Archive for October 15th, 2013

Post 2013 Economics prize.. Will we see behavioral finance becoming a core course?

October 15, 2013

The mind is overjoyed on hearing that finally Prof. Shiller has won the coveted award. This blog is a big fan of behavioral economics/finance and keeps looking at research/events which show exciting applications of the field.

He along with a few behavioral guys have withstood this pressure from the rational/classical school of finance for many years now. One thought post 2002 prize to Kahneman one would see rise of behavioralistas  but this did not really happen. One continues to see the econ/fin schools being dominated by the rational world. Interestingly, the Fisher Black medal for 2013 given to top finance economists was also given to Ulrike Malmendier, a behavioral finance prof at UCB.



Can we predict asset prices even over a long-term?

October 15, 2013

The committee releases superb summaries of  works of winners of “The Prize”. This year is no different.

I have so far only read the popular version as adv version is too detailed.

The popular version begins like this:


Niall Ferguson takes on Paul Krugman…

October 15, 2013

In a series of posts, Niall Ferguson chides Paul Krugman for being so harsh and unruly on the blogosphere.

  1. Part 1
  2. Part 2
  3. Part 3

(HT Mankiw for pointing all three).

And today he argues the same on Proj Syndicate as well calling is civilising the marketplace for ideas:

Like any market, however, the marketplace of ideas needs regulation: in particular, its participants should be bound by norms of honesty, humility, and civility. Moreover, every idea-trader should adhere to these principles.

Of course, politicians through the ages have polluted the marketplace of ideas with invective. But in American politics, surprisingly, there has been progress. According to a study by the Annenberg Public Policy Center, there has been less incivility in Congress in recent years than in the 1990’s or the 1940’s. Republican Senator Ted Cruz was widely condemned for his aggressive questioning of incoming Defense Secretary Chuck Hagel back in January. But casting aspersions on a nominee’s patriotism was the norm in the McCarthy era; it is less common today.

Academia, by contrast, appears to be moving in the opposite direction. A “social science” like economics is supposed to be free of partisan vitriol. Yet economists now routinely stoop to ad hominem attacks and inflammatory polemics.

Then he takes on Paul Krugman for using his Nobel position and power to criticise and bad name all those who don’t agree with him.

even if Krugman had been “right about everything,” there would still be no justification for the numerous crude and often personal attacks he has made on those who disagree with him. Words like “cockroach,” “delusional,” “derp,” “dope,” “fool,” “knave,” “mendacious idiot,” and “zombie” have no place in civilized debate. I consider myself lucky that he has called me only a “poseur,” a “whiner,” “inane” – and, last week, a “troll.”

Far from engaging in Holmes’s free trade in ideas, Krugman has been the intellectual equivalent of a robber baron, exploiting his power to the point of driving decent people away from the public sphere – particularly younger scholars, who understandably dread a “takedown” by the “Invincible Krugtron.”

My preferred solution would be accountability. But I have given up hope that the New York Times will perform its proper editorial function. So, instead, I would suggest the intellectual equivalent of an antitrust law. For every word that Krugman publishes, he must henceforth commit to having first read at least a hundred words by other writers. I cannot guarantee that reading more widely will teach him honesty, humility, and civility. But it will at least reduce his unjustifiably large share of the marketplace of economic ideas.

Well, one can only agree with Prof Ferguson. Why does Prof Krugman use the vitriol he uses against other economists? He does not need to. All he needs to do is write and write and simplify economics to rest of the world. He does the writing bit but gets way too offensive. Debating and disagreeing is fine, but one should always maintain the decorum..

But then Prof Ferguson himself is guilty of making  a really sad comment on Krugman earlier. So it is all over the place..

Well, one expects a much better behavior from acads..

India’s inflation highest amidst G-20..

October 15, 2013

India released its WPI and CPI estimates for Sep-13 y’day. Both were higher than expectations.

Against this inflationary background, it was interesting to get this press release from IMF early in the morning.

Apparently G-20 countries (India is a member) have decided to compile aggregate econ statistics for G-20. They released an aggregate measure for GDP in Mar-12. Now they have complied the same index for inflation. Data available here (look at Inflation and Qtrly GDP…there is G-20 data there).

Today’s release of the G20 Consumer Price Index (CPI) marks the second release of a G20 aggregate statistic following the first publication of aggregate quarterly G20 GDP estimates on 14 March 2012. The releases on G20 aggregates contribute to the implementation of the G20 Data Gaps Initiative – a set of 20 recommendations on the further enhancement of statistics as agreed by the G20 Finance Ministers and Central Bank Governors. The process is coordinated by the Inter-Agency Group on Economic and Financial Statistics: Bank for International Settlements, European Central Bank, Eurostat, International Monetary Fund (chair), OECD, United Nations and the World Bank.

The G20 CPI provides a timely measure of inflation for the G20. In the future, the G20 CPI will become part of the regular OECD monthly News Release on CPI at around one month after the reference period.

Annual inflation in the G20 area was 3.0% in the year to August 2013, down from 3.2% in the year to July 2013.

The G20 CPI aggregate reflects diverging patterns among the world’s largest economies. India, Argentina, Indonesia andTurkey experienced the highest annual inflation rates (equal to or above 8.0%) in August 2013, while Japan, France , Canada and Italy had the lowest annual inflation rate (between 0.9% and 1.2%).

In August 2013, annual inflation slowed in Turkey (to 8.0%, down from 8.6% in July), the United States (to 1.5%, down from 2.0%), Germany (to 1.6%, down from 1.9%), and more moderately in the European Union (to 1.5%, down from 1.7%),Brazil (to 6.1%, down from 6.3%), India (to 10.7%, down from 10.8%) and China (to 2.6%, down from 2.7%). In contrast, annual inflation picked up in Indonesia (to 8.8%, up from 8.6%) and Japan (to 0.9%, up from 0.7%) while it remained stable in the Russian Federation (at 6.5%), South Africa (at 6.4%),Mexico (at 3.5%), and Italy (at 1.2%).

India has the highest average inflation of 10.6% (2010-13) and second highest GDP growth of 7%. Needless to say growth rates have dipped but inflation has remained constant around 10%..

Average GDP Rank Average CPI Rank
India 7.0 2 10.60 1
Argentina 5.2 5 10.40 2
Turkey 3.8 6 7.60 3
Russian Federation 1.1 14 6.88 4
Indonesia 5.9 4 6.28 5
Brazil 2.7 8 6.13 6
South Africa 1.9 12 5.59 7
Saudi Arabia 6.1 3 4.11 8
Mexico 2.0 11 3.91 9
G20 2.6 9 3.15 10
United Kingdom -0.6 19 2.98 11
China 9.2 1 2.91 12
Australia 2.5 10 2.62 13
United States 1.1 15 1.80 14
Italy -1.5 20 1.80 15
Korea 3.1 7 1.74 16
Germany 0.7 16 1.74 17
France 0.2 17 1.37 18
Canada 1.2 13 1.31 19
Japan 0.1 18 -0.09 20

I was trying to plot a graph but have not bene able to. But the data shows inflation is higher than growth for India, Indonesia, Argentina, Turkey, Brazila nd South Africa. Russia is suffering from stagflation . China and Korea have growth rates higher than inflation. Developed world has both inflation and growth at low levels.

Tough times for emerging economies..


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