A short note on Finance and Growth

This has been one of my favorite topics- How finance leads to growth. I have posted many a times on the subject ( see this for instance).

I came across this superb short note on the topic written by Aubhik Khan of Philadelphia Fed. It is basically a crisp literature survey and explains how various papers have gone on to show how finance helps in growth.

The note was written in 2000 and since then substanitial research has taken place in the subject. Like now we know access to finance is as important, finance helps reduce poverty, research on whether financial globalization is helpful etc. Keep posted for more developments.

Importance of legal system

The importance of an effective legal system is well known. I came across this excellent paperfrom Shleifer et al on the same.

The team discusses why people do not believe in legal system and how badly it effects economic activity. One should check out the way they explain how a capitalist goes on to hire a manager given different legal system.

The main finding of the paper is:

The question addressed in the following sections is how to get more people to use the legal system? We believe that court and police reforms should not be the starting point, since those reforms are likely to take a long time. The legal system must begin to be used with the existing courts and police. To do so, legal reform should begin with the adoption of legal rules that the courts find usable, and that private parties find cheaper to rely on than other methods of resolving disputes. Such rules should have several obvious but important characteristics.

First, bad rules — that keep people from using the legal system because they prohibit, or fail to support — legitimate market activity, need to be abolished.

Second, the new rules should to the extent possible follow business practice, thereby enabling private parties to continue their business activities but to rely on courts rather than crime to resolve disputes.

Third, the new rules should help the courts resolve disputes by telling them what to do in the cases where existing laws are most conspicuously incomplete. In particular, courts, with their extremely limited resources, should be able to verify whether violations of these rules have occured.

Is spirit of cricket dead?

I am sure most would say “YES” after the test match at Sydney that ended yesterday.

What could have been a great test match was turned into a death of cricket. It seemed only winning mattered and Australia can do anything to get the win. I agree India played badly but the Aussie behavior on the field was so attrocious that one couldn’t help but get angry.

The Aussies were celebrating the win as if they had earned it. We all know the 8 decisions that went against India (the catches of Australians were not given but non-catches (or doubtful) of Indians were given) and without the umpire’s help Aussies couldn’t have won. The worst was the third umpire also ruled decisions against India when it was obvious Andrew Symonds was out. When umpires favor a side, we usually say the team played with 13 players (11 players and 2 umpires), but ion this match it was 14 players ( 11+2 and one third umpire). And they claim this victory was special. Sure mate, we hope you continue your winning streak in this manner.

Andrew Symmonds was out thrice in the first innings and was not given out and went onto score 161 runs, He took the wicket of Dravid when latter wasn’t out. And Symmonds was given the Man of the Match for his effort. Whose effort may I ask?

I just loved the entire test match for the hypocrisy around the match. The same Australians who started all these mind games on the field were discussing ethics etc in the game. The Ricky Ponting indicating Ganguly was out and umpire obliging was icing on the cake. I mean what is going on Mr. Ponting? If you are doing such things, do them discretely as cameras are watching.

And the racism issue? Most know this old Aussie tactic. They should all get a PhD in the science they have dubbed as “Mental disintegration”. The media, players start targeting a key player before the series and stick to it. They put so much pressure on him to perform that the poor guy has to be really tough to give it his best.

Well, if any other team files a complaint I am ok. But Australia, give me a break. I have only one thought to this. Their Phd didn’t work against India so they decided lets do something different and filed a racist comment against Harbhajan Singh. And the refree without any evidence has slapped a ban against Harbhajan Singh. If this was followed earlier where on players’ complaint other players can be banned, I am sure most Aussies would have had a winning streak here as well.

I just hate Aussies for bringing this game to such low levels. Even West Indies was a champion team but didn’t behave that way. Infact it is still the favorite of many cricket watchers and all want them to really come back to the position they once held. Such was the spirit of their game.

What was once a gentleman’s game isn’t anymore the same. There have been champions who bring more pride to the game, but here we have a team which has brought such a bad name to the game. They call it the Aussie brand of cricket. Well if that is a brand then it isn’t cricket.

The teams should now rally and say we wouldn’t tour Australia. They shouldn’t be the only ones who have the right to not to tour Sri lanka, Pakistan etc. We should also say we would not tour Australia unless they mend their ways.

Many teams have since then picked these Aussie brand and we see many a series where mind-games are played. It is sad that it all has to come to such low levels but I don’t see how else it could have been solved. The cricket teams and administration should try and being the cricket of old asap.

Update:

1. It is just amazing to see the way the media has reacted to the events. And not just the Indian media but Aussie media. This one by Peter Roebuck says it all:

India has been dudded. No-one with the slightest enthusiasm for cricket will take the least satisfaction from the victory secured by the local team in an SCG Test match that entertained spectators at the ground, provided some excellent batting but left a sour taste in the mouth. It was match that will have been relished only by rabid nationalists and others for whom victory and vengeance are the sole reasons for playing sport. Truth to tell the last day was as bad as the first. It was a rotten contest that singularly failed to elevate the spirit.

2. Despite all this Ricky Ponting continues to defend him and his team. He thinks that relations have been cordial between the teams and is amazed by the buzz around this match. This time I am surprised.

3. Peter English rightly tells Ponting to open his eyes and understand the problems he has created. Roebuck even says Ponting should be asked to go. Meanwhile, Prem Panicker points how Mike Procter put a ban on Rashid Latif for appealing for appealing for what wasn’t a catch.

4. Allan Border and Steve Waugh defend Aussie behavior sayingit is cultural differences which have led to the problems. I really do not understand this. A bad behavior is bad, by calling it “Australian way” doesn’t mean it would become acceptable. If monkey is unacceptable to Aussies then talking about one’s wives and girlfriends aren’t exactly fun or kind words.

I have always thought that the way the game was moving, we are sure to see some big problems in future, which has happened now. Efforts should be made and Aussies be reminded that no one would play with them if they don’t improve. If that means to change their “cultural traits” be it.

5. The grief is so much in India that leading Business dailies have mentioned it in their editorial sections: ET ( I think they shouldn’t play unless issues are addressed), BS (I agree mostly to what it says)

6. Also read this funny piece on Symonds.

Assorted Links

1. Mostly Economics Blog is the second best South-Asian blog according to this list. Not bad considering the best is Ajay Shah’s Blog. New Economist also points to the list.

 

2.WSJ Blog discusses whether recession is just a matter of semantics? Meanwhile unemployment figures crossed the recession threshold. Another articlesuggests that subprime not as severe as S& L crisis.

 

3. Greg Mankiw congratulates Raj Chetty

 

4. Rodrik on political economy, he points to a paper which addresses whether trade leads to lower wages and higher inequality.

 

5. New Economist on the recession.

 

6. Econbrowser discusses weakening economy.

 

7. Ajay Shah discusses whether fiscal policy should be used for stability.

 

8. TTR points tosubprime losses being exaggerated.