WEBVTT

NOTE A Snapshot of Croatia in Transition

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I'm happy to be here to give the seminar.

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I feel a little uncomfortable in an Austrian building.

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I'm not like a blue blood Austrian economist,

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but I took the test on the Internet,

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and I'm not socialist.

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I learned that.

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I'm 50-50.

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I'm Chicago slash Austrian.

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But I got confused on some of the questions,

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so we need to talk.

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The questions are a little bit confusing and sometimes I had a hard time choosing between the two, so my roots are really in market economics, I believe markets work and that governments try to mess with it, often successfully, but always with unsuccessful results, so that probably qualifies me as sort of an Austrian.

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This paper is about Croatia.

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Everybody here knows a little bit about Croatia.

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I'm sure it was part of Yugoslavia.

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And it's in a transition from socialism.

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So it's an ex-socialist country that's now moving toward market economics.

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It's Catholic. It's about as big as Alabama.

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It has twice as many people as Alabama.

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And per capita income is about a quarter or so in Alabama, so that gives you a basis of comparison.

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And I'll try to go through the paper quickly, I'm sure some people may have questions about Croatia.

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And I learned a little bit about the education system, that was a real eye-opener.

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And just the general impressions of the economy and also the country.

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Probably what I'll do first is go through the paper in maybe, you know, 10-15 minutes

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and then look at some photos which will be more fun than the paper

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and then kind of throw it open to discussion.

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The paper is a specific factors model.

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Now that may not mean much to anybody in here except a few misfits from economics.

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It's a neoclassical model.

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If you study microeconomics, it's the last chapter in microeconomics.

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It's the general equilibrium chapter and so it's mainstream old microeconomics, you know, with marginal products, diminishing marginal productivity, all that stuff.

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But you look at the whole economy and the specific factor refers to the fact that in this model, labor is assumed to be stuck in its industry.

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And this input capital, capital moves around, it can go between industries, and this paper

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has 23 different industries, but the workers are stuck for one reason or the other.

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They may be stuck because of their training, their background, or so on.

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I mean, I think in the long run the assumption would be that the workers can move, but in

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this economic theory type, if you look at the theory of the paper, the workers are stuck.

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And what the paper does is look at Croatia's entry into the EU and it makes the assumption

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that, which is probably reasonable, that Croatia is a small economy and a price taker in these

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23 markets.

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And the markets are things like apparel and chemicals and so on, so it's probably a reasonable

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assumption, they're broad aggregates.

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And what the paper does, what we do is, I say we, I'll tell you who they are in a minute,

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We look at changes in prices across those industries and see how the economy adjusts.

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The economy adjusts in economics and in the model along the production frontier.

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So you have adjustments due to prices, you have adjustments in outputs along the production

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frontier, and if you think of the contract curve, there are adjustments in factor prices

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or in the input prices, which is wages and rents.

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So all the wages and the rents in the economy are going to adjust to the new prices.

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This model then tries to project how big those changes are going to be, how large the shocks are going to be for Croatia.

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Josef Funda is a young guy. He graduated from college, just, and he's thinking of graduate school.

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He's either going to go to Germany or come to the US.

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He's interested in international finance, and he did the work, really. I mean, he did all the nuts and bolts for it.

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Mikač was actually at the University of Zagreb, now she's working for the UN in somewhere, the Far East, I forget exactly where, but she just took a new job, she was raised in Australia, she's Australian, but came back, she was born in Zagreb and from Zagreb and then went back and worked there 6 or 8 years at the University.

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All right, so let's talk a little bit about the model.

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It is a general equilibrium model, so we're looking at adjustments in all the markets.

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So I call the specific factors Ricardo-Weiner model.

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Ricardo and Weiner described it pretty well back, what, 200 years ago.

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Labor is specific to each of 23 industries, so that's kind of the structure.

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The industries are in agriculture, manufacturing and services.

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And there's a capital input that's sort of a residual.

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This is not Austrian capital.

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We're not growing capital or anything like that.

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In fact, this is a comparative static model.

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So the time dimension is warped.

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It's just, you know, we have this stuff that's not labor that's used by industries.

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It's like delivery trucks.

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And they can go from industry to industry depending on where they might get paid more.

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So the capital owners are going to put their stuff in the industries that are expanding with higher prices

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and take it out of the industries where it's non-productive because of falling prices.

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So it's sort of mythical. I mean, the theory is mythical and the numbers are mythical in a sense.

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So it's not capital in any growth sense. We're not looking at economic growth. It's not a long-term model.

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It's like sort of the shorter medium-term adjustment through these changing prices.

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Where are the delivery trucks going to go?

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And what's going to happen to the rent or the price on a delivery truck?

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Don't look at me like that. It's not that complicated.

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The model uses, you have to have a production function working in it.

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And it assumes what are called constant elasticity production functions.

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Functions, Cobb-Douglas is a common example. It's the simplest production structure you can assume and I've done a lot of work with this type of production function and other estimated production functions and they don't matter.

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The estimates don't matter, really. In the end, you can end up using constant elasticity. What really pushes these types of models are the shares of the inputs in the industry, how much they get paid,

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and also where they work, how much of the capital is in the different industries.

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That's what really pushes the results.

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Well, some people would disagree.

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I think it's okay at an aggregate level like this one.

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It may not be that good if you get down and looking at the actual adjustment in each industry.

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Especially, I mean, if you broke, for instance, chemicals down into three or four or five or six types of chemicals,

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then you might want more information about the actual production process.

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But at the aggregate level, Cobb-Douglas is not bad. There are studies these days that kind of show that.

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They compare simple production functions with more sophisticated estimates, and they don't matter.

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The sophisticated estimates really don't matter much.

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So the model assumes competition, cost minimization and full employment.

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These assumptions can all be relaxed, at least the full employment assumption could be relaxed if you wanted to.

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So we're looking at the market forces at work, you know, sort of the raw market forces.

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And then, of course, if you really wanted to delve into issues of unionization and so on, you could say,

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and so on, you could say, well, this model shows you the market forces, now the question is, how is the Union going to react?

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And we're adjusting along a contract curve or a production frontier.

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So we look at changes, we try to project changes for economic adjustment to the EU.

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The idea is that with entry, Croatia now is going to have to go with free trade with Germany, which is right next door,

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and of course the rest of the EU and then also Croatia is going to have to adopt all of the European external tariffs, the common external tariff

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and they are lower than Croatia's so there'll be some adjustments there also.

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What the model cannot do really is estimate what these price changes will be.

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That's very hard to do. We use sort of reasoned arguments, kind of ad hoc reasoning.

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It's even difficult after the fact to get estimates like this.

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I've been trying to look at what happened to Greece when Greece entered the EU,

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and more importantly, the Eurozone.

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When Greece went into the Eurozone, prices went up, generally, especially for consumer goods.

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At the industry level, it's just hard to find price changes.

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It's hard to find this kind of information.

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All right. What happens, I'll go ahead and give you the punch line, is that at the industry level there are big wage changes, big shocks.

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We project price changes no more than 5% up or down and work in that range.

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In the model you can make it 10% if you like or 15% and use the same setup and get the projected changes.

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And with a range of minus to plus five percent for price changes, the wage effects are big

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in this model on the order of 15 percent or so.

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So noticeable wage effects, 15 percent up or down in some industries down.

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In the industries where price is falling, wages drop and vice versa.

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We know what trade does, right?

