Archive for November, 2012

Should financial products be given Censor-like ratings for movies – A,UA, U etc.

November 30, 2012

Liz Warren has recently become the Senator for Massachusetts  Financial industry managed to keep her away from the Consumer Financial Products Bureau which was her brainchild. It will be interesting to see what role she plays as a Senator..

Here is a nice suggestion from Prashant Saran, Whole Time Member of SEBI on regulation of financial products. He says it is is wrong to say fin products are different and cannot be regulated:

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Balance Sheet comparisons of Fed, ECB and BoE..

November 30, 2012

Well there is tons of research and discussion on central bank balance sheets and even comparing who did what.

However, this brief note from Ricardo Davico and Brian John Goldsmith of IMF is one of the simplest and neatest so far.

Although each of the central banks had a different approach, all three acted aggressively to inject liquidity into their economies and promote growth.

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Looking at a magic number to summarise macroeconomic stability/instability – 4 could be the answer

November 30, 2012

An insightful paper from Norges Bank econs.

Its starts with intro from Jan Fredrik Qvigstad, Deputy Governor of the central bank. His  experience tells him anything above 4 mark shows build up of instability in that indicator:

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Genius of Dirt Roads…

November 29, 2012

A nice article by Brandon Fuller on the importance of road grids for urbanisation…

While twenty-first-century urbanization can offer millions a path out of poverty, it also presents major policy challenges. If cities in developing countries are to accommodate millions of new residents, they will have to do what New York did so well in the nineteenth and early twentieth centuries: make room for urban expansion. A sufficiently expansive, well-defined grid of arterial roads is a good first step.

 More on the NY grid here.

Greece’s inefficient tax system – Case of lack of trust between citizens and government

November 29, 2012

Each time one reads  a paper featuring Greece on systems etc. one can’t miss the comparisons with India.

A superb paper on Greek tax system by University of Athens econs – Georgia Kaplanoglou & Vassilis T. Rapanos.

The paper aims at highlighting a number of shortcomings in the design and enforcement of the tax system in Greece, which have played a key role in the exacerbation of fiscal deficits that led to the current sovereign debt crisis. More precisely, we argue that these shortcomings that result in low tax revenue, relate to the structure of the Greek economy and to the failures of formal institutions (such as poor function of the tax administration and lax tax enforcement). At the same time such failures are rooted in and at the same time reinforce failures of informal institutions, namely low levels of trust to institutions and perceived fairness of the tax system.

 Nice bit. They say lack of formal institutions is not the only answer to Greece (and other economies) tax problems:

The third section attempts to explain the above empirical findings in terms of the longstanding failures of formal institutions. Despite the fact that evidence is sparse and fragmentary, all available indicators point to the fact that the low and unfairly
distributed tax yield is primarily due to the  poor functioning of the tax administration, lax tax enforcement, inefficiency of tax collection and the lack of effective dispute resolution mechanisms. Such failures result in high tax evasion and a thriving
underground economy. 

These findings cannot be interpreted in economic terms alone. The standard view of tax theory is that taxes are a necessary harm whose ‘excess burden’ has to be minimised in order to finance some undefined public expenditures. Standard tax evasion theory treats the decisions of individual taxpayers with regard to their tax payments in a similar way (e.g. Allingham & Sandmo 1972; Yitzhaki 1974). Two issues escape the attention of such models. The first one is that in the real world citizens of democratic political jurisdictions perceive a connection between the taxes they pay and the government services provided to them. In this context, citizens could ‘voluntarily’ pay their taxes if they trust their government to deliver the services it has promised. The second issue is that, even if a citizen trusts her government, the citizen’s behaviour will still be influenced by how she perceives other taxpayers to behave. In other words, tax evasion should be treated not only as a pure economic but also a social phenomenon (Sandmo 2005).

Superb reading..

FDI (Farmers Direct Investment) in development of Magarpatta City

November 27, 2012

This is an amazing paper/case study by Prof. Amit Gupta, Sucheta Dalal, Debashis Basu and Amita Joseph.

Someone asked me what FDI means given all the furore over the  FDI in retail issue. This paper shows FDI could have a very different meaning as in the paper it stands for Farmers Direct Investment. If we could have more such FDI schemes, there might be more support than the usually understood FDI or Foreign direct investment.

So in this case we have India’s farmers who built a township named — Magarpatta City — on their land holdings. The township is in Pune and succeeded despite many apprehensions over farmers taking up the project:

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Why Can’t India Feed Its People?

November 27, 2012

A stirring (and  disturbing) piece by  of Business Week. He relates his experiences living in a small village (Auar in UP) where his ancestral family once lived.

