Economics a.k.a El Banzeen Ghaly!

Almost all Egyptians know that gas prices are subsidized, people outside Egypt might not but if they're reading now they do.

As a consequence, Egypt "enjoyed" one of the lowest prices for gas (petrol if you're a brit) anywhere in the world. Up until a few weeks ago 1 liter of 90 octane gas was being sold to the public for 1 EGP (around 18 US cents), that is less than 70 US cents per US gallon. For a quick comparison gas in the US is cheap because it goes for around $3 US a gallon, and is expensive in the UK where people pay around 1 sterling pound for a liter. That's more than 10 times as much.

A few weeks ago, the price at which gas is controlled rose 30% to 1.3 egyptian pounds, and while I was not there when it did, I can definitely imagine the major uproar on the streets following that. If conversations with friends and family are anything to go by, I actually bet thousands, if not millions, of people are still uttering swear words in disapproval of the government's action.

I, too, think this was a wrong step to take, gas prices should not have slidden up 30%. The subsidies should have been lifted and prices should have been let to shoot up to the 5 or 7 times the current price that it's estimated to be worth. I am not being sarcastic either, hold on to your guns a little bit before you declare me crazy and hear me out.


Subsidies mean that the government is paying the price difference between what you're paying at the pump and what it actually cost to get the gas to the pump. It does *not* mean that the cost of gas is less, it was just transferred and is being paid by someone else.

Now, a basic economic fact is that demand increases with lower prices and decreases at higher prices. That is why not everybody is driving around in cars costing millions of pounds, and why on the other hand almost everybody can eat bread.
In fact it is so basic that it's almost considered common sense, and is ultimately portrayed by the common saying "Abo balash kattar meno" or translated "Get more of that which is free".

Combine both facts and you get a better picture, taxpayers' money is used to buy gas and people are using more of it because of exactly that.
If subsidies were removed, and gas prices are allowed to fluctuate according to free market conditions, prices will shoot up to maybe 6 or 7 times their current values. This will naturally cause people to use less and prices will go back down a bit. Not back to the point they're at with subsidies but to the point where equilibrium is reached between supply and demand.

And before thinking that this would be a life threatening situation for low income people let me explain what I think.
What would people do if they found out their dinner is free? I say they will probably eat more than what they usually do, much more actually.
This is no different than the gas situation. I know that I drove around for much more than 500 Kms on the first day I got my first car in Egypt. I also know that it would have been prohibitively expensive for me to do that if gas prices were 5 times their values back then.

Nobody likes high prices, specially those who can't afford it themselves. And even though it might be nice to imagine a world where everyone affords everything, the underlying scarcity of resources makes that practically impossible.

What subsidizing gas is doing is taking from tax payers, many(most?) of which are low to middle income, and paying it for gas much of which is consumed by the higher income classes who own the bigger and more gas guzzling cars.

Still not convinced? I'll leave you with a few statistics I just looked up.

-The FY 2006-07 budget earmarks EGP 40 billion for fuel subsidies, up from EGP 22 billion in 2005, and more than is allocated to health and education combined.

-According to Boutros-Ghali, the rich benefit by EGP 1,700 per capita from fuel subsidies, while the poor benefit by only EGP 300 per capita.


Economics* is interesting isn't it?

*Most of my recently acquired and embarassingly little knowledge of economics has been through this book, Basic Economics by Thomas Sowell. A highly recommended read.

Layout

I know it's long overdue but somehow whenever I decide to blog I end up doing something else... I assume this is a good thing (that I'm busy with other stuff) but I also promise I'll keep on blogging (even if just photos :P).

Anyway, I just have a quick question, does the blog layout show correctly on your computer? Ever since I modified it to be wider so that I can post bigger photos inline it's been showing up great on my laptop but kinda funny on my desktop. Is it just my desktop?

Appreciate the feedback!

Rebel!

Been a while since I last posted and I don't feel like typing a lot. And while most people use lyrics to fill in the gaps, I feel photos are more my style.

Of course the fact that I just got the Canon Digital Rebel XT that I've always wanted comes to play very conveniently. I'm extremely happy with it even though I only have one low end lens for it thus far (50mm/f1.8, yes fixed focal length and no zoom)

Instead of boring you with a review which you can find better done somewhere else I'll let the photos speak for themselves.

Enjoy, but be forewarned, lots of sexy cars in the photos amongst other things. :)

Not all that looks like politics is

The subject is an early disclaimer that I'm not politically inclined. I'm not a lawyer, all characters and events -- even those based on real persons -- are entirely fictional, of course your mileage may vary, and you should eat your greens.

Anyway, so a good discussion today was brought up at lunch out of the blue. Usually we'd discuss... errr pretty much nothing, but somehow today we ended up debating whether punishment should be applied to "insane criminals" just as well as their sane counterparts, specially in a murder case where a sane person would've been sentenced to death.

