On Brexit

Europe, a continent that midwifed the birth of globalization, foster-mothered its infancy, and nurtured it into its prime age, now seems to be retreating into its shell with increasing number of parties and movements in all its corners tilting toward protectionism. Indeed, this time it is not the globalization’s discontents, but its ardent advocates who are pushing globalization off the precipice by pulling the rug from under the EU. But why is it so?

It seems that at the heart of the idea of Europe lies a confusing conundrum. The more centralized and European it becomes, the less transparent and democratic it gets. The bigger the union, the farther away from its alienated citizens.

The forces that push for creation of a centralized union, away from the every-day business of the rank and file, inevitably lead to alienation of citizens from the centralized institutions. And perhaps the Brexit vote could be understood in light of this ever-deepening gap between European citizens and institutions.

Fortunately, the legal and institutional framework of the EU has the capacity to avoid the aforementioned dilemma by taking advantage of the principles of subsidiarity and proportionality and Meroni doctrine in its constitutional arrangements. However, the vicissitudes of crises seem to erode the importance of such counterbalancing provisions and upset this equilibrium in favor of the EU institutions vis-a-vis the Member States and their citizens.

One of the central ideas pushing for centralization at the EU level is the pronounced emphasis on the need for a unified European governance and regulation; the underlying reason being the fact that a European single market necessitates a single governance and regulation. By highlighting the gap between EU-wide governance and regulation, and European integrated markets, new policy proposals are incessantly pushing for harmonization, centralization and consolidation of regulatory regimes: a move from economic union to political union.

For example, in financial regulation, we have witnessed policies pushing for a Banking Union, which have given shape to new ideas for a single supervisory mechanism, a single resolution mechanism, a single European deposit insurance scheme (under construction), and different single rulebooks and handbooks. In stove is yet another union (i.e., the capital markets union), which will be accompanied by a whole host of new mechanisms and perhaps handbooks and rulebooks with the word single preceding them.

Although the push toward having all these single institutions in place is understandable against the backdrop of the financial and sovereign debt crisis, it seems that not only would not these single mechanisms achieve the objectives of stability and growth, but also the EU markets would be as prone to crises in the presence of such institutions as in their absence, if not more.

This is mainly because a move toward regulatory and governance harmonization and consolidation (regulatory monopoly) would diminish diversity, which can lead to lower levels of competition among different institutional forms and models. In other words, establishing an EU-wide regulatory and governance authority may contribute to heightened fragility because in a harmonized regime, which is free from the market or downward accountability, a monopolistic regulator is more likely to adopt one-size-fits-all regulatory strategies and perhaps inadvertently encourage homogeneity and correlated business strategies.

Deprived of the benefits of diversity and heterogeneity, a harmonized regulatory regime, in which the risks of regulatory and governance errors can be easily amplified, could be more prone to failure and collapse than its decentralized regulatory counterpart. A more localized and diversified regulatory and governance design, within which there is a healthy level of regulatory arbitrage, which encourages regulatory competition, would minimize the risks of catastrophic large-scale regulatory errors. Therefore, a move toward regulatory monopoly (harmonization) can hardly be justified as a mechanism for achieving stability.

However, this note is not intended to downplay the positive role of the EU in improving the lot of the EU citizens by supporting the single market and the four freedoms, nor is it an advocacy of regulatory faineance at the EU level, but it is intended to highlight the importance of principles of subsidiarity, proportionality, and deference to the virtues of local experimentation, incremental and evolutionary transformations, and leaving sufficient room for crosspollination of diverse views on important policy issues. With a tunnel vision towards centralization at the EU level, one would be reasonably wary of dreary prospects of impending great disasters as a result of a Great Leap Forward towards the Unites States of Europe.

Although the urge for betterment and perfection is a deeply-engrained human desire, it comes with huge pitfalls and perils; the perils that often remind me of Adam Smith’s recount of an epitaph on the tombstone of a perfectionist mason reading: “I was well, I wished to be better, here I am.”

On Cannes 2016 and the Iranian Cinema

It seems that recent achievements in the Iranian cinema have dethroned some long-lasting stereo-typical Iranian products in representing the country in international fora. In my conversations with people of different nationalities in the last 2-3 years, I can hardly remember a dialogue in which the Iranian cinema was not mentioned.

As someone without any expertise in the film industry, I have two modest (and perhaps crude) observations about cinema.

There seems to be an antifragile aspect to cinema. The more you suppress it and put it under constraints, the more it thrives. That might explain why some of the best movies I have seen were made in an era during which the directors’ political views were suppressed or were dominated by the opposing political ideologies, or were about an era during which individual and political freedoms did not fare very well.

The second observation, which to a certain degree flows from the first one, is that the best movies of all times were made by the artists belonging to the left side of the political spectrum (Marxists, communists, lefties or whatever label you prefer). These movies are exceptionally effective at casting some light on certain genuine concerns and poignant aspects of human life which cannot be captured by the narrow calculus of an economist or a policy maker. But the caveat is that a movie is probably the last thing by which a policy maker or an economist should be inspired. Though these genres of movies and their artists are incredibly powerful at highlighting ‘some’ problematic aspects of the status quo or reality, they often are as hopeless as economists or policy makers in explaining what to do about it.

Anyway, off-topic basta! I just wanted to congratulate the Iranian artists on their recent success and I hope that the Iranian cinema will continue to contribute to human civilization and its wealth of cultural heritage.

