Rostra Economica 295

rostra economica War on the internet:

the booming business of cybercrime

Interview Adjiedj Bakas: the end of Facebook and Europe

The dark side of economics

Issue 295 June 2013 respond? rostra@sefa.nl

Modern day treasures: the dilemma of tax

havens

-------------------------------------------------------------------------------------------------------------------------------editorial rostraeconomica 3 -------------------------------------------------------------------------------------------------------------------------------text Bart Hoffmann editor-in-chief -------------------------image Flickr

Bart Hoffmann is 22 years old and a master student of ­Economics.

A dark goodbye

“T

he night is dark and full of terror.� Some of you may recognize this quote from Game of Thrones, spoken by a character played

by Carice van Houten, one of the best Dutch export products in a long time in my opinion. Although a bit dramatic, this sentence does connect quite well to the theme of this last Rostra Economica of the academic year: the dark side of economics.

you can find an interview with trendwatcher Adjiedj Bakas and an article that gives you an insight in taxevasion by the use of tax havens. Some of our returning articles will also focus on the theme of this issue: what history tells us for example will tell the fascinating story of one of the best con-artists of all time: Frank Abagnale.

This name might not ring a bell, but if you know the movie Catch Me If You Can you might recognize him.

The cover already gave it away: this issue is going to be a bit different from the rest. While you are all preparing for a nice, relaxing and hopefully sunny summer, this Rostra is delving into the bad areas of economics. No happy, uplifting stories this time, but articles investigating criminal activities, big black markets and other dark topics. On page 9 for example you can read all about the booming business of cybercrime. We have all noticed the recent boom in cyber-attacks (referred to in the news as DDos attacks). Whether it were the major banks, the official government system DigiD or the KLM, they all had problems with their systems due to these attacks.

This article shows just how big a business this is and how we could be able to fight it.

This is also the issue in which I say goodbye to the Rostra Economica. After two years of writing and then one year as an editor-in-chief it is time for me to focus on other things. A big thank you to everyone that I have worked with over the past three years: first and foremost, my fellow editors, who have helped me a lot during the first few issues that I was writing and have constantly put in their effort to make this an interesting and exciting magazine. I also have to thank everyone at Sefa that have cooperated in making the Rostra , the designers for their enthusiasm and hard work and of course our columnists.

A special thank you goes out to professor Joop Hartog, who is also leaving the Rostra after an amazing 7,5 years as a columnist, he will be greatly missed.

Another article delves into the war against drugs, and how it is important to understand the mechanism of addiction to make this a successful fight. Furthermore,

I hope you will all enjoy reading this issue as much as we enjoyed making it. For now, I have nothing more to do then to wish you all a great summer and a great read!

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The Rostra Chart

The Big Black Markets We all know about black markets and all the horrors they hide. Even legal goods and services have their counterparts in the shadow economy, not to mention illegal, yet highly demanded ones. In the Netherlands you often hear about criminal activities in the black market, but let’s take a look at the global picture. Here are the worlds’ largest black markets and their global value in billions of US dollars, estimated by CreditScore.

Internet software piracy $ 53 billion Opium and heroin $ 65 billion

Fake technology $ 100 billion Prescription drugs $ 73 billion

Marijuana $ 142 billion

Cigarette contraband $ 50 billion

Internet video piracy $ 60 billion Cocaine $ 70 billion

Fake pharmaceuticals $ 75 billion Prostitution $ 102 billion

-------------------------------------------------------------------------------------------------------------------------------rostraeconomica 5 --------------------------------------------------------------------------------------------------------------------------------

COLOPHON Editor in chief Bart Hoffmann Copy Editors Jules Vos Ruben Slot Editors Floris Dekter Corneel den Hartogh Klara Keutel Tim Martens Ruben Slot Dovile Venskutonyte Pierre Borst Supervisory Board Wouter Smeets Hanne van Voorden Lennart Verhoef Reactions, letters and ­applications can be sent to: Room E0.02 Roetersstraat 11 1018 WB Amsterdam 020 5254024 rostra@sefa.nl www.rostraeconomica.nl Columnists Roger Pruppers Joop Hartog Design def., Amsterdam (Yvonne Roos) Print run 5000 Address Changes Can only be made through studielink, www.studielink.nl

A con artist worth to be loved – Frank Abagnale

18

Rational addiction theories and their impact on the war against drugs

27 33 34 FEB student abroad: Maaike Boot in Barcelona

The state and the mafia, frighteningly similar

Book review. Debt the first 5000 years: Boon and bane of society

The Faculty Think Tank - what did we get out of it?

Advertisements NIBC Advertisement Costs Contact Sefa and ask for Aniel Ganga 020 525 40 24 commercial@sefa.nl Printing DR&DV Media Services, Amsterdam Copyright Notice Any redistribution of part or all of the contents in any form is prohibited. You may not, except with express written permission by the editor in chief, distribute or commercially exploit the contents. Nor may you transmit it or store it in any other website or other form of electronic retrieval system.

and more 8 The Booming ­Business of ­Profit-driven Cybercrime

36 Tax Havens: X marks the spot 40 Economics from the Outside

13 column roger pruppers 22 sefa front 28 The profession of educated guessing

42 FEB student abroad: Sofie van der Feer in Rabat 43 FEB flash

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-------------------------------------------------------------------------------------------------------------------------------rostraeconomica 7 -------------------------------------------------------------------------------------------------------------------------------credits UNHCR -------------------------image L. Boldrini

While most of us think of human trafficking as one of the most filthy crimes in the world, we must realise that others have a different perspective. Research from the Institute for Migration and Ethnical Studies (IMES) suggests that the people that are trafficked, like the ones on this boat near the Italian island of Lampedusa, have a different view. They see the traffickers not as criminals, but as entrepreneurs that provide a desired, yet forbidden product. Due to the fact that immigration is limited the demand exceeds the supply which enables traffickers to exploit the fortune-seekers. The result is that ambitious people travel in degrading conditions without knowing if they will reach their goal.

-------------------------------------------------------------------------------------------------------------------------------rostraeconomica 9 -------------------------------------------------------------------------------------------------------------------------------text Floris Dekter -------------------------images Yvonne Roos, MĂĄrcio Duarte

Floris Dekter is 25 years old and currently pursuing a MSc in International Management.

The Booming ­Business of ­Profit-driven Cybercrime The past few weeks, multiple large banks and government agencies in the Netherlands announced to have suffered from massive distributed denial of service (DDoS) attacks, knocking down websites such as DigiD and payment services for bank customers. It is likely that large, globally operating criminal organizations are responsible for these attacks and many other acts of cybercrime; organizations that increasingly mirror legitimate businesses processes and operate within a dense network of cybercriminals.

For instance, these organizations, buy and sell goods and services in order to increase their profitability, and the involved players have a designated role or function to perform in order to achieve the organizational goal of making money. Furthermore, according to the FBI, the UN and various anti-virus software providers, the context in which these organizations operate has evolved into a black market that is driven and governed by fundamental rules of economics. Business is booming for these organizations, but why are they so successful and how do they infect machines and make money by doing so?

-------------------------------------------------------------------------------------------------------------------------------10 rostraeconomica -------------------------------------------------------------------------------------------------------------------------------How exactly do cybercriminals get their hands on virtually stolen money?

After all, shifting around ones and zeros seems useless when you don’t end up with the actual cash in your hand. Josh Sanburn writes that there are various ways criminals go about it.

They can use money mules as described in the article. The criminals can also use alternative payment channels, which are basically obscure versions of PayPal. Cybercriminals transfer funds to those channels and link debit cards to those accounts.

Because criminals can create an unlimited amount of account, they simply switch to another when one is being compromised by law enforcement. Mobile telephones are increasingly being used by cybercriminals as payment devices in order to get their hands on the money because transactions on these devices cannot be undone for they take place in real time.

Furthermore, using mobile devices, criminals get their hands on the money before the accountholder and financial institutions realize it because they are fed false information using malware.

Profit-driven cybercrime organizations Cybercrime appears to be a widespread problem, for we are frequently and increasingly confronted with disturbing news items concerning DDoS attacks on banks and multinationals or with massive online robberies whereby criminals infect machines and steal the information of many thousands of credit-cards, including credit-card and security numbers, account holders’ names and addresses, which are then sold on underground forums. It appears that these crimes are not committed by lonely teenagers operating from their bedroom or by bored pranksters, but rather by globally operating, profit-driven criminal organizations that show a remarkable degree of sophistication in their operations.

Booming business According to Europol, business is booming for these cybercrime organizations and the volume of cybercrime activities, such as credit card scams, is expected to increase, especially as the internet occupies an ever more prominent role in everyday life. Due to speed of communication and the enormous reduction in the cost of transmitting information, the barriers to entry into the information marketplace have been significantly reduced. Therefore, online crime is big business because organized cybercrime organizations have easy access to the resources needed to commit the crimes, but also to a large pool of victims.

Furthermore, the anonymous nature of the Internet makes it possible for them to obscure their activities, if skillfully executed. The UN for instance provides an example in their 2013 cybercrime study whereby hundreds of ‘smswarez’ (illegal trade in content protected by copyright in return for payment by SMS), and ‘smswebs’ (webpages where copyright-protected content can be downloaded in return for payment by SMS) were concealed by using a legal computer server and hosting business as a cybercrime front.

It seems that the cyber underground thrives because of anonymity; the fight between computer protectors and

-------------------------------------------------------------------------------------------------------------------------------rostraeconomica 11 -------------------------------------------------------------------------------------------------------------------------------Criminals earn about $80 for 20,000 spammed backlinks an around

$100 per 1000 machine infections.

-------------------------------------------According to Europol business is booming for these cybercrime organizations and the volume of cybercrime activities, such as credit card scams, are expected to increase, especially as the internet occupies an ever more prominent role in everyday life

attackers is consequently no longer evenly matched as balance shifts in favor of the cybercriminals.

Business processes and the online black market The vast increase of profit-driven organized cybercrime and the success of the organization involved can also be explained by the fact that due to the possibilities of the internet these organizations increasingly mirror legitimate business processes and operate in a thriving online black market.

