How much foreign wealth does a country really have? In the Balance of Payments Accounts, the net foreign wealth is essentially the difference between the assets held by the country’s residents abroad and the country’s liabilities to foreigners, valued at the market price in each given year. If this number is negative, then the country is a debtor to the rest of the world, and needs to generate enough surplus output in the future to pay back foreign investors.
The change in net foreign wealth in any given year reflects the extent of country’s borrowing or...
ISET Economist Blog
A blog about economics in the South Caucasus.
Feb
03
Jan
26
Please have a look at the above photo of the beautiful Kura River with the Sameba Cathedral in the background. Now, contemplate the picture for another 10 seconds and ask whether something suspicious is part of the scenario. Have you recognized it? Right, there are no rescue ladders at the waterside edges. If someone falls into the water, there is no way to get out again. The picture shows just a cutout of the view, but when standing on Saarbrucken Bridge, looking down at the river, you will see no possibilities to get out of the water anywhere! About 30...
Jan
17
One thing few visitors to Tbilisi fail to notice is the rich and layered architectural heritage of the city. There are medieval churches in Old Tbilisi. There are art noveau buildings in Sololaki. There is Stalinist architecture in Vake. And there are modernist experiments such as the Wedding Palace or the former Transportation Ministry Building. But at the same time this rich architectural heritage is threatened – either left to decay or destroyed or overwhelmed by new building developments.
One worrying development is the proposed reconstruction of Gud...
Dec
18
Far from being the root of all evil, money is one of the most spectacularly useful human inventions. On par with the technology of a wheel, the technology of money has made civilization as we know it possible. But what kind of technology does money replace?
Narayana Kocherlakota (JET 1998) argues that money is a form of memory. Here is an example: John has apples and wants bananas. Mary has oranges and wants apples. Paul has bananas but wants oranges. When John and Mary meet, John can accept money from Mary in exchange for apples and us...
Dec
14
Classical production theory knows three so called “production factors”: labor, capital, and land. One needs a certain amount of each of these factors in order to set up a production of whatever good. Then, in the 20th century, it became common to not count land as a separate production factor anymore. Today, we usually speak about labor and capital, with the understanding that some of the capital is the land on which the production facilities are built.
On the surface, this looks just like a pure change in terminology. Yet in fact it reflects an und...
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