Sunday, May 12, 2013

Why charge grooms more than brides?

Today, we have a question from Jo in Africa. She asks: why do grooms pay more than brides?

If I speculated, I would think about:

On the supply side:
If the company is doing cost-price pricing and grooms consume more (for example, drink more, eat more) then perhaps the company would charge different amounts. This is not an ideal pricing model, of course. Far better to respond to the customers, so:

On the demand side: 
- Perhaps brides and grooms pay separately and they have different price elasticities - i.e. brides are slightly more cautious about how much they spend on honeymoons. Women earn less than men and this is a luxury item.
- Perhaps the groom pays for both and is simply less willing to spend money on his new wife than on himself. Doesn't seem like a great start.
- Perhaps the parents pay separately and parents of brides are less willing to pay more than the parents of the groom.
- Perhaps the parents of the groom pay for both and the groom's parents are less willing to pay for the bride.

Interestingly, there is very little difference between the top and bottom prices for either the bride or groom. But the cost goes up more for the groom than for the bride (R900 from the cheapest to most expensive option verses R470) and ratio of the cost for the groom compared with the bride goes up from 138.1% to 140.8%.

If they are paying for themselves, this would support the idea that females are more price inelastic than males. Interestingly, if the groom is paying for everything, it suggests that he is less has a higher price elasticity for his bride than for himself - i.e. he is more wiling to pay to inch himself up the luxury chain than he is for his bride. Of course, assuming a honeymoon is for two, if only one person is paying then this is all about the framing. The sum still has to be paid. That makes the insights quite interesting (assuming the marketing department know what they are doing).

Dan Ariely might have something to say about this.

Saturday, April 20, 2013

One reason for gold's declining price: herd mentality?

Buttonwood says he doesn't know why the price of gold is falling. It doesn't reflect any of the economic fundamentals. Or, at least, the optimism that selling gold implies is overblown (people may sell gold to buy equity). Or the pessimism may be overblown (holders of gold may be scared that countries such as Italy may have to sell gold to pay bills, pushing down the price). So why so much of selling?

How about herd mentality? I see some other people sell gold and, even though I know nothing myself, I think that others must know something. Its a vote of confidence in the wisdom of other people in a way. I can't know everything myself and so I have to take some of my cues from somewhere. If you pay attention, you can see this in life all of the time. You always want what some else suggests is good. You cultivate acquaintances or alliances with people you can see have others' approval.

I took advantage of another sort of herd mentality a few months ago when I bought some g4s shares when they plummeted due to poor handling of Olympics Security. It didn't reflect any fundamental flaw in the company, and they are doing very nicely now, thank you very much!

Now I am off to buy some gold while it is cheap (and hoping Buffet is wrong).

Saturday, September 8, 2012

The wonders of Peru

[First post in a long, long time!]

So I recently came back from Peru - my first trip to a Latin American country. Let me briefly tip the amazing people (super, super friendly, honest), the beautiful old cities, and the stunning mountains. But having done that, I should quickly come back to my area of value added: economics and random observations.

1. One of the first things you notice is that tourists (I think those in the country under 60 or 90 days) don't pay VAT. You get a silly little piece of paper at immigration to show at hotels (apparently it is a pain to replace if you lose it). I imagine that this was introduced by some genius to help boost tourism but I am skeptical of this measure. Although the government seems to be doing very well thank you very much with budget surpluses of around 1-2% of GDP in good economic times, this won't last forever. Excepting comparatively rich tourists from taxes is not a good way of returning surpluses to the population, if that is what they want to do. It would, after all, seem strange to offer every tourist a hand full of dollar bills (or soles) on entering the country - but that is effectively what they are doing. Far better to reduce national debt, lower taxes for Peruvians, increase spending on infrastructure, health or education. VAT is a tax that should be paid in the place where the good is consumed - hence the reason you can often claim it back at airports. But in Peru, tourists are consuming hotel services and should not therefore be except from VAT. I am skeptical about the extent to which it can work to attract tourists too. True, it reduces the price of a hotel room by 19% (well, probably in fact the tourist gets only a certain % of this and the hotel gets the rest with the shares being determined by elasticities) but when you decide where to go, you look in books or on the internet to get an idea of the prices. It is not always clear to me that the non-VAT prices were given. An incentive that no one knows about cannot really work. If ever the Peruvian government has revenue collection issues, this should be the first tax exception to go!

