Archive for December, 2012

Happy New Year to all and Mostly Economics Annual Report -2012

December 31, 2012

Wishing all the visitors of ME Blog a very happy new year! Have a great year ahead.

WordPress has generated Annual report 2012 of the Mostly Economics blog (just like it did in 2011).

This year the total blog views was about 350,000 lower than 360,000 views seen last year:


About 55,000 tourists visit Liechtenstein every year. This blog was viewed about 350,000 times in 2012. If it were Liechtenstein, it would take about 6 years for that many people to see it. Your blog had more visits than a small country in Europe!

In 2012, there were 721 new posts, growing the total archive of this blog to 4,157 posts.

In 2011, there were more new posts  – 756 . However, both years have been near similar with few things here and there.

The most popular post that day was Temasek and Singapore Puzzle – Is it another Madoff crisis in making?. The popular search strings that led to the blog were  inclusive growth, hayek vs keynes,mostly economics, impossible trinity, and effective revenue deficit. Visitors came from 197 countries however one can never be sure of the origin in the internet era.

Thanks a ton people once again for visiting my blog. Suggestions to improve and make the blog a better one are always welcome..



Time for a WTO 2.0 to monitor global supply chains??

December 31, 2012

An out of box thinking by Prof. Richard Baldwin on the topic (a more detailed account here).

He says WTO is focused on multilateral trade based on trade between goods and services. However,  world trade is changing with evolution of global complex supply chains. Here, it is not simply about trade between two countries but one good being made partnering  with other countries before selling to customers. This requires a new organisation:


Political economics of Arab Spring..

December 31, 2012

Roland Hodler of University of Lucerne writes this nice paper (another link here).

He provides a model on Arab Spring. He says there were differences in the Middle east  countries which went through the uprising:


Azim Premji University’s Master of Development Course…A breath of fresh air

December 28, 2012

Two universities from two IT czars – Azim Premji (APU) and Shiv Nader (SNU). SNU has more courses whereas APU has just two – MA in development and MA in Education.

I was just going through the course design of MA in development course and was just amazed. This is exactly the kind of prescription most econs have suggested for revamping economics education post-crisis. It has this mix of economics, sociology, philosophy, politics, law etc with development. So you truly get interdisciplinary perspective on development unlike just economic development which most courses have. It is even more Indian in the sense that there is focus on castes, adivasis, religion etc.


Joint Ventures between MNCs and local firms in financial services: 2 cases from India..

December 28, 2012

An amazing paper by Prof Murali Patibandla of IIM Bangalore. He mixes so many areas – financial services, transaction costs, emerging economy issues, joint venture economics etc etc.

There are two ways to look at JVs:


What is the single most important thing that can be done to improve the world?

December 28, 2012

Shashi Tharoor was often asked this q in his UN days. Over a period he found the answer as two word manta- “educate girls”.

It really is that simple. No action has been proven to do more for the human race than the education of female children. Scholarly studies and research projects have established what common sense might already have told us: if you educate a boy, you educate a person; but if you educate a girl, you educate a family and benefit an entire community.

He points to several examples to show the importance of girl education:


Global Income Inequality by the Numbers: In History and Now

December 27, 2012

A very good overview of global inequality trends from a historic perspective by Branko Milanovic of World Bank.

The paper presents an overview of calculations of global inequality, recently and over the long-run as well as main controversies and political and philosophical implications of the findings. It focuses in particular on the winners and losers of the most recent episode of globalization, from 1988 to 2008. It suggests that the period might have witnessed the first decline in global inequality between world citizens since the Industrial Revolution. The decline however can be sustained only if countries’ mean incomes continue to converge (as they have been doing during the past ten years) and if internal (within-country) inequalities, which are already high, are kept in check. Mean-income convergence would also reduce the huge “citizenship premium” that is enjoyed today by the citizens of rich countries.

The paper points to three kinds of inequalities:


How George Washington would greet the Occupy and Tea Party movements…

December 27, 2012

Another book based on history and fascinating insights..William Hogeland, a writer has written this book called  Founding Finance: How Debt, Speculation, Foreclosures, Protests, and Crackdowns Made Us a Nation.

There is a nice interview of the author here:

In his latest book, Founding Finance: How Debt, Speculation, Foreclosures, Protests, and Crackdowns Made Us a Nation, William Hogeland argues that America was born less from the fight between the founding fathers and the British Crown, which we’ve all heard about, than from the fight between the founding fathers and American economic populists, which we haven’t heard enough about. The much-ballyhooed conflicts among John Adams, Thomas Jefferson, James Madison, and Alexander Hamilton over the federalist project belie their unity against pro-democratic financial and economic measures that would benefit the indebted masses at the expense of financial elites allied with the founders. That we still fight today over similar issues shows how central they are to our national identity. BR Web Editor David Johnson asked Hogeland about who Herman Husband was, why Robert Morris would feel at home working for Citigroup, and how George Washington would greet the Occupy and Tea Party movements.

