Tuesday, January 19, 2016

On The Outside Looking In: The Paradox of Perspective

Appearances to the contrary notwithstanding, we're all multicultural, and we all wish to be on the inside of whatever community we happen to be courting at any point in time. Our confirmation bias makes us seek and trust others whose multiculturalism is harmonized with ours, but keeps us watchful for the slightest divergence (an offhand remark or gesture, perhaps) to reconfirm our suspicion about said others.

Being on the outside looking in gives you a valuable perspective for those on the inside, or so you think when you're the one on the outside. Those on the inside are quick to decide that your perspective is not useful, tautologically, because you're on the outside, and vice versa.

I have a small replica of the Rosetta Stone above my desk at school, and used to have a mousepad shaped like one. I thought that my comparative advantage -- professionally, socially, politically, and in every other way -- was in my ability to translate cultures on the inside to those on the outside and the other way around. Now I think that this may be a futile exercise: How can you convince those who want translation that you truly understand the two languages -- ancient Greek and ancient Egyptian on the Rosetta Stone, Economics and its critiques professionally, Islamic scholarship and its critiques professionally and socially, Egyptian and American cultures, and so on?

More difficult still, when they think that they already have a dictionary and good translations (on the inside), how can you convince them that their translators' understanding of the two languages was flawed? Can you convince yourself? Aren't you essentially arguing that you're the one on the inside of this cultural bridge, and that their other translators are the ones outside that bridge looking in?

Rumi famously composed the verses about blind people in a room, each holding a different part of the elephant, and each insisting based on their differential experiences that the elephant is something different from what the others profess it to be. You would think that a sighted person standing at appropriate distance -- for example, Rumi -- shedding a light on the situation, and describing the full elephant and how you can reconcile the varied experiences described by others, would be offering a valuable perspective. Why should those on the inside need Rumi, though: they will say that they are the ones experiencing the elephant directly, and they can aggregate their experiences without his help -- thank you, very much.

Saturday, October 10, 2015

On Islamists, Hindu Nationalists, and Education

Today's New York Times has a very interesting op-ed piece on India's Prime Minister Modi, and the clear lack of education that he and other leaders BJP leaders exhibit. The author, Aatish Taseer, indicts the Indian intelligentsia, to which he and his readers belong, which is associated with Congress party, and generally have received elite Western education, while the majority of the Indian population was left to Socialist-era public education systems that failed to deliver.
The parallels to my native Egypt are staggering. Indeed, Nader Bakkar, who may still belong to the Salafist Nour Party, for which he was a spokesman until recently, raised a question in his op-ed yesterday: What have the highly-educated offered beyond criticism of Islamists? At the other extreme, we find democracy advocate Mohamed Aboul-Ghar today saying that he and his party will not deal with prospective parliamentarians from the Nour Party, ostensibly because the party is religious and therefore unconstitutional (never mind that this constitution would not have been possible without the alliance of Salafis with military and civilian-democratic forces to oust the Muslim Brotherhood government).
This also reminded me of a vignette with the late Jamal Barzinji, who passed away last month, at IIIT in 2010. He had invited me to a two-day discussion of a proposal for IIIT to sponsor a textbook on "Islamic Economics." Naturally, I stuck with my view that you can't write a respectable textbook on something that doesn't exist, and which is almost certainly neither needed nor possible. My view was that it would make sense to write a book on "Economics for Islamists," as a way to introduce them to modern social scientific thought, which would be of value beyond economics per se. Needless to say, this was not a popular view, especially with the advocates for this proposal, but I believe that it prevailed, at least during that short visit. Late in the second day, Dr. Barzinji spoke to me privately during a coffee break, with apparent embarrassment regarding the Islamist project to which he once belonged, saying that when they were high school and college students, the dominant cultural forces in school were communist, and they sought to balance it out, but found nothing but these anachronistic Islamic references to counter. There, also, the Arab literati and elites are primarily to blame.
As the world's largest democracy, India provides a perfect example of the difficulties of balancing democracy, which will put majorities in power, sooner or later, with the need to have decisions made by those who are best educated. The tension becomes particularly high when the latter elites fail to deliver sufficient economic dividends to support some degrees of authoritarian or elitist bargains. They get even worse when the highly educated use their positions of power to make Wall-Street-style fortunes, as their fellow Western-educated friends in the West do, again without producing sufficient dividends for the less fortunate strata in their societies, but demand to remain in control because they know best.

