PJ Nayak Committee report… How can such reports be written in 2014?

For a moment, I could not believe we could have such a report written in year 2014! After seeing what has happened in last 5-6 years, to have a report which says bank governance will improve if we privatise them. Really? Thankfully I am not alone thinking on these lines. As I was writing this piece came across these two EPW articles on similar lines – one (edit piece) and two ( By Prof TT Ram Mohan of IIMA. Prof.  TTR nicely titles it as  Bank Privatisation by the Backdoor.)

The huge response to this another hyped report from RBI stable is not really surprising. It is not the first report which talks of privatization of Indian Public sector banks. But like all RBI things these days, we are made to believe this is the first such attempt. It is one thing to argue for privatisation of banking  based on the premise that government should not be in businesses. But this thing that by moving to private banking way, will lead to better governance is like a big joke seeing how things have been globally. And I don’t even want to talk about the financial engineering to privatise PSBs suggested in the report .

The main point is that public/govt is all evil and private is all fair made sense before the global financial crisis.But it doesn’t make sense now.  The kind of governance standards we have seen in the so called doyens of capitalism (read private banks) has been so abysmal that there is no place left to hide. They have mismanaged most things under the sun and have brought enormous damage to the banking sector. These private well run professional banks have not just limited their abuse to their own houses but for the entire neighbourhood as seen in the case of LIBOR manipulation.  These private better governed entitites have completely damaged the central tenet of banking – trust.  Our PSBs misgovernance standards pale in comparison to the kinds of misgovernance seen in the western world of private banks.

And we still think that mere privatization will help in better governance? Really Sirs?

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Did German Jewish emigrants help spur innovation in US?

Petra Moser of Stanford University looks at the issue and debate around it in this Cato research note. The note is based on a paper by written by the author along with others.

In all their research shows that the immigrants did help push innovation in US..

Profile of Chris Pissarides and review of his work on labor economics…

IMF has a great review of an economist who is hardly known – Chris Pissarides.  And this despite getting “the prize” on the topic “which is one the most relevant” – labor markets.

The interview has this rare case of an eminent economist admitting his policy error – pushing Cyprus into adopting Euro:

Simplifying tax filling and increasing compliance — a behavioral experiment

Jan-Emmanuel De Neve and Cait Lamberton explain this simple way to simplify taxes and increasing compliance. They say by making taxpayers more voice in the whole exercise of taxes generates positive results.

They start in a nice way saying one is not sure what citizens dislike more – taxes or death :-):

India’s Political Parties – A book review

India has been in politics mode for quite sometime now. Given the noise, one is always interested in understanding things a lot deeper than what us thrown at you from the media galleries.

Came across this really useful book – India’s Political Parties. It is part of series of books on Indian government and politics. The book has chapters on India’s key political parties by different experts. The book is edited by Peter Ronald DeSouza (0f CSDS Delhi) and E. Sridharan (India Centre at UPenn).

The book is a rare gem as it gives you great insights on history and ideology that has shaped these various political parties from Congress to Shiv Sena. For a largely politically ignorant person, it is a great start as much is unknown. Apart from political parties, there are articles on how we classify political parties based on objectives etc and how India’s political parties can be classified accordingly. It has classical articles by likes of Rajni Kothari, Jayaprakash Narayan (JP), MN Roy etc. names  which are hardly talked about in our discourse.

Economics of Political leaders favoring their preferred regions

An interesting article (hugely relevant to India) in voxeu by Roland Hodler and Paul Raschk.

They point to how politicians favor their regions:

Many political leaders favour their preferred regions. An extreme example is Zaire’s former dictator Mobutu. In his remote ancestral home town Gbadolite, he built a huge palace complex costing $100 million, luxury guesthouses, an airport capable of handling Concords, and the country’s best supply of water, electricity, and medical services. But Mobutu is no exception. There is a large literature on distributive politics documenting regional favouritism. Golden and Min (2013) review the literature on redistributive politics based on an inventory of more than 150 empirical studies. They notice that most studies focus on a single democratic country, and a single policy outcome.

We have many such news around India as well. There has been a lot of news recently on how India’s new PM will revitalise city of Varanasi. Though it is not his place of origin but as he has fought elections from Varanasi, it has become his preferred region.  Similarly how SP leader Mulayam Singh has tried to develop the area around his hometown of Saifai in UP. There are many many others.

So how can one figure this regional bias?

In a recent article (Hodler and Raschky 2014), we complement this literature on distributive politics by taking a systematic look at regional favouritism in a large and diverse sample of countries that includes democracies as well as autocracies, and by employing a broad measure of regional favouritism that captures the aggregate distributive effect of many different policies. In particular, we use information about the birthplaces of political leaders and satellite data on nighttime light intensity to study whether subnational administrative regions have more intense nighttime light when being the birth region of the current political leader.