In this he shows how much of US is built  on big finance. So unlike what most people say, the founders of US would not have really sided with Occupy Wall Street movement etc:

DJ: Crazy ideas like banks that help the people. Speaking of the banks, the Occupy and Tea Party movements, who both took issue with the bank bailouts, have made rhetorical reference to the founders and their supposed values. How might they think differently after reading your book?

WH: When Occupy and the Tea Party reference founding finance, they’re just doing what everyone else does, too: everybody wants to ground their ideas in the basic values of the country, even if those ideas are diametrically opposed to what they advocate. When the Tea Party began, protesters wore three-corner hats and dressed up in 18th century garb. In the Occupy literature I’ve read, there are a number of references to the founding, and “We the People,” and so forth. They, too, seem to be suggesting that if the founders were here today they would be out with Occupy in the street trying to change the relationship between high finance and government. And I think my research suggests precisely the reverse.

Now that doesn’t mean there was nobody out in the street during the founding period trying to correct the relationship between high finance and government. There were people like Herman Husband, and thousands of people he represented, and the regulators and the militia privates, and so forth that I talk about in the book. But the famous founders themselves would not be the friends of Occupy. The question is whether there is something for those movements to get out of the founding period.

What ultimately is the real lesson? Herman Husband makes a difficult hero, as does Thomas Paine. They were far from pragmatic; they were visionary. Paine was a hyper-rationalist but, in another way, he could be quite extreme in his fervency about really changing the fundamental bases of society. I think Occupy has roots in the earliest moments of the founding period and that’s one of the things I want to bring out—but, if they followed those strands back to their origins, they would not find George Washington supporting them. Rather, they would find George Washington there with a club, trying to lock them up; they would be on Herman Husband’s side. And then the question becomes: how much do you want to embrace Herman Husband? That’s a question for everybody today. We’ve ignored Herman Husband partly because he’s so difficult to embrace. But maybe if we could embrace some of that extreme, utopian vision in the most radically democratic elements of our founding—the very things George Washington was trying to shut down—we might have something to learn from them.

Fascinating to read all these different perspectives on history and how it has shaped today’s events…

Setting a finance data centre at a University/College

December 26, 2012

P. Shrikant a doctoral student at IIM-C writes this interesting paper on the topic.

He narrates his experience of setting such a centre at IIMC:


Hedge Funds and Alpha masters

December 26, 2012

Maneet Ahuja of CNBC has written a new book called, The Alpha Masters: Unlocking the Genius of the World’s Top Hedge Funds.

She discusses the book in this interview:


Property Rights in Space…

December 26, 2012

As it becomes near impossible to buy property in most Indian cities, we perhaps need to look at space.

Anyways this super article by Rand Simberg is not about buying homes in space, but over the property rights issues in space. Thanks to this piece I realised there is  research and discussion on the issue of property rights in space.

Space contains valuable resources. These provide a compelling reason for entrepreneurs, investors, and governments to pursue space exploration and settlement. Asteroids are known to be rich in valuable elements like neodymium, scandium, yttrium, iridium, platinum, and palladium, most of which are rare on Earth. Because of the high price that these minerals command, harvesting them from space could possibly justify even very costly mining expeditions. This is the hope of Planetary Resources, a company recently formed and funded by Google executives Larry Page and Eric Schmidt with the intent of mining asteroids. Similarly, Microsoft billionaire Naveen Jain has founded the company Moon Express, with plans to use robots to start mining the Moon — as early as next year, it claims. Meanwhile, Texas-based Shackleton Energy Company plans to mine ice in Shackleton Crater at the lunar south pole to provide propellant for planetary missions, and is raising funds for the venture now.

The basic technology for space travel necessary for off-planet development has of course existed for several decades; the United States did, after all, put a man on the Moon in 1969. And recent advances in spacefaring technology, like the SpaceX Falcon Heavy launcher, promise to reduce the cost of transporting people and goods to and from outer space. This new rocket will deliver about fifty metric tons of payload to low-Earth orbit at a price of $120 million, allowing material to be shipped to space for about a thousand dollars per pound — far less than the tens of thousands of dollars per pound that technologies like NASA’s retired space shuttle cost to ferry cargo. And if SpaceX or some other company can achieve the goal of partial or full reusability, the price of launching goods into orbit will likely drop much further, especially if market forces bring more competitors into the field.

It all began post cold war:

International space law, such as it is, began to take shape during the space race, when outer space was viewed not as a potential frontier for development and settlement by private actors but rather as a competitive battlefield between the two superpowers in the Cold War, as well as a new realm for scientific discovery, led by government space agencies. The United States and the Soviet Union each sought to curtail the other’s political and military use of space; they found common ground, or at least claimed to, in the project of exploring space for the advancement of science.

