CETERIS PARIBUS

Of f icial Newsletter of IBA Economics Club

By the Editor -

Sapna Ashok

Congratulations, I am glad to introduce the first issue of Ceteris Paribus. Our team sincerely hopes that you

Issue 1
November 2014

enjoy it. Ceteris Paribus is a small initiative to bring something new that hasn't happened in IBA before.
Special Thanks to everyone who contributed to this newsletter. Although, all the submissions were not published in the first issue, they may be considered for our successor issues. After an overwhelming response
from the writers, I am hopeful that this shall continue with a huge readership and support.
Wait till the next! Your feedback and suggestions would be much appreciated. We would also like to thank
Mr. Talha Nadeem for his valuable suggestions and edits.

The Illusion of Choices: A diabolic approach to making exams.

Danish Us Salam
Inside this issue:
By the Editor

The Illusion of
Choices

Eccentric economics
of the World

Calvin & Hobbes

explain corporations

Kabul and Me!

(Visiting faculty at Karachi Institute of Technology and Entrepreneurship and is available at danish.salam@khi.iba.edu.pk)

It seems like in todays world there

are fewer people making choices for
the greater good. Everything is consolidated: ten huge corporations
control the production of everything an average person buys from
personal care to personal wear.
Media is no exception to this trend
with only 6 major companies dictating about 90% of the media we
have access to, thus depriving us of
the content of choice.

INFER (Feb 2015)

But is choice deprivation always as

evil as it seems? Or are there exceptions to this too? As a lecturer of
Economics, I am supposed to make
exams with an aim to gauge students learning. This, however, becomes a troublesome task when it
becomes intricate to ascertain which
question shall gauge which portion
of the learning curve. My not so
extensive teaching career does point
out a space which if dealt with in a
shrewd manner can bring more
good than evil.

Contact us at ceterisparibus.iba@gmail.com
for
feedback/
s u b m i s s i o n s /
sponsorships or any
thing else really, we
love to read your
emails!

I've observed that students, on average, get overwhelmed by the idea of

having choices in their exams. On
the contrary, an exam bearing the
words attempt all questions
knocks them down morally within
seconds. Now theres nothing
wrong in giving choices, though it
comes at the cost of a student leaving out a question that perhaps is

Upcoming Events:
Stata Workshop (Dec

2014)
DICEINVENT

19th-20th Dec 2014

far more important than others.

Well obviously, one way is to make
that question compulsory.
But again, the word compulsory
isnt free from elements of pressure,
and there is a high probability that
students out of sheer pressure end
up doing badly in the exam.

But is choice deprivation always as evil

as it seems? Or are
there exceptions to
this too?
Alternatively, how about an approach that doesn't really give them
the freedom to attempt what they
want, but does give them something
equally invoking i.e. the idea of
freedom. How about giving them
choices and not giving them choices
at the same time? My experience
does signal the productiveness of
this theory. Heres how it works.
Instead of making any restrictions
on what to attempt, an instructor
should aim to give them as many
choices as they want. The larger the
number of choices, the greater is
the illusion.

Here comes the diabolic part: just

make sure to make the extra choice
questions so hard that students
almost always skip those and eventually end up doing what you as an
instructor want them to do.
This creates an illusion of freedom.
Students no longer leave the examination hall grumbling about how
unfair it was of the instructor not to
give them any choices. Its a win-win
situation for everyone.
They get the idea of freedom which
makes them feel exactly the same as
freedom itself. The instructor, on
the other hand, enjoys the liberty of
making them attempt those questions which gauge a significant portion of a students overall learning
curve, if not all.
Critics might raise the geniusstudent argument which points out
a subset of class population that is
shrewd enough to solve any question. Even extra-ordinary students
will fall prey to this illusion. Above
average students inherently solve the
dual maximization problem, i.e. not
only do they want to ace the exam,
but they opt to do it in the most
efficient way. Its this efficiency
which demands them to keep track
of time, which in turn motivates
them to almost always attempt an
easier question against a hard one.