Tuesday, October 06, 2015

State Religion Explanatory Power (Barro and McCleary 2005)

Today, I am going to discuss in class (Econ 452: Religion, Ethics, and Economics) the Barro and McCleary (2005, Quarterly Journal of Economics) paper "Which Countries Have State Religion". The preliminary data analysis in the previous few posts is part of my illustration to the students in this class of how to come up with a term paper topic, how to look through available data to formulate a reasonable hypothesis, etc. They all write term papers for this course, and I am writing one with them, hopefully showing them by example how it's done (they also do team projects wherein they do data analysis to replicate results from earlier papers, to learn how to use R, concatenate datasets when needed, use reasonable instrumental variables, etc.).
For today, I figured that the presence of a state religion may provide explanatory power for the level of mistrust of people of other nationalities (which, as we have seen in previous posts, correlates strongly with the level of mistrust of people of other religions). Below are plots of the level of mistrust measured as the percentage of those surveyed who choose "do not trust very much" or "do not trust at all" when asked how much they trust people of other nationalities (this is the percentage for those who gave an answer; i.e. those who said that they didn't know or otherwise didn't give a response wee excluded).
The first plot is for the country having a state religion in 2000 against the level of mistrust, and the second plot is the ratio over three years (1900, 1970, and 2000) of having a state religion. The data for that are taken from the Barro and McCleary paper, Table I, which is mostly based on Barrett's World Christian Encyclopedia.
What would be more interesting would be to correlate the state religion variables with the correlation between mistrust of people of other nationalities with mistrust of people of other religions (treating religion as a nationality). I should do that next, but am not sure whether or not I can get it done before going to class in an hour.

Monday, October 05, 2015

Mistrust, FDI, and Trade (No Relationship!?)

Below are two plots of the level of mistrust in a country (the portion choosing either "don't trust very much" or "don't trust at all" when asked about people of other nationalities, WVS Wave 6 data) against (1) foreign direct investment as a percentage of GDP, and (2) openness (exports + imports) as a percentage of GDP (both from WB, WDI).

The two fail to exhibit any significant relationship. (The outlier countries with moderate levels of mistrust and very high levels of FDI/GDP and (X+M)/GDP are the Netherlands and Singapore. Removing them makes the relationship even less significant).

Less extreme mistrust in East Asia

I shared the previous two blog posts with an Egyptian-American friend, who was equally alarmed. Then he asked how the patterns in China, Japan, and South Korea compare.

Here is the data for China:

and here is the (somewhat similar) data for Japan:

Both show very strong cautious mistrust of people of other religions and other nationalities, as well as quite significant extreme mistrust of both. Concentration along the diagonal is extremely high for these countries, suggesting that they have stronger association of nationalities with religions than most other countries.

Data for South Korea also shows quite significant cautious mistrust of people of other religions and nationalities, but almost equally significant cautious trust. This places South Korea somewhere between Japan and China, on the one hand, and U.S. and Germany, on the other.

Thursday, October 01, 2015

Religion, Nationality, and Trust Redux: How Blameworthy Are Muslims?

This is really alarming. The relationship between trust of people of other religions and trust of people of other nationalities, which I have mentioned in the previous blog posting is one of the strongest relationships in the latest wave of the WVS, may reconfirm my worst fears about Muslims remaining stuck in the 20th Century phenomenon of confusing religion with nationalism. In the previous posting, I showed that for the entire world, the largest category seemed cautiously untrusting both of people of other religions and nationalities, but the second largest category, and not by far, was people who were cautiously trusting of both people of other religions and people of other nationalities. I then showed that the picture was significantly better in the U.S., where a significant majority was cautiously trusting of both.

Then it struck me: I had spoken before about the 20th Century confusion in Muslim countries, wherein the concept of a Muslim community ('umma) was interpreted in the sense of nation statehood. The abomination that is ISIS/ISIL may just be the most offensive manifestation of this heresy, but its roots are unmistakably traceable back to the middle century thought of Mawdudi and those whom he inspired, and to some extent also to the earlier effect around the turn of the previous century of Al-Afghani, who equivocated a lot on those issues, depending on his audiences. So, the hypothesis immediately jumped to my mind: Is it possible that Muslims are the most offending culprits in mistrust of other religions and nationalities. WVS data on religious identity is not very usable, because, it appears, that a person, for example, may identify herself or himself as "Sunni", and thus not be counted as "Muslim." So, I decided to look at countries with Muslim majorities, and the first few results were quite alarming.

Here are the data for Algeria:

The largest category of those surveyed in Algeria (42%) fully mistrust people of other religions and other nationalities. The second largest category (24%) somewhat mistrust people of other religions and other nationalities. Together, more than two thirds of the population either do not trust at all or somewhat mistrust people of other religions and nationalities. This is very sad, indeed.

The results for my native Egypt are not as bad:

However, they are still not good at all. The magnitudes of the two groups along the diagonal of mistrust are not as large as in Algeria, but they are still quite large. 21.5% not at all trusting people of other religions and not at all trusting people of other nationalities is not good!

Pakistan is somewhere in between Algeria and Egypt.

