Volcker does not understand the monetary policy of today…

November 14, 2014

Well, not many do either barring those who seem to be making the policy.

WSJ Blog has these comments by Paul Volcker over the monetary policy at today. He does not really get it:

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Why Keynes is important today?

November 14, 2014

Eco Historians Peter Temin and David Vines have this article.

There is huge animosity to fiscal stimulus today based on Ricardian equivalence. The authors show how Keynes faced a similar situation in 1930s:

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How academics can engage with policymakers?

November 14, 2014

This blog has has written in the past on the need for policymakers to engage with academicians.

Professor Hugh Lauder of University of Bath has this excellent article on the same:

As academics face increased pressure to prove the impact that their research is having on the wider world, universities are considering how they can communicate more effectively with policymakers.

There are fundamental problems that confront the relationship between academics and politicians. The rules, incentives and institutional architectures that distinguish the academic field are different from those of the policy landscape.

Policymakers often have relatively tight timeframes when compared to academics: they frequently want short, clearly written synopses of research that can throw light on their policy problems.

In contrast, academics are driven by the need to secure grants and get published in high quality journals.Their research may take five years or more – the length of a parliament. Having been trained to think carefully and at length about the problems they confront, they find responding to the more immediate demands of policymakers a challenge. How can these difficulties be overcome?

Politicians could better engage with academics at the point when they start to think about manifestos; embedding academic knowledge into the policy process from the beginning. In order to develop such agendas, universities need to foster new channels of engagement with policymakers. Policymakers could have an increasing presence on our campuses to develop the questions that are key to their policy concerns.

So what should be done? Both should meet and discuss often:

The onus lies not just with policymakers visiting academic institutions. There is also the opportunity to get more academics directly in front of policymakers, be it through presenting to all-party groups, being involved in calls for evidence, and presenting to select committees. However, the processes for being invited to present are far from transparent, limiting the opportunity for fair academic representation.

Communicating with policy think tanks is also beneficial – this is something we’ve tried to do here at Bath with the appointment of our new advisory board that brings policymakers, think tanks and academics together. We hope that university policy institutes can act as a bridge, developing links between the worlds of academia and policy.

There are occasions when it takes the policy community time to take in the implications of research.

My own work, with Phillip Brown, on the future of graduate job opportunities and earnings was based on a study of the implications of the emerging global labour market for many graduate jobs. It was not an optimistic picture we were painting; British graduates now have to face competition from their counterparts across the globe who can often work at a fraction of the price of our graduates.

Younger policy wonks from across the political spectrum quickly expressed interest but it took some time before senior policymakers took note. In part, this may have been because the research challenged official estimates of the returns to graduates. It’s not, however, the role of academics to serve existing policy agendas, important as they might be. It may take time or a change of government for such research to surface in policy agendas: it is a question of dialogue and maintaining good relationships.

Well, this will be a win-win. Policymakers get access to academic understanding and acads get real world perspectives.  Academicians will then pass on the info to the students who will gain immensely in the exercise.  Research students can do thesis on policy related issues and be a part of the real world.

In India’s context. it is even more amazing that some academics do become policymakers but stop engaging with Indian academics thereafter. They are far more comfortable in engaging with academia abroad but are highly reluctant to do the same with academia in India. It is like best of both the worlds for them. Academics abroad and policymaking in India. Indian economic policy will only improve if there is a healthy relationship between policymaking and academia. Both have to look for ways to reach out to each other..

Does corporate ownership of media lead to conflict of interest?

November 13, 2014

Recently there is increased spotlight and criticism due to increasing corporate takeover of the media. People feel over a period of time. much of the news is going to be managed and presented to suit corporate interests. We are seeing it partly as the media has gone completely berserk over anything that the government does. It has just lost its basic element of journalism.

Anyways, this paper shows that conflict of interest is rather limited. In a really innovative way the authors figure the conflict of interest. They look at movies which are produced by these big media houses and movie reviews in newspapers owned by the same media houses. Ideally, we should think that these reviews shall be biased. But the authors figure no such thing:

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How Pakistan created its Unique identity system?

November 13, 2014

I was completely unaware of this thing called NADRA Card (National Database and Registration Authority) which serves as an identity card for Pakistan people.

This speech by Tariq Malik, former chairman, National Database and Registration Authority is quite a fascinating one. He explains how this idea of unique identity for Pakistan people came about and was then implemented in a vigorous fashion. There are not many poisitive stories from Pakistan but this one looks like quite a successful one. How the identity card eventually got integrated with all kinds of services and also helped in conducting a transparent election in 2013 is quite a story.

There are questions raised on this identity system but the speech is much more than that. It also explains how one goes around developing a good public organisation in countries like Pakistan.