2. A quick check of the latest IMF Article IV tells me that the unemployment rate is about 8%, although I have no idea if this is a realistic number or not. One thing I do know is that almost everywhere I were, shops and restaurants were advertising for sales staff, kitchen help. This was most prevalent in Lima. Perhaps Lima is booming in a way the rest of the country is not. Or perhaps it is actually difficult to find unemployed people who actually have the basic skills to do simple jobs. It reminded me of a friend in Lesotho who always needed to recruit waiters and waitresses and people to work on skills. Hundreds of applications but almost impossible to find someone who had the soft skills required. Who would turn up on time, get on with customers and other staff, notice customers exist, not keep walking across the room and forgetting what on earth they were there for while a customer is waiting half an hour before realising the waitress had completely forgotten after just 30 seconds she had ever taken an order at all. If this is the case, perhaps some basic education could be a good way to spend some of those tourist VAT dollars. The tourist industry is down at the moment from what hotel staff and cab drivers said.

3. Peru 'gets' democracy. During elections people paint big signs on walls in support of candidates or parties. Sometimes neighbours clearly supported different candidates during the last election (e.g Ollanta vs Keiko last year). This is amazing and wonderful. Try walking into a solid Republican area wearing an Obama t-shirt, or a solidly Democrat area waving an elephant flag. Even more amazing, these signs are still up. You can differ from your neighbour and those supporting losers have no fear. I think that Peru probably 'gets' democracy waaay better that a lot of recently 'democratic' countries following the Arab Spring. Democracy is not about the rule of the majority. Or not just. It is about protecting minorities and their beliefs. That they happily elect racial minorities is also a great sign.

4. There are copy shops. Lots and lots and lots of copy shops. Either everyone in the country has an obsession about making photocopies of everything. And I mean a real obsession. Or it is a bureaucracy heavy country. The little piece of immigration paper and the VAT exceptions suggest the latter. But who knows? maybe everyone gets genuinely excited about making photocopies.

5. Cusco is subsidised by the rest of the country. Cusco (the base for Machu Picchu) is super expensive. The rest of the country is pretty cheap. If tourists travel around Peru, they spend a lot of money in Cusco but they know that they can spend less elsewhere. That is great for people around Cusco. But it also means that, in terms of tourism, the rest of the country is subsidising the Cusco region.

6. Perhaps linked to 4 is the 'type' of tourists in different parts of the country. There are virtually no Americans anywhere except Cusco and the coast. The rest of the country is filled with French (especially), Brits, Italians, Spanish, other Latin Americans. No North Americans. Then you arrive in Cusco, and there are more Americans than anything else. Probably tourist networks work in the same way as migrant networks (you go where your friends go and people like you go - word of mouth) but it may also be because Peru is a big country and Americans don't get much holiday. So they go to the most important site. It seems there are even plans to build a special airport for Machu Picchu.

7. People selling things to tourists don't hassle you. If you say no, they wander away. I don't know if this is cultural, behavioural, or if it is because it makes best economic sense: there are so many tourists that make easy sales, why waste time on a tough sale.

8. TheFood. Is. Totally. Amazing. They say they have been doing 'fusion food' for 500 years. And it shows. Already half of the food you eat comes from Peru. You can see 2000 year old pottery of chickens. Yes, chicken is from Peru. Along with potatoes, tomatoes, and loads of other things. A thousand years before the Incas, agriculture was highly developed and cooking sophisticated and varied. Whether you eat cheap and simple or at restaurants with famous chefs, it is fantastic. I heard one expression: Eat like an Inca; pay like a peasant. Go there and eat it. Arequipa is the gastronomic capital.

9. The Spanish conquest was different to British colonialism. The church seemed to have a lot more authority. The British seemed to want to bring the three C's: Civilisation, Commerce, Christianity. But the Christians largely trailed behind the soldiers and traders. The army might be used to support commerce or open up trade routes/smash monopolies etc but not to spread Christianity. I saw a few things that suggested that the Spanish church often used the army for their own purposes and in many cases the army seemed to be subordinate to the church. A rather different model to the British one. Fascinating. Need to read more about it though to understand better - this is just an observation from a few things I noticed. The church used some interesting techniques convert the locals too - art that associates Pachamama (mother earth deity figure) with the Virgin Mary, Last Supper paintings with cuy (big juicy guinea pig that I meant to try and never did)...

