It is in human nature to feel in control of the choices we make in our own lives, such as going to the right university, marrying the ideal partner or even deciding which bike would suit us best. According to standard economic theory, consumers, given their personal preferences, try to maximize their own utility within the limits of their budgets, that is, they seek to find the particular combination which offers them the highest amount of utils per unit of currency spent ratio. However, theory often differs from practice, and human rationality is not an exception. Behavioral economists are mainly concerned with the same topics as economists, but the approach taken by the two groups slightly differs: while economists assume rationality in most of their models and draw conclusions based on this assumption, behavioral economists start with no prior beliefs, that is, they take the raw human behavior and analyse it as it is. If you think about that for a second, human behavior is all but rational. Why, then, do most of us begin our descent into the world of Economics by studying something that is quite far from reality? It’s mainly because had it not been for the assumption of rationality, analyzing the simplest economic models would have become too cumbersome to draw any concrete conclusions from them. Nevertheless, as it turns out from various experiments, humans are not only far from the assumption of rationality that many economic models propose, but are predictably irrational, systematically making the same poor decisions over and over again, as Dan Ariely puts it. Thus, Behavioral Economics is able to explain a great deal of settings where Standard Economics fails. Let us consider supermarkets. One would assume that his or her strong preferences are the guiding force behind most of their decisions. Far from it. The average person may acknowledge that consumers are somewhat influenced by product layout, prices, promotions and so on, but does one really sense the extent to which this is happening? Highly unlikely. Imagine it’s a Saturday morning, you just woke up and realized there’s not a slightest trail of food in the house, thus the decision to go to your nearest supermarket to do the weekly grocery shopping (fun fact: people who are hungry and decide to go to the supermarket spend increasingly more than people who ate before going there). Once there, on an empty stomach and with a dreamy mind, you mindlessly grab your shopping cart and begin your adventure. Immediately after you enter, you have 2 simple choices: to either go left or right (most supermarkets only offer the possibility of going straight). By choosing the former, you encounter fresh fruits and vegetables, salads, organic drinks and others of this kind. On the contrary, if you adopted the latter option you get…well, the cash registers and some “unimportant items for the moment”, as you might be inclined to label them, such as toilet paper or cleaning products. “But I’m here for the food”, you say to yourself, and thus automatically reject the idea of turning right, knowing that your immediate desires will not be satisfied by choosing this path, that is, if you don’t fancy eating toothpaste and razors for lunch (fun fact 2: research has shown that people spend increasingly more money when they adopt the first shopping path rather than the second; coincidence? I think not). You proceed through the groceries section, admiring the fresh products placed in picturesque-looking crates, as if they were brought into the supermarket straight from the farmers’ fields. Although you do not buy any fruits or vegetables, your mind perceives the place you’re in as a healthy, enjoyable environment. Not only that, you are also more likely to regard other items that have nothing to do with produce as fresh or natural, and thus the increased probability of adding them to the shopping cart. While you’re passing by, you can’t help but notice that “bio” tomatoes are considerably more expensive than normal tomatoes. Is this because they are really more expensive to produce or is the price difference just a carefully laid trap in order to screen those who are willing to pay a lot for “healthy” products from those who don’t? Unfortunately, a great deal of consumers desperate to stay healthy are led to believe the former, despite the latter seeming like a much more credible explanation. This wouldn’t be a problem if we knew for sure that “bio” tomatoes are really healthier and produced in better conditions. However, I theorize that the cost of growing bio tomatoes is not too different from the cost of growing normal tomatoes, even if the average consumer is led to believe that by noticing the considerable price difference between the 2, among other factors. Normally, if the additional utility the bio tomatoes provide to consumers is higher than the incremental cost, they should buy them. Nevertheless, what if the increased utility that consumers derived from consuming the bio tomatoes is just a placebo, as a consequence of the tomatoes being similar? Should they still buy them? The answer is most probably yes: as long as their mind regards this illusionary boost in satisfaction as a real one, they will have administered part of their limited budget in the best possible way, as perceived by them, such that in the end they are even better off than by buying normal tomatoes! The bakery products and pastries usually come next, and since you’re quite hungry and they smell and look so well, you foolishly fill your cart with unnecessary cakes and croissants. Would you have bought them if you only noticed them at the end of your shopping session when the cart was full of other items and your psychological feeling of hungriness is somewhat alleviated? Maybe. But since you’re starving yet the cart is as empty as your stomach, your mind overestimates the quantity of food that would satisfy your edacious desires and thus determines you to impulsively fill your cart as soon as possible, just in case. As you crawl your way to the back of the supermarket, you finally find that bottle of milk you’ve been seeking from day 0. What’s the catch here? Items that one almost always buys, such as milk, butter, yoghurt, or even eggs in some cases are placed all the way to the back of the supermarket, such that consumers have to walk through all the aisles to reach them. Obviously, they will most likely thoughtlessly throw in other items on their way to the destination, just in case they need them, this being the main reasoning behind the placement of those products. Supermarkets also like to trick consumers on issues regarding product placement on shelves. While it may be well known that the most attractive brands pay in order to have their products on the middle shelves, where the majority of consumers focuses their attention and where their eyes naturally fall, there are some other strategies that are not as straight forward. For instance, they place very cheap and very expensive products on the top and bottom shelves. Why is that? It’s because customers who have very strong “preferences” towards these particular products will seek and buy them anyways, regardless of their placement, while the hesitant consumers who are also open to other possibilities will more likely choose items that are placed on the middle shelves and are neither too expensive nor too cheap (there is a tendency of humans in general to be “in the middle” and to not substantially deviate from this trajectory). Secondly, supermarkets tend to place very expensive items next to very cheap items (usually store brands). The thought process behind such placement is the following: because most consumers are quality averse, that is, they obtain negative utility from acquiring low quality products, marketeers try to indirectly emphasize how bad low-quality products are when compared to quality items. The fact that a $4 chocolate sits next to a $1 chocolate which also has a grotesque label makes consumers think about the provenience of the inexpensive chocolate. They imagine it being fabricated with the worst types of raw materials and in questionable conditions, while the expensive chocolate is suddenly a great choice that they will probably greatly enjoy. It is not the price of the expensive chocolate that matters here, but the price of the cheap one, which determines consumers to perceive a big quality gap between the 2 products (although it need not necessarily be a big difference). The discrepancy between them might even be amplified by the placebo effect, according to which consumers are very likely to enjoy expensive items much more than cheap ones, especially if they are reminded of the price paid before consuming it. Funny as it may be, we wouldn’t ever think of buying a $4 chocolate if it wasn’t for the cheap one, which serves as an inferior benchmark. Furthermore, the cheap chocolate would deteriorate our own view about ourselves if we made even the slightest attempt of buying it. Thus, in order to prove ourselves that we are not cheap by any means, we try to compensate the fact that we ever thought or looked at the inexpensive chocolate by ruling out the possibility of buying it. What better way there is to accomplish that than by buying the expensive one? Problem solved. Now we feel good about ourselves. We just got deceived, but at least we’re not cheap! What is quite surprising is that it need not be a noticeable difference between the actual chocolates in order to put this tactic into practice. Research shows that it is enough to give the exact same chocolates to consumers, but with different prices and labels, in order for them to appreciate the two in vastly opposite ways. Again, are such prices really justified, that is, are the expensive chocolates really tastier and considerably more expensive to produce than the cheap ones, or are we just the unwilling prisoners of marketeers? In this case, it is likely a little bit of both, although I incline to say that the latter holds a more considerable weight. Another widely used tactic which some highly dislike is bundling. Instead of selling products separately, firms combine them into a discounted package, from which consumers “benefit”. A common type of bundling is buying 2 products and getting 1 for free, for example. The thing is that had it not been for such “sensational” deals, you would have only bought 1 item instead of several and you wouldn’t even consider the possibility of buying the second. Now that bundling is involved, you are presented with a new opportunity: getting a (considerable) discount on buying the second piece. Despite not really needing the second piece of the same product, it seems that the psychological feeling of not taking the discount is huge for a great deal of consumers, such that in the end, it is easier for them to bear the disutility that the additional product causes, rather than the “loss” of not taking the discount. The main reason of concern for corporations is that eventually and hopefully, at some point in the near future, consumers will realise they are mainly being harmed rather than helped when taking up such opportunities (although highly unlikely, judging how the behaviour of most