As you might have already heard, Venezuela is going through some pretty hard times right now. The country has been facing a political, economic and humanitarian crisis since 2012, which only seems to be getting worse over time. Some of the problems that the Venezuelan citizens are facing include hyperinflation, civilian unrest, food, and medicine scarcity. All of which has led to several manifestations against the government, and consequently a death toll of approximately 128. To solve some of these problems, president alias dictator Nicolas Maduro has been coming up with rather unusual and in multiple cases unfruitful methods, the latest one being “Petro” a cryptocurrency backed by their oil, mineral, and gold reserves. Why a cryptocurrency? Currency substitution is hardly a new concept, and given that inflation in Venezuela recently reached 1369% it can be easily stated that they are desperately in need of a new one. However, up till now, this measure has generally been implemented by means of “Anchor currencies”, the use of a cryptocurrency is definitely a first. The reason behind this is that with Petro, the government is also trying to get past its growing international isolation and most importantly the US sanctions imposed back in August as a result of Maduro’s power grab; currently preventing them from getting access to the financial system and many sources of funding. A task for which a decentralized currency, able to avoid central banks, is perfect for. This and the soaring prices of other virtual currencies such as bitcoin and Ethereum have made the creation of Petro a very attractive option. How will they do it? The announcement was made pretty recently during Maduro’s weekly 4-hour long TV show, and besides its name, he did not go into much details about how the cryptocurrency would function. According to Dr. Garrick Hileman, a professor at the University of Cambridge, it is possible to create a cryptocurrency in around 20 minutes just by copying and pasting the software code. However, the fact that Petro, unlike any other cryptocurrency on the market, will be physically backed by the country’s natural reserves increases the complexity of the project. This is because it means that the government will need to establish a formula to tokenize their assets, and most importantly to convince the public that the formula is accurate and that they won’t be constantly altering the formula. Something very challenging given that there is little to none juridical system in Venezuela and that Maduro’s government is well known for their lack of transparency and instability. Moreover, the announcement was met with backlash from the opposition, who declared that in order to do this he would need congressional approval. However, given Maduro’s history, it is very unlikely that this will prevent him from carrying out his plan. Will it work? A cryptocurrency would definitely help Venezuela evade US sanctions, that is, of course, if they can get sellers to trust and accept Petro as a form of payment. Besides this, the ideal event would be for it to also attract international investment in the form of cryptocurrency enthusiasts, which has been lacking since the 2014 plunge of the oil process. And according to Jesús Palau, a professor from The ESADE, it is also a subtle way to default on their debts while simultaneously leaving their doors open for investors. On the other hand, it has also been stated that the replacement of the current currency could also provoke a bank run given that, if the central bank starts providing the services of commercial banks, then people would start taking the money out of their current accounts and putting it on the central banking system in the form of Petro, a situation that would provoke commercial banks to collapse and probably bring the whole economy down with them. All in all, it is a fact that Venezuela is running out of options, and although the chances are slim Petro does give them the opportunity to boost trading and reach international markets. Nevertheless, just as any other currency, the trust that people and investors put in this one also relies on the credibility of the country. And given the fragile state of their economy, this is also a very risky move.

Who does not know the delivery services Foodora, Deliveroo, and UberEats. They are most famous for their environmentally friendly way of delivering food. In most Dutch cities these companies deliver food by bike. Even though this is very eco-friendly, these companies are not that friendly towards their employees. For example, Deliveroo wants that employees from February 2018 will not be in paid employment anymore, but continue as an independent proprietorship. Now all employees are still in paid employment, so that they get paid an hourly minimum wage and are insured if anything happens to them during working hours. When they will continue as an independent proprietorship they receive no longer an hourly wage but they will get paid 5 euro per delivery, from which taxes still need to be deducted. Furthermore, the administration needs to be done by the proprietor himself, which will consume much time. But most importantly, these delivery men will not have any insurance. When they get hit by a car while they deliver food on their bikes, Deliveroo is not responsible. The delivery guy himself is responsible for all the costs caused by an accident. Deliveroo does not want to change this business model without a reason. They think that the delivery men will profit from this change, as the minimum wage is very low, approximately 6 euros per hour. But with this piece rate, they are able to earn 5 euros per delivery. According to Deliveroo, a delivery guy can deliver approximately 3 meals per hour, so in this case the wage will indeed rise. However, delivery men themselves say this is not the case. They say that the average number of deliveries per hour is around 2, on a good day, however, on bad days there are often no deliveries at all throughout the whole hour. In combination with the increase in work due to more paperwork and the increased risk, the delivery men themselves do not benefit from this change in Deliveroo’s business model. Then why does this change happen? By hiring the proprietors Deliveroo has lower administration costs, on top of that, they do not have to pay the delivery guy the time he is not doing a delivery. This saves them a lot of money. Of course, this change in their business strategy received a lot of criticism. Mainly by the delivery men themselves. It is dangerous to cycle around the city, there is hectic traffic and as a cyclist you are vulnerable. As a response to this risk Deliveroo provides a public liability insurance, unfortunately accidents are not included, while accidents are the main reason a delivery guy would take an insurance. Also, politicians and trade unions do not agree with this change Deliveroo wants to implement. They think it is terrible that Deliveroo lets young people work uninsured and not able to build any pension. Former minister Lodewijk Ascher states that companies like Deliveroo destroy the fair job market by avoiding any payment of employee premiums. As a response to these measures, Sytze Ferwerda, one of the deliverers has begun a lawsuit. He thinks it is unfair that Deliveroo forces people to start their own proprietorship. Whilst Deliveroo’s main motive is making as much money as possible, by avoiding the responsibilities and risks that are involved with hiring employees. In order to afford a lawyer Ferwerda tries to receive 7500 euros through crowdfunding. To add to that, he receives support from the PvdA and the FNV (Federatie Nederlandse Vakbeweging). Furthermore, The Riders Union supports for Ferwerda’s statement, they suggest that Deliveroo transfers all the risks to the ‘employees’ to enable Deliveroo to go public. Other support comes from employment lawyer Peter van de Brink, who thinks Ferwerda has a good chance, which will have consequences for the other companies who have a similar business model as Deliveroo. Current employment law is not adjusted for online companies like Deliveroo and UberEats. Which is a problem because now it becomes hard to check whether these employees are actual employees or act as a sole proprietor. These companies mainly operate throughout websites, often not only one website but several. Due to this, wages, insurances and working hours are hard to track. At this moment companies like Deliveroo make up a small part of the job market, but when this kind of employment starts to grow, the employment law needs to be adjusted for this specific type of employment. Whether Ferwerda will actually win the lawsuit or not is something we will see. But I hope he will succeed. Even though Deliveroo has its reasons, and some independent proprietors will eventually earn more with this new business model, I do not agree with it. Most of the employees who work at Deliveroo, at least in the Netherlands, are students or high school students for whom this job is just a side job. I do not think these people should be an independent proprietor for just a side job. It should not be their burden to carry the risk and do all the paperwork. This is the responsibility of Deliveroo, as a company. If they want people to cycle for them around the city, they should also offer security and a consistent wage.