Our analysis is based on a panel dataset with 38,427 subnational regions in 126 countries, and annual observations from 1992 to 2009. The dependent variable is the logarithm of average nighttime light intensity, which is recorded by US Air Force Weather Satellites and provided by the National Oceanic and Atmospheric Administration. Henderson et al. (2012) document a strong relationship between nighttime light intensity and GDP at the country level, and propose the use of nighttime light intensity as a measure of economic activity at the subnational level. Using regional GDP data by Gennaioli et al. (2013), we find a similarly strong relationship between regional nighttime light intensity and regional GDP. Our main explanatory variable is a dummy that equals one for the birth region of each country’s current political leader, and zero for all other regions.

Our results suggest that being the leader region increases nighttime light intensity by around 4%, and GDP by around 1% on average.

Hmmm..

Rise in GDP was expected but night time light intensity too rises..Nice way to capture the impact.

Though this does not lead to sustainable development. Once the elections are lost, out goes the leader and the growth..

Building Business histories of emerging economies

HBSWK points to this really exciting project by HBS on business history in emerging markets.

The article says:

Economic History and Economic Development: New Economic History in Retrospect and Prospect

Peter Temin, eminent econ historian has this food for thought paper.

He points to this interesting comparison of econ history and econ development. Former looks at high wage econs and latter at low wage econs:

Competition commission of India’s first five years..

Nice to read an article which talks about an institution which is largely ignored from discussion- Competition commission of India.

CCI recently completed its five years and the author reviews this period. As per the author, CCI has done a great job in such quick time:

Do Indian business group owned Mutual Funds maximize value for their investors?

One always wonders how India’s Business groups perform in their finance ventures? Do we see conflicts of interest as in funds are channeled to the groups from their finance entities?

In this paper, IIMB Professors look at this problem albeit from a different angle. The paper is written by – Profs. Pulak Ghosh, Jayant R Kale and Venkatesh Panchapagesan. They see how mutual funds operated by these business houses perform:

Mises and Hayek mathematized: Towards mathematical ‘Austrian’ economics…

Nice paper on a topic which is always a stirring one – mathematicisation of economics.

This one is by Marek Hudík of Charles University in Prague. He first points to costs and benefits of using maths. Then he says use of maths actually complements Austrian school:

Teaching Economic Concepts with a Bag of Chocolate..

Came across this paper via MR blog (the blog points to a different version though). It is written by Nicholas G. Rupp  of East Carolina University.

He points to an interesting way to teach basic principles of economics to a elementary school class via an experiment.

How will the new Indian government balance the artha and raj dharma?

An interesting piece by EPW edit.

It says how the new govt. will balance the raj dharma which is guided by RSS and Artha which is guided by big businesses:

How Railroads Changed American Government?

MR points to this nice review of this book on American Railroad history – The Great Railroad Revolution: The History of Trains in America. It is written by transport historian and expert – Christian Wolmer.

We think govt has been hugely affected by imternet and technology. Well, railroads created a similar impact:

“Showrooming” and the Competition between Store and Online Retailers

Amit Mehra, Subodha Kumary and Jagmohan S. Raju do a pretty useful research on a topic affecting a number of offline and online retail stores.

Showrooming means people simply come to these offline stores , scan products and buy it online as it usually gives discounts etc on the same product.This has become a big problem for retailers. I was reading how India’s retailers are trying to fight this problem by making sure the same products are not available in the online stores.

Anyways, so what do these authors suggest?

How Hitler’s roads won German hearts and minds?

Hans-Joachim Voth takes us to this really interesting episode of political economy history.

He explains how construction of German road system by Hitler (called Autobahn; though some myths are explained here) led to rise in political support:

The Hitler government built the world’s first nationwide motorway network. We examine the impact of road-building on the popularity of the Nazi regime. Using shifts in electoral support between 1933 and 1934, we conclude that ‘pork barrel’ spending worked in reducing opposition to the regime – wherever the new roads ran, fewer Germans voted against the government in elections and plebiscites. At least part of the regime’s popularity after 1934 can be explained by the popularity of the Autobahn.

 Nice bit..

Budget institutions in G-20 economies…

A nice paper from IMF econs on a topic which is covered very little despite its importance.

It says:

Comparing Fed-Markets love affair to Disney movies

An interesting piece by Mohd. El Arian.

He connects this whole Fed-financial markets love affair to Disney movies. In both, the relationship so far has been to make sure the end is happily ever after. However, a recent Disney movie Frozen did not go the beaten path. He says Fed should do the same thing as well:

Delivering pizza using a Drone…..

The blogger only saw what a small 4 wheeler drone was and could do in the movie 3 idiots.

Apparently, it is being used to solve real world solutions. This Outlook article talks about this really interesting experiment by a Pizza eatery in Mumbai. It delivers pizzas using drones! There is a video too:

From PMO India’s Twitter handle to PMO India’s Archives twitter handle

A really interesting development yesterday completely missed by the blogger.

Well, one was also expecting a difficult transition from the outgoing govt to the new one. But to imagine this transition will be as difficult in the digital world as well, was not imagined.

So PMO India twitter handle has been converted into archives. It  says : Archival material under the RTI Act for @PMOIndia till 20/5/2014. @PMOIndiawill be available shortly. PMO India office twitter has become a bland page with zero tweets but has quickly risen to 15,200 followers.