Shomron Center for Economic Policy Research

In Search for an efficient Institutions

September 28, 2024
by Moshe
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Assessing prospects of Nasrallah’s elimination

In April 2004, the IDF eliminated Hamas founder and spiritual leader Ahmad Yassin, along with the organization’s chief executive Abdel Aziz al Rantisi. During this period, Hamas also lost numerous field commanders.

Though weakened, Hamas was not destroyed. Since 2004 and by 2007, the organization had shifted its focus to internal struggle against Fatah, seemingly abandoning its vow to “swing the gates of hell open for Israel.” For a detailed analysis, refer to our paper ‘To Kill Hope? In Search of a Reliable Strategy to Fight Terrorism. Jewish Political Studies Review, 29(1/2), 27–57. http://www.jstor.org/stable/26500671; Supplementary materials.

The paper’s short description.

Preliminary Conclusion:

The 2024 blow to Hezbollah is comparable to that dealt to Hamas in 2004. While short-term effects may be significant, this action alone is unlikely to create lasting deterrence. Sustainable deterrence could be achieved through a decisive defeat of Hezbollah, perceived as catastrophic by Lebanese Muslims (not only Shiites) and potential terrorist sponsors.

Minimal conditions for lasting deterrence include:

Severe Hezbollah manpower losses (well over 50%)

Hezbollah’s retreat north of the Litani River, accompanied by a mass exodus of the civilian population (terrorists’ families)

Israeli annexation of territory up to the Litani River, followed by repopulation with Jews and Christian Arabs

Territorial loss is the most evident sign of disaster (Nakba) for Arab leaders and the only guarantee against regular bombardment of Israel’s densely populated north. A similar effect was observed following Syria’s defeat and the annexation of the Golan Heights, which drastically improved security for Israeli communities south of the Golan.

September 22, 2024
by Moshe
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Big Government, Not Big Pharma…

The paper ‘Looks Like a Conspiracy but Is Not a Conspiracy: Big Government, Not Big Pharma, Explains the Response to the COVID-19 Pandemic’ has just been published by The Independent Review (Volume 29 Number 2., Fall 2024, pp. 347-360).

From the article:

The anti-scientific and seemingly illogical worldwide assault on freedom during the COVID “crisis” appears to have been a highly coordinated and even pre-planned action. Many have suggested that Big Pharma took over governments through direct and indirect bribery, as it was the immediate beneficiary of these policies. This reflection argues that Big Government, not Big Pharma or anyone else, was the ultimate source of the ineffective and misguided reactions to COVID-19.”

“Small groups with strong interests and a high degree of coordination can successfully impose tribute on society if the amount of an individual tribute is less than the sufficiently high costs of coordinating the collective actions of members of the society (Olson 1965). Usually, the position that allows both coordinating actions and imposing tribute on society is a position within the bureaucracy of the executive branch of the modern welfare state. The expansion of such groups can increase the regulatory and tax burden and slow economic growth (Olson 1982).

The situation is complicated by the ability of bureaucrats to bribe part of the electorate at the expense of the budget—that is, at the expense of other taxpayers (Jasay 1985).”

“Common interests, strong incentives, and classified knowledge make special coordination efforts unnecessary in the huge majority of cases perceived as a result of perfect coordination.

As a result, bureaucrats of big governments over the world do not usually need explicit coordination to make perfectly coincident or perfectly complementary moves against their societies and against individual rights.

The most important implication of this case study is the understanding of politicians’ and, primarily, bureaucrats’ incentives, which in turn sheds light on their actual policy choices during the COVID-19 pandemic that resulted in huge economic and societal losses (Singleton 2021). Our analysis offers a straightforward recommendation: We need a substantial reduction in the functions, power, and funding of the welfare state to mitigate the most severe consequences of future failures, whether they are preplanned or informally coordinated.”

The short, ‘Popular Science’ version is available at SSRN.

If you need the full text, please contact the authors <yanovskiy.moshe[at]gmail.com>

September 20, 2024
by Moshe
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Six Lectures on Business climate & Economic Institutions’ quality

We have prepared a series of lectures covering problems of Business Climate assessment (Economic Freedom etc) so you can find the less problematic place for doing your business in the long run.

Here are the presentations of these lectures:

(1) Lecture 1. Business climate indicators: the Rise, the Decay, and the ways to repair.

This presentation provides some materials for a better understanding of the advantages and shortcomings of Business climate indicators like Economic Freedom indices. Economic Freedom Indices and ‘Doing Business’ Project are far from perfect as measures of Business climate quality. The assessments are often poorly compatible and subjective. Some additional factors taken into consideration with special attention on the harm inflicted by ‘antidiscrimination policies’ (more correctly, policies undermining freedom of private contracts) could make indices much more reliable and practically applicable instruments.

