Shomron Center for Economic Policy Research

In Search for an efficient Institutions

December 22, 2020
by Moshe
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Tax reforms in Israel: fine-tuning which tunes nothing

Gradual economic reforms rarely (if ever) had proven to be successful. Tax reforms in Israel since 1990-ties just presents one more case to add to the failures’ collection.

Almost all tax reforms in Israel since 1996 were ‘gradual’, ‘fine-tuning-style’, and eventually had zero impact on the economic growth rate. The only exemption – corporate tax rate [significant] lowering was caused by the pressure of international competition. Some data and references are provided to the reader to illustrate this bleak and unimpressive picture.

The short draft paper ‘Israel Tax Policies since 2009 and Economic Growth‘ has just been uploaded at SSRN. Criticism is welcomed.

 

December 19, 2020
by Moshe
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Inequality in Israel: Curse or Blessing?

We were asked by our friends to prepare a few introductory notes on inequality in Israel and here is a first draft.

First and foremost we take into account a simple fact: Real Justice has nothing in common with redistribution and disgraceful ‘equity’, so we are discussing inequality as a purely economic problem.

There are two sources of inequality in focus in this short paper.

The first one is rooted in the level of risks accepted by business: if a significant part of entrepreneurs is ‘risk loving’ innovators who could both to lose big or, or to win big it inevitably results in relatively high inequality (as it is observable in the US economy – Acemoglu et al, 2012; Adam Smith). The second source of inequality is high barriers for entering markets protecting crony – capitalists. The latter is quite typical for some autocratic governments as well as for every economy plagued by socialist-like institutions (as a majority of Latin American countries and Israel with ‘socially oriented’ patron-client pyramids in broad use – De Soto, 2002).

We will be very pleased and grateful for the critics.

 

March 17, 2020
by Moshe
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Are we ready to lose the Opportunities unleashed by COVID19 Crisis?

As every crisis, current COVID19 pandemic causes economic setback, fuels demand of special interests and emboldens bureaucrats’ claim for more and more discretionary power. But the same crisis brings not only heavy losses for all the countries, but opportunity to succeed also. The opportunity to succeed will not need heavy governmental spending but it will require termination of various practices harming both business climate and public morale. Deep deregulation and respect of freedom of contract, termination of violation of freedom of private choice under pretext of ‘fighting discrimination’ will benefit the courageous society and will pave the way for lasting prosperity.

The following moves and measures are recommended:
Repeal of modern ant-trust legislation and disbandment of ‘Anti-monopoly’ authorities;
Nature, environment protection will be vested to private interests, based on privatization and due delimitation of the property rights (including forests, lakes etc.), responsibility for negative externalities established in the court disputes; respective governmental bodies disbandment;
‘Anti-discrimination’ through ‘positive’ discrimination legislation repeal and abandonment the respective policies, liberalization of real estate and Labor markets
Limiting the scope of [welfare state] activities and responsibilities of the Government, respective Balancing of the budget under moderate tax burden.
Abandonment so called ‘stimulus’ Governmental policies.
General repeal of business regulations through Idaho pattern – based solution (for Israel – Basic Law: Freedom of Occupation (1994) Amendments – new Edition of the Basic Law).
All above mentioned measures would lay solid foundation for healthy, sustainable economic growth in Long ran and will attract direct investments in the country in short and medium ran period, exploiting opportunities lost by the rest of developed nations and the opportunities unleashed because of weakening PRC competition for the investments caused basically by worsening of guaranties for private property in the communist China and, currently, – by the panic, caused by COVID19.

The paper, presenting the proposals and providing some materials to support it one could find at SSRN site.

 

February 6, 2020
by Moshe
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Former IDF combat training chief poor memory

Former IDF combat training chief: Hamas, Hezbollah are better fighters than our elite units

The final argument of m-r Amidror is: “The end result, if you look at the bottom line, is that the IDF does not dare cross the border into Gaza”. Pretty strange and disappointing is his deliberate ignoring a little bit changed (extremely complicated) procedures of decision making on crossing in and invasion. I can’t explain why Amidror keeps silence about ‘Military attorney general corps’ fighting tirelessly to protect Hamas from IDF… One really brave Russian (Ukranian) general and dissident Petro Grigorenko once told something about civic courage which is much superior to military courage.

Maybe it is the explanation?

For in depth study of the problem of lack of civic courage among modern military professionals  see our paper Yanovskiy Moshe, Zatcovetsky Ilia “How Butter beats the GunsDefence & Strategy, 2017 Volume 17, Number 1 (June 2017) pp.141-154 doi 10.3849/1802-7199.17.2017.01.141-154

August 30, 2019
by Moshe
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“Universal Suffrage: The Century of Corrupting Incentives?”

Our paper “Universal Suffrage: The Century of Corrupting Incentives?” has been published (at long last) at Volume 14 of the New Perspectives on Political Economy (now on-line) – see pp. 63-89.

The paper could be downloaded from the SSRN web site also (separately from the whole NPPE Volume).

Conflict of interest of welfare dependent voter creates wrong incentives. These incentives inherent to universal suffrage, yield consequences, as predicted by John Adams back in the 18-th century. Historically the rise of the modern welfare state might be traced to the emergence of mainstream left parties, which promoted government care “from the cradle to the grave”. This paper will address the damages to Democracy caused by conflict of interest, which led to irresponsible leadership and permanent peacetime budget deficit. Historical examples from the 1990s show possible escapes from the trap of universal suffrage.

