Fed assembles inventory of historical materials on central banking in the United States

One could be doing a project on Federal Reserve history sitting anywhere in the world.

As Fed is gearing for celebrating its 100th anniversary next year, it is looking at providing web access to records of the Federal Reserve’s past.

Adventures (Tragedy) of Greek Drachma: From 1830s to joining Euro

Not sure why we don’t really have many papers on history of Greece economy circulating around. We are told repeatedly that Greece has a terrible economic and political history full of crises. But the empirical or historical work is rare to find.

I discovered this gem of a paper by Sophia Lazaretou of Bank of Greece. It gives history of Greek Drachma and monetary developments from the 1830s to joining Euro. She calls it adventures of Greek Drachma though on reading it you realise it is more of tragedy. And with the current experiences , even tragedy is a light term.

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Which Keynes for understanding the crisis?

I posted a paper by Carlos Zappia on how financial economics is likely to be more Keynesian  kind post crisis. His take was much of financial economics and decision theory is based on Bayesian probability. Bayesian in turn does not really model uncertainty which is core problem in financial decisions. What is instead needed is a behavioral decision theory which looks at the idea of uncertainty.

Work has started already on modeling these new paradigms. However,  none of this is new as Keynes meant the same in his animal spirits ideas. So it is going to resemble Keynesian ideas.

In another paper he expands the idea further.

Competition between Western Capitalism and State Capitalism…

A nice article by Danny Leipziger of Growth Dialogue. Growth Commission headed by Michael Spence gave way to Growth dialogue. The idea was to continue the work of GC…

The author points to these two systems of capitalism – Western and State. In first government was minimal and in second it led capitalism (ironical but true):

From BigMac Price Index to Mcwages…

Orley Ashenfelter of Princeton University in a fab paper looks at this issue of real wages. Even more interesting is his usage of wages paid at McDonalds in different countries to arrive at a kind of McWage index:

Economics Is Not Math…

Michael Edesess (a Mathematician) writes in this post.

He says econs pose as wannabe mathematicians. However, much of math is pretty well defined. In eco, math is used to define eco terms:

“Economics pretends to be mathematics, but it is not mathematics,” he says. “There is a major difference. No mathematician uses a term in a formula, or a statement of a theorem, unless that term has first been defined with excruciating precision.”

And while economists may think they’ve defined terms like “aggregate demand” or “economic growth,” Edesess suggests they talk to a mathematician. “Economists may think they’ve defined them, but they should try reading some real mathematics to see what a precise definition truly is,” he says.  “The economists, I think, leave the work of definition to be inferred from the way the terms are used in the formulas. This, to me, is weird.”

 The post is based on a longish article he wrote earlier.

Using a recent blogosphere debate between Steve Keen and Paul Krugman as a jumping off point, Edesess offers a mathematician’s insight into some of the key problems with economic theory and economic debate. The lack of precise definitions produces some distinct symptoms, as the Krugman-Keen argument shows: “The amazing thing is that, in this debate, one side or the other will present what appears to be a very simple proof that they are right – and yet the other side is not persuaded in the least.”

He traces this problem back to what he suggests is the cause: “The source of all the confusion, in my view, is the idea that if you can’t measure something and model it mathematically, it has no meaning. There is too much mathematics used and expected in economics, and too much of it is of poor quality and distorts the ideas it is meant to undergird.

If econs need to be relevant they should focus on core economics related issues. They should avoid all the math hubris they have created:

If economists want to remain relevant they have to return mathematics and the precision it offers to its proper place in the discipline. Math should be a tool that economists use, not an end goal in and of itself.  And economists must focus on addressing humanity and morals and ethical dilemmas, which lie at the heart of it all.

Well who cares..Most of this would fall on deaf ears…

Robert Johnson of INET also suggested a similar revamp of economics. Econ bashing remains one of the hot topics of the season..

MIT economists/central bankers Family Tree

I just pointed to a Bloomberg article which showed how most central banks of the world have been students of MIT.

Businessweek has a graphic which has put all this via a family tree . Paul Samuelson, Franco Modigliani, Rudi Dornbusch, Stan Fisher and  are the main guys around which the tree of current central bankers is built (Stan Fisher himself is the chief of Bank of Israel).

Trivia: Check the pics of the young guns at the end. Answers on the left lower corner…Bernanke looked quite a cowboy in 1975…and Summers is just plain unrecognizable…

Did India’s IT industry develop because of industrial policy?