Eccentric Economies of the World.

Anil Saleem

Economists claim to practice a discipline which enables them to predict the future. They have always constituted models which estimate as well as predict a range of phenomena from profound to bizarre. They even have econometric models which explain why divorce rates in a certain territory are high.
Thats why all hell broke loose against economists who failed to envisage global financial crisis of 2008. However, in economists defense, to model the
inexplicable and often irrational social behavior which results in such financial catastrophes is often quite trying. Despite occasional failures, economists
have discovered numerous frameworks which have been tremendously effective in explaining and operating many paradoxes of the world.
Ideally speaking, ethnicity or geography should not play a role in economic performance, but historically the results have been biased towards it. Theres
a huge disparity between average wage and economic welfare of African-American and White-Americans in US, and similarly among Arabs and nonArabs in Middle East. This exhibits that diversity doesnt need social inclusion access to opportunities which uplift the social status of migrants is what
is important. Most of the migrants from different ethnicities arent offered privileges in contrast to locals. Often, they havent been treated with dignity
either. For instance, Saudi-Arabia, Japan, Korea and few other countries have unacceptably stringent rules for immigrants. During the time of financial
crisis of 2008, when economies faced deceleration, Saudi-Arabia and few other Middle-East countries deported legal immigrants without any reason,
because their governments were susceptible about unemployment and didnt want their natives to face any kind of misery.
Diversity is a pivotal factor of growth: intermingling of different groups of people nurturs innovation and robust businesses. But the global leaders exhibit antipathy for this factor and restrict non-nationals to become inhabitants within their territories. We have witnessed that the most growth oriented
metro cities contain people having diversified culture like in New York, Toronto, London, Sydney etc. Domestically, we observe that Karachi an economic hub of Pakistan, is more ethnically diverse than any other region of the country. These metro cities, ingrained with diversity, approximately contribute around 80% to global GDP.
One example of this is Silicon Valley (San Francisco, USA) which has progressed through the ideas generated from people of all cultures. Multiculturalism has defined Silicon Valleys success in many ways promoting many different outlooks on technology, innovation, science and education. It is surprising to know that majority of entrepreneurs of Silicon Valley are non-American. It is important for cultures to respect differences in human beings.

Multiculturalism has defined Silicon Valleys success in many ways promoting many different outlooks on technology, innovation, science and education.
Most of the global leaders are reluctant to open their borders for other nationals (labor), and consider it as a threat towards their locals. They further
presume that economic, social and cultural changes can be the result in, or amplify conflict. These presumptions show that few of them are tolerant
enough to warmly welcome diversity and carry it further in a pluralistic manner for the achievement of common goals pertinent to global welfare.
I think mistrust among natives of different regions isnt the clash of civilizations or cultures, in fact its the clash of ignorance. Regulators assume that by
giving access of domestic markets to international labor, there will be a shortage of jobs which will further increase unemployment in region. But they
arent compelled to analyze it from different facet of economics inflow of migrants will increase the aggregate demand for commodities, which will
enhance production and lead to more economic prosperity.
Every forerunner of the state should broaden their vision, and not only mentor the state but the whole region, like the European Union (EU). During
World War II, most of the EU countries were acrimonious to each other, in fact some of them belonged to different poles of the war. Similarly, there
was a time when EU was fragmented in riots of culture, race and sects; the conflicts between Protestants and Catholics were elongated for decades. But
after that destructive incident, they have certainly realized the causes, and consequences, of conflicts, and eventually re-emerged stronger than before.
They formed an economic and customs union which permitted the inter-regional mobilization of labor, services and capital. Manifestly, we can see that
majority of EU labor migrate towards UK, Germany and Benelux. By these migrations, UK and Germany havent faced high unemployment levels.
However, these movements have reinforced their economic growth, not only the growth of UK or Germany but also bolsters the upliftment of the whole
EU region. The inflow of labor has enhanced aggregate demand and productivity of UK; on the other hand outflow of remittances have upheld other
EU countries.
So we can conclude that the dominant countries of EU have progressed from the openness of migration (free market) and have also contributed towards
the development of rearmost countries. If such mechanism - based on the inflow of migrants and outflow of remittances - can prevail in the EU region,
then why do we resist implementing it globally? I presume its because we have to endure diversity for this cause, and accept different cultures, religions
and ethnicities to be a part of our countries. Besides sustained economic growth, this mechanism has also curbed lots of paradoxes: destabilized exchange
rates, unemployment, inequality amongst other things. Instead of granting any developmental aid, developed nations should opt for free market and
labor mechanism. I can reveal that theres a significant impact of diversity on remittances, which further have a ripple effect upon economic growth of
developing countries.
A huge outflow of remittances depends upon the acceptability of multiculturalism. Still, after so many barriers in the international mobilization of labor,
there are 232 million migrants inhabiting different regions of the world. The ripple effect of remittances towards economic growth can be explained in
the form of direct relationship and strong correlation between productivity of migrants and exchange rate (the rate between their working and native
currencies). The more exchange rate would be, the more migrants are inclined towards work, and there are great chances that theyll work efficiently and
productively in contrast to locals.
2