10. The Incas were highly sophisticated war-mongering people who thought they had a divine right to rule the earth, bring 'civilisation' to other people, and destroyed many other civilisations in the process. They were also great builders. With so much in common they should probably have got along rather better with the 16th century Spanish. 

11. There are some super super interesting pre-Inca civilisation. The Moche are marvelous with great cities and amazing agricultural skills. They only have rain once every 10-20 years when el Niño comes but had fantastic irrigation culture. Wonderfully, when the priests couldn't stop the rain, they had a revolution from which arose the Chimù culture that included a city of somewhere between 60,000 and 250,000 people (the guide around the city gave this estimate higher than I saw elsewhere but maybe I didn't understand everything he was including in his number due to my rough-but rapidly improving!- Spanish). Worshiping a different god apparently did the trick. (Ahem.)

12. Some Latin American civilisations were great astronomers. Fascinatingly, they didn't look at the stars in the Milky Way but at the black spaces within it, and took meaning from this. Check it out here. Cool, huh?

13. The Incas were great builders - some of the stonework is simply amazing. Large parts of Cusco (an Inca city - not territory they conquered from other civilisations) are basically still Inca. In Santa Catalina, the Spanish seemed to just remove the Inca's women and replace them with nuns, and it remains thus to this day. The building was so amazing in some places, such as the Temple of the Sun, that the Spanish simply could not destroy it all so bits are destroyed and rebuilt as a church, the rest remains. Even as you wander the streets of Cusco, half of the buildings are clearly Inca built on the ground floor and maybe upwards. Not all of the stonework is as impressive as in the more sacred or royal buildings but clearly a lot of effort went into those. I wonder what the opportunity cost of such perfection was. Did it hold back scientific development in other areas? They built roads and (despite what I have read in some places), wheels would surely have been useful. As would a more advanced and permanent writing system. Maybe with better technology, I would have been using Pimsleur to learn Quechua instead of Spanish...

Overall, GO TO PERU. It is an amazing and wonderful country. You will love it! You need at least 2 weeks to do it even vaguely properly because it is MUCH bigger than you think because of the curvature of the earth. The buses are amazing (super comfortable overnight ones you can easily sleep on) and the people are amazing.

Saturday, March 17, 2012

How easy is it to recreate Nazism?

I reckon very easily. Nationalism, racism, unjust and paranoid vilification of a group. Give me, or create, the right context (and they are easy to find) and a few good impassioned speeches about how we care very much for our own and these awful people are destroying us and Bingo!

T'other day, I was walking the streets of downtown Washington and a guy just stopped a girl and said 'what country do you come from?'. Just like that. The rest of the conversation suggested that he wasn't trying to chat her up. I suppose she had a vague 'foreign' look about her and she didn't have an American accent but, unless you were especially bothered by this, I don't think you'd even notice. She seemed more confused to be asked than anything.

It made me think of a recent This American Life podcast on the recent anti-immigration law in Alabama. I have blogged about a similar law in Arizona before. It has led to crops rotting in the field because there is no one left who wants to harvest them. And amusingly several foreign company directors have been arrested leading to fears that foreigners will not invest in the state. Indeed, some neighbouring states are using it as a means of attracting foreign investment - come to us, not them - they don't like you! The Governor apologised and was rather embarrassed but the police say exactly the same would happen again because that is the law and police have strong sanctions for not enforcing it.

The thing that struck me most about the podcast was the fact that non-Latinos were refusing to talk to Latinos (who the law was mainly aimed at). Even in churches. Non-Latinos were not shaking hands with Latino members of their congregation and school children are chanting 'Mexicans to the back!' in class/assembly/meetings. Walmart employees were refusing to serve people without papers (even though that is not a part of the law). 

The law makes it illegal to simply help an illegal immigrant. You can't give people lifts in your cars. Identity papers are checked by every state official before providing any service. Even legal residents and citizens are being hounded out of the state. The aim of the law is to encourage illegal residents to return 'home' voluntarily by making life so difficult for them it is not worth staying. 

I kind of fancy a trip to the friendly south and it would be curious to know how Nazi Germany would have been. I just need to make sure I carry all my papers around with me all of the time. Or might it be an even more interesting experience not to do so?

