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On the Money
Kash Mansori (economics) keeps a close eye on Europe's money and economic issues of importance to you

Eight New Faculty Members on Tenure Track

Faculty Briefs

on the money: kash mansori wants more of us to understand economic forces

By Stephen Collins '74

Kashif Mansori

At 12:01 a.m. on January 1, 2002, Assistant Professor of Economics Kashif Mansori wasn't wearing a party hat or raising a champagne flute. He was in Paris, putting his debit card into an ATM machine to see what would come out.

As 2001 gave way to 2002, the European Union introduced the euro to replace the national currency of the 12 member nations of the union. As an economist who has followed the development of the EU as the foremost case study in his emerging field, economic integration, Mansori wanted hard evidence that the new standard for hard cash was officially in play.

For Mansori the introduction of the euro provided a unique opportunity to study market forces. Sales of handheld calculators had doubled in the waning months of 2001, he said, as merchants prepared for a new order in which they could accept old currency-Belgian francs in Brussels-but had to give change in euros. He was curious to see if retailers would use the shift and associated confusion to raise prices. (His finding was that generally they did not. "The market is working," he concluded.)

When Mansori began studying economics in the 1980s, as an undergraduate at Wesleyan and later at Princeton, where he earned a Ph.D., economists talked about economic trade, not economic integration. "The extent of economic integration then was all about tariffs being reduced," he said.

In the last dozen or so years, economic integration has become part and parcel of the shrinking world/global society phenomenon. "Europe is a great case study, but it's happening all over the world," he said. NAFTA is less ambitious, but its passage was both a signal and a major boost to economic integration among the three North American countries.

In the EU it's what economists call deep integration. Take your toaster across the border of two EU countries and you can trust it will work, for example. The idea is for transactions between two countries to be as simple as transactions between two states in the U.S.-for people, goods, services and capital to move around freely.

Interviewed in September, the day after voters in Sweden rejected adoption of the euro in place of the kronor, Mansori called the referendum results "baffling to most economists."

"It [the euro] is so much less popular than we think it should be," he said.

Mansori's recent research, which built on data collected for a senior thesis by Grete Rød '03, examined prospects for expansion of the EU as Eastern European countries are slated to join the union next May. By looking at exchange rates economists can get a good idea about how ready the financial markets of the new countries are to join the union, he said.

Rød's research provided a lot of information about the prospects for Poland, Hungary and the Czech Republic making a smooth transition into the EU (which looked promising, he said), and Mansori was scheduled to present a paper on the outlook to the Applied Econometrics Association at a meeting in Spain in November.

Just to recap: Mansori, the son of a Pakistani and a Dane, teamed up with Rød, a Norwegian and a United World College alumna, on research about Poland, Hungary and the Czech Republic, with the results to be presented in Spain. With that as background, it's interesting to hear Mansori talk about his sense of obligation to educating the local community-meaning greater Waterville and the people of Maine-about economics and to read op-ed commentaries he has published in Maine's daily newspapers.

In the last year he has contributed articles about the prospects for social security and the President's economic plan. In May, he published a piece titled "The Problem With Deficits" in the Bangor Daily News and the Waterville Morning Sentinel.

Mansori says he writes for newspapers and talks to reporters when asked because he worries about the lack of popular understanding of economic forces at work in the world. "We don't do it very much," he said.

On the value of adopting a common currency in Europe, for example, he said economists can have mathematical proof of the advantages, but those advantages aren't widely understood: "It's not intuitively obvious." And without efforts to educate people about those advantages, economists are likely to be baffled by more votes like the one in Sweden.

Talking about the breakdown of World Trade Organization talks in Mexico in September he said, "I think international trade is one of the areas where we've done the worst" at explaining economic principles to mass audiences.

"We can do the math, we can make the forecasts, and we can say 'one hundred and forty-four million people are going to stay in poverty who may have been lifted out of poverty [by a free trade policy],' but that doesn't matter."

So at the same time he's burnishing his presentation for an international meeting of econometricians, Mansori turns his macroeconomic lens on issues that he feels Maine residents need to understand better and explains them in simple, nonacademic language. A column in the Sentinel in October focused on what he calls the "birth tax."

When President Bush and the Congress repealed taxes on multimillionaire inheritance gifts, it was spuriously labeled the "death tax," Mansori said.

Now, he maintains, the combination of tax cuts and deficit spending enacted over the last two years amounts to a "birth tax." His calculations project that every man, woman, child-even each newborn baby-will owe the government $9,000 more come 2008 than they would have were it not for the recent tax cuts and spending choices. That figure could hit $20,000 per capita in 2013.

Mansori feels strongly that the "birth tax" is something Maine people should care about. He and his wife, Assistant Professor of Spanish Meriwynn Grothe Mansori, do. It's a debt that their daughter, Mira Catherine, who was born in January, will have to pay off, he says.



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