(2) Lecture 2. An overview of some doing business costs and private property guarantees in Estonia and the Visegrád countries

Lecture on prospects of Long Run investments and doing business in the Estonia and Visegrád countries. Presentation for the lecture on Business climate quality in Estonia and the Visegrád countries. By most measures, Estonia and the Czech Republic lead the sample in terms of favorable business conditions. Compared to most countries in Old Europe, the Visegrad countries and Estonia present lower risks for medium- and long-term investment and business operations.

(3) Lecture 3. China: the forecast which comes true. Analysis of Institutions without the support of local experts

Chinese Model – Deng Xiaoping’s informal institutions imitated Western political competition and secured impressive economic Growth in the 1980s-2000-ties. This institution was critically damaged by 2009 and collapsed in 2017 with the rise of the personalistic rule of Xi Jinping. Thus, imitation of political competition and limited government and real limitations protecting a private person and his property are proven not to be the same.

(4) Lecture 4. Long Run Economic Prospects of AI – revolution: new industries to emerge … or not …

Here is the presentation of the lecture ‘Long Run Economic Prospects of AI – revolution: New Industries to emerge … or not …’ Under protected personal rights, freedom, and property, AI and Robotization do not pose a threat but promise great economic advancement. The Alternative: AI and robots under strict state control lead to a dystopian future.

(5) On Some Problems and Long-Run Prospects of Doing Business in Israel

This presentation addresses the lecture ‘On Some Problems and Long-Run Prospects of Doing Business in Israel’. It examines how several factors negatively impact Israel’s business climate, including: 1. An overly powerful social bureaucracy 2. An excessively active judiciary and public prosecution 3. Mandatory ‘social solidarity’ policies 4. Positive discrimination (‘affirmative action’) practices Despite these challenges, the presentation also explores reasons for optimism regarding future improvements in Israel’s business environment, particularly when compared to other developed nations.

(6) Israel as a place to live and do Business: a Country Where You Can Make a difference

Limitations on the voters’ ability to influence policy and the Rule of Law in Israel are deeply embedded in the country’s historical context. However, these constraints are increasingly acknowledged by society, leading to potential opportunities for reform. As awareness grows, the path to resolving these issues could emerge, and with strategic effort, the political process that opens these ‘windows of opportunity’ can be accelerated at a reasonable cost.

September 2, 2024
by Moshe
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Are Term limits for Congress the best way to ‘drain the Swamp’?

This section is part of Chapter IV, “Modern Conservatism in Old Democracies,” from the upcoming book “To the Conservative (or Free Man) at the Crossroads: Notes on Poorly Learned Lessons.” It follows the paragraph “The Top of the Federal Bureaucracy in the Mirror of Voting.” All source references not in footnotes can be found in the book’s reference list, available in the downloadable manuscript (in Russian). This text examines the popular idea of limiting congressional re-elections, championed by D. Trump, and compares it to an alternative approach for “draining the swamp” – reestablishing voters’ control over federal Civil Service and drastically reducing the size and power of federal bureaucracy. To be clear, this discussion does not condone abstaining from voting or supporting parties that promote a Hamas-friendly version of socialism, as exemplified by K. Harris-T. Walz. These political forces must be opposed. Rather, the focus is on what reforms might help restore lost freedoms and responsibilities to US citizens.

August 7, 2024
by Moshe
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What Will Talented Young People Do if Socialism comes back?

We have previously discussed ideological indoctrination in public schools (Yanovsky, Zhavoronkov, 2022; Yanovsky, Zhavoronkov, Cherny, Zatkovetsky, 2018, Chapter 8). In public schools and publicly funded universities, youth are taught that the State and Government are indispensable in private life. Young people, often ignorant of human history, are told about the “moral dubiousness” of entrepreneurial success. Frédéric Bastiat warned about the danger of such indoctrination in the mid-19th century in his work “Higher Education and Socialism” (Bastiat, 1848, pp. 186, 212). One consequence of this indoctrination is the diminished prestige of entrepreneurship as a profession in modern society.

Max Weber demonstrated that capitalism and its institutions became possible and achieved unprecedented success only after entrepreneurial success received moral and religious sanction and ceased to be considered reprehensible. Only then did sufficiently reliable protection emerge for two potentially unpopular characters to earn huge amounts of money and calmly pass them on as inheritance. The first is the owner of capital, the “means of production” (resources that generate profit). The second is essentially a specialist in acquiring cheap resources and selling significantly more expensive products created with their help – goods and services.