Often, when we find ourselves confused and going astray, we need a mentor to give us a helping hand. We need someone who can tell us what we should do, how do we overcome a certain problem, and most importantly: We need a friend with whom we can share our problems. This is why we have the Mentor Committee at the University of Amsterdam’s Faculty of Economics and Business. The Mentor Committee plays a very vital role in students’ life at this faculty. Right from the beginning of the new academic year, they help organize the Intreeweek (Introduction Week) for new students. This helps a lot for students to make new friends, facilitating valuable relationships over their university life. In other words, the Mentor Committee is playing a role in the transition from high school life to university life for a lot of students, and this is a very important phase to ensure that students kick off their academic careers here. The Intreeweek is designed to make sure that students get very well acquainted with the city of Amsterdam. It is a five day period filled with activities and events. Students are divided into groups and these groups go to different parties and events together. Every group has a pair of mentors, or as they are lovingly known, “parents”. These mentors have a schedule which they follow accordingly. The events and parties during Intreeweek can mainly be categorized into social and cultural. Social events include visiting the “coolest places in town” such as some popular bars and night clubs, where the students can go for a fun night out with their friends. It also includes some great places to hang out around the city for a laid back weekend, or a few nice lunch spots for a delicious brunch. Cultural events focus more on the history and historic significance of the city of Amsterdam. Some of the world’s best museums, such as the Van Gogh museum and Rijksmuseum are located here, and many new students look forward to visiting them. The Mentor Committee makes sure that these students get a taste of Dutch culture, which enables them to appreciate the city they will be studying in even more. An impression of the Intreeweek outline is shown below: Monday Wednesday Friday After the Intreeweek, students kick off their academic life at the University of Amsterdam. Of course, Intreeweek mentors help out their “children” with any possible questions about academia, but it is much different when students actually face problems as they study. That is why the Mentor Committee organizes “Social Mentors”. If you are reading this and are a first year Bachelor student at the FEB, you will most definitely have a Social Mentor as well. The point of being assigned to one is that they will be able to help you hands on with whatever problem you may have. Also, they provide valuable tips and tricks to help you get through university life. If you have any problems with housing, the city office or anything, they will be more than happy to help you out, or at least guide you in the right direction. They can also hand out past exams for you to do well in your courses. Finally, the current Mentor Committee is made up of six industrious and hard-working people who make it possible for new students to assimilate into the city and university life. These are the names and the roles of the Mentor Committee members: Desislava Zheleva: Chairwoman Marcelo Pira Beckerling: Vice Chairman Richard Hartweck: Treasurer Anastasia Kovalenko: General Member Eugeniy Mironov: General Member Alfonso Garza: General Member These are the people who make the university a better place and who try their best to make new students feel at home. This is very crucial because for fresh undergraduates who will be here for the next three years of their life, it is very important that they feel welcome, and the Mentor Committee does exactly that.

In the midst of a depressing, cold December, you can take comfort in the variety of upcoming music festivals that are bound to cheer you up in the summer of 2018: whether you are an electronic or indie fan or you prefer big pop music festivals, you should probably start buying your tickets as these disappear quickly. The experience of a massive music festival is quite unique in itself, and some will argue that the experience even trumps the music. What once used to be a rebellious way to spend a few days in a remote field or forest is now a trendy, Instagram-worthy pastime backed by a billion-dollar industry. Some avid music fans claim that music festivals have undergone a process of commercialization, associated with corporate sponsors and aggressive marketing. Small, edgy festivals do exist but it is the big music festival that has become a lucrative business for performers, agents, producers and promoters – and everyone wants a share of the pie. Perhaps quite unexpectedly, music festivals are not an invention of the past few decades. An enjoyable paper about the economics of music festivals traces the phenomenon back to 11th century France, where passing travelers could enjoy the singing of troubadours in communal gatherings. The famous German composer Richard Wagner founded a music festival to showcase his work in the 19th century; he did so, among other reasons, to establish his own financial independence as to free himself from the grip of various artistic patrons. In the 1960s, the world was introduced to American music festivals such as Woodstock and the Monterey Pop Festival, attracting hundreds of thousands of people. Although these festivals are now considered historical landmarks, it is interesting to note that they were not conceived specifically for the generation of large profits. The picture is quite different today, as many festivals are quite successful in commercial terms. The growth in the number of festivals catering to all genres (including classical, jazz and folklore music) is explained by the increasing demand of audiences, their varied tastes, and their increasing leisure time. From the supply side, music festivals can provide large profits for relatively low marginal costs and transaction costs. For example, audiences at festivals usually spend more money than the average one-time concert-goer because they purchase food and beverages for several days. Another interesting economic insight about music festivals is that much of their appeal is due to product bundling, that is, selling pure bundles to a captivated audience. Festivals also inject enormous amounts of money into the communities in which they take place; for example, in 2013, it was reported that the famous American festival Coachella brought around a quarter of a billion dollars into the Californian valley in which it takes place. Technology, not surprisingly, plays a role in the spread of massive musical venues worldwide. Even though technology makes music accessible in ways unimaginable for a listener 30 years ago, it is interesting to see how people are still drawn together to listen to a live show. Technology has also become an important part of the festival experience itself, as audiences can purchase tickets, personalize the musical program, and find their way around the venues on-site, using a festival app. Some festivals are now cashless, with transactions made with shiny wristbands that are virtually connected to social media platforms. A prime example of the transformation of music festivals from indie venues to commercial extravaganzas is one of the most famous music festivals in the world, Lollapalooza. It was started in the US in the early 1990s by a group of musicians and managers headed by Perry Farrell, the frontman of the alternative rock band Jane’s Addiction. The festival was established amidst an exploding demand for musical venues that featured alternative rock and punk bands. It was unique amongst festivals for various reasons, most notably the fact