By all appearances, the organizations involved in cybercrime are highly sophisticated and increasingly mirror legitimate businesses. According to the FBI and various anti-virus software makers, the organizations are organized according to their strategic and operational vision, logistics and deployment. For instance, there is a clear and hierarchical chain of command involving a worldwide network of cyber criminals who fulfill specific functions in order to contribute to the organizational goal, which is

often making as much money as possible. At the top of the chain of command, executives make strategic decisions and oversee operations, while at the bottom ground-level forces - often referred to as the infantry - initiate the actual infection on a user’s machine. Workers who run affiliate programs mirror regular company’s middle management and are responsible for infecting as many machines possible by recruiting and supervising ground forces. One could say that the services of these criminals are rented or bought by the organization in order to commit a specific crime.

Especially during large operations, the dirty work is done by ground forces, while middle and upper management refrain from engaging in the actual act of infecting machines. Effectively the cybercrime organizations operate within a thriving black market in which cybercriminals can buy, sell or rent all the crime ware services (often for a set price but subject to negotiation) needed to commit cybercrimes. For example, there is a virtual online marketplace, much like Amazon or eBay, where instead of books, music or collectables, stolen credit card information is sold to organizations by hackers. According to Bloomberg these websites mirror legitimate online marketplaces in the sense that they have virtual shopping carts, seller ratings, bulk-discounts and sometimes even customer service operations. Thomas Holt, associate professor in the School of Criminal Justice, found that cybercriminals’ reputation and trust drives sales because the criminals often provide feedback with starred reviews on transactions in order to get rid of sellers who do not deliver or can’t be trusted. Using such a website a European hacker stole 1,400 credit-card numbers including names, addresses and security codes and posted them for sale on an e-commerce site for cybercriminals. Selling them for $3.50 piece, this hacker received $4,900 for his efforts. According to Holt, prices typically range from $5 to $20, depending on the card type, country of origin and the number of cards. Although the line of investigation ends here, one can assume that criminal organizations that purchased these

-------------------------------------------------------------------------------------------------------------------------------12 rostraeconomica -------------------------------------------------------------------------------------------------------------------------------A European hacker stole

1,400 credit-card numbers including names, addresses and security codes and posted them for sale on an e-commerce site for cybercriminals.

Selling them for $3.50 piece, this hacker received $4,900 for his efforts.

credit-card numbers and information to transfer the money on these cards to their own accounts. A process for which these organizations often employ money mules, who are again recruited through advertisement on underground forums or websites such as the ones described above.

It becomes clear that this black market does not consist of few hackers and that the acts of cybercrimes are diverse, as many different services and products are bought, sold and/ or rented. Amongst others, Fortinet, a worldwide supplier of network security appliances, conducted research and provides an overview of the black market pay rates. In their 2013 cybercrime report, one can read that money mules for instance typically receive a commission of 25% for their services. Criminals earn about $80 for 20,000 spammed backlinks and around $100 per 1000 machine infections.

The fact that these profit-driven cybercrime organizations use business models furthermore reveals that they quite strongly mirror legitimate business processes. Cybercrime organizations use comprehensive business models and monetization strategies such as the ‘pay-per-click’ model or the ‘pay-per-purchase’ model to make money. In the latter model a pay-out is given to a member of the infantry when this member successfully infects a machine and the user of this machine purchases fake software such as fake antivirus products. By infecting the machine, the criminals scare the victim into thinking their machine is infected and needs to be cleaned by a product offered by the criminals. According to the Fortinet 2013 cybercrime report, victims typically pay between $50 and $100 for removing the malware.

How to fight this battle?

Lou Hughes writes in The Economist that in order to make sense of the threat of cybercrime and realize a solution it is important to distinguish among different levels of risks and absolute security should not be perceived as feasible for this is deemed too expensive. In accordance with Hughes, computer-security companies argue that organizations need

to take proactive steps to prevent machine infection and the spread of crime ware so that they security risks can be mitigated. Organizations therefore need to develop a comprehensive security strategy that consists of various elements such as antivirus, antispam and botnet and application control.

Stopping crime ware at the source by preventing it from being made or spread seems to be a challenge too great to bear for computer-security companies or even states because it constitutes a never-ending, resource-draining game of cat and mouse. It is for instance believed that for every illegally operating domain that is shut down, two new ones pop up almost instantly. The creation of a global institution with a powerful mandate and sufficient resources to investigate and prosecute cybercrime organizations and the involved players is desirable in this regard but the creation of such a cyber-police is unlikely to happen any time soon.

It seems however that the level of awareness regarding cyber-security is rising. Governments are starting to take the problem seriously and allocate increasing resources towards the fighting of cybercrime, while at the business level cyber-crime fighting is more than ever being viewed as a serious business opportunity. The Economist states there are more venture start-ups in data security today than at any time in recent decades. At the individual level, people too are becoming more aware of the problems and threats of cybercrime and start to protect their machines better.

This is very important because people increasingly use their own private devices such as smartphones and tablets for company as well as private tasks. Furthermore, delicate information is stored in and sent from cloud services like Dropbox, which are relatively easily infected through malware. It seems that in order to effectively fight organized cybercrime, a collective effort, which includes individuals, companies and governments, is required.

-------------------------------------------------------------------------------------------------------------------------------column rostraeconomica 13 --------------------------------------------------------------------------------------------------------------------------------

Roger Pruppers

Hi, I’m totally gross! Please buy me!

S

everal editions ago I discussed “weird attributes” in advertising. Let’s go one step further this time and discuss the use of negative/fear/disgusting appeals. Why would any organization show “nasty things”? One answer seems obvious: to scare away people from undesired behavior. We all know public service messages intended to make sure you don’t drink and drive, smoke, play with fireworks, or beat your wife (unless she wants to talk about feelings during Ajax-PSV, that is). The tricky thing with such appeals is to find the delicate middle ground between “too mild” (makes no impression at all) and “too confrontational” (target audience shuts down mentally). If you search for “Graphic Australian Anti-Smoking Ad” on YouTube, you’ll find a commercial in which a lady visibly suffering from mouth cancer tells us that “quitting is hard, not quitting is harder”. I wouldn’t recommend watching right after breakfast. When I showed the commercial in class, a student (and smoker) simply refused to believe the endorser was “for real”, stating that “it’s unbelievable what they can do with makeup these days”. A quite extreme version of “what are the odds of THAT happening to me?”

Perhaps this is why several recent public campaigns in the Netherlands have taken a more positive or humorous approach. Think of anti-smoking campaigns targeted at a young audience (“Hé, maar ik rook niet”, “Roken is zóóó’...”), or the (don’t drink and drive) “Bob” campaign, where Bob is the name for the designated driver. (Here’s an interesting tidbit: contrary to

popular belief, apparently BOB wasn’t meant to be an abbreviation for “Bewust Onbeschonken Bestuurder”.)

I haven´t seen any numbers on the actual effect of the campaign, but at least it has enriched our language with a meaningful new noun. (And as far as I’m concerned, “de Bob” is easily the most constructive one out of all the new words added to the Dutch language in recent years, but your mileage may vary. Feel free to prefer “zeilmeisje”, “kopvoddentaks” or “swaffelen”.)

But the use of negative appeals is even more interesting in a commercial setting, where they are used to support brand messages. The line of reasoning would be that fear appeals illustrate the horrible things happening to you if you DON´T use a brand. Any classic Head & Shoulders commercial starts with people having nasty flakes in their hair and on their shoulders, consequentially being shunned by society. But (and I think this matters a lot) these images are neatly followed by positive images illustrating the wonderful effects of using Head & Shoulders: beautiful, flake-free hair, and (more importantly) feeling confident in a social setting and being absolutely irresistible to the opposite sex. Perhaps not the most subtle approach, but it works. It is therefore surprising some advertisers put such a weak emphasis on the positive part of the scenario or leave it out altogether, focusing exclusively on the nasty elements. My personal favorites are a print campaign for soap (do a Google Image search on “Just liquid soap print ad”. You will not be disappointed) and the commercials for a brand tackling nail infections starring

text Roger Pruppers -------------------------Roger Pruppers is an Assistant Professor of Marketing at the ­Amsterdam Business School (University of Amsterdam). His ­teaching activities focus on consumer behavior, marketing communication, and brand management.

Digger, or “Schimpie de Schimmel” in Dutch (YouTube search “Lamisil TV Ad (2004)” for a prime example). That moment when Digger/Schimpie lifts a dirty toe nail and crawls underneath always does the trick for me.

The core idea doesn’t change: “we show you what happens if you don’t use our brand, so you’ll realize the crucial importance of buying our stuff”. But without explicitly showing the positive effects of brand use, that a) is a more complicated message to process than one might imagine and b) ignores the simple response mechanisms in our brain. Mister Pavlov would testify that our natural reaction to repeated exposure to “things combined” is to link them together in our mind, so our response to one of them will eventually be transferred to the other. In other words: seeing nasty Digger in combination with the Lamisil brand over and over eventually makes my response to the brand quite similar to my response to Digger´s activities. In all fairness, the ad (and later followups) also discusses the positive message of Lamisil´s solution, but the emphasis is so strongly on the disgusting images in the beginning of the ad that my focus is long gone by then. What I’m stuck with is an emotional response to a dirty creature using a crusty toe nail for an entrance, and this emotion is activated every time I see the brand.

YUCK!! (if you’re a guy) and EW!! (if you’re a girl). It may be an effective way to attract attention and create awareness, but I wonder whether that was the core intention. Advertising as an exercise in suppressing your gag reflex: marketing at its finest…

-------------------------------------------------------------------------------------------------------------------------------16 rostraeconomica Education in the new decade > What history tells us -------------------------------------------------------------------------------------------------------------------------------text Dovile Venskutonyte -------------------------image International Association of Venue Managers

Dovile is a Bachelors student in economics.

My favorite con artist E

very edition Rostra looks at the theme from a historical perspective. Whether discussing an important economist in this field, an exceptional occurrence or simply telling a story that is known to very little people. This issue: one of the most well-known con artist of all time.