Without the first, there is no modern capitalism and, accordingly, no mass entrepreneurship that potentially generates economic growth (Mises, 1949/2005, p. 640). The second is a “speculator,” and according to I. Kirzner’s definition (Kirzner, 1978), is actually (in the narrow sense of the word) an entrepreneur. It is his “vigilance” to business opportunities that is the direct driver of the modern economy.”

The role of prestige as an important (and sometimes the most significant) element of reward for work done was shown in great detail and with numerous examples by Adam Smith in his “Inquiry into the Nature and Causes of the Wealth of Nations” (1776) [1]. The lack of public respect, honor, and prestige for business and the profession of entrepreneurs can lead to a decrease in the quality of novice entrepreneurs. The low prestige of business undermines incentives to choose risky, innovative strategies for business development, as respect and public recognition are standard compensation for the riskiest occupations (e.g., military, firefighters, rescuers). [2]

The indoctrination of children in modern state educational institutions leads to a shift in public opinion and public choice towards parties that support compulsory state care (“left” parties). More votes for such parties eventually lead to a heavier regulatory burden and a weakening of competition. Voting for ideologically “anti-capitalist” parties signals to potential entrepreneurs that they cannot count on public respect and honor for their achievements. It should be emphasized that the feeling of prestige in being an entrepreneur is an important factor in choosing self-employment (Segal et al., 2005).

Murphy, Shleifer, and Vishny, in their seminal article (Murphy, Shleifer, and Vishny, 1991), analyze the factors that determine career choices. The most talented market “agents” can, under certain conditions, achieve success in business by satisfying market demand through organizing the production of goods and services for consumers, thus leveraging their abilities on the largest possible scale if the return on their human capital (talents, abilities) seems fair. Under different conditions, they might use their abilities to seek rent, redistributing wealth and thereby slowing economic growth. Society’s attitude towards business and success noticeably signals whether business rules will be friendly or hostile.

In summary, the hardships of doing business, humiliating inspections based on the presumption of entrepreneurial dishonesty, and lack of respect for business success lead to a decrease in the influx of new innovative firms to the market. Even when the government’s “care” extends to business, it distorts incentives, attracting those who are more likely to find common ground with officials rather than those gifted with the talent to best please consumers. Such individuals use their connections to limit competition and extract rent. In this scenario, the likelihood of mass expansion in the production and supply of new goods and services resulting from the discovery of new technical capabilities is significantly reduced.

If state education becomes almost the only option (Yanovsky, Zhavoronkov, 2022), the alternative to prolonged unemployment becomes mainly the forced transition to unskilled and low-paid work, even for the most educated and qualified specialists from “old” industries. This situation creates a temptation (both for the ruling bureaucracy and politicians and for workers in difficult situations) to sharply expand the layer of benefit recipients dependent on the state.

Bastiat Frédéric, Selected Essays on Political Economy [1848], trans. Seymour Cain, ed. George B. de Huszar,  introduction by F.A. Hayek (Irvington-on-Hudson: Foundation for Economic Education, 1995).

Kirzner I. M. (1978). Competition and Entrepreneurship. Chicago: University of Chicago Press.

Mises L. (1949). Human Action. A Treatise on Economics. Yale University Press, 1949.

Murphy K., Shleifer A., Vishny R. (1991) The Allocation of Talent: Implications for Growth Quarterly Journal of Economics Vol. 106, Issue 2  pp. 503-530 https://doi.org/10.2307/2937945.

Segal, G., Borgia, D. and Schoenfeld, J. (2005), “The motivation to become an entrepreneur”, International Journal of Entrepreneurial Behavior & Research, Vol. 11 No. 1, pp. 42-57. https://doi.org/10.1108/13552550510580834.   

Weber Max. (1905 / 1930). The Protestant ethic and the spirit of capitalism. New York: Scribner.

Yanovskiy Konstantin (M.), Zhavoronkov Sergei. (2022). Universal and compulsory: what has happened to Education and is it possible to restart the motor of Economic Growth?  (Vseobschee prinuditel’noe: chto sluchilos s obrazovaniem I mozhno li perezapustit motor ekonomicheskogo rosta?)  Voprosy Teoreticheskoy Ekonomiki  (Issues of Economic Theory, in Russian) Vol. 6 Issue 4, pp. 57-76.  https://doi.org/10.52342/2587-7666VTE_2022_4_57_76. Yanovskiy K., Zhavoronkov S., Zatcovetsky I., Cherny D. (2018). Strategya dolgosrochnogo procvetania: v poiskah rastayavshego orientira (The Strategy of Lasting Prosperity: In Search for the Lost Constellation, in Russian) Moscow: Delo, 2018. https://www.researchgate.net/publication/366977534


[1] “First, The wages of labour vary with the ease or hardship, the cleanliness or dirtiness, the honourableness or dishonourableness of the employment….  Honour makes a great part of the reward of all honourable professions. … Disgrace has the contrary effect”. See Chapter 10.