that it was not bound to a specific location: it toured across the US, featuring other counter-culture acts beside musical performances. After a decline in popularity in the early 2000s, the festival regained attention from crowds and is currently one of the most known festivals in the world. Now based in Chicago, Lollapalooza became a brand of its own as it expanded to other countries beyond the US, such as Brazil, Germany and France. In the United States, Lollapalooza attracts around 100,000 people per festival day. The popularity of Lollapalooza also sparked ample criticism, that the festival commercialized alternative music for profit, and that the tickets were far too expensive. In 2014, it was reported that the Illinois Attorney General was investigating the festival’s demands for a “radius clause”, preventing acts in the festival’s lineup from performing in competing venues within almost 500 kilometers of the festival, 180 days before and 90 days after the show had taken place. It was also reported that local club owners and producers had complained about this clause for years. This is, however, not a new policy in the music festival industry: exclusivity clauses are an efficient economic measure to ensure the monopoly of a festival on the attention of its audiences who live close to the venue. Whether such clauses give the opportunity for the development of local music scenes beyond the scope of a big festival is a different question. Lastly, for the big festivals, tickets can be sold out in a matter of minutes, often priced at hundreds of dollars or euros for a few festive days. We often hear of scandals related to resales of tickets and scalping, with audiences calling for better regulatory actions regarding ticket-selling platforms. Big Festival production companies make their money from selling tickets, but also from sponsorships and selling merchandise. In fact, corporate sponsors are now a crucial player in the industry: some brands sponsor festivals for reasons like boosting their public image (a company selling alcoholic beverages, for example, would like its customer to associate its brand with a positive experience), or to simply take part in this financially lucrative opportunity. Some brands produce their own music festivals. Another notable trend is the consolidation of the industry that leaves many festivals in the hand of just a few media companies. Live Nation Entertainment, for example, produces dozens of festivals per year such as Creamfields, Lollapalooza, Bonnaroo, Lowlands, Austin City Limits Music Festival, and dozens of more (the company’s website lists 131 festivals, including 8 in the Netherlands alone!). The corporatization of music festivals has a profound effect on artists, producers and fans; as usual, it remains to consider what will happen to creativity along the way.

Basic income right now is such a hot topic that it’s pretty much the bitcoins of policymaking. The idea is extremely simple, and that makes it extremely appealing: Governments give money to their citizens simply for being their citizens, and just enough of it that they don’t starve. As simple as that. With all the concerns regarding the widening income inequality and unemployment due to increased automation, it seems like the best thing since sliced bread! In an attempt to pioneer the scheme, or at the very least to figure out the potential consequences, the Finnish government took action. About a year ago they decided to give 2,000 people, chosen completely randomly out of the pool of unemployed people, money. The control group in this experiment on the other hand, with nearly 197 thousand people as of October. The experiment is significant in the sense that it’s what a basic income plan would look like in reality. The lucky participants did not actually volunteer for it, they simply received a bulky mail that detailed how the experiment would proceed. They receive roughly 560 euros each month, for two years. Participants don’t have to report how they spent the cash. That’s it. Free cash. The immediately apparent difference between unemployment benefits and free cash for these people is that unemployment benefits can be lost. If you find work, then you no longer receive any benefits whatsoever. The perverse incentive here makes it such that the unemployed population is a bit discouraged from finding work if they don’t find it to be as reliable as the benefits. Especially true for Finland, given that “without [increases for caring for children under the age of 18], the amount of the unemployment benefit is on average EUR 697 per month (21.5 x EUR 32.40).” Notice how this is actually more than what people get in the basic income experiment. Yet, basic income cannot be lost like these benefits. If you are a part of the experiment and you find work, you don’t actually stop getting these payments. Although two thousand seems like a large enough sample, policymaking is a bit too nuanced to consider the results of this experiment at face value. The problem stems from the fact that is that nobody actually knows how exactly to model this, let alone make concrete predictions. Unfortunately, whatever we learn from this tiny experiment, we may not be able to extrapolate to a larger scale. Effects such as changes in the unemployment rates, inflation, or GDP growth are affected by a practically infinite amount of factors. Taking this experiment to 10,000, or a million people may have consequences that are completely chaotic. Roope Mokka, the founder of a Helsinki based think-tank called Demos Helsinki that the prime minister’s office turned to when they started working on basic income, thinks that if anybody’s claiming to know how much a basic income system would cost the average taxpayer, they are simply lying. The German government decided in 2013 that they had no feasible means of financing a scheme like this at a national scale, so Finland probably has it worse. One other drawback of this experiment is also that the people chosen were not initially employed, so it cannot tell us how this extra money would influence the working behaviour of them. Universal basic income, which is the idea that everybody in a country receives basic income, requires even further experimentation and analysis to be considered feasible by policymakers. In addition to these concerns, the implementation is not necessarily so straightforward either. Some right-wing supporters of the idea have noted that a basic income system could streamline the welfare system and reduce the bureaucratic burdens. Although unemployment benefits could be replaced by a program such as this, social welfare programmes in Finland are so extensive that a great deal of the population receives benefits exceeding what basic income could bring them. Marjukka Turunen, who oversees this experiment, works for a government institution called KELA that handles social welfare programmes ranging from paternal care to student support, pension subsidies to unemployment. KELA goes as far as paying for travel expenses in case you need treatments as a part of the sickness or incapacity benefits. Turunen himself notes that one reason why he doesn’t believe it will ever be implemented universally is because the Finnish government would never wipe out all of these welfare systems that have been developed, and are still being developed, to replace it with a single payment. We will soon see how the Finnish experiment turns out, and also whether or not that leads to more experimentation. It seems that people who are working on basic income trials are already well aware of the potential effects of such schemes; the Finnish government seems to be taking their time to come up with an incremental scheme that will ‘ease into’ what could ultimately become universal basic income. What’s left, is convincing the policymakers!

