Archive for December, 2012

HongKong Monetary Authority and Consumer Protection: Mix of traditional and behavioral approaches

December 17, 2012

Eddie Yue, Deputy Chief Executive of the Hong Kong Monetary Authority gives this speech on consumer protection in financial products.

HKMA has an interesting strategy of consumer protection. It is a mix of classical and behavioral approaches to fin reg:

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Should India become a tiger?

December 14, 2012

Considering the trackrecord of earlier tagged Tiger economies, I am not so sure (Celtic Tiger, East Asian Tigers etc.) . India is too large to be a tiger anyway. Ruchir Sharma nicely calls all this naming a fancy marketing gimmick..

In a recent speech, RBI Dep Gov Dr KC Chakrabarty, looks at six ways India could become a tiger.

First the elephant and the tiger: Which one should we prefer?

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Food Preservation introduced in School Curriculum….

December 14, 2012

I did point to this development earlier. Govt is planning to increase awareness over food preservation and  wastage amidst children. This was to be done by conveying the message in school curriculums.

This has been included in NCERT textbooks:

A reference was received from the Ministry of Consumer Affairs, Food & Public Distribution, for the inclusion of content on Avoidance of Food Wastage in the syllabi of the Secondary and Higher Secondary schools through the National Curriculum Framework (NCF) – 2005 under the National Council of Educational Research and Training (NCERT). NCF-2005, developed by NCERT, includes food as one among six common themes of the syllabus of Environmental Studies of Classes III to V. The content relating to ‘Wastage of Food’ has been included in the syllabus on Health & Physical Education, a compulsory subject up to the secondary stage, with a focus on avoiding wastage of food. The Central Board of Secondary Education (CBSE) has issued an advisory to its affiliated schools to sensitize students to incorporate the topics related to Food in their curricular and extracurricular activities under the curriculum provided by the Board.
Super stuff..To be lauded..
A nice paper in making evaluating whether this intervention helped lower food wastage or not…

Is US Post going Greece way?

December 14, 2012

It is all about comparing a crisis to Greece thesedays. Earlier people compared to Latin America, Argentina etc. Now it is just about Greece…

It seems US Post chief Michael Donahoe commented on US post going the Greece way. Michael Schuyler of Tax Foundation writes a nice note drawing similarities and differences between the two cases.

Overall, things are not as bad as Greece but unlike Greece things move much slowly in reforming US post:

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Why We Blab Our Intimate Secrets on Facebook?

December 14, 2012

A question I am sure asked by many…

Apparently there has been some research by HBS Profs on the issue. The findings will please the behavioral economics camp:

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Should Wall Street be occupied?

December 13, 2012

It seems so. An interesting paper by Maya Eden of WB.

She says absence of financial intermediation people will rely on internal funds. When we introduce fin intermediation, it allows excessive borrowing. So to balance the two situations some resctriction on fin intermediation is needed:

 

Does an unregulated financial system absorb too many productive inputs? This paper studies this question in the context of a dynamic model with heterogeneous producers. In the absence of a financial system, the only way to purchase inputs is using internal funds. Producers are subject to idiosyncratic productivity shocks, and will decide to produce only if their productivity is high enough. Otherwise, they will hold money. A financial intermediation technology allows producers to purchase inputs in excess of their internal funds, by borrowing from unproductive agents. However, intermediation requires the use of costly monitoring services. In equilibrium, intermediation increases the money in circulation and raises nominal prices, thereby reducing the value of internal funds and making producers increasingly reliant on costly monitoring services. For this reason, society is better off when intermediation is restricted.

One would ask what is new? This is all know. Well, the paper is on technical side and helps you think through the modelling bit of this (though must admit did not understand the model bit much)..

 

Estimating Current Account Deficit from GDP – India’s Case

December 13, 2012

A short note on the topic by yours truly. Comments/Suggestions are welcome..

Why Monitor Consulting failed?

December 13, 2012

Monitor consulting (found by the strategy guru – Michael Porter) filed for bankruptcy recently.

Steve Denning reflects on why  the once famed consulting firm  failed. The main reason was focus on top-down strategy and not understanding the role of consumers in business:

Eventually even attractive illusions come to an end: people see through them. Ceremonial rain dances come to be viewed for what they are. The financial crisis of 2008 was a wake-up call that reminded even entrenched firms how vulnerable they were. Today, large firms have little interest in paying large fees to strategists to find sustainable competitive advantage just from studying the numbers.

Monitor eventually learned the hardest lesson of all: strategy, business and business education are not about pursuing the chimera of sustainable competitive advantage.