consumers evolves, or rather how it regresses). In short, by consuming high quantities of the same product, the utility one derives from consuming an additional unit of good X will at one point become lower than the cost paid for that unit. Moreover, companies should theoretically be worried about consumers’ perception of fairness (but should they really?). Ideally, consumers should be somewhat aware that by falling prey to such tactics, their surplus significantly diminishes and is translated into even higher corporate profits. Because of that, they have a moral responsibility of promoting companies (by buying from them, for instance) that don’t just gain alarmingly high profits by ripping off consumers. In reality, however, while most corporations tend to disrupt the last bits of consumer trust that is left, rather than preserving it and acting as if it was a quintessential asset without which their activity would not take place, consumers tend to completely ignore such unimportant aspects of their existence, and tend to focus on important matters, such as consuming and taking more debt than ever before (take the incredible use of credit cards in the US, for instance). If that is the direction we, as a society, want to take, that is, allow corporations to obtain increasingly bigger profits at the expense of unsuspicious consumers, whose only goal is to consume, rather than take real action, it means that there’s not much hope left. René Descartes said the following words some 400 years ago: “cogito ergo sum” (I think therefore I am). But what if we reached a point where we don’t really think at all? What if we reached a point where we don’t take any decisions by ourselves and where even our preferences are not what they seem? Does that mean that we stop existing? Not really, but we’re not far from this outcome either, both literally and figuratively. We are meticulously and unscrupulously guided through a maze full of pitfalls, which funnily enough we take pride being part of. The supermarket is just one of many such instances. This should make us all think about our goals as a society. However, in the end we shall always remember that without ethics, Economics is just another social science.

Alarm bells started to pound louder when former U.S. Federal Reserve Chair Janet Yellen made this statement about real estate prices: “Commercial real estate prices are now ‘quite high relative to rents.’ Now, is that a bubble or is it too high? It’s very hard to tell. But it is a source of some concern that asset valuations are so high.” Even if it recalls one of the warning signs missed at the dawn of the 2008 Crisis, she made this statement on February 4th, 2018, just before she left the Chair. This statement echoed as 2 consecutive Effective Federal Funds rate increases in 2018, lifting the rate up to 1.75%-2% interval from around 0.75% in 2008. The latest interest rate hike happened this month on June 14th, 2018 as the seventh one since 2015,  the year known as the beginning of “13th Tightening Cycle.” This Tightening Cycle is the one coming after the 2008-2015 Monetary Easing period, initiated on March 2008 as an affirmative action taken towards recovering post-crisis shocks and the diminishing demand by increasing the money supply. It was launched when the FED gradually slowed its bond-buying programme from $85-billion a month to $15-billion, followed by a funds rate lowering rally. Besides the current one, there have been 12 tightening cycles in the US since 1955. Each of them has been mainly initiated because of the inflationary pressures due to economic overheating and rapid growth or to cope with the risk under political uncertainty. As Jannet Yellen gave the clue, reasons for initiating this Tightening Cycle were abnormally high real estate prices, peaked global debt and general belief that markets recovered from 2008 Financial Crisis to a large extent. Besides, political risks posed by rising populism both in Eurozone and US brings up the tension even more. Tightening cycles begin as central banks jack up the base interest rates in a rally. For citizens, higher interest rate means higher borrowing costs for cars, home mortgages (Benchmark Mortgage Rate is currently at a 4 year high in the US, just 3 years after the Tightening Cycle was initiated) and financial derivatives. For businesses, as spending is tightened, uncertainty in the market peaks and a reluctant approach takes place towards large-scale investments. The last target interest hike took place this month, for instance, got an instant reaction from stock markets as the Dow Jones (DJIA) declined by 0.5% and the S&P 500 (SXP) by 0.4%, followed by the plummet of the telecommunications industry in the USA by 4.5% as AT&T and Verizon’s shares dropped rapidly. Major Dow Jones players Caterpillar(CAT) and Boeing(BA) didn’t fare much better, as each of their shares diminished by around 2.0%. “A Quantitative Easing”” period a.k.a. “Easy Money Period,” is essentially the opposite of a Tightening Period. It refers to the time in which banks have more money to borrow, stock market soars (the S&P 500 Index is now about 80% higher than it was in late 2009 thanks to the QE period) and security valuations are high due to the encouragement of risk appetite. That is why governments usually increase spending through long-term projects and costly economic programs during monetary easing periods. The Bank of England, for example, launched its Quantitative Easing period on March 2009 with a tremendous initial spending target of £75-billion over three months, simultaneously cutting the interest rates to a record low of 0.5%. Easing periods occur almost every decade and they are in line with boom and bust economics. What’s actually important is how countries make use of that Easy Money Period. Through sustainable investments in R&D and production that would secure the economy in tightening times; or with construction investments which do not really create an added value in the long term? This question eludes policymakers even more this time due to a paradigm shift: The 4th Industrial Revolution. As a new form of industrial revolution emerges, countries have been expected to include such points in their economic program: blockchain technology, AI, Green Energy, Internet of Things and integration of robotics to production facilities. Because this time, how countries exploited the 2008-2015 Easy Money Era will draw the line between who is “catching-up” and who is “cutting-edge” for the next decades. So let’s see which two countries advanced most sustainably while the money taps were open… China China shifted from fixed to floating currency right after the 2008 Financial Crisis, in the beginning of the QE period. Since then, Chinese economy boomed during the Easy Money Era with it’s most glamorous project: Shenzen City. Located perfectly on the Pearl Level Delta and nearby Hong Kong, Shenzen was a small town with 30.000 inhabitants just before it was declared as the first Special Economic Zone (SEZ) in 1980. Today, especially during the last QE period, Shenzen has evolved to become the “Silicon Valley of Hardware” as currently %90 of the hardware products in the world are manufactured in Shenzen. Thanks to its location, the attraction for talents, huge government-backed high-tech investments and coopetition ecosystem, Shenzen became the largest technology manufacturing hub in the world. Currently, Shenzen has country’s highest property prices, the highest per capita GDP and ranks number eight on the global list of cities with the most billionaires. China also completed enormous investments between 2008-2015, some of them regarded as “mega-projects”. One of them is Hong Kong-Zhuai-Macau Bridge. Connecting the three big cities of the Pearl River Delta, it is the world’s longest sea-crossing bridge with a total investment of $ 20-billion. Another massive scale project was Beijing-Shanghai High-Speed Railway. Being the longest high-speed railway in the world, the project cost around $ 35-billion. Construction was launched at April 18, 2008 and commercial services started after an unimaginable 2 years time span, on November 10, 2010. 2 remarkable mega-projects of China in space industry were Aperture Spherical Radio Telescope (the largest in the world, looking for intelligent life in space) and Wengchang Spacecraft Launch Site built on an artificial island. Moreover, to seize its regional influence, China spent $29-billion on roads in Tibetan-populated provinces as a part of an integration strategy of Tibet to China. To seize its worldwide influence, Chinese corporations embraced a post-colonization approach by making billion-dollars of government-backed land acquisitions in Africa for mining, oil and food crops. Currently, 7 out of 10 biggest construction companies in the world are Chinese, taking over billion-dollar projects in countries geopolitically essential to China. Thanks to its vast development tailored with a global agenda, China is no longer a country of cheap labor as cheap labor started moving towards less developed countries like Bangladesh, India and Vietnam. But still, air pollution seems to be the issue China prefers to turn a blind eye rather than solving it. Not to mention their national debt, which accounts for 15% of global debt. Israel The high-tech sector has been booming in Israel as a result of a long-term strategy adopted since the mid-1990’s. As Israel has the second best entrepreneurial ecosystem in the world, the locomotive of this boom is highly innovative startups financed mostly true venture capital. In 2017, Israeli startups raised a record-breaking $5-billion. Since criticisms arise that there are still no major technology brands in Israel like Nokia (Finland), Taiwan Semiconductors (Taiwan) or TAT Consultancy, Infosys (India) it is worth mentioning that the Israeli government uses incentive mechanisms to turn this innovation hub into a “showroom,”  rather than letting them grow year after year, for those startups to be acquired by major worldwide corporations after their development phase. During the QE period, the swift rise of Israeli businesses has become even more evident. The government raised its R&D investments by $149.428.000 during the last QE period. Now, they have the highest R&D expenditure as a part of GDP in the world with 4.2% (In Eurozone it’s around 1.95%). Israeli startups have been known to specialize generally on information technologies. However, during the recent years, they have also diversified through biotechnology, Unmanned Aerial Vehicles (currently, Israel is the biggest Drone exporter in the world) and most importantly: Fintech. Top global companies like JPMorgan Chase, Visa Europe, and HSBC work with Israeli startups for FinTech and blockchain solutions through 14 R&D centers formed by those companies after the 2008 Financial Crisis. Since the 2008 Crisis, Israeli FinTech industry has grown from 90 to 500 companies, raising around $600-million in 2017. All in all, being the 10th most innovative country in the world, Israel exploited the last QE period by cultivating a vibrant startup ecosystem, taking steps to evolve as the “blockchain and FinTech leader of the world.”