The Internet has become such an integral part of our lives, which consumes our hours and hours every day (well, or at least it does for me!). Sometimes, we do take it for granted that the access to it should be open as it is right now. It wasn’t exactly the case in the United States before 2015, and it might as well not be the case in two weeks’ time. On December 14, the process of repealing the net neutrality act will be invoked by the National Congress, which potentially could transfer a lot of rights back to the corporations who have the control of public access to the Internet. So who is in the position to dictate the net neutrality policy? Net neutrality is the policy that prohibits internet service providers (ISP) to deliberately slow or block the access to a certain Internet service, in order for them to promote the own or closely affiliated service. In the United States, the independent institute that is in charge of foreseeing all domestic means of communications is called the Federal Communication Commission (FCC). Established in 1934 through the enactment of the Communications Act, the organization attempts to provide its own citizens with equitable access to all means of communication services without any kind of discrimination and at reasonable prices. In its mission statement, while it tries to ensure the rights of people to access any means of communication, it also wants to make sure that service providers are able to continuously improve themselves with innovative products to promote the sense of competitive markets between them. As of current, the Communications Act classifies the Internet as a “common carrier”, so that companies which provide these services could not impose upon any restriction to its users, similar to that of home telephones and radio services. The Chairman of the FCC is currently Ajit Pai, who had been working in various positions in the organization before being elected to the elective board by President Donald Trump earlier this year. He previously worked as the attorney general to Verizon Communications (which is one of the biggest ISPs), so his stance on this issue was widely accused to be privately-motivated to benefit these companies. The current Board of the FCC consists of five officers, in which three of them are Republicans. Famously known for his stance on anti-regulation, this decision merely struck any surprise to the public. If the vote against net neutrality is accepted by Congress on this upcoming week, it would classify the Internet rather as an “information service”, so that companies who provide Internet access can discriminate their users by their subscription to a limited range of websites – which can be translated through additional costs to consumers. So before the net neutrality rule was in place in 2015, many customers had difficulties getting access to some of the online applications. Google Wallet was the most prominent example of this act of discrimination, whereby the ISPs deliberately shut down any public access to the application which in turn competed with similar products developed by these ISP companies. Of course, this is not something that the US had not been through before. In fact, the “net neutrality” policy has only been endorsed officially by the former President Barack Obama since 2014, and the full and comprehensive enactment of net neutrality was not imposed until one year later. More detrimentally, a research found that when the access to a certain webpage is not as it normally would with some ISPs, consumers would click out of it expecting the published content of the website to load constantly. This goes against the benefits from the standpoint of both consumers and the producers from the construction of welfare, in which an economic transaction might not occur due to the restriction of accessibility that raises the searching cost. Of course, the beneficiaries of this policy are the ISP corporations, more particularly the established providers in the United States. The argument against net neutrality Prior to the enactment of the vote on December 14, the FCC officers, of course, do have the obligation to explain publicly on the cons of net neutrality and why it is necessary to repeal the current policy. In many debates and public speeches, net neutrality is presented as the policy that goes against the epitome of competition. The (large) ISP companies say that the imposition of the broadband as “common carrier” would put fewer incentives on them to put further investment on their current broadband infrastructure, thereby limiting them to the option from the further decrease in prices in a distant future, in which of course, that this would eventually benefit the customers. Furthermore, ISP companies such as Comcast, Verizon, and AT&T claim that they were being regulated extremely strictly as much as monopolies – and these companies are hugely annoyed by such statutes. However, the validity of these arguments does remain in question. For example, a certain neighborhood is usually dominated by an ISP company, which is similar to what we have here in the Netherlands. From the report that is issued in 2016, the FCC found that only 38 percent of US customers had a choice to pick an ISP for their Internet service; otherwise, they usually remain (or are rather forced) with the one that is installed at their own accommodation. Therefore, the sense of competition might not be encouraged drastically between these ISP companies as asserted by the FCC chairman, but rather embracing the freedom for these companies to overcharge their customers. Furthermore, while it might encourage domestic investment from these ISP companies, it does decrease a lot of investment made by other small businesses, especially in this era where the main exposure to the growing population is the Internet. The restriction on the Internet access limits the option for SMEs to grow, for example with digital marketing, small businesses might create an avenue for them to advertise their products without paying too excessive of a price. When the Internet is considered as an “information service”, then these businesses have to make some financial compensations to these ISP to get prioritized feature when customers use their Internet service. For example, in a hypothetical situation, if Microsoft pays to Comcast to throttle the access of customers service to their search engine while Google doesn’t, then obviously in the long-term, Comcast customers would prefer to use Bing not because of its virtue as a search engine, but only because of the unblocked access to the web-searching service. Small businesses may not even have a chance to introduce their products through the Internet. Some might even argue from the philanthropic viewpoint, that Internet is not created by these companies but a public property, so the access to all content of the Internet should be equal to everyone. However, the FCC could not decide the issue in their own hands (because it is an independent entity), and any decision has to be approved by the National Congress. Although the Congress in Republican-dominated, there is still some strong resistance within the party in regards to the repeal, so many American citizens are trying their best to make their voice heard, which can be done by writing your opinion on the matter on the FCC website. More than 98.5% of comments on the FCC website vows against the legal proceedings of abandoning net neutrality, but could they make a change? Net neutrality around the world Surprisingly, Chile was the first country on our entire planet to adopt this policy back in 2010. On June 2012, the Netherlands became the first country in Europe to enact the net neutrality rules, which echoed across Europe and turned into an intra-continental adopted policy made by the European Union in 2014. Still, the regulation that is in place is still relatively lax compared to that of the United States and the Netherlands. When many countries, especially developing ones, look up to the US as their guidance of governing a country, the net neutrality repeal might have adverse consequences all over the world.