A non-economist justified the law by saying that a local woman who worked in childcare came up to him crying because she couldn't find work because all the foreign people had taken her work. He passed the law for people like her, you see. (Clearly a jolly nice chap giving that wonderful speech about how much we care for our own and are such nice people and these evil foreigners..... ) Since the law has been passed, unemployment has come down much faster than in the rest of the country. Only, not in the sectors where immigrants tend to work. And in any case, this is appalling economics. It suggests that there is a limited number of jobs to go around. It is amazing anyone at all is employed given that the population of the US has increased from about 225 million in 1980 to around 310 million today.

The interviewer asked the Governor whether Jesus would vote for the law. After some awkward sounds, the answer was 'no'. 

This is a recurring theme of mine. I have blogged before for example about how Britain prefers to be POORER and be a CULTURAL BACKWATER than accept foreigners. It all depends how much your prejudices are worth to you

Of interest is that the guy who is crafting these laws to encourage 'voluntary repatriation' has jointed Mr Romney's campaign team and the term has crept into a speech or two. I wonder if everyone would like living in such a place or if there might be some voluntary expatriation too.

The minority few?

From lolgod.

Sunday, February 26, 2012

How bad is giving gifts?

The more I learn about it and the more I think about it, the worse I think it is. At least in the most general aggregate sense but also often on an individual level. Here is my last post on this. And one before.

I recently finished reading Scroogenomics and learnt some fascinating and other quite horrifying things. Here are a few of my highlights, either quotes or things I learnt:

On average, we value gifts at just 80% of the cost of the gift. Americans manage to destroy a total of around $66 billion dollars per year. In general, people close to us do relatively well, destroying only a little bit of value (parents destroy about 3% and siblings 1%, significant others actually increase value by 2%) and those further away (uncles, aunts, grandparents) destroy between 20 to 25% of the value of the gifts. The average American in 2007 purchased 23 gifts for Christmas! Twenty-three! It's no wonder we destroy so much value. To steal a quote from the book: "... that perfect gift says 'I had no earthly idea what to get you, but chose this particular item because, um, it is shiny and appears to cost what I could reasonably be expected to spend'". We have got ourselves into a social equilibrium where giving rubbish gifts is a necessity. We are crazy! The data by the way, do suggest that gift-giving is a 'necessity good' like basic food. We are socially obliged to give but as a proportion of our income, we give less as we get wealthier. It is also no wonder, we have started to prefer gift cards (now amongst the most popular gift to receive) - they get around the expensive stigma of giving cash (largely reserved for grandparents, who tend to destroy a lot of value by giving gifts).

This estimation of value destroyed is pretty generous since it ignores the opportunity cost. Even if I value a gift at 102% of the cost, would I have chosen to buy that or something else I value at 150% of the cost? It also ignores the estimated 2.8 billion hours of time spent Christmas shopping in America (80% of it by women - believe me, if the time cost had this gender division in a developing country, we would be writing about it).

So here we are merrily giving gifts that no one wants, wasting time and destroying value. But it gets worse. Significantly worse. We do it all on credit. Around two thirds of Christmas shopping is paid for on credit cards and a third is still not paid off two months after Christmas. We are getting into debt to give things to people that they don't want! The 'trade deficit' is larger than it would otherwise be meaning, at some point in the future, we will have to work harder to produce things that, largely, the Chinese want. And I can only hope they are more sensible actually want it. 

Now add to the environmental damage caused by the production, packaging, shipping of all of the crap in the shops over Christmas. I haven't seen an estimation of this but I am pretty sure it is high. Again a nice quote from the book: "It's probably wrong to pillage the planet in celebration of Christmas. But if pillage we must, we should at least do it efficiently".

Finally add the fact that we moan that our health systems should be better or education should or transport or we should give more aid to poor countries or we pay too much in tax, and it gets even worse! When we choose to buy crappy presents for people, we are sending a message to the market. No, I don't these resources to be used for an extra nurse or teacher; I want them to be used to produce something shiny and stupid to give to someone who will throw it away. What is wrong with us?!

All this is on a macro, economic level. I can't help but find it sickening on a micro level too. Tales from the Hood wrote a wonderful blog a few weeks ago (but has unfortunately closed up his amazing blog to the public recently). He called it 'more blessed to give than to receive' and makes the interesting observation that the US turned down help from Bangladesh following Hurricane Katrina. Seriously? Could there be a country with better expertise at dealing with the aftermath of flooding? But the US just couldn't bring itself to say yes. The focus of his blog comes from the final episode of NBC's Law and Order. In it a woman may have cancer. She makes very, very clear that does not want sympathy or help. But her colleagues just can't help themselves. Her boyfriend realises she does not want their sympathy or help but admonishes her and says that she should accept it for them. Imagine! A woman dying of cancer is expected to do something for the other people because she has cancer. She should make her life, already pretty shitty, even worse, so that theirs are better. It really drums in who we give for. We give for the giver. Not the receiver. 

