Wish A Happy New Year in 2012 although this year will be dread full for the majority of people in this world...!

The proverb for this year:


"Live like we die tomorrow; Talk like we live forver" (Mahatma Gandhi)


This year will be even tougher than the last year! Everyone has got to prepare for it!! The majority of people are in a bloody hell condition this year!!!

But, I still wish us A Happy New Year even though we may have got to prepare for this dreadful time period!

Lord of Mercy....... Amen!

The Irony of Fate: Russian New Year Tradition Movie

This is the movie strongly recommended by my female friend from a Russian speaking country.

According to her, almost all Russian speaking people watch this movie in the night between the new year eve and the new year day. The reason why this movie is popular is that watching this movie before the new year comes makes people really happy, content, pleased, and entertained, and happily welcome the new year.

This movie is a love romance movie which contains Russian humours. Russian humours are quite unique. We see the humours from experiencing a little bit of pains in a funny incidence. Russian people seem to know how to laugh at unexpected incidences with some pains. We can see a strong pleasing humour from their natural ability to overcome any unexpected incidence and always expect a better outcome afterward by making fun of it instead of remaining the pain hurting them.

This also involves a secret rhetoric to criticise the extravagant USSR administration by using an example of their housing development plan. The great ability of Russian film makers is that they produced a love romance movie which does not look like harshly criticing the USSR administration. They simply made a fun of the negative influence of the administration in the Russian humours! The USSR government official would have never felt being criticised at all, and they would have simply enjoyed seeing the funny humour and unique charming personalities of the characters in this story!

This love romance is so diffrent from cheesy movies which always show provocative sex scenes in order to attract mobs to watch. This Russian movie is a traditional love romance which shows having experiencing dilemas and struggles to acquire a loving relationship with each other. Unlike the films shown nowadays, this Russian movie expresses the complicated feelings these young adults face, and how this complication developed their romantic mood. The story in this movie takes place in the contemporary time when majority of young adults still had a naive attitude toward loving relationship. This story may make young adults, and even teenagers, nowadays think these young adults in this story are too naive and jevenile. Nowadays, the romance these characters in this story experience seems to no longer exist so that some young generations may find difficult or even impossible to understand the meaning of the love of these characters in this story. However, I am happy to introduce these young generations to watch this movie as well.

This is educational to learn that openness of sexual relationship and having a big love romance are different from each other. At the contemporary period, people might not have been to flexible to express their emortion to each other unlike nowadays. These contemporary people have struggles in expressing their emortions and then suffer from dilema and regrets more than those nowadays. I do not mean the feeling and attitude toward love nowadays is faded. In fact, I embrace the flexibility and openness of expressing love, by means of physically and mentally, nowadays, and detest the reluctancy on expressing love in the old days. Nevertheless, the feeling of romance becomes bigger when the obstacle of expressing and/or obtaining love becomes bigger. Therefore, in this movie, we can discover the love romance which grows in the sorrow, the struggle, and the achievement after overcoming the reluctancy and the obstacle in the old day men&women relationship!!


Well, I hope everyone enjoys watching this video. This is a really good asset of people having lived in the communist Russia period! Click the following link to go to the website to watch "The Irony of Fate"!!

* Russian New Year Tradition Movie:
- The Irony Of Fate
http://video.kylekeeton.com/2008/12/russian-video-new-year-tradition-movie.html





* The image of this picture is from http://darim.info/59870-ironiya-sudby-ili-s-legkim-parom-saundtreki.html.

The Prisoners' Dilemma in the EU Parliament concerning the Fiscal Unification

Last day, Ms. Merkel said "At least, this is the second best outcome" in the treaty concerning the EU fiscal unification. She wished if all EU nations had agreed to participate the fiscal unification plan as the best outcome. However, there are some nations, such as the U.K., who objected to the participation in the rescuing the European economy by the fiscal unification. Although there are substantial numbers of the EU countries agreed to participate in rescuing the European economy by their unified fiscal stimulus plan, the best outcome (all the EU nations participate) was not accomplished.

The matrix shown above is the Prisoners' Dilemma matrix modified to explain the Prisoners' Dilemma in the EU parliament concerning this treaty on the fiscal unification. At this time, this Prisoners' Dilemma matrix is based on the mixed strategy which considers all agents do not act like the prisoner in the Prisoners' Dilemma theory. In the pure strategy of the Prisoners' Dilemma theory, all agents decide to take their action 100% rationally, do not trust each other to cooperate together, and cannot exchange the information between them. By contrast, the mixed strategy takes the possibility of agents not acting 100% rationally, cooperating together, and exchanging information between agents. Therefore, we never know how these agents select their choice.

