Archive for the ‘Blogs to Read’ Category

How US resolved its first debt ceiling crisis

March 11, 2013

A fascinating post by Kenneth Garbade of NY Fed.  It is written on the style of Lords of Finance.

In the second half of 1953, the United States, for the first time, risked exceeding the statutory limit on Treasury debt. How did Congress, the White House, and Treasury officials deal with the looming crisis? As related in this post, they responded by deferring and reducing expenditures, by monetizing “free” gold that remained from the devaluation of the dollar in 1934, and ultimately by raising the debt ceiling.

Well, just like most history episodes particularly econ history ones, one can’t help but compare the eerie similarities to today’s US debt ceiling crisis. The debt ceiling issue keeps coming back to hit the global markets as US keeps piling on debt. And how US resolves it each time just in nick of time should be fairly similar to how they resolved it way back in 1953.

What is most amusing is how fannie Mae rescued the government on debt ceiling crisis in 1954:

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Latvia’s Parliament votes for the Euro….

February 25, 2013

Anders Aslund of PIIE points that Latvia’s Parliament has voted for joining the Euro:

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Making a strategy to get an “A” despite scoring a zero in the exam..(insights from Game Theory)

February 18, 2013

Good friend Niranjan  Rajadhyaksha pointed this  super post by Catherine Rampell (on NYT Economix Blog).

She points how  computer science students (not economics) at Johns Hopkins University gamed the grading system. They managed to secure an A despite all scoring zero:

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When the Bard met the Fed…

February 11, 2013

A nice post by Mary Tao connecting Shakespeare and Fed..

How an economist breaks from his girl-friend..

February 8, 2013

Clearly one of the best readings for a while (HT: Mankiw).  Should make it straight to all the micro classes where figuring things like utility etc never make sense.

Susan, we need to talk. I’ve been doing a lot of thinking lately. About us. I really like you, but ever since we met in that econ class in college I knew there was something missing from how I felt: quantitative reasoning. We can say we love each other all we want, but I just can’t trust it without the data. And after performing an in-depth cost-benefit analysis of our relationship, I just don’t think this is working out.

Please know that this decision was not rash. In fact, it was anything but—it was completely devoid of emotion. I just made a series of quantitative calculations, culled from available OECD data on comparable families and conservative estimates of future likelihoods. I then assigned weights to various “feelings” based on importance, as judged by the relevant scholarly literature. From this, it was easy to determine that given all of the options available, the winning decision on both cost-effectiveness and comparative-effectiveness grounds was to see other people.

Lol all the way..Brilliant take on applying economic principles on human relationships…

Happy New Year to all and Mostly Economics Annual Report -2012

December 31, 2012

Wishing all the visitors of ME Blog a very happy new year! Have a great year ahead.

WordPress has generated Annual report 2012 of the Mostly Economics blog (just like it did in 2011).

This year the total blog views was about 350,000 lower than 360,000 views seen last year:

 

About 55,000 tourists visit Liechtenstein every year. This blog was viewed about 350,000 times in 2012. If it were Liechtenstein, it would take about 6 years for that many people to see it. Your blog had more visits than a small country in Europe!

In 2012, there were 721 new posts, growing the total archive of this blog to 4,157 posts.

In 2011, there were more new posts  – 756 . However, both years have been near similar with few things here and there.

The most popular post that day was Temasek and Singapore Puzzle – Is it another Madoff crisis in making?. The popular search strings that led to the blog were  inclusive growth, hayek vs keynes,mostly economics, impossible trinity, and effective revenue deficit. Visitors came from 197 countries however one can never be sure of the origin in the internet era.

Thanks a ton people once again for visiting my blog. Suggestions to improve and make the blog a better one are always welcome..

 

Does the theory of comparative advantage apply to dolphins?

December 5, 2012

What a pointer from Tyler Cowen.

On his blog MR he points that Dolphins are losing their comparative advantage and utility to US Navy:

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Acemoglu/Robinson reply to Jeff Sachs

November 22, 2012

This blog had pointed to Jeff Sachs’ review of Why Nations Fail.

A/R duo respond to the criticism in their typical style.

Several people asked us why we haven’t responded to Jeffrey Sachs’s review of Why Nations Fail in Foreign Affairs. Well the answer was sort of in-between the lines in our response to Arvind Subramanian review (the original review is here and our response is here): we said that thoughtful reviews deserve thoughtful answers. What about not-so-thoughtful ones?

Be that as it may. We cave in to pressure.

Sachs charges that we are “simplistic” and our argument “contains a number of conceptual shortcomings”. But in each case, these are either just stated (and are wrong) or he is criticizing something we haven’t said. The Sachs strategy seems to be to throw a lot of mud, hoping that some of it would stick — did we say that we didn’t think it was quite thoughtful?