Monitor wasn’t killed by any of the five forces of competitive rivalry. Ultimately what killed Monitor was the fact that its customers were no longer willing to buy what Monitor was selling. Monitor was crushed by the single dominant force in today’s marketplace: the customer.

An interesting bit on Michael Porter:

The answers to these intriguing questions are strange and troubling. We can find some of them in the work of consulting insider, Matthew Stewart, and his enlightening, but misleadingly-titled, book, The Management Myth (Norton, 2009). In his book, Stewart tells how in 1969, when Michael Porter graduated from Harvard Business School and went across the river to get a PhD in Harvard’s Department of Economics, he learned that excess profits were real and persistent in some companies and industries, because of barriers to competition. To the public-spirited economists, the excess profits of these comfortable low-competition situations were a problem to be solved.

Porter saw that what was a problem for the economists was, from a certain business perspective, a solution to be enthusiastically pursued. It was even a silver bullet. An El Dorado of unending above-average profits? That was exactly what executives were looking for—a veritable shortcut to fat city! 

Why go through the hassle of actually designing and making better products and services, and offering steadily more value to customers and society, when the firm could simply position its business so that structural barriers ensured endless above-average profits? Why not call this trick “the discipline of strategy”? Why not announce that a company occupying a position within a sector that is well protected by structural barriers would have a “sustainable competitive advantage”?

Why not proclaim that finding these El Dorados of unending excess profits would follow, as day follows night, by having highly paid strategy analysts doing large amounts of rigorous analysis? Which CEO would not want to know how to reliably generate endless excess profits? Why not set up consulting a firm that could satisfy that want?

Superb this.

So Monitor was all about strategy which was to be developed by CEOs/Corporate Boards:

Porter’s theory thus played to the image of the CEO as a kind of superior being. As Stewart notes, “For all the strategy pioneers, strategy achieves its most perfect embodiment in the person at the top of management: the CEO. Embedded in strategic planning are the assumptions, first, that strategy is a decision-making sport involving the selection of markets and products; second, that the decisions are responsible for all of the value creation of a firm (or at least the “excess profits,” in Porter’s model); and, third, that the decider is the CEO. Strategy, says Porter, speaking for all the strategists, is thus ‘the ultimate act of choice.’ ‘The chief strategist of an organization has to be the leader— the CEO.”

Strategy leads to “the division of the world of management into two classes: “top management” and “middle management.” Top management takes responsibility for deciding on the mix of businesses a corporation ought to pursue and for judging the performance of business unit managers. Middle management is merely responsible for the execution of activities within specific lines of business.

It ignored the developments in the emerging world where focus was moving to customers and to value creation/addition..

Quite a read..

Nobel Prize 2012 Lectures…

December 12, 2012

The lectures are online.

More than economics (Shapley, Roth here), I was curious to read the Peace lecture by EU officials..

Roth lists many pioneers towards the end who have contributed/contributing to the area of market research with pictures and profile. That is a super gesture calling development of market design as a team work

Yet to read them..

Primer on using cobweb charting for economic/financial stability

December 12, 2012

Nice stuff from Kristian Jönsson and Caroline Leung of Riksbank.

Using cobweb charts has become the in-thing with many central banks using it to assess financial/economic stability over the years. It helps bring multiple indicators on one chart and shows how they have moved over a period of time.

They explain how we can actually try & make these  cobweb charts and track the changes overtime:

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Mythological tale of Eklavya and Drona: Case of teacher-student relationship or disempowerment of Dalits and Adivasis

December 12, 2012

very different kind of a  speech by Dr Narendra Jadhav of Planning Commission. His speech is titled as “Empowerment of Dalits and Adivasis Role of Education in the Emerging Economy”.

He first twists the interpretation of the famous story of Eklavya and Drona. It is usually epitomised as a classic tale between student and teacher (atleast that is how it is told to kids). However, there is another interpretation to it:

Actually, the tale can be seen in a very different light. Ekalavya was a representative of marginalized strata of society. He was denied empowerment  through education by Guru Dronacharya, who embodied the high-born and hence the establishment. In demanding the right thumb of Ekalavya, the guru  was not only protecting his intellectual property rights, but he was also perpetuating a social order that was inherently unjust. The moral of the fable is simply that power of establishment will remain the guarded position of the highborn, striving to ensure that an outcaste remains a lowly outcaste. Paralyzed by the establishment, the outcaste will never dare to question it. Ekalavya was cleverly cornered into sacrificing his strength, and as a consolation, his devotion was glorified. His silent consent was transformed into a myth that actually promotes submission among the disempowered. This is not a story about guru bhakti or “devotion to the teacher.” This is a story of traditional disempowerment of Dalits and Adivasis in the Indian society.