Speaking of Pakistan, it was natural to check neighboring India, with whom she shared the colonial past and gained independence:

India displays the most diffuse distribution of any country that I have checked so far, and, certainly, none of the xenophobic mistrust of people of other religions and/or nationalities. I don't want to jump to the conclusion that this is a Muslim problem, but the evidence is certainly mounting in that direction.

Returning to the West, I wanted to check France, but, unfortunately, it was not available in this sample. However, West Germany was, so I used it, and the results are back to the relatively good ones seen in the case of the U.S., although not quite as good. This is the table for Germany:

And this is the table for the U.S.:

Now, I understand that these negative attitudes in majority-Muslim countries may be the result of their colonial pasts (this is the same excuse that we use for most ills of that part of the world in the 20th century). However, that cannot be the end of the analysis. This lack of trust must be serving a function in today's world -- which may or may not be a positive one. One can compare it to the negative attitudes towards Islam and towards immigration among some Americans on the extreme political right. However, the latter, thankfully, are a small minority.

Analysis to be continued ...

Thursday, September 24, 2015

A Question of Trust -- Religion and Nationality

Everyone must know by now about presidential candidate Dr. Carson's remarks regarding a Muslim potentially becoming President of the U.S. and some depressing data from recent polls about percentages of Iowa Republicans who must have a very low opinion of Islam, to say the least.

As it happens, I've been looking deeper at the World Values Survey, and, in particular, at relationships between questionnaire responses that are strong whether or not we control for country specific effects. One of the most resilient relationships, I have found, is that between questions V106 (degree of trust in people of other religions) and V107 (degree of trust in people of other nationalities). For the entire sample, the relationship is shown below:


1 = Trust Completely
2 = Trust Somewhat
3 = Do not trust very much

4 = Do not trust at all

Here is the relationship graphically:

Fortunately, the largest groups are those who are reservedly non-trusting (3 for both variables) followed by those who are reservedly trusting (2 for both variables), but there is a large mass (the third largest) of those who do not trust at all people of other religions or other nations.

For the U.S., the data is even better:

A clear majority, 56% of the respondents were cautiously trusting (2 for both variables), with an additional 5% fully trusting (1 for both variables). Yes, 16% are moderately mistrusting, and 4% are fully mistrusting, but these percentages are still much lower than for the world as a whole. Here it is graphically:

The relationship between approaches to religion and nationality are undeniable, here in the U.S. or in the world as a whole. Recent bad news notwithstanding, America still seems more (cautiously) trusting than most!

Friday, September 18, 2015

Walking into the desert

This is the draft of my khutba (Friday sermon) for this afternoon:

