Clean Energy

In my last post Resource Depletion and Green Economics I have mention how the human race is depleting the environmental resources and ruining the eco-system. But the awareness is been developing since last two decade, and the concept of sustenance of natural and environmental resources are introduced. Developed countries are finding alternative resources of the energy so that the dependence on oil and other carbon emitting fuels like coal which is considered to be the major contributing factor of global warming according to the Intergovernmental Panel on Climate Change and dependence on nuclear energy (Sometimes, this less comprehensive meaning of "alternative energy" excludes nuclear energy as defined in the Michigan Next Energy Authority Act of 2002) can be reduced.

Against conventional resources the alternative resources of energy are given the name of Clean Energy Resources. These clean energy resources will not only help to protect the eco-sys but they will also create new jobs. Against energy resources like fossil fuels there are many other clean resources of energy like water, wind and solar energy. Renewable energy sources such as biomass are sometimes regarded as an alternative to ecologically harmful fossil fuels. Renewables are not inherently alternative energies for this purpose. For example, the Netherlands, once leader in use of palm oil as a biofuel, has suspended all subsidies for palm oil due to the scientific evidence that their use "may sometimes create more environmental harm than fossil fuels.

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Resource Depletion and Green Economics

Hello friends I am back with a newer post about the depletion of natural resources and introduction of Green Economics. This is first of the serial of posts that I am going to share with you. Our world’s natural resources are depleting due to excessive extraction to feed the needs of the capitalistic giant, and the rate of extraction of resources is increasing day by day and if we will continue to do so sooner the scarcity of resources will become so swear that we will have to pay it at the cost of existence of our future generations. This excessive extraction of natural resources is also disturbing our ecological system. Due to massive carbon emissions on one side the ambient quality of eco-sys is decreased but it has highly reduced its assimilative capacity. So we have to do inter-temporal decisions by trading off between our needs and future generations. So the concept of Green Economics is introduced.

The concept of Green Economics don’t only relates to the survival of environment by drowning the economy. It tells us how we should take our economy along with the eco-system. But it requires a great effort on the part of all of us because the process of transformation of a system always requires the mental and physical efforts of the agents of that system. Green Economics talks about the introduction of positive alternatives in the all areas and each sector of the economy. In economics the concepts of social cost and social benefits are already familiar, for example to reduce the emissions the governments can put emission taxes on the producers as social cost so that the damage done by emissions could be recovered and due to these taxes the producers will also reduce the emissions. On the other hand to some extent reduced emissions also mean reduced resource depletion. This can happen in many ways but I will discuss two of them.

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Fiscal Measures to Control Recession

In one of my earlier posts “Is it the call to another Great Depression?” I mentioned how the easy monetary measures of Federal Reserve lead the US economy toward the Deflationary situation and suggested that the Black Man’s government should adopt easy fiscal measure to overcome this alarming situation. One of my friends posted me a comment on that article. In fact in response to that comment I was forced to write this new post.

Let’s take the things one by one. We know that US economy is facing a very high unemployment rate (up to 9.5%). Professor Arthur Okun conducted an empirical study and concluded that an increase in unemployment rate by 1% reduces the Real GDP of by 2%; his observation is given the name of Okun’s Law. So the government has to control unemployment rate by deficit spending and many economists recommend deficit spending to end recession, especially a severe one.

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The Beauty Premium

There are many way the people differ from each other and one prominent difference is how attractive they are. For example actress Angelina Jolie is good looking, due to this reason her films attract a large audiences so this mean large income for her.

Now we see hoe prevalent are the economic benefits of beauty? The answer is in the study of Daniel Hamermesh and Jeff Biddle published in American Economic Review. They collected the data from surveys from individuals in the US and Canada. The interviewers who conducted the survey were asked to rate the physical appearance of the respondents. They examined that how much the wage of the respondent depends upon the standard determinants like education and experience, and how much they depend upon physical appearance.

They found that the beauty pays. People who more attractive earn 5% more than the people of average look and the people average look earn 5% to 10% more than the people of less than the average. Similar results were found for both men and women. Why there is difference in wage? There are several ways to interpret the beauty premium.

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The Impact of Western Development on the Rest World, 1000-1950

A major feature of world development which emerges from our macro–statistical evidence is the exceptionalism of Western Europe’s long–run economic performance. By the year 1000, its income levels had fallen below those in Asia and North Africa. In its lengthy resurrection, it caught up with China (the world leader) in the fourteenth century. By 1820, its levels of income and productivity were more than twice as high as in the rest of the world. By 1913 , the income level in Western Europe and its Western Offshoots was more than six times that in the rest of the world.