[2] See Adam Smith’s observation of young peoples’ readiness to volunteer during the war (chapter 10).

March 5, 2024
by Moshe
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How to restore public trust in Science?

The erosion of public trust in Science since the COVID-19 pandemic is evident. This erosion reflects a natural response to heavy-handed attempts to enforce a singular and unquestionable “truth” through governmental coercion.

Restoring trust requires a straightforward yet lengthy process. The government and its experts must prioritize genuine science, a principle that was neglected in 2020-2021 when China-styled lockdowns were imposed without consideration of human losses as a result of these policies OR

pushing highly centralized solutions of “safe and efficient” vaccination as the only way to protect people from the pandemic, disregarding the choice of patients.

Additionally, governmental experts should disclose any conflicts of interest when their publicly funded research results in policy advice/decisions that allocate more funds and discretionary power to governmental agencies.

***

Yanovskiy, M., & Socol, Y. (2023). The conflict of interest that is so grave that we all prefer to ignore it?. Semestre Económico, 12(2), 78–91. https://doi.org/10.26867/se.2023.v12i2.153

Abstract: Conflict of Interest declaration is the default way to mitigate the risk of harm of unconscious or deliberate promotion of self-interest causing misinformation or wrong decision-making. Public attention to the disclosure of interests caused by private sources of research funding results in a routine procedure now. At the same time, very strong interests caused by taxpayer-covered Governmental funding of research are generally badly underestimated. Researchers generally have no idea that taking public funding and promoting policy advice to provide more funds should be declared as a conflict of interest: Promotion of more funds and power under the control of bureaucratic bodies or entities is anticipated to bring more funding for the researchers themselves. For example, the COVID-19 response of most democratic governments, based on the use of emergency powers, enjoys broad support from publicly funded research – though the effectiveness of such a response is not supported by the history of previous pandemics. The explicit requirement to disclose public funding as a potential Conflict of Interest, at least in case the authors promote more power and more funds for the Government, will mitigate risks of one of the potentially dangerous biases both in research and in decision-making.

February 7, 2024
by Moshe
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AI in biology and medicine: perspectives from Jerusalem

A New Paper “Artificial Intelligence in Biology and Medicine, and Radioprotection Research: perspectives from Jerusalem” by Yehoshua Socol, Ariella Richardson, and other colleagues just been published in Frontiers of Artificial Intelligence, Sec. Medicine and Public Health (Volume 6 – 2023).

The paper reviews reports delivered by participants of the workshop on “Artificial Intelligence in Biology and Medicine” (Jerusalem, Feb 14–15, 2023).

Among the reports, the paper’s authors mentioned our (Moshe Yanovskiy and Yair Shaki) presentation:

Moshe Yanovskiy highlighted the ethical challenges of using AI in medical decision-making. While some of these issues, such as the “moral hazard” of asymmetric information (AI developer—AI developer’s expert—medical practitioner—patient), have been discussed for decades, others are more specific to AI (Zheng et al., 2019; Cohen, 2023). Practitioners’ fear of competition or unemployment (a modern form of Luddism), can jeopardize proper deployment of AI systems. However, a more pressing and specific ethical concern is the potential for developers and regulators to promote their subjective choices under the veil of anonymity, thereby imposing them on practitioners and ultimately on patients. This can result in unforeseen and grave consequences (Yanovskiy and Socol, 2023a). For example, including equity as a component of an AI utility function may force AI decisions that might decrease the survival rate of some human cohorts (being unable to increase the survival rate of other cohorts). These and other challenges have led to calls for strict government regulation of AI, but since the government is neither an error-free machine nor a heavenly host (Yanovskiy and Socol, 2023b), caution must be exercised in implementing such standards.”

November 21, 2023
by Moshe
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Is this an opportune moment for a substantial, long-term investment in Israel? It is worth considering

Is engaging in business in Israel a reasonable prospect? Should Israel be viewed as a destination for sustained business endeavors and, consequently, for substantial direct investment? We’re not suggesting a hasty purchase amidst declining asset prices due to the war and political instability. Instead, we’re focusing on the wisdom of considering long-term projects in Israel.
The pandemic and the conflict with HAMAS are undeniably detrimental to the economy. Nevertheless, there’s reason to believe that the disruptions they create may foster societal changes. In the long term, these changes could steer Israel towards a path divergent from that of other Western countries. Specifically, towards safeguarding property rights and freedom of contract, thereby cultivating a sustainable and positive business climate.