Giving has become an inherently selfish act in the way in which it happens in our society today. I don't think it has to be this way. But we need to dramatically change how we give for this to be the case.

I personally think a good start would be to buy fewer gifts and only do it for people you *really* care about and are close to. Secondly, don't give when society mandates it. Give randomly (the surprise must have some value, right?) and when you find something someone might actually like rather than struggling to find something when society tells you you must. In the sense of doing "good" things, probably sometimes we should learn that less can be more. Humans always want to do 'something' but unless we know what we are doing we are as likely to do bad as good. Try not interfering sometimes! Scroogenomics has some ideas too. You should read it.

Finally, thank you to everyone who respected my wish not to be given presents at my last birthday. Especially those who might have felt socially pressurised or emotionally obliged to give me something. You gave the best presents of all :)

Thursday, February 16, 2012

Sunday, February 12, 2012

Moderate Modern Malaysia extradites evil blasphemer and apostate

Nice, liberal London Muslim seems to feel that he doesn't deserve to be executed since Allah is merciful, and he has repented, after all. The implication being that if he had not repented then committing such an evil thought crime would be rightly punishable by death. The incredibly enlightened Sheikh Nasser Al Omer (see the wonderful video below - 5 points for spotting the crocodile tears) is extremely upset that the poor man might have religious doubts in public and the upset he has caused presumably justifies his death. I wonder if his god is equally offended.

Difficult choice in justice

I was struck by this headline in The Scotsman a few days ago: "Family seek maximum sentence possible for killer". That they are seeking to do this is, of course, understandable. But, for me, it raises some important questions about the justice system. Questions like: to what extent should the victim (or, in this case, the murder victim's family) have an influence in sentencing? and Why do we bother having a justice system?

This family is seeking the maximum sentence possible justified partly by the fact that he was a wonderful person with his whole life ahead of him. Would a lesser sentence be justified if it had been an older person? How about if, as in this Onion article he "had a pretty terrible life ahead of him"? If you kill a person with no friends, is it a worse crime than if you kill someone with lots? How about if you had no idea if it was a popular person or not, or a productive person, or a nice person? In all cases, it seems to me that the crime is the same and it is the crime which is being punished. Otherwise, we are introducing some degree of luck. If you happen to kill someone we like, you will be punished more than if we happen not to like them. In America, you are far more likely to be executed for killing a white person. And that is even worse if you are black. Or poor. Or other things juries tend not to like. If we are punishing an outcome rather than the crime itself, should manslaughter carry the same punishment as murder? If you walk out of a shop without paying for something accidentally should that be punished the same as deliberate shoplifting? 

This family understandably wants the maximum punishment. I suppose most people would. And most shops would want the same for shoplifters. But the justice system is supposed to be blind to both parties - and with good reason. The moment it ceases to be blind, it becomes emotional. Whoever shouts the loudest, has the most friends, is able to appear the nicest, will come off best. Emotional people can easily do very stupid and unfair things - like accidentally attack paediatricians instead of paedophiles. Rather, we have built a justice system which is meant to be calm and considered and as blind as possible. The aim is to avoid mob justice or inter-generational feuds or an anarchy in which everyone delivers the justice they feel to be right in the moment. Occasionally you lose because you want a harsher punishment than the one passed by the system, but society wins.

Sunday, January 29, 2012

Why America executes innocent people

I wasn't sure whether to go with the US legal system or paranoia about those evil dirty foreigners*. In the end, I have decided to talk about both.

This story came to my attention a few weeks ago. A 15 year old American girl was mistakenly identified as an illegal immigrant in the US and deported to Colombia. She went through the whole court process maintaining a completely different identity to her own. No one seemed to notice. And it didn't matter anyway. Once a mistake has been made in court, you have to follow the procedure as if it were true. So you blindly carry on as if nothing has happened and, in this case, you deport a girl (who, it seems, happily lived in Bogatà for a few months).