In order to understand the forces which made for the Western ascension, and the reasons for its greater dynamism than the rest of the world, it is useful to scrutinise the interaction of the West with the Rest over the long run. It is not feasible to embark on a comprehensive survey of all parts of the world economy. This chapter therefore presents four case histories. A great advantage of this detailed scrutiny is that it demonstrates how misleading it is to treat Western experience as homogeneous or monolithic.

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In the Memories of Talibaans : Introduction of Islamic Banking in Afghanistan

If we remember the past few decades we can easily remind the sharia imposed by the Talibaans in Afghanistan which is anyhow still in charge in some parts of Afghanistan. President Obama have indicated to leave Afghanistan and meanwhile DAB's (Da Afghanistan Bank) spokeman Aimal Hashoor announced the Afghanistan plans to issue licenses for three Islamic Banks to offer the services comply with the majority of the population's religion.

The Three banks who are seeking to work in Afghanistan are Afghan United Bank, Ghazanfar Bank and Maiwand Bank. CEO of Afghan United Bank Sayed Mahmood ul Hasssan said the products are limited to Islamic Loans.
Government took this decision because it want to expand the Islamic Finance to draw more assets in economy to reduce the nations dependence on the foreign aid and as being the extremist Muslim society the Afghan's will not tend to use the conventional banking. Afghanistan have received nearly $32 billions in terms of international aid since the U.S attack on Afghanistan in 2001.

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Is it the call to another Great Depression?

"The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy."

Milton Friedman

After the financial crises of the 2008 Federal Reserve (C.B of US) injected money to uplift the credit market. Interest rate was cut down which was already been kept low for about a decade. Normally when interest rate are kept low and large amount of capital is injected in the market it leads to inflation, and as it was expected in the case of Federal Reserve’s easy monetary actions. But the symptoms are showing that another economic depression is going to hit the global economy and large economies are going to face deflation.

One of the drastic reasons is that the US economy is facing and unemployment rate of 9.5% and a fuller picture of unemployment shows a full 16.5% is not been paid. Thus inflation is not possible when people have no money to spend and when they have so much debt to pay. The individual saving rate has increased from 2% to 6%. So it will be helpful to individual to pay off their debts but it means less money to get the economy moving.

Meanwhile with all the C.B’s money and assurance, the financial institutes and not willing to lend and the investors are not willing to spend and sitting on the sidelines. They're waiting on a better economy - and the fact that worker productivity has yet to skyrocket (increased productivity is usually a sign that precedes increased hiring) suggests that they may be waiting for a long time.

So as the economies become slower the risk of deflation is increased. In US during June the overall prices (excluding food and energy) was up just 0.9% the slowest increase in last 44 years in US. Federal Reserve had announced to adopt the easy monetary policy as it will continue to buy treasury bills from the market in order to help the economy by keeping interest rate low.

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Impacts of Information and Communication Technologies in Pakistan

1. Introduction

What are Information and communication Technologies?

“Information and communication is essential for a society in terms of education, economic and political awareness, social relations, entertainment and well being of the individuals of a society” .

In today’s globalized world information and communication is the base of businesses like media, telecommunication and software industry. TVs, Computers, cell phones, and internet are considered as development and a step forward in the human history. So Improvement in technologies is considers as high economic growth and increasing welfare.

It is common understanding that ICT sector is rapidly growing and very important in development of economy. The data characterizing the relevance of ICT may as well as refer to domestic production, import, export, and consumption of commodities relating to ICTs. So there must be some comprehensive definition of ICT.

The common international definition of ICT is given by Organization of Economic Co-Operation and Development (OECD). OECD is a working party on indicator of information society , it released a guide that defines ICT on more than 70 pages but here we will see the comprehensive definition.

“The OECD defines the ICT “sector” as the combination of industries of manufacturing and services ”

Broadly Information and Communication Technologies impact education, business, communication, entertainment, employment and banking. So we can say it impacts the whole society and its reforms environment. In ICT sectors there are numbers of huge enterprises working around and generating the revenue of billons and trillions of dollars. In simple they are cash cows , we have the examples of INTEL, AMD, MICROSOFT, NOKIA, and SAMSUNG. There are number of other companies that are playing major role in isolated and global economies.

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Masturbation : An economics way to understand

Hay guys I am back with a new post and it’s about public health and safety. The major problem of our country is that people are afraid of talking about. I think most of the guys will find this interesting and beneficial. Today we are going to see how much the masturbation cost and what are its benefits. I am not a medical doctor and I think like an economist thinks. So the best way so far is to conduct a cost benefit analysis and interpret the results. In such an analysis we can estimate the cost and benefits of a certain activity to see its feasibility and reliability.

