Well, Prof Mankiw’s blog and research followers know he was a math guy first and then moved into econ.
Here is a more elaborate version of what actually happened. He realised he is not good enough in Math as others are and then moved into economics based on what someone in college told him about the subject.
This is part of a commencement lecture he gave recently at a school. He discusses the key moments in his life. He draws four lessons from his life experiences:
Shifting to Bangalore has been a wake up call on many fronts. Benefits of labor mobility looks so farcical till one does not figure the transaction costs in shifting places. It is not trivial at all.
One such experience has been with respect to LPG cylinders. I have never really understood this whole business of subsidies anyways. The government first subsidises to get cheap votes and then rolls it back to show its reform colors. In LPG it is worse as we are neither here nor there with 6/9 subsidsed cylinder per household per annum.
People should pay the right price of the good and especially on energy related goods which are scarce and needs to conserved and used judiciously. But what has happened all these years is just reckless usage and wastage of this scarce resource as govt. subsidised LPG cylinders by a huge amount for a very long time.
Having said that, if one is willing to pay the market price he/she should be able to get LPG connection with minimal fuss. However, it is here where the whole system crumbles. Like Niranjan says the focus is on subsidies and never really building the system. The government heaped huge praise on itself for creating transparency portals of gas connections but is it really needed? What is the government trying to achieve by figuring how many LPG cylinders should a family be consuming? This whole wasteful consumption of LPG cylinders is a result of governemnt’s subsidies at the first place. If it was priced correctly, people would have been more conscious of it right away. You incentivise bad habits and expect good actions? Possible?
The focus should have been on provision of the good. To get a new gas connection is such a headache. Even in transfer cases one just does not get the connection immediately. One is subject to ridiculous things for a gas cylinder like KYC documents (which has become a fancy name/tactic for public harrassment as rowdies manage the game whatever KYC maybe), several proofs etc. Infact one even needs to make a affidavit on stamp paper saying that “I will use this cylinder for household purposes etc etc”. *I thought this was a joke but was told this is serious stuff.
So you have these distribution agencies becoming like CBI checking whether you are a bonafide citizen so that the subsidised cylinder is used correctly. I mean how ridiculous the whole thing could be. The subsidised gas cylinder has become like a veblen good of sorts and has become neighbour’s envy. So adding on to Siddharth’s piece in Mint we have a case of govt not making private goods as public but also kind of Veblen goods.
This government also loves to centralise policies and systems. LPG is another such case where am told IT systems have been centralised. So if one link goes down, all goes down. There has been such a problem and as a result customers are getting harrassed.
Even more funny is to note a new kind of shortage created by govt- that of LPG cylinder regulators. Lately, I am told there are no regulators and hence no cylinders. Can anyone beat that?
Compare all this to a private LPG supplier in Bangalore – Jyothi Gas. You make a call, the guy drops the cylinder in 30 mins and you just pay the bill. No harrassment at all. Next time just give your customer no and immediate replacement.
In case of govt. cos just forget it. All people from those booking cylinders to providing it behave as if some favor is being done. The delivery guy also expects a tip per cylinder which is pushed onto all.
Despite much better services, agencies like Jyothi run limited in scope. Why? Thanks to govt subsidies, households still prefer the govt LPG cylinders. The natural (read forced) monopoly also spoils the chances of private sector surviving. Essar and Reliance tried with petrol pumps but as their products were expensive died soon.
So private sector does not have a chance unless you could be as efficient as Jyothi. Perhaps the public sector distribution in Bangalore is terrible for companies like Jyothi to make an impact.
Makes for a very interesting paper…Why private gas companies like Jyothi do well in places like Bangalore ( I am assuming they do well, which itself is a hypthesis) and not in other cities Are public agencies better in other cities? I doubt it but has to be tested..
UK has two world famous addresses - Buckingham Paalce and 10, Downing Street. There is another one for econ nerds called Threadneedle Street, the place where Bank of England is housed. Interestingly, BoE is called Old Lady of Threadneedle street as well.
There is some interesting history behind this title given to BoE. John Keyworth, curator of the Bank’s Museum (and the Old Lady’s oldest and longest-serving employee tells the story in this nice article in BoE’s latest bulletin.
BoE got this title thanks to a cartoonist named James Gillray published on 22 May 1797.