First for the paranoia over foreigners. And where better to start than Alabama's would-be-amusing-if-it-were-not-so-serious anti-immigration law. This wonderful article in the Economist talks about a visiting German Mercedes-Benz director who ended up in prison because of it (maybe they should close down the factory employing all those nice legal Alabamans). And the crops rotting in the field because there is no one to harvest them. And the rising costs companies are facing due to lack of workers. And the lower tax collections due to the consequent falls in productivity and output. And the declines in consumer spending. And the loss of legal citizens who fear their lives being made more difficult. After all, if executive directors who employ so many Alabamans are treated like that, what hope for everyone else?

Now for the executions part. We all love a good execution, don't we? And one day, it might be you or your friend! What a great party we can all have! I learnt a lot from one of my favourite books, Executed on a Technicality by David Dow, a death penalty lawer in Texas. One of my favourite parts are when I learnt that proof of innocent is not actually sufficient to prevent an execution. Because once a lower court has accepted some often emotional, racist, uninformed, corrupt 'fact' a higher court cannot overturn it unless there were either procedural errors or else it was completely impossible for a jury (ahem) to believe it, and that 'completely impossible' bar is set rather high. Of course, executing innocent people is not a problem - being human, we can't get it right all of the time. It is to be expected and we do accept the possibility of error in all punishments. But what I love is that we can know something for sure but in order to be more fair and systematic we have set up a system with rules that cannot be broken. We are unable to introduce common sense. And that is why the deportation of this girl reminded me so much of numerous executions I have read about. It is a lottery at the start combined with strictly following the rules in place. Beautiful stuff.

*I am in Vienna just now and yesterday struggled to communicate in German - the dirty, filthy foreigner that I am. I managed in the end though my incredibly bad German.

Who is more trustworthy: atheists or religious?

Trust is increasingly being researched in economics as an important oil for transactions and other social behaviour (see also this paper from the OECD). In finance, a lack of trust between banks mean that they don't lend to each other overnight, creating the risk that a perfectly solvent bank can go bankrupt overnight as it fails to meets very short term obligations. The Turkish Central Bank took an excellent step during the crisis in which it acted as a 'blind broker' guaranteeing all overnight lending amongst banks to mitigate this risk. 

Recent research discussed in Scientific American suggest that people trust the religious more than they trust atheists and would systematically chose religious people for jobs requiring high degrees of trust. Even the non-religious suffered from this bias. The reason may be that people behave better when they believe that someone is watching over them. Simply believing this to be true will favour believers either from an evolutionary perspective (if there is a reason to believe believers will be more likely to pro-create, and, it seems that there is) or from a social perspective (believers rise to the top and favour other believers for this reason). In either case, we fall into a self-reinforcing pattern resulting in a social equilibrium in which everyone believes (or pretends to).

This week's economist has a great article entitled 'Affinity fraud: the big business of swindling people who trust you'. The word 'religion' does not appear one single time but the article repeatedly gives examples of swindles by the religious. The blind faith religion requires is a great business opportunity.

I, by the way am an atheist. And extremely honest about it.

Saturday, January 28, 2012

Who is more colonial?

Country 1: human populated then about 500 years ago foreigners came lured by nice things like silver, farmland, natural human spreading, curiosity, as well as wanting to impose their religion on the natives. The foreigners dominated the natives and most died (disease, hunger) or were killed. All were treated badly. About 250 years later the colonisers decided they were the victims (partly true but rather exagerated) of their mother country and fought for and won their independence. Today about 85% of the country has its ethnic origins from the 'settlers' and under 2% from the original population.

Country 2: Uninhabited islands. Then about 500 years ago a few kerfuffles started over them. Eventually about 200 years ago a bunch of farmers settled there and stayed there to this day. There are now about 3500 people, most of which have origins with the original settlers. They have a small town and basically run themselves although they are nominally controlled by the government of the country they came from. They are strongly supportive of and happy with this set up. The only problem is that there is a big country next door (well, about 300km across the water) with about 40 million people. They feel that because it is 'close' to them, they should own it. They did invade it once but thankfully the 'home country' of the islanders came to the rescue. Now the big country is making threatening noises again - saying they want to take them over. They are trying to make life difficult for the islanders, taking away their livelihoods by blocking ports for their boats and encouraging other countries to do the same. That country is country 1.

Let's give these two countries names: Country 1, we will call the the Silver Country, or perhaps, Argentina. Country 2, we will call the Falkland Islands. Just for fun.

HERE is what a letter might look like to the Falkland Islanders if the UK Government decides to sell them out.