Most of us believe Indian IT industry developed mainly because of absence of government intervention in its initial years. Infact some say government officials were clueless about this industry and as a result there were no policies to ruin the sector.

There is some nice debate on the point between WB econs.  Kalpana Kochhar points how Indian IT industry grew in absence of government intervention. Justin Lin disagrees. He points to a number of ways in which govt. policies  have led to promotion of the software industry.

What do others think on this super topic?

Well, if you look at it there are some similarities with the US story. Most believe US  software industry or Silicon valley is because of power of markets. However, later econs like Rodrik pointed the industry would not have existed without government investment in DARPA etc. So, the debate remains active and acrimonious in US as well..

Facebook is a corporate dictatorship…

A fab interview by Aswath Damodaran on the  Facebook IPO debacle.  (Here is another Wharton article discussing the (de)famed IPO)

He has been dissecting the FB valuation for a while now on his super blog (each post is like a mini paper with so much to understand). As per him the value of FB was $29 per share and was obviously over-valued in the IPO. (He says this wasn’t valued but priced).

In this interview he pretty much discusses all he has been saying on FB IPO:

India’s Slowdown May Have a Silver Lining??

IMF econs – Roberto Guimarães and Laura Papi – summarise the state of Indian economy.

They say Indian eco slowdown mainly because of investments which is pretty much known:

Krugman interviews

There are three  of them.

One in FT and the second in Spiegel. Promoting his book and talking about failure of austerity in Europe.

Here is some nice stuff from FT:

Politics of India’s Capital Market Reform…

John Echeverri-Gent of Virginia Univ (Politics Dept, is an India political eco expert) writes this interesting paper.

He ponders over this q on why India’s equity market developed so much but corporate bond markets still remains weak:

US States with better education, report lower unemployment

Edward Glaesar seldom disappoints. His writing style is just amazing.

In this new piece. he looks at state wise unemployment and analyses the reasons for differences.

How would Ronald Coase solve the monkey externality in Delhi?

An amazing post by Matt Kahn of Greenomcis Blog.

He does not answer the question but gives the problem a nice perspective. The monkey menace continues to rise in Delhi and there is no relief despite attempts. Kahn calls this an externality and asks:

How would Ronald Coase solve this externality?  Perhaps the monkeys should be paid to move away?

What do the visitors think?

Sweden – from Macroeconomic Failure to Macroeconomic Success

A nice paper by Lars Calmfors of Stockholm University.

Just 20 years back Sweden was going through a major crisis. And now it is much better off.

How universities helped transform the medieval world..

Davide Cantoni  & Noam Yuchtman have written this paper. The findings are in voxeu:

How does a new form of knowledge enter the public sphere and what are the consequences for economic activity? Today, thousands of students are pursuing university degrees in biotechnologies and computer sciences in order to enter the high-tech labour force or to become entrepreneurs. Do the institutions that train them generate economic growth? What roles can governments play in establishing educational institutions and supporting investments in the new forms of human capital they produce?

The paper looks at a natural experiment:

Government Cash Balances – Linkages with Liquidity

This is  the title of my new paper.

Might sound esoteric to most, but this government cash management has become a top issue recently. Thanks to its impact on liquidity in money markets. It was partly discussed in previous report on liquidity.

NY Fed released a paper on US Treasury Cash Management which is also discussed in my paper.

Comments/suggestions are welcome..

 

Celebrating 25 years and 100 issues of Journal of Economic Perspectives

JEP— One of the most readable economics journal  is celebrating its 25 years.

There is a special issue on the occasion.

Joseph Stiglitz the founder of JEP, writes a very good account of the reason for starting this journal and experience so far..

When Greece exited from Latin Monetary Union in 1908…

It is amazing how things hardly change. Something which to us is a freak life time  economic event, has apparently happened before.

Katrin Bennhold of NYT in this article talks about Greece exit (0r Grexit) from Latin Monetary Union in 1908:

Review of Why Nations Fail?

This blog is a big fan of the Why Nations Fail blog  based on the book by the same title. I have still not read the book and hence no real comments.

Here is a superb review by Jared Diamond who also wrote a famous book — Guns, Germs and Steel. 

It is just an amazing review of the book. Gives both pluses and minuses of the book..