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Free trade is going to increase per capita income.

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And if you believe in utility theory, it's going to raise national utility.

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But for sure, if you don't believe in that, it raises per capita income.

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No doubt about that.

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It has other benefits too that go beyond this model.

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But in that higher per capita income, there are winners and losers.

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What this model does is let you look at who wins and who loses, and it can guide you through

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the potential transition process.

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Also there's a small increase in the capital return.

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So, capital, that mobile thing that goes between industries comes out ahead as you'd expect it would, but not much.

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There's not a big change there.

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Now, you can use the model then to project what would happen to labor if it becomes mobile.

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In other words, let the labor move around and see what happens.

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And what happens then is that the wage changes are not large.

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There's a small increase in the wage.

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So the wage shocks are much lessened if labor agrees to become mobile.

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Now in Croatia, that's a big deal.

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Because Croatians, from afar, you think of Croatia, well it's like this homogeneous place, but it's not.

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It has three or four regions and the people in each region don't like each other much.

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And they certainly wouldn't move.

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Somebody from Zagreb would not even dream of moving down to Dalmatia on the coast to find a job.

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It's just out of the question. And vice versa. Their cultures are not that...

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They speak the same language, pretty much, but the cultures are different.

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The religion is the same. Everybody's Catholic in Croatia, but there's strong regional preferences.

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There may also be other issues that kind of keep labor tied to an industry.

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So, labor mobility is a big issue.

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I mean, you talk to Croatians about this and they say,

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well, you know, it's just not going to happen.

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They're arguing, you know, talking about labor mobility,

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talking to one of the economists there about comparing Croatia to the U.S.

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Well, you know, in the U.S., you know, if I found a better job in California,

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I'd go to California, you know, it doesn't really matter.

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I'd go to North Dakota or New York.

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Labor is mobile like that in the U.S.

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People move around.

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And he said, well, you know, I think what happened is

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says all the people that had an inclination to move just left Croatia a long time ago.

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They all came here, right?

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So people that are still there, they're not moving, they're stuck.

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So it is an issue.

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It's an economic and a political issue, I think.

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So our policy recommendation is to encourage labor market flexibility, labor market mobility.

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An easy thing would be just a lump sum payment.

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If you agree to go work at this new factory, or if you change jobs, and change locations, and change industries, I mean, at some level, change industries, and we'll just give you $1,000 or $2,000, like moving expense, and that could be, that would be one way that would, one thing that would encourage labor mobility, you know, sort of the least harmful tax, let's say, or redistribution to encourage mobility.

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So here are some of the numbers.

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The first column shows the share of labor in each industry.

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So agriculture has 2.9% of the labor.

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Food manufacturing has 4.2%.

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In fact, let's look down.

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If you look at that first column, that's the way to do this.

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And then go look where labor is.

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It's in the first column, so 9.5% of labor is in other manufacturing and so on.

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This is a pretty big industry.

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Most of the manufacturing industries aren't that big.

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One or two percent of the labor force.

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And then the last column, 15% is in trade.

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So that's a big industry.

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This is the whole economy.

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There you go. Hey, that's cool.

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I can do that.

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And then public administration is 11 percent. That's a big deal. And then education, about 8 percent and so on.

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So it gives you a picture of where the workers are, 6 percent in construction.

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And then the other columns, the second column shows the distribution of that other input, that mythical other input.

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If you look at the third column, that's a little more insightful, that shows the share of the revenue, or value added really, in that industry that goes to labor.

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So it's like labor's share of what, of the payment to that industry, the net payment to the industry.

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So agriculture gets 9% and that's 9% of the share, that's 9% of the income in the industry.

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So most of the income in agriculture goes to capital, and that's land. Land is included in that residual.

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In fishing it's 13%, in food 35% of the income, 35% of the income in food goes to workers.

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These are called factor shares.

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The labor share is big in apparel, and then it's big in, not too big in chemicals, well it's big in publishing.

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Let's see, the other big labor shares are in transport equipment manufacturing and they make street cars, that's what they make, these street car carriages and they sell them internationally.

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Zagreb has these little street cars, they hold about 20 people and they put around town, well, they have electric motors.

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So they make transport equipment but they don't make cars, not good transport equipment, you might say, and so on.

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If you look at this last column, education has 60% or 57% of the income and education goes to labor.

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The last column kind of sums that up and that's the factor intensity, the capital labor ratio in the industries.

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Big numbers mean very capital intensive industries, that's agriculture, but that includes land.

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My impression is that it's not capital intensive in the U.S. sense.

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They don't have any like big tractors or anything.

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It looks like a bunch of little small farms.

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The small numbers are capital-intensive,

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like mining is capital-intensive.

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Chemicals is pretty capital-intensive, refining is.

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There are some big refineries.

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There's some nuclear reactors too,

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I'm pretty sure, I thought there was one,

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although people said they don't have one.

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It looked like, but it might've been a coal-fired reactor.

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Small numbers are labor-intensive industries, that's that transport equipment, apparel is very labor-intensive, and those intensities drive the results.

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They drive the results in the end, and this is what the results look like.

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The first column shows the projected price changes, and again we just made these up, right? These are just made up price changes, although the paper talks about where they come from.

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You can sure use the model to use to talk about other price changes.

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The losing, let's go back, the winning industries are fishing, food manufacturing.

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This is where Croatia has export opportunities.

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Real estate, public administration, in the EU now, so public administrators.

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There'll be a lot more of that going on, I suspect.

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At least the price in a sense would go up, health and social work, higher prices, hotels and restaurants, tourism is expected to do well, and that's it really.

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The big negative numbers are in manufacturing and apparel, that's with EU competition, but also the multi-fiber agreement is ending,

213
00:18:46.540 --> 00:18:55.540
And so, Croatia along with the rest of the developed world is going to have a hard time competing with China in apparel and already is having trouble.

214
00:18:55.540 --> 00:19:02.540
Manufacturing equipment, they're probably in trouble in that industry. That's an old-time, old-line socialist industry.

215
00:19:02.540 --> 00:19:07.540
In fact, we launched it in the old-time socialist industry. It was the school cafeteria.

216
00:19:07.540 --> 00:19:13.540
If you didn't get a chance to go to Russia in the old days, you should just go visit the school cafeteria at the University of Zagreb.

217
00:19:13.540 --> 00:19:22.540
I mean, it's just like these, you know, hefty women in white uniforms and they have this food, you know, just mounds and mounds of food and it's free.

218
00:19:22.540 --> 00:19:31.540
They give it away. The students don't have to pay to eat. It's a snapshot of socialism.

219
00:19:31.540 --> 00:19:39.540
The second column shows the wage changes in the industry and the thing to remember about this is that they're large.

220
00:19:39.540 --> 00:19:45.540
Like, for instance, in fishing, there's a 5% increase in price, but wages jump up 28%.

221
00:19:45.540 --> 00:19:51.540
So, the wage adjustments are bigger than the price changes in the model.

222
00:19:51.540 --> 00:19:55.540
That works uniformly throughout all of these changes.

223
00:19:55.540 --> 00:20:01.540
So, we're talking about wage changes on the order of minus 20, and then let's see for the winners.

224
00:20:01.540 --> 00:20:05.540
Well, real estate, they're going to be a lot better off.

225
00:20:05.540 --> 00:20:10.540
Hotels and Restaurants, so it's going to vary by industry, but the changes will be noticeable.