When I hear the words “con artist”, usually a picture of Bernie Madoff comes to mind, which is not the best sight. Of course, scammers and cheats are not exactly liked in society and for good reasons. We often imagine them as Gordon Gekko, from the movie Wall Street: sitting in their penthouse office, drinking a glass of 1000-dollar worth scotch and whispering in a creepy voice: “Greed is good”.

However, my favorite movie about con artists is “Catch Me If You Can” about a young, charismatic guy, who starts living off of counterfeited bank checks and gets himself into all sorts of trouble. Unlike Gekko, he is very hard not to like, even though he is a criminal. Moreover he makes you appreciate his talent and work. This movie is based on a true story of Frank Abagnale, who is widely recognized to be the best con artist of all time.

Abaganale was born in New York on the 27th of April 1948, to a stationery business owner and his wife. He had four siblings and a happy childhood until one day his mother divorced his father, leaving Frank, his brothers and sisters and especially his father devastated. Frank discovered his talent for scams early in life. In his teens he dabbled in petty crimes like shoplifting, until one day he decided to look for something more challenging and profitable. When buying gas with his father’s credit card, he convinced the salesman in the gas station to give him back a portion of what he paid in cash in exchange he offered some profit back. Soon his father found about his sons money laundering and decided to send him to a boarding school for disobedient boys. Of course, Frank wasn’t too happy with that, so at the age of 16 he quit and started out on his own.

It was extremely difficult for a 16-yearold with no formal education to make a living, however Frank got all the education he needed in his dads stationery shop. He adjusted his driver’s license to make himself 10 years older and faked an education.

This allowed him to get better

employment opportunities, however it was still very hard to get by. That’s when Abagnale decided to live on writing checks instead of working.

Once he was thousands of dollars over his credit it became clear that it wouldn’t be long until the bank and the police would catch him. So he needed a new him. Frank had to impress bank tellers and create a trust worthy persona to be able to cash more bad checks. One of the most respected professions of that time was that of an airplane pilot. Therefore Frank decided he was going to become one. Not the usual way of course! He called in Pan American Airlines pretending to be a pilot, who had lost his uniform. The company directed him, where to go and get a new one.

He used a fake ID to pay for the uniform and then skillfully made his own. He certainly looked the part, but he needed to actually know something about operating an airplane. Frank learned about flying by pretending to be a student, writing about Pan Am for an assignment and by dating many stewardesses. He got to travel around the world, but eventually the airline got suspicious. Franks short career as a pilot came to an end and he had to look for a different profession and, of

-------------------------------------------------------------------------------------------------------------------------------rostraeconomica 17 -------------------------------------------------------------------------------------------------------------------------------Frank W. Abagnale:

What I did in my youth is hundreds of times easier today. Technology breeds crime

course, a new identity. And what more respected profession is there than a doctor. Frank forged degrees and pretended to be a pediatrician on sabbatical in Atlanta, Georgia. You might think that it is near impossible to convincingly fake a person with years of medical experience, but Frank pulled it off. One day he met a real local doctor, but even he did not doubt Franks honesty. Furthermore, the doctor offered the young con artist a job in the local hospital. He read up on medicine in the library and started supervising interns. He even got a promotion and a license to practice medicine in the state of Georgia.

However, one time his act nearly lead to the death of a child and Frank decided to leave. During the next couple of years Abagnale was a legal assistant, a sociology professor and even a film director. Eventually he decided that he wanted a steady life so he defrauded 300,000 dollars from banks and settled down in France.

But it wasn’t long before a former girlfriend recognized his face in a wanted poster and turned him in.

After 5 years of running, the 21-yearold had to do time in jail. However the FBI soon recognized his talent

-----------------------------------------------Frank W. Abagnale:

Former police chief of Houston once said of me: “Frank Abagnale could write a check on toilet paper, drawn on the Confederate States Treasury, sign it ‘U.R. Hooked’ and cash it at any bank in town, using a Hong Kong driver’s license for identification

and agreed to let him go on parole just after 5 years, with the condition that Frank would work for them.

Most would choose working for the FBI over jail, so Frank agreed to help them deal with fraudsters. He educated FBI agents on his methods as well as other creative ways of scamming and helped catch many criminals. He worked for the FBI for 30 years and even started his own company, where he taught companies and institutions about fraud and methods to prevent it. Today more than 14,000 financial institutions use programs, of his design, to protect themselves from all sorts of scammers.

Abagnale has written numerous

articles and several books, is renowned as a great expert in his field and received many awards.

In the 1960’s Frank Abagnale, between the ages of 16 and 21, stole 2.5 million dollars in bad checks in 26 countries; he fooled the FBI, airlines, government institutions and experts of various fields; he barely did time in jail for crimes of that mast. Why don’t we hate him? Partly because he did a lot of good afterwards, but also because his talent and skill are impossible not to admire. Frank Abagnale, even though a con artist and an example of very naughty economics, is a true artist and master of his craft.

-------------------------------------------------------------------------------------------------------------------------------18 rostraeconomica -------------------------------------------------------------------------------------------------------------------------------text Tim Martens

Tim Martens is 23 years old and a Master student in Economics.

the war on drugs AND THE MECHANISM OF DRUG ADDICTIONS ince 1971 the United States have become the arena of one of the biggest fights against drugs but the results are very poor.

For this reason economists try to understand why individuals get addicted to drugs. The result is the questionable rational addiction theory.

S

----------------------------

A new public enemy in 1971 Richard Nixon, the president of the United States, declared the “war on drugs”. The target of this initiative was to decrease the consumption, production and distribution of illegal drugs. Two years later the Drug Enforcement Administration was formed to combat drug smuggling and consumption in the United States.

In theory the activities of the Drug Enforcement Administration should influence the supply of drugs in the United States. The desired result was a lower supply of illegal drugs and hence a higher price but the reality looks different.

Since the local peaks in 1990, the national indices for the price of one pure gram of heroin steadily decreased.

Between 1997 to 2007, estimated adjusted prices dropped about 30 percent for all quality levels. A similar price drop is observable for other illegal drugs except marijuana.

Richard Nixon:

America’s public enemy No. 1 is drug abuse

At the same time the consumption of heroin has remained stable in the main consumer market, according to the World Drug Report 2012. The United Nations Office on Drugs and Crime (UNODC) expects for 2014 a large increase in production of opium in Afghanistan. Afghanistan is responsible

for 90% of the world raw opium supply according to the UNODC. Consequences for the U.S. Since 1980 the number of inmates in US prisons have risen dramatically.

The increase is partly the result of the enforcement of the new drug policy.

In 2011, 1,53 million people were arrested for drug production, distribution or consumption in the US. The enforcement of this policy creates enormous costs for the taxpayers. The average cost to incarcerate a federal prisoner for one year is $25.251.

The Harvard economist Jeffrey A. Miron estimated that the legalization of marijuana alone would lead to a reduction of government expenditure of $8.7 billion and to an increase in tax revenue by $8.7 billion, assuming marijuana is taxed similar to alcohol and tobacco. The legalization of all drugs would yield tax revenues

-------------------------------------------------------------------------------------------------------------------------------rostraeconomica 19 -------------------------------------------------------------------------------------------------------------------------------Incarcerated Population in the U.S. Prison and Jail Inmates

2500000

Source: CEPR

2000000

1500000

1000000

500000

year

0 1970

of $46.7 billion and a saving of $41.3 billion in government expenditure.

It is perhaps difficult to compare these economic gains to possible social costs.

However, it may be argued that public health is harmed by the prohibition.

Drug addicts face the hazards of dirty needles and HIV. The medical use of cannabis is hampered due to its illegal status. Patients with cancer or glaucoma may fear legal consequences and hence avoid therapy with cannabis.

The enforcement of the drug policy mainly affects those drug dealers that get caught. This gives way to the drug cartels that survive to operate on a larger scale and intensify their bribery and coercion of police and other individuals. The harder the government tries to fight illegal drugs, the larger the profits for the surviving drug cartels and the higher the level of violence and corruption. Prohibition encourages violence because drug markets are

1980

1990

2000

2008

located underground. Sellers and buyers cannot resolve disputes with legal support. Consider the increase in violent crime during the prohibition of alcohol in the twenties.

Since Calderón declared war against drug traffickers in 2006 several thousand Americans and more than 55,000 Mexicans have been killed in drug related violence.

----------------------------

Portugal - an alternative A possible alternative to the recent drug policy of the United States is the drug policy of Portugal. In 2001 Portugal government enacted a law that decriminalized the use of drugs but not the trafficking and distribution. Due to this policy drug addicts have better access to self-help facilities and clinics that can operate without legal consequences. The society can openly address drug addicts with therapy opportunities.

Twelve years after the introduction of this drug policy the results of this reform are not clear. Two studies that deal with the decriminalization have found different results. The first study released by the Cato Institute in 2009 found that the number of drug users

Uruguayan President José Mujica:

What scares me is drug trafficking, not drugs

In an interview with The Economist, the former president of Mexico Felipe Calderón said, “If they want to take all the drugs they want, as far as I’m concerned let them take them. I don’t agree with it but it’s their decision, as consumers and as a society. What I do not accept is that they continue passing their money to the hands of killers.”

-------------------------------------------------------------------------------------------------------------------------------20 rostraeconomica -------------------------------------------------------------------------------------------------------------------------------Average Price of One Pure Gram of Heroin

Source: System to Retrieve Information on Drug Evidence (STRIDE) / Office of National Drug Control Policy.

All prices are adjusted for inflation and reported in 2002 dollars.

$ 2000

$ 1500

$ 1000

$ 500

year $0 1981

1983

1985

did not increase while the number of drug deaths decreased from 1999 to 2006. The second study published by the Association for a drug free Portugal in 2010 concludes that the number of drug users and drug deaths increased from 2006 to 2007.