World Cup is now heading to its latter stage of the tournament, and without the participation of the Netherlands in this tournament, World Cup still has managed to draw significant attention from football fans across the country. When your team is not participating in the tournament, then one of the most common ways to enjoy every moment of the game is to involve in betting. Betting in recent years has evolved so much such that not only die-hard players are willing to put their money into the service, but also many others who are just as enthusiastic in football as the die-hard players. The number of betting accounts has increased ten-fold in Britain only in a span of five years. How has the industry of betting become so attractive, and, does betting (in sports, in particular) help you to get money? Betting has dated back to ancient times, as people did not want to be only the mere spectators of a competition. Instead, in order to keep themselves engaged in it, there must be some forms of involvement in the event. Back in the days, “competition” was mostly understood as the combat between two athletes; the only question is who would be the winner of that fight. The betting slowly evolves in a way such that an intermediary (now officially called as the “broker” or the “bookmaker”) would organize such bets so that they could find two players with opposing opinions on who would win and are willing to bet at a similar amount of money. Only when the horseraces became a popular demand for betting at around the 19th century did the first ever professional broker came into existence. They organized a platform in which people would process bets and prize payout for everyone. They only kept the profit and a small commission fee from the betting players. When the statistical data in sports began to prosper, especially in baseball, the bookmarkers started to import these pieces of information into their computation in order to improve the odds in such a manner that it attracts more players. In the context of football, some of the information that gets changed during the pace of play. The parameters that can be adjusted vary from expected goals to the number of yellow cards given in the game. However, this odd can never achieve optimality, since odds represent collected information from the past, but not the incidents that are bounded to happen in the future. Taking stakes in the future is eventually what betting is all about! Besides the traditional bets, in which you would simply predict the outcome of a certain game before it begins, the diversity of betting methods has grown exponentially over the years. The most prevalent feature, “in-game” betting, allows us not only to bet on the outcome of a certain game but also bet on the possibility of an event that happens to occur during the middle of the game, and even on multiple time intervals of the game (especially for football and cricket). Despite its relatively short existence, in-game betting has now accounted for about 60% of all money wagered on sports bets. This is the result of self-learning algorithms where they are able to collect a massive amount of data and process it in a relatively short amount of time, and different odds can be created based on that newly collected information. This creates not only more betting scenarios but also keep the fans to stay in the game and thus allowing for even further in-game bets. For the brokers whom would be proud of getting more money through in-game bets, such development in technology has also allowed betting to virtually eliminate the element of luck. With the abundance of data available on disposal, and as complex as it has been ever before, this is, of course, is bounded to happen. However, on the contrary, it would be extremely difficult to quantify the effect of an (unexpected) occurrence that has little relevance to data, numbers, or statistics. One may ask how the layoff of the coach of Spain immediately before the beginning of World Cup affects the probability of them to win the championship, or how Ramadan would affect the performance of Muslim football players at the tournament. The latter question might be easier to answer since there have been quite numerous occasions where players have to play professional football during times of Ramadan. The former might be just too difficult to predict. Are the odds true? However, statisticians, as proven throughout history, have not always been right in predicting the future (and who would have anyway?). No models are perfect, even if companies might have claimed that their models are immune to errors. Many different brokers use different models, and because of that, different odds arise in an identical game between brokers. There is also little justice to agree with the model whenever an identical are run multiple times, the outcomes usually turn out to be different on separate trials. Betting is also somewhat analogous to other investments. One of the most fundamental foundations of asset investment is the efficient market hypothesis. The theory stipulates that no one would earn long-run profits on a certain investment because of complete information and arbitrage is not supposed to happen. Similarly, the efficient market hypothesis, in this case, would tell you that there would be no long-term profits from betting, since all information is started to be incorporated into each bet, and the wagers should reflect those pieces of information. However, since the wagers do not accurately present the true odds per the hypothesis, and usually the unusual bets are underrated, the most profitable strategy for many “experienced” players are to bet for those unusual ones to reap lucrative returns. However, betting on risk is not always ideal, and as many financial investments would too, there must be some “calculated” risk to betting, so there should be “risky” bets that are much more favorable compared to others. Although, if you remember Paul the Octopus from eight years ago, it made some of the most tremendous feats in football match prediction. It barely had to understand football and the teams behind it, yet somehow it managed to predict 12 out of 14 matches correctly between the European Championship in 2008 and World Cup 2010. Rarely do we see such an accomplished feat by a betting player, let alone a creature who has zero knowledge of what football is about. Would it be miraculous if Paul the Prophet would live to this date?