Roughly 2 million pilgrims are converging on Makkah. On Tuesday, they will move to the tent city in Mina, and then on Wednesday, they will go to the mount of Arafat to perform the central rite of Hajj.
For those of us who have not performed the Hajj, may we get a chance to be there. For those of us who have already fulfilled the requirement, please join me in thinking of another group.
Pilgrims pay substantial amounts, around $10,000 for each of the 10,000 or so Americans going to Hajj, and in many parts of the world, their entire life’s savings, to leave their homes and dwell in tent cities in the Arabian desert for five days.
Meanwhile, many more millions have been forcibly displaced from their homes, often after suffering life-altering losses in life and property, and with little or no hope of ever returning to their homes.
According to the UNHCR (the UN refugees agency), the number of displaced persons at the end of 2014 was 59.5 million people — and by now, the number must have exceeded 60 million. This is an all time high, nearly double what it was a decade ago.
This rise in the number of refugees is mainly due to conflicts in Africa, Asia, and the Middle East, and more than half the refugees are children. 
Most recently, Syria — historically one of the wealthiest and most educated regions on earth, the cradle of civilization, the seat of the mighty Umayyad dynasty — has become the largest producer of refugees — nearly 8 million internally displaced and nearly 4 million refugees seeking refuge in other countries. The second largest number of refugees come from Afghanistan, nearly 2.6 million, and Somalia at 1.1 million. Adding Iraq, Pakistan, Myanmar and other countries, it is clear that disproportionately most of the refugees and internally displaced persons are Muslims.
A Friday sermon is not the right place to focus on denouncing the war-mongers and the Muslim and non-Muslim states that feed the war machines that have resulted in massive carnage and displacement of Muslim and non-Muslim populations. Denounce we must, because the refugee problem in Europe, which grabs most headlines today, is only the tip of the iceberg, consisting of the relatively few tens of thousands who have managed to brave treacherous waters or mountains to make it to European borders. Many more millions stay behind, internally displaced or seeking refuge in Turkey, Jordan, Lebanon, etc. So, denounce we must, but we must also look at what we as individual Muslims can and should do.
Therefore, I want to return to the stark similarities and stark differences between the two experiences of groups, on the one hand, paying thousands of dollars to walk out into the desert and stay in tent cities, and those, on the other hand, who had to risk their lives by moving out of their homes, in order to avoid near certainty of death if they stay.
I want to focus on the individual Muslim and his choices. As I scanned opinions of scholars and laypeople last night on the issue of performing multiple pilgrimages, I noticed a rift between those (including numerous highly respected religious scholars) who had condemned it — because it increases crowds, and raises costs, thus preventing others from performing the obligation and increasing the risk of disease for those who go — and those who deflected the question by saying that acts of religious obedience should never be condemned, and that one should first look at those who waste their money on frivolous tourism and other spending, those who haven’t paid the right amount of zakah, etc. 
I will not even comment on the $20 billion being spent in the construction sector to attract more pilgrims, or the many more billions spent on buying weapons and supporting waring groups, sometimes on both sides of conflicts. And, of course, I am not commenting on those who are performing their first obligatory Hajj.
I want to use the contrast between the two groups walking out into the desert — one knowing that tents are waiting for them, and that there is a very good chance that they will make it back to their homes, and the other group, just hoping for food, water and shelter to last one more day — and to think of a Muslim who has to decide whether to pay $10,000 to go to Hajj one more time or to give a fraction of that money to support the refugees.
Please understand that I do not mean to condemn any particular personal choices. I mean to study the mindset of Muslims that may be behind our current state of affairs. 
As a social scientist, I turned to data. In the most recent World Values Survey, collected in 2013 and 2014, two questions were asked about the meaning of religion:
  • The first question (V150) went as follows: With which one of the following statements do you agree most? The basic meaning of religion is:
1 To follow religious norms and ceremonies 
2 To do good to other people 
While 71% of non-Muslims stated that the basic meaning of religion was to do good to other people, barely 51% of Muslims stated the same. The sample sizes were big enough (63,500 non-Muslims and 17,500 Muslims) for this result to be shocking.
This is in direct violation of the Hadith narrated by Tabarani:
 حَدَّثَنَا إِبْرَاهِيمُ بْنُ مُحَمَّدِ بْنِ عَلِيٍّ  ، ثَنَا السَّرِيُّ بْنُ مِهْرَانَ  ، ثَنَا أَبُو مُعَاوِيَةَ عَبْدُ الرَّحْمَنِ بْنُ قَيْسٍ  ، ثَنَا سُكَيْنُ بْنُ أَبِي سِرَاجٍ  ، ثَنَا عَمْرُو بْنُ دِينَارٍ  ، عَنِ ابْنِ عُمَرَ  ، أَنَّ رَجُلا جَاءَ إِلَى رَسُولِ اللَّهِ صَلَّى اللَّهُ عَلَيْهِ وَسَلَّمَ ، فَقَالَ : يَا رَسُولَ اللَّهِ ، أَيُّ النَّاسِ أَحَبُّ إِلَى اللَّهِ ؟ وَأَيُّ الأَعْمَالِ أَحَبُّ إِلَى اللَّهِ عَزَّ وَجَلَّ ؟ فَقَالَ رَسُولُ اللَّهِ صَلَّى اللَّهُ عَلَيْهِ وَسَلَّمَ : " أَحَبُّ النَّاسِ إِلَى اللَّهِ أَنْفَعُهُمْ لِلنَّاسِ ، وَأَحَبُّ الأَعْمَالِ إِلَى اللَّهِ سُرُورٌ تُدْخِلُهُ عَلَى مُسْلِمٍ ، أَوْ تَكْشِفُ عَنْهُ كُرْبَةً ، أَوْ تَطْرُدُ عَنْهُ جُوعًا ، أَوْ تَقْضِي عَنْهُ دَيْنًا ، وَلأَنْ أَمْشِيَ مَعَ أَخٍ لِي فِي حَاجَةٍ ، أَحَبُّ إِلَيَّ مِنْ أَنْ أَعْتَكِفَ فِي هَذَا الْمَسْجِدِ يَعْنِي مَسْجِدَ الْمَدِينَةِ شَهْرًا ، وَمَنْ كَفَّ غَضَبَهُ سَتَرَ اللَّهُ عَوْرَتَهُ ، وَمَنْ كَتَمَ غَيْظَهُ ، وَلَوْ شَاءَ أَنْ يُمْضِيَهُ أَمْضَاهُ ، مَلأَ اللَّهُ قَلْبَهُ يَوْمَ الْقِيَامَةِ رِضًا ، وَمَنْ مَشَى مَعَ أَخِيهِ فِي حَاجَةٍ حَتَّى يُثْبِتَهَا ، أَثْبَتَ اللَّهُ قَدَمَيْهِ يَوْمَ تَزُولُ الأَقْدَامُ " .
[On the authority of Ibn Umar, a man came to the Prophet (pbuh) and asked him, what people are most beloved to Allah, and what acts are most beloved to Him. The Prophet (pbuh) replied: "The most beloved people to Allah are the ones who are most beneficial to other people. And the best actions in the eye of Allah is happiness that you bring to a fellow Muslim, a problem that you solve for him, hunger that you feed, or debts that you repay. Indeed, to walk with my brother in his time of need is better for me than spending a month in seclusion in this (Madinah) mosque. Whoever can curb his anger, Allah will hide his faults, and one who curbs this anger when he can act on it will be rewarded on the day of judgement with a heart full of contentment..."]
  • The second question (V151) went as follows: And with which of the following statements do you agree most? The basic meaning of religion is: 
1 To make sense of life after death
2 To make sense of life in this world 
For this question, 67% of non-Muslims opined that the basic meaning of religion is to make sense of life in this world, but, again, only 51% of Muslims agreed.
Combined, nearly one third of Muslims, 31%, chose the first option in both questions (religion to them was basically about norms and ceremonies, and is about life after death), whereas the fraction was less than half, at 14.6% for non-Muslims.
 This is quite alarming. Lest we forget —
In the Qur’an, those who focus on ritual and make business of religion have been strongly chastised:
أَجَعَلْتُمْ سِقَايَةَ الْحَاجِّ وَعِمَارَةَ الْمَسْجِدِ الْحَرَامِ كَمَنْ آمَنَ بِاللَّهِ وَالْيَوْمِ الْآخِرِ وَجَاهَدَ فِي سَبِيلِ اللَّهِ لَا يَسْتَوُونَ عِنْدَ اللَّهِ وَاللَّهُ لَا يَهْدِي الْقَوْمَ الظَّالِمِينَ 
[Do you consider providing water to pilgrims and keeping the Holy Mosque occupied the equivalent of having faith in Allah and the final day and struggling in His way? These are not equivalent in His eyes, and He does not guide transgressors.]
Muslim has narrated
4661 2569 حَدَّثَنِي مُحَمَّدُ بْنُ حَاتِمِ بْنِ مَيْمُونٍ حَدَّثَنَا بَهْزٌ حَدَّثَنَا حَمَّادُ بْنُ سَلَمَةَ عَنْ ثَابِتٍ عَنْ أَبِي رَافِعٍ عَنْ أَبِي هُرَيْرَةَ قَالَ قَالَ رَسُولُ اللَّهِ صَلَّى اللَّهُ عَلَيْهِ وَسَلَّمَ إِنَّ اللَّهَ عَزَّ وَجَلَّ يَقُولُ يَوْمَ الْقِيَامَةِ يَا ابْنَ آدَمَ مَرِضْتُ فَلَمْ تَعُدْنِي قَالَ يَا رَبِّ كَيْفَ أَعُودُكَ وَأَنْتَ رَبُّ الْعَالَمِينَ قَالَ أَمَا عَلِمْتَ أَنَّ عَبْدِي فُلَانًا مَرِضَ فَلَمْ تَعُدْهُ أَمَا عَلِمْتَ أَنَّكَ لَوْ عُدْتَهُ لَوَجَدْتَنِي عِنْدَهُ يَا ابْنَ آدَمَ اسْتَطْعَمْتُكَ فَلَمْ تُطْعِمْنِي قَالَ يَا رَبِّ وَكَيْفَ أُطْعِمُكَ وَأَنْتَ رَبُّ الْعَالَمِينَ قَالَ أَمَا عَلِمْتَ أَنَّهُ اسْتَطْعَمَكَ عَبْدِي فُلَانٌ فَلَمْ تُطْعِمْهُ أَمَا عَلِمْتَ أَنَّكَ لَوْ أَطْعَمْتَهُ لَوَجَدْتَ ذَلِكَ عِنْدِي يَا ابْنَ آدَمَ اسْتَسْقَيْتُكَ فَلَمْ تَسْقِنِي قَالَ يَا رَبِّ كَيْفَ أَسْقِيكَ وَأَنْتَ رَبُّ الْعَالَمِينَ قَالَ اسْتَسْقَاكَ عَبْدِي فُلَانٌ فَلَمْ تَسْقِهِ أَمَا إِنَّكَ لَوْ سَقَيْتَهُ وَجَدْتَ ذَلِكَ عِنْدِي
[On the authority of Abu Hurayra, the Prophet (pbuh) said that on the day of judgement, Allah will say "O, Son of Adam, I was sick and you didn't visit me." Man will answer: "Lord, how can I pay you a visit in sickness when you are the Lord of all worlds," and the Lord will reply: "Did you not know that my servant so and so was sick, and you didn't visit him; did you not know that had you visited him, you would have found me there?" "O, Son of Adam, I was hungry and you didn't feed me." Man will way: "Lord how can I feed you when you are the Lord of all the worlds," and the Lord will reply: "did you not know that my servant so and so was hungry, and you didn't feed him; did you not know that had you fed him, you would have found the same with me?" "O, Son of Adam, I was thirsty, and you didn't give me water." Man will say, "O, Lord, how can I give you water, when you are the Lord of all the worlds," and the Lord will reply: "Did you not know that my servant so and so was thirsty and you didn't provide him with water; did you not know that had you provided him with water, you would have found the same with me?"]
So, I leave you with these questions:
  • Have too many of us confused tools (acts of worship) and incentives (afterlife rewards or punishments) for ends in themselves?
  • In the process, have we become so selfish that even when we want to spend in the religious path, we end up spending on ourselves?