The cartoon shows the Prime Minister of the day, William Pitt the Younger, pretending to woo an old lady, the personification of the Bank, but what he is really after is the Bank’s reserves,
represented by the gold coin in her pocket, and the money-chest on which she is firmly seated.(1)
At the time, the Bank was a joint-stock company(2) operating under Royal Charter, and therefore essentially a private company — and so it was perceived as having been taken advantage of by the politicians. A series of events beginning with a landing in February 1797 by several hundred French troops at Fishguard on the Welsh coast and ending with an accusatory speech in the House of Commons by the opposition MP Richard Sheridan had prompted Gillray to produce the cartoon.(3)
The Fishguard incident was perceived by many as a precursor to the long-expected French invasion and sparked a panic. The Bank was inundated by holders of notes wanting to exchange them for gold and its reserves were reduced within a fortnight from £16 million to less than £2 million. This situation could not be sustained and an order was passed releasing the Bank from its obligation to pay its notes in gold. Known as the ‘Restriction of Cash Payments’ or simply ‘The Restriction Period’, it had the effect of reserving the gold in circulation and the Bank’s vaults for the war effort. The Restriction Period continued until 1821. Unsurprisingly, this action was seen by the Government’s detractors as outrageous and Sheridan, representing the Whig opposition, described the Bank as ‘an elderly lady in the City who had… unfortunately fallen into bad company’.(4)
Gillray, from his workplace in St James’s, latched onto Sheridan’s words. Dressed in a gown made of the new £1 and £2 notes issued to supplant the gold coin in circulation, an old lady sits
protectively on a chest representing the Bank’s reserves, declaiming against the unwanted
attentions of the skeletal, freckle-faced, pointy-nosed Pitt. The scene is set in the Rotunda, a
well-known public office in the Bank’s Threadneedle Street building. Clerks seated at their
desks can just be discerned in the background. A document headed ‘Loans’ refers to the
Pitt administration’s continual demands on the Bank for funds.(5)
It has other historic cartoon strips as well. They show BoE’s history as it has evolved in interesting manner…Wish we could study economics using such tools as well..
I stumbled upon this very interesting conference- The economics curriculum: towards a radical reformation hosted by World Economics Association. Some very interesting papers there.
I just read this nice paper by Nicola Acocella former Prof at Sapienza University of Rome. He discusses the birth of econ policy in Italy:
A very apt and hitting article by Niranjan of Mint.
Two broad points in his piece.
I missed this issue completely but thanks to this voxeu article woke upto it. I mean EZ crisis is one crazy event and events around the crisis keep making you pull your hair once in a while. Germans did not like the support being given to peripheries and there were court cases against EFSF etc. But those cases were mostly by German econs (as far as I can recollect).
It now seems Bundesbank (which is a ECB member and biggest ECB shareholder) has filed a case in German court against Outright Monetary Transactions:
A superb summary by Prof Alberto Alesina of Harvard in the latest NBER reporter.
Apart from super coverage of super papers, what surprised me is this pol eco research program started only in 2006!
Just came to know this morning of demise of one of the most eminent econ historians- Robert Fogel. He won the Prize in 1993 with Douglass North. ME wanted to read much of his works but just could not. Hope to read in future..
Well as kids you loved to hear stories from parents, relatives etc. It helped extend your imagination and also figure some history and mythology of India. And some of it still remains widely etched in the memories as well. They are indeed formative years.
So it is not surprising to read this voxeu post which says reading to children gives them a headstart in life.
The main message from these analyses is that in all approaches and specifications the ‘effect’ of reading to children remains. This ‘effect’ remains over time and spills over into other cognitive skills, particularly those skills more closely related to reading. However, it does not spill over to non-cognitive skills. This consistent effect of reading to children on cognitive skills indicates that it is not just that well-off, well-educated parents read to their children more, generating an association and making it appear as if reading to your child leads to better outcomes for the child. There indeed appears to be a causal effect.
What are the implications of these findings? The main finding is that it is important that young children are being read to. This is an early-life intervention that seems to be beneficial for their early learning outcomes. The study shows that there is an important role for parents in the development of their children. Parental reading to children increases reading and other cognitive skills at least up to the age of 10-11. An interesting further question, which is relevant to policymakers but which cannot be answered with the current data, is whether reading to children at a childcare centre or at school has similar effects.
Nice intuitive bit..
Well actually it is a book review by the RBI Governor. I have not seen any articles/reviews by the Governor in the past and nice to see him engaging with the media.
The review is of this book called Physics of Wall Street. It is written by James O. Weatherall, a PhD in physics, and now an Assistant Professor of Philosophy in the University of California at Irvine. Wow that is some profile to have.
Guv starts with his typical humor:
Well more than falling inflation numbers, RBI would take some respite from its recent Survey of Indian households on Inflation Exp. As most mon pol econs would say it is expectations which matter.
