Assorted Links

1. Dani Rodrik posts another thought on why trade does not necessarily lead to growth (reduction in poverty etc). This time he goes a step further and presents available literature (read papers) done by him and others saying the benefits of trade are not as large as people as they are made out to be.

Rodrik then looks at one of the papers by Bradford, Grieco, and Hufbauer (subscription needed) that show trade is beneficial and says the models are not robust enough and more so have used wrong numbers which have been picked up from study. Sample this-

The paper also calculates benefits from regional trade agreement and for this it takes a formula from another paper as (exp(1.17)-1»)222%. But BGH use the figure as 118%.

On reading the comments on the pots I came across this fact:
(exp(1.17)-1) ~=222% but a simple misreading could result in
exp(1.17 – 1) ~=118% !!

So we have a classic problem of measurement here. Rodrik begins the article like this:

“Many many years ago when I was a recently minted assistant professor, I heard Gary Hufbauer tell an anecdote at a conference on international trade. A government economist is called in by his superior, who tells him “Look, I have to make a case for this policy in front of Congress, and I need a number real bad.” The economist responds, “well, I haven’t done a proper analysis, so I can give you a real bad number.” Perhaps it was a true story based on Gary’s own government experience. “

This clearly summarises the state of problems.

2. Buffet says index funds are better!

3. Jeremy Siegel’s view on stocks.

4. Josh Lerner’s view on Reverse LBOs

5. Much of the widening gap in incomes reflects the rising payoff for a college education and other skills. Becker and Murphy argue that it is beneficial and desirable.

I don’t really agree to the view point though. It may be ok for a developed/rich economy but may not be the same in a developing economy. As the article is on US, I would like to see how can emerging economies benefit, particularly India and China with huge populations.

6. Crony Capitalism is alive and kicking in India. On one hand we talk about MIFC and on the other we witness this

“Records investigated by The Sunday Express show that the Government has crammed at least 33 of the 37 positions for independent directors (called “non-official” directors, in banking parlance) with men and women known for their allegiance to the Congress party: at least five secretaries of the All India Congress Committee (AICC), a vice-president and a secretary of the All India Mahila Congress (AIMC) and the Sewa Dal — politicians who have lost elections or loyalists to whom the party wishes to dole out a favour. “

Read some reviews here and here

Thanks to Ajay Shah for 6, Finance Professor for 2, Greg Mankiw for 3 and Economist.com for 5.

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