Thursday, July 16, 2015

Profit sharing takes center stage in American politics

Today's Financial Times highlights leading Democratic presidential candidate Hillary Clinton's advocacy for profit sharing schemes that would contribute to tapering wealth and income inequality.

The FT article cites work done by the Center for American Progress, led by Larry Summers and Ed Balls. CAP is, of course, very close to the Clintons. Its founder, John Podesta, is the Chairman of Mrs. Clinton's presidential campaign, and was formerly President Bill Clinton's Chief of Staff.

Of course, profit sharing has been for long a favorite subject of those writing about "Islamic economics," although the practice of "Islamic finance" has been mainly focused on debt finance, which is not forbidden. Rather than brag about the West discovering the virtues of profit sharing, and labeling the latter "Islamic," one should note that the profit sharing forms discussed in Islamic books of jurisprudence (mainly mudaraba, or silent partnership, and musharaka, or full partnership) predated Islam and were simply adopted within.

In other words, the choice is really not between financial methods that depend for their legitimacy on holy writ and revelation, on the one hand, and some man-made alternatives. All of these financial models are man-made through a trial and error process. We learn from history the effects of various mixes of finance, especially on combinations of economic growth and equity of distribution, and societies may then make their choices. Obviously the American left is getting more interested in issues of income and wealth distribution, and hence refocusing on financial and corporate models that are conducive to less inequitable distribution (although this is no panacea, as I have argued in an earlier posting), including, potentially, hybrid mutual models wherein the workers have partial ownership of enterprises (which, I have argued here and here, is closer to the spirit of classical Islamic jurisprudence than the more recent financial-engineering driven "Islamic finance" that aims to circumvent the spirit of the Law while following its letter, not too well).

Abandoning the brandname "Islamic" and focusing on the prudential regulatory substance of profit sharing rules is best exemplified in the best selling book House of Debt: How They (and You) Caused the Great Recession, and How We Can Prevent It from Happening Again, by two very successful mainstream Finance professors, Atif Mian (at Princeton) and Amir Sufi (at University of Chicago GSB). We know from this review that Larry Summers thought quite highly of Mian and Sufi's argument, which was focused on the housing crisis, in particular, but the principles have been well known for a long time.

Let this be a lesson for young scholars who are interested in "Islamic finance." Don't. Focus on being very good at Finance, writ large, like Mian and Sufi did. Then, if you are even half as good as they are, your arguments, which are not hidden behind references to metaphysics and exclusionary scholarship, may convince leaders to make the world a better place.

Friday, June 05, 2015

Class and conduct

I decided finally to get out of Cairo before I left for good at the end of the month. The closest beach was at Ain El-Sokhna, so I came to spend the weekend here. As I was walking, minutes ago, by some villas overlooking the sea, I came face to face with A young gardener working on the gardens of these mostly unoccupied villas. I smiled and said good morning, but he kept his stern face and fierce gaze and didn't reply. There's no way he didn't see or hear me as we were close and looking eye to eye.

Staff in the hotel always smile back and return the greeting. For them, it is obviously a repeated game (both individually, for tips, and collectively, for repeat business). I wonder if the gardener had been working at an area where most homes are occupied. Would he have been conditioned to smile back and return the greeting? Does he do that with the owners of these resort villas when they're in town?

More importantly, are those workers who smile and return the greeting secretly resentful, and would they like to keep a stern face and fierce gaze like the gardener I've just met? When one gives a significant tip, are they genuinely happy and appreciative, or are they secretly resentful that a sum of money that one considers substantial may be insignificant to another (a tip)?

