What Merkel and Cameron don't want you to know about Romania

It seems that Germany, the United Kingdom and the Netherlands (among other European countries) don't want Romania to join the Schengen area. Romania's bid was rejected by the Council of Ministres in September 2011 because of a lack of anti-corruption measures and the influx of illegal immigrants from Ukraine or Moldova. The British even considered launching a campaign in order to dissuade any potential Romanian workers from immigrating to their island, and the Germans were concerned that thousands of Sinti and Roma could take advantage of the German social insurance system.

I'm sure you still remember the meat adulteration scandal: foods that were supposed to contain beef were found to contain horsemeat. And yes: the horsemeat came from Romania, which motivated Germany's state television to broadcast a couple of documentaries about poor Romania. “Who wouldn't want to leave such an underdevelopped country?” many German spectactors may have wondered.

So why was Romania allowed to join the European Union in the first place if it's such a horrible place? Well, first of all: it's not horrible at all. If you've ever been to Bucharest, Brasov or Constanta you'll find that it's a modern and civilized European country, which is why Romania's tourism industryis groing steadily.

And Romania has potential – if you don't believe me, you might trust Nouriel Roubini. As a matter of fact, you'll find lots of Zara, Mango and H&M stores in Bucharest. More and more people drive foreign cars (expensive ones like Mercedes or BMW, and less expensive ones like Opel or Renault) – 20 million people is quite a big market. And it's also cheap to produce your products in Romania and to export them other European countries (no customs, no tolls...).

Many American companies (like HP or Oracle) decided to open their European headquarters in Bucharest. Why? Well, because 95% of young Romanians speak English and many speak other languages, too (especially French, Spanish, Italian or even German) – you won't find that in any other European country. Ok, maybe in Sweden, Denmark or the Netherlands, but their salaries are also much higher.

Last but not least: Romania's educational system is really good. Did you know that Romania rankedfirst among all European countries at the 2012 Mathematical Olympiad? And that Romania has one of the highest computer scientists ratios of the world? I guess this is the real reason why the German and the British governments don't want Romania to join the Schengen area: more competitors. They're not afraid of an invasion of poor Romanians, but of an invasion of highly skilled workers (which could have a negative impact on the wage level). But let's face it: Romania has one of the lowest unemployment rates of Europe and wages increased by 22% since 1990– why would you leave your family and friends behind if you have a decent job and salary?

And by the way: I'm not Romanian and nor am I trying to promote Romania. I just don't like that “black/white mentality”

WhatsApp and Rational Thinking

WhatsApprecently announced they were going to charge (some of) their users0,99$ for their services. The users' reactions were really harsh: many of them immediatley started looking for alternative mobile phone messengers like LINE or KakaoTalk, critized WhatsApp on Facebook and felt “screwed” by the company (I'm not kidding; one of my contacts said that on Facebook).

Eventually it's not really clear what WhatsApp is going to do. It seems that that some users won't have to pay, others already had to pay and some just stopped using WhatsApp. But why would somebody consider 1$ to be a disproportionate fee for a service that you can use everyday (24/7) and that is really usueful? I can think of two contradictory explanations (maybe you can think of more):

First reason: People try to maximize their utility

If you study basic Microeconomicsyou'll learn that people always try to maximize their utility and that they're completely rational – we're all “homines economici”. Well, in this case users can save 0,99$ a year by switching to any other messenger. The users' utility would increase by 0,99$... but there's always a “but”... They also have to tell their friends that they stopped using WhatsApp. They could inform them by publishing a post on Facebook or by sending an e-mail, which can be time-consuming. Furthermore, it's probable that some of their friends won't see nor read these messages. So they'll have to call them and tell them that they started using a new messenger, which costs money. In the end these people might save a couple of cents by switching to Line or KakaoTalk. Do you really think those guys are completely rational? Well, they're as rational as those people who pay 500$ for a handbag which was made in China and cost 15$... which leads me to the second possible argument...

Second reason: There is no “homo economicus”

People are not rational. Actually the intelligence quotient of 50% of the global population is below average (if you assume that intelligence is normally distributed) – maybe “irrational” is not the most appropiate word to describe them...

More Business Schools, more growth, more everything...?

The positive impact of higher education on a country's economy is beyond all question: there are many studies and surveys that show that investing in higher education and economic development correlate.

(You may read Larry Gigerich's and Elisa Stephen's articles if you want more information).

But is this also true for business schools? Given that many MBA programs are really, really expensive and elitist, one would expect that the most developped and fastest growing countries also have the most business schools. Some people don't think so, like Thomas Sattelberger (T-System's former CEO) who said that MBA graduates behave like John Wayne when they become managers in a company.

I decided to analyze the data that is availabe on business schools and their impact on economic growth. It's really easy to find out the number of business schools per country: you just have to go to wikipedia and you'll find a detailed list of these instituions per country. In order to keep things simple I focused my analysis on European countries. 

It's pretty obvious that big countries like Germany, France or Italy have more business schools than Luxembourg or Cyprus. Therefore I divided the populationof each country by the number of business schools. 

On Eurostat's website I found the real GDPgrowth rate of each European country. Then I related the number of business schools per contry to their respective real GDP growth rates by fitting a linear regression model. In the below figure you'll see the regression line (in red), the different data points, the number of business schools per country (scaled) on the X-axis and the GDP growth rates (scaled) on the Y-axis.

 

The slope of the regression line is slightly negative (-6.775e-05), which would mean the less business schools a country has the lower its GDP growth rates will be. Nevertheless the analys also yields a P-Value of 0.46 for the slope – which means that it is statistaclly not significant.

So what does this mean? Well, nobody can say that business schools have any impact on economic growth. In any case it's marginal and less important than the impact of other higher education institutions (like real universities).

Last but not least: Spain, Portugal and Cyprus are among the countries with the highest business schools per inhabitants ratio, whereas Germany and Luxembourg have really low ratios. This is why Spain, Portugal and Cyprus will have to finance Germany's bail-out.... oh, wait...