Even more interesting is how NADRA is now doing similar/related projects in other countries as well. So, the quality of work is accepted at an international level as well.

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Is Your Impact Evaluation Asking Questions That Matter? A Four Part Smell Test

November 13, 2014

Prof Lant Pritchett gives his 4 smell tests to figure whether impact evaluators are asking the right questions..

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How restaurants in Lima and Copenhagen became best in the world..

November 13, 2014

Interesting piece in HBSWK.

It is all about the vision of the founder and persistent maintenance of high quality:

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The Economics of Tipping

November 12, 2014

Kenneth A. Zahringer  has this interesting article on the topic.

Why do we tip?

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The rising complexity of the FOMC statement

November 12, 2014

Rubén Hernández-Murillo and Hannah Shell have this interesting graph which shows how complexity of FOMC statement has been rising.

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Why the Allies won World War I?

November 12, 2014

2014 celebrates many anniversaries. WW-I s one of them.

Stephen Broadberry says the initial resources mattered The Allies were more developed and hence could raise more resources compared to the central powers:

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Book Review – The travels of a T-Shirt in the global economy..

November 11, 2014

I mean one can just put all trade books/papers away and just read this book.

Prof. Pietra Rivoli of Georgetown Univ has written a terrific book which needs to be widely read.  Stumbling on the book was sheer luck as I have hardy seen the book being mentioned anywhere. As one of the reviewer says Rivoli has achieved the nearly impossible. Another one calls it part travelogue, part history and part economics.

Prof. Rivoli builds this really fascinating story of how T-shirts are made. For this she goes into history of cotton. On this she realises how US has been the leading cotton producer for around 200 years now. This is surprising by itself considering how other countries are nowhere close to US. In other industries we have seen either massive or atleast some changes. But in case of raw cotton, nothing. US remains the undisputed leader. Questioning this why takes her to history of cotton, history of industrial revolution, history & geography of US and all kinds of other histories. The reason is how US had the basic ecosystem for allowing agri business to flourush – prop rights and so on. And in recent times, the dominance is there due to active govt support in form of subsidies and trade barriers. So first half (or more) is actually abt efficeny of US industry and latter half due to policy. So a mixed story here..

Then she moves on to how this cotton makes its way to China where cotton is processed and all kinds of garments are made inclusing T-shirts. Before China there were other countries which dominated this space like Uk, Japan, Korea etc. Each one gave way to other as labor costs were much lower in other countries. This bit of trade history is fascinating by itself.

Then how this T-shirt comes to US. This leads to other kind of history which is to deal with trade restrictions. How countries all through history have been uncomfortable with some or the other low cost producer is nicely told as well. This leads to lobbying and all kinds of ways to restrict and push trade. Infact, the competition could be within countries too. In a nice tale, how British woollen industry seeing competition from cotton industry lobbied and forced all Brits to leave cotton and continue to wear itching cotton is quite a story.

In all these stories, China has obviously come to the centrestage., The rise of China into all manufacturing industries including T-shirts needs to be understood as well.

The book finally has this amazing and ignored story of recycling of clothes.In detail, author explains how rich Americans dump their worn out T-shirts which are then sorted and sold to poor countries for a fraction of a price. This makes the industry  highly recyclable as well. The author adds the above trade is highly political and has become restrictive. It is in this recycling category, we actually see markets working really well. The government hardly intervenes to regulate this market. But this has led to questions of morality. Should Africans wear thrown away clothes of Americans? How Africans chose those clothes which have certain deo etc kind of fragrance. This shows the shirt was indeed worn by Americans and not really recycled again in Africa. This offends some people who think Africans deserve better. The other side argues better to have some clothes than nothing at all.

The sheer coverage of issues and yet be so simple is really the hallmark of this book. A story which will appeal to all kinds of people.  Cannot get better than this.

Must read..

Political economy of Bihar’s development..

November 11, 2014

In UP we continue to get news whuch we have been hearing for decades now. And then there is its neighbor Bihar which also had simialr stories for a while but is now trying its best to change.

IdeasforIndia has a nice interview of Anjani Kumar Singh, Bihar’s Secretary.

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The govt could take a look at Inter-State Council to replace Plan Com…

November 11, 2014
Jessica Seddon  and T. N. Srinivasan make their case for Inter-state council replacing Plan Com.
Points well taken. But seeing how things go about in India better to just close Plan Com and not replace it with any other entity. In all likelihood any new entity will become like Plan Com, such is the legacy of that agency.
Instead of a centralised unit, the govt should push for more decentralisation and well managed research agencies at state/district level. These agencies will be really useful as we will get regular updates on affairs at a more decentralised level. We have enough agencies giving us information on what is happening at the centre but hardly anything at state level..

