Archive for February 9th, 2011

Learning economics by shovelling snow off the roof

February 9, 2011

Seth Gitter asks this question on his blog- Why Greg Mankiw shovels snow off of his roof?

Greg Mankiw is the author of one of the leading intro to econ text books, and like any intro to econ book he discussed comparative advantage. In short comparative advantage shows you can be better off if you do what you’re best at. So instead of shoveling snow off of his roof, Mankiw should spend an extra hour consulting and make $500 and pay someone $100 to shovel snow off of his roof. Yet Mankiw last week was up on his roof shoveling snow, despite his worries he might fall off an injure himself (he wasn’t worried about dieing as much since he had life and not disability insurance)

Few people hire someone to do everything for them, most people cook their own food, wash their own clothes, and spend time with their children even though many people could earn more working extra. The basic theory doesn’t include a few things.

1. People on salary might not be able to earn a few extra dollars to make trade offs.
2. After a certain number of hours working is less fun, even things like being an economist. We do get utility from cooking our own dinner, so at some point we might like to do things ourselves
3. Transaction cost are high, I could hire someone to do my laundry, but either I would have to take it somewhere, a pain, or pay more to get it picked up and delivered.

But I think Mankiw still would have not been influenced by 1-3. In short, I think Mankiw just couldn’t find anyone to hire. He was worried about his roof collapsing and in the snow storm most crews were over booked (although they should probably raise their price then) or might not get to the Mankiw residence in time.

Mankiw responds and agrees to Gitter. And adds it is again snowing in Boston and asks:

Anyone know of any job openings for middle-aged economists in warm climates?  Maui would be nice.

Superb stuff.

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UK links

February 9, 2011
  • Robert Peston points UK Chancellor has implemented a higher bank levy from 2011 itself.

    Earlier it was at 0.5% of bank’s wholesale finance amount for 2011  and 0.75% from 2012 onwards. It has been made 0.75% from 2011 itself leading to a rise in total levy by GBP 150 mn to GBP 473 mn.

  • Stephanie Flanders points to BoE dilemma. If BoE raises rates tomorrow, would it signal strong economy and stronger pound? Not at all as economy is still weak. So what does it do?

Microfinance firms seen as Ponzi schemes?

February 9, 2011

IFMR blog points to some furious comments on CGDEV blog where people have said microfinance firms are like Ponzi schemes. IFMR blog defends saying nothing of this sort is happening.

What a time for microfinance firms. From becoming an idea worthy of Nobel peace prize and tons of accolades to being seen as a ponzi scheme even by some. Microfinance sector has lost a lot of face and needs serious brand rebuilding.

This blog always thought the whole idea was overhyped and glamorised a bit too much. THis is how development economics has been for so many years. You pick one idea, hype it and stretch it to an extreme. And then comes the happy realisation that all was not true. Development and getting out pf poverty is much more complex than thought to be….

Celebrating 75 years of Keynes’ General Theory

February 9, 2011

In Feb-11, Keynes published The General Theory of Employment, Interest and Money.

Matthew Luzzetti and Lee Ohanian have written a paper saying the book was all about being in the right place at the right time. They present a summary in voxeu. They say why General Theory became popular in 1930s and then declined in 1980s.  

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South Africa faces similar poor public service issues

February 9, 2011

A followup to the post on PAL opening office in SAfrica (SA).

I read this superb speech from Trevor Manuel welcoming JPAL in SA. Manuel is  Minister in the Presidency in charge of the National Planning Commission. Some key points:

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What is the Cure of India’s Inflation Problem?

February 9, 2011

This is the title of my interview at daulutguru.com (though the interview covers many other topics). Daulutguru is a web-based forum for finance and economics students.

Also check the list of previous interviewees. Some interesting names there 🙂


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