With decline in WPI inflation, the inf exp of HH have also declined.Earlier no of people expecting inflaiton to rise higher than current rate was hovering around 70-75%. This has declined to touch 59% which is still high but better than the 70% number. Having said that future inflation numbers continue to hover in double digits for most people.
Some respite but still not out of the inflation woods..
Well here Because of EZ crisis, no of econs have pointed to how US stitched its fiscal union ahead of mon union. And how that is the path EZ should take as well. This blog has pointed to several such research papers. The problem with such pieces is that they make this whole stitching of political and mon union look like a cakewalk.
Peter Rousseau of Vanderbilt shows in this fab paper why this whole union business was not easy at all. There was lots of politics in it and was drawn over many decades:
Is political unity a necessary condition for a successful monetary union? The early United States seems a leading example of this principle. But the view is misleadingly simple. I review the historical record and uncover signs that the United States did not achieve a stable monetary union, at least if measured by a uniform currency and adequate safeguards against systemic risk, until well after the Civil War and probably not until the founding of the Federal Reserve. Political change and shifting policy positions end up as key factors in shaping the monetary union that did ultimately emerge.
Based on US history, Europe is not much different from US in 1790s :
Seen from this perspective, the early United States was not much more of a “political union” in 1790 than today’s European Union, though it did enjoy the advantages of a common culture and language early on. If history offers insights for the future, perhaps monetary stability in the EU will also arise through a sequence of informed trial and error across political and monetary actors, though knowledge of the past may accelerate the time frame this time around.
This is not to say that the Federal Constitution was unimportant. The lack of even a rudimentary political union among the thirteen colonies prior to their independence allowed, for example, individual colonies in New England to undermine a loose regional currency zone, and the weak political union that emerged with the Continental Congress during the Revolution (1776-1781) and then under the Articles of Confederation (1781-1789) aggravated problems of monetary control. Moving to a single unit of account in the dollar, privatizing the money creation process, and ceding some fiscal authority to the Federal government after 1789 represented a leap towards a well-functioning monetary union, but the process by no means ended there. Rather, political struggles shifted the balance of power between centralist and decentralist influences in the government and produced a patchwork of institutions and monetary practices that ended up being codified in the compromise that was the Federal Reserve Act of 1913.
The paper goes on to show how various political wars were fought by politicos then over the US economic and monetary system. It is all about politics at the end of the day.
Today’s U.S. monetary union would look quite different had the Federalist plan gone off without a hitch. In this paper I lay out the broad history of how political and economic forces interacted up to the founding of the Federal Reserve, emphasizing how a basic political union was insufficient for having a stable monetary union, and how the two evolved side by side. In this respect, optimism about the European Union’s prospects for emerging in the end as a true political and economic union does not seem misplaced.
Hmm.. But would Germans want to be part of the same country as French?
Superb read on econ history of US and comparison to EZ. Would be amazing to read such an account on India as well..
A nice paper by Akshima T Ghate and S Sundar with very useful data on car usage in India’s cities.
The per capita car registrations in India may still be low compared to world standards but some Indian cities have higher car owndership than Singapore, HK etc. And growth rates of car ownership is rising bigtime as well. They say we need to check this growth:
One of the many interesting aspects of reading econ history is to know of certain historical events which one is so ignorant of. For instance, it is unlikely that normal people read on Ottoman empire history unless you are a history student.
Thanks to this nice paper by Ali Coşkun Tunçer of LSE that I got something to know of Ottoman Empire. This paper talks about monetary systems adopted by Ottoman empire during the gold standard era.
This study analyses the functioning of the “gold standard” in the Ottoman Empire during the pre-1914 gold standard era, with specific emphasis on the institutions regulating commodity money and fiat money. It explores the extent to which the Ottoman monetary system was an outlier with reference to the experiences of other peripheral countries. One of the findings reveals considerably limited circulation of notes in the Ottoman Empire even after adherence to the gold standard in 1880. By highlighting the anomalies of the Ottoman case, this paper concludes that the transition from commodity money to fiat money did not take place at the same rate across peripheries during the pre-1914 gold standard era. These differences may be explained by the relative autonomy of the central banks of issue from governments, and in turn may have implied changing degrees of monetary sovereignty and fiscal capacity across the members of the golden periphery.
Notice the periphery debate bit? So just like we see in EZ case where peripheries struggled to adopt Euro, same was the case in Gold Standard as well. Monetary historians have compared the Euro to Gold Standard and this paper is a more specific example of why we need to be skeptical of fixed exchange rates whatever their form may be.
Though, again the debate is rife with many people skeptical of today’s fiat currency standards where there is just no backing to the currency. The government declares by fiat the legal tender and like a magic wand it becomes a currency of circulation. This allows both the C-bank and government to go crazy on printing once a while or many a while
So debate is on..
Well, I am late commenting on many things these days. Can’t help it as ME blogger is going through a major transition.
RBI had consulted a committee to review the presentation of its balance sheet and account statements. The committee put up its report y’day and is a decent read on RBI’s B/S.
Currently, RBI B/S is presented as BS of Issue Dept and BS of Banking Dept. It still follows the colonial masters as even BoE presents its B/S in the same manner and RBI was pretty much modelled on BoE. As the report says:
A nice tribute to one of the most fascinating social scientists – Lin Ostrom. It is by Prof. Brett Frischmann of Yeshiva Univ.
This article is a tribute to Elinor Ostrom. It explores two enduring lessons she taught: a substantive lesson that involves embracing complexity and context, and a methodological lesson that involves embracing a framework-driven approach to systematic, evolutionary learning through various interdisciplinary methodologies, theories, and empirical approaches.
First, I discuss Ostrom’s work on environmental commons. I illustrate the two lessons through a discussion of the tragedy of the commons. Next, I explain how the two lessons play a significant role in recent efforts to extend Ostrom’s work on environmental commons to knowledge/cultural commons. I draw a parallel between the tragedy of the commons allegory and the free rider allegory, and show how many of the problems Ostrom explored in the environmental context are manifest in the cultural environmental context. I discuss an ongoing research project that follows the path that Ostrom blazed and systematically studies commons in the cultural environment.
This extension of Ostrom’s ideas into figuring cultural commons is an exciting read.
An interesting article pointed by Nitin Pai. It is by Chidanand Rajghatta.
He says Indian cities lose lakhs of revenue for not fining people for overspeeding:
Blogging has been really poor recently and is totally against the wishes of the blogger. ME hopes to resolve the issues in a few days and blog much more over the coming days. I keep wondering whether our econ models which sing wide praises on labor mobility know the hassles involved in the same. More on this later.
Anyways, whatever little I can lay my hands on am sharing with people. Came across this interview/profile of Carmen Reinhart, the econ much in focus. It is in IMF’s quarterly publication – F&D whose theme is another hot topic – women empowerment.
Interesting to note that Reinhart wanted to be into fashion. Like most top econs, she too came into eco by chance:
Had Miami Dade College offered a concentration in fashion design, Carmen Reinhart might never have become an economist.
Reinhart—the world’s most-cited female economist and coauthor of one of the most important economic books of the past decade—studied fashion merchandising instead.
“I like art a great deal, and I like drawing. And I thought that, well, I really didn’t go to the right school to become a fashion designer. So, let me see whether I like fashion merchandising.”
She didn’t.
“Fashion merchandising is how to become a buyer. It has really little to do with any kind of design . . . the artistic part of it.” She was convinced she’d made a poor choice.
But the merchandising curriculum required her to take a course on the principles of economics. Her instructor, “a crazy old Marxist,” paired a standard textbook with Douglas F. Dowd’s critique of U.S. capitalism, The Twisted Dream. “And I found it fascinating . . . . I didn’t make a decision, ‘Oh, I’m going to become an economist.’ No, I made the decision that I was going to take more economics courses and see how I liked them. And I did.”
Nice bit. Discusses her work on crisis and long association with Ken Rogoff.
A nice piece by Prof Bardhan in Boston Review’s recent edition.
He begins saying how eco was all about development earlier and then lost its ground only to regain it now:
A brilliant interview of a brilliant econ historian – Barry Eichengreen .
He is asked this very important q on what econ history means and what do econ historians do?
This probably brings us back full circle. We started with the uses and misuses of economic history and we’ve been talking about economic history throughout the conversation. I think it might be helpful to hear your perspective on what economic history and economic historians are. Why not just an economist who works in history or a historian who works on topics of economics? What does the term “economic history” mean, and what does the professional discipline of economic historian connote to you?
Eichengreen: As the name suggests, one is neither fish nor fowl; neither economist nor historian. This makes the economic historian a trespasser in other people’s disciplines, to invoke the phrase coined by the late Albert Hirschman. Historians reason by induction while economists are deductive. Economists reason from theory while historians reason from a mass of facts. Economic historians do both. Economists are in the business of simplifying; their strategic instrument is the simplifying assumption. The role of the economic historian is to say “Not so fast, there’s context here. Your model leaves out important aspects of the problem, not only economic but social, political, and institutional aspects – creating the danger of providing a misleading guide to policy.”
Hmm…I actually don’t understand why econ historians are not given their due. They have such interesting things to share. Later on this..
Is the crisis another missed opportunity to reemphasize the importance of history?
Sniderman: Do you think that, in training PhD economists, there’s a missed opportunity to stress the value and usefulness of economic history? Over the years, economics has become increasingly quantitative and math-focused. From the nature of the discussion we’ve had, it is clear that you don’t approach economic history as sort of a side interest of “Let’s study the history of things,” but rather a disciplined way of integrating economic theory into the context of historical episodes. Is that way of thinking about economic history appreciated as much as it could be?
Eichengreen: I should emphasize that the opportunity is not entirely missed. Some top PhD programs require an economic history course of their PhD students, the University of California, Berkeley, being one. The best way of demonstrating the value of economic history to an economist, I would argue, is by doing economic history. So when we teach economic history to PhD students in economics in Berkeley, we don’t spend much time talking about the value of history. Instead, we teach articles and address problems, and leave it to the students, as it were, to figure how this style of work might be applied to this own research. For every self-identifying economic historian we produce, we have several PhD students who have a historical chapter, or a historical essay, or a historical aspect to their dissertations. That’s a measure of success.
Well Sir, it is mostly missed. How many depts have opened upto history. Look am not saying we don’t need to do quant side of things and let us replace it with econ history . My contention is there is equal need for history as well. We need researchers in both disciplines. And who said history does not do quant. If one does get reasonable data there is nothing better than using quant tools to figure histiry. It helps you know more and test the history and ascertain whether history known so far was a myth or a fact.
Further, the allegation that econ history only looks at past. The interview nicely begins with this remark by the interviewer Mark Sniderman of Cleveland Fed:
To some, the term “economic historian” conjures up images of an academic whose only interests lie deep in the past; an armchair scholar who holds forth on days long ago but has no insights about the present. Barry Eichengreen provides a useful corrective to that stereotype. For, as much as Eichengreen has studied episodes in economic history, he seems more attuned to connecting the past to the present. At the same time, he is mindful that “lessons” have a way of taking on lives of their own. What’s taken as given among economic historians today may be wholly rejected in the future.
Well I ahve never really understood this allegation. Do people who work in so called present/future have anything useful to say on economic events. For instance, how many could figure the current crisis? Most did not even know how to respond to the crisis. It was the work of econ hostorians which prevented a second depression. One can suely argue whether any better steps could be taken but knowhow of history clearly played an important part. Yes there is confusion over which side of history should one look at to resolve current events. But that means more research in history and not less.
As Prof says in the first q we need to draw the right lessons:
Sniderman: It’s an honor to talk with you. You’re here at this conference to discuss the uses and misuses of economic history. Can you give us an example of how people inaccurately apply lessons from the past to the recent financial crisis?
Eichengreen: The honor is mine.
Whenever I say “lessons,” please understand the word to be surrounded by quotation marks. My point is that “lessons” when drawn mechanically have considerable capacity to mislead. For example, one “lesson” from the literature on the Great Depression was how disruptive serious banking crises can be. That, in a nutshell, is why the Fed and its fellow regulators paid such close attention to the banking system in the run-up to the recent crisis. But that “lesson” of history was, in part, what allowed them to overlook what was happening in the shadow banking system, as our system of lightly regulated near-banks is known.
What did they miss it? One answer is that there was effectively no shadow banking system to speak of in the 1930s. We learned to pay close attention to what was going on in the banking system, narrowly defined. That bias may have been part of what led policymakers to miss what was going on in other parts of the financial system.
Another example, this one from Europe, is the “lesson” that there is necessarily such a thing as expansionary fiscal consolidation. Europeans, when arguing that such a thing exists, look to the experience of the Netherlands and Ireland in the 1980s, when those countries cut their budget deficits without experiencing extended recessions. Both countries were able to consolidate but continue to grow, leading contemporary observers to argue that the same should be true in Europe today. But reasoning from that historical case to today misleads because the circumstances at both the country and global level were very different. Ireland and the Netherlands were small. They were consolidating in a period when the world economy was growing. These facts allowed them to substitute external demand for domestic demand. In addition, unlike European countries today they had their own monetary policies, allowing them step down the exchange rate, enhancing the competitiveness of their exports at one fell swoop, and avoid extended recessions. But it does not follow from their experience that the same is necessarily possible today. Everyone in Europe is consolidating simultaneously. Most nations lack their own independent exchange rate and monetary policies. And the world economy is not growing robustly.
The larger question is whether it is productive to think in terms of “history lessons.” Economic theory has no lessons; instead, it simply offers a way of systematically structuring how we think about the world. The same is true of history.
Superb read. I so hope to see econ depts opening up to history and students applying as well..