As opposed to your local brick and mortar butcher who’s running the shop with his son, which is what really comes to my mind when someone says ‘family business,’ Koreans have managed to take the concept of a family business and turn it into a synonym for ‘too big.’ In the Western world, the names of these conglomerates are associated most often with their flagship consumer products, but in reality their long arms reach to the furthest corners of the Korean economy, and monopolise everything that comes to their path. Just as the last year’s editor-in-chief went to South Africa with the Sefa Study Trip and wrote two articles about it (here and here), I think it’s granted that I write about my trip to Seoul. In this case, I’ll be discussing a concept that was introduced to as, pretty much as soon as we landed in Incheon (a city mostly associated with the international airport on one of its small islands). We were introduced to the word “chaebol” by the Dutch embassy. The Korean term jaebeol stands for the conjugation of jae, meaning wealth, and beol, standing for faction or clan. “Wealth clan” is quite appropriate for what these companies are, and how they conduct business in Korea. These conglomerates were all extremely small at first, none of them were founded with the idea of turning into multinational conglomerates in the first place. The big-three chaebols you might know by name are Samsung, LG, and Hyundai. Samsung started off as a trading company that sold dried fish, vegetables, and noodles; and Hyundai was simply a construction firm. Now, much separated from what they initially started off as, these companies are globally known for their electronics or cars. Yet it’s good to note that they work in areas from shipbuilding to steel, food to aerospace, planes to insurance. Having complete domination over the daily lives of Koreans in pretty much every profitable industry imaginable, these companies are not seeing slowdowns in growth anytime soon. The way that these companies came to the position they are in right now can be attributed much to Park Chung-hee, the de facto president of Korea from the military coup in 1961 until 1963, and the de jure president of Korea until 1979, when he was assassinated. He led the Supreme Council for National Reconstruction (which is a very aptly named council), The assassination aside, Mr Park achieved a great deal of progress in Korea during his time and time after through his modernisation plans. By establishing a planned economy where companies selected by the government (and the current set of chaebols were already sizeable at the time) were entitled to start large projects and the government loans to fund them. This system continued for quite a while, with foreign loans being added into the equation further down the road. As it established itself further down in the lives of Koreans and the culture, political favours and corruption became normalised too. Considering all these benefits of this established system, one might wonder if these conglomerates are beneficial to Korea as a whole, today still. Although there’s been a lot of debate about this matter, one signal that should be clear to us is that the former Korean president Park Geun-hye, and the current president Moon Jae-in both campaigned for the position that chaebols should be slowed down, and their powers over the nation’s economy and its bureaucracy should be weakened. Unfortunately, Park Geun-hye was sentenced to 24 years in prison this April over corruption charges for the 2016 South Korean scandal. Her aide and unofficial adviser Choi Soon-sil, the daughter of a cult leader, was accused of extorting money out of chaebols using her influence. Ms Park was accused similarly of bribery and leaking government documents to Ms Choi. So, well, the whole anti-chaebol position did not really work out; in fact, the presidents of several chaebols which funded organisations that ultimately help oust Ms Park denied the allegations that they were motivated to do so with their donations. The central criticism against chaebols have been that they are extremely detrimental to the growth of smaller entrepreneurial businesses, but it can be seen that the influences do not extend solely on the economic side of things. When letting private organisations have such powers, you do end up benefiting from the fact that things move faster and higher economic growth, but the costs of such schemes may not always be immediately apparent. One thing that was quite interesting to all of us was the fact that most young Koreans are very disinterested in working for smaller firms or startups as opposed to how we might prefer them. In turn, they are most often taking up engineering studies due to the excessively high demand, and targeting the big-three (also well known to us): Samsung, LG, and Hyundai. They provide comfortable lives, great benefits, extremely competitive salaries; all of which are very desirable in a country that’s not well-known for their social benefits. For the Netherlands, I can’t even think of companies that operate at such scale, and ones that are capable of hand-picking the crème de la crème out of its universities.

Do you give to charity? if so, how do you decide to which charity to contribute to? The last one is not an easy question, there are over 1.2 million charities in the world, all offering to improve some aspect of our societies in one way or another. So how do you make the optimal selection? In the current system, most people end up giving their money to charities that they are familiar with. This is a problem because, in the increasingly competitive market of non-profit organizations, the ones thrive and get the most donations are in many cases, not the ones that are better at making our world a better place, but instead the ones that are better at getting people to make a donation by means of compelling advertisement. This is where effective altruism comes in handy. It is a movement that intends to optimize the ways we give money so that our good can reach better outlets and have the greatest possible impact. One of the main aspects of Effective Altruism is that it encourages benefactors to treat their donations as investments. This means that instead of making a contribution to a cause that you have an emotional connection to, you should give to the one offers the greatest expected value. For example, some popular charities in the United States include the Make a Wish foundation or Guide Dogs of America which have a unitary cost of about $10,000 and $40,000 respectively. On the other hand, there are charities such as Against Malaria offering to save a child’s life for $4000 as well as preventable measures for as little as $4. Looking at it in this way, it becomes obvious which options maximize our return on investment. You’re able to help more people and do more good by donating to the ones that offer the lowest costs. However, the implementation of this approach is not as simple as the logic behind it. If you have ever taken at least one lesson in economics then by now you must be aware of the fact that we are not rational beings, this idea comes in handy when we try to explain our charitable patterns. Opposite to our previous concept, people think about charities in very subjective terms, they believe that their personal feelings and preferences should guide their donations. In 1968 the American economist Thomas Schelling wrote about the inconsistencies in the valuation of human life. He noted that an individual life described in detail provokes more sympathy than their equally needy, statistically pooled counterparts. As a result, they encourage more donations given that when donating to a specific cause, the benefactor usually feels that they are having a clear impact on the problem. This puts the most cost-effective charities in a position of disadvantage, because they are more likely to provide aid to a statistically pooled group of people. And, given our ability to empathize in most cases is positively related to the situational relevance, we are more likely to donate towards causes in our vicinity, even though providing aid to the developing world is often much cheaper. But, let us assume we can somehow manage to convince people to ignore their emotions at the time of making a donation. Consequently, they might lose all the motivation they had to give money to charities at all. Not everyone is able to be truly altruistic and perform a costly behavior solely in order to help other people, people do look for emotional satisfaction at the time of making a donation, which is increased by supporting causes that we actually believe in. Fortunately, making sure your contributions count is becoming increasingly easy. Most nonprofits are required to disclose their finance and governance information, and on the last years, we have witnessed an increase in third-party evaluation platforms that rate the effectiveness and legitimacy of these organizations. They advise benefactors, to look for charities that have a clear mission statement and that spend at least 75% of their expenses directly on their programs. Some of them are GiveWell.org and CharityNavigator.org. Although this movement is rapidly gaining popularity, it is doing so within specific groups of people such as economists, financiers, and philosophers. In other words, people that are used to thinking in terms of maximizing utilities and such. It may not be realistic to ask people to leave their emotions aside when making a donation. after all, they do come from our compassion and capacity to feel the distress of others. However, within the cause that you feel the strongest connection to, it is crucial to spend some time looking for the ones that have the greatest impact instead of the best ads.