‘Children of the Wall’: Outcomes for kids born in a crisis

November 11, 2014

Timely piece by Arnaud Chevalier and Olivier Marie. Anything on Berlin Wall is likely to be read at this hour.

In this article, authirs show how children born during the fall are facing several issues:

Children born in crises face different initial conditions. Data on children born in East Germany just after the Berlin Wall came down confirms that this corresponds to worse adult outcomes. ‘Children of the Wall’ have 40% higher arrest rates, are 33% more likely to have repeated a grade by age 12, and are 9% more likely to have been put into a lower educational track. This column argues that these negative outcomes can be explained by the lower average parenting skills of those who decided to have children during a period of high economic uncertainty.

The authors get hold of a survey to tease these relationships:

To explore if these negative outcomes are driven by negative parental characteristics, we make use of very detailed survey data from the German Socio Economic Panel (SOEP) and the Deutsches JungedInstitut survey (DJI). Women who gave birth in East Germany just after the end of the communist regime were on average younger, less educated, less likely to be in a relationship, and less economically active.

Importantly, they also provided less educational input to their children even if they were not poorer. The Children of the Wall also rated their relationships with their mothers and the quality of parental support they received by age 17 much less favourably than their peers. Both these children and their mothers were also far more risky individuals compared with individuals who did not give birth (or were not born) in East Germany between August 1990 and December 1993.

While these results are in line with negative parental selection, they could also be driven by timing-of-birth effects. Due to the economic turmoil prevalent at the time, these children may have experienced higher levels of maternal stress in utero and during early childhood, which may have shaped their future behaviour.

To assess this hypothesis, we examine the same set of outcomes for the older siblings of the Children of the Wall who were born in the non-uncertain times of East German communism. They also similarly report having a poor relationship with their mothers, lower educational attainment, and are more risk-taking individuals. We thus reject the possibility that the Children of the Wall have worse outcomes due to being born in ‘bad times’ and instead conclude that the negative outcomes observed for this cohort can be explained by the lower average parenting skills of those who decided to have children during a period of high economic uncertainty.

A possible reason for this negative parental selection is that the fertility decision of these women did not react as strongly to changes in the economic environment. Indeed, further analysis of the SOEP reveals that less educated mothers were far less likely than more educated ones to reduce their fertility when they perceived a bad economic environment.

:-) Importance of parenting..

Hey French people, send your crops here..

November 10, 2014

Atlantic has this news over how French farmers became angry and destroyed so much crop. Reason falling prices of their crops:

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The Free Market (and all that) did not bring down the Berlin Wall

November 10, 2014

There are certain narratives which are never questioned. One such narrative is rise of free market thinking in the last 30 years or so. Now, this itself was not new as before great depression we had similar thinking. But then you know our memories are short and most of us are ignorant of history.

After fall of Berlin Wall (stunning picture here) we are lectured through numerous articles and books that how that phase signalled the end of communism and rise of American brand of capitalism.In 25 years of celebrating Berlin Wall we continue to do the same. Some experts by force point whether certain leaders have learnt the free market lessons from the fall, least bothered whether  the leader knows anything about the event. They actually even add that yes these lessons have been learnt!

The reality seems to be lot different. This FP piece explains what really happened. What was just a mere effect is now touted as cause:

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From minimum government, maximum governance to maximum government, minimum governance?

November 10, 2014

What times we are living in really. The sheer hype in which India is placed today is mind-blowing to say the least.

Just a few months back, when the new government came in there was huge focus on the slogan — Minimum Government, maximum governance. Our media took on the message big time and started suggesting how there will be really low number of ministers and there will be super ministries. The initial Ministry size was 45 and it seemed small governments is indeed going to be the case.

Just after six months the size has been expanded to 66 and guess what the media says? The Government inducts go-getters and vote-getters! Some say it is still leaner  than UPA. Well wait for some more time Sirs. When UPA expanded the cabinet, it was all criticised for being too many etc.

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Economics of inclusion..

November 10, 2014

Prof Hausmann again. This time he writes on how we can make inclusive growth count.

The central idea is to get the basic infra going:

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Influencing household inflation expectations…(comparing US with Argentina)

November 10, 2014

Alberto Cavallo, Guillermo Crucas and Ricardo Perez-Truglia have this post in voxeu on the topic.

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Sugarcane, Banks and UP Government…interesting case of political economy

November 7, 2014

Bhupesh Bhandari of BS has an informative article on the topic. Linking sugarcane crop to banks and government is quite a read.

Broadly the story is same whenever government interferes. Either prices are kept high or low leading to problems in market mechansims. As banks are usually the second party, eventually they get in trouble as well. In this case, prices are kept higher  for mills to benefit the farmers:

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