Archive for February, 2013

Was Mancur Olson Wrong?

February 28, 2013

Beginning today’s super hectic day with this nice article by Jonathan Rauch. The article  is a review of this  book: Strength in Numbers: The Political Power of Weak Interests. The book is  by Prof. Gunnar Trumbull’s of HBS.

The book criticises Mancur Olson’s ideas of logic of collective action. Olson said people with narrow interests can organise themselves better as interest groups.

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Promoting Women’s Economic Participation in India..

February 27, 2013

Finally we have some research and thoughts on a hugely important issue in India – women empowerment. I hope it continues and more on the implementation part as we have many ideas on the table already.

Ejaz Ghani, William Kerr, and Stephen D. O’Connell look at ways to promote economic participation in India:

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John Maynard Keynes of Bloomsbury: Four Short Talks..

February 27, 2013

Nice paper by four econs — Craufurd Goodwin, Kevin D. Hoover, E. Roy Weintraub, Bruce Caldwell. All four are from HOPE Centre at Duke Univ.

Each of the four talk about Keynes and his association with his elite Bloomsbury group:

Four talks on Keynes in relation to the Bloomsbury Group: I. Maynard Keynes of Bloomsbury (Craufurd Goodwin); II. Keynes as Policy Advisor (E. Roy Weintraub); III. Keynes and Economics (Kevin D. Hoover); IV. Keynes and Hayek (Bruce Caldwell). The talks were delivered as part of roundtable discussion on John Maynard Keynes of Bloomsbury, the inaugural event of the Center for the History of Political Economy at Duke University, and were held in conjunction with Vision and Design: A Year of Bloomsbury, a campus-wide interdisciplinary program surrounding an exhibition of Bloomsbury art at Duke University’s Nasher Museum.

Key ideas by each of the four:

Crauford Goodwin:

My main message this evening is that John Maynard Keynes (Maynard to his friends), contrary to popular belief and recent caricatures in the media, was much more than a tax and spend liberal. Indeed, he was a liberal only in the  original sense of that term, in that he placed the highest value on human  freedom, and he believed that this freedom could most likely be gained and preserved within a smoothly functioning competitive market economy. Unlike many of the economists of his time, notably the so­called “American  Institutionalists” with whom he is often mistakenly grouped, he was deeply  suspicious of government and was constantly searching for solutions to economic problems through actions in the private sector rather than the public sphere. Maynard Keynes served in government for extended periods throughout his career, so he really knew whereof he wrote.

E. Roy Weintraub sums up various roles Keynes played in policy.

Kevin D. Hoover discusses Keynes central economics ideas: The Fallacy of Composition, Uncertainty, The Role of Government and Do It Now.

Bruce Caldwell talks on relationship between Keynes and Hayek. It was not healthy but not as bad as it is made out to be.

Caldwell ends with a nice Keynes quote:

So I will end with one of my favorite Keynes’ quotes, one that is always popular with my students, and one which should make our transition to the reception  awaiting us a bit easier. A few weeks before he died Keynes was asked in anKeynes and Hayek Caldwell interview if there were anything that he would have done differently. His response was: “I would have drunk more champagne!”

Super light read on Keynes..

Decentralisation gone wrong in Italy…

February 27, 2013

Alberto Alesina of Harvard University writes how decentralisation went wrong in Italy:

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Explaining economic systems/structures using two cows analogy..

February 27, 2013

Using two cows in jokes is used to  explain capitalism, socialism, communism etc.

Here is a pictorial representation of the two cows analogy :-).

This one adds few more economies- Greek, NZ. Australian, Iraqi etc.

I remember earlier versions showed the German Eco System saying something on using engineering to increase productivity. This I think is missing from the list.

Good stuff..

Helicopter Money vs Printing Money vs QE Money…

February 26, 2013

Stephen Grenville

Visiting Fellow, Lowy Institute for International Policy writes this interesting article on voxeu.

He says all these concepts (given in the title) have different meanings:

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Bringing Green economics into Keynes GDP equation..

February 26, 2013

A food for thought paper by Jonathan Harris of Tufts University. This is a must read and is valid for India as there is a war between environmentalists and growthistas.

He says we could mix Keynesianism with Green economics:

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Latvia’s Parliament votes for the Euro….

February 25, 2013

Anders Aslund of PIIE points that Latvia’s Parliament has voted for joining the Euro:

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Why Capitalism inevitably leads to more inequality..( A historian’s perspective on inequality)

February 25, 2013

A food for thought long article by Jerry Z. Muller, Prof of history  at Catholic University of America.

He says both right and left are wrong about rising inequality:

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14 ways an Economist says I Love You…

February 23, 2013

Saturday night is surely not the time for writing a blogpost.  But I could not resist on reading a super post (HT: FB Page of this community — Economic Sociology and Political Economy; thanks to good friend Anshu Dash for the pointer).

Liz Fosslien in this blogpsot mentions about 14 ways an economist says  I love you.  So after posts on how an econ breaks-up and economics of love , there is more from economists on love..

She uses Production  Possibility Frontier, International trade curves, Pigou Club (several econs there) vs. Pick-You Club (only econ), ZIRP vs steady interest, risk of default, natural monopoly, inelasticity etc.. 

This makes it straight to the classroom…It is simply brilliant.

Why should President of India talk like Prime Minister/Finance Minister?

February 22, 2013

It was a bitter disappointment to read President’s opening speech ahead of crucial Budget session. I was amused to read some newspapers calling it a signal in

Firstly, the speech was just like any speech from PM/FM etc. It is like reading an Economic Survey of sorts with My Government thrown in between.  My last count showed he used the word My Government 52 times! I mean we know he heads the government. But why mention it so many times?