La bella Italia, it may be the world’s most admired country for its rich history, beautiful cities, the most UNESCO monuments of any country in the world and of course its wonderful food. However, it’s also known for the mafia, the big economic divide between north and south and its tumultuous politics. Recently, all the remorse of the Italian people about these factors seems to have been outed in Italy’s parliamentary elections. Here, the far right party Northern League and the left-leaning populist party Five Star Movement (M5S) got a combined majority. They have now formed a government, and the policies they are enacting could be a potential danger to the stability of the European Union. Let me give a quick overview of the policies agreed upon. The economic reform most heard of is the basic income instituted for low income households of 780 euros. There will also be large tax reductions and the retirement age will be lowered. This is a potential reason for conflict with the EU, since the measures will mean an increase in spending of 109 to 126 billion dollars a year. Italy will no longer comply to European budget rules, or even try to do so. The Italian government will also start taking protectionist measures against companies that do not keep their production in Italy. Other important reforms of the new government concern immigration, which will get a much more repressive treatment. Doomsday is coming for the EU These new Italian government poses a threat to the Italian position in the EU and even the EU as a whole. Firstly, Italian politics tends to be a good predictor for the rest of western politics. The Italians were the first to introduce fascism in the form of Benito Mussolini and the first to introduce populism with mister bunga-bunga Silvio Berlusconi. The new Italian government is now again the first example of a western European country with a complete populist and Eurosceptic government. If it proves successful in curbing immigrant inflow and raising the welfare of Italians through deficit spending, it could mean people in other countries would also like to go the Italian way. If multiple EU-member states get a euro-sceptic government, that could mean the end of the European project. It is also possible that the new policies have a destabilizing effect on the Italian economy, and especially its government financing. As you can see in the graph below, the Italian debt-to-GDP ratio is high relative to other European countries, with only Greece outpacing it. At 130 percent, it far outpaces the European rule of 60 percent. However, the graph also shows that most countries don’t achieve the 60 percent norm, not even Germany. Also, the Italian debt may be high, but it’s also relatively stable since 2012. Source: Eurostat But the new government’s policies could mean the end to this budget stability. The proposed increases in spending and tax reductions are met with a austerity of a mere 0,5 billion euros. Thus it is likely that the budget deficit will increase and thus the debt-to-GDP ratio will start to increase again. This wouldn’t be major problem if the debt wouldn’t have been as high as it is. But at the level of debt Italy has, rising debt levels may make investors lose faith in Italy’s ability to pay its debt back. This will increase interest rates on Italian debt and in turn will make it harder for Italy to finance its budget deficit. Another cause of concern is that interest rates have started rising again now the world economy has recovered from the 2008 crisis. The American Central Bank, the FED, has already increased its interest rates now that the American economy does quite well, in order to combat inflation. Draghi, chairman of the European Central Bank (ECB) has announced last week that the quantitative easing (QE) program will be ended by the end of this year. QE has been beneficial to countries like Italy that run high budget deficits and have high levels of sovereign debt, since their interest costs were lowered. Now that interest rates are increasing again, running budget deficits becomes more expensive for governments. This is not a major problem for most governments since the good economy also means higher tax incomes, higher economic growth and higher inflation (which means you can ‘inflate’ your debts away). However, Italy has shown rather low growth rates and its tax cuts and increase in spending will likely increase the budget deficit. Countries like The Netherlands or Germany could responsibly raise their expenditure, but Italy is creating a growing debt burden which could result in a debt crisis. Source: Eurostat And since the exposure of the financial system to unstable Italian debt poses a threat to the European financial system, the EU will do everything to keep an Italian spending spree from happening. The inability of Greece to finance its debt forced the other EU countries to help it out financially. If Italy gets into this similar situation, it will be a lot harder for Europe to help them since Italy’s GDP is 10 times as large and Italy’s debt is seven times as large as Greece’s. Add to that Italy’s relatively unstable and undercapitalized financial sector and you get why the European Commission and ECB look anxiously at the current developments. And although the current Greek government was elected as a protest against the Troika-forced austerity measures, it did eventually comply to the demands of its creditors and the Troika. Even recently Greece has implemented new austerity measures to curb its budget deficit. The new Italian government however seems less enthusiastic to conform to Brussels’s and Washington’s desires. Both the M5S and Northern League are openly Euro-skeptical. In one of their leaked draft coalition agreements, leaving the euro was even mentioned. So if the new government does throw Italy’s government spending off the rails, it’s unsure if the new government will take the necessary measures to stabilize it again. All will probably be fine Greece is also the prime example of how European stability will probably be maintained. The Syriza party of prime minister Tsipras was elected with the promise that the Greek population would no longer have to suffer under the dictated from the Troika. But Syriza eventually took the same painful austerity measures. Once bankruptcy looms, even populist governments don’t see any other choice than the impactful austerity they protested against to be elected. This won’t be any different in Italy. If it ever comes that far, the new Italian government will see no other choice than to comply to budgetary rules. Otherwise, they won’t be able to pay healthcare, pensions and schools, which would mean major political backlash. The leader of M5S, Luigi di Maio has also pledged that the budget deficit will be maintained at the current level of 1.5%, which is comfortably below the 3%-rule of the EU. This is hard to imagine given the policies that have been announced, so either these new policies will have to be weakened or Di Maio probably won’t be able to keep this promise. The current minister of finance Giovanni Tria has also confirmed that Italy will stay in the euro and will focus on structural reforms instead of deficit spending. The financial markets seem to believe him, which has resulted in a decrease of the interest rates on Italian bond after the new government was installed. Although the yield is higher than under the last government, it is stable. The situation for the Italian financial sector is also improving. The most recent financial stability report by the Italian Central Bank, Banca d’Italia, states that capital reserves in banks have been increasing sharply. This despite the historically undercapitalized nature of Italian banks. This decreasing the vulnerability to external shocks. The Italian financial sector is thus more prepared to endure a sovereign debt crisis, which exposes the rest of the EU financial sector to less risk. The Banca d’Italia does show its concerns about Italy’s high sovereign debt, which could become a problem when financial markets react negatively to changes in growth rates. But seeing the current economic growth in the EU, this may not be a large issue at the moment. To conclude, the Italian government debt is not something to be light-hearted about. The new Italian government could destabilize the just stabilized situation with their radical policies. This could mean a serious danger to the stability of the EU if not dealt properly with. However, the current government does not seem to look for major confrontation with the EU. This would mean the inability to pay for public services and therefore political suicide. The days of the European Union are not yet numbered, but it’s in our best interest to keep an eye out.

Industrialised China has faced pollution problems for several years. A wide variety of documentaries on the country’s pollution can be easily found online, and pretty much everyone has seen the shocking images of Beijing or other cities covered in smog. Nevertheless, things seem to be changing. How does China tackle pollution? About air pollution In 2009, the US started measuring certain pollutants at their Embassy in Beijing, confirming the threatening results. Information was put online and quickly expanded. Now, you can just go on google and find within seconds a real-time air quality index of the country. The sources of pollution in Beijing are many and varied: expanding provision of energy at the lowest possible cost, increases in transportation infrastructure and agricultural emissions. All of them in a country that has experienced great growth and industrialisation. Because of their critical situation, the government has seen the need take action to improve the quality of its air. Until now, initiatives seem to be working. China expects to increase its landmass forest coverage to 23% by 2020 to fight pollution and “make the cities greener”. To achieve this objective, in February 2018, the country reassigned over 60,000 soldiers to plant trees. The reassigned should have covered an area of 84,000 km2 (roughly the size of Ireland) by the end 2018. The majority of them are working in the Hebei Province, heavily polluted and often blamed for producing the smog that covers Beijing and Northern China. China’s total forested area is now around 208 million hectares, with 33.8 million hectares having been added in the past 5 years. Together with the implementation of cleaner technologies (now greater than ever before), predictions of future outlook are optimistic. About soil pollution Unfortunately, China faces another important environmental problem – desertification. According to Greenpeace, only 2% of China’s original forests are intact. After decades of overgrazing and exploiting the land in the country, over 25% of the territory is now covered in sand. With the 5th largest desert in the world (Gobi Desert, 1.300.000 km2) expanding at an alarming rate, the country has therefore had to define some measures. China has been the world’s first country to integrate a law dedicated to combating desertification (“Law of Prevention and Control of Desertification”). This law hosts projects aimed at rehabilitating land of all kinds, from the Three-North Shelterbelt “Green Wall” Programme to local tree planting initiatives. The Three-North Shelter Forest Program, also known as the Great Green Wall, is a series of human-planted windbreaking forest strips in northern China, designed to hold back the expansion of the Gobi Desert. It is planned to be completed around 2050, and will be 4,500 kilometres long. The programme is by far the world’s largest tree-planting project, but it has faced some criticism. Several researchers have argued that the plan is destined for failure because of China’s aggressive rush to plant trees. Also, another point of criticism argues that it isn’t clear how sustainable the trees in the Green Wall can be, in terms of the mortality rate of the planted trees and how these affect grass, shrubs or land. In fact, Beijing Forestry University estimates that that only 15% of trees that were planted on China’s drylands since 1949 are still surviving, with most of them dying from age. However, there is still hope. Recently, researchers developed a clay made of a substance found naturally in plant cell walls. When this is added to sand, it is able to retain water, nutrients and air, therefore allowing the trees to grow in the desert. With this discovery, and choosing the right type of trees able for these climate, the country hopes to reforest 50% of degraded desert land. In fact, the forest coverage rate has increased from14.82% in 1998 to 21.5% this year. Researchers have stated: “the costs of artificial materials and machines for transforming sand into soil is lower compared with the benefit of having a controlled environmental agriculture and reclamation” In any case, major policy interventions and management approaches are needed to prevent and reverse desertification. Such interventions should be implemented at both local and global scales, with the active engagement of stakeholders and local communities, and undoubtedly, improved information generation and technology advancements will help to recover the lands. On 2010, Ban Ki-Moon, Secretary-General of the United Nations on the occasion of the stated: “When we protect and restore drylands, we advance on many fronts at once: we strengthen food security, we address climate change, we help the poor gain control over their destiny, and we accelerate progress towards the achievement of the Millennium Development Goals.” Investing in cleaner technologies and reforestation plans has a cost, but so does the healthcare and reduced productivity that pollution induces. Cleaner investments should be viewed as part of the engine of economic development, rather than the brake. Although measurement data is sometimes not that clear, it is reasonable to assume that China is now past its “peak pollution”. Things are getting better.