226
00:20:10.540 --> 00:20:17.040
So noticeable wage changes, and that's going to generate, of course, political problems, political issues.

227
00:20:17.040 --> 00:20:22.540
Labor unions are pretty strong, and the country's in a transition, so they're not really sure what their labor laws are.

228
00:20:22.540 --> 00:20:32.540
I mean, they're writing the laws and trying to create some sort of market economy in the process.

229
00:20:32.540 --> 00:20:34.660
The last column shows the output changes.

230
00:20:34.660 --> 00:20:36.780
They're similar but not as big.

231
00:20:36.780 --> 00:20:40.700
So the output adjustments aren't quite as big as the wage shocks, but they're big.

232
00:20:40.700 --> 00:20:50.500
I mean, a 23% increase in fishing, assuming the fish are out there, and these 20% decline

233
00:20:50.500 --> 00:20:57.060
in manufacturing when they start having to compete with other European refiners.

234
00:20:57.060 --> 00:20:59.900
These are a 10% reduction in mining.

235
00:20:59.900 --> 00:21:05.500
Those are traditional industries that have been state-supported and they're going to have to face some adjustments.

236
00:21:05.500 --> 00:21:11.220
Transport and telecom decline, although these two probably ought to be split.

237
00:21:11.220 --> 00:21:17.660
Telecom you can see getting cheaper, transport, I don't know, there are issues there.

238
00:21:17.660 --> 00:21:21.740
That would be better if it was split up, but we don't have the data for that.

239
00:21:21.740 --> 00:21:27.060
And then you see at the bottom the capital return and that's one and a half percent increase,

240
00:21:27.060 --> 00:21:32.660
So that mobile input, what it's able to do is seek out the industries where prices are going up

241
00:21:32.660 --> 00:21:38.460
and of course it always moves because it's offered a higher return and that happens on net

242
00:21:38.460 --> 00:21:41.660
and so in the end you see a bit of an increase in the return to capital.

243
00:21:41.660 --> 00:21:44.860
If labor was mobile, you get the same result.

244
00:21:44.860 --> 00:21:50.560
If labor was mobile, what you see is a smaller net increase in wages

245
00:21:50.560 --> 00:21:56.160
and that's why the paper argues for labor mobility.

246
00:21:56.160 --> 00:22:00.440
That's, I think, in the end, that's sort of the bottom line.

247
00:22:00.440 --> 00:22:03.680
So, should we talk about the economics before we look at photos?

248
00:22:03.680 --> 00:22:07.000
We probably should, because I don't have that many photos.

249
00:22:07.000 --> 00:22:09.880
And if we don't talk about the economics now, then I'll forget.

250
00:22:09.880 --> 00:22:16.240
And what is the status of price controls and things of that nature?

251
00:22:16.240 --> 00:22:20.760
There are, especially in the big industries.

252
00:22:20.760 --> 00:22:30.760
There are price supports, price supports for chemicals, metals, refining, none of that is open market, the big stuff.

253
00:22:30.760 --> 00:22:34.260
On the street, everything is on, everything is in a market.

254
00:22:34.260 --> 00:22:39.260
I mean, you know, if you just go to stores and shops, it's all, it looks like Europe, right?

255
00:22:39.260 --> 00:22:41.760
I mean, there are little shops and everything is for sale.

256
00:22:41.760 --> 00:22:50.260
I don't think there's, there must have a value added tax, so there's no sales tax, but I didn't see any evidence of,

257
00:22:50.260 --> 00:22:57.260
Are the big industries, are those nationalized?

258
00:23:20.260 --> 00:23:28.260
These firms are at least partly, if not mostly, publicly owned, so I think now it's sort of a mixed bag.

259
00:23:28.260 --> 00:23:36.260
There's still public ownership, especially for the big traditional producers like the transport equipment, chemicals and so on.

260
00:23:36.260 --> 00:23:43.260
But they've opened shares of ownership to the private sector.

261
00:23:43.260 --> 00:23:48.260
Not surprisingly, they're hard to sell.

262
00:23:48.260 --> 00:23:53.260
Private investors tend to kind of stay away because the state is still involved.

263
00:23:53.260 --> 00:23:56.260
I think that's kind of where they're at.

264
00:23:56.260 --> 00:24:02.260
I was thinking about this labor mobility issue over there.

265
00:24:02.260 --> 00:24:09.260
It's something that's hard to judge because in my hometown and in my family,

266
00:24:09.260 --> 00:24:19.760
There were probably two generations of my family of both sides, where nobody left town.

267
00:24:19.760 --> 00:24:21.760
Everybody just stayed right there.

268
00:24:21.760 --> 00:24:26.760
And then the next two generations, everybody left.

269
00:24:26.760 --> 00:24:31.760
There's nobody left there. They spread, you know, throughout the United States.

270
00:24:31.760 --> 00:24:34.760
So there was a couple generations where everybody was fixed.

271
00:24:34.760 --> 00:24:37.760
Nobody thought about moving or leaving or anything.

272
00:24:37.760 --> 00:24:43.760
and then all of a sudden, that equation somehow changed.

273
00:24:43.760 --> 00:24:45.760
Yeah, I think, yeah.

274
00:24:45.760 --> 00:24:49.760
Jobs are available, I've been here for a long time,

275
00:24:49.760 --> 00:24:55.760
and we've peppered and looked like exiles hired a lot of people,

276
00:24:55.760 --> 00:25:00.760
we don't need more, most of the world is gone.

277
00:25:00.760 --> 00:25:08.760
Q. Is fishing socialistic?

278
00:25:08.760 --> 00:25:10.760
A. No. I don't think so.

279
00:25:10.760 --> 00:25:17.760
Q. These people are taking fish in the ocean and lakes where they can grow those fish.

280
00:25:17.760 --> 00:25:18.760
A. No, that's right.

281
00:25:18.760 --> 00:25:23.760
There may be some fisheries, but I think most of it is small boats in the Adriatic.

282
00:25:23.760 --> 00:25:26.760
Small private boats.

283
00:25:26.760 --> 00:25:29.760
Q. Don't those fish belong to all of us?

284
00:25:29.760 --> 00:25:33.760
Well, you have to go catch them, though. I mean, they're out there, yeah.

285
00:25:33.760 --> 00:25:37.760
Yeah.

286
00:25:37.760 --> 00:25:50.760
Now, there are private, like in Greece now, where they have started these companies that, you know, grow their own fishing.

287
00:25:50.760 --> 00:25:55.760
Yeah, there's some of that in Croatia. There are some fisheries, offshore fisheries.

288
00:25:55.760 --> 00:26:02.160
But I think most of the fishing industries, it's not that big a deal in terms of the size and the economy.

289
00:26:02.160 --> 00:26:05.160
Of course, it's a big deal if you're in the industry.

290
00:26:15.760 --> 00:26:17.560
Well, but some of that's on private land.

291
00:26:17.560 --> 00:26:19.560
I mean, that's an interesting issue.

292
00:26:19.560 --> 00:26:25.160
In the Adriatic and in the Aegean, there are sharing agreements.

293
00:26:25.160 --> 00:26:31.960
So Croatia's not going to be, it's going to be subject to those EU restrictions on how much, how many fish you can catch.

294
00:26:31.960 --> 00:26:41.960
They do, yes, they do, yeah, that's, yeah, there is, in the Mediterranean generally, yeah, yeah.