Does the same extend to those whom we help? Especially, conversely, if you help someone of a higher class unselfishly, do they resent it? About 25 years ago, my friend RS introduced me to two great economists, RR and MM. The latter two were working on a paper and wanted someone to help them solve their model numerically. I gladly helped them out, and it only took a few hours. A few months later, MM was giving a seminar at Caltech and showed me a draft paper with the authors listed as MM, RR and El-Gamal. I didn't tell him that I always follow alphabetical order, but told him what is more important: I didn't contribute a whole lot to the paper, so a "thank you" in the footnote would suffice. RR later sent me a contract to be paid as a consultant for the work that I had done on the paper. I was deeply offended at the time. I guess that I was offended that he was offended (a lowly person like me should have been delighted to get a coauthorship with him, and should have accepted it gratefully). He was obviously a great man, and I should have accepted it, just like this gardener should have smiled back and reciprocated the greeting.

Monday, June 01, 2015

Social senility?

As a second year graduate student, the late Dale Mortensen walked into class (advanced macro) as I was telling my classmates that I thought the main source of Egypt's problem was that she is saddled with too much history. He wanted to explore the comment further, and we ended up spending a good chunk of the class wondering if a vintage-capital model should be applied to institutions and culture (the term "social capital" had not yet made it into Economics; I only read Bourdieu decades later) -- older societies and cultures carry embedded older technologies that impede progress.

At a recent conference on campus, on the subject of regional development, I was asked to give a welcome note but not to discuss Economics. I said in my remarks that I am very happy not to discuss Economics, because I remembered 30-some years ago, when I was studying the subject at the same University. I tried to explain my reaction to the current economic discourse thus:
The best way to describe this experience to you is to quote Mick (Crocodile) Dundee from his namesake 1986 movie: When Sue pointed to the television in his New York City hotel room, and asked Mick if he had ever seen one before, he said that he had seen one 30 years earlier. Then, he turned on the TV, and saw the opening credits of the 1950s show “I Love Lucy.” He quickly turned off the TV and said: “Yup! That’s what I saw.” 
Of course, the fact that we’ve seen this show before doesn’t mean that we remember the ending… Indeed, we may choose not to remember. After all, how else can we enjoy laughing at jokes that we’ve already heard, crying over tragedies that we continue to live, or coming to conferences expecting insights and policy solutions?
Then, I welcomed the keynote speaker and all in attendance, wishing them a good conference, and bidding them farewell "until we meet again, years from now, asking the same questions, and rediscovering the same answers."

Gulf-style shiny malls and mad construction booms aside, the deja vu experience of seeing the same movie again (a favorite activity of mine if the movie is good, but not if it isn't :-) has pervaded my 11-month experience back in Egypt. As I get ready to leave Egypt again in one month, I wonder: Is it possible that this society, like people, has aged to the point of senility -- repeatedly asking the same questions and forgetting all lessons learned?

Naguib Mahfouz famously coined the phrase "و لكن آفة حارتنا النسيان" (the scourge of our neighborhood is amensia/forgetfulness), as the refrain in his novel Children of Our Neighborhood. This neighborhood may have been senile for centuries. Every apparent rebirth turns out to be yet another delusion.

The late upper-Egyptian poet Abdel-Rahman Al-Abnudi (who passed away this April) wrote a poem in 2011 (about Mubarak and his power circle) asking for the "state of the aging" to leave. What if society itself has reached old age, senility and dementia? An old joke about Mubarak was that he responded to the suggestion that he may wish to say goodbye to the people by asking: "Why, where are they going?" Exactly!

Friday, April 17, 2015

Does Anyone Want Egypt to Succeed?

I have now been in Egypt for 9.5 months, during which I have only had the opportunity to talk about the Egyptian economy once, last month, at a small workshop, attended by roughly two dozen people.

At that workshop, I made the off-hand, but quite deliberate, remark, in reference to the recent Dubai-style conference in Sharm El-Sheikh, that, fortunately, there are many who don't want Egypt to fail, headed, of course by the U.S. and GCC countries (sans Qatar, which is very confused). In the meantime, I suggested, the U.S. and GCC countries also do not want Egypt to succeed, hinting that the current trajectory is so incredibly reminiscent of elements of the Nasser era and elements of the Mubarak era that it must raise very serious concerns in these countries -- making them deliberately not want Egypt to succeed, as currently configured.

[A full fledged Mubarak regime would be very welcome by the GCC, (sans Qatar, which is quite confused), in my opinion, but not necessarily by the U.S., which has been recognizing, increasingly, that authoritarian bargains often backfire: like debt finance, authoritarian bargains eliminate high-probability low-magnitude disturbances, but amplify low-probability high-impact ones... and you know what they say is the definition of insanity ("doing the same thing, repeatedly, expecting a different outcome.") A full-fledged Nasser regime would be alarming to all, but is impossible to take place post cold war, so, any such attempt may morph into a Pakistan-like version of the bargain, which is extremely ugly and dysfunctional, but workable. I hate to admit it, but Ann Patterson, I'm guessing based on advice from Vali Nasr, may not have been completely off base when she thought that her understanding of Pakistan may be more relevant for Egypt than I had ever thought possible.]