He goes on to explain the woes of dalits and adivasis in India. He stresses on the importance of education and creating a more inclusive society which is still very unfair..

Indian Business History: Fallacies of Interpretation

December 11, 2012

Another super stuff from Godrej Archives annual lecture series. The speaker is Dr. Dwijendra Tripathi, former IIMA prof of Business history (see his excellent views on business history here).

The lecture looks at the various myths surrounding Indian business history:

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Assessing Potential Inflation Consequences of QE after Financial Crises

December 11, 2012

Most policymakers and econs believe that there will be no inflation consequences of QE. As economy recovers, Fed (and other central banks will start their exit policies (how popular was the term exit policy in 2009!) and suck liquidity from the system.

Here is a different perspective from Samuel Reynard of PIIE. He goes back to the basic Friedman equation MV=PE.  Inflation follows the growth in  money:

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MIT Trained Swadeshis and Indian Nationalism (1880-1947)

December 10, 2012

This paper generated a huge interest in India’s business history. Well I just discovered this super archive of Godrej Group which has maintained all the records on the group’s history and so on..

It has this annual lecture series where noted speakers speak on business history/related topics. Unfortounately, not all have a link of the lecture.

Ross Bassett of North Carolina State University (Associate Professor, Department of History) gives a fascinating account of MIT’s connection with India’s Nationalism/ Swadesi movement. There is a pdf of his lecture and is quite an interesting read.

It shows how certain visionaries sent their relatives to train at MIT to help build engineering skills. The idea was to build capacity  and help develop India both during struggle for independence and post-independence. More interestingly. they came from families associated with Mahatma:

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Would the economy be better off without MBA students?

December 10, 2012

A nice debate on economist which just got concluded. 51% voted in favor saying economy would be better off without MBAs..

The debaters are:

  • For the motion: Henry Mintzberg  Cleghorn Professor of Management Studies, McGill University’s Desautels Faculty of Management
  • Against the Motion:Paul Danos  Dean, Tuck School of Business, Dartmouth College

There are independent statements by two others both for and against the motion.

Till now we were discussing the usefulness of economics and economists..now MBAs are also caught in the fire…Another victim of the crisis…

 

Perspectives and history of India’s BoP

December 10, 2012

Deepak Mohanty, ED of RBI’s speeches are usually excellent and full of ideas and perspectives. In a recent speech, he summarises the developments.

He divides the phases of BoP in six phases:

India’s BoP evolved reflecting both the changes in our development paradigm and exogenous shocks from time to time. In the 60 year span, 1951-52 to 2011-12, six events had a lasting impact on our BoP: (i) the devaluation in 1966; (ii) first and second oil shocks of 1973 and 1980; (iii) external payments crisis of 1991; (iv) the East Asian crisis of 1997; (v) the Y2K event of 2000; and (vi) the global financial crisis of 2008. I will analyse the BoP trend in this sequence.

BoP and GDP are interconnected greatly as  shown in this must read manual on BoP. So, what happens in BoP impacts GDP and vice-versa. So, if one is giving a ppt on trends in GDP he could look at the same six phases for easier classification of India’s macro story.

 

Conclusions:

  • First, the current level of CAD is far above the level sustainable for India.
  • Second, structural policy measures are needed to reduce vulnerability emanating from high oil and gold imports.
  • Third, current policies towards further diversification of India’s export basket, both destination and products, needs to be stepped up. Indian exporters need to accelerate efforts to move up in the value chain at the global level.
  • Fourth, given the global uncertainties and volatility in capital flows, the resilience of capital account needs to be further enhanced by encouraging FDI inflows.

Nice read and coverage on the issue..

 

 

Imagine an economic historian reviewing economy from 1970s to current crisis

December 7, 2012

Today is a history blogging day..

Claudio Borio, of BIS in this super speech covers many ideas which have emerged out of the crisis. He begins with economic historian:

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European crisis and second world war– comparisons

December 7, 2012

A nice article from a historical perspective on the European crisis.

He says memory of second world war hangs over Europe:

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Teaching business history in India’s B-Schools?

December 7, 2012

IIM-B conducted a round-table conference in Aug-09 to explore teaching business history in the B-School.

It was organised to discuss on three key ideas:

  • Perspectives on Business and Entrepreneurship History of India
  • Business and Entrepreneurship History Research: Themes, Approaches and Challenges
  • Embedding Business and Entrepreneurship History in Management Education

The institute released a working paper summarizing the discussion and it is quite a read.  An effort to improve the curriculum in management institutes. Following participated in the discussion:

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Both apes and humans suffer from midlife crisis..

December 6, 2012

A superb read from Andrew Oswald

Humans suffer from mid life crisis around 45-47:

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