Let’s go through each one of his points in turn.

They look at a total eleven criticisms made by Sachs. Fabulous stuff.

Thinking of coming to Canada to do an MA in Economics?..

November 7, 2012

A nice post by Prof.  of Worthwhile Canadian Blog.

She give some ideas and tips to those who want to pursue MA in economics in Canada. In the comments she explains the difference in Canada MA vs US MA:

In the US, students go from BA to the PhD program, right?. An MA is a consolation prize they give you if you drop out of the PhD after a year or two, right? In Canada the MA is a real degree. You go from BA to MA, then some students continue on to the PhD.

 

Acemoglu/Robinson on India and China puzzle…(reply to Arvind Subramanian)

November 5, 2012

One should have expected a reply though was amazingly quick. I had pointed to Subramanian’s review of the development tome Why nations fail. In this Subramanian said India and CHina are a puzzle in this entire development exercise. India has inclusive political institutions but growth remains poor. China has extractive political institutions but has a superb growth record in the last 30 years. How does this fit in with WNF claims that inclusive political instis lead to economic development?

The authors have  replied to the criticism.

Thoughtful reviews deserve some (hopefully equally thoughtful) responses. Subramanian is certainly right to draw attention to China and India. But perhaps his review is too brief to have done justice to our theory and its implications on these topics — so much so that he actually omits any mention of the extensive discussion of China and extractive growth in the book.

They start discussing China but I start from India. There have been couple of replies from the duo on China’s puzzle but nothing at all on India.

We go to pains in the book to emphasize that electoral democracy isn’t the same as inclusive political institutions. This becomes particularly binding when it comes to India. India has been democratic since its independence, but in the same way that regular elections since 1929 don’t make Mexico under PRI control an inclusive society, Congress-dominated democratic politics of India doesn’t make India inclusive. Perhaps it’s then no surprise that major economic reforms in India started when the Congress Party faced serious political competition. In fact, the quality of democracy in India remains very low.

Politics has not only been  dominated by the Congress party but continues to be highly patrimonial, and as we have been discussing recently, this sort of patrimonialism militates against the provision of public goods. Recent research by Toke Aidt, Miriam Golden and Devesh Tiwari (“Incumbents and Criminals in the Indian National Legislature”) shows there are other very problematic aspects of the Indian democratic system: a quarter of the members of the Lok Sabha, the Indian legislature, have faced criminal charges, but alarmingly, such politicians are more likely to be re-elected than those without criminal charges, reflecting the fact that Indian democracy is far from being an inclusive ideal.

What’s more, blaming India’s poverty on its democratic recent past, as Subramanian seems to do, is probably more than a little unfair. After all, India has been growing since independence even if the growth rate was disappointing for the first three decades, and it seems to have largely stagnated during British colonialism as Tirthankar Roy shows in The Economic History of India, 1857-1947.

Superb stuff..What most have been saying for a while. Dejure inclusive institutions do not mean de fecto inclusive developments.

Moreover, why so little on India?

In contrast to China, there is much less in Why Nations Fail about India, mostly because of space limitations. Be that as it may, Subramanian’s summary that our theory suggests India should be prosperous isn’t quite right. 

Hope there is a full book on India in future..

Now on China…

First, our theory isn’t that political institutions directly determine economic prosperity. Rather, we claim that economic institutions determine economic prosperity, and explain why the link is between inclusive economic institutions and sustained economic growth — not necessarily short-run economic growth. We then argue that inclusive economic institutions can only survive in the long run if they are supported by inclusive political institutions. On the way, we provide explanations and examples for why for extended periods of time economic institutions with fairly important inclusive elements can coexist with extractive political institutions. This is all brought together under our discussion of extractive growth under the auspices of extractive political institutions (see Chapter 5).

So China story is basically a result of inclusive economic institutions. This has led to higher growth. And where  did these inclusive economic institutions emerge from? Well it is politics again and the perspective is very different:

We also noted, in contrast to the standard accounts of Chinese economic reforms, that these didn’t have their origins in some clever planning by Chinese leaders but in political struggles within the Politburo pitting Deng Xiaoping against the Gang of Four. It was once again politics — not clever planning, design or economic advice — driving economics. In fact, the recent thought-provoking book by Victor Nee and Sonja Opper,Capitalism from Below convincingly argues that early reforms were neither instituted by the party nor were they outcomes of experimentation, but resulted from the party catching up with what had been going on on the ground given the political vacuum and crisis wrought by the Cultural Revolution.