As we know there are agents in an economy which are supposed as rational agents. A rational agent is one who is well aware of the situations, similarly in our case a rational masturbator will be the one who is well aware of dangers (cost) and benefits of his activity and will efficiently employee his natural resource in a balanced manner.

Now the question arises, why someone will masturbate? To find the answer I have conducted many interviews. In our case firstly we analyze the benefits.

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Terrorism and Economy

Terrorism is the systematic use of terror especially as a means of coercion. At present, there is no internationally agreed definition of terrorism. Common definitions of terrorism refer only to those violent acts which are intended to create fear (terror), are perpetrated for an ideological goal (as opposed to a lone attack), and deliberately target or disregard the safety of non-combatants.

Terrorism has occurred throughout history, but today the world is experiencing a global rebirth of attacks. Today it no longer affects only small societies, such as isolated third world countries who fell victim to regular terrorist attacks. The terrorist violence that is on the rise today has informed citizen all over the world about different types of terrorism. Also with the resurgence the world is experiencing of terrorism, the Nation's have been to do what they can to eliminate terrorism. Mainly terrorism has social, psychological and especially economic effects on societies. And we’ll have an eye on the effects of terrorism on international markets, businesses and commerce activities.

Extant research on the effect of trans-national terrorist attacks on international commerce has found evidence within a gravity model framework that terrorism reduces bilateral trade flows. The terrorism creates the overall risk environment for businesses in a country. Furthermore, many terrorist attacks actually involve an attacker from a particular country and a target in another country. The effect of terrorism on trade between countries is directly the effect of a terrorist incident involving an attacker from one country against a target in another, like the recent Mumbai attacks have highly affected the Indo-Pak economic activities. The idea is that such bilateral terrorist attacks more closely reflect the affinity and quality of the relationship between the citizens of the two relevant countries and hence, better represent the actual risk posed to traders in the two countries.

The possibility of an international terrorist activity has suggested to policy makers the need to consider the possibility of border closures to interrupt trade, international business travel, tourism and the loss of immigrant labor. In an era of significant globalization, the costs of such measures are substantial. On the other hand, the duration of a worst-case outbreak could be as long as many years and hundreds of thousands could die. The results must be assessed carefully in light of the uncertainties involved and the fact that this could be an extreme event outside the normal range of the data used to estimate the model. Nevertheless, the estimated costs of border closure and the benefits (the dollar value of lives saved and health expenses minimized) are sufficiently close that closing the border merits serious attention as a mitigation strategy if a pandemic breaks out.

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Monetary policy and the role of Central Bank

The policy with which the Central Bank controls the money supply in the economy is called the monetary policy. As Central Bank reduce the money supply in the market the interest rate increases or the other way we can say that to increase the Market interest rate the Central Bank reduces the money supply. Now the question arises that how the Central Bank do so? The simplest answer to this question is open market operations by the Central bank. In open market operations the central bank purchases or sales the bonds, security and treasury bills‎ in open market to control the money supply and inflation rate. When it purchases the bonds, securities and TB from market the money supply in the market increases and increased money supply leads to lower market interest rates. These lower interest rates or low cost of borrowing encourages the borrowers. As a result the domestic consumption increases this leads to demand pull inflation in the economy. So with the help of tight monetary policy the Central Bank increases the policy rate to control the inflation.

New Monetory Policy by The State Bank of Pakistan

From the beginning of this fiscal year persistent inflation and fiscal problems are resisting the improvement in the Balance of Payment and recovery of the falling economy. Due to uncertainty and worsen economic conditions the gap between national savings and investment has squeezed mainly because of decline in investments. At the same time aggregate domestic demand is exceeding the aggregate supply. Aggregate supply is squeezed mainly due to increased cost of production which is led by energy crises and increase in value of primary inputs. And the external debts has increased to $55.266 billion in January 2010 from $43.141 billion in the corresponding period of 2008, showing a net increase 28 percent in the last two years of the present government. So all this led to worsen inflation in Pakistan and government is not taking appropriate fiscal measures to control this situation. As inflation rate of 11.7% in fiscal year 2010 was 2.7% higher than the announced target of 9.5%. Inflation is projected to remain from 11% to 12% in fiscal year 2011.

To sterilize risks to macroeconomic stability, monetary policy has to take lead for containing aggregate demand pressures emanating mainly from expansionary fiscal position. Therefore, SBP is increasing the policy rate by 50 basis point, i.e. from 12.5% to 13% with effect from 2nd August 2010.