295
00:26:41.960 --> 00:26:51.960
I really like the thesis because it's easier to follow. Free capital can have a higher return than non-free capital.

296
00:26:51.960 --> 00:27:02.960
I'm somewhat interested in how small your number is. Have you done any looking at the issue of risk, rate of return?

297
00:27:02.960 --> 00:27:22.960
Well, this would be a real rate of return. That 1.5% would be an increase in what's the going real rate of return now.

298
00:27:22.960 --> 00:27:28.960
I think if you're really interested in capital markets, this model is totally inadequate.

299
00:27:28.960 --> 00:27:32.960
Yeah, because you'd have to then look at...

300
00:27:32.960 --> 00:27:34.960
So it's going to be half of Chicago, right?

301
00:27:34.960 --> 00:27:38.960
Yeah, because what you can do is flip this model around.

302
00:27:38.960 --> 00:27:41.960
What you can do is assume that labor is mobile,

303
00:27:41.960 --> 00:27:43.960
and we've looked at these numbers,

304
00:27:43.960 --> 00:27:46.960
and let capital move around, this fictional capital.

305
00:27:46.960 --> 00:27:49.960
Okay, what happens then is just the opposite.

306
00:27:49.960 --> 00:27:54.960
You see capital returns going 20% up, 30%, or not 30%, but 15% down,

307
00:27:54.960 --> 00:27:57.960
you know, 15% up and down.

308
00:27:57.960 --> 00:28:05.760
So that would be more of an investment type model, where the capital return is going to be highest.

309
00:28:05.760 --> 00:28:12.060
And then what you can do is say, okay, look, if it's the 15% increase in return to capital in this industry,

310
00:28:12.060 --> 00:28:15.560
of course, that's where the money is going to go. That's where the investment is going to go.

311
00:28:15.560 --> 00:28:20.460
And then you can play it out over a 10-year period and say, okay, given an increase in capital,

312
00:28:20.460 --> 00:28:24.760
what's going to happen to production in that industry? It's going to go up.

313
00:28:24.760 --> 00:28:28.760
and so are wages, and the number of workers.

314
00:28:28.760 --> 00:28:33.760
You've got capital, the prisoners later won't be able to receive that.

315
00:28:33.760 --> 00:28:39.760
That's the capital. I'm not sure that Croatia has any more monopoly on getting provincial than any other place.

316
00:28:39.760 --> 00:28:42.760
That's true. Central Europe is full of these little provincial economists.

317
00:28:42.760 --> 00:28:44.760
But I'm guessing you can talk to that.

318
00:28:44.760 --> 00:28:50.760
But it seems to me that if you could do some sort of control with your other EU nations,

319
00:28:50.760 --> 00:28:56.160
Is anybody here surprised that publishing manufacturers are going down, right?

320
00:28:56.160 --> 00:28:59.160
I mean, everybody, even Croatia has an internet now.

321
00:28:59.160 --> 00:29:00.160
Right, right, right.

322
00:29:00.160 --> 00:29:07.160
It seems to me that if you could somehow control the Ludwig industry, I'm betting you'll find the results even more robust.

323
00:29:07.160 --> 00:29:10.160
And that's my point.

324
00:29:10.160 --> 00:29:13.160
That's the technical difficult point.

325
00:29:13.160 --> 00:29:15.160
I don't thank you for having to think about that.

326
00:29:15.160 --> 00:29:16.160
I'm joking.

327
00:29:16.160 --> 00:29:18.160
No, that's, that's correct.

328
00:29:18.160 --> 00:29:19.160
That's right.

329
00:29:19.160 --> 00:29:22.160
And that, of course, makes the model more realistic.

330
00:29:22.160 --> 00:29:24.160
Sure.

331
00:29:24.160 --> 00:29:34.160
You said that, at some point, that with Euroization and entering into Greece, that in Greece, prices in the economy actually went up?

332
00:29:34.160 --> 00:29:38.160
Well, I have. The only thing I could find, I've looked for a few days and had other people look.

333
00:29:38.160 --> 00:29:45.160
What I was looking for would be price changes for these industries, industrial-level price changes.

334
00:29:45.160 --> 00:29:51.160
But either the Greeks don't know, or they know and they won't tell, or something.

335
00:29:51.160 --> 00:29:57.160
This is at the EU level, so the EU doesn't routinely do that kind of stuff.

336
00:29:57.160 --> 00:30:02.160
There's one guy that's been interested in it but hasn't done any studies yet.

337
00:30:02.160 --> 00:30:05.160
What I do have are price changes at the consumer level.

338
00:30:05.160 --> 00:30:09.160
They're pretty easy to get because you just survey retail stores.

339
00:30:09.160 --> 00:30:19.160
So it's things like apparel, food, you know, other consumer items, housing, the things that go in the consumer price index.

340
00:30:19.160 --> 00:30:29.160
And between 1999 and 2004, which is, this is in Greece now, when Greece went into the Eurozone, prices went up about 10%.

341
00:30:29.160 --> 00:30:34.660
It's about 10% more expensive in Greece than it is, than it was before.

342
00:30:34.660 --> 00:30:38.160
In fact, my wife is Greek and we go there in the summers and we can vouch for that.

343
00:30:38.160 --> 00:30:40.160
She's here now even, back in the back.

344
00:30:40.160 --> 00:30:48.160
It's about, it's 10, at least noticeably 10% more expensive and Paul also can vouch.

345
00:30:48.160 --> 00:30:51.660
The Euros cause higher prices in Greece.

346
00:30:51.660 --> 00:30:55.160
Now wages may have gone up too.

347
00:30:55.160 --> 00:30:59.160
And so the question is, you know, are the Greeks better off than they were before?

348
00:30:59.160 --> 00:31:03.660
And the answer is, of course they are, you know, not just for that reason.

349
00:31:03.660 --> 00:31:10.160
I mean, they're in Europe now, so Greece is a whole lot better off now that the Greeks aren't in charge of Greece.

350
00:31:10.160 --> 00:31:19.660
And I think the same thing is going to be true in Croatia, that if the Croatians aren't really in charge, they're going to be a whole lot better off.

351
00:31:19.660 --> 00:31:25.160
How can you tell, or how would you measure, what prices are?

352
00:31:25.160 --> 00:31:38.660
I grew up in a normal mall, and the prices are all that you can take a pair of trousers or a pair of shoes and put them in stores.

353
00:31:38.660 --> 00:31:45.160
And the prices are not only different in the stores, but they may vary.

354
00:31:49.660 --> 00:31:53.260
When commerce goes out, it has these people, they just go around and check prices.

355
00:31:53.260 --> 00:31:57.260
And they do it randomly, supposedly, at retail outlets.

356
00:31:57.260 --> 00:31:59.660
And they get their list at the start of the week,

357
00:31:59.660 --> 00:32:02.860
and they have a few thousand items to check in a certain location.

358
00:32:02.860 --> 00:32:04.460
They go around and write down the numbers,

359
00:32:04.460 --> 00:32:05.960
and then they send it all to the Department of Commerce,

360
00:32:05.960 --> 00:32:08.460
and they average up the numbers, and boom, there it is.

361
00:32:08.460 --> 00:32:12.260
And the EU does the same thing.

362
00:32:12.260 --> 00:32:16.860
They're pretty good on average, they're not bad, they're pretty good.

363
00:32:16.860 --> 00:32:25.860
Yeah, but what happens is it's a random check. You know, you just go to the stores and check.