Ever since I was a child, I was accused of being a sort of a hoarder because of how much I liked collecting things I found interesting. And unlike many hoarders, the things I like to collect are not usually things such as paper napkins, toothpicks or stolen sugar packs from my local coffee shop. I was always more interested in collecting items that I believed would make me happy in a way, even if they are not used for their original purpose. I never really acknowledged this little hobby of mine as something serious, however, a month ago I had the opportunity to go back and visit my parents in Turkey, and as I entered my room I’ve realized that I positioned my entire room in a way that it would be able to hold all of the separate collections I have, ranging from vinyl records to trading cards I’ve gathered over more than ten years. Realizing that I cared enough about the things I’ve collected to design my room layout after them, I got into thinking about what may have caused my interests in these things I’ve collected. Of course, they were all items that represented my areas of interests, such as music, sports or video games, but I could never really put my finger on why it made me so happy to see them all together in a collection and acknowledging that I own so many of them. After doing a bit of research, I’ve realized that the fascination with collecting objects starts early in childhood and has to do with the emotional attachment we make between lifeless objects, believing that they can offer us comfort and peace. I am sure everybody had a stuffed toy or a soft blanket that keeps on popping up in all of their childhood pictures, and this occurrence sums up the situation perfectly for this case. Another aspect to consider while trying to figure out why collecting things makes us happy is the nostalgic value they bring to the table. Collections are things that can be left behind or can be great reminders of what we’ve went through in different times of our lives, that forms a certain personal legacy. This personal legacy may fill individuals with a sense of pride and nostalgia, which are human emotions that are usually welcomed. Every individual can be considered a collector, since the things we collect do not always have to be in a solid state. As an example, an individuals train of thoughts can be seen as a giant collection of memories and experiences, which may be considered more valuable than most collectible items. A different perspective regarding this topic can be observed by looking at the importance of value and knowledge, since respected scholars, artists and professionals are making livelihoods off of their collections that they store in their brains. A rather “weird” way of looking at the debate would be to consider the enjoyment that comes from collecting memorabilia that has to do with concepts we are fans of, such as sports teams, or in most cases, celebrities. The emotional connections that an individual can form with pop cult phenomenon is likely to bring color to his/her life, therefore certain situations that comes from being a fan of a certain thing can result in interesting outcomes, such as the sale of Justin Timberlake’s unfinished French toast that was sold for 1000 USD back in 2006. While the emotional and existential side of the debate as a whole is surely interesting, it is important to remember that collectors can make serious profits from their purchases in the current world as well. Thanks to the meteoric rise in the usage of social media platforms, we can be informed about the various purchases that celebrities have made for their personal collections revolving around art, music or sports memorabilia. However, it is also possible to find ourselves bits and bobs we personally would love to collect and own thanks to second hand sale sites such as eBay. The monetary compensation for a certain collectable is determined by a number of things, including rarity, usefulness, emotional attachment and most importantly, popularity. If an item is rare and is part of a popular phenomenon, it is likely that its sale price will be relatively higher. Therefore, many collectors are wiling to pay serious prices to purchase items that may grow to be valuable over time, and this situation caused an inflation in prices for certain products and has helped the growth of many industries such as clothing, toys and music. Many companies have seen this as an opportunity to create buzz and boost sales and are now offering buyers limited edition collectable items by collaborating with admired public figures. Overall, it is possible to say that collecting is an act that every individual can engage in, whether to pursue monetary benefits, find comfort, or most interestingly, survive the current world they live in.

When I switched my thesis from the effect of IMF loans on sub-Saharan Africa to the effect of stock exchanges on sub-Saharan Africa, I thought I was the bee’s knees. After all, who would come up with such a novel topic, or anything remotely related to this? Turns out Joseph Schumpeter, an Austrian economist, discussed the effect of financial development on a country’s economy way back in 1911. And sub-Saharan Africa was arguably at the helm of the neo-liberal economic order, with international organizations such as the International Monetary Fund (IMF) and the World Bank pushing for privatization and liberalization, so ofcourse effect of financial development on Sub-Saharan African countries economic growth has been covered. However, I took countries from different zones and unions of the continent, such as MAGHREB and COMESA, and I ended up with 9 countries. So, I still have to collect data about stock markets for 9 African countries, and do regressions, and finish my thesis in time. Thanks for letting me share and pray for me. On the bright side, I have skimmed through enough papers to write a bit about my thesis, and as my last article for Rostra, I thought it might be a good idea to share some of the interesting things I found! There is this huge debate regarding whether financial development and economic growth are related, and if so, in which direction. Does financial development growth cause economic growth? Or vice-versa? For now, we will look at the first question. Financial development can refer to a variety of things. For eg., a private party setting up a group of private banks is an action which can be covered under this definition. Any action, and/or event which facilitates the betterment of the financial sector can be referred to as financial development. A stock is a share of a company, at a very basic level. As a stockholder of a company, you own a piece of the company, thus having a claim on their profit. Stock exchanges allow companies and individuals to transfer, buy and sell these stocks, depending on their intentions. As is evident, stock exchanges are crucial for financial development. They allow companies to grow, by providing a platform where companies can raise capital for future development, and investors can buy stocks to make profits. Due to this, companies can grow at a faster rate, thus contributing to the economy. Furthermore, stock exchanges encourage foreign investment. In countries like Zambia, where the domestic private sector is yet to develop, foreign investment could boost domestic companies, thus providing employment to more locals for example, consequentially improving the economy. As a corollary of the above point, due to foreign inflows and shareholders, risk is shared internationally. This in turn shifts investment from safer, low return tranches to riskier, high return tranches, thus promoting investments with high returns. Empirical findings suggest that stock exchanges affect GDP positively. However, there is a lot of debate about whether the opportunity cost of starting a stock exchange is too high. Scholars argue that the money could be otherwise used to invest in fiscal policy instruments, such as building roads, which are tried and tested methods for economic growth (in most cases). This debate shall go on, but unfortunately, I can not present the other arguments to you, my dear readers. As mentioned above, this is my last article for Rostra Economica. I would like to thank you for supporting us. It has been my honor to be able to share ideas with you, and hopefully ignite some discussion. Once again, thank you, to everyone I have had the good fortune of working with, and most importantly, to you, the reader. ~ Fin ~