A written question (they were all written at this workshop) came to the session chair, asking me if I thought that the Muslim Brotherhood want Egypt to succeed. The session chair hesitated, but showed me the question, and I indicated that I will be happy for him to read it, and will be happy to answer it. I proceeded first to clarify what I had said previously: I had said that the U.S. and GCC don't want Egypt, as configured currently, to fail, but also don't want it to succeed, due to worrisome similarities to previous episodes. Given how MB were ousted, they obviously don't want Egypt to succeed as currently configured, and MB-like millennialist/Islamist groups generally want success only on their own terms. So, I concluded, I guess MB would like Egypt as currently configured to fail. This was an off-hand remark that was less deliberate or carefully thought through. A better answer would simply have been that it is not clear if MB is sufficiently well organized now to have an opinion on whether they want Egypt to succeed or fail, or even if they want any measure of success under the current configuration, not to mention that their definition of success may be very different from the questioner's.

The more difficult question is whether anyone inside Egypt wants Egypt to succeed. Countries fail (and I am not citing Acemoglu and Robinson here, quite yet, but simply stating an obvious fact), when they fail at solving collective action problems. Every group wants success on their own terms -- identifying the collective good as their own, just like the president of a corporation may convince her or himself that whatever is good for them is good for the corporation, and vice versa. This is simply a human trait, that, as the saying goes, "power corrupts and absolute power corrupts absolutely." That's why we need systems of checks and balances for good governance, corporate or national (and here I may cite the institutional economics approach of Acemoglu and Robinson, as well as many earlier studies, including, most prominently, the voluminous and brilliant work of Douglas North and many others).

How we get from here to there is an even more difficult question. Why would those who possess power give it up, when they think that what they are doing is in the best interest of the corporation or nation, and doubt that others, with whom they may or should share that power, would have the intelligence or ability to do what's in the entity's best interest? Indeed, the Qur'an warns us all:
 وإذا قيل لهم لا تفسدوا في الأرض قالوا إنما نحن مصلحون * ألا إنهم هم المفسدون ولكن لا يشعرون 
[And when told: "Do not cause corruption on earth," they say, "but, we are reformers." Nay, they are the very corruptors, although they do not feel it; The Cow: 11, 12].
It is too facile to use this verse against others, even when done courageously in confrontation with those who claim to be reformers, but we believe otherwise. It is much more difficult to be able to intuit our own limitations, and to trust the judgment of others sufficiently to have a greater measure of actual success.

How can any one (individual or group) of us know if we are the ones driving our institutions or nations to success or failure? An aphorism that my late father used often to say is that "when they distributed wealth, nobody found theirs sufficient; but when they distributed brains, everyone found theirs more than sufficient." The same applies to integrity, etc. I don't believe that anyone looks at her or himself in the mirror and says: "I am going to do some bad today." I believe that they all think: "I am going to do as much good as I can today, even if the poor souls that I am trying to help misunderstand me." [Remember Rousseau's oxymoron that man "must be forced to be free."]

So, I ask myself again: Do any of us want Egypt (or our corporations) truly to succeed? At a superficial level, we will all say yes, even though we may have opposing views on what success looks like and how it may be attained. I am not sure that I necessarily buy the line that the dentist turned novelist Alaa El-Aswani used to write at the end of his columns: "Democracy is the solution," or the more elaborate institutional solutions that institutional economists have written and documented empirically -- simply because some of the achievements that they see as success, mostly in the industrialized West, may be seen by others as less than successful, and many side effects that we all agree are failures may not be as salient in our minds when we are trying to sell a particular method. Sometimes, we may be trying to delude ourselves that there is a method that will be the magic silver bullet to kill all our problems, whether that mythical solution is a political process (like the mirage of democracy, which I have never found real in any country), a religious doctrine (claiming access to supernatural Divine knowledge), a mythical leader (that the Arabs call "the indispensable man," الرجل الضرورة), or any other. Gandhi famously gave the witty reply to the question of how he found "Western Civilization." "It would be a good idea," he said. But hasn't "Eastern Civilization," ancient or contemporary, also been horrific in many ways? Has there ever been civilization in the sense that Gandhi's answer suggested?

This is all to say that answering the question whether any particular individual or group wants the nation state Egypt, or any other entity, to succeed is ill posed. Perhaps like the U.S. and the GCC (sans Qatar, which doesn't know what it wants), we all don't want Egypt to fail, but also don't want it to succeed, necessarily, in the way that many others may think that it can, or want it to.

Perhaps that's the problem. We know what failure is much more uniformly, so we don't want our institutions and countries, or others', unless they are sworn enemies, to fail. However, we don't agree, and often do not know, what success is, so we end up not wanting success, either.