Archive for January 27th, 2009

Public Policy for economists

January 27, 2009

RBI’s ex-Governor Dr Reddy’s humor is well known (see this and this for just a few amongst the many). I came across this speech which provides loads of food on thought for economists  involved in public policy. (It also tells me to try and read his previous speeches on various subjects). He details the challenges an economist faces in public policy with his trademark humor.

He begins like this:

The question is : Is there life without the economist? ….Since everyone has a view on economic matters, the subject looks deceptively simple in most eyes and is thus prone to much contention. Add to this the fact that in a subject which concerns everyone so intimately and which is almost always in the headlines, the temptation for the economist to play to the gallery and to seek the limelight by simplification, exaggeration and even glamorisation is not easy to resist. But with all that, it is difficult to imagine life without the economist.

But then, life with the economist is not very simple either. Economics is perhaps the only field in which two people can share a Nobel Prize for having divergent viewpoints – to cite Myrdal and Hayek. Often, people hold that economics is as definitive a science as astrology is, and the more charitable of them place an economist between a physicist and a sociologist. For example, in the Preface to his book Peddling prosperity: Economic Sense and Nonsense in the Age of Diminished Expectations (1944), Paul Krugman says that an Indian born economist once explained his personal theory of reincarnation to his graduate economics class. If you are a good economist, a virtuous economist, he said, you are reborn as a physicist. But if you are an evil, wicked economist, you are reborn as a sociologist .

🙂 I think that Paul Krugman joke was mentioned by Avinash Dixit, I read it somewhere not sure

Actually the speech is not as well organised as I would have liked it to be. It has many ideas so am just leaving a few quotes from the text.  Actually the entire speech is worth quoting. It is amazing how he mixes humor on a relatively serious topic.


RBI’s third quarter review of monetary policy – status quo

January 27, 2009

RBI has kept all the rates unchanged in its monetary policy

  • The repo rate under the LAF has been kept unchanged at 5.5 per cent.
  • The reverse repo rate under the LAF has been kept unchanged at 4.0 per cent.
  • The cash reserve ratio (CRR) of scheduled banks has been kept unchanged at 5.0 per cent of NDTL

The market was pretty much divided on the rate cuts, with half saying yes rate cuts and half saying no to rate cuts.

Anyways, what is actually better is this time’s statement. It is just about 35 pages which is a relief from the 60-70 pages statement.

However, the macroeconomic and monetary policy report released yesterday is still about 114 pages, similar to previous reports. In a way it is good as we hardly get any report from official sources on Indian economy.  But it also means loads of reading.


1. As I complain, RBI has released a short statement (all of 5 pages)  summarising its monetary policy stance.

2. I have analysed the credit market situation in India

Assorted Links

January 27, 2009

1. MR points to a new blog – William Easterly.

2. Krugman on liquidity traps

3. WSJ Blog on job losses at Caterpillar

4. Buiter says when all fails blame China. 🙂

5. Mankiw points to list of economists not agreeing to fiscal stimulus

6. Rodrik on fiscal stmulus debate

7. Finprof on CDS

8. Roth pointsto a paper which discusses UK’s TARP from auction theory perspective

9. CTB points to a nice debate (full of research) on banks and state

10. ASB pointstrade protectionism rising in India

11. TTR points to shameless financial sector

12. IDB points to an interesting study which says opening bank accounts does not lead to financial inclusion.

%d bloggers like this: