foodstuffs. Supermarkets and grocery shops across the Kingdom have been filled with Ramadan shoppers.

According to one survey, Saudis believe that the Ministry of Commerce and Industry has failed to deal with the crisis. They feel that the crisis has gone out of control with prices of essential commodities, including rice, milk, fruits and vegetables increasing everyday.
Economists would say its merely supply and demand at work. The higher prices signal cost. As shops with customers it becomes more costly to serve them.

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Tuesday, September 11, 2007

Is that clear?

Dubai authorities are taking notice of the value of carpooling for reducing traffic congestion. But they remain hesitant. They fear, I think, it would be too successful if it was unregulated. Allowing money to might change hands to share expenses or even to compensate the driver for his or her time would encourage carpooling. And compete with the taxis which are government owned. Thus, there must be a carpooling system. The invisible hand is not to be trusted.

Gulf News reports
Regulations for car pooling are being finalised and will be announced soon, said a senior official.
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He said that "pooling a car" for monetary gain is illegal but sharing a car with colleagues going to the same location is allowed.
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He said the RTA is considering to introduce system allowing motorists to register their cars to be used for "car pooling service". However, he said that motorists using their cars as illegal taxis are fined at least Dh2,000.

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Wednesday, September 05, 2007

UAE continues to rank well in economic freedom

Gulf News draws our attention to the latest rankings of 141 countries based upon economic freedom. The UAE ranks 15th worldwide. Saudi Arabia is among the countries not included in 141 examined in Economic Freedom of the World: Annual Report 2007 by the Fraser Institute, a Canadian economic thinktank.

Here's the link to those economic rankings. After you follow the link you find pdf links to the chapters and tables.

Gulf News observed
The UAE scored 7.7 points out of 10 in the survey compared with 7.8 points in the previous year as its labour regulations' score declined to 6.6 points from 8.9 points.
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The UAE came in fifth place globally in the 'freedom to trade internationally' category, compared with ranks of 18 and 25 in Germany and the US, respectively.

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Monday, September 03, 2007

Oh really?

The Gulf News headline reads "Telecom watchdog to end 'monopolies' by year-end." The story says
etisalat does not have access to internet or fixed-line customers in Dubai Internet and media free zones and nearby residential districts, while du is largely restricted to these areas.

"From now until the end of the year, both operators are obliged to cover the whole of the UAE and customers will have the right to shift from one to another," a spokesperson for the Telecommunications Regulatory Authority (TRA) told Gulf News.
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The TRA wants to "open the door for competition ..."
But what the story does not remind you is that the TRA does not allow the firms to compete on price. (Click TRA below for posts on this.) The reason given is that competition would be destructive. But destructive of what? Monopoly profit?

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More on those illegal taxis

Recently I wrote about the illegal taxis operating in Dubai. Illegal taxis operate in many big cities in New York, Seoul and Buenos Aires. At Dulles airport outside Washington you are warned not to take rides from people who approach you.

Back in 1997 John Tierney wrote a very nice piece for NYT Magazine on illegal taxi vans operating in New York (Times Select). Here are few extracts:
Vincent Cummins looks out from his van with the wary eyes of a hardened criminal. It is quiet this evening in downtown Brooklyn . . . too quiet.
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He looks left and right. No police cars in sight. None of the usual unmarked cars, either. Cummins pauses for a second -- he has heard on the C.B. that cops have just busted two other drivers -- but he can't stop himself.
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Five seconds later, evil triumphs. A middle-aged woman with a shopping bag climbs into the van . . . and Cummins drives off with impunity! His new victim and the other passengers laugh when asked why they're riding this illegal jitney. What fool would pay $1.50 to stand on the bus or subway when you're guaranteed a seat here for $1? Unlike bus drivers, the van drivers make change and accept bills, and the vans run more frequently at every hour of the day. ''It takes me an hour to get home if I use the bus,'' explains Cynthia Peters, a nurse born in Trinidad. ''When I'm working late, it's very scary waiting in the dark for the bus and then walking the three blocks home. With Vincent's van, I get home in less than half an hour. He takes me right to the door and waits until I get inside.''
Some of Tierney's analysis
The van drivers have refuted two modern urban myths: that mass transit must lose money and that it must be a public enterprise. Entrepreneurs like Cummins are thriving today in other cities -- Seoul and Buenos Aires rely entirely on private, profitable bus companies -- and they once made New York the world leader in mass transit. The first horsecars and elevated trains were developed here by private companies. The first subway was partly financed with a loan from the city, but it was otherwise a private operation, built and run quite profitably with the fare set at a nickel -- the equivalent of less than a dollar today.
The whole article is worth reading. It's reprinted in Mankiw's Principles of Economics 4e (look in right column under self promotion).

And if you are not a Times Select subscriber can become one free if you have an edu email address. Here's how.

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Saturday, September 01, 2007

A rental market opportunity

The Gulf News today has a nice description of the way landlords will try to get around rent controls. In RAK the government has gone so far as to make it difficult to tear down your apartment building -- one device landlords use to evict tenants who were renting at controlled below-market rates.

The latest scheme is to buy out the tenants. This doesn't produce a gain for the landlord if the tenants would simply turn around and rent the same apartment for at the market price (the buyout to the tenant is the same as the change in the rent in this case). It does work if at the market rate the tenant would move to a lower quality apartment.

Here's a bit of the GN report
This new tempting tactic has recently spread in RAK where tenants are being promised money to evacuate houses and shops they had taken on rent long time ago.
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Officials said some of the tenants in the key areas in the emirate have been recently moving to remote areas including Shaam, Al Jeer, Al Rams and Ghaleelah where they find cheaper houses and at the same time benefit from the money they get from the landlords to evacuate.
Officials said the landlords do pay the expenses their tenants take to move their furniture and in other cases, the tenants sell their old furniture in excellent deals to their landlords who later dump such furniture in the garbage.

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