Remittances are the silver lining for poor and underprivileged families. Few families in Udaipur (India), Azad Kashmir (Pakistan) and Bandung
(Indonesia) have breached the poverty line, and that too, due to the influx of remittances from their migrated family members. Its not only the hope for
poor, to drag themselves from poverty trap, but it also enhances entrepreneurship when it is sent by migrants for investment and new business purposes
to improve the quality of life. Entrepreneurship embraced from remittances will further fuel-up the growth of economy (Schumpeterian Model of Economics). Conclusively, remittances enable them to have better living standards, education and health facilities.
In my opinion, if global leaders especially those who are hailing the slogans of convergence, should have focused on relaxing the stringent policies of
international labor mobilization and immigration, rather than funding the developing world with trivial developmental aid.
Recently, we have seen that some of the crumbling western economies like Germany, Canada, New Zealand, Detroit (USA) and Sweden have started
offering high-skilled labor immigration, but this initiative has sharply aggrandized the brain drain from developing economies. Hence, it may further
decrease the ability of developing nations to trade high value added services or products, which is the main cause of divergence (Prebisch & SingerHypothesis of Economics). However, this brain drain may result in high remittances inflow compared to low skilled labor who will be rewarded with
lower monetary values in return for their trivial services.
Conclusively, I propose that the encouragement of free-markets - especially mobilization of labors - not only amongst territories but globally, can resolve
some of the dilemmas faced by the policy makers. The proposed model of openness will bolster developing economies via inflow of remittances. Furthermore, international mobilization of labors aggravates diversity which will eventually increase productivity and aggregated demand in the migrated economy. All over, it seems to be a win-win situation for the global economic growth. But for this sake we all need to be patient, tolerant and empathetic
about the diversity of religion, culture and race; and utilize this diversity in a pluralistic manner for the pursuit of global harmony.

The author is an enthusiastic researcher enrolled in MS Economics at IBA and can be reached at athawar@gmail.com

Calvin and Hobbes explain how corporations work!

Copyright Bill Watterson. All rights reserved.

Kabul and Me!

Mohammad Jibran Changi

As far as travel bucket lists go, Kabul, Afghanistan, would very rarely
feature on someones list. Its quite
a shame, because the city is more
than 3500 years old and has been
ruled by countless Empires of the
World, from the Mongols to the
Ghaznavids, to the Mauryans, the
Mughals, the British and more recently, the Americans, all leaving an
indelible mark on the city. So my
decision to go there was met with a
lot of skepticism by the family.
The purpose of our visit, on which I
was accompanied by Professor Dr.
Ather Elahi, was to conducr research on the bilateral trade between Pakistan and Afghanistan.
Afghanistan has, unfortunately,
been in a state of war for the last
couple of decades and as a result,
has suffered heavily in terms of
trade. Our focus was to meet with
the ministries of commerce and
industries and the joint chamber of
commerce to identify issues and
hurdles which were preventing the
facilitation of Pak-Afghan trade.