They point out that before Deng Xiaoping’s reforms, privately-led experiments with production for the market and ending collective incentives had started. For example, in Anhui province, peasant households had already dissolved communes and collectives before any reforms, and had started a land-lease system. They suggest it was this sort of development that forced the hand of Deng Xiaoping and Communist Party elites to start loosening of central planning and collectivization. Whether Nee and Opper’s interpretation is correct or not, what seems clear is that there was a radical change in economic institutions in China and most likely this resulted from a variety of political factors — rather than from Deng Xiaoping’s farsighted genius as the hagiographic biography of Deng, Deng Xiaoping, by Ezra Vogel suggests.

However for growth to be sustainable, there is a need for inclusive political institutions.

So when economic institutions take steps towards greater inclusivity — which has happened many times in history and is exactly what happened in China starting in 1978 — this can usher a rapid period of economic growth. Where political institutions come in is that inclusive economic institutions can emerge and encourage growth in the short run but cannot survive in the long run under extractive political institutions. It is for this reason that the rapid growth of China over the last three decades isn’t an exception to our theory. If China manages to continue to grow for several more decades and reach levels of income per capita comparable to those of the United States or Germany while still austerely authoritarian and politically extractive, that would be an exception to our theory. This is exactly what we argue in Chapter 15 as well as pointing out why the transition from extractive to more inclusive political institutions in China will be difficult.  

People have question how China grew despite such extractive political instis, AR duo say wait for some more years. 30 years is not as long a time for sustained growth….

Even in this blogpost, focus remains on China :-(

Incorporating behavioural economics into intermediate micro…

October 8, 2012

Prof. Frances Woolley again (earlier post here). In a superb post she points how intermediate micro and beh eco are complimentary.

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T-Mobile lessons in behavioral economics..

October 1, 2012

A superb account by Prof Matt Kahn. How he was tricked into not choosing “opt-out” and instead  remained “opt-in” and paid higher mobile bills.

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Curious tale of econ development in Abu Dhabi

September 27, 2012

Acemoglu/Robinson in their recent post:

Nestling at the Southern end of the Persian Gulf is the modern nation of the United Arab Emirates (UAE). The UAE was formed in 1971 from the amalgamation of seven different independent sheikdoms which had previously been part of a British protectorate called the Trucial States. The largest of these seven are Abu Dhabi and Dubai. Today the UAE is an oil fueled development success with astonishing urban development in Abu Dhabi and Dubai, the latter currently boasting the world’s tallest building. You can see signs of the remarkable transformation in the city state in the last 50 years in this picture.

But this was not always the case, even after the oil came on stream…

Read the post for more details..Fab as always

Linking welfare economics with behavioral economics…impossible?

September 27, 2012

A superb post from . What a blog Worthwhile Canadian Initiative is..

We keep mentioning about the interesting findings and applications of behavioral economics. However, how does one really fit the findings in other economic streams? If one brings the irrationality assumption in say Price theory, how will graphs etc change.  You get  some idea here as Prof Woolley links to welfare economics.

The case here is banning large sodas. Typically welfare economics assumes rational behavior. So banning large sodas leads to demand being higher than supply, leading to deadweight loss:

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If these are economic reforms, I’m Amitabh Bachchan…

September 26, 2012

A superb post from R. Jagannathn at FirstPost.com (HT: TGS Blog).

One could not say it any better:

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Tragedy on Honduras Charter Cities Project –Victory for Acemoglu/Robinson?

September 26, 2012

This blog was a supporter of the charter-cities project floated by Prof. Romer. It got some support from Honduras which became the first country to allow chart-cities. There were some grand plans to get the project going with things like transparency commission with people like George Akerlof, Romer, Nacy Birdsall of CGDEV etc. The region selected to develop charter-city was called REDs. The color RED got another  meaning…

There were sceptics from day one over the project which grew once Honduras was selected as the first country for experimentation.

Now, it seems Prof. Romer has resigned (HT: Gulzar) from the project at Honduras. He responded to qs asked by Prof. Cowen on his superblog:

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Economics of Stolen bicycles

September 24, 2012

A superb post on Priceonomics (HT: thebrowser.com)

It seems lots of bicycles are stolen in US. What is the economic basis for such thievery? Applying Gary Becker’s ideas, the authors say the risks to stealing bikes are very low. There is hardly any punishment for stealing bicycles in US:

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Politics and the Origins of Religious Rituals of Muslims..

September 7, 2012

A/R duo had said they will be blogging about more religions later and show much is linked to political struggles.

The latest post shows how politics led to origins and changes in Muslim rituals ..

Nothing much to say except keep bringing it on guys..

Welcoming Marginal Revolution University

September 7, 2012

Though it is all over the place by now.

However in case some have missed, Marginal Revolution Bloggers have started a Marginal Revolution University.

The first course is to start on development economics.

Great stuff.. Looking forward to it…

Why the Jews Are so Educated?

September 6, 2012

A food for thought post by Acemoglu/Robinson.

They look at several explanations offered in the past to the question:

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