I take my hat off to these Iranian artists and salute their achievement.

Moral Letters to Lucilius (Epistulae morales ad Lucilium)

Growing old, getting educated, wealthy, and married may satisfy most of our worldly needs, but satisfaction of one specific need has an inverse relationship with our age, and that is the need for getting advice from our friends and acquaintances. For some reason, our entourage deprive us from their advice when we pass certain age thresholds, even if they find us in a desperate need for it. However, such a reticence on the part of our family, friends and acquaintances should not give us the illusion of being perfect and should not deter us from searching for substitutes.

Not surprisingly, for grown-ups, books can make excellent substitutes for such a want. One such book, which I recently read, is Seneca’s “Moral Letters to Lucilius” also translated as “Letters from a Stoic”.

This book shares a notable feature with a few other excellent books in that it is the distilled wisdom of an aged and experienced statesman, written when the author’s life was drawing to a close. These genres are often replete with fascinatingly profound insights about life. Overall, no matter how good you are, this book will make you a slightly better person.

As an example of why reading the book would make the world a better place, let me provide a reason from the book for why I am introducing this book to you. On sharing knowledge, the book reads:

“Nothing will ever please me, no matter how excellent or beneficial, if I must retain the knowledge of it to myself. And if wisdom were given me under the express condition that it must be kept hidden and not uttered, I should refuse it. No good thing is pleasant to possess, without friends to share it.”

One great feature of the book is that almost all 124 letters are stand-alone and can be read separately, making it a great bedtime-book choice.

Fortunately, the book is in public domain. On the left-hand column of this webpage, under Download/Print you can download the book in the format of your choice.

In the end, I am willing to bet that reading a letter a day would keep anguish away.

Stray Dogs, Public Policy Blunders, and Entrepreneurial Response

Stray dogs, sometimes strolling in herds on the streets of Zanjan, have raised ethical as well as public policy issues since I have become self-conscious about the policy issues of my hometown. In the extremely cold nights of January, you have to get used to the continuous sound of barks that steal sleep from your eyes. It is as if you are living in a village with lots of watch dogs warning you against potential threats. 

A few years ago, as a public policy response to the influx of stray dogs into the city, the authorities put up bounties for killing stray dogs. A few years later, the number of dogs on the streets showed that the policy was a big failure, partly because hardly any bounty hunter, willing to kill dogs to earn a living, could be found. But such a brutal policy towards stray dogs, who reportedly attacked no human beings, raised sympathy towards them, and activists condemned such abnormally harsh policies of the city authorities.

The unintended consequence of such a policy was that it raised considerable awareness about animal welfare and people became kinder and more sympathetic to animals compared to the feelings people had at the time of my childhood towards such animals.

Today, the word of mouth is that a lady, who is an environmental activist and entrepreneur, has proposed to the city authorities that a bounty to be paid to anyone or any company that captures any stray dogs. Then, she buys dogs from the authorities and after taking all necessary veterinary steps, her company exports those dogs to Western countries, particularly Germany, where they are trained and sold to customers.

This is one of the greatest examples of achieving Pareto improvement with a bit of thinking and effort. I understand that the lady has had to overcome so many legal and cultural barriers, especially those related to the trade on dogs, to start that business. Although the number of stray dogs on the streets of the city suggests that the initiative was of a limited success, I salute her achievement in introducing such a humane way of addressing the problem and am proud to be a concitoyen of such an entrepreneurial lady.

On the Doers and the Losers

On the turn of the year, I see that some Iranian friends, who post New Year’s Eve wishes, are being subject to ridicule by some others. There might be a lot of different reasons for that ridicule, an important one being the western or occidental values expressed by the ones, who are oriental, posting such wishes.

It is absolutely legitimate to be funny, of good sense of humor, and make people laugh. But making fun of people for being open to new cultures and amenable to cultural changes is simply a signal of cultural regress and having a mind full of prejudices and bigotry. Those satirists, if we may call them so, often project cultural protectionist attitudes as well, the same sorts of attitudes that have found their way to the public policy. Compare the weekends in Iran (Thursdays and Fridays) with those in the rest of the world!

The world is changing fast and one has to be agile in his adaptations. Waves of globalization have swept away many barriers and if we are fearful of facing the forces of globalization, for whatever reason, we will soon become irrelevant. Adaptation is and will be the key for the survival of any nation as well as any individual. To paraphrase Keynes, when the world changes, I change my mind, manners, demeanors, and customs and adapt my life style accordingly. What do you do, Sir/Madam?

We know of the old adage, “if you can’t beat them, join them”. If a country or a culture cannot establish its norms as the dominant one with the greatest number of countries and cultures in its network, it is imperative for that country to shift to the norms of the dominant culture, and to shift quickly. Do we know how much it costs to have different weekends (Thursdays and Fridays) from those of the rest of the world? 

If we do not join them in time, we will become, to borrow from Thomas Friedman, roadkills of global highway. After the killing, it is not important to know who killed the roadkill, but it is important to learn the lesson on how not to come to a standstill or reverse on the global highway.

It is an omnipresent fact that there are always those fainéants who ridicule those who do things. Ignoring the former is the most virtuous and gracious response by the latter. If we are not able to do things, or we are not amenable to changes, perhaps we are the one who is to be ridiculed and criticized. Fortunately enough, throughout history the former (fainéants) are the losers, for had they been winners, we would have been living in antiquity, if not in the Stone Age, for good.