The speech hardly had any vision or anything beyond praising his govt and lauding its efforts for doing so much for India’s public. Really? What about the several negatives like rampant corruption and several policy errors.  Corruption being mentioned just once speaks volumes.

It is high time that Presidents use such forums to tell what its Government is not doing and should aspire to do. But how can they when they owe their Presidency to the ruling party and its politics. It is a pity that all offices in India are just boiling down to politics and strength of political parties. So you get elected just because of your affiliation with the ruling party.

And we have a President who has actually been a political leader of the ruling party for many decades. One does not expect much from him and that is a serious pity.

We hardly have anyone to hear for inspiration these days…Sad times..

 

Reasons for Eurozone Crisis: Keynesian or Hayekian?

February 22, 2013

As I keep saying no matter how much you read on EZ crisis, it can never be enough. There are always some different and interesting perspectives to follow.

George Selgin of Univ of Georgia in this note points that there were two critique schools when formation of EZ was being considered – Keynesian and Hayekian:

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A Primer on India’s Centre-State Finances (Functioning of India’s Fiscal Union)

February 22, 2013

I have been working on this area of Centre-State Finances/India’s Fiscal Union. It is an amazing amount of learning and I don’t think there is anything as vast as this area of Centre-State finances. There are so many concepts and issues.

So here is a paper written by your truly which should provide a start to those interested in the subject. It explains the flow of funds between Centre and Funds and concepts behind the several flows. I have provided some numbers from the Union Budget to bring more clarity and practical.

In a way, it helps understand the functioning of India’s fiscal union, a concept much in vogue these days. Much is written about US Fiscal Union and how it has helped US states avert the crisis. But still one does not know where to connect the dots with numbers. For this one needs to a deep dive into the US Federal Budget numbers and so on.

I have tried to connect these fiscal union ideas with facts and numbers for India. So, people know how to make sense of all these flows.

But then this subject is an ocean really. Lots to learn and unlearn. Will surely be writing more on the subject.

Comments/suggestions are welcome.

What Is Governance?

February 21, 2013

In these times of lack of GOvernance everywhere, time to do reality check. And who better than Francis Fukuyama on this.

In this paper he looks at various measures to track Governance:

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Difference between California and Texas…(Funny Story)

February 21, 2013

Missed this Oct-12 speech by Dallas Fed chief Richard Fisher. His speeches are real good full of anecdotes and fire.

The speech is about how US economy has recovered post-2008 crisis. It seems to be the lone running horse (albeit slowly) in derby race of advance economies. After US economy he looks at Texas. I am skipping all this and  getting to the topic.

Texas has emerged strong from the crisis but California continues to bleed. Why? Here is a story comparing governments in two states:

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Measuring the Oomph factor in economic philosophy

February 21, 2013

Nice paper by Altug Yalcintas of Ankara University.

The  author says economic philosophy has emerged as a distinct field in economics but interest in the area has waned. There are seperate journals for econ phil work but there are relatively few takers.

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Economics know-how about financial regulation/stability before the crisis..

February 21, 2013

Richmond Fed chief Jeffrey M. Lacker gives a useful speech.

He covers what econs knew before the crisis in financial regulation space.

The thoughts could be divided into two schools:As policymakers entered 2007, the economics literature offered them two broad but fundamentally different views of the world — two theories of financial instability. One tends to view market institutions and contracts as relatively fixed and the resulting financial system as inherently prone to the type of instability depicted by the simple model of bank runs. Under this theory, an expectation of government support may be necessary to make crises less likely, although that support necessitates regulatory oversight and constraints on banks to replace the market discipline that is lost when counterparties feel protected by government guarantees.

]In the alternative view, private financial arrangements are themselves adaptable and endogenous. Much of the vulnerability observed in financial markets is itself the induced response of market institutions and behaviors to the expectation of government backstop support in the event of distress. In the absence of that expectation, there would be stronger incentives to seek more robust arrangements.

So on the eve of 2007, policymakers were faced with two broad, competing views on the origins of financial market fragility — either it was inherent in the structure of financial arrangements, or it was induced by expectations of government support.

The US policymakers entered the crisis mainly schooled in the first thought. This led to perverse incentives and too big to fail problem. He of course believed in the second school.

He even discusses the broad research which led to development of these two theories starting from Douglas Diamond and Philip Dybvig theories, mechanism design etc.

He hopes we limit these government interventions and let markets function on their own:

There’s no doubt that the crisis will stimulate research for decades to come. Given the magnitude of the interventions we’ve seen, research that improves financial policy could yield enormous social benefits. In this connection I would note that our most recent estimates at the Richmond Fed are that, as of December 31, 2011, 57 percent of financial sector liabilities benefit from perceived government support. This is up from 45 percent over a decade ago and reflects in part an expansion of implied commitments based on new precedents set during this crisis. In my view, this growth in government support for the financial sector is not sustainable. As economic policy challenges go, I would rate this as second only to the looming federal fiscal imbalance. I sincerely hope we can make progress in the years ahead. 

Nice coverage on financial sector policy research..

 

Interview of Steven Landsburg – The Armchair Economist..

February 20, 2013

Nice interview of the Armchair economist.

Why did he write the book?

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How European model combines education with vocation…

February 20, 2013

Betty Joyce Nash has a nice article on the topic.

She discusses Europe’s vocation system and how it keeps unemployment in youth low:

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Strong Swiss franc and large current account surplus: a contradiction?

February 20, 2013

Thomas Jordan, chief of SNB in a speech clarifies this issue. However, as the full-speech is in German we only have to do with the summary in English:

The criticism is that Swiss economy records Current Account Surplus. hence, its currency should appreciate and SNB should stop pegging it at 1.2 per EUR.

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