In this matrix, there are two groups of EU nations, Pro-Europeanists, such as Germany, France, and Benelux nations, and Euro-Sceptics, such as the U.K., Sweden, and Czech. This model generalised to suppose all EU nations belong to either groups, and both groups' decision has a 50% influence over European economy.

The bottom left cells of this matrix are deleted because it is less likely that the Euro-Sceptics sign the treaty whereas the Pro-Europeanists do not.



If this game is based on the pure strategy, the Eurosceptic group would definitely not sign the treaty. The benefit to the Euro-Sceptic group will gain the tremendously high benefit by not signing the treaty when the Pro-Europeanist group sign the treaty. Furthermore, in the pure strategy, the Pro-Europeanist group would have given up signing the treaty as follow:



Because, in the pure strategy, both groups are afraid of the situation that the other group gains the free riding benefit by not signing the treary. The pure strategy does not take account of any action motivated by an intuition, a superstitious belief, altruism, an expectation that the opponent may cooperate, and an anticipation without logics. All groups select their choice completely based on the benefit coming from the rational and logical but selfish interest if it were the pure strategy. Therefore, in the pure strategy, both groups take the possibility that the Pro-Europeanists would not sign the treaty while the Euro-Sceptics would sign the treary (This is a very odd case which would not happen in the real world) into their consideration. So, that is why the Ms. Merkel's wanting outcomes are the least likely in the pure strategy. This is the reason why it would be the case, even in the real world situation, that both would not sign up the treaty even though both groups could maximise the utility if both sign up the treaty if it were based on the pure strategy.


By contrast, the last resolution on the treaty was based on the mixed strategy. Even some Euro-Sceptic leaning nations took account of the possible benefit for themselves coming from signing the treaty by knowing almost 100% of the Pro-Europeanist leaning nations would sign the treaty. In the real world, especially in such a big scale rather than two prisoners in a separated shuttered cell, there are always cheap talks, a flexible flow of information exchange, and irrationality caused by human-emotion and belief in something superstitious, and/or anticipated outcomes rather than the outcomes derived from logical analyses. Thus, everyone knew that all the Pro-European leaning nations were more likely to sign the treaty, and the Euro-Sceptics leaning nations would not make the loss by any choice they could select. This is why Ms. Merkel really wanted all the EU nations signed the treaty.

The matrix of the outcomes in the mixed strategy is as follows:



The outcome of the last resolution could avoid the worst case scenario, in which all the Euro-Sceptic leaning nations did not signed the treaty, and either 100% or 25% of the Pro-European leaning nations signed the treaty. If the worst case scenario took place, all the nations who signed the treaty had to suffer, and the rest of the nations who did not sign the treaty could gain the free-riding benefit. This is what Ms. Merkel was afraid of, and Mr. Cameron would have induced if not only the U.K. but also substantial numbers of nations did not sign the treaty.

The outcome was the second best according to what Ms. Merkel said. Majority of the EU member nations (more than 50%) agreed with the treaty so that the outcome became the middle right cell. Although it could not be in the bottom right cell, it did cause neither the decline of the power of the EU economy (The center cell) nor the collapse of the Eurozone (The top left cell: The collapse would be 100% possible in the pure strategy), nor the free riding by the Eurosceptic leaning nations (The top middle cell and the top right cell).



Nonetheless, it was almost falling into the worst case scenario (either the free riding by the Euro-Sceptic leaning nations or the collapse of the European Integration) unless the Pro-Europeanists had given up signing the treaty by knowing all the other nations would not sign the treaty. This is why Mr. Cameron's reaction caused to significantly lose the trust in the U.K. from the EU. At least, Mr. Cameron should have acted not explicitly like what he has done. He should have been wise enough not let any one to know the U.K. has wanted to keep the distance from the fiscal unification. The way Mr. Cameron acted was to make the Pro-Europeanist nations to think the U.K. is quite happy to sacrifice the EU for her own sake. I did not disagree with the Euro-Scepticism at all. But, I just wanted him to know this Game Theory! All political leaders, diplomats, and any those who have to face a big complicated decision making have got to study this Game Theory!!

The CBA of the EU fiscal unification and Mr. Cameron's failure in the Game Theory

The Eurozone countries are no longer able to give up the monetary union.

Even though the cost of continuing the monetary union is high, the loss of benefit when they dissolve the monetary union is very high.

As one of this blog entries [Sunday, September 04, 2011: Empirical evidence prooving Liquidity-trap: Lower interest rate does not stimulate economy ] demonstrated, all Eurozone member countries, except for Ireland, share a strongly harmonised business cycle. The dependency of these Eurozone countries (excluding Ireland) on the inter member state is extremely high.