364
00:32:25.860 --> 00:32:31.860
So I think the Consumer Price Index in the U.S. is pretty reliable. I mean, you know, for what it is.

365
00:32:31.860 --> 00:32:36.860
Yeah, you have to take it for what it's worth. And the same thing is in the EU.

366
00:32:36.860 --> 00:32:44.860
Is it labor? Okay. Yeah, that's probably right. Yeah, that is right. It's Department of Labor.

367
00:32:44.860 --> 00:32:52.860
I guess I'm still a little surprised that prices went up when they opened trade, except for a few things that will be next.

368
00:32:52.860 --> 00:32:59.860
In Greece, Greece had been in the EU since 1981. So Greece had free trade.

369
00:32:59.860 --> 00:33:04.860
It was the Eurozone thing, and with the Eurozone prices went up.

370
00:33:04.860 --> 00:33:09.860
Now this is also the time when Greece was getting ready for the Olympics, so there was sort of a boom in Athens.

371
00:33:09.860 --> 00:33:13.860
That probably biased the inflation.

372
00:33:13.860 --> 00:33:18.860
It may not be true in all countries that the euro has made much difference in price.

373
00:33:18.860 --> 00:33:21.860
In fact, I think that is true.

374
00:33:21.860 --> 00:33:29.860
I think that the euro, from what I've read, the euro has not made any difference in inflation rates and in price levels.

375
00:33:29.860 --> 00:33:33.860
I mean, it's made a difference in individual country inflation rates, of course, like the lira, right?

376
00:33:33.860 --> 00:33:36.860
And the Italians don't have the lira anymore, so there's no inflation.

377
00:33:36.860 --> 00:33:42.860
But if you look at real index prices, they're designed to take out the inflation and just look at the real price

378
00:33:42.860 --> 00:33:51.860
Relative to Other Commodities, Relative to Income, and Euro hasn't really affected price levels in Europe.

379
00:33:51.860 --> 00:33:56.860
What's the relative size of government in Croatia?

380
00:33:56.860 --> 00:34:03.860
The government is smaller in Croatia than it used to be, but it's bigger than it is here.

381
00:34:03.860 --> 00:34:09.860
I don't know off the top of my head, government spending relative to GDP.

382
00:34:09.860 --> 00:34:39.860
Here it's about, what, 20%? Is it 30? I think in Croatia it's probably, you know, 30 to 40 in that range, but diminishing, and they have guidelines to hit for EU entry, and I think in Europe they're generally higher than here, it's probably around 30 to 40, so it's going to be in that range to qualify for EU entry, so it's a bigger deal than here, but less than in Japan,

383
00:34:39.860 --> 00:34:59.860
How do you think getting into the European economy will affect people who are relying on what they have promised in relation to the return?

384
00:34:59.860 --> 00:35:08.860
Some of my friends are worried about that here.

385
00:35:08.860 --> 00:35:14.860
In fact, I tell them just forget about it, just don't count on it.

386
00:35:14.860 --> 00:35:17.860
I don't know that much about their retirement system.

387
00:35:17.860 --> 00:35:20.860
I think it's an issue.

388
00:35:20.860 --> 00:35:23.860
They have, what they have are Ponzi schemes.

389
00:35:23.860 --> 00:35:29.860
Old time, they have like social security, but at the industrial level.

390
00:35:29.860 --> 00:35:33.860
So workers and let's say chemicals in the big industry, they pay into that Ponzi scheme.

391
00:35:33.860 --> 00:35:39.860
It's an easy scheme, and the workers pay the retired workers in that industry, sort of industry specific.

392
00:35:39.860 --> 00:35:45.860
But the industries have always been protected and subsidized, so there wasn't any chance of failure.

393
00:35:45.860 --> 00:35:51.860
So the overall level, I mean the overall retirement has been very generous.

394
00:35:51.860 --> 00:36:00.860
Although what would happen typically is that you could retire relatively early with a pretty good paycheck,

395
00:36:00.860 --> 00:36:04.860
That paycheck would diminish over time due to inflation.

396
00:36:04.860 --> 00:36:06.860
So that's been the old system.

397
00:36:06.860 --> 00:36:08.360
The new system, I don't know.

398
00:36:08.360 --> 00:36:10.860
They're going to be in the European.

399
00:36:10.860 --> 00:36:13.860
They'll be in the EU social security system.

400
00:36:13.860 --> 00:36:16.860
So it won't be the old system anymore.

401
00:36:16.860 --> 00:36:19.860
So will they use what they've invested on?

402
00:36:19.860 --> 00:36:21.860
There's no investment.

403
00:36:21.860 --> 00:36:23.860
It's just money. You pay money.

404
00:36:23.860 --> 00:36:24.860
It's like social security here, right?

405
00:36:24.860 --> 00:36:27.860
You pay money in, they take the money and give it to somebody else.

406
00:36:27.860 --> 00:36:29.860
That's all. It's just the Ponzi scheme.

407
00:36:29.860 --> 00:36:39.860
It's like a chain letter. I'm sure, yeah. They may not get as much as they'd like.

408
00:36:44.860 --> 00:36:54.860
Yes, that's right. And even more socialized than Europe, although that's also in some kind of transition, transitional phase.

409
00:36:54.860 --> 00:36:58.860
There are private hospitals in Croatia.

410
00:36:58.860 --> 00:37:02.860
We had a colleague there, Ed Tower, an international economist who got sick,

411
00:37:02.860 --> 00:37:08.860
and he went to a private hospital, a private doctor, and got good service right away.

412
00:37:08.860 --> 00:37:14.860
I think otherwise, it's sort of wait and line.

413
00:37:14.860 --> 00:37:26.860
As an American tourist in Croatia, did you find it a place where things were generally very expensive or things were pretty much the same?

414
00:37:26.860 --> 00:37:30.860
It's cheap. I'd say, you know, it's a bargain.

415
00:37:30.860 --> 00:37:33.860
So now with the weak dollar?

416
00:37:33.860 --> 00:37:36.860
Yeah. Yeah, even with a weak dollar.

417
00:37:36.860 --> 00:37:40.860
Yeah, you know, things are, it's like 25% discount on average.

418
00:37:40.860 --> 00:37:43.860
Food's good. It's good for tourism.

419
00:37:43.860 --> 00:37:46.420
But the Croatians, it's funny because they don't like to admit it.

420
00:37:46.420 --> 00:37:52.660
The Croatians don't, they're not hot about the idea of tourism being their major industry,

421
00:37:52.660 --> 00:37:58.260
but I keep telling them, man, that's what you have to sell.

422
00:37:58.260 --> 00:38:06.420
This is a, it's too bad, you can't see, I guess all the lights are off, it'll go off.

423
00:38:06.420 --> 00:38:10.580
Tourism can be a big thing there because this is in Zagreb.

424
00:38:10.580 --> 00:38:14.780
So this is the first thing you see when you land in Zagreb is this huge,

425
00:38:14.780 --> 00:38:27.080
you can't really see a picture of how big the square is, but it's a huge square and there are just tons of old buildings and museums.

426
00:38:27.080 --> 00:38:37.380
So if you like architecture and museums, for me it was like a total waste, I'm just not that much into history.

427
00:38:37.380 --> 00:38:46.100
There are old buildings and museums.

428
00:38:46.100 --> 00:38:48.100
Is that better? Maybe, maybe not much.