reached a new high after the first 3

days. But of course, a cup of steaming kehva is more than enough to
calm things down.
Now coming on to research work,
one of the main issues we faced was
the collection of data on Afghan
trade. Any researcher worth his salt
would know how difficult it is to
collect reliable data. Fortunately for
us, Mr. Khurshid Marwat, an exlecturer at IBA and the Head of
Trade in the Pakistan Embassy,
Kabul, had a keen interest in bilateral trade and his experience and

contacts were quite invaluable. He

was able to arrange our meetings
with the top trade officials and experts as well. Meetings with their
trade authorities dispelled any notion or doubt we had about Afghanistans commitment to trade
with Pakistan.
Pakistans ambassador to Afghanistan, His Excellency Mr. Syed Abrar
Hussain also stated that Afghan
President Mr. Ashraf Ghani has
improvement of economic relations
with Pakistan as his top priority.
According to him, years of political

Upon landing in Kabul, we found

three things in great abundance
mountains, security personnel and
Toyotas. The criminal mastermind
Vizzini, in the classic movie The
(L-R) Mr. Mozammil Shinwar (Deputy Minister, Trade and Commerce, Afghanistan,
Princess Bride, is attributed as Dr Ather Elahi (IBA), Mr Rahim Momand, Director GeneralInternational Trade,
saying Never get involved in a Afghanistan, Mr Mohammad Jibran Changi (IBA)
land war in Asia, I am fairly confident that he had the Afghan terrain
in mind. Everywhere you look, Kabul is surrounded by beautiful
mountains. Of course, that leads to
there being more security issues as
well and hence, the over-abundance
of security personnel.
Once you get accustomed to these
things, we come on to the most
important question of all food!
Now, we experienced food from a
variety of places and everywhere we
went, the quality was simply exquisite. Afghans have a very rich palate
ranging from kabuli pulao, mantu
and chopan kabab to shinwari
karhai, namkeen karhai and dampukth.
Another thing to note is the quality
of dry fruits available there. Needless to say, my cholesterol level

(L-R) His Excellency Syed Abrar Hussain, (Pakistan Ambassador to Afghanistan), Dr Ather Elahi (IBA), Mr Mohammad Jibran Changi (IBA)

distrust and issues will not be overcome in one term but one has to
start somewhere and improving
economic relations would be the
best place to begin.
Mr Atiqullah Nusrat, CEO of Afghan Chamber of Commerce and
Industries also reiterated President
Ghanis sentiments and said that
improvement in the official trade
would automatically bring about a
decrease in the underground trade.
The dynamic Mr. Mozammil Shinwari, Deputy Minister for Trade
and Commerce, appreciated IBAs
initiative and stated that when it
comes to relationship between the
two countries, things are generally
looked at from a political point of
view but for trade, there is now a
need to look at things from a technical angle as well. And apart from
bilateral trade, he was appreciative
of the efforts being made to facilitate Afghanistans transit trade
through Pakistan.
Mr. Rahim Momand, the Director
General, International trade, also
lauded the efforts of the Government of Pakistan to improve the
trade and general political relationship between the two countries. He
insisted on improvement not just in
transfer of goods, but also in the
transfer of services from Pakistan to
Afghanistan to facilitate the industries there. We also met the heads
of Pak-Afghan Joint Chamber of
Commerce and Industries and our
survey questionnaire on trade was
distributed amongst the business
community for collection of data.
Overall, it was a rewarding trip in
terms of personal experience as well
as on an economic and political
front, considering that Pak-Afghan
trade relations are a high end priority in the international relations.
The people of Afghanistan were
very welcoming, the Pakistan embassy in Kabul very efficient and the
food was simply mouth-watering.
We aim to compile our report for
the World Bank by Feb 2015.
The author is a research assistant
at Center for Business Economic
Research, IBA and can be reached
at mjchangi@iba.edu.pk
4