Furthermore, when these countries abolish using the Euro, the value of their national debt will be almost worthless. Majority of Eurozone nations, especially the Mediterranean ones and the newly entered Eastern European countries, were benenefitted from their national debt value based on the value of Euro. These national debt is valued not only on the credit of these countries itself but also the credit rate of the entire Eurozone economy. Therefore, leaving or dissolving the Eurozone will decrease the value of their national debt, so these countries will suffer in their public finance. This means that these countries eventually have to go back to the old system relying on the excess money supply which induces a high inflation in their countries. (* Read "2. The problem caused by the monetary policy transformation" in [Saturday, July 23, 2011: The European Monetary Union is inevitable, but has to be fundamentally revised ])

Even Germany will be indifferent between restoring German national currency and keeping the Euro. German GDP relies on the export and German industries expanding their business in the EU member states with a low cost of labour, corporation tax, land, and utilities. In addition, German tourists visiting European (Tourism is an import from foreign countries to home countries: The monetary transaction of Germans touring foreign countries is German import from abroad). Therefore, the cost of German economy of leaving/relinquishing Euro is equally significantly high as same as keeping and assisting the European Monetary Union (EMU) by German effort. Germany may do well even she leaves/dissolves the EMU. But, the loss of the benefit Germany is gaining from the EMU is certain, and the cost of leaving/relinqushing Euro is uncertain.

All in all, even though the cost of keeping the EMU is high, the balance of the both cost and benefit all these Eurozone countries have is certain. The benefit will be certainly lowered by dissolving the EMU for both Germany and the rest of the member nations. Thus, the certainty of keeping and improving the EMU is certain at least, therefore the optimum solution for the European economy despite the high cost of reforming and maintaining the EMU.


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2. Mr. Cameron's failure in the Game Theory

On the other hand, the UK and Ireland will suffer from participating thsi scheme due to their independent (dis-harmonised) business cycle with the continental Europe. However, I would like to blame Mr. Cameron's unwise way to excuse to avoid participating with the European fiscal integration. The diplomacy is a serious mind game. As I have studied the "Game theory", I understand the importance of reading the mind of opponents, and not being too honest.


This considers both prisoners do not trust each other fully and there is no communication taken place between them.

Even though both can gain the best outcome (if they still think of each other as friend) by cooperating together by insisting both of them are not guilty, they are more likely to incooperate with each other. The most likely outcome will be that both prisoners will be guilty. This is because you can obtain the better outcome only for "yourself" by betraying your partner. You also may think that your partner is also about to betray you to gain the better outcome than helping you. Therefore, both you confess your partner is guilty and your partner confesses you are guilty.

However, if both of prisoners trusted each other and cooperated together to support each other, then both of them would not confess their partner is guilty.



Ms. Markel's feeling must feel like Henry (the guy in this picture) betrayed by Dave (Wow, same name as Mr. Cameron's first name accidently lol). In the conference, Ms. Merkel said that the best outcome would be that all the EU nations including both the Eurozone and the non-Eurozone cooperate together. However, it fell into the "second" best outcome in which not all but many EU nations agree to participate. From now, not only Germany but also the other EU nations start regarding the UK as an incooperating member in the Game Theory. All cooperating EU nations will act like the prisoners trusting in the previously shown matrix. By contrast, between the UK and the Europe will be the prisoners not trusting each other in the matrix.

When one player, whose chose has a high influence, chooses an incooperative answer, it will be a threat on the opponents. Now, the EU has started to see the UK to be an incooperative opponent (The free rider) so that the EU's treatment on the UK will become harsh from now.

If Mr. Cameron wanted to keep a distance from this treaty on the fiscal unification, he should have pretended he would still cooperate with them but inducing the consequence for the UK not to sacrifice her national interest a lot..... The U.K. obviously wants to avoid being too much involved in the fiscal unification. It burdens a cost on the UK because the UK is a relatively richer country so the EU expects Britain to participate or even sacrifice herself to help the EU. However, it is an extremely tough task for the U.K. to declare keeping distance from the EU fiscal unification plan. The U.K. has signed up the trade agreement with the EU since the U.K. joined the EU so that the U.K. has a responsibility for the entire European economy. Therefore, the U.K. has to be very wise to keep the distance by preventing the situation that the EU realises the U.K. is incooperative. I do not have any particular advice for Mr. Cameron. But he should have not been too honest to show the U.K. keeps an incooperative attitude on the current EU fiscal unification. We should have learned from what Machiavelli taught in his book "Prince" to act wisely in a foreign diplomatic game...!