‘People say you are what you eat. At Rostra we say you are what you read!’ Do you have a flair for writing? Have you always wanted to share your opinions not only with your friends but with the whole Faculty of Economics and Business? Then Rostra Economica is the team to join! Rostra is looking for new editors, a secretary/treasurer, and a new Editor-in-Chief to strengthen the Rostra Team. Write for this online faculty magazine about topics of your interest and become part of the international Rostra team. Apply before 30th December at Apply now! More information: www.sefa.nl / Hr@sefa.nl

Do you remember your first thought on the morning of 8th November 2016, when Donald Trump won the US presidential elections? Well, I do. And to put my thoughts into appropriate language, I remember thinking: “This did not just happen!”. I believe that the majority of people in the world felt the same way. Changing my TV from one channel to another, from CNN to BBC and back to CNN, I was trying to make sense out of something that seemed so odd, almost impossible, but, yet, deep deep inside very likely. In fact, it wasn’t the first time that I experienced such a feeling in the year of 2016. I felt exactly the same way on June 23, when 51,9% of the participating UK electorate voted to leave the EU. Again, I was both surprised and not surprised at the same time. As a matter of fact, there is a whole theory developed around the occurrence of such events and it was given a name: The Black Swan Theory. Before the discovery of Australia in 1679 by Dutch explorers, people in the old world were convinced that all swans were white — an indisputable belief as it seemed completely confirmed by empirical evidence. However, if you haven’t seen a black swan, that doesn’t mean that there are no black swans. The sighting of the first black swan might have been an interesting surprise for a few ornithologists (and others extremely concerned with the coloring of birds), but that is not where the significance of the story lies. You probably wonder why am I bringing up something that is totally irrelevant to economics or politics? Surprisingly, it is, in fact, very relevant! Black swans have shaped the history of technology, science, business, and culture. So what are these black swans? Black swans are highly consequential but unlikely events that are easily explainable — but only in retrospect. It is a phenomenon that comes about as a surprise but has an extremely significant effect on the future. Think of Donald Trump winning the US elections, Brexit, the 9/11 terrorist attack, or the annexation of Crimea in 2014; events that came almost out of nowhere, yet, looking back, they seem almost inevitable. Daniel Kahneman and Amos Tversky have demonstrated that people think that implausible events are more likely to occur if people argue about them: the more you talk about it, the less that scenery seems impossible. Black Swan Theory was first introduced by Nassim Nicholas Taleb, who has devoted his life to emerging himself in problems of luck, randomness, human error, probability and the philosophy of knowledge. Prof. Taleb defines a black swan as a highly improbable event with three principal characteristics: 1) it is unpredictable, it lies outside of realm of regular expectations; 2) it carries a massive impact; 3) after the fact, we concoct an explanation that makes it appear less random, and more predictable than it was. In fact, Taleb is not attempting to predict events which are unpredictable. The theory rather illustrates a severe limitation to our learning from observations or experience and the fragility of our knowledge. One single observation can invalidate a general statement derived from millennia of confirmatory sightings of millions of white swans. All you need is one single black bird. ‘Black Swans underlie almost everything about our world, from the rise of religions to events in our the everyday life’, says Prof. Taleb. Go through an easy exercise. Just think of the events in your personal life that did not occur according to a plan but have had an immense impact on your life? I can definitely think of a few. For instance, my unexpected move from Scotland to the Netherlands — a black swan in my life that I would have never been able to predict or expect. Just like my personal example, there are a number of examples of the unpredicted global events. Every black Swan is linked to a risk, both financial and political. Here’s an example of three economic black swans that the world has experienced. 1)        Internet Bubble (1990s) The bursting of the dot-com bubble, which was characterized by a rapid rise in equity markets sustained by investments in Internet-based companies. The value of equity markets grew exponentially with the by technology dominated  NASDAQ index growing almost 5 times between 1995 and 2000, and then dropping almost by 78% in 2001, leading to trillions of dollars of investment capital being vanished. 2)        Global Financial Crisis (2008) Probably the most discussed example through my whole bachelor’s programme. A crisis that started off as a filed bankruptcy by Lehmans Brothers and that grew into a subprime-mortgage-induced financial crisis that is considered to be the worst crisis since the Great Depression. 3)        The sovereign debt crisis in Europe Sovereign risk, according to a number of studies, was perceived as an unlikely issue to be crystallized in Europe. Following the global financial crisis, financially stronger countries like Germany were not capable of funding weaker countries, such as Greece (146,2% debt to GDP), Portugal (96,2% debt to GDP) and Spain (60,1% debt to GDP), out of their debt. Thus, they had a need for a bailout. The debt crisis led to a crisis of confidence for European businesses and economies. All of the events described above were not predicted to happen, leading to severe circumstances and required a long period of time to recover from them, thus, can be described as black swans. Predicting a Black Swan is quite impossible, because if you predict one – it will not be a Black Swan anymore. Can we understand health without taking into consideration heavy diseases and epidemics? Can we investigate a criminal affair by assessing only what a perpetrator does in his ordinary life? So what is the conclusion? Indeed, the “normal” is often irrelevant.  Almost everything in social life is produced by rare but consequential shocks. That is why the black swans in retrospective are often easily explainable. Our world is dominated by what is unknown and highly unlikely, thus we need to use “black swans” as a starting point rather than something exceptional and extraordinary hiding under the carpet.