429
00:38:48.100 --> 00:38:58.100
Anyway, is that worse?

430
00:38:58.100 --> 00:39:01.620
I would tell them that tourism is your hope for the future,

431
00:39:01.620 --> 00:39:03.220
but they thought the argument was,

432
00:39:03.220 --> 00:39:06.580
well, it's cyclical, which it tends to be,

433
00:39:06.580 --> 00:39:10.500
And really, you don't get a warm feeling when you visit there.

434
00:39:10.500 --> 00:39:14.460
They just don't, Croatians don't like each other much.

435
00:39:14.460 --> 00:39:17.380
They don't like their immediate neighbors at all.

436
00:39:17.380 --> 00:39:26.500
There's no love lost with the Bosnians or the Slovenians or any of those guys, Hungarians.

437
00:39:26.500 --> 00:39:29.060
And they don't really like the Italian tourists.

438
00:39:29.060 --> 00:39:31.460
Tourism is totally undeveloped.

439
00:39:31.460 --> 00:39:35.060
The hotels that are there, the state-run hotels, and they're just,

440
00:39:35.060 --> 00:40:05.060
I mean, now you can tell it's been privatized, so this guy, we stayed on the coast, he was trying hard, but he didn't have the facilities, you know, I mean, it was this old, like, I don't know, 1960s institutional type hotel, just not, you know, didn't have it, just wasn't there, but it's, I mean, in terms of landscape and, you know, things to see, museums, they've got it, so it's, you can get, no, that is a real crystal store,

441
00:40:05.060 --> 00:40:09.860
That's what I thought when we first went there. I went to see if it had...

442
00:40:09.860 --> 00:40:15.060
There is McDonald's, for sure.

443
00:40:15.060 --> 00:40:16.060
There is a McDonald's.

444
00:40:16.060 --> 00:40:19.060
This is the main square in Zagreb.

445
00:40:19.060 --> 00:40:25.560
And it's nice to have little rock shows and puppeteers and that kind of stuff.

446
00:40:25.560 --> 00:40:32.560
Henry, do they have philoxenia here?

447
00:40:32.560 --> 00:40:40.560
Well, in Greece, philoxenia, philos of friend and genus is stranger.

448
00:40:40.560 --> 00:40:46.560
And if you work it right, you can do it extremely well.

449
00:40:46.560 --> 00:40:50.560
No, Croatians don't like, they're not that warm.

450
00:40:50.560 --> 00:40:58.560
It's more Germanic. I think along the coast there's a little bit of that Mediterranean influence, but it's not said, they're not geared for tourism.

451
00:40:58.560 --> 00:41:07.560
I mean, if you look at the last 50 years, they haven't had any, right? But things can change, quickly too, you know, when the tourists start showing up.

452
00:41:07.560 --> 00:41:14.560
This is our apartment in Zagreb. Actually, it's not our apartment. This is just a building in Zagreb.

453
00:41:14.560 --> 00:41:19.560
And you know, I'm guessing it's what, like late 1700s or something?

454
00:41:19.560 --> 00:41:22.560
And the city is full of them.

455
00:41:22.560 --> 00:41:28.560
There are like thousands of these all over the place with these kind of carvings.

456
00:41:28.560 --> 00:41:29.560
Say it again?

457
00:41:29.560 --> 00:41:31.560
What rent did you have to pay?

458
00:41:31.560 --> 00:41:33.560
Oh, the university furnished it.

459
00:41:33.560 --> 00:41:36.560
Do you know what the housing cost is?

460
00:41:36.560 --> 00:41:38.560
I don't know.

461
00:41:38.560 --> 00:41:43.560
No, I don't know.

462
00:41:43.560 --> 00:41:50.560
How much impact would say Tito's legacy, or, I'm dusting off old memories here,

463
00:41:50.560 --> 00:41:52.560
when I was a former motor company,

464
00:41:52.560 --> 00:41:56.560
Yugoslavia was one of the few folks that actually explored automobile here,

465
00:41:56.560 --> 00:41:58.560
for those of you who don't remember the red Yugo.

466
00:41:58.560 --> 00:42:00.560
Sure, yeah.

467
00:42:00.560 --> 00:42:03.560
With a better position compared to some of the other folks.

468
00:42:03.560 --> 00:42:08.560
Tito was Croatian, but I don't know if that helped Croatia.

469
00:42:08.560 --> 00:42:11.560
In Yugoslavia, Slovenia is the outlier.

470
00:42:11.560 --> 00:42:17.160
Per Capita Income, Slovenia is up here, Croatia is down here, a little above, Bosnia and those guys.

471
00:42:17.160 --> 00:42:21.660
Slovenia is like Italy or something. You go there and it's like, whoa, you know, different.

472
00:42:21.660 --> 00:42:28.560
It's just right, you know, 20 miles away, but it's very, it's a much richer country.

473
00:42:28.560 --> 00:42:34.260
I don't know, in terms of their ability to produce things, I mean, the system is a little bit different,

474
00:42:34.260 --> 00:42:39.660
so they're going to have to, you know, mentally get adjusted.

475
00:42:39.660 --> 00:42:47.660
And they'll be in Europe, you know, what their comparative advantage is going to be in, it's hard to say.

476
00:42:47.660 --> 00:42:55.660
This is a picture from the train station in Zagreb.

477
00:42:55.660 --> 00:42:59.660
You really can't see too much the way it's set up.

478
00:42:59.660 --> 00:43:06.660
In fact, Slovenia is right across these mountains in the back.

479
00:43:06.660 --> 00:43:36.660
Yeah, that's the little, let me get down here and you can see it better, that's the streetcar, Zagreb is a nice city to visit because you can ride these little streetcars anywhere and they're quick, they're small, each little car holds 20 people or so and they run a lot and they go just anywhere in Zagreb, Zagreb is in this valley, it's trying to buy mountains and that makes it easy to get around so there's not a lot of traffic, it's a population of a million and you could spend a month there easy, I mean just seeing stuff, there's enough stuff to see in Zagreb

480
00:43:36.660 --> 00:43:41.660
It's a little hard to find the restaurants. They don't have signs on the restaurants.

481
00:43:41.660 --> 00:43:45.660
It took us like a week or ten days to find food.

482
00:43:45.660 --> 00:43:48.660
Where's the food? But when you find it, it's good.

483
00:43:48.660 --> 00:43:52.660
They have good food. People know where the restaurants are and they go there.

484
00:43:52.660 --> 00:43:55.660
They're like little taverns and that kind of stuff.

485
00:43:55.660 --> 00:44:20.660
This is a street in Zagreb. There are big wide streets and parks with squares that are nice.

486
00:44:20.660 --> 00:44:33.160
We were there in May and the weather was cool, some days, and you know, other days, other days were pretty nice.

487
00:44:33.160 --> 00:44:43.660
It's pretty far north. Some of you guys might not know the location, you know, if Italy is the boot, you know, you go up the boot and then Croatia is like the sweaty part behind the knee, right?

488
00:44:43.660 --> 00:44:47.660
That's Croatia right here.

489
00:44:47.660 --> 00:44:58.660
If you've been there, you would agree, and I mean it's a joke, but I like the place, I wouldn't.

490
00:44:58.660 --> 00:45:04.660
You should hear my jokes about Greece.

491
00:45:04.660 --> 00:45:09.660
This is the ceiling of our bedroom in the university dorm.