Discussion on European Integration

The European integration has failed* due to the compromise of economic rationale (Maastrict treaty on economic policies), and Kantasian = deontologist passion blinding both Europhiles from the currently shown reality which we can immediately observe....!

* Okey, I meant the "current administration" of European integration failed so that it requires the "new" administration. They still postpone the final weapon to tackle with the Euro crisis, which is the fiscal integration by establishing a common fiscal policy ordered by the EU federal government. But, they certainly "must revise Maastrict treaty " (I bold this word), fundamentally restructure of both labour market (by reducing barriers to enter any national labour market) and capital market (unifying the financial market regulation) to make them more flexible, and reduce the power of national governments (e.g. abolishing the right of incurring national debts, and irrational ego unstabilising the integration process).


But, they still postpone the final weapon to tackle with the Euro crisis, which is the fiscal integration by establishing a common fiscal policy ordered by the EU federal government. I don't think they are going to give up their economic integration so easily. I can see a sort of Kantasian = deontologist passion: They don't see the fact = reality they can obviously see: They merely focus on the anticipated outcome based on their fundamental principle rather than the reality they can see at the immediate moment. Therefore, for both Europhiles, the cost burdened on the European integration doesn't matter for them to quit striving to acquire their anticipated outcome.....

Judging from my point of view which is based on the "reality", "sum of utility", "freedom of choice (individual liberty)", and "economic rationale", the European integration has failed due to the compromise of economic rationale (Maastrict treaty on economic policies), and over-idealised analyses and expectations of European integration based on their fundamental deontologism which blinds them from the currently shown reality which we can immediately observe....!



I am not an enthusiastic supporter of the European Federalism: I would support only if they want to keep the common monetary policy. Actually, compared to North America and Asia, European population mobility rate is still low, which is a disadvantage of not having a strong federal gov't intervention into the business cycle of each member country. However, Europe has more frequent trade tie (GDP share of inter-country/state trade) between the member countries (states) than the USA. This fact lead the European monetary integration inevitable. The US monetary integration works better than European because they naturally had a common interest to make one strong unified nation without the conflict of interests like what we see in Europe. Even though the US citizens are very diverse (sharing each own different identity), they naturally have a very strong fundamental principle as a US citizen which works as "a priori" of their identity as the US citizen. Even though the US citizens are proud of their diversity and keep their own background identity from the motherland where they or their ancestors are from, almost all of them share their pride as the "US citizen". There is one remarkable political leader, who came into the power in a half century ago, said that the stable process of European integration requires one super-national federal authority which conducts them structurally and provides the "a priori" of their identity. His analysis was, and still is, underestimated, but the current situation proves his analysis was not false.

I agree with you having said that there is a risk of the federalism encouraging some member countries to become like Detroid and some minority states in the USA. The current US fiscal and monetary structure is based on Hamiltonian political model. Hamiltonianism advocates in the meritocratic/technocratic bureaucratic centralised structure which puts priority on socioeconomic stability. Thus, this Hamiltonian system merely focuses on the interest of the USA as a whole so that sacrifices the minority states' interest for the US federal interest. This induced that change in the industrial structure caused the highly volatile business cycle of some cities like Detroid. This is one aspect reminding why there are still substantially many people advocating "The South Rise Again". I am not particularly fond of Hamiltonianism at all. However, I noticed that Hamiltonian was once required when the USA needed to be unified when her people's interest became same to protect themselves under one umbrella of the federal principle guideline. Actually, at the time when the USA shifted to the more centralised federalism at the contemporary period, many uninfluential states were willing to support the federalism and be under the influence of the federal interaction due to the benefit from joining the unified social and economic tie with the other states and the federal authority, and the security required to protect from foreign nations. Nonetheless, nowadays, the USA should be more decentralised and many states started to want to be more detached from the federal intervention. This is that the different needs in different time, place, and occasion. Actually, the Mediterranean countries and Eastern European countries were "willing to" join the European political and economic integration more than Germany wanted them. These nations have already had a strong co-integrated business cycle with the main player of European economy so that it was inevitable they required the common currency to smooth the trade between these nations. The Mediterranean countries' GDP is very reliant on the key players in European economy (Germany, France, and Benelux countries). Italian economic and financial centre, Lombardia, is related to the West and Central Europe with a same or higher degree of the tie with the rest of Italy. Spain and Greece depend on exporting their tourism to these key European economic players. Eastern European nations still suffer from the asset of the USSR administration so that they are clinging to the father ship kinda protection from the EU to wipe out the suffrage from the USSR influence. These factors seem to be a resemblance of the USA transit to Hamiltonian nation state. If the centralisation like the US Hamiltonianism is required and answers to the great sum of utility, it should be adapted to temporary. I don't hope the strong federal reform continues in too long term. But, it looks like a temporary centralisation seems to be required as an emergent surgery for Europe....