The last Friday of November was not a normal Friday – it was Black Friday, one of the busiest shopping days of the year! Originated in the U.S., its name is derived from a dated method of recording business accounts. Profits were recorded in black ink, thus many business owners considered Black Friday as a turning point in sales for the year. Leaving stores open for more hours, significant discounts, and offering other special deals on Black Friday indeed helps business owners generate huge revenues. In recent years, the promotion period has extended, now lasting from the Thursday before Black Friday, Thanksgiving, to the Monday after, known as Cyber Monday. According to U.S. statistics from 2016, a total of 137 million people went shopping over the five-day Black Friday weekend. Moreover, 22.6 billion visits to retail websites were recorded in 2016 over the five-day period, with $12.8 billion spent online. Like myself, many students shopped during this year’s Black Friday. However, when we calm down from the craze of shopping, do we actually save money? And more importantly, does the discounted shopping really improve the quality of our lives? Last year, attracted by discounts, I bought a number of items from different online retailers. The first problem was delivery. Due to the overcapacity of most delivery companies, the delivery of my packages was delayed, some of which lost halfway. Therefore, I had no choice but to write emails to those online retailers. After dozens of emails, I finally got all of my items. By that time, however, I was no longer happy about receiving them because of the time I spent trying to get them back. Nevertheless, the arrangement of all those goods became the second problem. Given the space of accommodation for most students and how irrational we are when shopping, we do not consider the arrangement of them. If all the things you buy are small, you are lucky, because you can always find a way to arrange them. If what you bought are coats, boots or even electric appliances and furniture, storage becomes a big problem. Even if you find a place to put them, it can turn your room in a jumble. Frankly, I made little use of the majority of the products that I purchased. Then, why do we still purchase? The logic behind the purchasing action might be that customers, like myself, believe that shopping during sales and discounts is a sign of frugality and indicates a wise use of money. When you pick up a lot of goods at ‘insanely cheap’ prices, you might be happy about how little you paid for what you bought. While you might think that shopping during sales saves you money and makes you economical, in reality, the opposite is true. A ‘20% off’ coupon may seem good, but it is usually 20% off on a specific amount, like $500. Such offers appear good, but they almost always force the buyer to pick things they do not need. Posters screaming ‘Buy 3, get 1 free’, ‘Hurry! last 2 days’ and discounts on expensive products are similar strategies. If you are not seeking a particular item that you need, but you are simply seeking out low prices and accumulating stuff for the sake of accumulating stuff, you might end up emptying your wallet. Therefore, you can see that discounts, deals and sales have the power to encourage buyers to consume what they do not need, while making them believe that they are being economical. In actuality, this system is most beneficial for the business owners and takes advantage of the customers’ desire for a good bargain. Thinking carefully, you might realize that you not only spend more, but also spend carelessly. However, if you are rational enough to spend money only on the things you already plan to buy, it is definitely a good deal. Searching for deals, discounts and bargains are a different story: According to some research, consumers expend effort prior to Black Friday by reviewing and evaluating Black Friday information online. Black Friday ads are usually kept secret from consumers until retailer circulars arrive in the mail or in the Thanksgiving Day newspaper. For a few years, advance Black Friday sales information has been posted on special websites. This practice is called “leaking the ads”, and savvy consumers who want to make the effort can google for sale information. It is not surprising that reviewing and evaluating such information is time-consuming and may lead to overspending. The Black Friday doesn’t really benefit us. If you are buying something you don’t really need and didn’t really want before you saw it, you are wasting your money. It doesn’t matter how good the deal is, you’re just throwing away your money for useless things, and that’s a sure way to put yourself in a worse financial position. If you are spending plenty of time on searching for a good deal, you are wasting your time that you could invest into yourself. The Black Friday has already passed, but the Christmas Sale season is coming. Let’s be a rational customer this time.

As the majority of economists were (and most of them still are) working on a model in which markets ensure superior outcomes if left to themselves, they could not foresee the financial crisis. All the deregulation that happened since the early 80s, the supposed rational behavior of market participants, the technological capacity for calculating risks and the financial derivatives that allowed risks to be spread across a large number of market participants, were supposed to ensure that the financial market was close to perfect, so major disruptions would be a thing of the past. Top economists like Lucas (2003) went even further: “[Macroeconomics’] central problem of depression prevention has been solved, for all practical purposes, and has in fact been solved for many decades.” Undisturbed by the fact that banking crises were virtually nonexistent between the end of WWII and the mid 1970s while the number of countries experiencing banking crises shot up to 20% of all countries (weighted by their share of world GDP) in the fiercely deregulated financial markets of the mid 1990s (Reinhart & Rogoff 2008; cf. Chang 2012), economists propagated (and many still do) constructs like the efficient market and rational expectations hypotheses (EMH and REH respectively), that tell us that sufficiently deregulated markets will always get it right on average and will neutralize the effects of any attempts to interfere. When things do go south despite this, Real Business Cycle Theory (RBCT) tells us that the cause must be exogenous as EMH and REH ensure that the market itself cannot be at fault. In short, EMH and REH sing the praises of the market, while RBCT helps to reassign blame if events seem to prove that praise misguided (Varoufakis 2013). Both EMH and REH however, require market participants’ time-horizons to be long and their incentives to be symmetrical in the sense that they stand to gain as much from a good deal as they are to lose from a bad one. Anthropological research by best-selling author