492
00:45:09.660 --> 00:45:16.660
Actually, it's a ceiling in a museum, and there are hundreds of these things, if you're into that stuff.

493
00:45:16.660 --> 00:45:22.660
What's the style called, Madeline? Art Nouveau from the late 1800s or so.

494
00:45:28.660 --> 00:45:30.660
Let's see, I might have skipped one.

495
00:45:30.660 --> 00:45:35.660
Ah, this is a nice picture. This is in Zagreb, the main city square.

496
00:45:35.660 --> 00:45:38.660
This is the street market, which is very active.

497
00:45:38.660 --> 00:45:41.660
I mean, I like the flea market and people shop there a lot.

498
00:45:41.660 --> 00:45:44.660
There's a big, huge vegetable market, meat market.

499
00:45:44.660 --> 00:46:03.660
That's very convenient and I would say the average person in Zagreb lives out around the edge of the city and then takes the tram into the center and their job is here in the middle where their banks and that kind of stuff, government offices and you shop at the market and that you know clothes and all sorts of stuff.

500
00:46:06.660 --> 00:46:11.660
It's very convenient city and kind of fun. You walk a lot there of course.

501
00:46:14.660 --> 00:46:17.660
This is the University of Zagreb.

502
00:46:17.660 --> 00:46:18.660
This is the economics building.

503
00:46:18.660 --> 00:46:22.660
The university there is spread out over the city.

504
00:46:22.660 --> 00:46:23.660
It's not in one place.

505
00:46:23.660 --> 00:46:25.660
This is the economics building.

506
00:46:25.660 --> 00:46:28.660
The economics research institute is right here.

507
00:46:28.660 --> 00:46:32.660
I may have a chance to go there on a sabbatical if I'm lucky next year.

508
00:46:32.660 --> 00:46:34.660
This is the economics building.

509
00:46:34.660 --> 00:46:39.660
They have economics majors of about 10,000.

510
00:46:39.660 --> 00:46:43.660
It's a European system and the system is this.

511
00:46:43.660 --> 00:46:46.860
Yes, you get seven years to get a degree.

512
00:46:46.860 --> 00:46:50.660
During that seven years, everything is free.

513
00:46:50.660 --> 00:46:52.220
Well, not free, but highly subsidized.

514
00:46:52.220 --> 00:46:54.660
Housing, food, transportation,

515
00:46:54.660 --> 00:46:56.940
they don't need street car tickets.

516
00:46:56.940 --> 00:46:59.660
All this stuff is like free, right?

517
00:46:59.660 --> 00:47:02.940
Okay, when you sign up for a course,

518
00:47:02.940 --> 00:47:04.460
an economics course, for instance,

519
00:47:04.460 --> 00:47:08.860
you have seven, the seven is a magic number.

520
00:47:08.860 --> 00:47:12.660
You have seven chances to pass the exam.

521
00:47:12.660 --> 00:47:17.060
And you can take the exam any time you like.

522
00:47:17.060 --> 00:47:19.620
You don't have to take it, you know, after you took the course,

523
00:47:19.620 --> 00:47:23.740
you can take it before the course, you can take it seven years later.

524
00:47:23.740 --> 00:47:27.100
And not only that, the professor's job is to make sure that,

525
00:47:27.100 --> 00:47:29.940
their main job is to make sure that those,

526
00:47:29.940 --> 00:47:32.820
now we're talking about over seven years,

527
00:47:32.820 --> 00:47:36.860
a few thousand students that you have backlogged to pass this course

528
00:47:36.860 --> 00:47:40.500
are able to take the test when they want to take it.

529
00:47:40.500 --> 00:47:45.300
There are certain dates when you can take it, but there are a lot of those little dates.

530
00:47:45.300 --> 00:47:48.780
So, you know, the main job the professor has is going and look at the list of students,

531
00:47:48.780 --> 00:47:53.820
set up to take the test on this date, how big a room do I need, you know, how many teaching

532
00:47:53.820 --> 00:47:57.780
assistants do I need to proctor the exam and so on.

533
00:47:57.780 --> 00:48:02.940
But a lot of people, a lot of students, I suspect, are just students in name but don't

534
00:48:02.940 --> 00:48:06.940
ever go to class or even take exams, because you have seven years, right, it's like a seven-year

535
00:48:06.940 --> 00:48:07.940
vacation.

536
00:48:07.940 --> 00:48:11.940
You'll see a picture of the students in a minute.

537
00:48:11.940 --> 00:48:13.940
They're good students there.

538
00:48:13.940 --> 00:48:18.940
And the economists on staff were actually good.

539
00:48:18.940 --> 00:48:22.940
Did you say there were 10,000 economic students?

540
00:48:22.940 --> 00:48:23.940
Yeah.

541
00:48:23.940 --> 00:48:25.940
This school is the school of economics.

542
00:48:25.940 --> 00:48:27.940
But that includes business.

543
00:48:27.940 --> 00:48:29.940
When you say economics in Europe, you mean business.

544
00:48:29.940 --> 00:48:33.940
I mean, it's like finance is like a little trivial part of economics and management.

545
00:48:33.940 --> 00:48:35.940
They don't go for that stuff.

546
00:48:35.940 --> 00:48:41.940
It's all economics. You know, marketing is just nothing. It's just one or two little people.

547
00:48:41.940 --> 00:48:45.940
Economics is the main thing. So it's economics and business.

548
00:48:45.940 --> 00:48:54.940
In Zagreb's a million, Croatia is double. What's Alabama's population?

549
00:48:54.940 --> 00:49:03.940
So I think Zagreb's double that. It's like eight million. One million in Croatia, in the capital of Zagreb.

550
00:49:03.940 --> 00:49:08.940
How well or poorly received are you by most of your colleagues in the big market economy?

551
00:49:33.940 --> 00:49:36.340
It's true, though, that what they learned is a lot different.

552
00:49:36.340 --> 00:49:41.140
I mean, the style of economics that the typical professor trained in Europe,

553
00:49:41.140 --> 00:49:44.940
especially the older guys like me, you know, in the 50s and 60s,

554
00:49:44.940 --> 00:49:47.340
it's a lot different.

555
00:49:47.340 --> 00:49:49.340
But that's changing.

556
00:49:49.340 --> 00:49:51.340
It's changing.

557
00:49:51.340 --> 00:49:55.940
This is my international economics group.

558
00:49:55.940 --> 00:50:03.840
I taught a course in international economics and one in microeconomics.

559
00:50:03.840 --> 00:50:08.240
There's junior, senior level courses. These are the students.

560
00:50:08.240 --> 00:50:13.440
And you can see that in Croatia, it's a homogeneous group, right?

561
00:50:13.440 --> 00:50:17.040
This is to me like, I was there about a week or two and I told Madeline,

562
00:50:17.040 --> 00:50:19.740
this is like the Caucasian homeland.

563
00:50:19.740 --> 00:50:23.940
You know, it's like some sort of primitive Caucasian homeland.

564
00:50:23.940 --> 00:50:26.340
There are only Caucasians there.

565
00:50:26.340 --> 00:50:28.940
I mean, they're big, on average big.

566
00:50:28.940 --> 00:50:32.240
They're not little people, they're big people.

567
00:50:32.240 --> 00:50:40.240
Is there any interest in Austrian economics, Hayek and that sort of thing over there?

568
00:51:02.240 --> 00:51:13.240
If you can find a professor that wants to tutor you or wants to have you ride under him, then you're home free. That's it.