Global Wealth Tax is Inevitable to Sustain Capitalism

This is a new policy which should be "inevitably" introduced to this globalised economy. As the economic activities of individual economic agents have become so globalised that richer individuals transact their income and wealth across national borders frequently. Therefore, taxing rich has become more complicated and the income tax organised by one nation is not able to tax on richs' income efficiently. If individuals have freedom to move their wealth across the border, the nationally based tax system is not longer able to tax on their income efficiently and even fairly.

Furthermore, managements of the public goods (natural resources, environment, and very externally contingent industries such as nuclear technology and air traffic) have become globalied as well. It seems to be more necessary to manage these public goods usage and distribution in a globalised scale than national scale than the past as the economic activities are globalised more than the past. Therefore, there needs a public fonding resource based on a global scale i.e. Tax by a global institution to spend for global public goods.

Some monetarist zealots may claim that this is a socialist system which disturbs an equity of rich individuals. Nonetheless, if they blame this introduction of the new policy as a socialist idea, we also should abolish the progressive income tax based on national and regional scale. If they supported the complete abolition of tax system, government, public sectors, corporations, and nation states, I would agree with them. However, as long as they still stick to keeping these institutions in our community, the claim against the global wealth tax is not convincing.

I believe the progressive income tax is a necessary evil. As the world now still requires us to tax system, government, public sectors, corporations, and nation states to maintain a healthy usage of public goods, we inevitably need the progressive tax at the "minimum but optimum" level in order to be able to manage the public goods well. The income tax is the unfair tax, but the most efficient tax to take it by means of marginal propensity of saving. It is a macro economic issue. The richer individuals tend to split their disposable income into saving which does not goes into the economic stimulus. By contrast, the poorer tend not to be able to split their disposable income into saving. So, the higher income tax on richer is less likely to reduce their income expenditure into economy and reduce their utility by taxing on their income. So they are more likely to maximise their utility at the given disposable income level after the newly increased income tax. On the other hand, the higher income tax on poor reduces their income expenditure into economy and reduce their utility because their disposable income is reduced from the level maximing their utility.

As a matter of fact, the introduction of the Global Wealth Tax may reduce the bureaucracy rather than keeing the income tax collection based on national and regional level. It would be easier to tax some rich individuals transacting their wealth across the national borders than national governments cover the cost of scrutnise how these rich individual keep their wealth. This new tax also keeps the cost for rich individuals to move across countries by means of the different tax systems and the credit rating in each different countries. It will be possible if the introduction of the Global Income Tax system enables them to exempt from national income tax and maybe regional income tax as well. The middle and the lower income individuals will be taxed nationally and regionally, but the high income individuals should be taxed globally and exempted from paying national and regional income tax, or exempted just from national income tax and still paying regional income tax. The global economic institution should then distribute the Global Wealth Tax revenue to both the expenditure for global public goods and the government expenditure for national government and regional local authorities.

J.M. Keynes was actually the savor of capitalism because he said that, as capitalism grows, the wider scale of intervention becomes inevitable like establishing the IMF in 1944, and establishing the EMU in 1990s and 2000s (and possibly the European federal government). This is a next step of what J.M. Keynes described about an evolution of the global economy. I definitely think this global tax on rish is rather a capitalist idea. The reason why is that in order to make a process more efficient, fair, and effective, the progressive tax system has to be revised and evolved in order to sustain capitalism.

If we support capitalism going on, we inevitably need to support introduction of some globalised public economic system. Otherwise, the negligence of introducing a new global based policy causes instability of economies in this globe, causes economic catorophe, and then rising socialism. In order to stop socialism rising, we must adapt the inevitable global public policy and the institution controlling over it. Capitalism is only one most liberal alternative economic system which distributes the highest sum of utility as much as possible. Socialism and Cultural-Conservativism, the counter-part of Capitalism = Liberalism, are the opposite: retarding, supressing the sum of utility, and idealised system ignoring the natural geometry of market mechanism which inevitably exists in our living world. Hence, the monetalists' and bandit libertarians' objection against the new global capitalist order may help socialism and cultural-conservativism coming into the power. Capitalism inevitably evolves, and we must adapt into the new order following this evolution process as Prof. J.M. Keynes taught us...!