It is not as if things have not changed in his village. They have but things like hunger, lack of sanitation & water etc still remain a huge challenge. So people may not be hungry but nutrition is an issue:

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Shahjahan, Taj and rent-seeking..

November 27, 2012

John Kay has this super post linking all these things together.

On a visit to Taj he asked economics questions (well that is somethign for sure..how can one ask qs on economic related issues at Taj?). Apparently Shah Jahan regime was about rent-seeking:

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India becoming an E-bay (Auction) Republic..

November 26, 2012

A super column by Haseeb Drabu in Mint. He says India is about to become an auction republic where everything is likely to be auctioned. Even political seats:

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Scheduling and conducting India’s General elections efficiently — some lessons from Operations Research..

November 26, 2012

What an amazing paper from Bodhibrata Nag of IIM Calcutta. He uses optimization techniques in Operations Research to help make  India’s General elections more efficient.

He points to how Centre’s police forces are required to support the State polie forces to conduct the general elections:

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Choosing your own capitalism in a globalised world? Cuddly or cut-throat?

November 23, 2012

A super column from the super duo-  Acemoglu and Robinson.

They compare the two capitalism systems of US and Nordic economies. The point is both the systems are useful in their own way. US with its cut throat capitalism model leads the way allowing the Nordics to be followers and more welfare oriented (cuddly):

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What led Fama to develop Efficient markets hypothesis? (comments on behavioral finance etc..as well).

November 23, 2012

A super interview of Eugene F. Fama by Robert Litterman.

What was his switch moment which led to development of his core ideas? Well, it was his work experience as a stock market analyst:

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Are there Cultural Determinants of Entrepreneurship? (Case of Marwaris, Tamilians, Andhraites)

November 23, 2012

A nice paper from Rajkamal Iyer and Antoinette Schoar of MIT.

They set up an experiment in Chennai, Tamil Nadu to figure whether and cultural aspects impact business. They test this across three communities – Marwari, Tamilian and Andhraite to point to community differences:

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What is India? A historic perspective…

November 22, 2012

A must read lecture by Justice Markanday Katju by all Indians and those interested in India. I just stumbled upon it while searching for previous Nehru Memorial lectures after  Aung San Suu Kyi gace the 2012 lecture.

He discusses five points:

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Impact of Golden Quadrilateral on Indian Manufacturing…

November 22, 2012

Superb paper by trio –  Ejaz Ghani, Arti Grover Goswami and William R. Kerr.

They look at whether the Golden Quadrilateral project helped increase productivity in firms located around GQ highway:

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Acemoglu/Robinson reply to Jeff Sachs

November 22, 2012

This blog had pointed to Jeff Sachs’ review of Why Nations Fail.

A/R duo respond to the criticism in their typical style.

Several people asked us why we haven’t responded to Jeffrey Sachs’s review of Why Nations Fail in Foreign Affairs. Well the answer was sort of in-between the lines in our response to Arvind Subramanian review (the original review is here and our response is here): we said that thoughtful reviews deserve thoughtful answers. What about not-so-thoughtful ones?

Be that as it may. We cave in to pressure.

Sachs charges that we are “simplistic” and our argument “contains a number of conceptual shortcomings”. But in each case, these are either just stated (and are wrong) or he is criticizing something we haven’t said. The Sachs strategy seems to be to throw a lot of mud, hoping that some of it would stick — did we say that we didn’t think it was quite thoughtful?

Let’s go through each one of his points in turn.

They look at a total eleven criticisms made by Sachs. Fabulous stuff.

Which Villain’s Plans in James Bond movies would have worked (and which not)?

November 21, 2012

Superb article this (HT: WSJ Econ Blog).   interviews Jean-Jacques Dethier, a development economist at the World Bank (and a lifelong Bond fan).

Most James Bond movies have an economic motive as villain is looking to rake in the moolah via his grandiose plan. Dethier speaks on the plot first and then discusses whether the plot was economically right or not:

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Impossible trinity is like the Hindu mythology trinity…

November 21, 2012

Deepak Mohanty compare the two trinities in a speech on capital flows and controls at ADB conference:

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Will Guinea escape the natural resource curse?

November 21, 2012

A nice article by   of International Institute of Sustainable Development.

He says Guinea could escape the natural resource curse:

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On learning from (economic) history – Truths and eternal truths

November 20, 2012

A fascinating speech by Norges Bank  Deputy Governor Jan F. Qvigstad for history and economic history students.

He says most scientific fields have their set of truths:

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