569
00:51:13.240 --> 00:51:20.240
There are no graduate courses or exams or anything. You just write a book.

570
00:51:20.240 --> 00:51:23.240
How many years of subsidy can you get for that?

571
00:51:23.240 --> 00:51:29.240
That's right. That's beyond the seven that you would have, but I don't know the answer.

572
00:51:29.240 --> 00:51:33.240
You get seven as an undergraduate. It could be seven more.

573
00:51:33.240 --> 00:51:35.240
That's right.

574
00:51:35.240 --> 00:51:37.240
And these students were good.

575
00:51:37.240 --> 00:51:39.240
I mean, this is the small group.

576
00:51:39.240 --> 00:51:43.240
Actually, this class had 150 registered, and this is how many showed up.

577
00:51:43.240 --> 00:51:47.240
So that gives you an idea of the way the system works.

578
00:51:47.240 --> 00:51:49.240
But these are good students.

579
00:51:49.240 --> 00:51:52.240
And this is a program that's taught in English, lucky for me, of course.

580
00:51:52.240 --> 00:51:54.240
And they wrote in English.

581
00:51:54.240 --> 00:51:58.240
It's an English program inside the university.

582
00:51:58.240 --> 00:52:16.240
They're good students. I would say this group would compete well with Auburn's seniors in economics. They would out-compete them.

583
00:52:16.240 --> 00:52:22.240
I'm talking about seniors in economics.

584
00:52:22.240 --> 00:52:26.240
Now seniors in economics at Auburn are pretty good by that time because a lot get weeded out.

585
00:52:26.240 --> 00:52:32.240
They can write about as well and this group would probably work harder.

586
00:52:32.240 --> 00:52:34.240
The ones that like economics like it a lot.

587
00:52:34.240 --> 00:52:40.240
Out of this group, this guy standing next to me, he's good.

588
00:52:40.240 --> 00:52:44.240
He's good, she's good, she's excellent.

589
00:52:44.240 --> 00:52:48.400
I mean, these are top students. They could go anywhere. They go anywhere in the U.S.

590
00:52:48.400 --> 00:52:52.720
That's how they're top students. They could go to any graduate school in the U.S.

591
00:52:52.720 --> 00:52:54.520
That's how good they are.

592
00:52:54.520 --> 00:52:57.360
The average was pretty good. She's very bright.

593
00:52:57.360 --> 00:53:00.960
And there are other ones, too. Those are the cases. This guy, he wouldn't leave you alone.

594
00:53:00.960 --> 00:53:06.320
He's just ready to talk economics all day.

595
00:53:06.320 --> 00:53:09.320
Four minutes and maybe four more pictures.

596
00:53:14.240 --> 00:53:25.400
Part of that was not the class.

597
00:53:25.440 --> 00:53:31.540
Yeah, that group and that photo is very good.

598
00:53:31.540 --> 00:53:33.680
This was the lady that invited me over.

599
00:53:33.680 --> 00:53:36.480
It was the Fulbright grant, so she oversaw it.

600
00:53:36.480 --> 00:53:38.500
She applied for the money from Fulbright

601
00:53:38.500 --> 00:53:41.980
and then I just put my name on the list of eligible people

602
00:53:41.980 --> 00:53:45.980
and Fulbright mashed this up, a marriage made in heaven, right?

603
00:53:45.980 --> 00:53:47.980
And notice, I want everybody to see what's on top.

604
00:53:47.980 --> 00:53:51.980
This is after the lecture.

605
00:53:51.980 --> 00:53:57.980
Long-term effects of monetary policy equals zero.

606
00:53:57.980 --> 00:54:01.980
I made a big deal out of that.

607
00:54:01.980 --> 00:54:17.980
This is a picture of Zagreb. This is from the top of the mountain, close to Slovenia, looking down on Zagreb.

608
00:54:17.980 --> 00:54:30.980
That's a pretty good view. Big trees, big houses, big people. The scale is large, although it's not a huge country.

609
00:54:30.980 --> 00:54:36.980
It's a large scale country, if that makes sense.

610
00:54:36.980 --> 00:54:40.980
This is Malini on our Italian holiday

611
00:54:40.980 --> 00:54:43.980
on our way from Zagreb to Greece.

612
00:54:43.980 --> 00:54:45.980
We've got to stop over in Italy,

613
00:54:45.980 --> 00:54:49.980
so this is our Italian holiday.

614
00:54:49.980 --> 00:54:52.980
And then, a boat.

615
00:54:52.980 --> 00:54:54.980
It's very hard to get from Croatia to Greece.

616
00:54:54.980 --> 00:54:57.980
It's like the Croatians don't want anybody going to Greece

617
00:54:57.980 --> 00:54:59.980
and probably vice versa

618
00:54:59.980 --> 00:55:01.980
Because they compete in tourism.

619
00:55:01.980 --> 00:55:04.980
You have to go to Italy first and then go down, right?

620
00:55:04.980 --> 00:55:13.980
There's no direct flights, no direct connections down toward Greece.

621
00:55:13.980 --> 00:55:16.980
You can see the tourism potential.

622
00:55:16.980 --> 00:55:17.980
The beaches are very nice.

623
00:55:17.980 --> 00:55:21.980
Nothing like the beaches in Greece, of course.

624
00:55:21.980 --> 00:55:24.980
This is Dubrovnik, which is interesting to visit.

625
00:55:24.980 --> 00:55:26.980
It's an old medieval-type town.

626
00:55:26.980 --> 00:55:32.980
And we're looking from in the city up toward the hill

627
00:55:32.980 --> 00:55:36.980
and this little building at the top of the hill was the old Yugoslav fort.

628
00:55:36.980 --> 00:55:39.980
And this was in the news, of course.

629
00:55:39.980 --> 00:55:46.980
They were shelling this old medieval castle right here for a long time, six months or so.

630
00:55:46.980 --> 00:55:48.980
They were shelling Dubrovnik.

631
00:55:48.980 --> 00:55:52.980
And the local Croatian rebels, of course, they were called, or whatever, freedom fighters,

632
00:55:52.980 --> 00:56:22.980
They hold up in this old, inside these castle walls and they were, I forget, I mean they have each spot marked on a map where the mortar shells hit thousands and you know, it's a local, they're proud because the walls stood, here's the wall, they weren't affected by the artillery, even modern artillery, there was some fighting in Croatia with the Yugoslav army but in the end not too much.

633
00:56:22.980 --> 00:56:30.620
And then, let's see, I'm running out of time in photos.

634
00:56:30.620 --> 00:56:33.060
This is not Croatia.

635
00:56:33.060 --> 00:56:39.100
This is Albania, where Madeleine's dad's from.

636
00:56:39.100 --> 00:56:41.340
This is a beach just south of Croatia.

637
00:56:41.340 --> 00:56:42.980
This is Albania.

638
00:56:42.980 --> 00:56:47.260
We stopped there, maybe not on the way, but we were there during the summer, and I think

639
00:56:47.260 --> 00:56:52.260
The rest of the photos are just, let's see, nothing special.

640
00:56:56.260 --> 00:56:58.260
I should mention my son, Alexei, he's here.

641
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This is where we'll be this summer if he's lucky and we're lucky.

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He has a bar on a Greek island.

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This is the Greek island, Eos, which is not in Croatia, pretty far from Croatia.

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But anyway.