Archive for February 25th, 2010

Economic Survey 2009-10…not impressive at all

February 25, 2010

A lot was expected from this year’s Economic Survey. It was expected to be simpler to read and more analytical. The size (number of pages) was expected to decline  just like what RBI did. There was a new Chief Economic Adviser to Ministry of Finance – Mr Kaushik Bas) (Cornell University) – who was expected to drive some change.

The final outcome has been disappointing. It is the same style with more and more tables and data. It is not even organised properly. Nearly 294 pages report with not much value addition. One can read RBI’s quarterly survey which is much shorter and provides the same kind of analysis.

How did inflation targeting economies fare in this crisis?

February 25, 2010

Filho Carvalho and E. Irineu of IMF evaluate performance of Inflation targeting economies vs non-inflation targeting economies in this crisis. 

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First J-PAL Bihar Development Conference

February 25, 2010

This is exciting. MIT’s Poverty Action Lab conducted its first conference for Bihar’s development. They shared findings of the research work on various programs conducted in different Indian states with the politicians of Bihar.

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Behavioral economics lessons for marketers

February 25, 2010

Ned Welch of Mckinsey provides 4 lessons (free subscription required) from behavioral economics for marketers.

Long before behavioral economics had a name, marketers were using it. “Three for the price of two” offers and extended-payment layaway plans became widespread because they worked—not because marketers had run scientific studies showing that people prefer a supposedly free incentive to an equivalent price discount or that people often behave irrationally when thinking about future consequences. Yet despite marketing’s inadvertent leadership in using principles of behavioral economics, few companies use them in a systematic way. In this article, we highlight four practical techniques that should be part of every marketer’s tool kit. 

This is so true. I think one field where behavioral economics can contribute extensively is marketing. It is a natural fit. But we don’t see many examples.

What are the lessons?

1. Make a product’s cost less painful
2. Harness the power of a default option
3. Don’t overwhelm consumers with choice
4. Position your preferred option carefully

Read the article for more details. Nicely put.

Robinhood tax!!

February 25, 2010

Dani Rodrik points to this tax on a very rare blog post – Robinhood tax. It is an initiative started by many organisations that work to reduce poverty in the UK and overseas, and campaign to tackle climate change.

They plan to raise funds for poverty and climate change actions by taxing financial firms:

How it works

The Robin Hood Tax is a tiny tax on bankers that would raise billions to tackle poverty and climate change, at home and abroad.

By taking an average of 0.05% from speculative banking transactions, hundreds of billions of pounds would be raised every year.

That’s easily enough to stop cuts in crucial public services in the UK, and to help fight global poverty and climate change.

Why now?

Because of the financial crisis, frontline services at home – like the NHS and our schools – are under fire.

At the same time, poor communities and the environment are being hit hard – as aid and green budgets are slashed by rich countries.

So it’s time for the people who caused this mess to pay to clean it up.

Who’s in?

Gordon Brown, Angela Merkel (the German Chancellor) and Nicolas Sarkozy (the French President) have all spoken out in support of a tax on financial transactions.

Plenty of business bigwigs are on-board too. Like Lord Turner (from the Financial Services Authority), George Soros (the philanthropist) and Warren Buffet (US businessman extraordinaire). And then there are the hundreds of economists who have backed the idea, too.

This isn’t some crazy pipedream. It’s a simple and brilliant idea which transcends party politics and which – with your support – can become a reality.

Hmmm. Lord Turner’s initial idea has found many takers in UK.

I like the name Robinhood tax. Like Robinhood who passed the riches to poor, the tax plans to do the same. Actually because of the name and the broad idea, it might be pushed by politicians and the public as well. As Blinder says in this superb piece for economists advising governments – Getting a good name for a proposal/reform is  as critical as the proposal/reform itself. 

I was also thinking about the Obama’s proposal to seperate commecial banking from speculative finance. By calling it Volcker rule, it could go either way. Some politicians/economists might associate the proposal as a very good one as it has the name of Paul Volcker who is highly respected. Some might not as they may not like Volcker. Atleastb the financial lobby does not like him. You know it can go eitherway. But with something like a Robinhood tax…you make an impact immediately.

Addendum:

Rodrik has not been blogging for a while now. He says somethings suddenly ignite his urge to blog.  Well it is a real loss for not getting to read his blogposts regularly. Hope he gets ignited more frequently.


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