Rational addiction theory To address the problem of drug addictions requires understanding of the mechanism of individual choices and drug consumption. The theory of rational addiction is an economic theory that states that the decision to use drugs is a rational choice that can be compared to other economic choices. Each individual chooses a consumption bundle that consists of products that maximize utility given the budget constraint. The consumption bundles will differ because of different tastes, incomes and beliefs. Some people may include drugs in their bundle, while others may not. Prices identify how much an individual has

1987

1989

1991

1993

1995

1997

1999

2001

---------------------------Ole Røgeberg:

The evidence is mostly vague ­ hand-waving, anecdotes and loose references used to trick the reader into feeling that the models are more relevant to real life than they are

to give up to buy a product. Does a gram of marijuana yield a higher utility than a new shirt? In this model the consumers react to price changes.

future will likely be more concerned about the perceived consequences of addiction. (see also Rostra Economica 290: ‘The economics of smoking’).

An important determinant of the behavior is their time preferences.

This is related to patience - how much more an individual requires to accept a delay in when he or she get a good.

Consumers that value today more than the future will respond stronger to price changes than consumers that value the future more. Individuals with stronger preferences for the

But does this model reflect the actual behavior of drug consumers? The economist Ole Røgeberg criticizes this view. “Economists state that their model explains real world behavior and that it can be used for welfare analysis with important policy consequences, they don’t see the need to provide evidence that the assumptions regarding the beliefs and

-------------------------------------------------------------------------------------------------------------------------------rostraeconomica 21 -------------------------------------------------------------------------------------------------------------------------------Worldwide Illicit Drug Cultivation in hectares

Source: International Narcotics Control Strategy Report 2012 ­Bureau for International Narcotics and Law Enforcement Affairs.

250000 ha

200000 ha

150000 ha

100000 ha

50000 ha

year

0 ha 2005

2006

2007

2008

2009

Total Poppy Production Total Coca Production Total Cannabis Production

the preferences of the individuals provide a sufficient approximation to anything happening in real world.

Why should we then think that these factors are the cause of a certain behavior? We can’t measure them and we have no evidence that they are present when we see this behavior.”

The problem is that the rational addiction theory assumes that the decision to gradually increase the consumption of drugs is the implementation of an optimal, forward-looking investment plan.

The individuals know exactly how today’s use will changes their body and tastes tomorrow and how this will affect the shape of the optimal consumption path. “We are not given empirical evidence that the actual lagged effects of these substances match those required by the theory.

There is no evidence that people can solve this kind of investment problem, whether consciously or subconsciously.

In fact, lab experiments show that business students fail to solve formally equivalent investment problems even if this determined their real monetary payoffs from participating.” states Røgeberg.

Finally, if we claim to explain why real people behave in a certain way or how we can improve their welfare, then our model needs to stand up to the facts.

Some economists try to avoid criticism by stating that individuals act as if their model is correct. Røgeberg explains that this is absurd. “You could write up a model with preferences and beliefs that made it optimal to repeatedly hit your head against the wall, but that doesn’t tell us whether some mentally disturbed person is actually made better off by hurting himself. If you want to make claims about the real world, you need evidence from the real world.”

It is necessary to study reality to understand reality. Empirical work is needed to identify possible mechanisms and to check the different steps of the causal chain. It is required to identity plausible exogenous variation in the causal factors.

The American war on drugs illustrates that it is necessary to understand economic and social characteristics of drug addictions in the first place. Only then it is possible to find an effective strategy against drug addictions and drug trafficking.

-------------------------------------------------------------------------------------------------------------------------------22 rostraeconomica sefa front --------------------------------------------------------------------------------------------------------------------------------

sefa front

A thank you ­message from Sebastiaan Dear Rostra reader, The academic year 2012-2013 is almost over. We can look back on an amazing year, full of many highlights.

For us, a board year at Sefa has been very challenging and it is an experience on which we can look back for the rest of our lives.

This year couldn’t have been so successful without the active members of Sefa. Therefore, we would like to thank our members for organizing and visiting one or more events of Sefa. We would also like to thank the FEB for the successful cooperation. And of course, we

We are proud to announce the 92nd Board Merel van Geel, Voorzitter Wesley Kuiper, Secretaris

would like to thank the editors of the Rostra for making five very interesting editions this year. Special thanks go out to editor-in-chief Bart Hoffmann.

Ilse Eland, Penningmeester

Finally, we would like to thank you as a reader of this magazine. For now, make sure you don’t miss the opportunities Sefa offers to you. We hope to see you at one of our events!

Chloé Ajamlou, Project Officer / Vice-chairman

With kind regards, On behalf of the 91th Sefa Board, Sebastiaan Klein Chairman Sefa Board 2013-2014

Jeroen Pennings, Marketing Officer Charity Miller, HR Officer

Thijs Algra, Commercial Officer From August 1st on, they will be responsible for the daily management of Sefa.

Meet them at one of our activities or at the boardroom (E0.16).

March

-------------------------------------------------------------------------------------------------------------------------------rostraeconomica 23 --------------------------------------------------------------------------------------------------------------------------------

A quick overview of the last Sefa activities April

March: Room for Discussion - Mario Draghi April: Sefa Drink, Sefa Study Trip Athens, Sefa Career Month Junior and Sefa Queensday May: Room for Discussion - Christine Lagarde

April

April

May

April

-------------------------------------------------------------------------------------------------------------------------------24 rostraeconomica -------------------------------------------------------------------------------------------------------------------------------text Ruben Slot -------------------------image ToddinNantou

Ruben Slot is a 22-year-old Bachelor student of Economics and Physics.

just like the mafia T

he state and the mafia, at first glance they are two completely different concepts. The state provides essential public services while the mafia is engaged in criminal business activities – unsurprisingly, the two are sworn adversaries in most of the world. However, if one considers the origin of both, they turn out to have quite a bit in common. One might even argue that the state developed from some form of early criminal organization. More on that later. First, for a proper understanding of this unlikely resemblance, a short history of the original mafia, the Sicilian Cosa Nostra.

---------------------------One could argue that the state developed from some form of early criminal organization In the 19th century, Sicily went through a series of dramatic changes.

For centuries, land had been held by feudal barons who guarded their estates with small private armies. This practice of feudalism had been gradually phased out in the rest of Europe since the 16th century, but in Sicily it only ended after the annexation of the island by the Kingdom of Sardinia in 1860,

which became the Kingdom of Italy in 1861. The new Italian state divided up much of the public land to private citizens, while the nobility abolished their private armies and left the task of maintaining order to the government.

The local government, however, had little experience with of enforcing laws and contracts and it proved unable to do so. Exacerbating the situation was the fact that there were less than 350 policemen for the whole of Sicily.

Unsurprisingly, the social upheaval and the lack of law and order caused an increase in crime across the island.

With the local police force unable to protect its citizens, some of the bandits started to offer themselves up for hire to protect the communities from their former colleagues. In this way, most towns acquired some group of armed men to enforce the law. However, these enforcers soon starting using their power to demand large amounts of money in exchange for further protection, which became a profitable business and developed into the mafia.

The concept was soon copied to other regions with poor state control, such as southern Italy and later, Russia.

However, the chief operating concept stayed the same: the mafia uses its monopoly on violence to extract money from the local economy.

have formed, as described by Francis Fukuyama in his book The Origins of Political Order. The origin of the state lies in prehistoric bands or tribes of hunter-gatherers. In such groups, a relative equality between individuals was present: the group searched for food together and lived together, but were not subject to the authority of any single person. If you think about it, there seems little reason why people in such a society would consent to submit themselves to someone: their position in the tribe provided them with all they need and they were, to a great extent, masters of their own life.

The mafia origins of the state How this is similar to modern states can be inferred from the way states

With the development of agriculture, writing and other technological advances, such centrally-led tribes

What brought about the need for some form of authority was violence, or the threat of violence, both within the tribe and among tribes. Within the tribe, a dispute could quickly turn into deadly conflict, since there was no mediating authority nor institute that provided individuals with protection.

Between tribes, raiding parties stole cattle or other supplies, and efforts to defend against such attacks proved more effective if coordinated by a single person. For both reasons, it proved advantageous to establish an authority that cast judgment and held the monopoly of violence, generally in the form of a tribal chief.

-------------------------------------------------------------------------------------------------------------------------------rostraeconomica 25 --------------------------------------------------------------------------------------------------------------------------------

---------------------------Both the mafia and the state use a monopoly of violence to extract money from the economy developed into states, of which ancient Egypt was one of the first. It is also a prime example of the similarities between the early state and the mafia.

Egypt was ruled by a small priest class led by the pharaoh, who was the incarnation of the gods on earth and ruled with absolute power. He provided justice and order in the realm and held the monopoly on violence.

In addition, he defended the people against external threats. In exchange, the people provided him with large tributes, making the pharaoh and his priests immensely wealthy. Apart from the veil of religious rituals that legitimized the power of the pharaoh, such a system operates under the same concept as the mafia: the monopoly on violence is used to extract resources from the rest of society. In ancient Egypt, inequality was so large that the state was little more than a wealthgathering machine for the pharaoh.

Development of the modern state The Roman empire continued in this tradition: the many Roman provinces,

stretching from Britain to Syria, provided resources for Rome, which emperors used to lavishly decorate their palaces and the rest of the city. In return, these provinces received the protection afforded by Roman law and Roman legions, as well as public works such as the construction of roads and aqueducts. Being under Roman rule thus conferred benefits on the provinces as well – but for many years, the main benefactor was the city of Rome itself, with the emperor on top.

Despite the many positive side effects that the Roman empire brought to its citizens, its main goal was still the use of its monopoly of violence to extract wealth for the eternal city.

Such practices continued essentially unchanged in Europe in the Middle Ages, but on a smaller scale: the feudal lord had peasants that worked for him and whom he protected; most of the produced surplus went to him. Changes to this age-old system first started to appear in the Renaissance, with the increase of powers of Parliament in England and the establishment of the Dutch republic; both developments brought political power, and thus the power of wealth extraction, to a larger group of people. Slowly but surely, more and more people gained power in the nation-states of Europe. Kings gradually were deposed or had their powers curbed by constitutions, so they could no longer claim all of the state’s

wealth as their own. The introduction of democratic elections can be seen as the defining moment in the development of the state, since at that moment, the wealth extraction mechanisms of the state came under the control of all the citizens of that state.