It is no surprise that religion, and especially Christianity, has shaped the heritage and history of the European continent. Adopted by the Roman empire in 308 A.D., Christianity in Europe has been at the heart of wealth and war. After one big schism in 1054 and the reformations in the 16th century, we arrive today, with over 70% of Europeans being either Catholic, Orthodox or Protestant. However, the numbers are declining by day. Few to none young people are attending mass on a regular basis and the clerical staff seems to be more concerned than ever by participation numbers. Church taxes, very little reformation, and a relatively unpleasant media image are only a few of the reasons for the decline in piety among Europeans. Solutions might exist, but they come at great moral expense for the conservatives in many of the churches. This article will look at the reasons for the secular decrease in declared Christians in Europe. As previously stated, taxes are one main reason for the religious downturn. Being a constant all throughout the tumultuous past of religion in Europe and with a peak during medieval times, the tithe was dreaded by most since it’s first collection. Tithe ,tenth in old English,represents 10% of your earning that will be forgone to an organization, mostly the local church. Originating with relatively pure intentions of simply founding local parishes, the tax later generated a considerable percentage of the wealth of the national European Churches. Playing a big part in the causes of the 16th-century Reformation and spitting hatred towards clerics, the tithe is no longer mandatory in most European countries. However, the country that was the home of the Protestant reform, Germany, breaks the trend. If you are a declared catholic of protestant, you will see 8%-9% of your earnings going to the Catholic Church of Germany or the Protestant Church. For the past 5 years around hundred-and-sixty-thousand German Catholics of all ages have been leaving the church, as the Kirchensteuer (as locals call it), is a major cause of concern. The situation was further exacerbated in 2013 when a court ruled that, the religious rituals will no longer be available to the people who do not pay. Tying the payment to the sacred practices was taken in with skepticism and eventually reduced the trust that people placed in the religious institution. The incredible wealth of the German Catholic Church does not help either. Scandals exposing personal expenditures of the bishops add to the image that the church is actively seeking money rather than giving true spiritual guidance. The tax is also mandatory in other European states, but to a lesser extent. However, practitioners are encouraged to donate money in most states and by most local churches. Pastors are claiming the tax should rather be viewed as a form of giving and that it should not be contested but among young people the perceived reality is rather different. On the topic of media image, Catholicism in Europe has not had the best image among nonbelievers, to say the least. At first, Pope Francis seemed to have been the savior of the long spotted image. With a fresh approach and an appetite for reform, he was liked by all, regardless of beliefs. However, his efforts are undermined by conservative Catholics and recent sexual abuse scandals affecting Cardinal George Pell, the man behind many of the reforms that were about to take place at the Vatican. Promoting love and care, the Pope is hardly able to fight a whole institution by himself. His stance on allowing divorces and remarriages and his little commentary on homosexuality make him the enemy of what conservatives are considering the right catholic path. The rift between what Christianity actually stands for, the law of love, and what the church seems to be transmitting is almost unrepairable in the public’s perception. The reform that the Pope and many believers are trying to make is certainly not yet welcomed, but the public and especially the young, are tired of waiting. To stop the numbers of practitioners from declining further, the church should be willing to accept reform and listen to the younger generations. On the other side of the Atlantic, and especially in the liberal and tech-savvy communities on the West Coast, the myth goes that Christians are mostly “in the closet”. This shows that the Church has a rather serious branding problem that must be first solved internally. Detaching itself from the idea that God is in need of “gifts”, the image of conservatism and unwillingness to accept scientific discoveries are only the first steps in stopping the numbers from declining. What many seem to forget is that Christianity is, in effect, about love. This essence, as simple as it seems, has rarely been understood along history. In an era of progress like never before, it is maybe time that the church also gets on the same trend.

For the audience who is unfamiliar with contingent valuation (CV), it is a method of estimating the value for each individual on a good. The experimental design of this kind is simple: the interviewer would directly report each willingness to pay to obtain a specific good. This method has been extremely pronounced in situations where there is no hypothetical marketplace to facilitate physical transactions to happen. In recent years, public institutions have been focused on the evaluation of raising the quality of life and public programs in public countries. There is also an urge to impose a monetary value on environmental goods, and CV is probably the most appropriate method to measure the value of such goods. Most environmental damages cannot be estimated by the use of market prices since there is no seller for permission to damage the environment. For example, when there is an existence of externalities, such as in cases where a good is classified as a public good, it is inconvenient to impose a fair valuation on that product (Hanemann, 1994). CV is thus widely considered as the standard approach to evaluate environmental damages. However, since its inception, contingent valuation (CV) has not been totally immune to criticism, especially with regards to implementation problems and biases. One of the central critiques on this method is its insensitivity to scope: the results from these studies should vary with the extent, quantity, and the scope of the environmental good. This article would discuss how the insensitivity to scope is such a hindrance to the development of CV, and potential solutions to make the CV method more robust. Earlier studies on CV studies, for example, by Kahneman and Knetsch (1992) refutes CV method as being appropriate for sensitivity to scope, adding that as the responses might reflect only the aspect of “moral satisfaction”, and not the true “economic value” of the good, and disregard its importance in economics. To address this issue, the National Oceanic and Atmospheric Administration proposes that every CV study should be checked by the use of the scope test (Arrow, et al., 1993). The test should be conducted by introducing a reduced proportion of the environmental good, then recording both WTP for both the original and the reduced level. These levels can be subsequently tested by statistical means to assess whether these two values are significantly different. However, there are many studies that do not satisfy the criterion to be evaluated for responsiveness to scope. The reason to why studies are insensitive to scope are not yet clarified, however, even in recent studies. Adequacy and Plausibility of Scope Effect One of the requirements that is needed to ensure the reliability of the measurement in the damage assessment is listed as adequacy. Desvouges, Mathews, & Train (2012) conduct an investigation into CV studies to evaluate whether a CV study successfully passes or fails the scope test. However, they assert that there is little to infer about the verdict of each CV study since simply testing for statistical significance does not reveal whether the CV study adequately reflects the true estimation of the goods involved. For example, in Berrens et al. (2000), the average value of saving one fish is $57 while the value of saving 11 fish is only $74. In this case, it does not be necessarily the case that there should be a perfect linear relationship of the compensated value with respect to the number of fishes saved, but the results are still quite surprising. The authors provide that the adding-up criterion can be used to evaluate the adequacy of a CV study. The adding-up criterion, however, can only be applied when the goods are classified as being incremental to each other, so it is only presented in a limited of investigated studies. Using such valuation method means that the study will be deemed inadequate when this hypothesis is rejected. Another criterion that is used to evaluate a CV study is plausibility, as proposed by Whitehead (2016). Plausibility is understood as all the possible ranges of values of the measure Whitehead criticized the adding-up test as being the inappropriate technique to find economic meaning, but to only detect statistical significance. In this regard, the elasticity of willingness-to-pay can be used alternatively to measure economic significance, and its plausibility ranges from 0 to 1. In application, the “arc elasticity” of a point is used, since it is quite intricate to transform it into a functional form. While most studies cannot be applied to evaluate adequacy as it violates the criterion of incrementals, more studies can be checked for plausibility. Because of such discrepancy in the methods applied and there is no general principle of what to be used, CV studies in environmental economics are often considered unreliable. Are there ways to mitigate this problem? Potential solutions a) Presentation of size changes In order to mitigate the problem of insensitivity to scope, it is the case that the design and implementation issues are the two of the most important features. One recommendation that is offered by Ojea and Loureiro (2010) in their meta-analyses is that they present the scopes (or sizes) in different ways. They notice that across different empirical studies, the experimental designs do not adhere to any standard of presentation with respect to the size changes. There are two possible different illustrations of size changes: the relative change and the absolute