October 4, 2018
by Moshe
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ב”ד “To kill Hope? In Search of a Reliable Strategy to Fight Terrorism” has just been published

Our article “To Kill Hope? In Search of a Reliable Strategy to Fight Terrorism” by
Jewish Political Studies Review (JPSR Volume 29, Numbers 1–2 pp. 27-57).

One could download the article (draft version) as pdf – file from SSRN or read it at Jerusalem Center for Public Affairs web-site. Access through Jstor see at JPSR page here.

A panoply of anti-terrorism strategies were utilized in Israel throughout its history, beginning with Palestine under the British Mandate and continuing after the creation of the State of Israel to the present day. This history similar to international experience overall, and provides no basis to link terrorism with poverty or despair.

Nor does history suggest any reasonable expectation that terrorists will be appeased by concessions of any kind, whether transfer of funds or relinquishing territory to terrorist control. Neither statistical analysis nor the study of particular incidents support such a hypothesis.

The immediate and most obvious criterion of success for parties in mutual conflict is the control of new territory and its population, which allows terrorists freedom of movement and opportunities to try new terrorist technologies and take the initiative in dynamic situations. Loss of land and population, humiliating defeat, or ostentatious display of triumph by the enemy, in contrast, discourage both terrorist leaders and perpetrators, who would lose the posthumous reward typically promised them in the guise of prestige and income for their families.

Factual instances and statistical data provide evidence to support the hypothesis that terrorism is best put down by force. When opting for such a strategy, it is of critical importance that military personnel be provided with appropriate legal protection.

The supplementary materials for this paper may be found at http://ssrn.com/abstract=2747130 or at the Jerusalem Center for Public Affairs site – below the article .

April 26, 2018
by Moshe
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Left Liberal Hierarchy of “underprivileged” groups

Lefts dominate politically in the California. They are dreaming already to turn all the US in the Californian 1.5-party system.

Feeling of “political safety”, the rule which is secured reliably causes internal fighting for power and resources inside democrats there. Some of fights within Democratic Party  deliver valuable information about liberals’ vision of the future. The future of Big Government, the future of Great Redistribution requires the vision of the ways how to distribute. The Distribution under real socialism never been equal (it is not the case of Biblical “manna-from-the-heaven” when food was provided over the heads of the Moses, Aaron, over the heads of princes of the tribes, directly from the Lord to every family, every “household” in equal portions).

The distribution of the power and resources can’t be equal in the eyes of modern socialist, including left liberals in the USA too. 2008 primaries proved, the half-black man with some Islamic background dominates the white woman. The white woman could win only the white Jew (see 2016 Democratic primaries experience).

Californian intra-party conflict proved, open gay could succeed in his fighting against Latino woman. The Asian people are without doubts on the bottom of every realistically imaginable hierarchy of distribution (as they are big earners for the economy, competitive and independent, so they must pay, but not be paid).

This case provide more evidences for our previous research and proves, the best solution for every Group would be to stop Jihad against private discrimination, to stop governmental protection for “Historically excluded Groups”, to let all the people stand up and live the American way of life, being independent and industrious.

 

M.Yanovskiy, D.Cherny

 

 

March 6, 2018
by Moshe
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Does Government Crowds Out the Family?

Here is the updated version of the report, presenting current state of our studies in political economy of the Family institution crisis. The family was targeted (actually, picked for destruction) by totalitarian intellectuals since Plato. Acute need to destroy it was declared in the Communist manifesto 1848 (as the Family and the Private Property institutions are strengthening each other). Modern politicians standing with Big Government and civilian bureaucrats are permanently in search of new opportunities to extend the budgets and discretionary powers. So our principal hypothesis looks quite reasonable, almost “natural”.

Government interventions into the traditional functioning of the family became an important factor in the recent family crisis in developed countries (fewer marriages, more divorces, and lower birth rate). This hypothesis has been tested statistically for the period from 1800 to 2010 with data from 17 established democracies.

We show that mandatory pension insurance might contribute to the reduction in fertility, with a lag of 40 years. Legislation encouraging a high level of female employment and mandating no-fault divorce rules is tested as an additional factor contributing to the divorce rate hike and birth rate fall. In addition, the concept of “the best interests of the child” encourages children to challenge parents’ authority; the latter reduces “demand” for children (and birthrate) even further.

The reason behind this effect is the rise of the welfare state, crowding out male and parental responsibilities.

The paper was originally presented at the Public Choice annual conference (New Orleans, 2012 “The gender role of the government: some explanations of family crisis”).

October 1, 2017
by Moshe
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Political Factors Behind Cuts and Surges in Government Spending

Political Factors Behind Cuts and Surges in Government Spending:  The Effects on Old Market Democracies and Post-Communist Countries

We tried to explain surges and cuts in governmental spending of Democratic countries by some of the political factors affecting governments’ abilities to balance the budget broadly discussed in the literature. We focus on territorial separatism, minority government, grand coalition, single party government, and the ruling party’s ideology. Special attention is paid to the phenomenon of universal suffrage, which has caused the rise to power of modern left-wing parties and strong special interest groups within the bureaucracy.

Most political factors turn out to be time- and case-sensitive except for universal suffrage. A severe crisis can open the window of opportunity to cut public expenditure, while favorable economic conditions stimulate claims for redistribution and spikes in government spending. The most effective way to curb the instability of public finance is to strengthen pro-reformist political coalitions, claiming defense of national identity and moral values, that encourage austerity and are market-friendly.

The paper has been published by Problems of economic Transition, (Tailor and Francis)  vol. 59, no. 4, 2017, pp. 294-320 2017,  doi: 10.1080/10611991.2017.1321418

Early and unedited version of the article  you could find at SSRN site.