These two parallel histories of the mafia and of the state show remarkable similarities. Both the mafia and the early state use their monopoly of violence to extort ordinary citizens. The difference lies in the legitimization of this power: whereas the mafia generally does not attempt to hide its criminal nature, the early state legitimized its power by appealing to a higher order: the Egyptian pantheon, the Roman emperor cult and the medieval kings ruling “by the grace of God” all constitute attempts to justify a distribution of wealth and power that would otherwise be hard to accept. It is only when democracy emerged that all citizens were able to profit from the economic benefits that having a state provides, and that the difference between the state and the mafia becomes obvious: citizens use their democratic power to establish welfare states that benefit everyone in society, rather than only a small ruling class. Up until that point, however, the state was little more than rent seeking machine that provided wealth for a small group by taking it from the rest of the population at the threat of violence – just like the mafia.

-------------------------------------------------------------------------------------------------------------------------------26 rostraeconomica column --------------------------------------------------------------------------------------------------------------------------------

Dr Joop Hartog

EXPOSING THE UNSEEN

A

re econometricians magicians?

Can they see things in the darkness that are hidden for ordinary people?

Tax fraud is deliberately meant to be unseen. Corruption should not see the light of day. Illegal immigrants do not want to be observed, and would happily pay to be invisible. Invisible, that is, for authorities, for officials who attempt to maintain the law. Not necessarily for researchers. Under proper conditions, giving respondents sufficient faith in confidentiality, it can be remarkably easy to get information on what is happening behind the doors that are closed to the officials. I remember calling one of these middlemen in horticulture who rented out illegal workers, from Poland and elsewhere, to do the work that the Dutch unemployed can reject in favour of their social benefit. I could ask anything, on wages, working conditions, dealing with tahe authorities’ attempt to impose the law and sensed that I got honest answers. I remember a beautiful project of one of my PhD students, Aslan Zorlu, on the underground textile sweatshops in Amsterdam, during the 1990’s. As an amiable person of the same nationality, with the same native language, he had no problems to move around freely and get the relevant information on the industry. He simply started frequenting the coffeehouses that served as the market place for employers and employees, gained confidence of

participants, and got easy access to the illegal workshops. And he was provided with all the required data to picture and analyse that institution seen so rarely these days: a labour market in perfect competition. It’s now all documented in De Economist of June 1999.

However, this is not what I have in mind with the econometricians’ magic.

It only relates to somewhat unusual ways of data collections. It is possible because what should be hidden for the authorities, need not be hidden for the researcher. The magic concerns the case where it is not illegality that plays a role, but the high cost or perhaps even outright impossibility to obtain the vital information that governs an individual’s decisions. The decision to attend university or not, to opt for selfemployment rather than become an employee. Self-selection and private information are the buzz words. Selfselection must now be one of the most frequently used terms in labour economics. It all started in the early 1950’s when A. D. Roy analysed occupational choice and illustrated his case with the choice between becoming a hunter or a fisherman. Each individual would have a potential as a hunter or a fisherman, in terms of rabbits caught and fishes hooked. The individual knows these scores, we outsiders do not and he chooses the occupation with the highest earnings.

As a consequence, each observed earnings distribution will only be a truncated version of the potential

text Dr Joop Hartog -------------------------Emeritus Professor ­ of Economics ­Amsterdam School of Economics University of Amsterdam Fellow of Tinbergen Institute, IZA, AIAS, CESifo, CrEAM Member KNAW ­Royal Dutch ­Academy of Sciences.

distribution. We cannot observe the productivity as a hunter for those who prefer fishing (and vice versa), and the aggregate earnings distribution will be a combination of the two truncated (selfselecteded) potential distributions. If we assume that individuals indeed know their potential productivity in each occupation, we cannot explain their choices from observed incomes, not even after controlling for observable characteristics, as there will always be unobservables (eg motivation, particular abilities) that affect both potential earnings and the selection. We cannot predict potential incomes in the occupation that has not been chosen from observable characteristics as there will always be unoberved variables that have an impact, and these effects are not random, but systematically related to the choice. The econometric trick is to model (and estimate ) earnings equations and the selection equation simultaneously, allowing for correlation between the unobservables in these equations. The magic is that this would retrieve the potential individual productivity in each occupation, which usually is an unproven claim and can only be judged on plausibility. The magician builds his trick on the assumption that the individuals indeed base their decision on their perfect knowledge of the options. But this can be tested in principle, by asking individuals what they think they know.

Potentially then, the magician can be unmasked. An interesting challenge, just like in the theatre.

-------------------------------------------------------------------------------------------------------------------------------FEB student abroad rostraeconomica 27 --------------------------------------------------------------------------------------------------------------------------------

text and image Maaike Boot

Maaike Boot is 21 years old and a third year economics student, currently studying at Universitat Pompeu Fabra in Barcelona.

The Erasmus way of life? Sí, por favor!

E

very issue of the Rostra we let a FEB-student describe his or her experience studying abroad at a partner university. This time: Maaike Boot on studying at the Universitat Pompeu Fabra.

While writing this column, I’m almost ready for a long run through the streets of Barcelona, along the beautiful houses and the smalls bars where local people enjoy their breakfast and I will probably end up somewhere on the beach, realizing that this might be the most amazing place where I have ever ran.

It’s already more than three months ago that I left Amsterdam for probably one of the biggest adventure of my life: six months of living and studying in Barcelona. I remember the day that I was standing on the airport, on my own, for the very first time. Excited, sad, scared, nervous, happy, curious; I don’t think I ever felt so many different feelings at the same time. The good thing is, that after three months, there are only positive feelings left. The cliché is true: this is definitely the best time of my life.

The experience of arriving in a new city where you don’t know anyone, far away from your safe home environment, but where, after the first weeks, you realize that you met more people than you ever imagined. You meet with a new culture, and even thouugh the cultural differences between European countries doesn’t seem that big, I can say that

arriving in Barcelona felt like a cultural shock. The Spanish language is one of the reasons why I wanted to study in Barcelona, but I realized that it’s not the same as going on holiday and being excited if people understand you when you say ‘Hola’, ‘Buenos dias’, ‘Gracias’ or ‘Adiós’. It becomes difficult when you try to communicate with local people in shops or the police when you need your registration number. However, there comes a moment that you realize that you’re getting used to being surrounded by people that you don’t understand, and even better, the moment that you actually begin to like listening to a new language and that you get more and more curious to learn and really speak that language. It’s not only the language that I begin to like more and more, it’s the whole Spanish culture. In the beginning it felt weird to not have dinner around six, say ‘good morning’ until two, arriving ten minutes late without having someone that starts to call you ‘where are you?’, or empty clubs until two at night.

Now I can’t even imagine that I ever have to go back to the Dutch punctual, efficient, but not always so relaxed culture. Besides, since I’m still Dutch, I do not dare to talk about the weather.

I’m so used to check the weather every day and be able to answer the most important questions of the day: ‘can we do something outside?’, ‘should we bring an umbrella?’, ‘do we need a jacket?’

Here this actually becomes boring.

Checking the fourteen day weather

forecast shows the same picture every day: more than ten hours of sun, very low rain chance, almost no wind, around 18-20 degrees and warm nights. I can have lunch at my balcony, read my book in the park and have drinks with my friends on the street until late.

I remember how long the upcoming six months felt when I just arrived here.

Now, after more than three months, time flies and I do not want to go back. If I would get the opportunity to experience this amazing time again, than my answer would be clear: ‘Sí, por favor!’

P.S. And yes, I would almost forgot, I’m also studying here. I remember a friend’s gift before I left, which was about the Erasmus way of life. One of the sentences was: ‘The Erasmus doesn’t go to the lessons (also if he would like to) but if he goes there he doesn’t pay attention to it.’ Although this might not be completely true in my case since I try to go to every class and pass all my exams, it’s just that this whole experience is not about what you learn from the courses, but about all the other things I wrote before, when I forgot to mention the official reason why I’m here.

You can still apply before June 15 for an exchange in the 2nd semester of 2013-2014.

More info and online application at: www.student.uva.nl/­ feb_studyabroad

-------------------------------------------------------------------------------------------------------------------------------Interview with Adjiedj Bakas rostraeconomica 29 -------------------------------------------------------------------------------------------------------------------------------text Klara Keutel, Dovile Venskutonyte -------------------------images Dovile

Klara Keutel, 2nd year Economics.

-------------------------Dovile Venskutonyte, 3rd year Economics.

The profession of educated guess?ng War is good, the EU will implode, Facebook is a bubble and dark economics comes from politicians.

Adjiedj Bakas is a provoking but always optimistic trend watcher with roots in India, a childhood in Suriname and professional education and life in the Netherlands. He gives around 200 lectures and strategy consultancies per year to companies such as Philips, Apple, Google, Microsoft, BMW, KPMG, Nike and ING, speaks at conferences and has published various books on, for instance, the future of food, health, privacy, energy and the labor market. His newest book, The State of Tomorrow, can be expected this year. He was honored as the trend watcher of the year in 2009. And now he is sitting on the Rostra Couch for an interview.

Mr. Bakas, we are very glad to get the opportunity to speak with you about trends and the profession of trend watching, upcoming developments and, of course, dark economics – whatever that might be.

Mr. Bakas, you studied Dutch literature. How did you get from there to the unusual profession of a trend watcher?

Officially I studied Dutch literature, but back then we were allowed to study many subjects not related to your major.

You could make your personal study plan in whatever way you wanted. So for me Dutch literature was just a name,

-------------------------------------------------------------------------------------------------------------------------------30 rostraeconomica Interview with Adjiedj Bakas --------------------------------------------------------------------------------------------------------------------------------

Globalization is over - we are in a state of Slowbalization now

in fact that also included economics, politics, psychology, and a lot of other subjects.

I wrote my thesis on a Dutch broadcasting company which was in the middle of a privatization process. When I finished, they asked me to stay as they needed help in the privatization process. In the two years I worked there I learned a lot about media; how journalism and how television works.

Afterwards I started working for KLM, who were also going through a lot of restructuring. They were going to organize engineers in self-steering teams and cut out the managers, but I told them that it wasn’t going to work.