The discussion evolved to include ethics, right and wrong, free will, what it means to be human, the philosophy of imprisonment and the death penalty amongst other things. And the answer is not 42 (a joke if you're a galaxy hitchhiker). Actually we never came up with any answers, as is often with such highly enjoyable and rare debates. I was playing devil's advocate most of the time just to fuel the debate more and it worked. Good mental exercise.

- Waking life
An excellent movie (beware the spoilers on that link), one that can actually be watched many times over always finding new hidden ideas to think about. Warning: it's not for the faint of mind and will make you ponder themes you might have never thought of before.

- Women vote in Kuwait
While this should be good news. I can't help but think of how sad it is that the date this news item is published is in the year 2006.

- Bogs
By complete accident I learned this is not just a typo people make when trying to type blogs. It actually is something.

- Typos
Open notepad (or kpad if you're on linux or something) and type the word ratio. Seriously, try to do it. I can safely bet that at least 90% of the people will type it 'ration' first before correcting it (or not). It is one of the most popular typos out there. It's probably because we're used to typing 'ion' as in "relation", or "nation", come to think of it. 'io' is an uncommon ending for an English word. I find the typo that usually results amusing.

Congratulations, you just lost 5 minutes of non refundable time.

We eih kaman

Life can get boring sometimes, living seems to be the one action you can't just stop doing when you're bored with it to take a break and do something else, dying for example.
At a very high level, there's really nothing much to do out here but living. And living takes its toll on you eventually, they say smoking is dangerous because it might kill you at the age of 50 or something, but living is about as dangerous as smoking. In Egypt, for example, it kills people at an average age between 68 and 73.

Anyway, I'm done with the nonsense, here is a few things that might make slightly more sense:

- Drama
For some reason we all use the word Drama when we actually mean tragedy. Drama turns out to be a greek word that means "Action", kinda ironic, and something to think about the next time you watch a Jackie Chan movie.

- Ratatouille (rat.a.too.ee)
The funniest trailer I have ever seen, a definite must see. It played while I was waiting for Cars (an excellent movie too) to start and I was still laughing 10 minutes into the movie. Even though it's still a year away I can't wait.

It's getting late so I'll just wrap it up here.
Over and out.

Mom, what is a planet?

You thought you'd learnt it in school. Everybody knows what a planet is. And if you didn't you can always pick up a dictionary and look it up, right?.

Well I thought so too, but then I saw this on the news and I kid you not.

"After over seven years of debating, the International Astronomical Union announced that it expects to announce the official definition of a planet in September. After many-a-deadlock, they handed the task of deciding exactly what a planet is to a new committee, which includes historians and educators. 'They wanted a different perspective from that of planetary scientists,' said Edward Bowell, an astronomer at Lowell Observatory who is also vice president of the IAU's Division III-Planetary Systems Sciences group. If all goes according to plan, the wording will be proposed in their 12-day General Assembly meeting in Prague." (Courtesy of /.)

Unfortunately, they're serious.
Some people have too much time on their hands obviously.

Tourism And Marketing

Continuing with the multi-point posts I had these 2 separate subjects in mind. Only when I put them together in the title did I notice they are actually related. My post however is agnostic of that and you'll hardly notice any relation, it's more of something for you to think about.

-Tourism
At the start of the last century (the 1900s) Leavenworth, WA was a city that depended on commerce for its economy. The railroad tracks used to go through it and a railroad track going through a city back then meant a healthy commercial economy. But then the railroads were rerouted, the city's economy fell apart gradually and for some 30 years the city was on the brink of extinction.
In the late 1960s they decided to try and do something about it.
Ideas were thrown around and an idea to turn the city into a mock bavarian (Bavaria is a state in Germany) village was chosen to turn the city into a touristic destination and help revitalize economy.
And it worked. Even though the city had nothing particularly Bavarian about it, they started remodelling their hamlet to look Bavarian. People started festivals, signs in German were erected, and with all the remodelling work the city looks very refreshing.
Today the city whose area is 3.2 Km² and population around 2000 people gets more than a million tourists annually.
It would be a healthy exercise to think about the story of this city and compare it to how we're "investing" our priceless monuments and potentially touristic areas.

Actually, I take that back, this is not a healthy exercise at all.

-Marketing
I've noticed a few things about ads and marketing that I find oxymoronic. Let me illustrate.
Quite a few ads or statements on product packaging proudly boast "Better taste or less fat or more cleaning power than the leading (beverage, or chocolate, or detergent) brand(s)"
Well, if I, the advertiser, willingly admit that some other brand is the leading brand what am I basically declaring my brand to be... the following brand perhaps?

The other thing is just as popular, I would be watching TV or listening to the radio when the announcer declares '60 minutes of music brought to you "commercial free" by Mercedes Benz' or 'The Closer, series premiere brought to you "commercial free" by Audi'
What exactly is this statement if not a commercial?

Anyway, I'm done talking. I'll leave you with a few photos of my visit to Leavenworth that triggered parts of this post.