Archive for July, 2012

For Want of a Nail (read Profit), the Ship (read banking system) Was Lost

July 23, 2012

A nice example from shipping industry to help understand the woes of finance industry (HT: thebrowser.com)

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Krugman vs Iceland; Krugman Vs. Estonia

July 23, 2012

The Krugman Vs. Battles go on.

There was some stirring discussion on Krugman’s analysis on Iceland. CFR Blog pointed Krugman used wrong analysis to justify having your own currency helps. Arvind Subramanian helps understand the debate.His verdict:

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Evolution of top incomes in India (1922-2000)..

July 23, 2012

An absorbing paper from  Abhijit Banerjee and Thomas Piketty (Piketty in turn has co-authored many papers with Emmanuel Saez on incomes in other countries).

We are discussing so much about rising top incomes in developed world, how does India fare?

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Is Rising Income Inequality Inevitable?

July 20, 2012

Well, econs did warn about this issue of rising inequality.  Anthony Atkinson of Oxford University gave the annual WIDER lecture in 1999 (another super lecture series).

In the lecture he pointed that inequality has been rising for two decades (way back then). This was common across transatlantic economies earlier but was becoming common across other econs as well.  However Prof. Atkinson disagreed with the notion that this was inevitable. Policy could lower the inequality. Of course none of this was followed..

Why We Do Not Try to Walk off without Paying after a Tax-Ride?

July 20, 2012

I did hear Prof. Kaushik Basu speak about this research issue in one of his talks. Though, I thought this must be some work under progress. However, I realised he worked on its pretty early.

In this 1983 paper, he looks at this question on why people wait to pay after their taxi-ride?

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Hayek vs. the development experts..

July 20, 2012

I have been  trying to read the superb Hayek lectures by Manhattan Institute (after discovering them recently and also posted 2012 lecture here.

William Easterly got the 2008 award for his superb book The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good. His lecture on the occasion is a decent read.

As we know, Easterly is a huge critique of top down approach of development. In this one has all these development experts who think they know what is in the interest of the poor. Easterly instead vouches for bottom-up approach where people decide what to do. This is also similar to what Hayek also said:

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Do most sons take up their father’s occupations? Some evidence from India..

July 19, 2012

A nice paper from Sripad Motiram and Ashish Singh of IGIDR.

Economists call this issue as Intergenerational Occupational Mobility and is really important to understand the inequality issue.  Hopefully over a period of time we can expand this research question to Do most children (both sons and daughters) take up their parents’ (mother and father) and  occupations? It is too gender-specific issue as of now.

The broad idea is as an economy develops, people from lower skill/earnings group should be moving to higher skill earning group. This is especially true of children of low earning strata. That in turn leads to development and better lives.

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Republic of India is the most reckless political experiment in human history..

July 19, 2012

Time for some exciting article on Indian history.  Chris Blattman tips onto this article by one of the top India historian Ramchandra Guha.

Guha reviews two books on India history- Recovering Liberties: Indian Thought in the Age of Liberalism and Empire
By C. A. Bayly and Democracy and Its Institutions  By André Béteille.

The start to the review is amazing:

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Importance of unconscious thought…

July 18, 2012

A super interview of Maarten Bos  of HBS. She discusses her research on unconscious mind and its underutilized potential.

The research in a way is quite similar to Daniel Kahneman’s research. But the stress on unconscious mind is quite a read.

Martha Lagace: What do you mean by unconscious thought?

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Figuring inflation via RBI Governor’s haircut charges…

July 18, 2012

RBI recently held its Sixth Annual Stats Conference. This is a really brave annual conference given with huge issues with stats reporting in India. This year’s theme was central banks and data gaps.

RBI Gov. Subbarao gave some great insights in the speech on Indian economy and its stats system. There was some great humor on himself as well. On inflation measurement he says:

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Do Business Schools Incubate Criminals?

July 18, 2012

A very controversial and strongly worded article by Luigi Zingales, who is a B-school professor himself. He is a prof. at Booth School at Chicago and writes on the need to have ethics in B-school training.