Then KLM said: ”Okay, here you have money and time, go dive into it”. In order to succeed in this, I got some private tutors, among them Wim de Ridder, who teaches “future research” at the University of Twente. Every professional trend watcher in the Netherlands today learned from him. He told me that I have a talent and an intuition about what’s behind today’s headlines; therefore he was going to show me how to express it in a scientific way. That was 20 years ago. Afterwards I watched trends for many companies, I never advertised, but a lot of word-of-mouth recommendation and now I’m here.

How do you watch trends?

I make predictions on my intuition and then I find evidence for it. For that I depend on excellent researchers.

I have a professional team in the Netherlands and in India, where labor costs are much lower, but the quality of research is just as good. They observe and analyze, for example, patent registration as this is a very important source of trend evidence: It is a very costly procedure, to patent one new invention you have to table €200.000.

Having in mind that IBM alone registers 2000 patents every year it becomes evident how much money is circulating here. Thus, following the flows of funds – where is the money going, what are the big investments? – gives a lot of insights into upcoming developments.

That is how I know that the people who own twitter are financing the 3D printer, to give just one example.

Sometimes big investment flows end up in a bubble, which bursts, like the US housing market or the dotcom bubble. Do you predict the end of certain trends?

Yes, I predicted that Facebook was a bubble from the very start. I think that within five years it will be where My Space is now. In the US you can see that teenagers are leaving Facebook, and today it was announced that the game industry is stopping to produce games for Facebook.

Facebook is now only for old people in America. 30% of the Dutch are spending less time on Facebook. Thus, if frontrunners like the Netherlands and the US are leaving it and advertisers are backing down, it will not be here for long anymore.

Do you think that it will be replaced by another social network, or do you think that people are fed up with it?

I think that people are fed up with it. Social networks are not social at all; people are lonely and want to connect again. Especially your generation; they are looking for real intimacy again. Facebook is a tool that can help you find someone you once knew, someone who is hard to reach, but it is just that. But in the end we are going back to physical contact. One of the biggest problems of this century is loneliness.

But Facebook played an important role in community organized movements like the Arab Spring.

Well, the Arab spring turned into the Arab winter.

The Facebook generation loses to the fanatics. The same happened in the 1970s in Iran: the young generation revolted against the dictatorship together with ayatollahs, but in the end the ayatollahs won and kicked out the students. Now we experience something similar: The dictatorships lost power, when its people revolted – facebook is just a new tool.

-------------------------------------------------------------------------------------------------------------------------------rostraeconomica 31 --------------------------------------------------------------------------------------------------------------------------------

Adjiedj Bakas 1963 birth in Suriname

But, after all, we do not see the revolting people in high governmental positions. The fanatics won again.

So we’re moving in opposite directions at the same time: on the one hand IT is becoming more and more important and on the other, we are looking for real relationships?

Yes, but you can combine the two. So we need to know more about IT, in your study program as well. We are going to see more data storage online, which allows for personal service, personal advertising. I often lecture to young managers that they need to study IT. It is neglectful of the universities to ignore this. You will have to deal with this in your future, so I would advise you to take some courses in IT. Everybody should learn about IT and not leave it only to the nerds.

1983 move to the Netherlands and study of Dutch Literature in Utrecht Thesis and employment with De Omroep (Dutch Broadcasting Company) Employment with KLM, personal trainings (e.g. from Wim de Ridder) Work at trend communication office Dexter Now: Own trend office, guest lecturer, speaker, coach and author

Sometimes people tend to overestimate technological change, how do you predict the time span in which progress is going to happen?

IT guys tend to overestimate, so you need to talk to many specialists of varying subjects to get a more precise estimation.

The topic of our current issue is Dark Economics, what comes to your mind when you hear this term?

I love economics, but you have to be aware of the fact that it is also emotion, and economists are not taught about that.

Queen Elizabeth two years ago said: “How is it that I have been on the throne for 60 years and not one economic prediction has come true”, and the answer from the Royal British Society of Economics, was: we just don’t know, we’re just guessing. So it is interesting that people who should know are just guessing. So that’s one thing. Secondly, politicians, for example in case of the introduction of the Euro, decide economic policy. The French president Mitterrand, who just wanted to beat the Germans, invented the idea of the euro. According to him the Deutsche Mark

and the Bundesbank were the Germany’s nuclear weapons and should be defused. There was no single economist who favored the monetary union because the rich would have to bail out the poor and eventually the system would implode. It is like marriage: if people are not happy, they are not happy. Even if it is expensive for them to separate, they will. And the euro-marriage is not working. So I think that by 2014 or 2015 the euro-system will collapse and end up in a tragedy - all because of thoughtless politicians. A look at history shows that it always repeats itself. We had 150 monetary unions before and they all imploded because of the same reason – emotion. So, if you ask me about dark economics: politicians make it and economists do not revolt enough to their actions.

-------------------------------------------------------------------------------------------------------------------------------32 rostraeconomica Interview with Adjiedj Bakas --------------------------------------------------------------------------------------------------------------------------------

Sustainability is the new religion

Assumingly, you are skeptical about the talks of a European banking union and fiscal integration?

It is not going to work. It cannot work. I heard from insiders in the IT-sector that banks throughout Europe use different IT systems; it would take 10 years to synchronize them. That costs time and money and I do not see the willingness to invest either of them.

Another barrier is cultural differences. Culture is much stronger than structures. 90% of company mergers do not work because of cultural reasons. Globalization is slowing down, I call it over. Things are going back to the local level, economic nationalism is on the rise, and governments are protecting their companies. With inventions like the 3D printer we won’t have to rely on cheap labor in developing countries. Trade will go down, as well. A lot of manufacturers like Samsung and Apple are preparing for this. Of course you can’t grow Chinese tea in Holland or make French wine here, so we will still have trade, but much less.

that will work out with the Green Church?

Of course it is. God added paradise because it was so boring.

The Swiss had 500 years of peace and their only invention is the cuckoo clock. That tells a lot about the importance of wars. It brings people and societies forward. Wars are good and we are going to see more of them: in the physical, online and natural sphere where we will have to fight against dramatic changes in our climate.

Let’s move from the macro-view on the down-side of economics to its micro-foundations: One current philosopher said that people don’t really care about the organic, free trade or sustainability movements because they are good for them, but because it is a fad. Do you think that it will go out of fashion?

It might go out of fashion but I think that in around ten years we will go back to religion. And sustainability is the new religion. I propose the Green Church. It will be a spiritual movement about sustainability and reconnection.

People want to go back to nature, be more sustainable and feel good about themselves. It is like Christianity, which started as a network of people, who wanted to go against the establishments and do something new. We see the same thing happening again.

There two main areas of scientific advancements: technology and genetics, which one has more potential?

I think that we are going to see a revolution in genetic technology; it has huge potential. Not only in healthcare or agriculture, but also in energy and manufacturing because we will have a bio-based industry.

History shows that religion is often abused for power, gives reason for conflicts and wars – how do you think

Then let us, for now, look at a small and every-day war: consumers are often not willing to give up low prices and convenience for organic, fare trade or sustainable products. How do we fight that?

The consumer is how he or she is, thus we are going to see a very hybrid culture. Organic is going to meet GMO; we will still have gas or fossil fuel energy, but will also see an increase in sustainable energy. In order to satisfy consumer needs we will have hybrid industries; not 100% sustainable and renewable ones.

Last question, in the future economy, what do you think is the most important asset for an individual, a company or a country?

Relevance. You should always be relevant. You should make relevant products and you should be aware of the real aspirations of your consumers. Aspirations are changing, we are moving to Capitalism 3.0. The world economies will quadruple and population will grow, but economies will be more localized. However, in Europe, aspirations will become less materialistic.

-------------------------------------------------------------------------------------------------------------------------------rostraeconomica 33 -------------------------------------------------------------------------------------------------------------------------------Debt: the first 5000 years Author: David Graeber Number of pages: 544 Publisher: Melville House First edition: July 12, 2011

text Klara Keutel

Klara Keutel is a second year Economics student.

Relevance READABILITY CONTENT

When it’s necessary to sell your daughter “And what’s more, if human beings owed nothing to one another, life would be no better than a dog fight”: “Among human beings none will save each other; no one has anything to lose by another person’s fall or death. He has lent nothing. And: He would lend nothing either hereafter.

In short, Faith, Hope and Charity would be banished from this world.”

W

e are in the middle of a European and perhaps a global debt-crisis. No news passes without the term being dropped at least three times, not to mention all its related topics.

Haircuts, debt quota, aid packages, debt amortization, austerity and others are frequently heard terms. More and more countries find themselves unable to escape the burdens of their debts.

Debt is gaining an increasingly negative connotation.

But before it got so much into public focus as a trouble-maker it simply was, and undeniably still is a very common phenomenon. Students take loans to finance their studies. Loans are used to buy cars and houses. Firms invest in capital, research and innovation. States move into budget deficits in order to stimulate or restructure the economy. On the

other side, the same players in different constellations earn money by accepting debt and receiving interest payments. Economic textbooks declare it as common sense that debt is not necessarily good or bad. That it is a crucial part of our economic system.

Some years ago, David Graeber, a well-known American anthropologist, researcher, lecturer, political activist and anarchist attended a garden party at Westminster Abbey. The talk with a social lawyer and in particular a single sentence – “Surely one has to pay one’s debts.” – made him start doing extensive research on one of the most prevalent and undeniably fascinating topics of – the title already suggests it – (almost) all times the combined human memory can remember: Debt.

What is it? Why do we need it? Are there differences in its perception depending on culture or location?

What are the underlying anthropological and moral determinants? The first half of the book is dedicated to an insightful exploration of the origins of debt.

Afterwards, in the second half, David Graeber takes a closer look at how the function of debt changed throughout the development of civilization: From

the Sumer civilization in 3500 BC to today’s globalized world.

After reading “Debt” you might have the impression that nearly all social revolts and public outcries, wars and conflicts were – at least to a great extent – caused by debt.

You might also not be sure anymore whether debt is necessarily tightly connected to a monetary system.

Graeber suggests that, in the very beginning, debt was associated not with coins but with a social currency: This everyday communism, as he calls it, is based on mutual expectations and responsibilities among individuals.