An important precedent for the development of international space law was the 1959 Antarctic Treaty, which was meant to prevent the militarization of the Antarctic and to ensure that peaceful activities, particularly scientific exploration, be allowed to continue there. These were just the sort of aims that world leaders at the time were concerned with achieving through an international agreement governing space activities, and on September 22, 1960, President Eisenhower recommended that the principles of the Antarctic Treaty be used as a model for an international agreement governing space. But tellingly, because the Antarctic Treaty prevented any nations from establishing sovereignty and contained no provisions for granting property rights or regulating economic activity, resources in the Antarctic have gone undeveloped to this day. This stands in contrast to the emerging resource boom in the equally inhospitable regions of the Arctic, where much clearer property rights exist under the jurisdiction of Arctic nations.

In the end:

With new affordable spaceflight technologies on the horizon, extensive private activity in space will be a serious possibility in the near future. If we wish to see humanity flourish in space, we have to recognize that the Outer Space Treaty is a relic of a different era. Fresh interpretations may not suffice: we may soon have to renegotiate and amend the treaty — or even completely scrap it and start from scratch — if we want not just to protect space as a mere scientific preserve but to open it for settlement as a grand new frontier.

 Great read. Very different..

30 Years of Prospect Theory in Economics: Mixed experience

December 26, 2012

An amazing paper by Nicbasics holas Barberis of Yale (free version here).

He says despite 390 years and usefulness of Prospect theory, its applications have been limited so far (mostly in finance and insurance). However, things are looking better with some researchers looking at applications in other fields:

Prospect theory, first described in a 1979 paper by Daniel Kahneman and Amos Tversky, is widely viewed as the best available description of how people evaluate risk in experimental settings. While the theory contains many remarkable insights, economists have found it challenging to apply these insights, and it is only recently that there has been real progress in doing so. In this paper, after first reviewing prospect theory and the difficulties inherent in applying it, I discuss some of this recent work. While it is too early to declare this research effort an unqualified success, the rapid progress of the last decade makes me optimistic that at least some of the insights of prospect theory will eventually find a permanent and significant place in mainstream economic analysis.

 Apart from  PT’s applications, paper also explains basics of PT. It has four elements:


Evolution and developments in India’s money markets

December 24, 2012

Deepak Mohanty of RBI gives really good speeches.

In his recent speech, he explains how India’s money markets have evolved and developed over the years. It also has some basics about money market and its role in an economy..

He makes three suggestions towards the end:


Euro crisis – A timeline since 1992..

December 24, 2012

Warming upto blogging after a break…

Bruegel has prepared this interesting timeline of the critical events before and after the European crisis so far..

Nice summary..

Some inspiring speeches we could look at..

December 24, 2012

Apologies for being off blogging for a while…..Have been on leave and could not blog ..

I could not track the recent shocking events in Delhi as much would have liked..And once again it points to the glaring and widening governance deficit in India. While trying to catch up witrh the various statements and views, one is really shocked even more. We as voters need to be really sensitive to the kind of people we have been electing to represent us.

Just heard another insipid speech from India’s PM….After the infamous “money does not grown on trees” speech here was another one…And it came after many such pleas and requests from public that why doesn’t PM address the nation during such times.

Incidentally, I was reading this interview on some best speeches selected by Clarence B Jones (former personal counsel, adviser, draft speech writer and close friend of Dr Martin Luther King, Jr.). Visitors can help compile a similar set of speeches given by India’s leaders. It has been a while we have heard any such speeches/statements from our leaders.


FII Debt Limits in Bond Markets – A Review

December 18, 2012

This is the title of my new paper. I have looked at how FII debt limits have evolved/changed over the years. Was an interesting exercise to do.

Comments/suggestions are welcome..

RBI’s Mid-Quarter Monetary Policy Review: Dec 2012

December 18, 2012

RBI kept the policy rates unchanged. Again disappointing markets.

Here is a review of RBI’s policy. RBI statement here

Factoring role of Grandparents in Child Care Policies..

December 18, 2012

Josefina Posadas writes this interesting article on designing childcare policies.

The cenral issue is to encourgae women to remain in labor force. Most women quit labor force post children as there is little support to take care of children. Hence, the need for child care policies.  However, Posedas  says most such policies ignore the role of grandparents/relatives in upbringing children:


Home in Manhattan –To Buy or Not to Buy?

December 18, 2012

A nice paper on economics of home buying. The region discussed in the paper is Manhattan but could be applied to all other cities as well (provided you have data). It is written by Jason Bram of NY Fed.

He looks at price/rent ratio in Manhattan to show homes are expensive in the region. Hence not the time to buy:


Bank Deregulation and Racial Inequality in America

December 17, 2012

Nice paper by Ross Levine, Alexey Levkov, and Yona Rubinstein.

It makes case for bank deregulation looking at a different perspective altogether. They show bank dereg had led to lower racial inequality in US:


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