He says these recent scams like Insider trading, LIBOR fixing etc come from B-School and Econ training.

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Will India’s fiscal deficit be worse than Greece’s this year?

July 17, 2012

As per IMF’s Fiscal Monitor Update for Jul-12, the answer is yes! Thanks to Manas of Mint for the pointer.

India fiscal deficit at (8.9% of GDP) might just better than Japan (9.9% of GDP) this year. But in 2013, India might top the list with FD at 8.8% of GDP vs. Japan’s 8.6% of GDP.

On India’s Fiscal misfortunes, IMF says:

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Politics of Budget Allocation for Developmental Expenditure…

July 17, 2012

I posted a paper from NIPFP econs on the topic earlier. Here is another one this time from IGIDR econs –  Arun Kaushik and Rupayan Pal. Both point to the importance of politics in allocating development expenditure. However, the results are just opposite.

The first one looks at whether fragmented or single party govts spend more (it is fragmented which spend more). This one looks at the role of political stronghold and does not think fragmentation has a major role:

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Hayek taught freedom and the rule of law drive prosperity….

July 17, 2012

Manhattan Institute organises annual Hayek Lecture.

The 2012 winner was John Taylor.  Here is his speech on the occasion titled as Road to recovery (based on Hayek’s famed book – road to serfdom).

Taylor connects his rule based policies to Hayek’s freedomm ideas which also relied on consistent rules:

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Reviving India’s corporate bond markets….

July 16, 2012

Another attempt to think on reviving India’s corp bond markets. The paper is by  Sanjay Banerji, Krishna Gangopadhyay, Ila Patnaik and Ajay Shah.

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In finance, laws of supply and demand do not apply

July 16, 2012

A superb article in Economist on 4 laws of banking/finance (HT: Browser.com). Another finance sector bashing article.

The four laws are:

1. The laws of supply and demand do not apply. (In terms of wages of financial sector. More the applicants for i-bank etc jobs, higher are the salaries!!)

2. Success is down to my genius; failure is caused by someone else.  (Something which Prof. Kahneman put up nicely)

3. What is lucky for an individual trader may be unlucky for the bank as a whole (he may have taken higher risks to boost his bonus which is revealed later)

4. Resigning can be a retirement plan. (lol)

More to come…

The best money hiding places in Greece

July 16, 2012

A fab link showing pics of where Greeks are hiding Euros (HT: MR blog).  It is in German so you need to use some translator software…

The vacuum cleaner, the freezer, the bag of flour: the hiding of money..

Salvatore Vinci’s Greek friends are quite imaginative. “I was really surprised that everyone had such hiding places,” says the photographer. For months, accusing the Greek banks need to resolve the country’s citizens to keep their balances and cash. “I have friends who work in the bank, telling me that every day 80 to 100 million euros will be lifted,” said Vinci. He has photographed the €-hiding his Greek friends.We show his pictures.

See the link for more details..

Efficacy of Fed Monetary Policy: Comparing 1990s with 2000s

July 16, 2012

This is a startling note from Daniel L. Thornton of St Louis Fed.

He questions efficacy of monetary policy in raising output and employment. He compares  the mon pol trajectory in 1990s with 2000s. Research shows policy rates were tight in 1990s and easy in 2000s:

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Reinventing Affordable Housing in NY…

July 13, 2012

NY Mayor Bloomberg announced a housing program to build micro-apartments in NY City. These apartments would be of 275 sq. ft (hopefully all carpet feet area 🙂 and mainly for households having 1-2 persons (in Mumbai whole families live in this kind of area).

Howard Husock of Manhattan Institute writes this terrific article on this policy move:

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Reforms are basically about mindset…

July 13, 2012

Sanjeev Aga has this terrific article in ET. It came on 9-Jul-12 but just forgot to link it. Those who missed it this one is a must.

He ponders on one of the most important reform in 1990s. However, this reform just skipped most of the issues hurting us today:

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