Debt – the first 5000 years presents a radical but well-founded and detailed view on the current pop-star of the daily news. Peppered with anecdotes from various times, countries, cultures and societal systems that range from shocking (fathers who sell their daughters as debt payments) over funny to enlightening, it illustrates in an eye-opening way how and why we got where we are.

A provocative and fun must-read for every student interested in and concerned with what is happening outside of the lecture-room.

-------------------------------------------------------------------------------------------------------------------------------34 rostraeconomica FSR page --------------------------------------------------------------------------------------------------------------------------------

The Faculty Think Tank

image Yvonne Roos

Have you ever thought about how many things you have in common with your faculty? Some months you need to spend less in order not to go broke and so does your faculty. Sometimes you are punished for not obeying the rules and so is your faculty. And sometimes you have big problems which you cannot solve alone and, guess what, so does your faculty!

the room and heated up the discussions. Besides this, a number of problems were pointed out by the participants such as: the first year students do not really know what they want to study; the FEB is not considering the transition between high school and university; and the faculty is focusing too much on obtaining the success rate of 70% by implementing rigorous measurements.

There are 4 major issues that are an equal concern for both the students and the FEB:

Possible solutions included separating Maths&Stats in two courses or shift the course from block one of the first semester to block two; giving students room for electives in the first year and the FEB being more lenient with the second and third year students and inspiring them to do more next to their studies.

1 Study success measures 2 Separation of the English and Dutch tracks 3 Incoming and outgoing exchange students 4 Integration of international students in Amsterdam So we, as the link between the two parties, figured out: What if we let them find the solution together? This became the fundamental idea of the think tank the FSR FEB organized last month – ask the students to help the Board and administration to improve the quality of education by bringing innovative and fresh ideas.

More than 30 people attended the meeting and brainstormed with the Dean over coffee and tea about possible future changes concerning the 4 topics. There was a great deal of useful input, but we are presenting you only a small summarized part of it: 1 Study success measures The main question covered was: In what way should the FEB try to achieve the study success rate quota of 70% in 2016 in a student-inspiring manner?

Ideas like a 60 ECTS requirement in the first year and higher entry requirements for Dutch students circulated in

While most of these issues are well-known, a convenient way was needed to address them properly and to the right people – and this was one of the main purposes of the think tank.

2 Separation of the English and Dutch tracks Should the Dutch and English economics and business tracks be together or separated? This is a major question for a number of students. Right now there is no clear line between the two programs, which start relatively divided and are then brought closer and closer together in the subsequent years. Same books, same exams, same lectures, different diplomas. Should we be one whole?

Simple question, no simple answer. Pros that were formulated included the better integration, broadening of students’ horizons and a better adaptation to the increasing tendency for internationalization in the global business world. Cons were that Dutch students no longer have the opportunity to study in their own language within their own country, that specific Dutch courses can no longer be taught and that there would be an overall loss of the quality that the international track now possesses. The main thing which became clear during the think tank is that a decision needs to be made: either completely separated or completely merged. Not half way.

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3 Incoming and outgoing exchange students So many incoming exchange to UvA, so little outgoing.

Aren’t your twenties the best time for exploring the world, travelling, spending a couple of months in a completely new country? What is better than an adventure like this which is actually incorporated in your study schedule?

Apparently there is something better since so very few students from the FEB decide to study abroad. A couple of points stood out during the discussions, such as insufficient communication and almost zero inspiration from the faculty, high expenses and unsuitable timing.

Maybe better promotion techniques, more information, student fares and scholarships would benefit everyone?

4 Integration of international students in Amsterdam The FEB is a little Garden of Eden where international and Dutch students coexist in a peaceful and supporting manner. But to what extent are they actually interacting with each other; how big is the gap? Our event gave space to the students to brainstorm about this and to suggest who is responsible for the integration – the internationals themselves, the Dutch “hosts” or the faculty? How can we bring everyone together so they can mutually benefit?

It turns out everyone has a role to play in this situation and needs to put in a little effort. Unlike the other 3 topics, this one gave very straightforward solutions, which only need an action plan to be executed : mixed Intreeweek; mixed housing; mixed committees; compulsory Dutch language courses in the first year; a buddy system where Dutch and international students can help and meet each other.

Nice work FSR, you would say, but what are you going to do with the input? Well, here it is: By the time you are reading this, we have already had a formal meeting with the Board, the education directors, teachers’ union and other important decision-making people from the FEB to give them the input they asked for.

We discussed the outcome and ideas of the think tank and agreed on future actions that need to be taken to implement the students’ suggestions. We will keep you posted!

To sum up, the think tank proved to be a great, resultsgenerating idea. Students and administration working together for a better faculty appears to be an optimal way of improving quality of education and the atmosphere at the FEB. As a Student Council, we believe that the close connection between those studying and those guiding the course of the faculty needs to be preserved and further developed and this is why we are planning on making the think tank a regular event. Join us next time and maybe you will be the one deciding the future of the FEB!

FSR Contact details Open office hours E2.09: Tuesday, Wednesday and Thursday 11:30 – 12:30 Tel. 020 - 525 4384 For questions, complaints and feedback you can reach us by sending an email to: fsr.feb@studentenraad.com For regular updates and information join our Facebook-group: facebook. com/groups/fsrfeb www.studentenraad.nl/feb

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-------------------------------------------------------------------------------------------------------------------------------rostraeconomica 37 -------------------------------------------------------------------------------------------------------------------------------text Dovile ---images iStock, Jouko Luhola

Dovile is a Bachelor student in economics.

Tax Havens: X marks the spot We’ve all read books or watched movies about pirates. They hide their treasures in small islands and devise esoteric maps, full of riddles and dangerous obstacles to find them again. The Kings Navy desperately tries to catch them, find their maps and bring back what they’ve looted, but often fail.

Todays’ Pirates of the Caribbean Put the pirates in suits, replace their ships with multinational corporations and rename the King’s Navy the G-20 or the OECD and you will get today’s real-life treasure story. Most treasures are still buried in small islands, such as the Bahamas or the Cayman islands, just not in the ground, but in their financial institutions, who will not charge you a corporate tax rate, only a fee for holding your treasure. These small islands are robbing the West blind, because they are also tax havens. Countries, NGOs and various international organizations like the OECD have been complaining about rich corporations and individuals shifting their profits to teeny tiny islands with little to no income taxes for years. The issue of tax havens seems to be a never-ending discussion, however, it became more intense in the past weeks.

A leak in the ship In addition to zero or close to zero corporate and individual tax rates, another important benefit of tax havens is that they are extremely secretive and never reveal the accounts and identities of their customers. However, in the first week of April a massive amount of approximately 2.5 million secret documents on accounts in tax havens were leaked to the public. The leak revealed 130.000 rich individuals in 170 countries including politicians, celebrities and even leaders of corrupt regimes. The leak touched the

-------------------------------------------------------------------------------------------------------------------------------38 rostraeconomica -------------------------------------------------------------------------------------------------------------------------------Change in U.S.-owned financial assets in tax havens

Source: US Department of Treasury, Christian Aid, OECD, and Tax Justice Network.

$984

Dec. 2004 Dec. 2006 Dec. 2008

$836

$588

$280

$195 $126

$118 $112 $111 $63

$86

$23 Cayman Islands

Bahamas

Switzerland

Ireland

$35 $39

$65

Netherlands

------------------------------------------Tim Ridley, former chairman of the Cayman Islands Monetary Authority:

Whatever may happen with offshore accounts today with everybody smiling about it could happen to onshore accounts in London or New York tomorrow Netherlands a well. ING and ABN Amro were revealed to have set up dozens of offshore accounts to their customers.

In addition, the accounts and identities of 21 former and current ING board members were brought to the fore by the leak. ABN Amro has responded to the leak by saying: “The companies are set up for international customers and always comply with local and international laws.”

Bad guys caught While the banks actions may have been perfectly legal, there is a thin line between tax avoidance and tax evasion.

Currently tax authorities around the globe are investigating the leaked information to identify possible tax evaders and recuperate lost tax revenue. This is not the first leak of

$9 $16 $19 Luxembourg

$32

$46

$19

Channel Island / Isle of Man

$34

$22 $10

Bermuda

$6 $8 $13

$7 $6 $9

Hong Kong

Singapore

secret tax haven information. In 2007, 5800 accounts were leaked from the private Lichtenstein based bank LGT. Countries reported to have recovered illegally evaded taxes, including Germany, which states to have collected hundreds of millions. Also in 2008, Brad Birkenfeld, a former employee of the Switzerland based financial services firm UBS, pleaded guilty in a US federal court to helping clients evade taxes. In addition he revealed 4450 accounts of tax evasion. UBS had to pay a fine close to 800 million dollars and hand over information to the American tax authorities. In 2009 and 2012 one of Europe’s biggest banks, HSBC holdings, was implicated in similar scandals.

In all of these cases illegal activities were identified and some lost taxes were recovered. The 2012 case, where accounts of a total value of 1.1 billion were leaked to the UK, is still being investigated. Even though tax haven leaks are not new, the most recent leak is much larger than all the previous ones and is reheating the debate on tax havens.

What are we doing about this?

On the 19th of April, in a G-20 meeting in Washington, the world’s most powerful economies have decided to take action towards tax havens. They decided to start a system of automatic exchange of bank accounts of suspected tax evaders and illegally earned money. Furthermore, the G-20 identified 14 countries, including Switzerland and the UAE, whose tax secrecy laws do not fit international requirements; the group has thus decided to put pressure on theses havens

-------------------------------------------------------------------------------------------------------------------------------rostraeconomica 39 -------------------------------------------------------------------------------------------------------------------------------The Bahamas is the world’s 4th largest financial center, with combined value of its financial institutions assets of

$595.000.000.000

.

to improve their tax laws. The head of the Association of Certified Financial Crime Specialists, Charles Intriago, made a bold comment on the G-20’s decision saying that: “This may be the beginning of the end of bank secrecy havens.” This move may indeed help deal with corruption, by identifying politicians and company leaders, who shift their profits through illegal means, and revealing criminals who place their dirty money in tax havens. Some experts believe that this time, G-20’s actions may be serious and successful, due to the fiscal problems member countries are facing at this time. A British NGO, the Tax Justice Network, estimated that globally there are between 16 and 25 trillion euros placed in tax havens. In the extreme case of Venezuela, the 406 billion dollars that are deposited by Venezuelans exceeds the country’s GDP. If these estimates are correct, the problem of tax havens is substantial and will be very difficult to solve. Although the G-20’s move is surely a gesture of good intention, it may not be sufficient. The actual proposal is rather ambiguous, which casts doubt on the question whether we will see tangible changes.

Looking at the bright side of life Perhaps that is a good thing. Even though the first impression of tax havens may be one of little ticks, sucking out countries tax revenue, there is a bright side to them.

Some economists with a more right-wing perspective, such as experts from the CATO institute, have stated that tax havens increase corporate tax rate competition between

countries and don’t allow them to overcharge companies.

This is highly debatable, especially since it is very difficult to compete with a 0% tax rate, but nevertheless they do have a point. Even though companies deny taxable profits to the countries they operate in, they are still a crucial part of the economy. Tax havens get a lot of income, but this allows corporations to increase investment, expand their business and employ more workers around the world. A 15-year study published in 2009, showed that every additional percent that a US company invests in a tax haven generates 0.5-0.7 percent more sales and investment growth in neighboring industrialized countries.

Furthermore, sometimes tax havens can really help people and companies in undemocratic regimes. For example, after the Argentinean government seized bank deposits in 2001, it can only be expected that people would want to bury their treasures in a safer place. It also helps Venezuelan companies deal with political risk in a country where the government is known for randomly nationalizing corporations.

Not that good, but not that bad Tax havens are indeed a dilemma. Dismantling them would harm corrupt leaders, but also the people they oppress; it would increase revenue in fiscally constrained countries, but might also decrease their growth. We are unlikely to find a panacea for all these problems, so perhaps we should not take a purely negative approach to tax havens. There are clear bad guys in this story, like corrupt politicians and criminals. There are also ambiguous cases, such as corporations, who can either be overtaxed or just greedy.

And then there are the good guys, people who are just trying to protect their money from bad politics. One thing is for sure: to solve this riddle, countries have to act in unity not only directly towards tax evaders and avoiders, but also to the underlying causes of this issue and inefficiencies in local and global tax policies.

-------------------------------------------------------------------------------------------------------------------------------40 rostraeconomica Economics from the Outside -------------------------------------------------------------------------------------------------------------------------------text Corneel den Hartogh -------------------------image Yvonne Roos

Corneel den Hartogh is 23 years old and masterstudent Philosophy of Social Sciences.

The EU: ­democracy or economy?

L

ast April, Mario Draghi was not only a guest at Room for Discussion but was also included in the TIME list of 100 most influential people in the world. While the validity of such a list can be disputed - this year Mario Balotelli and Jennifer Lawrence were present is section on world leaders gives an impression of the division political power. Interestingly, in this leader section there was no place for Angela Merkel or François Hollande, nor any other European politician. Thus, according to TIME Magazine, Mario Draghi is the only relevant leader in the European Union. How could it be that a banker is seen as more important than all those chosen representatives?

To get an insight into this, we can look at the work of Michel Foucault.

In his lecture series “The birth of biopolitics” he introduces, as you might expect at this point, the concept of bio-politics. While guiding the audience through the history of political power, Foucault points out

that while the Middle Ages were characterized by the destructive forces of despotism, the 18th century enlightenment encountered a different problem . The main problem became the extent of the state. Even the most severe bureaucrats will agree that in order for a state to keep control over its subjects, it must control itself.

The acknowledgement of this paradox, that states must remain limited in order to remain powerful, is traced back by Foucault to the concept of ‘political economy’ which came to the centre point of debate in this time. For the first time in history the legitimacy of political power was no longer questioned. Instead, the functionality of states became the point of discussion. In the words of Foucault: “Political economy reflects on governmental practices themselves, and it does not question them to determine whether or not they are legitimate in terms of right. It considers them in terms of their effects rather than their origins, not by asking, for example, what

---------------------------Without facts, ­rationality is just a mind game

authorizes a sovereign to raise taxes, but by asking, quite simply: What will happen if, at a given moment, we raise a tax on a particular category of persons or a particular category of goods?” Or, in the words of Bill Clinton: “It’s the economy, stupid.”

It is important to realise that before this particular conception of the state, there was no particular theoretical framework of the economy either.

This is why Foucault talks about thebirthof bio-politics. The modern state and the modern economy define each other, they are inherently entangled. It is impossible to envision a state without an economy, or to run an economy without a state. Due to this entanglement between state and economy, the keystone of economics,

-------------------------------------------------------------------------------------------------------------------------------rostraeconomica 41 --------------------------------------------------------------------------------------------------------------------------------

rationality, became more important for governmental action as well. If governments ignore certain facts, their actions will turn out to be mistakes.

Therefore, economists are always seeking more information, more data.

Because they know that without facts, rationality is just a hypothetical mind game.

However, although this birth of biopolitics led to more rationality and facts in politics, there is something lost as well. If you think about it, this is not very surprising, since it would be strange if the state was completely on stand-alone basis before the modern economy came into existence. According to Foucault, the state was entangled earlier, via the law, with morality. The question of legitimacy is the question of right and wrong. However, there is no place for this question in economics.

We never ask each other whether

something is morally good or bad.

We just calculate whether it works or not. Economics is, on a fundamental level, amoral.

While this entanglement between state and economy, this bio-politics, became the centre of attention in the 18th century, Foucault states that its birth was two centuries earlier.

One could say that in the 18th century it became, with the inevitable fluctuations, somehow mature.

However, the realisation of its potential, or to put it more economically, the career of biopolitics, was only at its beginning.

Since the 18th century the state and economic science have developed themselves and their entanglement.

The maximization of utility slowly but steadily became more important.

Economists do not talk about happiness, but measure it based on income. The idea of living together,

of community has no meaning in the world of bio-politics.

The world of bio-politics is not only characterized, but nowadays dominated by the standard entity in economics: money. The chosen representatives know that bankers know more about money and therefore they give bankers power over it. This might seem undemocratic, but actually the people seem to have more trust in Draghi than in the politicians they have chosen. We must remember that economics is not immoral, but amoral. The fact that Draghi is seen as the only leader in Europe is therefore not anti-democratic. If we agree with Foucault, we have to conclude that it just has nothing to do with what the people want or not. It has nothing do with democracy; Draghi and has fellow economists are leading the European Union, because that seems the only way to make it work.

-------------------------------------------------------------------------------------------------------------------------------42 rostraeconomica FEB student abroad --------------------------------------------------------------------------------------------------------------------------------

An internship in Rabat Sofie van der Feer is a Master student Business studies at the UvA. Currently, she is in Rabat, Morocco, for an internship at the Dutch embassy. We interviewed her about her experiences.

Why did you decide to do an internship abroad?

I have always been interested in international business and economy and after a commercial experience at Unilever it was time for a public sector experience. Here at the economic department I am between business and government and so far that combination works well for me.

--------------------------In Morocco it is very important to build relationships when doing business What are your tasks in the embassy?

I am an intern at the economic department of the embassy. Basically, we are the external sales team of the venture the Netherlands. The more I learn about The Netherlands, the prouder I get On an international

level it can really be said that The Netherlands is standing out through its creativity, its integrated way of working, and its technical knowledge of water, dikes, green energy and so on. I was involved in organizing Dutch-Moroccan trade missions in the field of transport and logistics and on green energy.

Why Morocco?

I was curious to go there and see how an emerging economy works; Morocco has a strategic geographic location as it is on the border between Europe and Africa. I personally feel that The Netherlands is already done, every square meter is cultivated. In Morocco you can discover things. It is inspiring to see how active and hopeful the people are here to create a better future.

It is inspiring to be part of that.

What did you learn about Morocco and its (business) culture?

The biggest eye-opener so far is that there is a lot going on in Morocco.

Many countries are actively investing here: the Gulf countries, Turkey, Spain, Germany and France are already building their presence in the market. The Netherlands is a little bit behind on that. It surprises me, as The Netherlands and Morocco have a lot in common: we share 360.000

citizens, we are both investing a lot in agriculture, we both have sustainable energy goals and we both have important international harbors.

Another thing I learned is that in Morocco it is very important to build relationships when doing business, for example: if I don’t ask the seller “La bas” (how are you?), he will charge me at least the double of the normal price. Besides that the what I call “show” seems to be much more important in Morocco than it is in The Netherlands. If you show up casually dressed in a meeting, the Moroccan counterparts are generally not amused. I have also experienced that Moroccans have a great sense of humor, which makes it easy to break the ice.

What is your advice to students that want to do an internship in Morocco?

Generally, my advice is to start a French course yesterday; French is the political and business language here.

Start on time, be culturally sensitive and enjoy places where things are not completely controlled and clean.

Furthermore, I am very open to answering reader’s specific questions, so feel free to contact me at s.y.vanderfeer@gmail.com.

-------------------------------------------------------------------------------------------------------------------------------FEB flash rostraeconomica 43 --------------------------------------------------------------------------------------------------------------------------------

feb flash

image Jeroen Oerlemans

Marc Salomon new Chair of Amsterdam Business School Professor Marc Salomon has been appointed Chair of the Amsterdam Business School (ABS) effective 1 March 2013. ABS is the business school of the University of Amsterdam’s Faculty of Economics and Business.

Salomon has also been appointed professor of Management of Professional Service Firms. This sector, comprising e.g. accountancy firms, law firms and management consultants is considered vital to the Dutch economy and Amsterdam in particular. (www.abs.uva.nl).

Room for Discussion with Mario Draghi and Christine Lagarde There was large public and media attention on 15 April for Mario Draghi’s appearance and on 7 May for the Managing Director of the International Monetary Fund (IMF), Christine Lagarde.

Room for Discussion is the discussion platform of the University of Amsterdam’s Faculty of Economics and Business.

Every week, students interview prominent academics, politicians and business leaders on a variety of subjects related to economics and society.