Luyendijk (2015), however, has shown that the real incentives facing people working in the London City (and arguably Wall Street and other financial centers as well), do not even remotely come close to this ideal. He describes a world of zero job security in which people that make smaller than average profits on their trades are periodically ‘culled’, that is, fired by the hundreds. As this can happen on a moment’s notice, long-run consequences of decisions play no part in any decision making and as trades are assessed only on the profit – and not the risk – they entail, traders have very strong incentives to secure their jobs and their bonuses by taking excessive risks. If the gamble turns out right, you get a big bonus and get to gamble another day. If it does not, it is only ‘other people’s money’ that the trader is not personally liable for (but as such trades may cost you your job, there is an incentive to administratively hide the bad deal and/or to try and compensate for the loss by taking an even bigger gamble hoping to be luckier this time). So, far from harboring a randomized distribution of risk-loving and risk-averse as well as short and long term oriented traders, this institutional set-up means that only short-sighted, consequences-be-damned risk-lovers have any chance to survive in the business. Together they created the massive bubble that burst in 2008. As governments and ultimately tax-payers are squeezed to cover bank losses their thinking turned out to be right all along: even if everything goes wrong on a world scale, they’ll be bailed out with other people’s money. Not only does this seem incredibly unfair, it also cripples the last vestiges of any market forces keeping financial markets sane for it shows that neither traders, nor the banks they work for, will be held accountable for the losses that result from their unscrupulous risk taking. This implies that today’s financial system is not a free market at all, let alone an efficient one. In a functioning market, after all, competition should ensure that companies that manage their costs and risks most prudentially can stay in the market longest. But if you are a too-big-to-fail bank you will be bailed out first and the worthless assets you created due to excessive risk-taking will be bought by central banks (CBs) under the guise of quantitative easing (QE) later. CBs thus artificially breathe life into markets that would collapse if they were left to themselves (as economists usually argue they should). The idea is that the money that QE creates, will prop up banks’ reserves and entice them to step up their lending for productive investments. But this can only happen if such investment opportunities exist and as effective demand slacks under the weight of the recession, and deteriorates further due to austerity measures and low wage policies, such opportunities are few and far between. So the surest way for banks to invest the proceeds of quantitative easing profitably, is by buying the very assets that CBs’ quantitative easing programs are targeting. Thus, a new bubble is forming through the unholy alliance of financiers, governments and CBs. So, whereas the bubble bursting in 2008 was at least in part caused by overoptimistic households taking on excessive debt, households have no part in creating it this time (but I do fear they will be forced to pick up the tab again when it implodes). In Varoufakis’ (2013) terms democracy is temporarily or indefinitely suspended in favor of what he calls a bankruptocracy: the reign of banks that should have gone bankrupt. I, for one, am not surprised by the voter revolts (e.g. Trump’s electoral success in the US; the extreme right rising to unprecedented prominence on mainland Europe; the Brexit vote in the UK and the pirate party tripling its seats in Iceland’s parliament) following this state of affairs. Voters may not know or understand exactly what is going on, but they do feel they are being played, squeezed and used by ‘the establishment’ and when a screw-you vote is available I can hardly blame them for casting it. But, but, but… surely governments cannot allow too-big-to-fail banks to actually fail, for if they did, all their clients would go down with them, right? You cannot actually be suggesting that would be the preferred outcome? Well, I am not, or not completely. I like the suggestion Steve Keen made in Room for Discussion (2016), where he says that the failing banks should have gone bankrupt as commercial banks, but instead of going off the market and taking their clients down with them, governments should have nationalized them and continued their services. Moreover, instead of creating an artificial market for worthless financial assets through QE, the state would have done better to expand CBs tool kit so they can improve banks’ financial health by scrapping private debt through a program that Keen dubs the people’s QE, which does not target bank assets, but relieves the underlying debt causing the assets to lose value in the first place. Thus, e.g. the much maligned subprime mortgages would be cancelled as would the assets repackaging their risks into collateral debt obligations (CDO’s) and what not. Such a program would thus shorten the banks’ balance sheets and deflate the original bubble, rather than replace it with a new one. Through the shortening of the banks’ balance sheets, a modicum of market discipline would be restored, while the associated debt relief would boost consumer confidence and demand (thus upping profit opportunities and productive investment to boot) (see also Blyth & Lonergan 2014). The latter effect would surely result in rising inflation, but, as Keen points out, this is exactly what CB’s are trying to achieve through QE anyway, but as long as QE money sloshes around within the financial system, they will keep on failing dismally at it. All in all then, the people’s QE deflates bubbles that need deflating, relieves the debt burden for those that are least responsible for the crisis but suffer its consequences most and restores some market discipline instead of suspending it. So why doesn’t this happen? It doesn’t happen because regulatory capture (see e.g. Buiter 2009) keeps many career politicians hostage: after their term is up, politicians hope to cash in on the favors they extended to banks by pursuing careers there (and these careers pay a LOT better than political ones, so again, who can blame them?). Meanwhile, the many (financial) ties between many influential economists and financial and insurance companies, suggest they are not immune to regulatory capture either (my source is focused on Dutch media-economists, but the Inside Job documentary suggests economists elsewhere are hardly more independent). So criticizing the status quo impedes politicians’ careers and the most influential economists are in no position to offer objective advice. No wonder then that proposals like the People’s QE are hardly ever seriously discussed.