change. Results show that the coefficient on size is only significant when the sizes are illustrated as an absolute change and not relative changes. So, the CV studies imply that size changes, when illustrated as the absolute changes, are more sensitive to scope. Thus it would be more sensible to phrase the fish problem as “How much more would you be willing to pay to conserve ten additional fish?” rather than “How much would you be willing to pay to save 11 fish (instead of 1 fish)? b) Statistical assumption When the data are collected from respondents, it is necessary Borzykowski, Baranzini, & Maradan (2018) contribute to this research by applying several statistical distribution assumptions for WTPs of respondents, which include both parametric and non-parametric distributions. They elicit responses from participants by a split-sample survey on the WTP of two forest conservation programs in Switzerland, on two different scales: the national (Swiss) forests and the regional (Geneva) forests. However, because of the selection of geographical areas, these two programs cannot be seen as incremental to each other and thus could not be checked for adequacy by the adding-up test, as illustrated by Desvouges, Mathews, & Trains (2012). The authors assert that similarly to the problem with the presentation of the differences between different scopes, there is also no scientific consensus to use a uniform the statistical distribution of the WTPs for these studies. In terms of testing for scope effect, they find that the WTPs of respondents are susceptible to the assumption of statistical distribution. They find that non-parametric methods would be more informative of revealing the scope effect than parametric models. Therefore, the general recommendation for testing responsiveness to scope, is that to fit WTPs to a number of different statistical distributions, as long as there is not yet a consensus to be reached at this issue. The scope effect of contingent valuation on environmental damages, albeit not a new issue, remains to be unsolved. Even with decades of empirical studies, there is still a lot of vagueness in terms of the construction of CV survey across different studies. In principle, testing for adequacy and plausibility of responsiveness to scope is considered extremely useful to evaluate the reliability In order to make the measurements more adequate and plausible to the scope effect, further studies, especially empirical studies, could explore variants of other potential developments to the design of similar experiments. If CV works well with environmental goods, then it should not be so surprising that CV to be extremely useful when it is applied in other similar valuation methods.

Fernando de Magallanes would have never imagined that his explorations would lead to one of the most disputed diplomatic conflicts of the 20th and 21st centuries. He was selected by King Charles I of Spain to discover a new commercial route from the Kingdom of Castilla to the Maluku Islands (Indonesia) passing through the South American continent. Among his voyages, he encountered two relatively small islands 400 kilometers off the coast of Rio de la Plata (Argentina today). With no other resourceful purpose than non-fertile land and a limited amount of trees, Magallanes and his troops were neither surprised nor honored about the islands. Without excitement or pride, he proclaimed those territories under the Spanish Crown and continued on his journey… If you found yourself in the neighborhood of La Boca in Buenos Aires, maybe trying to catch the bohemian vibe and the smell of tango that the city emits, you would hear the past tale over and over. As for Argentineans concern, they inherited the islands once they became independent from Spain. Hence, the Malvinas are their property and are not up for grabs. True, the islands were never heavily populated by Argentineans, but that does not entail a foreign country to appropriate them. The British version of the story tells a whole different anecdote about the discovery. According to the British Academia, the first person to visit the Islands was the British captain John Strong in 1690, whom at the time of arrival, proclaimed the Islands under the kingdom of King James II. Ever since then, they have been part of the British Crown. The argument about the discovery of the islands has generated disputes between scholars and universities, but no one seems to have arrived to a shared truth. In the early 19th century, Argentina claimed sovereignty over the Malvinas (Argentina’s name for the Islands), but Britain confiscated the territories in 1833, expelling the remaining Argentineans and rejecting every claim over the Islands. The loss of the Malvinas was embedded into Argentina’s memory and ever since then, they have claimed their right over the territories, searching for a pacific negotiation to obtain them back. The population of the Malvinas however is mainly British descendent, and Britain has used this as their key argument to retain the Islands. Twelve thousand squared kilometers of land in such an isolated area with limited resources should not be a reason to start an international conflict. But that did not stop Lieutenant Gen. Leopoldo Galteri, who was the president of Argentina at the time of the dictatorship in 1982, to begin the 72-day war of the Falklands. Galteri sent military forces to the Isles in order to proclaim them as an Argentinean sovereign state. In response to this attack, the United Kingdom, under the government of Margaret Thatcher, assembled a naval task force with two aircraft carriers and two cruise ships pressed into service as troop carriers and sailed off of Portsmouth on April 5, 1982. According to some political advisers and historians, the decision of Galteri to invade the Falklands was mainly political. The Argentinean dictatorship was being nationally and internationally criticized for human rights abuses and economic mismanagement; therefore, it was widely believed that the recovery of the islands would bring unity among Argentineans in a feeling of patriotic service. However, at the time of defeat, the military government was heavily discredited and civilian rule was finally restored in Argentina in 1983. Meanwhile, Prime Minister Margaret Thatcher earned unanimous patriotic support that became evident in the victory of her Conservative Party in the 1983 parliamentary elections. After the war, the United Kingdom reinforced the Islands with heavier military force. There was controversy about the presence of nuclear submarines close to the coasts of the Falklands. The presence of such vessels would violate the Treaty of Tlatelolco that specifically prohibits nuclear weapons in Latin America and the Caribbean, hence breaking international law and involving the United Nations in the conflict. The Falkland Islands are nowadays under British control. Their economic activity lies primarily on fishing and farming, but these two sectors are not the only economic advantage of those pieces of land. According to the United Nations Convention of the Law of the Sea, every nation has an “Exclusive Economic Zone” (EEZ) that covers up to 200 nautical miles (230 regular miles) from the coast. This EEZ grants a country the potential right to exploit the natural resources covered by the zone. The Falkland Islands are indeed a small territory, but the potential gains from their natural resources are a huge advantage to Britain; the only one entitled to exploit every mineral and hydrocarbon in the area. Nowadays, there are five oil companies drilling in the Falklands EEZ. They have considered an approximate of 60 billion barrels of oil, although there are estimates of larger reserves that will emerge when new explorations take place. The geographical position of the islands is crucial for the British whom, ever since the Second World War, have been trying to regain control of the Atlantic Ocean; therefore a military base in the South Atlantic, close to the border with the Pacific Ocean is ideal to the United Kingdom, not only militarily, but also economically. With the Falkland Islands under their domain, the United Kingdom can easily monitor every ship (commercial or militant) that goes through the South Atlantic. Argentina has not made things easy for the Islands either. Counting with the support of every Latin American country (except for its neighbor Chile), Argentina has restrained the flow of air traffic to the islands, hence virtually halting its access to international airports and reducing the entrance of tourists and potential investors. Santiago and London are the only two cities in the world with flights to Stanley (capital of the Falklands). As a measure of political punishment, Argentina has frozen assets of every foreign company involved in the exploration or exploitation of natural resources in the Falklands. Also, it has used La Vaca Muerta (its major mainland oil & gas reserve) as a trump card against major oil conglomerates by blocking every investment from companies that have presence in the Falklands. The conflict is not solely considered a bi-country issue, but it rather resembles a regional concern. Latin America is widely recognized for its colonial and imperialistic regimes throughout its history, thus the Malvinas conflict has evolved into a regionalist struggle full of pride that aims to eradicate European intervention in a region that is not longer theirs…