Thus, starting a business in Israel – is an opportunity, to succeed in founding a new enterprise and in refounding the Country – more free and safe.

A short paper reasoning this risky forecast just has been uploaded and is available at ResearchGate.

October 21, 2023
by Moshe
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Victory means Annexation נצחון אמיתי זה ריבונות

:”יש ח”כים שחתמו את המכתב לממשלה שכולל דרישת הריבונות, אז מגיע להם “ישר כח

kallner@knesset.gov.il, hmelavitzky@knesset.gov.il,)
(ahalevi@knesset.gov.il, bbismut@knesset.gov.il, danillouz@knesset.gov.il, mosaada@knesset.gov.il

.ויש רוב מהח”כים מהקואליציה וגם ח”כים מהמחנה ממלחתי שבעבר התחסדו כאנשי ימין שזקוקים בלחץ שלנו

:אז בוא נשלח להם מיילים ונדרש תמיכתהם לנצחון, זאת אומרת לריבונות

אנחנו היום יוצאים לפעולה שתוצאתה צריכה להיות בעלת השלכה אוניברסלית, שבכל העולם כולו, כל מי שזומם לעשות רעה ידע שיש דין ויש דיין ולא רק בשמיים אלא גם בארץ.

גם האויבים סביבנו, כולל חיזבאללה, מצרים, אש”פ וערבי ישראל, עוקבים אחרי המתרחש. אם לא ננצח את חמאס הפעם – אז בעיני כל העולם הערבי והמוסלמי נהיה לסמרטוט, לטרף חלש ובזוי, ואף דבר לא ימנע מהם לתקוף אותנו.

הפעם אנחנו חייבים לנצח. אך כדי לנצח ולהביס את החמאס – עלינו להבין איזו תוצאה תתקבל בתודעת אויבינו כתבוסה שלהם. מוות? הם מקדישים את מוות. כל אבידה בחיי אדם שלהם – מתקבלת אצלם כפרס. “הרס תשתיות”? חסר משמעות בעיניהם. אבל, אם אחרי הקרבות, על חורבות עזה יקום לפחות איש חמאס אחד, או אולי איש מאירגון טרור אחר, ויכריז “שהידים שלנו הביסו את ישראל, שמרנו על האדמה שלנו” – זה יתקבע בתודעה כניצחון שלהם.

אסור לנו לאפשר להם את זה.

הדבר היחיד שיכול באמת להכניע אותם טוטאלית, זה אם אנחנו ניקח מהם את השטח שהם שולטים בו היום. עם ישראל מוכן לזה. הממשלה, הצבא צריכים לשמוע לקול העם.

:מקורות – פרושים של

דר’ מרדכי קידר

דר’ אליעזר שרקי

ר’ אורי שרקי

ר’ יהודא לאון אשכנזי

אפשר גם לחתום את ה עצומה

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October 8, 2023
by Moshe
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Time to destroy the Idol of “Purity of Arms”

It is a really hard time, marked by numerous horrific events. However, it is a perfect time for us to critically examine the concept of “Purity of Arms” and recognize its grave flaws.

The recent failure of the Israeli Army to protect fellow Jews represents an awful moral failure. Among all the moral failures, the failure of the Jewish Army to safeguard its own people is the most profound.
Causing collateral damage or incurring losses among individuals exploited by the enemy as “human shields,” regardless of the scale, should not be regarded as a moral failure.
It is important to note that, even from a formal standpoint, Israel has never formally obligated itself to minimize losses among “human shields” or other collateral damage. Israel ratified the Geneva Convention (IV) relative to the Protection of Civilian Persons in Time of War on August 12, 1949. The Convention clearly places the responsibility for civilian lives on the side that uses human shields for defensive purposes, rather than on the attacking side. The party deploying its forces among civilian populations bears the responsibility for any resulting losses. Israel’s Military Advocate General’s Corps and certain elements within the judiciary, driven by far-left ideology, attempt to place the blame on our soldiers and officers, which is simply against the law.
However, the most critical point to acknowledge is the state of military “justice” in Israel and the false prophets who promote the “Purity of Arms” concept.
Jewish children’s and Jewish women’s blood and their damaged Honor – are the only substances really damaging the Jewish warriors’ honor and real purity of arms.
This is a matter of great concern that we must fully comprehend and address.