It is the year 1879. Tensions are rising in South America. On February 14, troops of the Chilean army occupy the Bolivian port city of Antofagasta, thereby commencing what would later be known as the War of the Pacific. The Bolivian-Peruvian alliance would then suffer a clear defeat against Chile, resulting in painful loss of territory for both countries in the resource-rich Atacama Desert. Fighting over valuable resources and disputes over the often vague borders of the fledgling nations in South America are no casus belli to be considered very unusual at the time. And yet, the outcome of the War of the Pacific remains a national tragedy in the Bolivian memory of the conflict and antagonism in the public towards Chile continues to run deep until today. Since 1978, no official diplomatic relationship exists between the two countries. The loss of the Departamento del Litoral is commemorated in annual celebrations of the Dia del Mar, or “Day of the Sea”. The reason for this is that since the war, Bolivia has been landlocked, meaning it has no sovereign access to the open seas. This is considered a severe problem, and the government continues to lay a claim to obtaining a sovereign portion of the seacoast through what is now Chilean land. In Bolivia’s case, a Treaty of Peace and Friendship was signed with Chile in 1904, in which perpetual duty-free use of the Chilean ports of Arica and Antofagasta as well as of the (then partly yet to be built) railroads connecting them to La Paz were granted to Bolivia. But even in recent years, several strike waves in said Chilean ports have caused significant harm to Bolivian trade, which Bolivia considers a violation of the treaty. In the Bolivian gas conflict starting in 2002 it also became apparent that there exists strong support to divert trade to the Peruvian port of Ilo by building a new gas pipeline there rather than to Chile, though being the costlier option. In Ilo, Bolivia maintains a special economic zone for free trade, and a similar arrangement exists in Rosario, Argentina. The Bolivian efforts to reach the sea, however, cannot conceal the fact that the country has been lagging behind its neighbors in its development, scoring the lowest HDI out of all countries on the South American continent. Transit countries (like Chile in the case of Bolivia) are not much incentivized to invest in infrastructure for the purpose of facilitating the trade of their landlocked neighbors. The latter essentially have no influence on the political and administrative situation in their neighbor country and face relatively low bargaining power. This issue is especially grave in many of the landlocked nations in Africa, where oftentimes political situations are unstable and economic cooperation is weak. Generally, being landlocked increases the costs of trade due to tariffs and higher transportation costs. Further, trade of landlocked countries often does not extend much beyond neighboring nations, which is particularly unfortunate if that neighborhood suffers from poor overall development, as is the case in most of Africa. This moreover will likely deter foreign investments. Therefore, being landlocked is especially problematic for developing countries. The Convention on Transit Trade of Land-locked States of 1965 recognizes the disadvantageous position of noncoastal states. Transit countries agree not to discriminate against trade from landlocked states. Nevertheless, the disadvantages persist. An expedient approach to alleviate them is economic integration. The hindrances for trade of landlocked countries in Europe have been largely removed due to close cooperation, mostly within the framework of the European Union’s single market. Switzerland, a landlocked nation, is considered one of the very wealthiest in the world. This can be partly attributed to European integration but also to the type of products it exports, which are mainly either high-value industrial output or service based, like finance. This also shows further complications developing nations face, of which the exports are mainly commodity based. Some landlocked nations also benefit from being located at navigable inland waters. Paraguay, for instance, enjoys an advantage over Bolivia as the Paraguay River and the Paraná River, both large in size and navigable, connect it indirectly with the Atlantic Ocean. The same goes for many European nations with access to rivers like the Rhine or the Danube, both international waterways. A result of this, among others, is that some landlocked countries have navies. Bolivia still maintains a rather sizeable fleet, sometimes seen as a symbol of its claim to sovereign access to the sea. In addition to that, landlocked nations have also been entertaining merchant fleets since this was granted in the Declaration recognising the Right to a Flag of States having no Sea-coast in 1921. It becomes apparent that having no access to the sea can put a country at a serious disadvantage and hinder development. This makes a strong case for economic integration and the facilitation of trade for the countries concerned. To reduce transportation costs, the most severe impediment to growth, landlocked countries will need to invest in infrastructure and higher value goods more so than their littoral neighbors. Some might want to aspire to become a hub for inland trade. The African noncoastal nation of Botswana is displaying great economic success mostly due to its diamond trade. And even though not every country faces such advantages, it does give hope that the destiny of being landlocked need not be gloomy after all.

I love going to the movies. It really helps me to relax after a long day of teaching. This week, I went to see Murder on the Orient Express with my nephew, Paul. The movie, based on an Agatha Christie novel, tells the story of a murder committed on a stranded train. Hercule Poirot, the moustache-wearing Belgian master investigator, tries to unravel who did it. Paul said he loved the movie. I found it kind of off. “I am not sure why, but I found the movie kind of off,” I said to Paul. “Of course, it has a star cast, including Penélope Cruz, Willem Dafoe, Johnny Depp, Judi Dench, and Michelle Pfeiffer. It’s not exactly boring. And the landscape is mesmerizing. But I don’t really see the need for all the visual splendor, and I also dislike the focus on Poirot’s moustache and his emotional temper.” Paul sighed. “Are you getting old? I loved the movie! If this isn’t your cup of tea, what movies do you like? What’s your favorite movie?” That was a no-brainer: “Dr. Strangelove or: How I Learned to Stop Worrying and Love the Bomb.” This movie was right at the forefront of my mind because in my lecture earlier in the day I had shown a fragment to the students that nicely illustrates the value of commitment – the topic of the lecture. The movie is a black comedy from 1964. The Soviet Union has built a doomsday machine that will destroy all civilization if the Soviet Union is attacked. The doomsday machine is supposed to serve as a commitment device to prevent the US from attacking. However, when the American general Ripper decides to launch an unauthorized nuclear attack, the Soviet Union’s strategy goes tragically wrong. Commitment is a central topic in economics. In many settings in which decision-makers interact strategically, they fail to reach favorable outcomes for themselves. Early entrants in a booming market see their initial profits marginalized once other firms enter as well. Workers slack because they do not expect their managers to pay a bonus at the end of the year even if they have the discretionary power to do so. Children continue begging for sweets because they know that their parents will give in if they whine for long enough. At a macro level, investors are hesitant to lend money to Greece because they fear that the European Central Bank will not bail out the country in the event of a credit crisis. The key insight is that commitment to a strategy that is ex post unattractive might actually help decision-makers reach better outcomes. An early entrant opening an excessive number of retail shops prevents entry because it credibly commits to aggressive pricing once another firm enters the market. A manager encourages his employees to work harder by signing contracts with them according to which they will obtain a bonus if they perform well, even though the manager will rather keep the bonus at the end of the year. Children will behave if their parents throw away the sweets at home. And the European Central Bank can prevent a credit crisis by committing to bailing out governments when a crisis emerges. The scene that I showed in my lecture takes place in the war room of the Pentagon. The Soviet ambassador, Alexei de Sadeski, reveals that the doomsday machine will be triggered automatically and that it cannot be disarmed. Then wheelchair-using Dr. Strangelove (whose character was modeled after the game theorist John von Neumann) comes to the fore. He explains why it is essential that the doomsday machine cannot be untriggered – yielding the necessary credible commitment for it to work. But, of course, a commitment strategy only works if the counterparty is aware of it. Dr. Strangelove: “The whole point of the doomsday machine is lost if you keep it a secret.” “Why didn’t you tell the world?” he asks the Soviet ambassador. The ambassador replies that they planned to do so a week later at the Communist Party conference, in honor of the Premier, “who loves surprises.” “Why this particular movie?” Paul asked. “It nicely illustrates the value of commitment.” “Sorry, the value of what?” I did not feel like repeating my lecture to Paul, so I quickly said: “Now that I come to think of it, I believe I liked Pulp Fiction even better.”